Market Analysis: Dan Hueber and Matthew Bennett

Market Analysis: Dan Hueber and Matthew Bennett

Jul 10, 2020  | Ep4547 | Podcast


Much of the week’s gains were wiped out in the final session following the USDA report with the exception of wheat. For the week, September wheat jumped 42 cents or 8.5 percent while the nearby corn contract declined 6 cents. Weather concerns and higher ending stocks weighed on the soy complex. The August soybean contract fell four cents. August soybean meal shed $3.60 per ton. December cotton gained $1.37 per hundredweight. Over in the dairy parlor, August Class III milk futures kept the rally going with a $1.87 gain. A mixed week in the livestock sector. August cattle lost a nickel, August feeders declined 15 cents and the August lean hog contract added 83 cents. In the currency markets, the U.S. Dollar index dropped 68 ticks. August crude increased 20 cents per barrel. COMEX Gold topped 18-hundred with a $12.30 gain per ounce. And the Goldman Sachs Commodity Index improved more than 5 points to finish at 335.95. Joining us now to give us some insight are two of our regular market analysts, Dan Hueber and Matthew Bennett. Gentlemen, good to see you both. Dan, Matt, hi.


Hi, good to see you.

Yeager: You just can't talk at the same time. I'll try to play traffic cop. Dan, we're going to start with you. Give us a take on today's report and we'll do the same with you, Matt. But Dan, a tweet, how would you sum up USDA's moves today?

Hueber: Certainly nothing surprising in any of the reports that came out. I guess I would say the only surprise out there was their adjustment to the Brazilian soybean crop, raising that 3 million metric tons, which really puts them far and away above anybody else in the industry out there. But the numbers all fell within expectations, should not have been a shock I think the corn, my twee of the corn reaction is it was payback. I think the large spec was punished after the acreage report, they covered over 50,000 contracts last week and I think it was kind of payback time. So they probably came and reaccumulated some of those short positions again here today.

Yeager: Matt, what was your twee on today's report?

Bennett: I think ultimately with corn obviously numbers came in pretty close to what everyone was thinking. So you look at the screen and you think this is going to be a non-event, let's just take a long lunch and go home for the week, but you wouldn't want to do that because then you turn around and this market is down double digits. And so very poor reaction to what I would call an average report.

Yeager: Poor reaction to an average report. We'll talk corn in a minute but we first have to start with wheat guys. Dan, there's a TV show they're filming not too far from you called Chicago Wheat. That was quite the leader this week. What's going on?

Hueber: Really wheat has been a leader for almost a couple of weeks now and I think if there's any irony in all of this if you look at what it probably without question has the most bearish fundamental setup both domestically and worldwide. We have ample stocks, some of the highest stocks to use ratios we've seen in years and years and yet continue to rally. And I think one, looking at wheat as a leader I think you have to get the wheat market to move before you can stimulate corn and I think that is probably a positive sign. But little by little we keep getting reports of issues, we know there have been some problems in Russia and Ukraine this year, we know there has been an issue in Argentina with wheat production still very dry there. And then there was additional stories this week about acreage problems in South America, France did not get off to a good start or a good production number. Of course here in the U.S. we're at century lows in wheat acreage. So I think all of this, even though the fundamental picture doesn't say we should be moving up in the wheat, I think one little piece after another keeps falling into place and I think a thin market, no real harvest activity pressuring prices and the path of least resistance to the upside.

Yeager: Matt, are you buying anything on the quality discussion of this? There's the discussion of food grade wheat is a problem and that's driving it? Kansas City had three week highs and Chicago had a rally.

Bennett: As far as the direction of the market I Dan covered the bases very well. I think the interesting thing the funds are sitting here covering shorts like it's going out of style whenever you're looking at the wheat market and it's because of all these various issues. As far as quality is concerned you hear talks of quality, but bottom line whenever you take the wheat market up 44 cents in a week obviously you've got people that are wanting to own this wheat. I agree though, it's so hard for me to understand wheat at times, whenever you start talking stocks to usage ratios as compared to for instance corn and beans they're just gargantuan. And so to me yeah, stocks to use are going to be a little smaller than what we've seen in the last couple, three years. But are they going to be tight in any way, shape or form? Absolutely not.

Yeager: Matt, are you looking to, we're not quite to April marks on this contract, are we looking to make a sale right now? Are we holding because the technicals and the fundamentals are not matching up here? Are you selling anything either nearby or deferred?

Bennett: Are you talking wheat still?

Yeager: Wheat, I still want to finish wheat.

Bennett: Yeah, to me whenever you get that sort of a rally absolutely. The thing is that doesn't mean you step in and sell all of it. But by any means any time you see a 40 cent rally in a week, I guess one thing I would say is a rally is not a rally unless you step in and sell some because as we've seen, look at the corn market just today, for instance, most people wouldn't have expected to see what we saw happen there. And so I definitely don't want to take anything for granted with the wheat market. To me it's the moodiest of the top three and so I really struggle, in my opinion, to ignore a 40 plus cent rally.

Yeager: Dan, you talked about thinking when it came to the wheat market, we just didn't think it was going to go any lower, but it also pulled the corn market along. Could you say Ben Franklin's approach in this maybe played in the corn factor? Or what is going on with corn?

Hueber: Again, I think what we saw today was probably a victim of end of the week, not enough volume in there that it was easy for the buyers to kind of step aside with that news in there. But I do kind of tend to think that one of the factors in wheat, corn and beans to a lesser extent is when we start looking at those global stocks where are they sitting? And when you look at the ending stocks projected for this coming year in wheat 52% of that is in China, in corn 62% of that is in China. So that is a product that is going to stay there. So it's really not necessarily as over burdensome as what they look like at face value here. And I certainly agree, when you get a 40 cent rally you have to reward that. That said, looking at some of the very long-term technical set5up here in corn and wheat both they really just seem to be turning a corner and I'm not going to sit here and say bullish, bullish, bullish. But on the same token I think we've maybe got a little more time on our hands to see this move out, get a little more weather under our belt before we really see these markets totally exhaust themselves this year.

Yeager: Okay, Matt, you get to answer the question that Justin in Ithaca, Michigan is asking and it's the elephant in the room when it comes to corn and soybeans and to an extent with wheat. He's asking, with recent years of dry conditions or wet springs that the market thought would hurt yields but ended up surprisingly good yields, will the market have a short-term memory and move higher if dry and hot conditions continue or will they be more resistant to another weather scare?

Bennett: That's a great question because I think all of us that are in production agriculture understand the genetics are just phenomenal. We've been able to withstand really harsh conditions. Like a year like last year most of us thought yield was not going to come in where it did because bottom line we had a terrible spring. You come in this year though and whenever we're looking at what we're talking about right now, you're talking about excessive heat. and so some of the forecasts just on Thursday were showing 100 degrees for 2 or 3 days with the nighttime temperatures not getting below 75 for several days in a row in the I states, especially Illinois and Indiana. And so to me that sort of a forecast, if it comes to pass it certainly is going to have an impact on production, especially whenever a large part of that area is trying to pollinate, because most people are talking about shooting tassels this week, right here in central Illinois we're shooting tassels, we're trying to pollinate right now which is a little bit concerning whenever we've got a fairly warm wind going on today. But bottom line is I think the market will react. If you come in on Sunday night with an ominous forecast are you going to get back everything you lost this week? If the forecast comes to pass, absolutely.

Yeager: Dan, if the weekend rains don't materialize, and like Matt says continued hot and dry into next week, Sunday night's opening into Monday's opening, is this thing going higher or lower?

Hueber: I think if we miss the rains we're going to move higher. Granted, we believe, I think the trade as a whole believes corn is kind of bulletproof, it's hard to throw anything at it that's going to really destroy it, but that doesn't mean you can't start trimming a half to a bushel, a bushel and a half off of there and with 92 million acres planted instead of what just a few weeks ago was perceived going to be 95 or 97 million acres there's not as much room for error out there. So I think we move higher. Plus add in the fact that even though they covered a fair amount of their shorts, we still have a very large spec short position and of course that is kind of if one starts to get out that pushes into the next and it can become kind of a self-fulfilling move as well.

Yeager: Are either of you making sales on Monday morning?


Hueber: If we're back up into the ranges we traded this week in December corn, that $3.60 area, between $3.60 and $3.80 I'm a seller of December corn.

Yeager: Matt, are you?

Bennett: I am as well and I think this is a precarious time for a producer because a lot of producers are going into, for instance, this weekend without knowing what their production is going to look like. If they don't have full soil moisture profile it's precarious to sell 30, 40 cents below your spring insurance price. In fact, it's just flat out dangerous. So if we come in here Monday and we rally sharply like Dan said may be we break $3.63 next week with a hot and dry forecast. If we do and we see what's on the other side of there I think you could see a little bit more buying come in. Absolutely we're going to be taking risk off the table.

Yeager: Matt, what are you doing for beans?

Bennett: With beans I Guess I'm a little more friendly. Whenever I look at the supply and demand balance sheet for beans I guess it's a whole lost more snug than what corn is. Right now we're assuming about a 50 bushel yield, it gets you $4.25. Yes, we crept up from last month but at the same time if you start to trim a little bit of yield off beans and a lot of the forecasters are talking about this pattern that we're in is going to intensify as we move into August, which makes sense because August is typically a hotter, drier month. So I guess for beans I'm not in any huge hurry here. I've got to think that you're going to have the opportunity to maybe build a little bit of a bullish case in here.

Yeager: Dan, what about you? Beans may be a couple of weeks behind the corn when it comes to the vital part. Do you think soybean has a chance to run up like Matt is talking about?

Hueber: I believe so. Again, I think he's right on the money. We do not have really that dramatic of a -- if anything we're reducing our carryout in the next year pretty substantially so I don't think seeing November beans up in the $9.25 to $9.50 range takes a lot of imagination at all. I think that could happen with any kind of a weather scare. Interestingly enough too I was going to point out earlier in the year -- made a comment about often times, he has watched South American, North American crops for many, many years and he said it's interesting so often when we see a problem in South America we tend to have a very similar problem in North America on the next growing season. And so far he has been pretty astute in that observation. Those are the same problems we're seeing particularly in the southern regions of the growing belt.

Yeager: Let's get to the livestock. We'll discuss cotton in Market Plus because we've had some significant moves in that market. Matt, I'll start with you on cattle here. We're seeing a winding basis. Why?

Bennett: With cattle bottom line is you've seen a fair amount of strength in here lately but at the same time they're talking about margins are actually fairly decent for cattle. But bottom line to me there's not a lot of cattle, you're seeing that people are not actually bidding, there's some cattle that are no bid and so I don't think that there's, I guess there's not as much enthusiasm right now. At the same time it's very interesting to see the board moving a little bit higher. I'm not bearish cattle by any stretch of the imagination, especially farther out, but when you're talking about big supplies up front, weights were down this week thank goodness, but these heavy weights in my opinion have to factor in whenever you're talking about basis or margin or however you want to put it.

Yeager: Dan, we talked about the number, some of the economy issues that are starting to inform with re-infections. Is that playing at all do you think in the cattle market about what the consumer is going to do, vote silently with the wallet and close it a little bit here and conserve some cash?

Hueber: Probably more so on the cash market than the futures. The futures have responded a little positively here as of late. But I think so, I think people are, again, the fear about going outside again, the fear about getting together in groups and picnics and whatever the case may be and I think the industry is playing it pretty cautious out there. What happens if we run with another big problem on transporting the meat around. And I don't think anybody would argue we have a major issue totally in the meat industry in this country with just too few packers out there and until that changes the cattle, hogs, are at the mercy of that packing industry and it's not a good position to be in.

Yeager: There's few lots and what lots we do have with various owners they're pretty full right now. They're still trying to feed. Dan, we hear about this wave of animal that is going to come in the fall that maybe was held back. Do you still see, Matt just talked about lower weights on these live cattle, but on the feeders are you seeing or hearing about slowing of some of these feeder numbers? Are we spreading them out? How are they getting to market?

Hueber: I think spread out is probably the best term. They did and could leave them out on pasture a little longer than they needed to, but yes the animals aren't going away. Ultimately they have to come in there, you can back them off so much, and they're going to come into the feedlots once that space is available. The saving grace of course up to this point has been the relatively cheap price of corn. If you start moving, changing, putting a change on that with the weather scare that's not going to be very friendly to that feeder market either.

Yeager: Matt, the August hog contract went above $50 for a short time this week. It did finish higher on the week. But, that hog market has been much cheaper compared to beef. Is this a buying opportunity for people right now?

Bennett: That's a tough call. They say markets are pretty good, cutout values fairly strong but I guess in my opinion on this hog market I can't get super friendly in here, this time of year no matter what meat you're talking I think demand is usually pretty good. But again, as Dan was suggesting people going out to eat, there's a lot of fear, a lot of issues on who is going to open up, where are you going to be able to even go. You guys know how it is, my wife and I try and figure out where we're going to go eat we've got to figure out who is going to be open and who's not, whether they're open just inside, outside, if it's 95 degrees out I don't want to go too bad and sit outside. So there's a lot of demand issues I think that I still want to sort through. I guess if I was going to compare I'm a little more friendly to the cattle market than what I would be hogs especially long-term.

Yeager: Dan, same question. What do you think about hogs in comparison to beef?

Hueber: Well, I would tend to agree. 6% more hogs on feed right now and granted, some of the farrowing intention numbers were a little less than anticipated but that could still change. And so much of the industry is on packer contract so they know exactly what is coming in, it's pretty difficult unless we see something really shape up in the export business moving forward it’s tough to paint a good picture in the hogs. I think you go ahead and look out into those summer months, those June, July, August of next year, which are already in that 70 plus cent range and producers if you can make money that's probably time to be locking that in.

Yeager: Speaking of locking in, I'm going to lock in my thank you know. Dan Hueber, thank you for the time. Matt Bennett, thank you as well. We'll continue this discussion in just a moment. That will do it for this installment of Market to Market. We will talk more in Market Plus so join us. You can find it on our website at You can’t always pause and rewind life, but you can do that for this program. Watch all our videos via our YouTube channel. Subscribe and click on the bell to get notifications when we post new content. Next week, we’ll see how one exhibitor is overcoming obstacles in the show ring. Until then, thanks for watching and have a great week.



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