Market Analysis with Dan Hueber

[Yeager] The easiest path was lower this week more than ideal growing conditions and the emergence of an expanding Brazilian crop was seen alongside new lows for the year and a few contracts for the week. The nearby wheat contract lost $0.19, and the September corn contract sold off $0.14. It was the elevator down as four sessions wiped out a 40-cent gain in the soy complex. The September soybean contract fell $0.37, while August meal sold off 12 over 60 per ton. December Cotton expanded by 256 per hundredweight. Over in the dairy parlor. July Class III milk futures declined $0.66. The livestock market was mixed. August cattle improved $0.85. August feeders gained $1.47, and the August lean hog contract cut 217. In the currency markets, the U.S. Dollar index took off 62 ticks. July. Crude oil gave back much of last week's gains, with a sell off of 842 per barrel. Comex gold weakened 95. 80 per ounce, and the Goldman Sachs Commodity Index fell by almost 36 points to settle at five 4575. Joining us now is regular market analyst Dan Huber. Hello, Dan.

[Hueber] Hello. How are you?

[Yeager] I was all prepared to talk about oh, doom, gloom, oh doom and gloom all week in the commodities. And then Friday came along. Wheat, though. Not a good week.

[Hueber] No, no, it's certainly not a good week for any of the commodities with. But that said, it's a you know, we're that time of the year where sometimes you, you finish the end of a trend. So maybe we're going to be fortunate enough this year to maybe find a low around the 4th of July instead of a high. So, it, you know, not that we're going to need something to spark that along. Maybe USDA will do it next week. That's, you know, not that usually grain stocks or acreage is going to be a big surprise at this point. But, you know, maybe we'll get the bad news out of the way. We can talk about something else then.

[Yeager] Do you think there was a shorts, a purging of the shorts?

[Hueber] You know this and not that. It was a panic type sell off. Although some markets got a little, a little excited to here and there this week. But it does have that almost feel and look of an exhausted move. I mean we're here. The weather forecast looks great. There's no sense sticking around any longer. Get me out. And you know oftentimes that will happen towards the low in the market. So again, we'll next week we'll probably tell us a lot more. But you know we're down to levels that should be value at this point in time. You know strangely enough when you look at the corn market, we've had great demand up until this point. You know, the other thing that's a little bit unusual for this year is we've had the dollar break down to the lowest levels it's been for several years here. Now, you know, no reaction to that. So, I mean, this this market just does not want to seem to pay attention to anything. Might be positive. But you know, those things don't tend to catch up with us eventually too.

[Yeager] So almost like negative blinders on, right? Exactly. All right. Let's specifically talk wheat for a minute. If we could. Chicago and Kansas City down pretty hard right up until Friday. Is that a trend again? The exhausted trend done.

[Hueber] Well, you know, if you look at seasonals, I mean, this is actually the time of the year where the old voice from the tomb myth kind of comes into play, that around July 1st is really when you want to be long in the wheat market. So again, yes, I think we're probably looking at one of those final flushes lower. We know harvest is really just upon us or already started. Of course, in some areas. So, so yeah, you know, certainly I can't look at anything that happened this week and say, well, that was it. You know, we're ready to make the turn. But that said, a lot of this accumulation of negativeness, you know, is probably pushed us to the extreme or beyond what we should realistically for value and prices right now.

[Yeager] In corn. September was five straight days lower closes and then changed on Friday.

[Hueber] A little pop up today.

[Yeager] Again. Is this tied strictly to the safrinha situation in Brazil on this contract?

[Hueber] Well, certainly weighing on it at this point in time. I think agro consult this week said this is the mother of all safrinha crops. So, it it's here again not a shock, but maybe that final realization that you know it's here, it's upon us. Harvest is actually a little bit slow so far. I mean they have not really gotten off to a great start down there because it's been wet. So, you know, here again too, that that could upset the apple cart a little bit as well, that we're expecting this crop to really hit us at this point in time. And it's maybe going to dribble in more than come at a big rush.

[Yeager] Well, let's look at the long-term aspects of that. Gary in Wisconsin wanted to know, Dan, could the large swath of Africa, South American safrinha crop corn specifically take customers from the U.S. For longer than just a year?

[Hueber] Oh, you know, to go beyond a year, of course, it's going to really just hinge on I mean, this is just a single crop. I mean, just like just like in our crop, you know, we can't predict what this year's crop is necessarily going to do for next year. Will carryout numbers world domestic or domestic carryout numbers are not overwhelming on corn by any stretch of the imagination. Even with this big safrinha crop. So. So yeah, I don't think it's much more than a six-month kind of impact on prices.

[Yeager] So, I think you said the phrase of the dry for you here today was emerald green. Everything looked really good on that new crop. What's the new crop story right now?

[Hueber] Well, here again too, if you if you look at December corn as a whole, we're really just into support areas, you know, compared to where the December of last year found a low in August, September of last year. So, I think we're kind of at a bench. This is where we could find value. But to really turn around from this point in time, we're going to need a stimulus. Most likely that stimulus would have to come from a weather problem. Up until this point, you know, that has not materialized. So, it's but we've got we've got, you know, certainly the most critical 30 days just in front of us here. So interesting things could come about.

[Yeager] Yet it's not been real interesting in the bean market, unless you like it lower.

[Hueber] Well, you know, of course, go back a week. A week ago, we had the beans at the highest we've been since the beginning of the year. So. But that said to if you looked at the November beans got up against resistance. That stopped us really probably for the last six months. Now we've come back to what's been supporting us for the last 4 to 5 months, you know? So, I mean, it's really a market that's going nowhere. We here again too. We know that there is a very ample supply coming out of South America, Argentina, Brazil, both. You know, we're not going to be the market for soybeans at this point in time, at least for the next couple of months. So here again, if anything's going to happen positive in these markets, it's going to have to come weather related.

[Yeager] And you don't see anything from Monday's report on acreage or stocks that would contribute to that.

[Hueber] You know, the acreage, the acreage, probably not. You know, they're looking for just a touch, an increase. The trade is a touch of an increase in soybean acres, corn. They're looking pretty much the same as the March numbers here. Again, if that's the case, those are already factored into the market. Grain stocks, you know, certainly. And probably more so to corn grain stocks could have a little surprise in there. So, it on the positive side particularly on the feed usage. So, it we'll find out on Monday.

[Yeager] Why the move in cotton this week.

[Hueber] Oh, here again two. Not much more than an oversold market. We'd push down to what has been the low edge of trade here for the last 3 to 4 months. And I think the bears have said, you know, thought it was time to cash in a few chips and bring it back up. So realistically, it just brought us up to the upper side of what has been recent trading ranges too.

[Yeager] So, there's a theory in the cattle market that since there hasn't been the massive gain this week, that maybe, just maybe, that top is in.

[Hueber] Well, I think the there's a reasonable probability. Yes. That that top could be in there. You know. So again, you've had pork kind of catch up to it. So, I mean they're competing with each other pretty handily at this point in time. But the I think next week, if we do get the cattle market to bounce back up a little bit, if it's a feeble rally, then that would be a pretty strong signal that the party's over and the bulls. So.

[Yeager] Same with feeders as well.

[Hueber] Oh yes, oh yeah. Absolutely, absolutely.

[Yeager] You think the feeder picture is dramatically different than live cattle?

[Hueber] Well, one thing about feeders you've got the low input cost of, of feed. And traditionally, yes, if you get cheap corn feeder prices usually stay pretty well supported. But you can't continue to keep holding feeder prices up. If we start taking the fat market apart. So, it's I mean that's a very, very high stakes gambling game at this point in time, if you're putting cattle in the feedlot so.

[Yeager] Well in this room last week at this time, we were talking about how there were signs in that cattle on feed report that maybe there is more being held, more animals are being held back. There's more not. Things are moving forward. Do you subscribe to that theory?

[Hueber] I think so, yeah. I mean, again, it's I think this last move up, you know, not that it was totally out of line, but, you know, pushing over that $200 mark, you know, really has all the characteristics of a final push to a, you know, a record peak, which will probably be for many years to come. And it's going to take some time to kind of unwind that once we turn back down.

[Yeager] So, and you can tell people you were there and you saw it unfold.

[Hueber] There we go.

[Yeager] This hog market this week. We had the quarterly Pigs and Hogs report and surprises there.

[Hueber] No, I mean, pretty much every estimate was, you know, almost at 100%, which is pretty much what the trade was looking for. So yeah, I mean, the hog industry is, you know, six months ago we didn't have much to cheer about. But I mean, here now we're back at some pretty solid levels. So, it's decent profitability there once again. But there's never much there has not been any incentive to really expand anything at this point in time either.

[Yeager] Oh, you don't think so?

[Hueber] Oh, I don't I think there's been enough red ink over the last couple of years that it's. Yeah, it's, you know, tempered that enthusiasm to keep expanding herds.

[Yeager] So, you, are you more cautious for livestock feeder, for live cattle, for feeders, for hogs. Right now as a whole.

[Hueber] Well, on the particularly on the fed cattle market, if you're if you're feeding cattle out, I mean more than cautious. I think, you know, if you're not hedging this, you know, you're really leaving yourself out to some pretty massive losses and similar, you know, hogs, you know, I don't think that the downside maybe is could be as dramatic or the pain could be as dramatic as it would be in the cattle market. But that said, seasonally, this is when you usually see your peak in the in the hog market. I don't think this year is any different than an average year. So yeah, if you've got profitability now, now's probably the time to lock in some hedges to make sure you take that home.

[Yeager] In crude oil in 10 seconds. Is this thing done falling?

[Hueber] Well, maybe temporarily, but not over time. You know, the Saudis or I should say OPEC plus really wants to take crude back above $60 level. You know, that will temper any enthusiasm for the for the fracking industry. And that's what they want right.

[Yeager] Dan Hueber good to see you. Thank you so much for the time.

[Hueber] My pleasure. Thank you.

[Yeager] All right. You've been watching the analysis segment. And in a moment, we will continue our discussion in an online only segment. Search Market Plus with Dan Hueber. Wherever you get your podcast to hear that conversation, or go to our website of markettomarket.org. We have a way for you to find out some of the inside information on this program and what's ahead in rural America by subscribing to our Market Insider newsletter. Look in your inbox each Monday after you subscribe at Markettomarket.org. Next week, an extended discussion on the rural economy. Thank you so much for watching. Have a great week!

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