Market Analysis with Matt Bennett

China canceled wheat orders all over the world as Russia kept flooding the market with cheap product and a rally in corn met resistance mid-week. For the week, the nearby wheat contract fell 9 cents and the May corn contract lost three cents. A technical-driven rally ended Thursday after an optimistic start to the day as South American weather forecasts improved. The May soybean contract added 14 cents, while May meal lost $6.70 per ton. May cotton shrank by $1.33 per hundredweight. Over in the dairy parlor, April Class Three milk futures dropped 12 cents. The livestock market was mixed. April cattle lost 35 cents. April feeders cut $1.97. And the April lean hog contract improved $2.55. In the currency markets, the US dollar index strengthened 74 ticks. April crude oil expanded $3.18 per barrel. COMEX gold fell $22.10 per ounce. And the Goldman Sachs Commodity Index bumped up more than 12 points to settle at 573-even.

Yeager: Joining us now is regular market analyst Matthew Bennett. Hello, sir.

Bennett: I'm doing great, how are you doing?

Yeager: You are doing well?

Bennett: I am doing very good.

Yeager: You've been all over this week.

Bennett: I've been everywhere, man.

Yeager: We'll talk about that in Market Plus about your travels and what you're being asked. But I'm sure people were curious. Tell me more about these cancellations? And do they matter whether it's soybeans -- soybeans was always the story, now we're getting these wheat cancellations.

Bennett: Yeah, a million tons out of Australia. U.S. wheat -- a half a million out of French wheat that we're hearing. The bottom line right now, I think China is looking and there's other wheat in the world that is cheap. We've all heard about basically cheap Russian wheat, it's kind of hurting the market. I don't think that they have missed that. I think some of that wheat will find it into Chinese hands. And yes, they have cancelled these shipments, but I think that they're going to end up buying wheat.

Yeager: I have a quick follow up to that, that the viewers want to know and this came in via social. This one I think was emailed actually to us. And it is from Larry in Minnesota and he wants to know, Matthew, how can China cancel grain purchases that they have made? When we contract grain at an elevator, we are required to deliver on that contract or buy it back.

Bennett: That's an excellent point and that is something that we have all been faced with at one time or another, trying to answer that question. We don't know the details to all of those contracts. But you've got to be clear that that's not China buying wheat off of the U.S. necessarily. That is COFCO, ADM and COFCO. Those are agreements from multi-national companies. There is likely some sort of a penalty that they have to incur. But there is an agreement, most likely, that they are going to still buy that wheat eventually. And I've got to think that they're going to. So yes, it's frustrating. Yes, it's handled differently than what we see handled as far as what we've got as producers and purchase contracts. But it is what it is. I don't have all the details and they won't want us to have all the details.

Yeager: What details do we have in corn that we were able, I won't say hold onto a three-cent rally, but it's a lot better than we've seen in the last couple of weeks. Do you see brighter days ahead?

Bennett: Yeah, and so you look at this corn market, Commodity Classic two weeks ago on Monday morning, made a new low for the move and then we settled higher four out of five days. So, we had a weekly close higher, another weekly close higher, a reversal in the market. We actually had the reversal this time get a little bit of buying support it. And then you come in this week, of course you lose a little bit of ground, but quite frankly after the kind of day that we had on Thursday, the market turnaround and closing higher on Friday I think was a very good sign. A lot of things are going on here. I think that the funds are covering shorts. But at the same time, producers have quite a bit of corn on the other side of those shorts.

Yeager: Our friend Angie Setzer had a very enlightening tweet, the first farmer who is storing and ignoring to call her and book something is going to get a free hat. Do you still feel that the farmer is holding onto everything?

Bennett: I don't know about everything. I think whenever you are forced with do you roll out to the May on some of these basis contracts and producers, are you going to go ahead and pay another month of storage in those situations? I think there was a fair amount of grain that hit the market there. How many bushels? I think the USDA was talking closer to 10 billion, if you read between the lines whenever we're looking at that January report. I would probably trim maybe 20% off of that, 25% off of that since then. And so, you're probably still holding onto somewhere between seven and eight billion bushels, which is still a ton of corn. You've got to understand as a producer that whenever we've got that much corn on hand, any sort of a rally in the market, you're likely to see some basis weakening. Now, basis has held in fairly good so far. But I think if you continue this rally higher, I think you're going to start to get some stiff resistance as far as basis goes.

Yeager: Well, we saw resistance, 40, 50 day moving average was kind of that ceiling. So, then it gives credence to the argument this was a lot of technical things moving. Do you see it that way?

Bennett: Yeah, there's no doubt whenever you reverse the market and selling actually showed up that it gave people a little bit of fire power, if you will, to step in and buy this thing. But at the same time, people understand the fundamentals of the corn market, on a global basis and on a domestic basis, are not all that great. And so, if we start talking about acreage and what not, and I know you're going to want to go there, but if you pile 92 or 93 or more like some folks are saying onto a 2.172 carry, that all of a sudden gets you to some numbers none of us really want to think about. And I will say, the last time you had a 2 billion plus carry was back in 2018 and the average cash price in 2018 was $3.66.

Yeager: You've said enough with the three. Allandale this week 93.42, USDA still at 91. We'll get a better picture here at the end of the month. Your private estimates in between those two numbers?

Bennett: Yeah, we're at 91.5 on corn. I think that this is a really tough one to gauge, Paul, because we had a fantastic fall, no doubt about it, Mother Nature was great to just about everyone in the Corn Belt. And so, we got most of the work that we wanted to get done, we got the anhydrous put on, the anhydrous pipeline essentially ran dry when you talk to most of your suppliers on the retail side of things. But, at the time, whenever we were making those decisions, corn penciled better than beans. I've got to think we've quantified a lot of corn acres. But the ones that haven't been quantified, Paul, in a lot of areas beans actually pencil better than corn today. And so, I think that some swing acres could go over towards beans. Now, as of March 1st, given how pathetic the corn market was, I think some folks might have already been thinking about switching a few around. 91.5 for me is where we're going to sit as far as our company goes. But I'll tell you that we wouldn't be surprised if we're not off a little bit here because this is a very interesting subject here given the way that these markets have moved.

Yeager: Let's move into beans because that looks like there was some hope. And do you think it faded?

Bennett: You know what, Thursday you traded to the highest level we'd seen --

Yeager: Very quickly.

Bennett: -- right, you got over $12 and people said hey, this is great, this is fun, we're going to keep going. Now, there's people that work on my team actually that feel like we could go up and fill these gaps on May and July beans. Those gaps are at $13. And I'm not saying that they're wrong, I'm not saying -- I'm probably not quite as friendly. I'm more along the lines of hey, you know what, as you rally, if you do get a rally like that, that none of us were expecting necessarily two weeks ago, maybe we ought to be rewarding as we go. But, has the hope faded necessarily? I'm not so sure. I think that you've got to get a better handle on what is this Brazilian crop size going to be? Last week on the USDA report we took 4.1 million metric ton out of the market. The marketing year start two years ago, the stocks, USDA went back and changed world stocks. I thought it was very interesting. And then of course the USDA is running 8 to ten million metric tons on Brazil estimates over everyone else essentially. So, there's a lot to learn here. I don't know that we're going to be in a stocks building world situation like is currently being forecasted. It may be status quo at the end of the year.

Yeager: Ross Baldwin was on last week, gave us a lot of good insight on the livestock market. Cattle wise we didn't quite get -- I told him as he was walking out of the studio -- about positioning yourself and hedging things differently and options. There seems to be a whole lot of movement in that direction. Any advice for people watching the cattle market?

Bennett: All right, so obviously you and I had talked last year, I thought we were going to get fats to $200 and I think you raised your eyebrows at that. But, you know, I felt like the fundamentals would support this massive move. We got a really big move, dropped $35, April just absolutely plummeting and now we get this run back almost to $190. And so, Ross and I have talked about it, our whole team has talked about it, do we see the potential to go up and make new all-time highs? At some point this year, yes, we do. But for the time being, if I'm someone that is prone to risk there and I'm taking high $180s or even $190s and snubbing my nose at it, I don't think it's a smart move. So, what we've said if nothing else, set a floor in under this thing if you want to let the upside run. Doing nothing whenever you've gotten another $20, $25 up after this massive move lower is probably not the smart thing to do.

Yeager: And the volatility though, it seems to be this week in the feeder market.

Bennett: Yeah absolutely. But here's the thing, go try to buy feeders right now. I know what the market is doing on the board, but in the real world feeders are hard to get your hands on. When you look at fats, there's $190s out there, $188s, $190s. Bottom line is people are out there hunting trying to get a hold of fats, trying to get a hold of feeders. This cattle market is far from over. But I don't think the real fireworks are going to occur until you get out past this next cattle on feed report, which we would expect due to the January report not being, for January that was released in February, not being as bullish as what we thought it was going to be, I think this next one might be a little more bearish than what we originally though it might be. You have to get out past it and I do think the funds could come back in and buy this thing.

Yeager: Are the funds interested in the hog market at all?

Bennett: It just depends. I never thought that we would see triple digits on several of your front months. Export sales stunk this week. But still, I think that moving forward hogs have kind of rallied in sympathy with this cattle -- cattle have helped hogs in my opinion. But moving forward am I a buyer or seller at the levels we're at? I'm probably a little standoffish. I want to manage risk here. I'm not saying we can't move higher, but I would certainly be setting a floor in under these hogs.

Yeager: We have a whole lot of questions we'll get to here in Market Plus, so stay tight for us, will you please?

Bennett: Absolutely.

Yeager: Matt Bennett, thank you. We are going to pause because I've got this full list right here of questions from you. We'll continue that discussion in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org. We have a secret almost 10,000 of you already know -- our YouTube channel releases this program, Market Plus and our news stories all before it is on your TV. Help us remove the ‘almost’ and put us over the 10k mark by subscribing at youtube.com/markettomarket. Next week, working to connect that last mile of the digital divide. Thank you so much for watching. Have a great week.