Market Analysis with Matt Bennett

Selling pressure was evident for various reasons including good weather and funds changing positions.

For the week ending June 5… 

The nearby wheat contract lost 31 cents and the July corn contract fell by 29 cents. 

Favorable weather led the move lower in the soy complex.

 The July soybean contract sold off 65 cents, while July meal weakened by $21.30 per ton.

July cotton declined by $2.44 per hundredweight. 

June Class Three milk futures shed 12 cents.

The livestock market was mixed. August cattle added $2.60. August feeders put on $5.47 and the July lean hog contract declined 70 cents. 

In the currency markets, the U.S. dollar index added 98 ticks. 

July crude oil gained $2.85 per barrel.

COMEX gold was off $220.80 per ounce, and the Goldman Sachs Commodity Index was higher by almost 5 points to settle at 698 - 85.

Here now, to lend us his insight on these and other trends is market analyst, Matt Bennett. Hello, sir.

Matt Bennett: Hello, Paul.

Yeager: You know, this is probably one of the most down weeks we've had in quite some time. Is there an overarching theme on why grains were the way they were? I mean, the easy thing to say is the fund's changing and the weather. Is there more to it than that?

Bennett: Yeah. I mean, the fund's obviously got into a record, almost a record long position with this corn market. You know, we saw price levels we hadn't seen in a couple three years. You had presidents Xi and Trump. They talked about the $17 billion program. Right. That was going to be on top of soybeans. And I think a lot of folks felt like right on the heels of that, we're going to get maybe a bean sale or two in several corn sales, maybe even some wheat sales. It's been crickets since that happened. And so I think that kind of frustrated some folks. You combine that with obviously a pretty good start to the crop. I know some regions have run behind and clearly have had issues. And I feel for those folks. But if you looked at the weekly progress report, we actually have been running at pace or above average pace. And then conditions this week, of course, 67% did nothing to keep a story alive, if you will. You know, there's parts of the country that are excessively dry, but this time of year, that's not a huge ordeal just yet.

Yeager: And it's maybe a little early for that story to develop as well. But Let’s Talk wheat then specifically, if we could, because that is where the wheat or the weather has been the best story. But if my rough math, something like 65, $0.66 in two weeks, and that market is this end anywhere close?

Bennett: Yeah. I mean, that's been rough. You look at, for instance, hard red hard, red's been down 12 straight sessions. I mean, just an absolute death spiral. I don't know how to even explain it. It's been awful. And I know that some folks in that part of the world are saying, you know what? I don't have a crop. It's not that great. Yes, they got some rain here recently, but let's face it, a lot of that wheat is ready to cut, you know, so it's probably a little bit too late. You get into the soft red, it's going to be a little bit better crop. And so those folks in the Kansas City situation on the hard red, they're like, how is this occurring? Well, the problem we have, Paul, is that the total wheat crop. You put all three classes together. And in the grand scheme of things in the world, it doesn't matter a whole lot. We are not a huge player in this wheat deal. So you take one of the three classes that had an absolutely awful situation. It still doesn't move the needle, and I know that's frustrating, but that's pretty much where we're at. And so obviously this wheat deal, you're going into harvest. You know, there's just headwind after headwind after headwind.

Yeager: So that would, I'm guessing by what you're saying. So we always talk about a harvest low. This is not, really sounds like a time to be selling anything because of fears it could go lower. This is more a harvest issue than it is anything.

Bennett: Well I think it's a variety of things. Clearly, I think that we got overbought at the time. Whenever we look, for instance, at world fundamentals, you couldn't really make the case for $7 and above wheat if you looked at everything in total. Right? The problem, of course, is that you get into this tunnel vision of what the hard red crop was, the situation you went on the tour, obviously hearing some yields that are really challenging, you know, 15 and below. But the bottom line is once again, probably not the best time to be stepping in after you basically stepped off a ledge.

Yeager: Old crop corn. I know we're going to talk a lot about new crop corn, but why is old crop struggling so much?

Bennett: Well, first of all, we have a couple billion bushels still is what we're thinking, you know, going into harvest timeframe. I mean, here's the deal, Paul, we had a lot of opportunities here. And I don't want to be a hindsight guy. We had a lot of opportunities to sell. And so what happened was in those opportunities is that the funds were buying okay. Because they had a story. It was kind of an inflationary hedge type situation. Obviously, war situation. We know fertilizer that kind of played into it. But regardless, they're buying at the same time the commercials are selling because the grower is selling to the commercials. They turn around and hedge it until it gets used. Well, the problem is the funds, they lost interest for a variety of reasons. There's a whole lot going on here, but now you've got funds selling, you've got commercial selling. And let's face it, we don't have enough buyers on the other side of this thing. And so yes, there's plenty of corn around. Some of these basis levels have improved. But Paul, whenever you drop 25 - $0.30 in a week. I don't know anybody's basis levels that are improving enough to counteract that.

Yeager: Well, I knew you would say something like that. And so that was that's a big concern is the thought of this basis, because sometimes that's a savior for people. Yeah. It doesn't sound like that's coming anytime soon.

Bennett: With 2 billion bushels. Yeah. Yeah. Right. That's the problem.

Yeager: And that's the math.

Bennett: That's the problem. Paul. If I want to get a little more of a friendly tone, it's tough to do so based on old crop. You know, my biggest concern isn't even ‘26. I mean, obviously ‘26. We can talk acres. They're probably going to scale back somewhat. It depends on how good that March number was. I don't know how good that March number was, but I think some folks switched a few acres around due to fertilizer, where I'm really concerned because a lot of growers had the opportunity to sell, and I believe they sold a lot more corn for this crop than they did the previous three crops. They never had an opportunity. The problem I've got is ‘27. That's what scares me the most.

Yeager: Well, let's talk about the new crop then, because are you referring to new crop? Do you think they've sold a lot of new crop? Or were you saying they've sold more of the old.

Bennett: I mean, I'm going to guesstimate at 25%. Okay.

Yeager: Okay. So then on this new crop story, whether you mention it, it's ideal in certain spots, not all, but enough to keep the market saying you're fine crops, It's June.

Bennett: Yeah. Well, the thing is, is that if you go into pollination with a drier bias, there's always the chance to get things fired up. Right. The problem is, if you go into Fourth of July with plenty of moisture, it's not probably going to give you a whole lot of concern around pollination. Pollination, as we all know, a very important time frame, genetics have been able to counter a lot of stress here over the last several years. So you would need to throw a fair amount of stress at it, in my opinion, to get people fired up. Right now, you look at the National Drought Monitor, there's a ton of drought in the U.S., but where it matters to this corn market, there's just not that much stress at all.

Yeager: So we've saved the worst for third because beans took a huge hit. Weather is a factor in that. But tell me about the old crop story first.

Bennett: I mean, the thing is with beans yesterday, in my opinion, Thursday, if you will, that was the real blow. It seemed to me like beans were kind of hanging in there, relatively speaking. They were performing better than corn, let's be real about it. And then you come in here and you look at the screen, you're down $0.35. It's like, oh, they got the memo, right. And so the thing about beans, you've got great domestic demand. There's a lot of hope. You know that, hey, China's going to come in here. They're supposed to buy 25 million tons. I know some people say, well, who knows if they're going to do that. Well, they bought several beans over the winter at a dollar premium to Brazil because of this sort of trade agreement. Part of the problem this week, in my opinion, was China. You know, some rumors that China said, hey, we're not going to do anything until maybe September. So I've had a lot of questions. Could they get all these beans bought if they wait till then, go back to 2024? We hadn't sold hardly any beans heading into harvest. And then it was just a flurry of sales to China. It can happen, but the trade's not real happy with the fact that they haven't started that purchasing program.

Yeager: And then on the new crop side, then again, weather is a story. I mean, I have plenty of questions that I could have gone to. I guess let's Holtz View Farms if we could, because this one ties both corn and beans and wheat, but with the lack of moisture in the corn belt, why is the market's going down? Did I miss something? That's the issue that you're talking about. It's not the same everywhere.

Bennett: Yeah. It's the lack of moisture is a regional issue. Now if you get into my part of Illinois we're in decent shape. We've actually had too much rain at times. But you get like north, for instance, of I-74. And I mean it's dry as a bone now. They had some rain on the radar here this morning. I don't know how much rain they're going to get, but the forecast is that over the next week they could get 4 to 5in. Now if you bless that area hopefully not all at once. But with that much moisture, you're going to start to take some of those dark red areas on the drought index or topsoil index, and you're going to shrink them, which is going to do nothing. I do believe that's part of the problem this week with the markets.

Yeager: How many conversations did you have with Ross Baldwin once this new world Screwworm was coming and what was the take that the two of you were talking about?

Bennett: We've been busy enough, to be honest with you. I've read his stuff though. And the thing about the Screwworm incident. The market just plummeted, you know, and then we stabilized later on. How come we didn't come here? Well, two days before this was announced, it was 31 miles south of the border. The day before is 25 miles south of the border, and flies fly, and they don't know where. They don't know where the border is.

They don't know where the border is. And they can go over it. They can go through it. But the bottom line is we knew this was going to happen at some point. And so what Thursday looked like to me was a sell the rumor, buy the fact type of deal. And so I think moving forward, it still could be actually kind of friendly. But I was a little surprised that whenever it was announced, there wasn't more panic. But look at the ranges yesterday. I mean good night.

Yeager: Feeder market too. Had some of that same same low. And then a quick high.

Bennett: Absolutely. And up the limit. You know, I mean you had a 15 like $15 range there. I mean it was just an incredible move there. But bottom line is I think moving forward, you got to ask yourself if we have much of an outbreak at all, what does that do to us fundamentally on down the road? You've still got people right now. You've got people selling pairs out west because they're too dry and don't have enough grass. I mean, we are not having any luck building this cattle herd here. And fundamentally, I think that you're going to have a story for some time.

Yeager: And there's the news from this week means we're not opening that border anytime soon.

Bennett: I don't know how they could.

Yeager: So that was always Ross has talked about that and it's like it could happen. That's not happening anytime soon.

Bennett: I don't believe there's any way with what we're dealing with now. They've obviously got their hands full trying to make sure that we don't let this thing get out of hand quickly.

Yeager: 20 seconds on hogs. They haven't benefited.

Bennett: No. And you look at that chart, it's just ugly, ugly as can possibly be. And I think that if cattle can regain some momentum here, maybe that substitution effect really sees them. Maybe you'll have an opportunity to see this hog market get back up into triple digits on more than 1 or 2 contracts for a little bit, but I don't know right now. It doesn't look great.

Yeager: I thought we could have something positive. We'll work on that in Market Plus. How about that? Absolutely. All right. Thanks, Matt. Good to see you. Matt Bennett everybody.

You’ve been watching the analysis portion of our program and in a moment we will continue our discussion in an online only segment. Find it by searching Market Plus with Matt Bennett wherever you get your podcasts. You can also go to our website of markettomarket.org to listen. 

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Next week, indoor farming looks to survive the hype and harvest profits.

Thank you so much for watching. Have a great week.

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