Market Analysis with Sue Martin

Paul Yeager: Weather issues globally and domestically played in the grains as the weather window remained open to keep some premium on the table. 

For the week… 

The nearby wheat contract gained 18 cents and the July corn contract found 16 cents. 

Soymeal tried to stabilize the soy complex as tax credit futures lingered overhead. 

The July soybean contract added a dime while July meal put on $4.30 per ton.

July cotton expanded $1.22 per hundredweight. 

Over in the dairy parlor, June Class Three milk futures improved 19 cents.

The livestock market was mixed. June cattle strengthened $3.57. August feeders put on $2.78 and the June lean hog contract fell $2.03. 

In the currency markets, the U.S. dollar index lost 203 ticks. 

July crude oil decreased by 44 cents per barrel. 

COMEX gold added $177.20 per ounce, and the Goldman Sachs Commodity Index found almost 3 points to settle at 533 - 70.

Joining us now is regular market analyst Sue Martin. Hello, Sue.

Sue Martin: Hi there Paul.

Paul Yeager: Wheat has gone and put together two winning weeks in a row. How do they get to three?

Sue Martin: By moving higher.

Paul Yeager: Well, that's the easy answer. Yeah, I did give that too easy.

Sue Martin: I think that, when I look at the wheat market, the funds, I haven't seen Friday's, you know, commitment of traders, but I think we've seen some short covering. But on the same token, the commitment of traders in the past few weeks have shown record short position in Kansas City wheat and then in Chicago wheat. Very large, short position, but not record. And I think that when you look around the world and you look at whether China's weather's very concerning and, you know, just this last week they had temps of 104 and, Okanagan and some of the surrounding provinces, and they account for at least 20% of the wheat produced. And now, if China's going to be importing wheat, they tend a lot of times go to Australia. But Australia is having some dry weather concerns too. And so, you know those two now there's Russia and Russia's been on the drier side and more arid here of late after we've had some frost freezes here in May. This almost feels like a year where Mother Nature could gratify Russia with a frost freeze in June. And a lot of times when you get a violent move higher in June, it's coming off of something that's happened in Russia. Saudi Khan said that they're, they raised their estimate by 1.2 million metric tons for Russian production and took it to 81.2. That's still is not what you call really burdensome. And then you've got, of Rostov, the, province there or state and the governor there is calling for state of emergency.

Paul Yeager: So that's a lot of factors that are being thrown into this.

Sue Martin: Yes. And then U.S..

Paul Yeager: And the U.S., you've got those quickly on we are you holding right now? Are you thinking you're going to make a sale right now?

Sue Martin: No, I would not sell yet. let's counter seasonal a little bit. but if we can hold that counter seasonal, we could rally into June. I think that $5.35 $5.40 is just too cheap. you might get a chance closer towards $6.

Paul Yeager: Weather has also become a story. And corn. Let's talk old crop first, though. Is there any big reason to see that come to the market right now at this rally this week?

Sue Martin: Well, when I look at old crop corn, 85% of it's been sold. And so the commercial doesn't have any need to have to push bids to get the farmer to sell. So when I look at old crop corn, yes, we can still go higher. But for now, I think the concern is about new crop and the lack of farmer sales. Farmer sales are about the lowest they've been in 20 years for like by the 1st of May.

Paul Yeager: Is that a little bit because the farmer is hesitant? Because of the uncertainty of maybe not so much weather, but trade is causing pause or what do you chalk?

Sue Martin: I think it's a little bit of both. I think that the uncertainty with politics is maybe got them on hold for a minute. Price levels aren't high enough. That attracts them. The other thing is, is that we keep hearing talk, weather forecast, talking hot June and July, possibly first half of August. If that is the case, those farmers aren't going to sell. They're going to hold.

Paul Yeager: Especially if you're in the East where you haven't planted anything.

Sue Martin: Yet. That's exactly right.

Paul Yeager: So you have this weather big change in the east and the west.

Sue Martin: And you've had four years of beautiful, everybody, we thought we were in a drought and stuff, but we never had triple digits, and yields were pretty decent this year. Maybe a little different.

Paul Yeager: Let's move to beans, because that's the one that has been weaker for quite a while. And all of a sudden, here comes spring and here comes some optimism. Do you buy into that?

Sue Martin: I do. I think the bean market still has room to go. I think new crop beans will trade over $11. What's sad is that doesn't sound like much when you're trading at, what, $10.50 or something like that or $10.59? That's certainly not asking the world. but it's going to take. we'd like an oil, you know, a policy by the EPA, a decision of what they're going to do with the Renewable Fuel Standard, the 45Z. We've had rumors, but we haven't got anything substantial. And the Senate now with the big tax bill, the beautiful big tax bill. that 1st May be a little more of a struggle because in the House, it only passed by one extra vote. And so I think that, but we keep hearing we're going to have something by June 1st. So that means I got to get busy this next week.

Paul Yeager: And you have rumors out there about all these tax credits and what could happen for renewable fuels. Renewable energy in general has seen that is less optimistic about future there. So if I'm a wheat corn soybean producer right now Sue what's my optimism meter? Am I half up? Half down with my optimism of how things can go higher?

Sue Martin: I think we're still in a half up. Okay. I just don't think we're done yet in this rally. but you got to keep in mind, July 9th, those 90 days are done for the pause. And that could come into play psychologically here at.

Paul Yeager: Or like what happened Friday morning. The president said to Europe, you're not negotiating fast enough. I might raise the tariff by 50%. We could see the same thing happen with China.

Sue Martin: Oh, right. Yes. Yeah. we have to realize in the last go around when they agreed to a phase one. And I think ultimately that's where we'll end up. It might have a little bit of a different feel, but it took from 2018 to 2020 for them to finally come around. And so this time around, is it going to be that quick? Maybe not.

Paul Yeager: Trade is a big thing in the livestock industry too. Cattle Mexico, the screw worm. What is that doing to prices right now?

Sue Martin: Well, first off, you know, we were going to look, cattle come in from Mexico. And of course, in today's cattle on feed report, as would expect, Texas, you know, placements are down quite a bit. I would have to say the concern now is that this and then, Secretary Rawlins banned cattle from coming in from Mexico because they wanted the border to the south, maybe more constrictive because they feel that screw worms coming across that border. However, there is some fear that by the 1st of July, this screw worm could be in Texas and possibly by the end of the summer, maybe to Canada. That's a big concern, because if that screw worm, when it first off ivermectin works quite well and maybe putting it in feed, I don't know. But, they're going to have to start producing more of it just in case. And the concern is if it comes into the U.S., then do they open the borders to cattle coming from Mexico? But the bigger one I'm concerned about is the health issue for people used to eating beef, because if the animal has been infected, it gets into their bloodstream. Yeah, it feeds on tissue, but if it's in the bloodstream, it's in the meat. How will the USDA look at that? I'm not sure.

Paul Yeager: And how will the average consumer look at that?

Sue Martin: Well, all you have to do is give them a little fear. But then you're very tight supply on cattle right now anyway. Prices are extremely high. It could be one of the catalysts that sends this market right back south.

Paul Yeager: Well, you mentioned Cattle on Feed. It was 98% on feed, 97 placed in 97. Fed. What of those three numbers stood out to you in feeders?

Sue Martin: Well, first off, the numbers are right in line with the trade guess. So it'd be called neutral on Tuesday. but in the end, looking at who's placing cattle. I would it was Oklahoma and Kansas that placed more cattle, but on weights, heavyweights 800 pounds and on up 900 pounds. It's over. It was Nebraska that placed a lot more of those. And I think it's because of just how dry they have been. Cattle are moving off of pastures in Nebraska. They just haven't had enough moisture since the first of the year.

Paul Yeager: The conversation, obviously, with many people at grilling time this weekend over the holiday is going to be about the price of beef. And given what you just said about what could happen. Is that the type of discussion that can maybe spook these markets, lower that they've had enough?

Sue Martin: It could. for one thing, when I look at we have indicators we're using and they're all into sell mode. one of them very long term indicator. In fact, it's been flatlined at 99% since July of 23. And it's still there, but it takes proof. I mean, you have to get a break started and then have it end up that it confirms that at the end of the time frame. I think that when I look at my indicators, if the most optimistic thought process could happen in feeder cattle, it might be they could go to 320. They could, but in the scheme of things where prices are, that's not astronomically higher. And I look at fats. And one thing this past week here, we did have, a small earlier than the week before, negotiated cattle, which means coming on next week. We could have a very low kill for that week, and that could stimulate the market.

Paul Yeager: And we are out of time. Thank you Sue. Appreciate it.

Sue Martin: Thank you.

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