Market Analysis with Kristi Van Ahn-Kjeseth

A major break in wheat comes as the U.S. harvest hits its stride and weather keeps moving other grains. For the week, the nearby wheat contract fell 51 cents and the July corn contract dropped 15 cents. The old standby of “rain makes grain” has pressured the soy complex as well. The July soybean contract lost 19 cents while July meal declined $6.60 per ton. July cotton shrank by $2.03 per hundredweight. Over in the dairy parlor, July Class Three milk futures weakened 86 cents. The livestock market was lower. August cattle fell 3 cents. August feeders cut $3.60. And the August lean hog contract dropped $1.12. In the currency markets, the US dollar index increased 26 ticks. August crude oil expanded $2.42 per barrel. COMEX gold lost $17.40 per ounce. And the Goldman Sachs Commodity Index was up 2.5 points, to settle at 580.75.

Yeager: Joining us now is regular Market Analyst Kristi Van Ahn-Kjeseth. Hello, Kristi.

Van Ahn-Kjeseth: Hi.

Yeager: I wish I could keep that smile.

Van Ahn-Kjeseth: I know.

Yeager: A lot of red on the board this week.

Van Ahn-Kjeseth: It has not been a good -- it hasn't been a couple of weeks that we've seen some positive action in it. But the nice thing is I think that you're getting to some support levels, should be at some support levels I should say for corn and soybeans.

Yeager: Let's start with the wheat for a minute though because almost 8.5% drop on the week. Harvest pressure is one. But you keep hearing conflicting stories out of Russia that yes, we've replanted, no we haven't, there's drought, there's -- what's the story?

Van Ahn-Kjeseth: Yeah, so the wheat is tricky because Minneapolis wheat made new contract lows, but when you're looking at Chicago and Kansas City wheat not so much. And so, there's still that gap in there. There's no technical indicators that look like this market is going to turn around. And the problem is you have that old logic of that you need to feed a bull and we haven't been able to get any of those stories. So, we initially knew that there were less than ideal situations in Russia and Ukraine, but we haven't had any confirmation on that. So, even if they're having continued problems, you're not just hearing about it and it's not getting there and it's not making a difference. So, I think right now wheat is just really struggling to find its foot. I think you said it right, harvest pressure. And then honestly there's still a ways to go for Chicago and Kansas City wheat before they hit some of those technical targets and that is problematic to me. I'm hoping that eventually you're going to see this bottom in here. But right now on the chart there's nothing to really grasp onto right now.

Yeager: When you look at the chart, and we'll show you the deferred here in a moment, we're almost back to the levels that we were a month ago. So, I guess, prior to 16 days ago, was that a gift? An aberration? What was that bump?

Van Ahn-Kjeseth: Yeah, we used it as a gift. So, we went really heavy on marketing, to be honest. So, we were behind on marketing. You have to go back all the way to last fall where producers just didn't know what to expect for their spring wheat and weren't really happy with some yields, got into the field and their yields were huge. And so, we had to kind of come back and fight back and when we got to those levels, we took it as a gift. But honestly this wheat market is going to be a roller coaster. And if you look at these deferred contracts or even the chance of some weather and talking about weather conditions going forward like La Nina, that would not be all that favorable when you look at wheat conditions. So, I think wheat still has its story down the road, but that's down the road here a while.

Yeager: Old crop corn has been, it didn't go along with wheat on that last bump, gift. It stayed somewhat steady. Why?

Van Ahn-Kjeseth: Yeah, I think that there is an abundance of supply. I do think that over the last little bit of a rally that you got into old crop a lot of corn was sold. If you talk to elevators, I think that they're going to say that there's still a lot out there. But there were a lot of bushels that were sold. There was some basis pushes. And now we’re kind of sitting here and we have to remember that it's already June 21st. You're running out of time to get that corn out of the bin So we're running out of time to really look and capitalize on this. We have seen some basis push here on corn lately. I do think that's a big help to this market that it's just saying that the farmer is not selling at these prices.

Yeager: We're showing December corn, so new crop. Every day the story changes. It's too dry here, it's too wet there, it's too -- what was the -- are you a paddler on your boat down here on the left or the right or both?

Van Ahn-Kjeseth: Yeah, it took both of them. There was a massive amount of rain. There is so much water around on the way down. And I think that's one thing is I'm trying not to get too much backyarditis of saying hey, this whole stretch down -- so last week I took it from Alexandria down to Marshall, this week obviously down here, we had a coworker down to Wisconsin Dells for a family trip and there is a lot of rain not only impacting these areas but forecasted again and then a lot of drowned out spots. And I think the tricky thing is, these areas that have drowned out spots did try to replant and now that replant, the chances of that actually sticking I think are slim to none. So, I actually think that there are some friendly tidbits if you want them in corn. We could discuss that so much more. But the big thing is we have such a big crop report one week from now that can change everything. But as of now I look around and I see these conditions and then I haven't been out east, but what I'm hearing from out east is that they're really dry out there. You can see it start to pop up on the drought monitor. And so, I think you have really less than ideal situations for so many areas right now, it really took me getting all the way almost to Des Moines before I really saw a crop that I was like oh, that corn actually looks really good. I couldn't believe entering into Iowa how short the corn was, how yellow the corn was. You could definitely tell if a producer was able to get that crop in early because that corn looked decent. But other than that, I was less than impressed.

Yeager: Are you impressed at all with beans right now?

Van Ahn-Kjeseth: No, I'm not. Beans are so sad. So, when you look at beans, I just think the tricky thing for beans is there is really nothing going for beans right now. Fundamentally, technically, you just don't have a lot. And we're right at a support line. If we break this support line, I do think it opens up targets to $10.78 for November beans and just talking about a 10 in front of beans, that is not fun. And I do think eventually you'll have that story. But right now, if we're going to say next week, we might think less corn acres. I think in the back of everyone's mind the worry is that does that mean more bean acres? And do you still have some time you're still going to see some people plugging in if we can get behind this rain to try on beans. So, beans just don't have a lot and it seems like they need a leader and right now no one wants to be a leader when you look at it.

Yeager: Do you see next week's report impacting, in the scenarios you just laid out, impacting corn or beans more?

Van Ahn-Kjeseth: Listen, this report can go any way, which is really, really hard. But what I can say is that this report is a big deal to the market. So, you really need to look at your personal farm and be saying, where is my risk? Is my risk more heavily on corn right now? Is my risk more heavily in soybeans? Have I been doing a decent job selling corn along the way? You need to look at that because you just don't know what kind of numbers you're going to get from USDA. I think one thing that is a little bit worrisome to me is that the general talk of less corn acres that are out there. The March number that we got for corn aces I thought there was no way you would see a lower number. We were so dry in so many areas. We love to plant corn. And then we had the spring that we had and so it was a lot different. So, I think now you're coming back and saying could we stick with this or lower? I think we really need to look back and say hey, 2019 was a really wet year, they took away acres in the June report, the WASDE June report, and by the end of June they added those acres back in when no one anticipated to see more corn acres. And that’s the type of report that this is, that it can really shock the market.

Yeager: So, Paul, I want to let you know I did steal your question a little bit and we'll answer it for sure in depth in Market Plus. I need to move to livestock, Kristi. Live cattle, we've seen front month, back month, big discrepancies there. But the question to me still is the demand. Is it still there?

Van Ahn-Kjeseth: Yeah, I think so. I think cash is proving that. I think that you see cash remain very strong and I think there is that difference between it's kind of a nice thing for producers right now, hedgers if they can be hedging in the account and still seeing the cash value increase, their hedges increase. That doesn't happen very often. And so, it's nice to be able to see that. But I'm friendly cattle on feed after the close on Friday. That's going to play a role into Monday's trade. But for the most part to me it seems like futures and cash are not agreeing right now and you're seeing that separation. But I think the demand is still there.

Yeager: And they haven't been together in quite a while though. We've really seen an inverse there. Let's talk about that cattle on feed. I think it's 99% on feed, 104 placed and one other number, of course I set it away. What numbers stood out to you?

Van Ahn-Kjeseth: Yeah, the 104 placement I think is the biggest one. I think that's just going to be a big shock to the market to see that. And when you even come back to the demand side of things you can say we have not seen demand start to pick up in pork. I think that is one of the craziest things to me is that with the demand in the cash prices and the boxed beef cutouts that you have, you haven't started to see that shift yet. So, for me it feels like consumers want to stick to this product.

Yeager: Marketed was 100, disappearance during May 84. So, you mentioned the hogs, we'll get to that in a moment. But in the sense of has that story changed at all in the feeder market of what's available out there? There's not anything out there?

Van Ahn-Kjeseth: No, that has not changed and I don't foresee that really changing at all for the near-term to be honest. Interest rates the way they are, the ability to get feeders right now. So, I don't see that market changing any time soon. And I really think that's going to be the story that we continue to progress with throughout the year. And I do think that if you can get the futures on board, you can get the technical action behind the markets, I eventually think that you'll see cash and futures come together and I do think that would lean more towards a friendly futures market than it would the opposite.

Yeager: You mention there's some friendly tidbits out there for grains. Are there any friendly tidbits that can help the pork, the hog market right now?

Van Ahn-Kjeseth: Yeah, so the fundamentals behind pork, obviously we can't get the demand to pick up, continued problems, cash continues to be sluggish. But you look at a chart right now and you say, it's got to be time sooner rather than later. You have a lot of these futures markets for hogs at beyond two standard deviations away from linear regression. I know that sounds like a lot coming out of my mouth. But on a chart when you look at that there's not a lot of trade volume that happens beyond that. But it's kind of like where I look at corn market too is that it needs a spark to be able to do something and so far, for some odd reason, we cannot find that when it comes to pork. We can't find the demand. We can't see that pick up. But I do think eventually technicals alone could be supportive to that.

Yeager: Well, we'll find out what else is supportive in Market Plus because we have a few more questions for you to sort out. Thank you, Kristi.

Van Ahn-Kjeseth: Perfect, thank you.

Yeager: All right, that will do it here as we're going to pause the 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. Now, since you watch this program we have a recommendation for you, our MtoM podcast. Season 9 debuted Tuesday as we continue our conversations with those in and around agriculture, weather and energy. Sound familiar? Subscribe today wherever you get your podcasts. Next week, a roundup of new laws aimed at limiting farmland ownership. Thank you so much for watching. Have a great week.

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