Market Plus: Sue Martin

Jul 31, 2020  | 13 min  | Ep4550 | Podcast

Podcast

Sue Martin discusses the commodity markets in a special web-only feature.

Paul Yeager: This is the July 31, 2020 version of the Market Plus segment joining us now, Sue Martin. Hi, Sue.

Sue Martin: Nice to be back.

Paul Yeager: It looks like I'm talking to you from the studio, but I'm only a few miles away from you down the road. I'm over in Fort Dodge, Iowa. You're in the home office or your office there. Umm, a little different this week's program. So thank you for your patience in dealing with all this craziness that we've done. You really don't have much of a choice. I know that that's the other thing. So let's start with some of those great questions as we have gotten this week, uh, via Facebook, Twitter, and Instagram up first though, I guess I should have mentioned, uh, the cotton market, uh, that one had, uh, it's been flirting around a, a technical signal, right? Uh, there's, there's more technical action there than fundamental.

Sue Martin: Yes, there is a cotton's got very overbought for the moment. Um, but truthfully, I think if you could get cotton with a little bit of a correction here, we could still maybe see that market try to push up to $64.90, um, basis the, uh, December contract. I think that, uh, when I look at cotton, it looks like it should be edged, but we know that yields probably are going to be down this year. And, uh, China's demand has been huge for cotton. In fact, China's got an awful lot of U.S. Cotton, so it may be, I'd like to see what happens that it tries to push for the $64.90 area. It may do that, but I would probably say pull some triggers and maybe do some booking of cotton.

Paul Yeager: Speaking of booking, we have a question about booking some things here in corn and soybeans. Chad writes us via on Twitter. He's asking, “Should we be locking basis in now for corn and soybean bushels that we will have to deliver at harvest, but leave the futures open or should we sell cash now and buy back calls or a door number three, do nothing?”

Sue Martin: Well, I don't think I would do nothing if you're having to sell at harvest what I would do, because remember I'm kind of thinking there is the potential that we could still see the market make up a low here in August and come back up. But what I would suggest is basis tends to get softer as we move through August and into September. So my recommendation would be go ahead, market some cash, but then reown the options back, is the way I would go at that. Um, the thing about the options is volatility is low. So you're not going to have that keyed into your premium. And, um, but you are going to probably want to go super far out in time. Either

Paul Yeager: Philip in Dresden, Ontario is asking a question, I think on the minds of many, both in his country and, and ours “Does the market think the corn crop is made? Is there a, for a record yield and how far into August will we need to go for the market to realize the soybean crop is made too?” You mentioned during the show about 90% of corn is made during pollination we're past that point. So what do you think about Phil's question you think that corn crops made as a market reflect that?

Sue Martin: Well, we have a lot of summer left on the corn. And I think the forecast, you know, through August is that we should start turning more cooler. And so, especially in the Western half of the Corn Belt, um, if you get into the Eastern half, there's where I think we have to keep an eye on the, uh, humidity, the, uh, temperatures at night. If we see them consistently running at 70 or less, then that's probably going to be good for that crop. Um, I think that the yield is vulnerable enough that we could see yield decline from August into September. But I sure think we're going to lift this, this next report that we'll see the yield go up on beans. I think by the middle of the month of August, we're going to have a pretty good clue about beans and the market's attitude is going to be that the crop is there.

I think this is a year where we're going to have to really well. Let's put it this way. Uh, humidity and higher temperatures at night on corn is a thief, but you gotta get down the road to find it out. And, um, if the forecast that I'm hearing is calling it's interesting because in a way it's opposite, but the forecast I'm hearing is calling for cooler temps and maybe more rainfall picking up as we move into September and even getting colder as we live through late October on in, then of course, November, December. So I think that we have to be very cautious here because the attitude through August is probably going to be, 'Hey, the crop has made the crops is going to be there.' Beans are shorter this year. And one thing I noticed yesterday was that, um, on, I believe it was in the Iowa State, uh, weekly email letter and they were talking about 70% of Iowa's beans have cyst nematode. I thought that was rather interesting because if Iowa's got it, then what about Illinois and Indiana? I have a feeling that, um, everything looks pretty good right now, but it might not end up that way.

Paul Yeager:  We had a question that kind of followed up about what you were asking Marty in Nebraska. He's asking “Why can't the markets wait to react when it rains instead of moving lower on a predicted rain that doesn't materialize?”

Sue Martin: I know I feel his pain. You know, we're in an area where it's very, very dry in Iowa. And, um, and even though they've talked about West central, Iowa, 58% of normal rainfall for the past two months, uh, we're not a whole lot better where we're at in Clarion. Um, and, and, uh, National Weather Service, this past week, said “We have 95 hundredths of an inch of rain on the past weekend” and we had no drop. There was nothing checking around the edge of the county, even, there was no rain. Where they got that, I don't know, but Doppler radar can be a little deceiving at times. So I feel his pain. Unfortunately, the market is always the future. So the future and they look ahead. And so if they see things saying it, we've had rain, they're thinking things are going along quite good

Paul Yeager: Futures aren't always indicative of the future or reality. Yeah, I get you there. Jonathan, uh, is a question about China and I brought it, I've brought it up several weeks in a row. It seems like when we think we need China, they don't show up when we don't care as much. If they're here, they do show up. Um, I have a concern that was brought to me that what happens if China doesn't take delivery on all of these November beans that they keep buying? Are you concerned about that? I mean, we did have our first cancellation of 2020 this week.

Sue Martin: Well, I think they will. I think China is really in need. You know, you look at their corn, for example, corn over there is over $8 a bushel and they've got a, they've been moving, I think over 40 million metric, tons of corn has been auctioned off and they're selling a hundred percent out at every auction where we've seen other years where the buyer was a little reluctant and didn't always pay up for the corn. They needed a price of food. Inflation is, is escalating. And so I think it was 10% in June and 10% here, so far in July. Um, so China's got a lot of mouths to feed. And so I think China's going to be taking it even though we are in a tenuous, um, uh, state with them right now, uh, between military COVID-19, uh, you name it. And, uh, but I think I hate to say this, but I think President Trump's kinda got them, uh, kinda cornered where they're going to have to give because they need everything they've got.

And of course that forbid if, if that, uh, potential Black Swan was to occur, they would just be behind the eight ball. Totally. So, um, I think that we'll see China take everything. You, what's scary is you look at Brazil's projections for 20,20 - 2021 production. And they're looking at, you know, 130.7 to 131 million metric tons. It's like that country's production just keeps inching up. And, um, you know, they're, they're going to end up being producing even more acres, planting, more acres than we even have. So they're gonna supersede the U.S. as number one in the world. Um, but you know, it's all about currency and, and there's other countries in the world that need grain not just China,

Paul Yeager: Right? Well, you say currencies gets me to metals. We had a, another run up on gold this week and Glen in Bryan, Ohio is asking “Will other commodities follow the runup in gold and silver?”

Sue Martin: Well, back in the 70s, and I hate to admit this, but I remember the 70s quite well, and there was a saying back in the 70s that, and of course that's when we had the great grain robbery with Russia, and I think we're seeing another one with China that's going to make the Russian one look little, but, um, it did become inflationary. And as money's leaving the dollar, where's it going? It's going to gold and silver because of concerns over inflation. And when we look at, back in the 70s, they had a same, the three "S"s and it was hedges against inflation, was silver, sugar and soybeans. And I still think, you know, markets always, or history always repeats itself sometimes not in the exact same reasons or pattern, but it does tend to repeat. And I think we're going to see some pretty high inflationary times go back to the 70s. We went from $2 something, what $240 or whatever beans up to $12. Look at the percentage, increase in commodities that we have. What do you think that would be in beans? This go around and it took some years to get there, but what do you think that'd be $30 beans. It could be $45 wheat? $42 wheat? Could be $15 corn? I don't know. It's it's, we're in for some exciting time. So we're just getting started. And if you've noticed this this week, we're starting to see volatility kick in all of a sudden on various market save just all of a sudden catches you off guard.

Paul Yeager: I have one last question. And you wrote about it earlier this week and it was about soybeans and we lost Regis Philbin this week. And when he hosted the show who wants to be a millionaire, he used to say, “Would you like to phone a friend?” You said, “Soybeans need a friend.” Maybe I should have used a Randy Newman reference, but he's still with us. So what is soybeans "friend" moving forward?

Sue Martin: I think that, uh, for soybeans, I would have to say it's continued interest by China, but also, you know, China's buying and cleaning, uh, Brazil out, Europe used to be their bigger customer. They'll be coming to us too. Um, I think another thing is getting past COVID, I'm starting to wonder if we aren't penting up demand around the world and countries learned this time, through pandemic, that they didn't dare be without food. And all of a sudden you couldn't get things. In the U.S., when have we ever seen grocery store shelves bare? We never have. In Russia, yeah, you do, but not here. And I think you're going to see countries all of a sudden, you know, back in the 90s, we went to that just in time inventory thing that was so sexy. I think we're moving away from that. And we're going to see other countries around the world, Egypt being a big one, but I think around the world, we're going to start seeing, um, storage facilities being built and having supplies on hand so that they're not caught off guard like a lot of countries got caught this time around

Paul Yeager: Sue Martin. Always good to see you next time. We'll be chatting in the studio. Hopefully thank you so much, Sue.

Sue Martin: Thank you.

Paul Yeager: That will do it for Market Plus. And this is in podcast form as is the market analysis and always go to our YouTube channel. If you want to see any of these videos again, or share and tell a friend. Thank you so very much for watching. Have a great week.

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