Market Analysis with Sue Martin

Yeager: The Senate voted three times this week to limit the president’s move to use his emergency powers to increase tariffs on China and Brazil. For the week… The nearby wheat contract gained 22 cents and the December corn contract added 8 cents. Soybeans seemed to be along for the ride on the trade and tariff express. The January soybean contract improved 55 cents, while December meal put on $27.50 per ton. December cotton expanded by $1.36 per hundredweight. Over in the dairy parlor, December Class Three milk futures fell by a dime. The livestock market was lower. December cattle sold off $4.25. January feeders cut $16.28 and the December lean hog contract weakened 62 cents. In the currency markets, the U.S. dollar index was higher by 88 ticks. 

November crude oil dropped 69 cents per barrel. COMEX gold lost $101.80 per ounce, and the Goldman Sachs Commodity Index was down almost five points to settle at 556 - 90. Here now, to lend us his insight on these and other trends is one of our regular Market Analysts, Sue Martin. 

Sue Martin: Hi there Paul.

Yeager: This week. The story continues to be one that kind of falls to the back burner. We just aren't focused on it. It was, was it on. Why was it along for the ride with corn this week.

Martin: Well I think wheat was you know, first off we had a nice, good rally in oats. There's that old saying, oats know, but wheat and oats fell apart. And even in one day lost $0.25 at one time. And then the wheat market took off and started to confirm. And I think what it is you've priced in all the good crops that have been produced around the world. There isn't much more negative news to throw at this market. And so I think the wheat market has made a bottom, and I expect better times ahead here for this wheat market.

Yeager: Even maybe a way to attract buyers, possibly late in the day was part of the story. But let's move to corn because for a minute, if I blanked out, I thought maybe you were talking about corn. Weathered. The storm continues to fight, and have we maybe turned the corner?

Martin: I think corn's in a corrective phase at this time. It lacks maybe some nice news as far as the China U.S. agreements. It wasn't. The tariffs were pulled off of that, off of corn. But on the same token, there was no talk about it. And sorghum was a huge benefactor in this negotiation. And I'm not surprised sorghum is so dirt cheap. I mean, corn's cheap sorghum is much cheaper and we have a lot of it. So I'm not surprised at that. But the corn market, I think as we go forward in time, you know, we've had less feed usage because of animals not coming in across the border. And yes, we're feeding animals heavier, but a lot of feeders haven't made it here to consume corn. So I think that's one change we're going to see here in time. When I look at the markets, it's funny how this for 47 area four, 4440 area is like a tough area. I will say to producers, if you have sold cash and you're looking to buy back, which many of them are, and we estimate that the corn farmer is probably 30, 35% sold. I would recommend going as far out as you can. So July this year, last year we thought, you know, you'd have a rally into January. Whatever. This year is different. I think this year we're going to see highs more in the summer. A year of a six, the last well since 1916. So we'll have 11 of them. One year made a high in June. That was 2016. One year made a high in May, three made a high, on July 2nd made a high in August and two in September and two in December. So the favoritism is more towards the heart of summer this coming year. We've got one more step. We're going to go further with that study, and we're going to pull out once we can get the USDA up and working those numbers. Back, pull out data and of course we can get old data back. And we want to take a look at those years and the years of a five before it. Take a look at stocks to usage exports. Just various different fundamentals. And I'm wondering if there isn't going to be something similar in many of those years to kind of guide us even more like, will this be a July high? I don't think it's going to be a June. So we're telling producers, if you're in options, you know, go at least to July, you may have to roll once, but that's where we're at.

Yeager: So it sounds like a technical story in corn, but in beans it sounds like I mean, all this talk is about fundamentals. It's about China. It's about enforcement. It's about are they going to follow through? Are they, are they, are they, pick a question Sue. You can go with it.

Martin: Well first off, my take on this time around and I tend to be an optimist. So I digress. But China knows President Trump pretty well. And the last time around, when they finally agreed to the phase one agreement, then they went into lockdown for three years. Who would have thought three years. And it was because Sino Grain, a lot of their granary managers had been lying and they were finding out that their granaries were nearly empty. And so they knew food was very critical. Plus the fact, trying to, you know, curb COVID. And then also President Xi wanted to make sure he got reelected after that was over with. Then the country came out of lockdown, took three years. So but this time, you know, they after they got past that COVID situation and into a new president, they weren't held accountable. They were let go. And so why wouldn't they take advantage of that this time around. It's not going to be that way. And I thought it was interesting. 25 million metric tons of beans for each year. The next three years. That's when President Trump goes out of office. Now they're going to relook at things in a year. And that's going to be very critical. But I think they'll follow up on this, at least for the next year. And truthfully, Brazilian beans have already dropped $0.50, so they're now the cheapest from January forward in the world.

Yeager: Which has been what we've been fighting to for all of this. So real quick on Sue on beans, Sue, I mean, are we going to do you need us to hold right now?

Martin: I think the bean market's still going to try to kind of grind its way higher. Now that we're over $11 on January beans for example. Even a lead contract of beans continuous, there's a gap from around 1120. Let's see here 1129 to 1137. And I think you go after that gap, then it's the 1160 area, something like that. But beans have been inside range all year, and you had to ask why when last year we had Chinese buying, but not this year. And last year we didn't have tariffs and we did this year, and yet we couldn't take out those lows that seemed awful strange. I think China, we have to keep in mind China can use our Board of Trade just as well as we can, and they're probably using it as they deal with marketing over in Brazil. Now, I've also understand that they've washed out of some cargoes here just recently, and I suspect those are, Cargill's, cargoes that would have shipped by the end of December.

Yeager: And that's what one of those concerns is going forward. That could happen again. We need to go to livestock because that was still a big story from last week. I want to start out of order a little bit and talk more about heifers. Joel in Oklahoma wants to know retain or buy heifers this fall for breeding next year at these prices, or wait?

Martin: I'm going to tell him to wait. And the reason I say that when I was on the show last time and it was actually the show where we were doing the 50th, I talked about, I thought we'd see higher highs in September. We didn't make the higher highs in September. Instead, we had an inside down month, and then we came back in October, took out the lows of September, and then flew and took out and made new all time highs on every single contract, with the exception of taking out the August contract high in August. So the market, I believe, has topped and the psychology has changed. And I one thing we have to keep in mind, going back to 2000, not 2000, 1975, 76, every year, a first off, in those years, I would have to say there were four other years similar to this one where the June contract made the highs for the year. Then the August came up and took the June highs out and made higher highs. One of those years. Now, two of those years have made the high. In August, one of those years put the high in in September, one in October and one in November. All of the years broke into December, and I think our market's going to go down in December. I don't care if we make an inside up month in November. I think it's going to roll right back over and fall. I think the one thing so I'm thinking that he'll get a better chance to buy heifers cheaper next year than this year. Now, a year of a six, we're ending a year of a six. Next year, all of them has taken since 1975-76. Every one of them has closed lower at the end of a year of a six than you did at the end of a year of a five.

Yeager: Which could be part of the. We have to ramp up and try to expand and retention, and all these things are going on. I'll get into that a little bit, but I need to ask you, in the final few seconds about hogs, they went lower this week. Is this still just a response to what's been going on with beef?

Martin: I think a little bit. And I think the hog market is, we're, seems like we're following with Marketings and what have you similar to what the pig crop report indicated. So the USDA might be a little more on target this time, but I do think the hog market's in line for a nice little corrective rally. Will it be one that holds us all the way into February? A lot of times you'll rally hogs into February, but I think you'll rally, pull back, and then we might try to make another effort. But I wouldn't sell hogs here. I wouldn't do that.

Yeager: You'd be holding just a tiny bit longer.

Martin: I think so.

Yeager: Well I have great questions here and a lot more. I know that's on your brain that we'll get to here in a few minutes.

Martin: So, you know, that brain could be shallow.

Yeager: Well, we'll find out here in a little bit. Thanks, Sue. Great to see you. All right. That's Sue Martin everybody. And you have been watching the analysis segment in a moment. We are going to continue in that online only segment that we call Market Plus. So here's how you find it. Search Market Plus with Sue Martin. Wherever you get your podcast to hear that conversation. Or here's a different way, go on to our website of markettomarket.org. We have the transcript right there. I want to let you know that our Facebook page has been a place for much back and forth over the news of the day here. Recently. This week we posted links to that 50th Anniversary Show program that featured 11 of our analysts who was just talking about it because she was on it as well. Join in on that Facebook page, see what else is there when you follow market to market. Next week, we are going to look at. Thank you so much for watching. Have a great week.

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