Market Plus: Dan Hueber

Apr 30, 2021  | 11 min  | Ep4637 | Podcast


Yeager: This is the Friday, April 30, 2021 version of the Market Plus segment. Joining us now is Dan Hueber. Hello, Dan. Are there bears right now in any commodities? Are there bulls?

Hueber: There's always a few that are in there trying to snag a little bit here or there but for the most part they went into a premature hibernation this year or maybe they never came out from hibernation because it was a rough winter on them. But they're lying in wait, their moment will come again where they recognize that we just get things overinflated and they have to step in.

Yeager: Riley in Winnebago County submitted this one. He says, how long after a La Nina event has the rains returned to normal in past history? He says they're dry in Winnebago County, Iowa. So that's north central Iowa. Is weather the story?

Hueber: Well, if it improved dramatically certainly that might give them a little something to be interested in. But I think the challenge we have right now is the market knows these things. It knows we're dry across a good portion of the nation, particularly if you get into the south, southwest. Is that going to encroach here? And I think we have already factored part of that into the price. But, it's difficult to determine just how much has been factored into the price yet. But yeah bears usually don't come in just because they think weather has turned. That is a fickle way to trade the markets. I think they're going to turn when they think we've just exhausted the buying.

Yeager: How soon before the La Nina event is over?

Hueber: I don't know if there's that strong enough of a correlation between a La Nina ending and dry patterns. I think there's probably a little more correlation in South America on La Nina years and yes they had some really challenging periods in South America this year. But La Nina and U.S. weather I don't know if we can draw that strong of a correlation.

Yeager: If I'm sitting in Ohio, Pennsylvania, parts of Indiana, I'm going what is this dry thing that you're talking about? If I'm in that position what am I doing right now?

Hueber: Granted you look to the Ohio Valley they have had some very interesting years. You look in the last ten they have had some very late planted years and still came up with pretty substantial crops. We do seem to be having a little longer growing season than we have in the past. So I don't see anybody panicking down there. We have a number of people we work with down in that neck of the woods and I think they're just going about their business and they’ll plant corn right into June if they need to and just work with it. Right now you're not unlike what happened in Brazil with the second corn crop. It was too late to plant probably 20%, 25% of that crop but they did anyway because the economic incentive is there and I think we're looking at the same situation here. Even if those wet areas have to push a little later than normal they've got all the economic incentive in the world to do it.

Yeager: You mentioned in the main program a little bit about buying acres. Is the acreage battle over? Is there anybody out there that's still going, I'm going to flip that?

Hueber: Again, the people we talk to it doesn't tend to be although sometimes when people get moving and the conditions are good they'll continue to plant the crop they're working on, which in the case of the Upper Midwest tends to be corn. Interestingly enough one of the CEOs of a major grain company this last week thought or stated out loud that he thought the corn and bean acreage, he didn't specify the breakdown, but he thought the corn and bean acres will be 5 million acres higher than the March estimates, which is where that's going to pull from I'm not sure. You can get some small grains. You maybe can get a little out of cotton. But cotton is not exactly a shabby price but it certainly hasn't rallied to the extent that corn and beans have at this time.

Yeager: But going ahead to cotton this week, again another -- it finished negative 88.08. But looking at that chart it was on a good run. That could just be a correction or another wave higher.

Hueber: I would kind of tend to say we're not seeing the big demand influx in cotton, particularly the imports from China have been pretty substantial as well. I tend to think the big story in cotton won't be this year. We'll probably lose some acreage to the main crops as far as corn and beans. But I think then you start looking into 2022 and beyond and there is where you could see some real explosive moves in the cotton market.

Yeager: All right. You want to get explosive let's talk about corn. Matthew in Donahue, Iowa submitted this one via Twitter. How far can corn go? He says we're seeing local basis make up for the small break in futures the last few days. So Donahue would be very close to the Mississippi.

Hueber: Sure. Granted as long as the cash market is strong that is really still our true market but that is going to be regionalized. Not that basis is terribly weak anywhere but there are going to be certain points, particularly when you start looking at eastern Iowa where they really had some crop problems last year, don't have the inventory there, the only way to get that corn into those users in that neck of the woods is to get the basis strong enough to bring it from an area that is a little more plentiful. So the upside I guess when you get in situations like this they're certainly unknown and we could see some I don't want to say unheard of but we’re already seeing prices we haven't seen since 2011, 2012. That said, underneath this market yes we are probably chipping away at some of the demand. And I don't -- we talked a little bit in the last show about what is going on in China. Yes they have been a phenomenal buyer to this point. But they don't tell us exactly what they're planning on doing and in fact they might even try to mislead us a little bit. So I think if they are truly having an African swine fever problem we're not really being notified of that. We know that they are encouraging alternative uses. And you almost hate to say it but I think domestically we're just now starting to see food inflation show up in the numbers. And we haven't seen any real panicky type of situation there. But I would not put it beyond anybody in the federal government to say, well we maybe need to pull back on some of our blending requirements if that started getting out of hand and the consumer started complaining about food prices.

Yeager: Right, which was its own story this week in the Supreme Court that the renewable fuel industry was arguing about exemptions and it's the government arguing on behalf of the farmer. All of a sudden they might be arguing on behalf of themselves if that becomes the case. But Dan, the question about how high can corn go, come Monday we've got limit changes. We've already seen the number of contracts expand. It has been an interesting year just from that. So with that volatility ingredient coming come Monday, we were up 10% last week in July corn, 6% this week, we could easily start next week with a 7 if we keep on that pace.

Hueber: The only real assurance you have is the volatility is going to go higher. That doesn't necessarily mean we have to bring in that many buyers that are going to accelerate it into $8 corn as we saw in 2012. But all that said, sure the possibility is there but again, just adding more contracts, expanding limits, absolutely it's going to increase the volatility. But does that mean people are going to put as much money there as maybe in another alternative that is out there? And one thing I guess we haven't really spoke about is what has been happening in the dollar. And ultimately that could come back and have quite a bit of bearing or at least create some headwinds in what is going on. So the dollar was nice first quarter rally, three weeks lower, three weeks in a row lower and then out of the blue here we turned around with a very sharply higher close today. So maybe that's just a one day bump to the upside. But if it's a reversal, which I kind of tend to think longer term it looks like the dollar is going to move higher, here again psychologically that starts working against the commodity people.

Yeager: I think you and Aaron in Ocheyedan, Iowa were reading from the same book this week. Aaron was asking, is this ancient wisdom? He said Matthew 24:6, you will hear of peaks and rumors of peaks but see to it that you are not alarmed. Such things must happen but the rally end is still to come. You said that too this week.

Hueber: I did.

Yeager: What made you say that?

Hueber: Well, I think it's pretty easy to get wrapped up in the moment. It's pretty easy to hear about this was the, we peaked yesterday, we reversed lower. Well, again, if you would have looked at the markets at 9:30 this morning boy you would have had a pretty good case saying uh-oh, we finally exhausted this and then here we turn around with a higher close. Keeping in mind that it is the end of the month you can exaggerate moves whenever that is the case. But I think we're going to see plenty of times that if I had any hair left I would worry about losing it.

Yeager: Well, that's going to be I guess my final question. Have we just begun to see crazy times?

Hueber: Well, considering that we've got the most critical three months of weather in front of us it's hard to imagine not. Yes. And granted if you just look at a normal seasonality in volatility, volatility generally doesn't peak until the end of June. So right there you've got 60 days of what could be some increasing volatility just on a regular basis. So it's not going to be for the faint of heart.

Yeager: Take your meds. Do your breathing exercises. Drink plenty of water, Stay hydrated. All of those things to help your stress.

Hueber: Get a ball and squeeze on that.

Yeager: I'm going to have a really strong hand soon. All right, Dan Hueber, good to see you. Thank you so very much.

Hueber: Likewise, thank you very much.

Yeager: Good to see you. And thank you for joining us. Next week we will look at the agricultural leaders dealing with the push and pull of China and Angie Setzer will join us to break down the markets. Thank you so very much for watching. Have a great week.

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