Market Analysis with Jeff French and Ross Baldwin

Brooke Kohlsdorf: The weather is helping support grain prices. While cutbacks in purchases by world buyers have traders keeping an eye on prices for beef and pork. A note here we are recording on Thursday due to changes in our production schedule for the week, the nearby wheat contract lost a nickel and the September corn contract added $0.16. Soybeans tested the 20 day moving average as the trade looks for more information about August weather, the September soybean contract got bumped up $0.38, while September meal put on 1760 per ton. December cotton shrank by 176 per 100 weight over in the dairy parlor. August class three milk futures rose $0.24. The livestock market was in the green. October cattle improved five $0.12, and September feeders improved to 12, and the October lean hog contract found 325. In the currency markets, the U.S. dollar Index lost two ticks. September crude oil got $0.78 per barrel, Comex gold subtracted 4320 per ounce, and the Goldman Sachs Commodity Index was down more than eight points to settle at five 5435. Well, joining us now are two of our regular market analysts, Jeff French, founder of AG Hedgers. And Ross Baldwin, hedging strategist for AG Market.net. Thanks to both of you for being here today.

Jeff French: Appreciate it.

Ross Baldwin: Thanks for having me.

Brooke Kohlsdorf: All right. So I'm going to start with a big story. It happened on Sunday. Maybe you heard about it, the political landscape is changing in the United States. President Biden dropping out of the race, and Kamala Harris likely taking his spot. So, Jeff, do you think that that news has impacted the markets this week?

Jeff French: You know, I, uncertainty will always impact the markets. Markets never like the uncertainty. The row crops, I don't think the announcement affected so much. But if you look at wheat or the crude oil market, those affected, you know, it went. You know, pretty much straight down. I mean, crude oil is down 8 or $9 here in the last week and wheat continues to sell off. So it feels like those markets are signaling that, if it is President Trump who would be elected, obviously, he's promised to end that conflict in,, in Ukraine and Russia, in the first week. And he's promised to drill, baby drill, which would obviously reduce the cost of crude oil. So I think if you look at those two markets, those were affected the, the the greatest.

Brooke Kohlsdorf: Ross, what about you?

Ross Baldwin:I agree with what Jeff said. The row crops, given the the calendar right now and the seasonal time frame. I think the, the bounce we've seen in corn and beans is more driven off the, the forecast. This is really our first bout of an extended forecast where we have warm and dry weather. I don't think it's terribly concerning in the big picture, given the ideal growing season that we've had, but just with what Jeff said, wheat and crude oil, they've reflected more of the political landscape. But as far as row crops and and even the cattle and pork industry, I think they're back to just their trade, more of their fundamental story.

Brooke Kohlsdorf: Okay, Jeff, let's start with wheat then. it has had a rough time lately. What will it take to see some kind of rally with wheat at this point?

Jeff French: Well, I mean, it's got a search for demand number one. but the two big wheat stories this week were the spring wheat tour, kicked off earlier this week. up in the, High Plains. And they are finding fantastic yields, in the 30 years that the wheat tour has been taking place. this is the best yields that they've found, they've found anywhere from 54 to 56 bushels per acre. they will have the, exact number, end of today here. but the best yield that we had in North Dakota came back in 2022, and it was 50 bushels per acre. So we're going to increase that by 5 or 7 bushels. So, it just goes to show you that when we do have moisture, we can produce some crops. And it's, it's probably going to be the West best wheat crop that we've seen up there. in our history. And then you come down here in the plains. It's been the best wheat crop that we've had in the last 8 to 9 years.

Brooke Kohlsdorf: So potentially record breaking crops here in the United States for.

Jeff French: The spring wheat, for sure.

Brooke Kohlsdorf: What about what's happening in Ukraine? Because we're hearing and other parts of Eastern Europe, we're hearing about maybe that some of their crop isn't as good as we thought it was. Is that going to impact the markets in any way?

Jeff French: It potentially can. But I mean it's nothing. And we saw China come out here. They're going to have one of their best wheat crops as well. So the northern hemisphere has not had really too many problems here this growing season. there hasn't been that one spot that has burned up or, you know, that big thing that takes yield and bushels down. We just have not seen that.

Brooke Kohlsdorf: Well, wheat isn't the only grain under pressure. What kind of weather story, then, will it take to get corn up?

Jeff French: Well, I think we're seeing it here, and I don't think, you know, this week it was the first week since the mid part of May that we've actually seen a change of sentiment. You know, we've been hammering this market lower here for the better part of two months. the crop was getting bigger. We kept on getting rain. There was definitely no temperature problems. I mean, it's been a very ideal growing season and the potential is still huge there. but we do have a change in sentiment here. We are going into a little drier, hotter time period. but you know what's going to take us, catalyst. I think you're going to have to see continued dry weather, limited rainfall and then we need to have the funds which our record short for this time of year, to shake out some of those short positions. If we can see a close above 427 on a weekly basis. I think that would look very encouraging. So, you know, I'm not bullish by any means. This is a start. but the potential is still there for a massive crop.

Brooke Kohlsdorf: Do you think, Ross, that the lows are and then for corn.

Ross Baldwin: Yes. And for soybeans. No I don't. I would just go back to what Jeff saying. The growing season has been as ideal as you can remember for several years. And while the funds are, they've been pressing a record short or have been record short, the corn and soybean markets, the it's due for a bounce with this ten day forecast being hot and dry, but at the end of the day, the potential is just massive for this corn and beans crop. And that's going to continue to hang over this market. And given the seasonal window that we're in, you're not far from harvest happening. And so while the funds could get a little scared over the next two weeks, I just don't see a big enough catalyst coming or enough damaging weather that could set this crop back far enough to where the funds don't defend this position to an extent. You could certainly see them cover more of the shorts, but at the end of the day, I don't see there being a catalyst to where they they cover a large portion of it and ultimately want to go long. I think they, they maybe cover some over the next couple of weeks, but they'll defend this position.

Brooke Kohlsdorf: I want to go to social media for our next question. this is from Mike in Iowa. Hi. How high can we keep inching up on the new corn crop?

Ross Baldwin: For December? Corn Jeff threw out 427, I think. 425 to 430 for December. Corn. If we get a rally up to there, I don't see us going much beyond that. I really struggle to see us going above 425 over the the near term here ahead of harvest. Just given given the sentiment the the big crop coming. We know it's going to be a big crop. It's just a function of how large will it be. And at the end of the day, the farmer is still the big long out in this market. So as the funds cover this short position that they have, you're still going to have farmer selling that's going to mute the funds buying. And every day that goes by the calendars working against the farmer to where they they don't have to but they will move this crop, especially in years of big corn crops. The farmer, the farmer, always empty, suspends out ahead of a big crop. So I just see there's just still too many headwinds for the grain markets to see. December corn moved to much higher from where we're at today.

Brooke Kohlsdorf : Okay, so wheat and corn farmers, this has all been pretty tough news for them. But this has been really good for, the price of cattle feed. So talk about how this is impacting live cattle.

Ross Baldwin: The cattle market. It's had an extremely good week here so far. August live cattle are up 580 on the week. August feeder cattle are $3 higher. We had a friendly cattle on feed report here last week that showed placements coming in about 3% below what the average guesses were. The cattle market's been extremely interesting lately where futures have have really underperformed relative to what the cash markets have been trading at. So this has been today's trade. We traded up to a nine month highs across the cattle market which is a great sign to see. Back to your question on the the price of corn and what that's been. I mean, it's certainly been a relief for the cattle guy as our cost of gain has, has dropped dramatically versus what we've been dealing with these last couple of years. How is that impacted? It's definitely supported the price of feeder cattle. Number one cheap, cheap cost of gain is supportive for these feeders. And we're seeing that with record high feeder cattle prices. The other thing that cheap grain has done or cheap feed, it has added to the carcass weights that we're seeing. And so we have cattle weights at all time record highs. We've consistently been running 25 to 30 pounds above a year ago, and that's 100% attributed to the cheaper feed and cash prices and expensive feeder cattle. But they all go hand in hand.

Brooke Kohlsdorf : Yeah, right. Jeff, I want to go back to now the grains again. So let's talk about actually let's talk about soybeans. So we've been talking about this dry and like kind of heat that's coming our way. A lot of forecasts now are showing that it's going to stick around for a while coming up soon. So is that what will direct bean prices in the next week or two?

Jeff French: Absolutely. you know, beans are an August crop. you know, they're pretty much a weed up until the month of August when they're starting to fill pot. So, yeah, I mean, if the weather stays extended hot and dry, you could definitely see beans move. I mean, beans typically move in dollar increments. and they've had a 55, 60 cent bounce here if we can get above 1087 in that November contract on a weekly close here tomorrow, I would look for that thing to move up to 1140. But again, you're going to have to see continued forecasts of hot and dry, because of the potential, is there? I mean, we are entering August with the good moisture profile. These crops look very good. when you look at the condition ratings. So, if we come in here and we get a forecast where it's dropping the temperatures and showing some more rain, you know, personally, we were out defending these prices. November 10th dollars being put for ten, $0.12 a bushel. Here. Get us through the month of August. You know, I think that's good. Good risk management.

Brooke Kohlsdorf: What do you think, Ross?

Ross Baldwin: I agree with that. I mean, for beans to have a much more of a rally beyond what we're seeing, it's all about, the forecast. And I keep going back to the calendar. But the calendars working against the market to rally too much with harvest right around the corner. And at the end of the day, with what this being crop looks like, you would have to do a complete reversal on the weather to start to damage this, this being crop corn crop in a meaningful way. So I just I, I agree with Jeff. I mean, producers still need to be looking at defending these rallies, selling these rallies, protecting against the downside. That's more than likely looming out here with these large stocks to use ratios that we're looking at for both corn and soybeans.

Brooke Kohlsdorf: What about let's talk about China. So we know that weather in China often impact, beans. So they're buying less from us. Will we start to see them buy more us beans soon.

Ross Baldwin: I would be in the camp of no right now. prove me wrong. That China is going to come to the plate. I just if you're going to sit here and say that all China is going to start buying new crop beans when they're so far behind their normal pace today, I think you're setting yourself up for for disappointment and the there's a greater risk that China doesn't come to the table in a meaningful way over the next 30 to 60 days on new crop beans that I think you you got to be in the camp of defending that they don't come to the table right now.

Brooke Kohlsdorf: Okay. What do you think?

Jeff French: We have a new market in year beginning, September 1st. and if you look back through history, on the Chinese commitments for the last week of July, right now we're at a 19 year low. So, the the new crop sales have been very slow. old crop. We're going to probably meet our USDA expectations. again, we only have about five weeks until, the 23, 24 season ends but, yeah, very slow start to the Chinese purchases. And the question is, you know, if they're not going to buy after a $2 dip, sell off here, when do they come? What are they waiting for? Yeah.

Brooke Kohlsdorf: What about exports of corn and beans? Are they going well.

Jeff French: Again, the the old crop have been keeping up with the USDA expectations. we will meet that, September 1st. We're going to begin a new marketing year. And as of right now, the sales are pretty disappointing.

Brooke Kohlsdorf: Okay. I want to ask you quickly about cotton, because you sometimes talk about that. So it's been a tough time for cotton farmers. is that going to continue? What will it take to reverse that market?

Jeff French: Well, you know, the the market needs to find demand, and that's what it's searching for. It traded down to 6750. That was a multiyear low here this week. we got the export sales. They were actually net reductions meaning they were cancellations. so there were countries canceling previous purchases. you know, so it's just in a free for all right now but we need to hold that 6750, but right now, the demand, it's a market that is searching for demand, and we just have not found that yet.

Brooke Kohlsdorf: Okay. All right, so, Ross, you said something I want to ask you about, on in your newsletter this week about feeders that they continue to underperform relative to fats.

Ross Baldwin: Why feeders are when you look at live cattle and feeder cattle and really most commodities, feeder cattle are one of the most volatile commodities that you can trade. The volume, the volumes lighter and they have massive daily limits, the daily limit on feeder cattle since the CME increase them recently is $9.25. That that is not for the faint of heart to trade the manage money traders. They have been long feeder cattle feeders have largely been stuck in this range here. August feeder cattle with 254 being big support on the downside and 263 to 264 on the top side. And we have just been chopping around in this range over and over again. Now well live cattle here recently. They they're at nine month highs with today's closed August live cattle. Feeder cattle if you go back to their May high and their February high was they were 265 and 272. Today's close was, I believe around 258 for August feeders. So it shows you while you're at nine month highs, you still got feeders. Seven $10 off of what their, their yearly highs were the reason for why have they underperformed I think feeders there for a while. When they got up to 272 back in, I believe it was February. Maybe they rallied a little too much too fast versus where the feeder index is. But there is no question that feeders still have a bullish story out here. You still have cash feeder prices at all time record highs. They're not pulling back very much. They they haven't. But I think when the avian influenza story hit the market in April, in May and we saw extreme volatility in the cattle markets, I think that is largely why the the futures markets have underperformed between both live and feeders versus where cash has been trading. And I think you've got to manage money crowd that they were a good size long back when that story broke. They still are staying long because the fundamentals are there bullish. There is bullish. Today is what they've been. But I think you've got to manage money crowd that is still just a little apprehensive cautiously optimistic. But while feeders underperform I think it's because of the extreme volatility and feeders. And they're just kind of walking before they run on building back into a much larger long position than what they currently have today.

Brooke Kohlsdorf: Okay. We've got about, I don't know, 45 30s left. So producers, hog producers have really seen a bounce back. What will that continue?

Jeff French: You know we had that big sell off and then we come on here. The last two weeks we've hit the 50 or 50% retracement. We're, we're $10 off the lows. I think as a producer here, you got to look to hedge and lay off some of this risk.

Brooke Kohlsdorf: Okay. It has been great talking with both of you. We have more to discuss, which we can do in Market Plus. But thanks so much to Ross and Jeff for joining us today.

Jeff French: Thanks, Brooke. Thank you.

Brooke Kohlsdorf: All right. We are going to pause this analysis and continue our discussion about these markets. As we mentioned in Market Plus in that segment. And you can find both analysis and plus on our website of market to market.org. The first place this program appears is on our YouTube channel. You can stay in the loop by subscribing to the feed, clicking on the bell to get notifications of new content, and then let the technology work for you. Find us at Market to Market on YouTube. Next week, we take a look at the story of the nation's first almost forgotten female veterinarian. Thanks so much for watching and have a great week.

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