Market Analysis: Sue Martin

Market Analysis: Sue Martin

Sep 17, 2021  | Ep4705 | Podcast

Podcast

Harvest lows appeared to be set early in the week while a post USDA report rally and the run-on milling week push the trade higher for the week. December wheat added 20 cents, while the nearby corn contract improved a dime. Two geopolitical alliances, one with one without China is pressuring American allies in the trade arena and the soy complex reflected the news first. The November soybean contract dropped 3 cents December meal lost 30 cents per ton, December cotton subtracted, a $1.17 per hundred weight. Over in the dairy parlor, October class three milk futures fell 15 cents. A mixed week in the livestock sector as October cattle shed 63 cents. October feeders declined a $1.35 and October lean hogs expanded $3.28. In the currency markets, the U.S. Dollar index added 61 ticks November crude oil improved $2.35 per barrel. A sell off in COMEX gold of $38.80 per ounce, and the Goldman Sachs Commodity Index improved almost nine points to finish at $538.50.

Paul Yeager:

Now here to provide insight is market analyst Sue Martin. Hello, Sue.

Sue Martin:

Hello there.

Paul Yeager:

Too bad we have nothing to talk about. So thanks for coming.

Sue Martin:

I know, a really dull day.

Paul Yeager:

This is like the last weekend for many farmers in the, in the corn and soybean belt maybe rested up before they go all in on, on harvest. So let's start with wheat because what is the wheat market doing? We talk about this run-on mill. What's the impact of, of that demand. And what's the other story in wheat right now?

Sue Martin:

Well, I think the global supplies first off, if we'd go back to the supply demand report here in September, it was bearish most everything. Wheat, rice, corn, coarse grains, soybeans, all of it increased in stocks. That's usually not a good sign. But in the meantime I have to say, okay, so we're hearing more production out of some countries, especially Australia. They've had a good year and they deserved it. But 40% of that country is very dry right now. So they might be heading back into potentially another drought. But in the meantime, I look at China and their production of corn beans, wheat, you know, they say China's had a record crop of corn. Well, if it is it, most of it's gotta be junk because they had a record flood this year that outdid last year, which was phenomenal.

Sue Martin:

So, I mean, I sure you can believe all that you hear out of China. I don't think they're being totally truthful or transparent, but that doesn't make any difference. That'll show up in their buying. And when I look at the wheat market, I think that this $9 area in Minneapolis wheat, where do you have the public long Minneapolis wheat? And I think as we get up over that $9 area, it's struggling and it might have a little bit of a pullback. I look at Chicago and K.C., K.C. Is dealing with some dryness now coming back and heat. And of course they're going towards their planting season. And the question marks is going to be, I hear a lot of talk about fertilizer costs and, and inputs. And so we're wondering, are they going to see maybe a shift towards more soybeans.

Paul Yeager:

Save your input comments for just a moment. But if I'm looking to plant right now in the Southern Plains, my wheat crop, am I looking to expand, take out the input issue. Am I looking to expand my acres right now?

Sue Martin:

Well, one thing that you have to say is that the crop insurance value of over $7, I think $7.04, I could be wrong on that, but I think it's around $7.04 has been decisive and that's not bad. That's that's that sets the bar for this crop. And so I think that helps add into, have some acres to,

Paul Yeager:

Okay. The acre question. Let's just go ahead and start. We always thank everybody who gives us the questions via Twitter and Facebook. This one is Josh and Kansas City, Missouri, right there in the heart of, of wheat country a little bit east how will the corn market respond when it finds out it is losing acres to bean wheat, literally any other crop? Will prices this rally to get the acres back or willingly, give them up?

Sue Martin:

I don't think it will willingly give them up. I think that price has a lot to do with that price discovery. And we have between now and March to worry about that. Although a lot of decisions are made in the fourth quarter of the previous year, but I think that when you look at corn, first off, Midwest farmers love to plant corn and they've had, if they've come through this year with a respectable yield, you know, that says something for genetics, cool nights dewey morning, something like that. But I think that the farmer's gonna take a look and say, you know, if I have a halfway decent year, we had a tough year last year and we did this good. Maybe we catch some rains this next year, which our weather sources are warning us.

Paul Yeager:

That rainfall won't be as much.

Sue Martin:

Is going to be very hot and dry especially in the Eastern corn belt. They're they're due is coming, I guess. But in the meantime, the, the bottom line is going to be these input costs too. Everything's going up, cash rents are going up. You've got phosphorus, you know, or maybe it's potash. One of them's over $800 a metric ton. I mean, it's, everything is increasing and exponentially. It seems like, and that's a concern. You know, do you see fertilizer going much cheaper than $500? No, it'll probably hold here. And after that, anything, it probably gets higher. I think you'll have an acreage fight on your hands as we go in towards spring.

Paul Yeager:

That'll be something we'll absolutely talk about as the winter wears on, but I want to discuss two things from this week and what it matters. First, do you agree with the premise that the harvest low is in?

Sue Martin:

No.

Paul Yeager:

Okay. When do you expect that?

Sue Martin:

At best October, maybe October 18th. I think we're in, you know, my premise this year always has been, I think since early in the year when I was on the show, I talked about this would be a year of two tails and that the first half of the year would be good. And the last half more traditional. Might even extend into November, December. So let's say the market, well, first off, let's go back and say, okay, is September the low harvest low, first off going since 1970, So the last 51 years, this has only happened 10 times out of 51 years. So it's not a super common thing. And the last two years that did this was 2018 and 19. So are we putting that low in? I don't really think so. But I also don't think that the push lower in prices is substantially lower because we are tight supplied.

Sue Martin:

And so I think that and the uncertainty over this quarterly stocks, remember everybody's got- it's human nature to believe the most recent. And of course, last year, the quarterly stocks we had,uan outside month or outside reversal month in August of last year. And then the quarterly stocks report surprised everybody with reducing stocks after a reduction in the June 30th report, which is not a common thing. And that was the igniter. And then things took off and ran. Everybody's kind of got that vision back in their head again this year. And I don't think it's going to happen that way. Uif, if we were to see stocks reduced, I would have to say, then that will be, and I know we had high,ubasis levels this summer that would have been enticing to be, keep moving stuff,uthe corn into the market. But if we show a reduction in stocks again, then I would say, it's probably in the feed useage, and I'm not so sure about that.

Paul Yeager:

And I got to get you to beans, and that is the basis story as big in beans as it is corn?

Sue Martin:

No, not right at the moment. I think that we have to believe first off with China this week going into Brazil and buying beans. And of course they canceled an order for a 132,000 metric tons and another unknown destinations, which we assume was China

Paul Yeager:

And the market only hiccups, just a tiny little bit on that news.

Sue Martin:

Well, and that would have had to been friendly news in a way. I mean, it's kind of an adverse thinking, but if you think about it, okay, China needed beans now. They can't sit and wait. They needed it. And the port out of Louisiana after Ida, isn't helping them out. So they couldn't get it out of Ida and there. And the Pacific Northwest is having a hard time garnering soybeans too. So therefore they had no choice. They had to go to Brazil and get beans. Now, keeping in mind that Brazil harvested later on that second crop or not second crop, but the soybeans and therefore later out means they've got a little bit longer window to be able to push beans, but I think they're getting very tight supplied as well. And so that brings us back to now being, I think the opportunity for more Chinese business, where we need to get the gulf up and running and barring any other surprise, you know, storms that might come our way.

Sue Martin:

And this seems to be a year where we're going to have them. Right. But I would have to say, I think that China will be back. I think China needs it. They're crushing margins are profitable now. And you know, they're only too anxious to get them and keep in mind. It was interesting back in 19 when China had a ban on U.S. Imports of beans, well, cough go international grain was in our, our deliveries almost every deliverable month taking beans and people kept missing that. And now that everybody's on to them, they've got to do it the old fashioned way, but what's to say they aren't selling our board to on rallies.

Paul Yeager:

That is absolutely something to think about. You mentioned the word anxious and, and you saw the story we had about the meat market, the cattle market. Who's the most anxious right now in live cattle?

Sue Martin:

Well, exports are excellent. I don't think our lows are in on cattle at the moment. I look for a lower logia in October. And I think part of it is you've got a premium structure. We had October's premium over August. So they rolled their hedges forward, covered their shorts and rolled them forward into October that put a weight on the September, along with the fact that you continued to see beef slaughter, continuing beef, cow slaughter, continuing because of liquidation off of pastures and what have you. And Canada's going through this at the same time. That's not friendly right now, although it's surprising how well hamburgers held up, but in time, this is going to be very friendly. But the other thing I think is that when we get in towards the fourth quarter, then we'll start running into tighter supplies.

Sue Martin:

But here again, December is premium over the October. So we look for when you get a premium of around $6 apart, in other words, Dec silver, the Oct, I wouldn't be surprised they roll those hedges, which could put a little bit of pressure on, but exports are excellent. China's our third largest customer at this time. And we have South Korea back. I just think that the market's going to still sift lower. However, carcass, if I look at carcass weights, the carcass dress carcass weight is 9.2 pounds under the five-year average, it is also 21 pounds under a year ago. So that makes me think we're starting to get current in this market, which is a very friendly thing, right

Paul Yeager:

In hogs have, is the worst over for the immediate term. Do we finally stick the low there?

Sue Martin:

Maybe for a moment? How

Paul Yeager:

Long is that moment?

Sue Martin:

Oh, maybe in early October, I would say the hog market is you know, if you look at February, February is so discount to the board and normally at this time of the year, it should be premium. What's it telling us, it's telling us one, they think China's going to have some decent enough supplies. So they're not, it's it isn't the Chinese business that's going to run the hog market like it did. Two, our numbers are still tight enough, but not as tight. And the product just like in beef is high priced. Every meat is high priced and not going to get cheaper, either.

Paul Yeager:

All right. So we will pick you up on hogs. And I got to ask you a couple feeder questions and marketplace. Thank you. So appreciate the time that will do it for this installment of market to market. As I said, we'll talk more and market got a lot of ground to cover also cotton. So join us there. Find that on our website of markettomarket.org and you don't harvest does disrupt many things, but missing our program, doesn't have to be one of those. Our on demand option of watching us on YouTube is always there including past episodes, check out our YouTube channel by searching Market to Market and ring that bell to subscribe. Next week, we look at those pushing through the pitfalls of urban farming. Thank you for watching. Have a great week

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