Market Plus: Dan Huber

Sep 11, 2020  | 10 min  | Ep4604 | Podcast

Podcast

This is the Friday, September 11, 2020 version of Market Plus. Joining us now, Dan Hueber. And this week's installment of Mr. Hueber's neighborhood. For clients of yours, Dan, you do enlighten us with certain themes. One of them was about Mr. Hueber's neighborhood, at least it felt like that. You also wrote about the word of gov this week. There's a group of people that think the word of gov is too weighted and then there's some that say that's all we have. Where do you sit on that?

Hueber: First if I had known you were going to bring this up I would have put my cardigan on to set the mood.

--

Hueber: Certainly a difficult question. We all have become disgruntled with some of the numbers that come out of the USDA time and again. That said, I kind of go back to the origins of why we have crop reports and it is really something started by Abraham Lincoln for the sole purpose of gathering crop data because farmers really had little access to it. And again the large, the grain industry, the livestock industry at the time had better information and this was a way to try to provide better information at the ground level. And there's some problems -- one of the challenges that the USDA has confronted is they are asked to do more every year with less dollars. So they're shifting and relying more and more on statistical analysis, statistical background which has a purpose but it will never truly replace boots on the field, doing crop surveys and that type of thing. Granted, one of these days we're going to have the technology to the point to where satellite is going to give us all the answers we could ever really want to have coming out of the field. Until we reach that point we have an imperfect system. But I still think because it is unbiased -- over the years you hear all these conspiracy type stories to keep the price of food products low -- I don't know if you've ever done it, I went out on the USDA lockdown a number of years ago and the idea is that they're actually conspiring to try to manipulate these numbers. I think you soon pick up that that's not the case. They're doing the best they can with the tools they have.

Yeager: That is a theory that is out there. Instead of the politics of that, let's ask about the presidential election. Oh wait, that's in Market Plus Plus. Let's start questions here that we received via Twitter. Dave is asking us, with no carry in the bean market how would you market the 2020 bean crop?

Hueber: Keep in mind no carry, we have less carry than we necessarily thought about but 450 million bushels of beans is by no means a tight carryout. If we were talking 100 million bushels of beans then we have a completely different story there. When I look at that 2021 November beans right now pushing the $9.50 area that is for many $9 cash coming out of the field. I really think it's time to probably step up and go ahead and get some beans on the books, not that you want to go hog wild by any stretch of the imagination. One of the big caveats there is we still don't know what is going to happen in South America this year which could change the entire picture as we look out over the next three to five months. But still one in the hand is worth two in the bush, so I think $9 beans with an average yield is worth taking a hold of at this point in time.

Yeager: That's Dave's question. We did kind of get Brent's question in Oklahoma. He was asking about feeder cattle. We'll just kind of quickly highlight it again if we could. What has really been pressuring feeder cattle? Boxed beef sales are still strong. We did rise but there is always still that pressure on the market.

Hueber: This is the time of the year where I think seasonally we tend to see the feeder cattle market set back a little bit because we know feeders are going to come off of pasture, they're going to move into feedlots, plus in that 2 week period where we saw this setback in the feeder cattle market very much coincided with the rally in the grains, psychologically that probably worked against the feeder cattle market as well. Right now it looks like we probably weathered most of that and technically we're oversold. I think we've got room to bounce back here again. Beyond that I just don't know if we can sustain the demand for the beef market into the winter months so that can usually be a little more difficult time to try to look at any of the cattle markets moving much higher.

Yeager: There is the theory of those that didn't have power for a few days through the derecho having to restock but that's not going to be enough to eat through demand. I do have another weather question. This one is about frost. It was raining in certain parts. But Bradley in Upland, Nebraska was asking about, what's going to be the yield impact of frost damage? It wasn't nearly as widespread as maybe forecast but it still had an impact.

Hueber: Certainly a local impact -- anybody who has been through frost and handles physical products realizes it usually becomes more of a quality issue than a major volume issue. So I think in those areas impacted you're going to have some off grade grain you're going to have to take care of. When it comes to the overall 15 billion bushels of corn and 4 billion bushels of beans we're producing in the country the effect is probably going to be somewhat negligible.

Yeager: And that would be similar to what some of the acres were, when we had that August USDA report, which is like Sheranda in Centerville, Missouri's question asking about, we had reports of all these record breaking harvests in corn, soybeans, cotton and spring wheat but then we had flooding and high wind damage and drought. So this is, weather has changed this story dramatically but it's not the only story in 2020.

Hueber: Right, certainly demand is the other part of that equation that we don't really forget about and the 800 pound gorilla in the room is China and without them we'd be questioning where demand is. But they have just been on an insatiable demand for corn and soybeans both and for all intents and purposes it looks like that will continue. So truly coming back to what you just mentioned, the event that really changed the whole picture psychologically, even more so the demand, were those storms that did hit Iowa so hard and realistically we don't know the total impact just yet until we get combines rolling. But there's been estimates of anywhere from 300 million to 600 million drop in production which is substantial. That really changed the corn market from what potentially could have been a rather negative outlook into one that is at worst neutral compared to last year.

Yeager: It wasn't just Iowa. We’re talking 700 miles that storm and what it caused and the damage in the towns. You were fortunate there where you were at. I want to finish with South America from our friend in Canada. Phil in Dresden, Ontario is asking us about with renewed U.S. soybean buying from China, the 800 pound gorilla as you refer to it, and a big move in world vegetable oils and soybean meal, will "beans in the teens" get back into the conversation in 2021 depending on what happens in Brazil?

Hueber: Absolutely. I would say do keep in mind that we have had quite a move in the oil markets. A lot of that was stimulated by COVID. Shut down of the plantations in Indonesia, we just were not running the palm oil out which led to a pretty strong demand for the bean oil products. China has finally moved over, they have been very substantial buyers from us, we were very competitive that made that work. But looking forward even on the reports here today the USDA bumped the Brazilian estimate up to 136 million metric tons, another record crop out of Brazil and the world has really had that factored in and is counting on that happening at this point. And as we have already heard in the weather forecast we have a La Nina forming. There is, we don't know how intense that is going to become, but there is some historical precedence that with a La Nina you end up with less than ideal weather conditions in the southern hemisphere. I think that will keep markets certainly cautious as far as trying to get too bearish. Getting beans in the teens we're going to have to have some real problems down there for that to happen but right now the question mark is where is the risk? The risk is growing that next crop.

Yeager: I believe the questions back in July were could we get back to $10. And we're knocking on the door. All right, Dan Hueber, good to see you. Next time bring the cardigan.

Hueber: Likewise. Will do, thanks.

Yeager: Next week we'll look at dredging efforts on the lower Mississippi River and Tomm Pfitzenmaier will join us to analyze the markets. For all of us here at the television show Market to Market, I'm Paul Yeager. Thank you so very much for watching, listening or reading. Have a great week.

Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.

Market to Market is a production of Iowa PBS which is solely responsible for its content.

Grinnell Mutual Insurance
Sukup
Accu-Steel
Pioneer