Market Analysis with Kristi Van Ahn-Kjeseth

[Paul Yeager] Friday's WASDE report left balance sheets and yield estimates relatively the same. This did little to move the market in a week where good growing conditions fed the bears for the week. The nearby wheat contract lost $0.02, and the September corn contract sold off $0.24. Absence of export sales by China continued to pressure the soy complex. The September soybean contract fell $0.46, while August meal sold off 710 per ton. December cotton shrank by $1 four per hundredweight. Over in the dairy parlor. August class three milk futures declined $0.70. The livestock market was mixed. August cattle added $8. 15. August feeders put on $15.83, and the August lean hog contract cut $1.42. In the currency markets, the U.S. Dollar index increased 29 ticks. August crude oil gained four. 41 per barrel. Comex gold strengthened 37. 71 per ounce. And the Goldman Sachs Commodity Index was up by more than four points to settle at five 5730. Joining us now, regular market analyst Kristi Van Ahn-Kjeseth. Hello, Kristi.

[Kristi Van Ahn-Kjeseth] Hello.

[Yeager] Is this wheat market more than just harvest pressure right now? [Van Ahn-Kjeseth] I just think that these markets in general are really struggling to get any sort of positive information. I think you look around and anytime you're in this time frame, and I know the rain when you look at it for wheat is not that important right now and actually might be causing more problems. But I just think anytime you're having rain during this stretch, it just brings out some sellers in the market. And I just think that you look at kind of the carryout levels for wheat, you know, we're at the exact same carryout or close to that we were a year ago. And our prices for Kansas City wheat are pretty much the exact we were a year ago. And so, I think that there's just no reason to really budge them right now. I think that wheat and we've been saying this for, what, a year, a year and a half now, I do think that there's enough on the backdrop that if something could come together, I think wheat really does have a story, because you look at the world situation. On ending stocks for wheat, and there is that story there. There's issues in Australia. So, I do think you could come together on that, but you got to see something happen first.

[Yeager] Well, what we've seen happen in the corn market is a lot of rain and in key growing areas, the markets, the estimates, there was some private groups that really put a lot of conversation at the coffee shop. This crop could be really big. Is that the biggest story in corn this week?

[Van Ahn-Kjeseth] Yeah, I think it's just in general, you have yet to get a weather threat story, and that's not very typical. You usually have some sort of story at some point, a little bit of hot stretch and a dry stretch paired up somewhere that gets people just second guessing, you know, scares off some shorts. We have not had that every Sunday. We've been coming in here with a forecast that has plenty of moisture in these areas that you're just saying, where is the issue? And now you have these independent yield estimate models coming out with some very, very big numbers. And I'm not in that camp. I feel like it's too early to be talking about that. But here's the thing. What I think isn't necessarily what matters, right? You have to remember that you might feel like those are inappropriate. That does not matter. You take those and the market is digesting them, and the market is pricing those in right now. So, you need to do the same thing whether you agree with them or not. And that is what the market's doing.

[Yeager] So, what do you do in that situation.

[Van Ahn-Kjeseth] What do you do it. You know, to be honest I do think that corn feels like doom and gloom. The world is over. What are we going to do here? It's been a slow bleed. It is really close to some support lines that we've been watching. And so right now I'm not that type of person that says just ignore it. But at this point I am saying do not be that person that panics here. Our support lines are for 13 for December corn. We are right there below that it's 405 and 385. And I think you need to reach a point where you're saying, where is the risk? You know, where is the bigger risk in the market? And when you're talking, we're 413 and the targets are 405. And 4 or 385. I just feel like that's you're getting to a point where that's enough risk that you can kind of say, hey, I know this, I can handle this. I need to just breathe through it, let it happen. If it happens, and then focus on my game plan moving forward.

[Yeager] Rains also making a lot of soybeans, too. And that is again, I would imagine it's more maybe a psychological $10 mark that's impacting us there.

[Van Ahn-Kjeseth] Yeah, I think so too, with 413 1007 has been our target on November beans. Then you have your psychological level of ten. And then below that it's 972 is what we're looking at for some numbers here. I think beans are such a wild card. You know, you saw what beans could do when there was a hint that China was stepping into our market. You know, you had this hint that we had this trade deal. You had some unknown destination sales. They were small, but there were unknown destination. And that got the market so riled up so quick. You got to those targets beans. If you could get a trade deal done with China, that I should say. You get details of a trade deal done that has actual details. That includes agriculture. I just think beans are a blow up waiting to happen. But you got to see that first.

[Yeager] You devil's in the details, right? It's the saying, let's go back to the comment you just made about pricing. Does a low price right now corn or beans make us think that, well, hey, now's the chance as a buying opportunity for some other country?

[Van Ahn-Kjeseth] I think. So, I you know, you look at where the U.S. Dollar is, you look at our prices. I, I would have thought that Mexico would be in here for a little bit more. You've seen them in here. You saw big one a few weeks ago for a decent sized sale. You would just think that you'd see more activity. Our demand has been running hot, but I'm talking about that big private sale. That is what you need to spark the market and get people kind of buying into the situation. You would think that that would start to happen, but demand has been very hot. You know, you're not getting those flashy sales, but every week it's adding up and you look at where we are for old crop, we're over 100% and that will even itself out. You'll maybe have some rolls, some cancellations and everything, but that's a strong start, knowing that we're where we are and that you could potentially even see USDA justify another increase to exports for old crop corn down the road.

[Yeager] We'll get back basis. I'm going to ask you about basis. And plus, I have a question that I kind of ran through here. It's really answer it in the corn mind if you could. And if you want to throw in beans to Jason and I will wants to know the market is so flat, 12 to 18 months out, barely any carry. What strategies are out there? Calls and puts are just they don't seem attractive either.

[Van Ahn-Kjeseth] Yeah, I wouldn't spend any money on puts right now unless you're really, really bearish right? If you're saying hey, I can't sleep at night, that's where options to me are very cheap right now. And you can do it as a strategy to say, hey, out of sight, out of mind, you know, let it do it. Otherwise, I wouldn't be spending money on them. I am close to being in the camp of spending money on call options. And when you look at the carry, yes, carry from, you know, crop year to crop year isn't necessarily there, but the carry from December to July corn or the carry from Nov to March beans are some of the widest levels we've seen, especially during this time frame. And so, I would say if you have sales at the elevator that you don't need to deliver, you really need to be looking at this carry right now and be taking advantage of it. Now, if you have, you know, contracts at the elevator and you think you need to deliver them, don't be rolling them out. Because yes, the carry is great. But interest rates the way they are, take it in hand. Take that cash in hand.

[Yeager] Let's go back to Mexico and its relationship to live cattle. And I know it's also impacting the feeder market, but live cattle. This week volatile cash is kind of changed a little bit. But it's about those cutout values. The consumer is still buying, right?

[Van Ahn-Kjeseth] Yes. And the demand is still there. But I do feel like you're starting to get a little bit on the toppy side. It makes me, you know, yesterday's action. Thursday's action made me really nervous. Right. You knew coming into the day that they had shut down the border again, you had live cattle, feeder cattle take off, and then they kind of reversed themselves, made new contract highs across the board, reversed themselves. And I was like, that is not what you want to see on a bullish set of information. Now we're coming in on another day of another set of bullish information. The fact that you could see these tariffs coming in on Brazil. You know, we get a lot of beef brought into the U.S. From Brazil. So, I think both of those impacts are bullish situations that the market is starting to feel a little tired on. And when you start to feel a little bit tired, you wonder, hey, can cut out values, can cash do it alone? Because we know manage money is long. They are there record length here. In when you look at hogs. And so sometimes cash can't do it alone. Just like fundamentals right now are semi friendly for the corn market. I'd call them friendly for the corn market, but that doesn't matter at all right now. And that's what I'm afraid you'll get to for cattle is that even though cutouts are strong, even though cash is strong, will you get to a point where it doesn't matter? Because manage money wants out.

[Yeager] And that's been part of this discussion, right, of I think we have a question that we'll talk about in plus is at what point what's the sign that manage money is getting out? Is there is that a commitment of traders type thing that we need to be watching?

[Van Ahn-Kjeseth] Yeah. So, every Friday you're going to get that unless a Friday is a holiday trade. And so, you get that information. And so yeah you do have to watch it. You do have to see what those trends are. I get very nervous that, you know, you're just going to run out of, of steam saying, hey, we got all this bullish information. Well, we all know these things. We all know inventory numbers are low. How long can we ride that story that you continue to see that trend happen. And so, I just eventually you need to feed the bull. And we've done a good job doing that. But you're looking at the dynamic and you're saying what else could we find out there that's going to be bullish for cattle. And I, I feel like we've covered so much.

[Yeager] Well for feeders it could be cheap feed.

[Van Ahn-Kjeseth] Yes. And that's exactly it. I mean you look at where you're at, you know, you look at meal prices I don't know, I mean obviously you have your hog producers really paying attention to the meal prices. But I mean, those levels are so low that you have to go back years to find these meal prices that were at. And you know what? I think corn is cheap right now. You're not necessarily going to hear that from everyone, right? You know, some cattle guys might not necessarily agree with me, but you look at where corn prices are compared to three months ago. Four months ago, you know, you're a dollar off those values for old crop. And so, I think you're looking at those situations, seeing the profitability there for a lot of those cattle producers, you're just asking them to put a lot of risk on the table to continue that trend. And it's working out for them right now. The profitability is there right now, but that's a lot of risk. You're asking that cattle producer to take on.

[Yeager] And the hog producer has been watching some of their market share erode because again, going back to beef.

[Van Ahn-Kjeseth] Yeah. And you know that's just I always have this conversation because I actually really truly love a pork chop. I love it. And so, I just am really surprised you have not seen that demand shift over, or at least just kind of taking a little bit away from beef, and it's just not there. We are very much big supporters of beef when it comes to the demand side of things, and I just don't think you've seen the prices where they are. I don't think you're going to sway people at this point.

[Yeager] Not sway them to protein completely.

[Van Ahn-Kjeseth] Right. Just not sway them to a different product. Right? You know, I just think they like what they like and they continue to be willing to spend a little bit more on.

[Yeager] Quickly as we close. Oil has kind of rallied again here. It's in that upper 60 mark. That kind of seems to be the spot. Is that what you think?

[Van Ahn-Kjeseth] Yeah, I think there's so many world dynamics that can influence it. But when everything shakes out and you have these world dynamics, you also have the president of the United States very adamant that he wants crude oil prices low. And so, when you have that chirping in the back of everyone's ear, I think people are a little bit worried to be able to be a buyer, to push it much higher without a big, big world event, knowing that that's the policy that you want.

[Yeager] And we'll see what we want to hear from you in Market Plus. Thanks, Kristi. Thank you. Good to see you. And you have been watching the analysis segment. And in a moment, we will continue our discussion in our online segment, search Market Plus with Kristi Van Ahn-Kjeseth. Wherever that you get your podcasts. To hear that conversation or go to our website at Markettomarket.org. Our YouTube site is full of current and past clips from our program. Be the first to know about new releases of content. When you subscribe to our feed of youtube.com Market to Market. Next week, we look at permanently protecting land for agriculture's use. Thank you so much for watching. Have a great week!

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