Market Plus: Dan Hueber

Sep 27, 2019  | 11 min  | Ep4506 | Podcast


Howell: This is the Friday, September 27, 2019 version of the Market Plus segment. Joining us once again is Dan Hueber. Dan, welcome back.

Hueber: Thanks very much.

Howell: Dan, we've got a great list of questions set up for us today. You mentioned during the main program the U.S. dollar and that has really been holding us back on U.S. exports. So a question here from Terry on Twitter. He wants to know what factors could lead to a weaker U.S. dollar?

Hueber: One of the biggest challenges right now I think the dollar probably would have weakened already if we were not in this battle of the currency markets. You've had the European Union basically throwing some stimulation into their markets and cut interest rates as has been the case in other nations. Yes we are seeing interest rates move lower. Probably the biggest way to see it drop would be a harsher cut or a surprise cut in the interest rates but that doesn't look like that's something the Federal Reserve has in the cards here at this point in time. So as much as anything I guess if we started seeing some economic signs finally that yes there are some indications in some of the global businesses that the trade war is slowing down the economy, the tough part about it is even though the dollar probably should have broken already we are kind of that reserve currency. So when people get nervous about a Saudi Arabia oil attack or something of that nature they tend to rush in and buy the dollars and here again too if we're paying any kind of an interest rate it's better than some of the zero or negative rates around other places in the world so that just keeps attracting money into the dollar.

Howell: Dan, I think that segways in nicely to another question coming to us from Chris in Bowling Green, Kentucky, looking at commodity rallies. He said, Japan and Taiwan both make big purchases and prices still struggle so what kind of sales do U.S. commodities need to see a price rally?

Hueber: Well, of course when you look at countries like that they're really pretty -- looking at Mexico, Mexico bought some great quantities. They're almost taken for granted because they are such consistent buyers out there. I think at this point in time we need to start capturing some non-traditional markets, certainly opening up if we can see China open up again that would be a great step forward to the soybean market. Corn exports have really been a very sour spot all year long, that has just been one of our nemeses of ours, any price recovery in there. So here again South America, Brazil in particular, had a record crop of corn this year, Argentina had a pretty solid crop, so it's just a very competitive nature right now and again with the dollar maintaining the strength it has we have just not been where we need to be in that world market to remain competitive.

Howell: Dan, with all those factors, especially in the corn market, you talk about a 2 point whatever billion bushel carryover, you look at these poor export markets, now maybe a potentially better crop than what we were expecting back in April and May. Is there any reason for corn prices to go higher?

Hueber: Well, one we have factored all those things in so those are all known entities and realistically should be well mixed into the batter at this point in time. So number one is yes we have kind of raised the expectation of what this crop could be. Really the proof is going to be in the pudding and let's not forget there is one more element and I'm not saying this necessarily has to happen this way but in October the USDA will review the acreage numbers once again and they potentially will make some adjustments on acreage. And of course that has kind of been forgotten about at this point but it has really been a bone of contention ever since the end of June when they came up with the original planted acreage numbers. So between that and we really don't have a great idea what this yield is going to be yet. So yes we've got the USDA out there close to 169 bushels, there's a lot of privates that are agronomists, strong backgrounds in ag production that are down towards 163 bushel. So we could still develop some elements of surprise that would lift this corn market out of here. Would it be a gang buster to the upside? No that probably doesn't seem to be in the cards. But again let's not forget we have South America moving to the field right now, not great conditions down there. Brazil the planters are sitting because it's just too dry of conditions and not only does that delay the soybean crop, it delays the second crop of corn in that nation and all those things just fell into place last year that really enabled them to put out such great crops, corn and beans both. Those things aren't lining up quite as favorable this year.

Howell: I want to go back to the October report that is coming up that you mentioned there with acreage in particular. What is the Dan Hueber estimate?

Hueber: I don't know if the USDA is going to necessarily drop the planted acreage much at this point in time. But I think they probably or at least have a decent probability of seeing the harvested acreage number as the percentage of the planted continue to be ratcheted down. So I haven't tried to run an actual number on it just yet but I wouldn't be surprised to see another half a percent or maybe even a percent drop in the harvested acreage number. And I still think we could see that yield ratcheted down just a little bit. Where harvest is happening right now, Kentucky, Tennessee, places like that I understand some phenomenal yields but boy they have been the garden spot all year long. So it may be a different story when we move into the heart of the Midwest.

Howell: And that is what I think everybody is waiting for to see what the heart of the Midwest has as far as what is actually in the field. We've got a question here from Norlin in Hampton, Iowa. Is this as high as corn and soybean prices are going to get this year?

Hueber: If you're saying this year, you're talking about the next twelve months, or are we looking at through harvest time?

Howell: I'm guessing through harvest time.

Hueber: I would say until we find out some more information on exactly where we stand with China in the next year, what we have for yields, $9 beans is going to be a tough number to get above. Now that said, we may not break a whole lot more than 30, 40 cents under there. It looks like it's more of a sideways pattern. Similar on the corn, I think we could probably if we get some yield adjustments or some yield issues certainly we could push the corn a little bit higher than we did here back into September. But yes, we're not looking at any kind of a runaway market to the upside. If we even got back into the above the $4 range I think it probably would be fortunate for at least the immediate future, when I say immediate between now and the end of the year. I think if we're going to look at gains in the markets it's going to be post-harvest and probably post-New Year at that point.

Howell: Okay. So Dan, would you be advising folks to store that grain then?

Hueber: I think the market is giving you the incentive to store, you've got a reasonable carry after the month of July, yes basis levels in many areas are better than normal but on the same token it still looks like there to be a pretty good return to storage. Now does that mean you want to speculate on the price moving up? Not necessarily. The storage decision is really what the market is telling you between basis and spreads if you store or not store. But that said, with particularly now when we start to see the wheat starting to shape up a little bit, wheat tends to kind of lead the corn market, so I think if we see the wheat come out of the doldrums here that's a pretty good sign that corn will ultimately and eventually follow. But how is the best way to speculate on that? Probably not necessarily holding all of your commodity unpriced in the bin. If you want to have a position on that I think you tend to be better off at least money wise to do it with futures or options.

Howell: Dan, we had a couple of reports, we've got a couple of reports coming up, but we had a report on Friday, the hog and pigs report. A question about that came into us from Ryan in Humphrey, Nebraska on Twitter wanting to know, how accurate do we feel the pork exports are? And are they current with the packers? And second, are all of the carcasses that are leaving being accounted for on the export report?

Hueber: Well, granted we get the weekly export sales reports, the total numbers are usually about a 30 day lag in there so I guess there's always a little bit of hesitation, a little question mark on how well they're being accounted for. I don't have any, it is all ultimately measured so it's not like there is this major black market out there that is trying to sneak pork out of this country but I guess that would show up in the warehouse numbers. So yeah, I think the numbers are there but I think that whole idea that yes we're always kind of looking back 30 days to see where we are in the pork exports, started out the year with some great numbers but then the combination of trade wars and not to mention the strength in the dollar all year long has really just waned that pork and beef both to where we're really pretty flat on the year.

Howell: Dan, final question for you. We are pre-report coming out on Monday. What are your estimates for that quarterly stocks report?

Hueber: Again, usually not a major surprise in that September crop report or September stocks report. We're looking at about a 2.4 million metric ton beginning stock I guess you'd say. It probably, I would tend to think we're going to see the beans under a billion bushels, which psychologically will be a good thing, it's still going to be compared to what we're normally accustomed to in the soybean market 900 million bushel of beans is just a pile of beans to work through. So granted we've already projected something less than that for this next year but that said that is the limiting factor. If it's 2.4 or 2.3 it really is insignificant on the corn because it is a very comfortable supply as is 900 million bushels of beans.

Howell: Dan Hueber, always a pleasure.

Hueber: Certainly, thank you.

Howell: Join us again next week when we assemble a blue ribbon panel to break down the latest major government reports. Elaine Kub, Naomi Blohm, Ted Sefired and Darin Newsom join us at the Market to Market table.  Until then, thanks for watching, listening or reading. I’m Delaney Howell. Have a great week!

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