Market Analysis with John Roach

Announcer: Next, the Market to Market report.

Kohlsdorf: Vladimir Putin’s comments about the potential of going to war with Europe sparked a rally in the wheat market. However, without any new comments, the market settled back as the market waits for next week’s WASDE.

For the week… The nearby wheat contract lost 3 cents and the March corn contract fell 3 cents. 

Secretary Bessent’s comments and the lack of flash sales to China did little to help soybean prices.

The January soybean contract dropped 32 cents, while January meal cut $11.20 per ton.

March cotton moved 80 cents lower per hundredweight. 

Over in the dairy parlor, January Class Three milk futures improved 12 cents.

The livestock market was mixed. February cattle added $9.32. January feeders put on $16 and the February lean hog contract cut $7.65. 

In the currency markets, the U.S. dollar index was lower by 77 ticks. 

January crude oil added $1.05 per barrel. 

COMEX gold dropped $10.60 per ounce, and the Goldman Sachs Commodity Index was up by more than 7 points to settle at 565 - 80.

Here, now, to lend us his insight on these and other trends is our senior market analyst, John Roach. Do you like that title, senior?

John Roach: I like that, thank you Brooke. It's nice to be back. Nice to see you.

Kohlsdorf: Nice to see you too. Okay, so starting with wheat, we heard Putin's comments about potentially blocking any exports out of the Black Sea area. There was a bump with wheat. Didn't last long, though. What's going to give that market some momentum?

Roach: Well, we need to have the fundamentals change. And right now the fundamentals are all looking lousy for wheat. Actually, production levels around the world seem to all be increasing a little bit when we get reports out the crop out of Argentina and Australia are both have been bumped higher. The Canadian crops a little bigger than we thought. And so we have supply issues in wheat that will just take time to work our way through.

Kohlsdorf: What about we also heard the reports about those insurance rates for the Black Sea. Ships are surging, giving given everything that's happening in that area, could that impact the market in any way?

Roach: Well it could change the ability of the the Black Sea region to be able to export when when rates go up. That means that your costs to transport moves up, and that puts it a little less competitive in the world marketplace. And so that certainly could help a little bit. But but our difficulty right now is our world supplies are adequate. They're spread around in most all the production areas, and we're just having to eat our way through them.

Kohlsdorf: Corn demand has been strong. We had some sales this week. Ethanol production is good. So why is that market so sluggish?

Roach: You know, it's it's again we have big supplies particularly in this country. There is some question about whether the yields were as good as what the USDA estimated in the last reports. We'll learn more in January for sure. But the ethanol demand has been excellent. In fact, as this week we set a new record weekly record on ethanol production. And and we're running at a faster pace than what the USDA forecast is right now. The demand from an export side on corn is also running at a faster pace. I think we're running about 7% ahead of the pace we would normally have if, in order to reach the USDA forecast. So the possibilities are good, actually, that the USDA could raise the demand forecast for corn. And the next report that comes out next week, whether they'll do it or not. I mean, there was some argument earlier in the year that they had two optimistic forecasts, but so far, those forecasts seem justified, and we're actually running ahead of that pace. And so they may choose to raise the demand side of corn. But again we have a lot of corn. We're eating through a very big crop. When you look at it from a graphics standpoint, this year stands out considerably larger production than than what we've seen in past years. And so we just have to eat our way through that. We think we're into a time frame on corn and quite frankly, on all the row crops that we raise. We're in one of those time frames. We came off of very big prices and tight supplies into a period of time, with big production in South America, as well as in the Northern hemisphere. And now we have big inventories of everything, actually. And so we think that puts us into relatively narrow price ranges for the foreseeable future until something changes. And and of course, you can change that in the Southern hemisphere right now, if the weather problems persist in some areas and there are some weather issues there, we did see a Dr. Cordonnier pull his bean estimate down for Brazil a million tons this week. The weather people cautioned us this week to pay attention to Argentina, that the weather conditions there are a little worrisome. They're getting spotty rains. It's a La Nina year, and so there is some possibility out there. And that's given us some of the price advance that we've had. But the reality is that we have big supplies, and that means that we have a we're going to have a confined range of trade until until that changes again, keep your eye on the southern hemisphere. And then in the northern hemisphere when we get into our growing conditions and our situation. But at the moment, nobody's very worried about weather or very worried enough about weather to give us much higher prices. So that's what's keeping the lid on the corn market. Even though demand has been very strong.

Kohlsdorf: Anything beyond South America, weather that could greatly impact corn.

Roach: Well, it's possible that we could have some kind of a surprising demand come from some sector, but really, that's hard to do. I mean, as I said, we're already setting records on ethanol production. We'd like to see them change the standards so we could have 15% ethanol blends all year long. And that's still out to the political decision. And so that could that could do help us with the demand side. But we really are going to depend on a change in supply. It would seem to me that's the more likely side rather than the demand.

Kohlsdorf: All eyes still on China for soybeans. So Secretary Bessent saying, well, now we have until February for China to fulfill its commitment of 12 million tons. Is that still doable?

Roach: Well, there's a there are a lot of people that will say that it's very difficult to do that. They don't have the storage capacity really to handle that at the moment. We looked at the totals, there was another sale announced today, 642,000 tons, I believe, was the number announced today. And and if you take the Chinese loan purchases together with the unknown sales to unknown destinations, it told us about 3.5 million tons of the 12 million tons he's talking about. So there's still a lot yet left to buy. There's rumors around that maybe they've purchased another 3 million tons that haven't been announced at all, but those are just rumors at this point. And the performance of the market today with was was one of of disappointment that we just aren't getting enough tickets on the buy side of the ledger coming into the marketplace. And because prices on soybeans have turned down, we're now in a downtrend. We measure that if the price is below the average for the prior 20 days, we say that's it's a downtrend. And that's when when we normally see commodity funds who are trend followers, mostly they'll when the trend turn down they become sellers. And today we we saw heavy sales with out buyers on the other side and prices slid.

Kohlsdorf: Okay. So I'm going to social media for our next question. Dan in Iowa is saying or asking is the head and shoulders chart formation on the nearby soybean futures chart something to be acted upon or shrugged off? And why?

Roach: You know, head and shoulders formations are you have to pay attention because basically you have a rally up, the market falls and then you have a higher rally with more energy, and then it falls and then it tries to rally and then fails. So it's really a busted trade, if you will. It's a bull market that was trying to go that tried to go a second time and then failed. And so you definitely have to pay attention. And as I said, we broke the 20 day moving average. We accelerated to the downside. Today we left a quite a bit of trade off to the left hand side, if you will. And so yes, you've got to be concerned about that. But for most farmers, making a sale in this kind of environment is a very difficult thing for them to do. Farmers need to pay attention to some oscillators rather than chart patterns, typically, and we generate sell signals when we get the markets into an overbought condition. And so we made a lot of sales back in the in the November peak that we saw. And now we're in sliding. And we're actually on the other side of the market telling livestock producers we have a buy signal on meal. We have a buy signal on beans, but we're not going to pay much attention to it. But we definitely think if you're a livestock business, you need to pay attention to the buy signal on meal. And by the way, we also have a buy signal that we've had this week on heating oil, which is the equivalent of diesel. So farmers looking to to fill the barrels up, it's this is a good time to to do some of that. We've had several of those buy signals on, on diesel. And so you don't have to buy a lot but but it's time to get some coverage on this on that market. And it's time to get some coverage over on the meal side, we think from a standpoint of selling beans, if you're a farmer, I wouldn't recommend doing that. Now if, if, if you made some sales when you should have back when we had the markets up at the top side, hopefully you got enough bushels sold that you can be a little more comfortable. Normally we will have three sell signals between November and March, and so we'll be patient. We'll see if there is a little weather worry or something that comes along gives us a better opportunity than where we are today.

Kohlsdorf: Let's talk about the cattle market. So they had there was a boost. They were higher. Are we going to see some new highs in that market? We've got about a little less than two minutes.

Roach: Okay. Well we'll talk fast okay. You know the good news that came in this week was the reports on the Good Friday or, sorry, the Black Friday and Cyber Monday. According to Mastercard, sales were up 4.1%. That spurred the cattle market, which had been worried about consumer demand and consumer financial situation. And and that signaled that maybe the consumers got more money than we thought. And so the cattle market lit on fire this week, actually, we've gained half of the losses back that we've had since the Catalan Fed report. And and that market is poised for higher price levels. You have to be cautious because we're dealing at very high prices and we're dealing in an environment where demand can slip here. The holidays are directly ahead. They could turn out to be good or turn out to be bad. We've lost some Packer capacity. So there's some things on the negative side. Cattle, cattle weights this week, carcass weights hit a new record. And so we're really moving the cattle engine as hard as we can in the demands, taking it all. And so the cattle markets in a pretty promising spot right now.

Kohlsdorf: Yeah it is. And you mentioned something about demand. It kind of feels like people are getting used to paying a lot for beef.

Roach: It's amazing. I like going to Steak steakhouse restaurants and and the prices are very, very high and they're full.

Kohlsdorf: They're full. People still buying their their red meat. Yeah. All right John, we are out of time. Thank you so much for discussing all these topics. Topics we didn't get to hogs. We'll do that in Market Plus in a couple of other things that we want to talk about with you as well.

Roach: Thank you so much, Brooke.

Kohlsdorf: All right. You've 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 want to make sure you never miss any of our content. So when you subscribe to our YouTube channel at Market to Market, there are benefits of being there. When you turn on notifications, you'll be at the front of the line for our stories Market Plus and MtoM Podcast. Next week. One family's love of farming leads to success on and off the farm. Thanks so much for watching. Have a great week!

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