Market Analysis: Sue Martin

Market Analysis: Sue Martin

Jun 11, 2021  | Ep4643 | Podcast

Podcast

Paul Yeager: A rain can be a welcome relief to push a crop along, but it can also wash the market of gains following government reports. For the week, July wheat lost, 7 cents. While the nearby corn contract added two pennies. The bean bulls look like they're hitting the exits in the nearby contract, but hanging around in November as the weather situation worsens. The July contract dropped 75 cents. July meal shed $12.90 per ton. December cotton rose by $2.04 per hundred weight. In the Dairy Parlor, July Class Three Milk weakened by $.40. A mixed week in the livestock sector, August cattle improved a $1.95, August feeders expanded a $1.25, and the July lean hog contract declined $.62. In the currency markets. The U S dollar index added 46 ticks. July crude oil added $1.24 Per barrel. Comex gold decreased $15.30 per ounce. And the Goldman Sachs commodity index increased by more than 10 points to finish at 530.45. Now here to provide insight is market analyst, Sue Martin. Hello, Sue.

Sue Martin: Hello there, Paul.

Paul Yeager: So we could talk weather, we could talk government reports. We could talk China, just like always, but the weather market in wheat has really kind of split these contracts. The Minneapolis wheat contract had a good week and then it was pretty weak. I mean, the rains are coming in certain spots that we hadn't expected. It had been dry. Why is weather so much a factor right now in this wheat market?

Sue Martin: Well, for one thing a lot of times when you're so moist in Kansas, Oklahoma in the hard red winter wheat, this time of the year, you'll be dry in the Northern Plains, but the Canadian prairies had been very dry. They'd been in almost a four year drought. And so they were so dry and the Northern Plains were extremely dry. It was thought that we'd lose some, a hard red spring, a hard red spring, but yeah, hard red spring wheat and at the expense it would move over to soybeans. And then we started to see some rains come across the Northern portion of Canadian prairies. Then we caught a second shift of that here this week. And again, even, you know, coming into Friday saw rains move across the Dakotas into the even made it in almost a Minnesota. So consequently that really worked over the Minneapolis wheat because remember it was setting new contract highs for the year on going into the government report. Now, the government report didn't really give us Minneapolis wheat, yes, it was friendly maybe towards that, but the report to this week, the supply demand report didn't really give us anything, all that much to write home about especially globally. And then you have Russia talking about their hard red spring wheat areas might be still a little on the dry side, but they, upped the amount of production that they thought they were going to have.

Paul Yeager: So If you're in a position as a producer in either one of these spots that you're talking about, what are you doing? I mean, are you doing the same thing or is it a different strategy in each area?

Sue Martin: Well, I think in the wheat in the hard red winter wheat areas and soft red I would be prone, you know, we're going into harvest time and, you know, the harvest because of the moisture, the hard red winter wheat matured, a little slower. And so it's making like an areas of custom cutters. They're going to be a little delayed making it north when they normally should be. And so I think that that will start to pick up a little bit of support under the market. I have been a proponent of this being a counter seasonal year rally. Maybe that doesn't happen, but I, I think the jury is still out on that one. Would I tell producers to be selling? I'm not going to say don't sell, but I don't think your highs are in yet. But you know, the one thing I look at when you look at in the U S we had on this report, ending stocks, domestically drop in corn, they dropped in wheat all week, basically for 20 20, 20, 21. And then they also dropped in rice and in feed grains, when you get all four of those on the same path or the same ledger, whatever you want to call it, you're in a bull market. The one thing is you'll play tag, which we're seem to be doing, but then you look at the global scale and the only one out of all of those, well, I guess two feed grains and corn managed to see stocks drop, but in the other two wheat and rice, they went up, especially in the 21, 22 uh, timeframe. So I think that we still have work to do on that level, but I think we're in evolving markets. You, at the early part of this year, I had, I think I was on the show and I might've even made the comment that I thought, you know, we'd move up into summer, June, July, and we'd go down into November. And our lows for the year would be in November. I still believe that. And so that's adding a little caution to the listeners and viewers, because we are going to get some opportunities here. Is the crop this year in corn and beans is going to be a disaster? I don't think so, but I don't think it's the, the wherewithal either.

Paul Yeager: Well, the WASDE report, you kind of danced a little bit. It was bullish for corn, but we were up until the last day of trading this week. And then Friday just kind of fell off the table. Why?

Sue Martin: Well, when you look at corn, it's fightin’, and soybeans, which the report was not bullish on. There wasn't any facet of it bullish. And then you look at wheat and it wasn't real special there. Then you had rains coming across the Dakotas. So all of that, even though there was heat in the forecast for the weekend and next week, in fact, for the eight to 14 day forecast heat. And yet the market chose to ignore that. I think with these rains coming through overnight, kind of took them by surprise, yanked and got an inch bless their heart, but they're going to have heat coming back, triple digit possibility. That'll evaporate a lot of that. So I think the market said, you know, we came up, we got fairly close, I think 28 and a quarter was the high on December corn, the high before that is 38, 8 and a quarter. So you've got fairly close. I think the market decided to take in some profit taking for the weekend and they stepped aside.

Paul Yeager: All right. So in soybeans though you mentioned the report not friendly to the soybean market, right? But there is a huge discrepancy between July and November. Why is that?

Sue Martin: Well, because we had such old, tight, old crop supplies, you know, we started off at 120 million bushels carry out for several months here. And we felt that might be pipeline supplies, even ADM, this research was saying that, and they should, they've got a whale of a research department. So we had to believe if that is pipeline supplies. What does that saying? That's saying that each report, you get that 120 is not going any lower and if anything, it's going to go higher. So it's diffusing some of that bullish attitude, even though it's also saying we don't have any, any more beans.

Paul Yeager: It sound like we've already rationed on our own. When that number doesn't go up. I mean, that's, that's a swear word. I get it.

Sue Martin: Well, you could say we've rationed. The crush dropped, but also where are we in our crop year? Because Brazil was delayed in their harvest because they were, they were delayed in the planting and then delayed in the harvest that shoved that crop in our face later than normal. So therefore we're dealing with that, but they're also dealing with not getting it out the door as fast as they'd like either. So I think, I think our demand has slowed a little bit. And if you don't have the beans, you can't crush them. So they got to drop the crush. What does that do? It ups the numbers.

Paul Yeager: All right. Real quick. Gary and Franksville, Wisconsin wrote us on Twitter and we, we've kind of talked about the weather a lot, and he's just asking, give us, give us a little quick thing. What is a good way to protect prices? If you are in a dry area, he says, I hate to sell and not have a crop to back it up with.

Sue Martin: I would recommend buying puts and I wouldn't buy puts on any more than what your crop insurance does. I would also recommend because volatility is key in this market, and I think you're going to see volatility all summer long, even into early fall. So I think what I would do is even entertain, put spreads, buying a, put, selling a put, and that'll cheapen up your costs, but you have to manage it and then walk the market down. If it goes down, if it goes up, you won't have spent as much for that insurance. And, you know, I remember when options came out, that's how they sold it to us was ‘it's insurance’. And that's about what it was if you weren't the speculator.

Paul Yeager: All right. This week, the World Pork Expo, we talk about it. And the producers who were in my ear wanting to know more about this market, a big discussion is about the exports and how they have continued to help this market. But they're also facing headwinds of feed issues. Why isn't hogs being impacted like the cattle industry has when it comes to feed.

Sue Martin: Well, for one thing, you know, we have to go back to last year. And last year we've seen because of the, not able to get hogs to the packing house and get them in. You've seen a huge liquidation that was under estimated, or it just was under, over underrated. And then you also through the winter saw PRRS and, and PED virus, so that tightened us up. And so we're tight supplied on hog numbers coming in, whereas opposed to the cattle market, because of packers not being able to kill as many as they'd like to can't find labor. Well, unfortunately, therefore they are oversupplied for what the killing capacity is right now. The other thing with the hog market is, is the sow's you've seen you were seeing huge liquidation of sow's and prices got to $80 back in April. I think it was. And the last time I think that happened, might've been 2014. So, you know, they got really high. Now they have dropped back off. They might be hanging in the $50 range or whatever, but the price of corn has come up. So now the, the producers got to decide, okay, you know, corn is this soy meal, which hasn't been the runner in the bean complex. So it's still tolerable. And we're, we're producers get yourself protected because we think long-term that soy meal market's going to bike.

Paul Yeager: Are you protecting in, in live cattle too? I mean, there just seems to be an, a ridiculous amount of optimism, not right now, but for down the line. Is there a reason for that?

Sue Martin: Well, I think your cattle numbers as we get into August and the third quarter should be a little tighter, but and we need to keep seeing some of these cattle moving. The problem you're encountering is what's holding corn up right now in the U S is our weather market. You know, when we started this corn market, we started last August, how the USDA started to admit that maybe they had overstated the crop for the previous two years. And then they started showing more demand and demand came at us full force. And so we moved into a demand market that we hadn't seen in a long time. And the market was relentless and very trendy. Then we got into March, April, and we started trading, not only demand, but we started trading safrinha corn weather, and that added the market. And when did we peak when the safrinha corn pollinated.

Paul Yeager: Okay. All right.

Sue Martin: So that, can I…

Paul Yeager: 10 seconds.

Sue Martin: All right. 10 seconds. I'll, I'll hurry. But that has created the corn price to be high. So the producer in the feeders is saying, wow, you know, you look at the different cattle prices. They're not paying very well to be buying those feeders, but you've got this cow calf herd that's moving out of the Southwest and the Northern Plains.

Paul Yeager: We will continue that in just a moment. Thanks. So appreciate it. That's it for this program, we will continue to discuss in market plus. So thank you, Sue Martin. Thank you very much for watching I'm. Paul Yeager have a great week.

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