Market Analysis with John Roach

Yeager: A crop tour of major growing areas gave the pros a chance to shed some light on how close their accounts are to USDA yield estimates for the week. The nearby wheat contract fell $0.02, and the September corn contract added a nickel. Some movement over refinery waivers boosted soy oil, which in turn helped the whole complex. The September soybean contract improved $0.14, while September Meal gained 1330 per ton. December cotton expanded by $0.47 per hundredweight. Over in the dairy parlor, September class three milk futures declined $0.15. The livestock market was higher. October cattle added $7.23. September feeders put on 1533 and the October lean hog contract widened by $1.10. In the currency market and the currency markets, the U.S. Dollar index dropped by 24 ticks. October. Crude oil, strengthened by $1.56 per barrel. Comex gold added $0.37 per ounce, and the Goldman Sachs Commodity Index was up by almost 11 points to settle at five 4485. Joining us now our senior market analyst John Roach. Hi, John.

Roach: Hi, Paul.

Yeager: I wish this wheat story would change, but it hasn't. Still ample supply. Still not a world picture. However, we had a little movement this week with this Russia and Ukraine story of what is going to come out of these negotiations. How big of an impact is that on wheat right now in your eyes?

Roach: Well, I think it's partly the reason that wheat prices are as cheap as they are. I think concern about those supplies becoming more readily available to the world market has pushed our price level down.

Yeager: Do you get the sense that that is the biggest factor?

Roach: No. The biggest factor is we have big production around the world. I mean, the supplies are big, but we've had some restriction to the availability of those supplies because of the restrictions that countries have put in buying Russian wheat and because of the restrictions, Ukraine had been moving and they're moving their wheat. And if there's a settlement in that area, then the Black Sea region, presumably this is what the market's thinking. The Black Sea region supplies will become more available to the world. And, and that's pushed prices down.

Yeager: And are we stuck in this lower price range for a while?

Roach: Well, we might be. I mean, certainly you have to eat your way through these kind of supplies. And so it's going to depend really on what kind of crops come out forward. But the market, we have an expression in the markets called buy the rumor, sell the fact. And so the rumor is things are going to get settled in in between Russia and Ukraine. The fact is, once that happens, then that negative has cast all the pressure on the market that it can. And emotionally, the market can then maybe recover. If you remember, if you go back to 22 when the Russians invaded Ukraine, we peaked the market on the second week of March when we thought that we're not going to be able to get any of those supplies. That was the peak of the market, and prices have slid from that peak. So it would be maybe just serendipity that we would make the bottom when peace comes to the region. We're praying for that.

Yeager: Is it rumor or fact that there's a big corn crop out there?

Roach: Well, at the moment it's a fact. But the rumor has it maybe not as big as we thought. There's been quite a bit of surprise here over the recent days, and that the USDA came out with a very big corn yield that surprised everybody. And then the Pro Farmer Tour this week said, well, wait a minute, wait a minute here. We've got some areas out here that once you get in the field and you look at it, it's not quite as good as we thought it was going to be. And so we're going to find out what the answer is. The USDA will come out with their in-field surveys starting here just in days. And then we'll get those counts on the WASDE report that comes out on in the second week of September.

Yeager: Penny last week nickel this week of improvement in corn old crop specifically. Does that give you hope that maybe that bottom is in.

Roach: Well the bottom was put in with everybody seeing very good weather, very good crop development, good crop ratings and an estimate by Stone X. That was a big, bigger estimate than people expected. And then the USDA followed that with even a bigger estimate. At the same time, we had commodity funds that had built a relatively large net short position. So you had all and you had farmers that were liquidating inventory out of the bins so they could harvest the new crop. So you really had all of those negative factors coming together at the same time that the user saw very little reason to step out and buy anything, because the crop looked big. I'll wait for harvest. I'll buy hand to mouth. And suddenly the market quit going down on bearish news. And then the market started to recover. And then today we pushed up above the 20 day moving average. Yesterday actually above the 20 day moving average. And that says the prices are above the average for the past 20 days. That's a trend change. And so a lot of commodity funds will take a look at these large net short positions. And we may well see, as we saw in soybeans, the commodity funds want to come in and cover shorts. Meanwhile, if you look at the daily sales reports, our corn sales have picked up, the export sales have picked up over this last week or so, after being very slow. It's actually coming together pretty good. And if you look at the total export corn sales, they've been rising rapidly. And that graph this morning shows that we're not very far behind our best year ever on total sales to date. So suddenly the demand maybe is a little better than we thought. At the same time. Well, maybe the production is a little smaller than we thought just a week ago, and the prices quit going down and now they're trending. So there's reason for this market to bounce up in here, and we think we'll get a sell signal this next week. And we think what's important is that farmers need to be mentally prepared to dribble some sales into this stronger market, because it's not going to run away from them. We're just hoping to get enough of a bounce here that we can put a little more money in the bank.

Yeager: You said it because I was looking at my John Roach translator, and it sounded like you were starting to say yes. Maybe there's a sell signal coming on corn. You did have a sell signal on beans this week.

Roach: We still do.

Yeager: And how much longer can that signal go?

Roach: Well, this today was the seventh day. And if you look back in the last 12 months, we had a nine day sell signal and an 11 day. And so we're nine. There were seven days into it and we're just ahead of harvest. We are at an important development stage here on soybeans. I mean, bean yields are determined in the month of August, and we've got a little bit of weather concern and we've got the funds short so we can probably we can hopefully move the market a little bit further. But I want to caution producers, you need to be selling into this, this soybean sell signal. If you're going to need to sell in the next 30 days, you need to be selling into this sell signal. If you're going to need to generate cash flow in the next 60 to 90 days, you need to be selling into the sell signal, and you need to be looking forward to 2026. We've been spending the last two weeks doing marketing plans for farmers, and we've been really happy with the response that we've gotten from our customers. About a third of the people that we call are putting together a marketing plan, and a lot of people have never done that before. And we really advise that that you get a plan put together for the most part, you're not going to like prices this upcoming year. We expect the market to have some weather peaks in the South. American weather is important. That's December January. You better have a plan put together, and you need to have some kind of a system you're following. So you you're able to recognize a market peak, understand that's a sell signal. And you need to have a plan put together. How many bushels am I going to sell on this next sell signal?

Yeager: Well, there's sell signals for one or the other. And Ronald in Iowa wants to know John. And this is a very popular question this week. Farmers that need cash flow this fall. Are you advising them to sell corn or beans?

Roach: I'd be selling beans because I've got beans up giving me a sell signal and I don't have corn giving me one yet. Corn's up a little bit from its bottom, but it's got a really hard row to plow here, to move forward very far. Whereas beans have already had a pretty good move. And I'll go one step further on beans if you're not paying attention to 2026 beans, if you're only thinking 30-60 days, you're short sighted because we've got big production out here and we're going to have probably the same problem next year as we have this year. And so we've got not only a sell signal on the beans that are in the bin, the field. We also have a sell signal on the beans that you're going to raise next year. And you need a plan to get those beans sold.

Yeager: And this is this. This is the crop that nobody really wanted to talk about as a positive going into 2025. And here it is. Sounds like the darling for you right now.

Roach: It is. And I hope that these are the sales that you look back on and say, darn it, I wish I wouldn't have made that sale, but every sale that you make, where the price goes higher, it's always too many bushels. So don't be out selling a ton of stuff. But you have to do business when it's time to do business, and you have to have a plan, and you have to have a methodology that will get you to make a sale. Because if you're not already paying attention to the 26 crop, you're doing exactly what you did last year and you don't like how that turned out. So you got to change your methodology. And our methodology had people selling when they should be selling last year. And we think you have to pay attention and do it again this year.

Yeager: Are you selling any live cattle right now?

Roach: Well, any cattle that already need to go because this is a hot market. I mean, this is we have prices that we know we can't maintain once it starts to break. Cattle on Feed report showed we had a few more placements than what we anticipated. The numbers were pretty much on target for on feed.

Yeager: On feed at 98, placed in July, 94 fed cattle marketed 94. Other disappearance 91. Which number stood out to you then? John?

Roach: The placement number was bigger than expected. They were expecting about 91 and it came in at 94. So we put a few more cattle on feed. Few more people are willing to take a chance. They're putting cattle in at the highest break even prices. Maybe they've ever seen. And so you have to be very careful, make sure you've got some risk management in place on those cattle. But this is a kind of a market that gets up here into kind of rarefied air. And something comes along and suddenly it disappears. And, and, and it costs people a lot of money. So, you have to be very, very careful with these kind of price levels. And market cattle is are ready to go.

Yeager: But I look at that feeder, 4.4% on an already large market of almost $15. Yeah, $15. It's crazy how this has been at this point, though. What takes the air out of it?

Roach: I don't know, you don't know. I mean, it's one of those kind of situations that you can you can look at all different kinds of possibilities, but it's just been my experience in the business over these years that when you get a market that's exploded the way this one has, you just have to expect something to come along.

Yeager: In the hog market that that has been there's a little bit of a concern for a couple of their products with the new administration and what they might do. Does that give you any pause for concern, expanding hog herd right now?

Roach: Well, the good news is that when we're negotiating, when the administration is negotiating with other countries, the product that we have that we're typically able to get some traction on is are our agricultural products and our pork products are high quality products. And, and and as long as the government overseas doesn't restrict them from coming in, we're darn competitive in that industry. And so I think the good news here is that the hog demand will or pork demand will prove to be stronger this upcoming year than what we currently see.

Yeager: And do you think that's partly because of higher beef?

Roach: I think certainly it is. Beef price worldwide beef prices are very high and compared to pork prices.

Yeager: All right John, good to see you. I appreciate your time. We're going to see you this weekend for a a good event, 1977 was your first appearance on Market to Market. We'll talk about that a little bit here in Market Plus. Thank you John.

Roach: Thanks, Paul. Great to be back.

Yeager: All right John Roach everyone. And you have been watching the analysis segment. And in a moment we will continue our discussion in an online only segment. Search Market Plus with John Roach. Wherever you get your podcasts. To hear that conversation or go to our website of markettomarket.org. We will have some images and stories from our 50th season celebration Sunday. In our next Market Insider newsletter. Sign up at our website at Markettomarket.org. To be in that exclusive club next week. Three big challenges facing the pork industry. We'll have that story when you join us next time. Thank you so much for watching. Have a great week.

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