Market Analysis with Dan Hueber

Paul Yeager: The source of some light at the end of the tunnel is still up for debate, however, prices rallied this week even as harvest rolls on. 

For the week… 

The nearby wheat contract added a nickel and the December corn contract improved by a dime. 

Cooking oil and domestic usage dominated the discussion around the soy complex. 

The November soybean contract gained 13 cents, while December meal improved $6 per ton.

December cotton expanded by 51 cents per hundredweight. 

Over in the dairy parlor, November Class Three milk futures strengthened by 42 cents.

The livestock market was lower. December cattle sold off 70 cents. November feeders cut $4.20 and the December lean hog contract weakened $1.65. 

In the currency markets, the U.S. dollar index was lower by 50 ticks. 

November crude oil fell $1.26 per barrel. 

COMEX gold added $217.70 per ounce, and the Goldman Sachs Commodity Index was down almost five points to settle at 539 - 50.

Joining us now - regular market analyst Dan Hueber. 

Hello, Dan.

Hueber: Hello. How are you?

Yeager: You know, I stole a little bit of your line. I'm going to give credit where it's due. I always enjoy your newsletter lines. You talked about light at the end of the tunnel?

Hueber: Yes, at the end of this wheat tunnel. I mean, there's light for a couple of these markets, right? We'll start with wheat. Is that light? The Road Runner or the or the actual train coming to get, us the proverbial train. I, I'm going to tend to think it's going to be the former that we finally are seeing markets not being able to kept under pressure. I mean, not that we've rallied significantly by any stretch of the imagination, but for the group, that was the first weekly high or close, I think in four weeks. And again, certainly one week doesn't make a bottom. But, you know, again, we've reached levels that we seem to have some value buying in there. What's really the incentive for the bear? I guess at this point? I mean, we've factored in so much bearish news. In fact, if anything, we're hearing continued and granted, no official word from the USDA, but we're hearing corn yields probably a little bit disappointing as compared to what expectations were. So, you know, like once you factored all that negative news in there, why hang around? I mean, if you're looking to enhance your earnings for the year, you're going to look for another pasture this little greener than the one we're in. So I think it's like I say, the incentive to remain a big bear at this point is becoming less and less every day.

Yeager: And you've waited this long, though, to sell any wheat. You wait a little longer for a little more rally.

Hueber: You know, even from a seasonal standpoint, I'd say certainly, you know, you’re not that we're going to see anything major to, to erupt out of here at this point in time. But yes, I mean, if you, unless you are in a dire situation where you need the cash flow, you know, that's of course another story. People have to have to market when that's the case. But yes, I don't see any urgency to run out and sell something at this point in time.

Yeager: So without the again, take a phrase from you, word of gov. In the corn market, we're just relying on what we see on X or from the neighbor at the coffee shop of how good or not good this corn crop is. Those comments about this crop isn't good if kind of faded, how good the corn crop right now?

Hueber: Well, I think it's going to be a solid corn crop. You know, even in our area, the farmers I've spoken with say, you know, they're good yields. I mean, hardly anything to be disappointed about other than in comparison to where the price levels are at this point in time. So yeah, not that there won't be some problems here or there, but it's just not the records that we factored in. So it's you know, again, when we were talking 186, almost 187 bushel, the acre, you trim back 2 or 3 bushel of the acre, then that can shift that balance sheet significantly. And even there, when you really look at the carryout numbers that are projected domestically, they're saying we're going to have 2.1 billion bushels of corn before we start ratcheting back yields. Will we actually get above 2 billion bushels? You know, I think that's pretty debatable at this point. So when you look at it on the stocks to usage ratio, it's pretty standard. We've been at this level for the last 2 to 3 years. 

Yeager: Well, you mentioned about stocks; let's talk about piles. This is a little bit of an agronomy question Dan in Nebraska wants to know what's the concern level for grain spoilage. As we could still have all this grain sitting around when we begin planting in the spring?

Hueber: You know, of course, most piles tend to want to be picked up by the spring. You know, we corn, you know, regardless if it's even got moisture in it or not. We'll like to sprout in the spring. So I think we'll get it off the ground. I mean, that's, you know, of course, the rule number one or the objective number one for grain elevator operator, you know, it's, you know, tell me what the weather's going to be. Are we going to have a wet, warm winter? If that's the case, then we've got a problem. But if it's a normal winter, then, you know, probably not a big issue.

Yeager: I haven't heard you mention, you mentioned it in wheat, but I also kind of wondered if you could say the same thing about corn light at the tunnel. Bears going into hibernation, journey of a thousand miles begins with one step. What is it right now?

Hueber: And you've covered them all there. So I.

Yeager: Haven't heard you say them yet, so I did.

Hueber: Okay, okay. I think it's the one we've taken that step. I think we were at the point in corn where, you know, domestic usage is still pretty solid. I mean, granted, there's no huge incentive to really kick up or increase production of ethanol at this point in time. But on the same token, the economy continues to churn along. So, I mean, domestic usage is going to remain pretty strong. Not that we couldn't get some upsets in the livestock market as we move along. And I mean, granted, we're now just getting back into the flu season. And of course, we're referring to poultry flu. I mean, are we going to see that flare up again this winter. That's a great unknown. But, you know, all things equal. Yeah, I think we pushed it too far to the downside. We need to start moving, recovering back to the higher.

Yeager: So we don't know exactly who's buying at this point without some of those reports. But were there livestock people buying on this last what maybe they think is.

Hueber: I think livestock. And I think you've probably got Mexico as a very active buyer in here. You know, they, I mean, that is our number one customer. And of course they raise a lot of livestock in that country. So I think they've probably been very avid buyers here. Well, we're not hearing about it. And they were prior to that. I mean that was really the dominant buyer. So they seem to know a bargain when they see one.

Yeager: Is there a bargain in beans or is it the bargain sale about to end?

Hueber: You know, granted a nice close today, but we still haven't gone anywhere. And realistically you look at the soybean market, it hasn't gone anywhere for two years. So we've been really kind of stuck in a 950, 1050 kind of zone on the front side of the futures. Maybe we can get up and challenge that upper range. You know, one thing about the soybean market, we've certainly grown accustomed to not having China in the market. That's the expectation at this point in time. Now China probably needs to buy 8 or 9 million metric tons of beans between now and January to kind of fill out the, the, the period between here and the new crop of South American. If that does turn around, we have a little bit of a trade agreement. So the surprise then is of course friendly. So, you know, not that that takes beans to the moon, but, you know, we could at least push back to that higher side of the range. And we've got a market that's been stuck in a range for that long. If it ever breaks out of it, for whatever reason, South American weather, you know, again, maybe a little surprise business from China. You know, it's probably not going to go 10 or $0.20 extra. It'll probably go another dollar. So I mean, if there's a market that is sitting with a potential for a surprise, it's probably soybeans. But we need that spark to make that happen.

Yeager: So we're bordering on beans in the pre-teens, not in the teens yet. For that, add that dollar because $10 seems to be that level that we've kind of held on to.

Hueber: I mean, when you look at just the November contract, it's been stopped at 1070. I think, for specific times over the last two years. So it's, I mean, that there's definitely a lid there. And like I say, if you ever go through it, you know, things could get exciting for a few days.

Yeager: So I think I'm going to ask you in Plus about domestic usage, but I'll talk about an export story when it comes to cotton right now, because that has been the bears might as well change the market to bear market, because it is constantly that way. Are they done?

Hueber: You know, this week it did reach down, pushed a little bit through lows that it traded back in the spring of this year and really just seemed to stop at that point. So yes, I think we hit a point where there was really no incentive to push them any further. Domestically. You know, it's hard to paint a pretty picture in the cotton market, but when you look at it in a worldwide, we're not looking at overburdened supplies. So it's yes, I think you can make a pretty good case on why at least we're going to stop going down. Granted, we'll need a new story to make him come back up much. But you know, for now, I would think shorts are probably ready to to move to the sidelines.

Yeager: Last week, Shawn and I discussed acres. Is cotton in a position? How long of a, how much of a rally is it going to need before it can buy in? Because there's going to be some areas that are going corn, beans, not going to plant, maybe cotton.

Hueber: Yeah. Boy, cotton is a you know, and again, I've never raised cotton I know it is a very expensive crop to produce. So it's you know, I think it's going to take a little more than what we've seen already to bring that. You know, I think there's probably a greater chance we're going to lose corn and soybean acres in fringe areas than we would be to have cotton take away those acres.

Yeager: So in the live cattle market, that story has been for weeks. Is this it? Then the president comes out and makes comments about trying to help the feeder market. The consumer buying beef that the feeder market didn't respond well to it, but the cattle market kind of had some resiliency. Why?

Hueber: Right. Well, you know, and again, we've had so many problems on availability. You know, of course, we already know domestically we have 70 years low as far as the beef herd. But you know, we're having the trade issues with tariffs on Brazil. You know we have the the screwworm issues. You know, so you know, we don't have any place we can go to to really bring in some available supplies. So until we see the demand really come apart here it's but you know again the reaction the cattle market today was not exactly favorable. And you know, once you have pushed this far, you know that that train could end any day. So it's on tenuous ground already.

Yeager: So we heard in the piece from Peter Tubbs about the, we might hear news. The Treasury secretary, we might hear news next week about beans. President yesterday, on Thursday, said we might hear something about this feeder market. Feeder market seems to think there's already something happening because even though it sold off $4 on the week, that's still a $16 gain in two weeks, right?

Hueber: Right.

Yeager: But is that finally signaling something? Is it outside force having a great impact on this market?

Hueber: Well, you've unsettled you've thrown in a level of uncertainty. It didn't necessarily have before. You know, that said, you know, when particularly when you look at that $16 gain over the last two weeks, that's generally how markets peak. You have kind of a a panic situation where you just accelerate wildly to the upside. And then when it's over, it's over. And you know, sometimes it's over because of an outside shift in the picture. And boy, we're in dangerous territory when it comes to the cattle market. So, you know that could all of them could end in a heartbeat here.

Yeager: So is dangerous more of an aggressive term than saying volatile?

Hueber: I would probably take it one step beyond volatile. Yeah. Volatility doesn't mean you necessarily peak dangerous means you know we're at risk of having the whole party over.

Yeager: That's a flash that you're giving me. Okay. Hog market that has been one that has been moving well, but not really.

Hueber: Had done well up until a couple of weeks ago. I mean, even was a bit non-seasonal. I mean, generally you would have lows when you move into the month of October in the, in the hog market. And here it's, it's of course been trending higher for the last several months, probably more I think in a correction phase at this point in time, I think we'll bounce back. Yes. There's a possibility that the highs we saw a few weeks ago will be they will be the match, the highs for as we move out into next year. But I think we're right at this point in time. We're probably getting a little oversold and due for a correction. Back to the upside.

Yeager: In 30 seconds, which is a bigger story to be watching. For those of us watching commodities, the dollar or gold?

Hueber: Well, the dollar, it’s gold. Gold's a bigger story. I mean, the dollar is probably going to continue to deteriorate, but it's not going to collapse gold. I mean, that's just a guess at this point in time.

Yeager: So I mean the dollar was another, was it another 5% up this week.

Hueber: Or down. or down. Down. Right. Right. Yeah. It finished weaker. But those are ranges we've been in for the last year and a half. You know, it did not break into new territory.

Yeager: So gold was down, was up 5%. Sorry I'll get it right. Thank you Dan Hueber great to see you. Appreciate your time. 

Hueber: Thank you.

Yeager: All right Dan, thank you.

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 podcasts to hear that conversation or go to our website of markettomarket.org. 

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