Market Analysis with Don Roose
Don Roose discusses the commodity markets.
Paul Yeager: As combines rolled this week. The variability in yield has both endorsed and contradicted the USDA report. The bearish market reaction has evolved to inside range trading for the week. The nearby wheat contract increased $0.09, while December corn lost $0.08. The soybeans sell off, met resistance at the bottom of the 200 day moving average. The November contract sold off $0.23 on the week and December. Meal shed 930 per ton. December Cotton found $0.53 per 100 weight over in the dairy parlor October Class three milk futures dropped $0.80. The livestock market was up. October cattle improved 370. October feeders put on 533 and the October lean hog contract added a 160. In the currency markets, the US dollar index rose 26 ticks. October crude oil improved 371 per barrel. COMEX gold increased $3 per ounce and the Goldman Sachs Commodity Index increased nearly 15 points to settle at six 2090. Joining us now is market analyst Don Rose. Hey, Don.
Don Roose: Thanks for having me back, Paul.
Paul Yeager: Don, this wheat market, we hit a bottom. Maybe we rallied, then we fizzled. Are we going back down? Well, I tell you, that was the one bright spot of the whole grain market this week, wheat and soy oil. But the wheat market, we did have a report on the 12th on Tuesday that was positive, took the world, ending stocks down 275 million. We tried to press lower on the wheat market. Remember, in June, we topped out at $8, dropped to 570 on Tuesday, had a hook reversal. You know, our stuff, we were in a six week downtrend sell signal that reversed. So that's a positive sign technically, Paul.
Paul Yeager: Globally, there's weather issues developing again. But not in the United States as much as Russia, Ukraine having drought conditions. Who knows what's going on in China? China not a big wheat producer, but what impact is that going to have on us here in the United States?
Don Roose: Well, I think that may have been the start of it. As you're alluding to. Canada had a dry drought situation there. Big wheat producer, but Australia's in a drought. Argentina's droughts continuing. And then we had the Ukrainian Russia war. It looks like Ukrainians going, Ukraine going on the offense. So the uncertainty with the the wheat market there. Remember, Russia is the largest wheat seller and exporter in the world and they've just been clearing wheat at any price. So we got to get them to stop production.
Paul Yeager: And here's the interesting note from the week. If we we do end up with what is projected, it would be the first decline in global production in five years. So if I'm someone looking at pricing right now, what am I what's a good thing I should think about?
Don Roose: Well, I think for an end user is probably the best chance to be pricing more than a producer from trying to look for a place to sell. It looks like, Paul that we've hit or were I actually it looks like we scored a seasonal bottom on wheat. I think it's just a matter of what we do to the upside. You know, after you drop, what, $2.30 during the summer, it looks like the upside, the risk is to the upside, not the downside.
Paul Yeager: You talked about this report, the corn market, those who were out combining, we've been looking at fields are screaming, but no way is this accurate. What are you saying? What the market tell you?
Don Roose: Well, it's what the market is telling me is it's not sure. And since August 15th, we haven't gone any place. We've been in basically for 73 and a half to a 490 trading range type trading range. I think what we're really waiting to see is what the yield really is. Remember, we dropped the yield in the last report. We're still over last year, if you can believe it. They still have Iowa at 200 bushel average yield. Our record is a 204. You know, it looks like the yields coming out of the field so far, those were running into disappointing a bit in Illinois, Iowa, Minnesota, Nebraska, and probably better in Ohio and Indiana. But it's early yet. The combines will tell. And I think the other thing we really need, Paul, is for the end user to step up and start to secure supply.
Paul Yeager: Yes, that's been a discussion for people sitting in your chair the last couple of weeks. Nobody selling anything. What are they waiting for? What should they be waiting for?
Don Roose: Well, the producer down at this level, I mean, with insurance where it's at, he has no advantage in selling anything. You know, in fact, actually probably buy some courage calls in case it would happen to go up and cover some of the insurance to the upside. But there again, it looks like the corn market, Paul, that we're trying to see if we are in the process of forming a seasonal low. We'll see about 90% of the time we scored in the last ten years, a low between the 1st of August and the middle September.
Paul Yeager: I'm guessing the early harvest is going to give us an early return of how good or not so good this crop is. Do you buy into that scenario? And if you do, what should you do?
Don Roose: Yeah, and usually short crops gets more small, crops get smaller. It looks like this yield What? We've had three reports in a row that the yields gone down. So we're on a direction in the corn and soybeans on that. But you know, from a producer standpoint, at these levels, I think the biofuel people are want to secure their supplies. The feedlots want to secure their supplies. Just a matter of when. What you've seen historically, Paul, is you reach this point where everybody gets nervous at one and starts to chase it. You know, producers not selling.
Paul Yeager: Yeah. All right. So in this being market, because some of that same scenario, but we're still dealing a tiny bit in places where this crop is still developing. Rain could fall. Or have we passed that window where weather really matters to the soybean market?
Don Roose: Yeah, You know, usually this time of year we're worried about do we get an early frost? Well, I think that's behind us. So, no, I don't think rain does a whole lot from here any more. Harvest next week and start to get a little more aggressive in the week after that. But, you know, I think there again, on beans, we're trying to see at what point do we score a seasonal low.
Paul Yeager: You talked about this, just a tiny bit in your opening comments, but this is a question that came from my friend Phil in Ontario, and he wanted to know, Don, soybean oil and meal sales have been reasonably buoyant lately and USDA did reduce soybean yields slightly. How much hope is there for soybeans to lead grains higher, especially with the prospect of a 163 million metric Brazilian soybean crop about to be planted?
Don Roose: Well, you know, I think he hit the nail on the head. It's harvest time here and we'll see if the end users buy stuff. Brazil's in you know, they're in their springtime, so they're just planting now. They're going to raise a 5.9 billion bushel of being crop or 4.1. So I think what we're really looking at, does Brazil have any issues? Does our crop get smaller going forward and the government, remember, they're continuing to reduce the yield, but they're reducing demand. Maybe the demand is not as bad as the government says.
Paul Yeager: Where do you anticipate the demand coming from, though, if the government if it's different than what you're saying?
Don Roose: Well, I think it's mainly from the export front. You know, Brazil's exporting 3.5 billion bushels of beans. Next year, we're supposed to be 1.8 billion. So, I mean, if we can steal just some of their business in if they have weather problems, we could easily do that. So watch Brazil. They're just starting to plan for September 15th was the first time they could plant beans.
Paul Yeager: I sound like a broken record. When I moved to the protein complex, especially live cattle. Just when you think we've hit the top, we go higher. Triple top means nothing is what our friend Chris Robinson said today. Do you buy that?
Don Roose: Well, you know, I think where we're really at and we're in the classic run blow off type of market, we're $8 corn or $18 beans were, you know, 15 or $10 wheat. It's a market that it's over. When it's over. The packer Paul still chasing these cattle on Friday yet you know across the corn belt there were some cattle traded for the winner at two oh to two or three you know big time basis over big time numbers. And we also, you know, usually think that the commercial knows all. Usually the commercials are the last one. And so it's a bull market, there's no doubt about it. But the consumer's going to decide where the top is.
Paul Yeager: Is the bull still in control of the feeder market?
Don Roose: Well, the feeder cattle market, as you know, had a bright spot just because the grain market's been moving lower. The fat cattle in those back months have been moving higher. So if either one of those things change, there are gaps below the market, which are targets on the feeder cattle, about 20, $25 lower. But, you know, you need some kind of a chart top. It's foolhardy to try and pick a top because you don't know where it is, but it's a market that you would have to say it's very mature. This is the kind of run that I think the Bulls thought could happen more so next April. You know, time frame. But we're doing a lot of it in already, Paul.
Paul Yeager: So we're accelerated six months.
Don Roose: I think that's the risk is that you know in for you know the cattle guys out here when your break evens are 196, 197. Who would ever heard on new cattle coming in. The risk is if if anything happens you know there's big money can be lost.
Paul Yeager: Well, the hog market, the losses stopped this week. Is this just temporary?
Don Roose: Well, the hog market is, you know, the opposite phase. We're in the liquidation phase. The slaughter or the liquidation was at a 14 year high in the summer this year. So I think the liquidation means that in 2024 we have a better chance for some better prices going forward. Paul,
Paul Yeager: Let's close with crude because of its impact on a number of things, is $100 back in the sights?
Don Roose: Well, the good news is that for the grain markets, petrol, grain and so we have that bit underneath the market. But yeah, I would say, you know, it's, you know, 90 to 100. Seems we're back to that sweet level again. You know, that looks like the target area.
Paul Yeager: And if you were betting on the dollar to keep rising, would you bet that?
Don Roose: Well, I hate to bet against the government, you know, for against the U.S. and where we have a lot of debt, but we're the best of the worst. So I would bet, you know, stay with the dollar. But it's it's dicey. There's a lot of people that are questionable on it.
Paul Yeager: You're the best of the best Don Roose. Good to see you. Thank you.
Don Roose: Thank you, Paul.
Paul Yeager: All right, Don Rose, everybody. Thank you. Please, Don, hold tight because we are going to pause this analysis, continue our discussion about these markets in our Market Plus segment. You can find both analysis and plus on our Web site of market to market technology. As you head to the field this fall, take us with you. We want to make sure that you are kept up to date on commodity market analysis and news around agriculture. With our three podcast offerings. Two of them come out on Friday and the third the M Tom is released Tuesday. Subscribe or follow where you get your podcast today. Next week we look at the nation's first almost forgotten female veterinarian. Thank you so much for watching. Have a great week.
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