Market Analysis with John Roach

[Yeager] Traders positions appear to be in neutral ahead of Monday's USDA report for the week ending January 9th. The nearby wheat contract added $0.11, and the March corn contract gained $0.08. China keeps buying from the U.S., but did signal fewer purchases from South America this year. The March soybean contract improved $0.17, while March meal put on seven. 70 per ton March cotton expanded by $0.47 per hundredweight. Over in the dairy parlor. February class three milk futures declined by $0.22. The livestock market was mixed. February cattle lost two. 27. March. Feeders put on one. 75. And the February lean hog contract increased by $1.20. In the currency markets, the U.S. dollar index moved higher by 73 ticks. February. Crude oil gained two. Oh five per barrel. Comex gold expanded by one. 74 per ounce, and the Goldman Sachs Commodity Index was up by more than eight points to settle at five. 5640. Here now, to lend us his insight on these and other trends is our Senior market analyst, John Roach. Hello, sir.

[John Roach] Hi, Paul. Thank you.

[Yeager] When we've discussed the wheat market in the past, at least in the last year or two, it's always been about supply. But it's not always about the U.S. supply. It's about this story that comes out of Ukraine and Russia. So why would the market move higher this week on declining weather conditions in the United States.

[Roach] Well, the the market really had to regain some lost ground. I mean, we had higher prices earlier in the winter and then slid into the lows that we saw around the first of the year. And and we bounced back with traders. Looking forward to Monday's report from the USDA. People decided they really didn't want to hold some of the short positions, rather take their profits and get out of the way.

[Yeager] Is that exclusive to wheat, or do you think that's another contracts?

[Roach] I think it happened in corn and soybeans as well. We saw both of those markets rally as well. And I think it's just people getting into a neutral position. It's interesting. We look at the 20 day moving average as an indicator of the trend. And and all three markets corn, wheat and beans closed right up or right above or just below the 20 day moving average. So prices have gone into neutral zone with everybody waiting to see what the government tells them.

[Yeager] We've put it off long enough. Let's talk about Monday because that is a massive deal for a number of reasons. Does this Monday's reports, plural, carry more weight than normal for you?

[Roach] It certainly does. I mean, these will be the numbers that we use from here on forward as it pertains to last year's production. The crop we harvested in 25 will be finalized on these numbers, and it will be double counted as we look at the stock's position. So not only will the government say here's what we believe the production was, they will say here's what the inventory is in the bin currently. And from that we'll extrapolate. Well, a combination of what was the supply and what has been the demand. And from those numbers we'll look forward and say, well, based on this, we expect demand to be a certain level, and we expect stocks before the next harvest to be at a certain level. So this is really sort of a a super kind of a report from a standpoint of all the information that it gives us. And then what we do with it. Looking forward.

[Yeager] But given that we maybe didn't have all the greatest data at the end of 2025, government shutdown thrown in the mix, some reports were a little different. We're not still 100% sure how big or small that corn and bean crop was. I guess that's why I'm asking if this one seems a little different to you.

[Roach] Well, this particular crystal ball has some fog surrounding it because we had some unusual circumstances. As you just outlined. Plus, the government is a smaller force than what it used to be. And so we don't know what for sure. That's done. And so we're we're really in a little bit of a quandary. But we'll take those numbers. The traders will take those numbers and they'll look out forward and, and make the adjustments that they think are correct. And then we'll trade from there. But but the thing that we have to keep in mind, one of the things we know the government is going to tell us is that we have plentiful supplies. I mean, the current estimate for stocks on on corn is about 7.5% bigger than the stocks were last year. Beans are about three and wheat is about 3% bigger than what it was last year. So we're dealing with big supplies of grain that we're going to then have to merge together with the South American production and South American production is all expected to come in at higher levels than a year ago. And now we have to find out what's the level of demand and can we consume all that grain. And the reality is it's going to be difficult to do that. So we're probably going to have surplus conditions lasting all the way around into the harvest of 26. And we'll see what our harvest of 26 is. And of course that's that's up for, for question, depending on the weather to.

[Yeager] Surplus for the grower usually means lower but better for the end user who's looking to make purchases. Given what you're outlining.

[Roach] That's exactly right. But but let's remember, Paul, we've known this for some months. So so that's six month old information that the supplies are big, the prices are cheap. So we've already seen maybe the worst news, maybe this news will tell us. It's not quite as bad as we thought, but we've already determined a price level. If you look at what the price level has been for the last 90 days, like I say, we're we're right now at the 20 day moving average on corn, wheat and beans. So we're we've adjusted and the market's comfortable. What's the likelihood is that we get something. What is the likelihood that we get something unusual. Not very likely. Well so if we get some some bounce up out of these numbers farmers need to use that as an opportunity to make sales.

[Yeager] Well, that's the perfect segue to Paul in Minnesota's question. And I think it's on the mind of many. And you're not going to have much time to act on it, though Paul wants to know some pretty nice local bases here in Minnesota where he's at. Should we look at locking some of it in before Monday's report?

[Roach] Well, I think what you have to do is be ready to to make some sales. And if you want to go ahead and separate the basis out and you want to lock in because you are anticipating a higher price than no problem with that. But if you're wrong and the price actually goes down, the basis is liable to actually get even better. Because farmers don't like this price. And so if you cheapen the price on Tuesday, you're going to have farmers like it even less. And the and the desire to make sales will be slow and the basis will have to stimulate it.

[Yeager] Are you saying that the it's possible that the the barn doors are going to get welded shut again?

[Roach] Well, until I need the cash, when I need the money. Okay, I'll move the grain. I have to move in order to generate the cash. But then I'm going to stop. And that's been the attitude farmers have had. And they've had it now since harvest. And that's fine. But you have to be careful here that you you're you're missing out selling. When we have rallies in the market and we've generated sell signals in corn and wheat, two of them here since during a season that we like to sell, we've only generated one in soybeans so far. But the next sell signal, we want to be making some sales. And I can almost guarantee you that the farmers watching this show tonight will not like the price.

[Yeager] Well, they like the price in beans any better.

[Roach] Well, I think on all three corn, wheat and beans. I don't think we're going to like the price. And I think we'll have to market in that environment until somebody has a crop problem that's possible. We can start to have a problem in South America, and possible we can have a problem in North America. But at the moment we're not too worried about the weather.

[Yeager] Are you in a position right now looking at the news of China? Maybe not interested as much in South America? Is that their signal to try to lower this market even further and swoop in and make some purchases, either from South or North America?

[Roach] Well, China always tries to talk the price down. So I mean, that's definitely normal. And if you remember, they tried to talk the price down before. They just bought the last round of beans. You know, that that they promised to buy. And it looks like they're going to get or get close to their 12 million tons that they promised they'd buy. They're up over 8 million traders think they might even be up closer to ten, although we don't really have those numbers reported yet. So they've actually done quite a bit of buying during this period of time. And that takes away their need to buy some of the South American inventory, because they actually followed through and bought us inventory.

[Yeager] Let's move to livestock for a moment, because live cattle was the story of 2025 like it was the story of 2020 for what are the headlines in 26 looking like to you?

[Roach] They're going to continue to be the headline of higher price levels or of strong price levels, not necessarily higher. We're actually struggling a little bit right now in the dressed beef trade. Maybe the demand through the holidays was not quite as big as we thought, but the inventory of feeder cattle they found Screwworms again in this week that were announced. And so we're going to continue to have slow movement of feeder cattle into the country. We're going to continue to have difficulty expanding the herd. And and we've got an economy that's a little more robust than we thought, which is probably going to help us as far as demand is concerned. If the government's new recommendations on eating more protein are followed, that could help us with demand. So so the the meat markets in a pretty positive state, although you have to be a little cautious when you're at these high price levels, it doesn't take much to get the get you in trouble and have and have a sharp decline. But it's going to somewhat come out of the blue.

[Yeager] It's not out of the blue necessarily, but the hog run up has been pretty steady on a good run here lately. If you look at the chart that we're about to see what's going to keep that thing, I mean, since the first part of December, we've been headed up.

[Roach] We have been. And what's interesting is if you look at the makeup of the charts, the nearby has gone up slower than the deferred. So, so really what we made new highs on the summer and beyond months this week. So the outlook has improved really just steadily here over the last month. The outlook has improved. And that's what you see in the more distant futures. And the interesting thing is that the hog crush, which is a combination of the futures and feeder pig and the corn values, is is down, is up as profitable as it has been, 90% of the time, over 90% of the time in the last ten years. So it looks very positive at the moment.

[Yeager] Well that's good. We ended on a positive note. Thank you John, good to see you again.

[Roach] Thank you very much. Appreciate it. Paul.

[Yeager] That’s John Roach and you've been watching the analysis segment. In a moment. We'll continue our discussion in an online only segment search Market Plus with John Roach. Wherever you get your podcasts to hear that conversation or go to our website of markettomarket.org. We are here to assist in the resolution to expand knowledge in the new year. January is the perfect time to dive into our Market to Market classroom project. We have modules on commodities, government and science. Head to Markettomarket.org. Next week, double the analysis of Monday's USDA report. Thank you so much for watching. Have a great week.

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