Market Plus: Sue Martin

Feb 26, 2021  | 13 min  | Ep4628 | Podcast


Yeager: This is the Friday, February 26, 2021 version of the Market Plus segment. Joining us now is Sue Martin, who has been extremely patient and she's going to have to listen to me for a long time. We're spending part of our Friday night together. So before I even get started let's just say you are going to be part of our pledge pitch on Iowa PBS tonight. A lot of stations are doing this. I don't think I've even told you everything that we're going to pledge tonight. So if you haven't watched we'll put some links on our Facebook and Twitter page about how you can see some of the things we're talking about. They're live events that you can watch. So, Sue, we used to have, people call in but we don't have volunteers tonight to call in with their questions. So instead they sent them to us via email and Twitter. We're going to start with one that kind of finishes up on what you talked about in the program. Aaron in Ocheyedan, Iowa, he says, will you please speculate on a 2008 versus 2021 comparison in a lot of commodity charts? You did do that. But I didn't ask you, how does this story end? How did 2008 end? We know it ended poorly in the U.S. economy. But how did it end in commodities in '08?

Martin: Well, it ended poorly in 2008. But what was interesting was we have these cycle windows that we follow and they are done off of volatility and I went back and looked at 2008 because of the similarities of Chinese buying, because of the Beijing Summer Olympics and they were culminating and this year it's the Phase 1 agreement that is going to culminate. And it was interesting because my cycle windows spread out starting from this week, this past week, now into May. And I've not seen that, boy that's rare. And so I went back and looked and exactly the same thing in 2008. But what's interesting is also looking at the pattern that we've got going, I think with these cycles spreading out, are we going to continue to just click along and make higher highs? I don't think so. I think we're going in for a catch your breath moment, one that is probably very healthy for the market and two, it lets South America, Brazil, get caught up on their -- they'll get those crops out -- but it lets them get caught up. And once the weather clears a little bit for them those farmers will make hay, they'll get it out. And then all of a sudden that market catches because now what happens, the late crop, I want to say maybe two-thirds of the corn that is produced in Brazil is the safrinha corn and it is the corn that is exported majorly. Well, that crop is going in one, because of late planting, behind soybeans. The later you harvest the beans the later the corn goes in. Two, the weather being delaying it getting in as well in some of these areas because of too wet, it's going to stick that safrinha corn into pollination and reproduction right when they start to turn the hottest. And that to me, at the same time we turn hot here according to my weather sources, we're going to see a very warm May and June and dry. And then you look at the drought monitors and a major chunk of the Midwest, especially from the Mississippi west and from the Canadian border down through Texas, or at least down through Arkansas, it is going to be very, very dry.

Yeager: Now, I've heard you say it and most market analysts say plant in dust, your bins will bust. But, some years it doesn't.

Martin: Well, it doesn't, but the reason this will have an impact is because yes, while they can plant and maybe garner more acres because it's going in easy, it also with the supplies or the stocks tightening as we are in this year and each month we keep tightening them and feed usage had to be good through the month of February, but as that occurs the fear of that crop, those stocks not producing like they should just creates even more -- look at soybeans what you would have to have for a yield on there just to hold a 200 million bushel carryout. This is going to be a very tenuous year. So I look for us to rally, break first, we might try to rally this next week and then turn around, break into late April, catch, start to move up and work our way up into summer. I think it will be either a June or July high is what I'm looking for and we'll nail down the dates as we get closer to see how this thing keeps evolving. But then I think we catch, weather moderates a little bit and we start to fall down as we move into November.

Yeager: Okay. That gets into, we talked about it in the livestock market with some of the consumer. But this one from Antonio on Twitter, are current price rises a sign of hyperinflation coming?

Martin: Not yet.

Yeager: Okay. Casey in Nebraska, this one is a cow question. He wants to know, do you see the bullish fundamentals already priced into the deferred cattle futures? Do you see outside markets or weather as the biggest risk going forward?

Martin: When I look at the cattle market, the last time I think I was on this show I talked about how I was very positive October cattle and thought they could probably go to $140 or something like that and I still believe it. I think that the fourth quarter of this year, by then our economy should be hopefully rolling pretty well, you'll have people being able to get out, go to restaurants. But we've already set a new stage where people have freezers now in their homes as well. And we're going to be able to, I think the demand for beef is going to be good, not to mention on the export market as well as we go forward. And so I see the market, the fourth quarter unlike 2008 when it wasn't any good into October, I think we will be moving higher through October, December and into April of 2022. There is one thing that bothers me potentially with the cattle market for this summer and it's the fear of weather, as dry as that drought monitor is, I'm wondering what is going to happen with the cow-calf man. If our pastures dry up that could force a liquidation.

Yeager: Well, especially if they had to feed from their stocks last week when it was so cold and had to change their feed pattern because whatever couldn't get into them that may have come. So that is an issue. In that same region in the drought monitor where it's dry, Cody asks via Twitter, how many acres of wheat will soybeans displace this year? And what are the factors that would lead you to your answer?

Martin: Well, if we pull acres -- first I think it's hay that is going to give up acres and I also think that you'll see some CRP come out and maybe move into acres. If it's -- I could see possibly maybe wheat acres to the north coming out and going more into beans possibly. Corn pencils out very well and so it's going to be interesting because if you look at crop insurance I think, I didn't get a chance to add in Friday's price, but coming into Friday we were I believe around $11.82 on beans for the month and then on new crop beans and then also $4.57 I think on corn, December corn. So you've got some nice levels of support there that guarantee a nice little profit on the farm, at least an underpinning of nice. So my take would be protect those values as you get into early summer, I'd be watching that very closely and I'd certainly have yourself floored or if you're going to make off the combine have them done, get them done. I think that when I look at -- this is the year where I think you market your crop and then you look at reownership possibly in the fall, kind of a seasonal, just a typical year. I am extremely, extremely bullish going into 2023 and if I told you where I thought things were going you'd think I had lost it.

Yeager: Oh, well Sue. You just wait what I have written down right now I'm going to ask you. First, before I get to that, Wade of Kodiak, Alaska, if you had a specific question Sue kind of touched a little bit on it but give a broker a call for your question. I'm going to come back to Phil. But Stephen in Virginia is kind of reading your mind, Sue. He knows, he has watched you for years. He says, Sue, will we see soys in the 20s?

Martin: You're going to see more than that. I think it's possible that in 2023 we could see, and this is just I'll pace it, but I think you could see $30 beans. I think corn maybe $18, $19 and wheat goes to $42 to $45.

Yeager: And is it because of the same factors that we're talking about now, the shortness of supplies, the increased demand, a weather issue?

Martin: Inflation.

Yeager: Inflation, all of those play --

Martin: Great Grain Robbery, you throw it all together. Oh yeah.

Yeager: That goes on for years, that's not just a one year thing?

Martin: Kind of like in the '70s, it took us into '73.

Yeager: Okay. That is an incredible statement and one that we will watch. 

Martin: And one that you could really get me on.

Yeager: We would never do that, we don't play tape back like that. But this is another question. This is a question, Phil in Dresden, Ontario, he's asking, this is coming up real soon. Will the increase in CME speculative limits on March 15th create greater volatility in grain prices? Will it create better marketing opportunities for farmers? Or is it about something else?

Martin: I would say that there's both sides there. When you expand the limits then the opportunities are there for the managed money to keep doubling down or pushing. And they don't go willy nilly and just buy because they want to buy, they have to have reasons and technical reasons besides. But when you have the speculative money, I've always been a proponent of the speculators because we need them to move the market so that we're not at the beck and call of the commercial --

Yeager: 2 to 3 cent moves, 20 to 30 instead.

Martin: Yes, we need that speculator there to give us the volatility so we can have those prices that the farmer wants or needs and then they need to be able to take care of them or secure it. But it also works the same on the downside and markets always go faster to the downside than they go up. So, I would just say it's going to work both ways. But we're accumulating so much more interest in markets and there's so many more vehicles coming. You've got Brazil now that is going to have, where the CME is going to have corn and soybean Brazilian contracts, which I think is kind of intriguing. So it's opportunity but with opportunity comes that risk.

Yeager: Thank you, Sue, appreciate it.

Martin: I beat around that one, didn't I?

Yeager: That's all right, I'll pin you down later about that. We'll discuss that tonight on the pledge. Thank you, Sue, good to see you.

Martin: Thank you.

Yeager: That will do it for Market Plus. Thank you everybody who submits questions. We don't get to them all but we really appreciate them because it helps understand what is on your minds. So this also is vital to our mission because during the next few weeks we're headed into an important part of public television and that is pledge time. If you value the work done on this program, please consider supporting the work that we do with a financial contribution to your local PBS station. Next week we will check out the report card for the Mississippi River and Shawn Hackett will break down the commodity markets. I'm Paul Yeager. Thank you so very much for watching, listening or reading and 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