Sue Martin on Grain Stocks, Harvest Risks and Commodity Markets

[YEAGER] The market thinks planting and harvest delays are nearing an end. That thought process was reflected in the market's action for the trading week ending October 2nd. The nearby wheat contract lost $0.20 and the December corn contract sold off $0.31. The fall of soy products kept a lid on the soy complex. The November soybean contract cut $0.41 and December meal dropped by 23 $0.50 per ton. December cotton lost $3.83 per hundredweight. November class three milk futures fell by $0.31. The livestock complex was mixed. December cattle fell by $0.67. November feeders declined $0.83, and the December lean hog contract expanded by $1.10. In the currency markets, the U.S. Dollar index gained 90 ticks. November crude oil decreased $0.50 per barrel. Comex gold dropped by $154.90 per ounce, and the Goldman Sachs Commodity Index was down more than ten points to settle at 738.91. Here now to lend us her insight on these and other trends is regular market analyst Sue Martin. Hello, Sue.

[SUE MARTIN] Hi, Paul.

[YEAGER] This wheat market had been all the rage in the summer we get now. Sounds like everybody left the party. Is that party over in wheat?

[MARTIN] No, it's not. Wheat is in a war cycle that has been in existence since 1860 61. The U.S. Civil War and in many of the cycles since that time have, I'd say all of them, but maybe two in the cycle of that chart, basically, you would see wheat. It's based on cash, wheat. You would see wheat move up and then pull back and hesitate, kind of like what we're doing. And then it exploded. And I feel that the explosion is yet to come. And I think that starts next year into 28.

[YEAGER] Is that a technical movement then that you're referring to, or is there some big fundamental story that's out there that's going to cause this?

[MARTIN] Well, I think the fundamentals will underpin it. First off, you know, you've got Russia, world's largest exporter of wheat, ceding about 15% less. You've got Ukraine talking there. Their egg ministry on Friday said they were going to plant 15% less. And it all comes back around not making money. The EU, who did get blessed with a wheat crop, not corn, but they got blessed with wheat and they're picking up their exports, trying to help fill in. But you know, it's all what it is. And I would have to say long term, I think you come back to these. One thing I'm interested in is this next Friday on the supply demand report, I want to see the global numbers. I want to see what the stocks are like on rice, what they're like on wheat. I think I already know and on corn. And of course, coarse grains fall in there. But that's a bull market.

[YEAGER] And when Sue says it's a bull market, we know there's something to talk about, which we'll get into. But I want to talk about that report just a little bit for next week. And specifically, when it comes to corn. And that is actually our question that I want to bring in here to start our discussion. And it comes from Brian in Nebraska. With all this harvest time, moisture, and the potential for grain quality issues that have presented itself, what scenarios do you see that could involve?

[MARTIN] Well, I think first off, you know, when we go looking at the report for next week, I can tell you the trade is one, their focus is going to go straight to feed in residual that the stocks report almost appeared like it might have ended up vindicated the analysts who had been saying it was overstated on the feed usage for the past year. And I think it's possible we could see maybe 220, 230. But then the other thing they're going to look at is production. And the one thing I'm hearing talk about is because out of the Delta, starting by the end of July, harvesting into the 1st of September, when this report is as of the thought is maybe 290 million bushels have been transferred out of new crop into old. If that is. And of course, this report was sort of similar to last year, and we found, you know, 173 million more bushels of carryout, I think it's going to be interesting to see how they handle this, if that is indeed the case, because then that tightens your carryout even further for new crop on a year that you've had lots of weather, probably some of the worst. And then on top of that, you're also looking at a super El Nino. And so, all of this combined, I think that corn markets got Interesting because I go back to the years of a six since 1916. And out of all of those, there's been. And this year I'll throw it in. So, it'll be 12. But since that time there's been one year where the high came for a lead contract in the month of May. That was 1986, one year in June, that was 2016. And then there were three years in July, two years in August. And up until this year, two years. Now it's three years thus far in September. So, the high for a lead contract is actually 544. And what, three quarters? Something like that. So, if in October here we take that high out, I don't care if it's by a quarter of a century. That's not the contract high on December corn. It's 549. I then think you're moving on up into December, but only two times since 1916. Have we ever put a high in for elite contract in the month of December? And one of those was 2006. So, I'm wondering about that. And in 2006, you know, the market just kept on shrugging. So, it's going to be interesting because, you know, this could be a market that just meanders around. But to be honest, with everything that's going on, there are so many other factors that we haven't had in the past.

[YEAGER] One of the factors missing in the soybean market this week is we're not hearing about Chinese buying after this summit. It seems like they maybe have left the market. Have they?

[MARTIN] I don't think so. They're on holiday right now. Golden week, and that ends next Thursday. But I think are they ever really out of the market. Probably not. So, it wouldn't surprise me. We come back here next Monday and we start hearing some sales because remember China wanted over 16 million metric tons done by at least the end of December.

[YEAGER] And if the harvest low is to be believed that the seasonality is about to kick in, there could be a lot of buying coming soon.

[MARTIN] There sure could. This market, first off, on the beans, there's a gap from that. 1358 I should say. 13 35.25 high up to 1358. But this bean market has a lot of demand to it. And I know that, you know, they're wondering how, you know, with the beds in processors and they need beans. And I know they say that there's X number of million bushels on farm. I don't see it. But what's interesting is the demand is so huge for beans, not only for export, but also for U.S. Domestic demand for our crush. Now, the next thing will be, what about Brazil? What about their weather? They haven't gotten into it. They're just planting. And so that's the one thing that is really could become an extra catalyst. And with El Nino and as strong as this one is, you could see the center and northern portions of Brazil having a big problem. And of course, Mato Grosso would fall in largest producing state that could fall in there very easily.

[YEAGER] I do want to dive into that a little bit and Market Plus, because I do have that written down that I wanted to get your take, because that seems to be the market seems to be waking up to that fact. Let's go to cattle for a moment. There's a couple of stories about transportation and the diesel impact on that market. Is that what's being reflected right now in this live cattle market, or is it more of a feeder issue?

[MARTIN] I think it's more of a feeder issue. As far as the diesel. Yes, it's no doubt it's high. And it wasn't just the Iranian war with the US and Saudi Arabia cut in production or not production, but what they were shipping out through the east West pipeline, what it is, it was being backed up by the war between Ukraine and Russia. Russia's refineries were getting hit. And Russia is a large producer of diesel fuel. And they were so much in stress that they had to turn to India for diesel fuel. And, you know, all of a sudden you see all of this gelling. And it sent the prices running. And I think crude oil, of course, you know, I'm a major bull on crude oil, diesel, I think, too. But I think we do catch a pullback in diesel and reset. And then I think next year diesel prices crude oil going higher. I think we'll see $200 crude if not by mid to late next year. I would imagine 28. But prices of everything I think is going higher. And that's also reflected in cattle. You know unfortunately when they have to ship these cattle to other packing houses, it's costly. Not to mention then trying to get it to the grocery store and what have you.

[YEAGER] Well, and that's still the consumer issue. I mean, that was part of the resilience of a couple of these reports this week, is that the consumer is still buying, no matter what the price is. But we don't always know what all the demand is. And diets change. If we could for a moment close with the hog market because they seem to be the bright spot in the livestock. Why?

[MARTIN] Well, you know, October is pork month. And I think that now that we are heading into fall and even though we should be warming up in the next week, the cooler temps and, you know, more diets where you have roasts and what have you, I think more pork is going to start to see some demand. And that's a blessing. But the one thing we keep seeing in the hog industry is that the Sow is so efficient in her pigs per litter. You know, when you talk about nearly 12 pigs per litter.

[YEAGER] And of our time together, too, it goes flat, doesn't it? 

[MARTIN] It always does. 

[YEAGER] It does. Thank you Sue. Great to see you. So, hang around for a minute though because you've been watching our market analysis. If you're watching us here online or on the PBS app, we're going to stay here, continue this discussion in Market Plus. That's our online only segment. Find it wherever you get your podcasts, you can go to get it first with our Market Insider. That's the stories behind our stories, what our analysts say off camera, and the special invitations to be a part of the program. Subscribe at Market to Market dot next week. From farm to tray, getting locally grown food into school. Lunchrooms. Thank you so much for watching. Have a great week.

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