Market Analysis with Elaine Kub

Yeager: A streak of seven consecutive losing days was snapped Thursday on Brazil’s announcement limiting tax credits beneficial to agricultural exports. For the week, the nearby wheat contract plummeted 51 cents and the July corn contract added 3 cents. Soybeans were under the same action as good growing and planting conditions played out over much of the Grain Belt. The July soybean contract lost 26 cents while July meal fell $4 per ton. July cotton shrank by $2.31 per hundredweight. Over in the dairy parlor, July Class Three milk futures decreased 33 cents. The livestock market was lower. August cattle fell $1.27. August feeders cut $1.47. And the August lean hog contract declined $4.82. In the currency markets, the US dollar index added 25 ticks. July crude oil shed $1.61 per barrel. COMEX gold fell $21.30 per ounce. And the Goldman Sachs Commodity Index was off more than eight points, to settle at 569.45.

Yeager: Joining us now is regular Market Analyst Elaine Kub. Hello, Elaine.

Kub: Delighted to be here, Paul.

Yeager: Wheat had been the darling for quite a while.

Kub: Yeah, it had a run.

Yeager: Now it's a tough one, 7%, 51 cents on the week. Technical correction?

Kub: It's a lot of things. I think it's a confluence of factors here. If we rewind right to the beginning of the show when you talk about the good jobs report, for instance, that makes you think that everything is optimistic and great, but not if you're a wheat farmer because the U.S. dollar finally really popped up. And the dollar sort of hasn't been a story for us lately. And on a day-to-day basis it's usually not a big factor for grain prices. But wheat is the most sensitive to that. So, it could be that. It could be weather forecast for Russia this weekend looks a little more wet. Could be Turkey is going to suspend some imports. It could be any number of things. But whatever it takes, those funds had been buying the wheat, as you mentioned, there had been that rally for wheat. So, there was a lot of fund money in there. Anything like that, that spooks them, yeah now is just their opportunity to sell.

Yeager: And then on the spring wheat finally getting in after allowing some planting your neck of the woods and other spots. But then it has been hot in part of the Plains and then rain fall. So, weather is -- but the U.S. story still isn't really a factor, is it?

Kub: No, you could say it is, especially because this is harvest time, so there's another little bearish factor. You're going to have farmers in Texas is about a third harvested, Oklahoma is about a quarter harvested. So as that wheat actually starts to come to market, that is also a pressure on the market domestically.

Yeager: All right, moving forward for the next month, are we in a position where we better take advantage of this rally that is still above $6.49 on close on September? Do I book something?

Kub: I don't know. It's really tempting to gamble because the Russia story is real. If you're going to cut Russian production that much you might be able to ride out some of this volatility that we're seeing here. We haven't really seen much buying come to the U.S. market yet. But if you're in a position to hold onto it yourself, maybe, maybe that's a gamble to take.

Yeager: If corn didn't follow wheat up dramatically higher, it clearly didn't follow it this week. It's the only green on our board. Why did corn withstand this pressure?

Kub: Yeah, corn is a little less sensitive to some of this export story or sort of global story right now. And domestically, if you look ahead to next week, we're going to have not only a new WASDE report, but an FOMC meeting. There's a lot of things that could happen next week to add some volatility to the market. And with regard to the WASDE report, the supply and demand tables that the USDA puts out, this is pretty nitpicky, but if they're going to make changes to those tables next week for corn, those changes are probably likely to be bullish in the demand side for both exports or ethanol. And we're talking pretty minor, pretty mild changes. I wouldn't expect to see a really big reaction, certainly not from the supply side. I think we know that we're looking at a record large crop here in the United States so far. So, it could just be some anticipation of something like that.

Yeager: But on the new crop side, that December contract, we've been stuck $4.45 to $4.70, had that little blip up above. Planting conditions -- it depends on who you read on X or Twitter how good it is or how bad it is for them. What do you see -- I guess the question -- I have seven of them that are kind of the same about weather. But what do you see as weather?

Kub: Well, I mean, not to negate the pragmatic influence of actual planting conditions for folks that are on the ground, but for the markets, the markets don't care. There is no statistical relationship between how fast things get planted in the spring and then the ultimate production in a nationwide level or the ultimate price by harvest. So, don't get bullish based on late planting. Rather I think it's really important for folks to be thinking seasonally. This is the time of year when you see these seasonal highs, when you have some of your best selling opportunities. And maybe they're behind us. Maybe the May 15th high, which it couldn't quite make it to $5, I think if it ever got near $5 again everybody would just sell the heck out of it again, and they should. But even you might not want to wait for that to happen. This is the time of year when we tend to see seasonal highs. We see weird little pockets of volatility with the WASDE report or with the three-day Juneteenth -- that's not going to be a three-day holiday this year -- but that trading holiday. This is just the time of the year when you see some opportunities and it's really important to get some sales made.

Yeager: I guess we'll talk about it in Market Plus, but that whole Mother's Day to Father's Day scenario, we'll see how that one goes. I need to move to beans and the old crop story continues to be, it looks like, still nobody from China is buying old crop, let alone new crop. What do you see in the old crop story right now as the big headline?

Kub: Yeah, the disappointing export sales this week I think that was the theme here towards the end of the week. But domestically things are fine. I don't think the market is going to fall apart because the crush spreads are good. There are certainly useful applications for this product. I don't think it's going to fall apart. But right now, the traders I think were trading based on disappointing exports.

Yeager: We do have a question about weather and some export issues. This one is from John in North Dakota. Thank you, John, for submitting this question. Drier weather is in the forecast, opens up the opportunity to finish soybean planting in the Northern Plains, combined with slow Chinese purchases of new crop soybeans. How low will soybean prices trend?

Kub: I don't know how low soybean prices will trend. And I think yes, it's very positive for folks that are still trying to finish up planting, that this active weather pattern that we've been seeing will slow down a little bit. But there's also rumblings of concern about dry weather farther into the summer, into June and July, but I just want to say, again, don't get too bulled up about that. That is pretty far away. If you've ever watched the local news, the weather forecast is barely reliable seven days out. I don't think that we should be trading bullishly based on a July forecast yet.

Yeager: Can you at least agree that beans might be headed lower?

Kub: Yes, it could go up, down or sideways, Paul. Yes, but I think fundamentally they are fairly well supported. I don't think they're going to fall out of bed.

Yeager: In the livestock market, live cattle have been dealing with lots of stories. But does it go back to the very first thing you said on the dollar now?

Kub: Yeah, on a day-to-day basis I think so, yes. And it's just really hard to get -- exports -- there is a very fundamental reason why the beef market and the live cattle market should perhaps trade according to the dollar because it is dependent on the export prospects more so than it was three years ago, five years ago or ten years ago. So, that makes a certain amount of sense. Sure.

Yeager: Do you buy that packers are in impatient mode in buying and that is maybe why we've seen a little fall?

Kub: I think it just will struggle to be able to move much higher than it is. It's a very well supported market. Everybody knows the scarcity of cattle in this country and nothing about that has changed. But when you see the beef prices themselves, so the choice boxed beef prices, they just cannot really get above $315. And they've tried it several times since last August. And any time that it gets too expensive, we just start to import beef. So, there's just really a pretty firm top on the beef market and that will keep a top on live cattle too.

Yeager: What about in feeders? Some of the same things you're talking about, but feeders I think gap lower on Thursday --

Kub: The futures did.

Yeager: The futures did. And that has been a whole different thing than the cash here lately.

Kub: Exactly. So, I was going to say, it makes it really difficult if you're using that futures market or the LRP market to be hedging. But as far as folks who are actually bringing calves to a sale barn out in the countryside these days, that CME Index has been fairly steady and possibly even higher lately up to about $250.

Yeager: Then we get to the hog market where we are down at major support levels. Can you turn that frown upside down?

Kub: I can make sort of the same story that I said about the feeder cattle is it's kind of a futures story. Futures have really fallen apart, but they really have only come down that hard this week I think to bring themselves into convergence with the actual prices being paid for lean hogs, which has been stable. So, as far as actual cash hogs being bought by packers, that has been pretty stable.

Yeager: The chart that we just showed while you were talking is a dramatic off the table. That has to send some heartbeats a flutter for those that are trying to find some market for their product, right?

Kub: Yeah, or for futures trading. And I think it's possibly the funds or algorithms, just anything that, again, is disappointed about export news for the pork market lately. They could trade that this week and get that volatility in the futures. But fortunately, the real market is holding in there.

Yeager: And the real story is we are out of time.

Kub: Sounds good.

Yeager: Good to see you, Elaine.

Kub: Thanks, Paul.

Yeager: Thank you so very much. We are going to pause this Analysis and continue our discussion about these markets in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org. Summer school is always in session here on the program as our Classroom section of our site is ready for the study of commodities, science and technology, along with new markets. Head over to markettomarket.org/classroom. Next week, making a profit taking vegetables from local gardens to local forks. Thank you so much for watching. Have a great week.

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