Market Plus: Sue Martin

May 22, 2020  | 14 min  | Ep4540 | Podcast

Podcast

Yeager: This is the Friday, May 22, 2020 version of the Market Plus segment. Joining us now, Sue Martin, Hello, Sue.

Martin: Hi there.

Yeager: I've been talking, I said this to Pfitz a couple of weeks ago, to a computer screen so it's good to have and we're starting to slowly get back into that human interaction. You were making the trip down today along I35 and you're used to seeing traffic on busy holiday weekends. Did it compare at all this week?

Martin: It compared very well.

Yeager: So what does that mean? Are we feeling like we're, this is coming to an end, we're itching to go, we're ready to drive, we're buying all this analyst business of, well you know if we start driving again that's just going to -- did you look at that going, well this is going to be a good story for corn?

Martin: Well, it's helping corn because ethanol lost its luster because of the fact that we were going to have such huge supplies of gasoline and gasoline was dropping because nobody was driving and so it competed against ethanol and pretty soon plants aren't making money and they shut down. Now they're coming back up online, in fact some of the larger ones have been coming back up online for the past two weeks. So that is a plus and that has helped the cause here a little bit. And of course ethanol on the charts looks similar like everything else and it has been oversold and it's starting to come around, met up its lower Bollinger Band and now we're starting to curve away from it on the weekly charts. But the one thing I will say in corn is that, and energy, is the concern is these global imports. For example, the largest exporter of energy, L&G for example out of the U.S., had 30 loads canceled overnight and that was a big surprise. That came out of China. China is seeing their economy slow for the first time in 20 years or whatever.

Yeager: In fact, they didn't even make a projection for GDP which is something they haven't done in 20, 25 years.

Martin: That's right, they're very concerned about their economy and so that shows. And then Germany, their imports dropped dramatically for the month of March and into April. And you look at Japan and I think they were down this past month for 27%. So it is having an impact because factories aren't running, people have been starting to get to drive but it's a big thing about the factories more than anything.

Yeager: Well, these factories apparently are making products that we're using in our lounge wear whether it's jogging pants, hoodies, leggings, home comforts. Some of that is cotton, but it's not. What is bumping the cotton market?

Martin: Well, I think part of it is the weather. The Delta has been having an awful lot of rain and even forecast again to be catching more over the next seven to ten days. And so I think that's part of it. The other thing is of course when we look at cotton and I look at the charts I think up front if I looked at the July contract for example, I would have to say around $61 I probably would be doing some hedging.

Yeager: Okay. Dairy market, that's another one that has gone up and up finally on the Class III side. It's a little too late for some. But is this going to be enough? As we were talking about in the break between the broadcast and plus here, we were still dumping milk on the ground the end of March, so why this rally?

Martin: Well, I think for one thing dumping this taking away supplies that the consumer could have. In the meantime you also look at milk and you're seeing a contraction in production via producers getting rid of cows, they're culling their herds. You're even not seeing as much in the way of holding back heifers for breeding. And so I think what we're seeing here is we're just seeing a contraction and I think that has helped and then as people get going to the grocery store, able to start getting out more and more you're starting to see a bigger pickup in demand for milk as well. We use it in cooking.

Yeager: Yeah, we do all sorts of things at our house with it. I want to start asking some of the great questions that have come in. We appreciate every one that comes in via Facebook and Twitter and Instagram. Nathan in Inwood, Iowa up in the northwest part, he's asking, how has the supply and demand fundamentals been impacted by COVID? What is the long-term market cycles tell us and set us up for in the last half of 2020? Is there, Sue, a long-term bear market, is it finally on its last leg?

Martin: Well, I think for this year, yes. I think we are because first off the President has already said he will not shut down this time if COVID breaks out again and I don't think he will. But what I do think is that when we look at the cycles, for example, I look at years in similar numbers, and my data goes back 100 years or more. And corn, for example, tends to in a year of a zero many times you will be more traditional and lift up into the June, July period and then slip back. But I have felt all along this was a year very similar to 2010. It was the only year out of the last ten that ended in a zero where we put our highs in, in the first week of January and our lows came in June. And I think that's what we're doing. And then the last half of the year ended up being more positively construed. I think especially let's look at corn for a second with the weather. First off, we seem to be catching rain, especially in the Eastern Corn Belt, pretty easily. And they already were saturated so it didn't take much rain even though they caught a fair amount to have flooding. But here's the deal, the forecast now is calling for more rain and originally my sources were talking heat in June, above normal temps, maybe turning a little dry and being that way on into about July 15th. Now it has changed, warmer temps but nothing special and moisture. Well it's jungle weather and do you know what that says? It says those risk systems aren't going to go down. Now you get into July and all of a sudden we start picking up heat and more drier patterns and we stay that way through the rest of the summer. What do you think it's going to do to the corn? Shallow roots, it's going to hit the yields.

Yeager: Can't handle any of that heat. And we had a whole bunch of photos, I was going to show them here from the Facebook page, but great comments from everybody from Illinois, Indiana, Wisconsin, wherever, just saying it's wet, it's dry. It doesn't take long. There's an old crop corn question from Scott in Indiana and I need to discuss this because we glossed over it. The President this week put out the details of the $16 billion plan to help producers and Scott is asking, if we get the 32 cents a bushel of government help on old corn, will the market take that same value provided to the producer away offsetting any financial gain? There's always conspiracy theorists out there.

Martin: Well, I will say this, the one fear that is out there is that farmers will take that money, use it to take care of bills in June after planting and hold onto the old crop corn. And if you have people driving you're going to have ethanol plants wanting supplies, they'll have to bid for it to get it and that will be the good side. But the deal was people probably hung on a little longer than they maybe should have anyway but I think that you're going to get some demand picking up with the ethanol plants as we move through summer and that is going to be, it's not going to be like under a normal situation, but certainly it's all about psychology. Markets are the future and psychology plays a big part in that. So I think that when we look at it I think your basis levels one, probably will narrow a little bit, but if they're going to narrow for new crop corn it's going to come after we get past the 4th of July, and then if our forecasts are right that they turn hot and dry, it's not going to happen just right away, but by the time you're hitting August, bean month, well then all of a sudden you're going to be looking at gee, this corn doesn't look so special and you'll be hearing it especially out of the Eastern Corn Belt and maybe even in the north.

Yeager: And that's something we've heard is we just need some type of weather. At first we thought it was going to be dry, maybe it will be the wet and hot problem. I want to go now to a question about energy and fertilizer. You kind of perked up when I started talking about this. Shane in Bloomfield, Nebraska was asking, should farmers be locking in 2021 and fall 2020 energy and fertilizer? And what is the best way to do that right now?

Martin: Well I think you do. Usually under a normal situation the best time to lock in energy and fertilizer is in the month of July. But this year with having hard the hard break that we've had and of course clearing firms were quick to jump on the gun and say after we all realized something could happen that we never dreamed they started telling people if you're in the June contract of crude you can only get out, you cannot add to your position and the same way was with options. Now they have kind of started to relent with the July contract. So we're not going to see, because they were proactive we're not going to see it probably happen --

Yeager: Negative, you mean.

Martin: Yeah, but we could get a little pullback here off of the fact that we're starting to see some cancellations, for example, by China like we've seen. You could start to see a little hint of a pullback. But the market rallied quite a bit off of that minus price. And in the meantime I would say first go to your supplier that you use and see where he's at, how you can work that. If you can't then I would say, and options are so expensive to buy, but that would be your best bet is to buy an option, try to do it somewhat fairly close to the money even though you're going to pay more and especially give yourself some time. But we're driving, things are picking back up, the President has said he's not going to shut down even if, so the next key will be how well does the media scare the socks out of everyone that they start staying home again. I don't know.

Yeager: I don't know if that will happen where people will really stay home. We'll see. Last thing, I've got two things I really want to talk about, one I'm probably going to have to put to a rainy day but this one is about India. They had a report today about African swine fever, hogs, they had almost 11,000 sick, deaths around 3,700. That's about a 9 million population of hog market. We talked a little bit about some of these other markets. So if you have a hog problem in India, they already kind of had their coronavirus round, rice has become a hot commodity, wheat has filled in some of those things, is this the kindling to a fire that could I think you said like an explosion of some kind?

Martin: Yes. The one thing we have to keep in mind is the desert locusts are on the move, in fact there are swarms in Eastern Africa that are as large as some of the major cities. That's hard to believe. And right now the latest number I've gotten is about 33 million people are at risk of losing food. And so you look a rice maybe first, that's usually an easy thing to get into them, but then it's the wheat crops. And here's the thing, you've just seen a major cyclone go into India and part of I believe Pakistan, and the thing is, desert locusts thrive on breeding in very wet conditions. And unfortunately Mother Nature seems to be gratifying that. So that is something that I think we need to be watching as we start to see these food supplies shrink even further globally and the demand for rice, you've got Ethiopia, Somalia, I'm trying to think of all of them, there's like 5 countries in East Africa that have got an issue and then you're looking at India, Pakistan and you have the world's second largest population in India that rely on rice, wheat and then of course they raise soybeans too.

Yeager: It's a global story that we always have to be following.

Martin: It is, our global supplies are going to continue to shrink I believe.

Yeager: Sue Martin, good to see you, thank you so much.

Martin: Thank you.

Yeager: That's Sue Martin and we appreciate her for coming in and giving us her insight. Next week we'll be back at the story table to examine the supply lines and see how they're handling the reopening of the country and Angie Setzer will join us to analyze these markets. I'm Paul Yeager. Thank you very much for watching, listening or reading here on Market Plus. Have a pleasant day.

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