Market Plus with Jeff French and Ross Baldwin

Paul Yeager: Welcome back to the table for the Friday, October 18th, 2024 installment of Market Plus. Back with us, Russ Baldwin, Jeff French. Just don't call him Jeff Ross, right? We'll be fine. Are you the one delivering the one liners?

Jeff French: That would be You.

Paul Yeager: That would be no no no no no. I'm just reading what's put in front of me. All right. we had a really good discussion, long discussion there in the main show, but guess what? We still have a ton of questions, and I'm just going to start, right here. Let's go. Phil in Ontario first, because, Phil, I think it's been a little while. So, you know, I think Philip, it's in his contract. He has to have his question every few weeks. it's been a long year of declining prices. In ‘24. Is there new demand currently being reflected in the January 25th soybean contract, offering some optimism for prices.

Jeff French: You know, new demand. You know, it's seasonal demand is I would call it. I mean, this is a time where China should be buying our beans. We're bringing them in. You know, from harvest. typically this is some of the lowest prices that you'll see during the cycle. so new demand I don't know if it's new, but it's seasonal demand. Now the market, you know, we, the Jan Beans, have closed three weeks lower consecutively. that contract I would like it to above the 100 day moving average. And I think the 100 day moving average is 1060 area. that contract has not closed above that 100 day moving average since May. Since May 29th. So, it's been, we challenged it there during the rally up to, you know, in September, but we weren't able to take that out. So it has been some significant resistance. So, you know, we'll just see. But, closing below $10. Not a very good look on those Jan beans this week.

Paul Yeager: I got to say, it did look kind of tough to see. And that's always that technical thing, right? I mean, it's it's just as much technical as it is psychological.

Jeff French: Well, yeah, technically it's a new low close for the move. And psychologically it's a very low close week close on a Friday which never really sits well over the weekend. What would be ultimate worse is if we gap lower Sunday night. Yeah. then we look at contract lows in my opinion.

Paul Yeager: All right. As we look at soybeans, I want to talk about soybeans that are coming out of the fields. I mean, you both have been involved with harvest. And so you can answer this one. And we all hear it. let's go, Roger, in Minnesota for this question because, I'm here in nine, 10%. So is Roger on soybeans, 12% on corn. Does USDA take into account low, low soybean moisture content in recognizing the size of the crop? Jeff.

Jeff French: Not right now. I think that comes down the road. but no question, the beans are extremely dried. The corn is extremely dry. So, that is added to the pace of harvest. I mean, you just don't want to sitting out there in the field when it's that dry, especially with warm, windy conditions that have been just plaguing the Midwest. So, yes, the short answer is, you know, they will take it into account, but not till later, are you?

Paul Yeager: I mean, you were telling, we were talking before we rolled something about 12%.

Ross Baldwin: Yeah. We've got corn in our area, 12 to 13% on corn. I've heard of soybeans, 7 to 8%. Seven being on the low end. And like Jeff said, no, the USDA is not going to take that into account right now. I don't think you'll see it taken into account in reports where that moisture, because there's no question that a 7% moisture on beans, it brings your yield down where that will get taken into account, I believe is the quarterly stocks reports is where we should see that reflected. If it's going to be.

Paul Yeager: Has it I mean historically does that ever happen.

Jeff French: Not not in the monthly WASDE, yeah.

Paul Yeager: So that's the unfortunate side of this dry side of things. But let's do Dan in Iowa for Ross here. Are you bullish or bearish at 243 50th January feeder cattle futures. And then you have to answer the why.

Ross Baldwin: 243.50 I believe cattle feeder cattle had a nice rally here today. Closed dollar or so higher. So we're probably a little bit above that long term bullish at two 4350. And when I say long term I'll even drill down into over the next 40 days. I'm not wildly bullish feeders up here. The managed money crowd has piled back into the feeder cat. They went from being short feeders here recently to they piled into the long side where last week they were long. It was a little over 7000 contracts, I believe, of feeders that when they get up to say the 9 to 12,000 range on being long feeders, you start to get to where your downside is far greater than your upside. Can they go longer? Yes they can. I believe their all time record feeder length back in 2011 or 12 was about 20,000 contracts. They have the bulls to throw at this thing, but they've already priced in a significant amount of bullish news. So while feeders we're sitting well off of our contract highs I think we could it's feeder cattle. You could put another 5 to $10 on them. But I still think at these levels you got to be more mindful of the amount of downside that could loom out here, especially when they're holding a long position like this.

Paul Yeager: But I have an issue with that because no news, no common sense has made any sense here lately in this market.

Ross Baldwin: Correct. These cattle markets, I will say cash has been rallying. We cash trade has been higher for the last 6 to 7 weeks. Feeder cattle across the country have been screaming. I think a lot of that is due to the amount of cheap feed we've got around, and people would rather walk cheap corn to town than they would just, go sell it. But I agree with you, some of these, these moves that we've seen in the across the marketplace, they've been erratic. They haven't seemed like they have made the most sense. And like we covered on the the main show, I think you look at these equity markets and, and these managed money traders look at those and they, they have spilled that into the cattle market, the hog market, into the protein market to where you look at the S&P and the Dow cranking out new all time highs day after day. And while we don't think that is a direct reflection of the actual economy and main Street America, they look at it and see that people got plenty of money and they're going to go eat a lot of protein. And so far protein demand has been extremely strong. And I think US beef demand domestically is stronger than we probably give it credit for.

Paul Yeager: Retail sales, another 4/10 of a percent three months in a row. As we mentioned at the beginning of the show, if we go out for steak tonight after the show, we're going to have to wait.

Jeff French: Around here in Iowa. Absolutely central Iowa.

Paul Yeager: All right. Let's, let's look at this, Andy and Iowa question, shall we? Because Jeff, which way can this corn market swing faster? Are we looking towards 350 or 450 come spring? The easy answer is usually right. No resistance. We go lower and can go quicker. Lower, right. Yeah.

Jeff French: But I think we've kind of probed the lower I mean, I would say 450. I mean, if you ask me right now, I think it just we don't want to press it here anymore. what has been sold needs to be sold. And, the farmer is going to keep those beans door shut until they absolutely have to, which won't come, for many, many months down the road. So, I just don't see it. Now, if we start closing a couple of days consecutively below $4, you know, do we test 385? You know, maybe we do, but, it feels like we're putting in a bottom here.

Paul Yeager: Sunday is of big concern for you on soybeans. More than corn, do I? Absolutely. And then do. What's your feeling on nervousness on Sunday and wheat?

Jeff French: Well I just think with the uncertainty in wheat I think the least path of resistance on the wheat is lower. and with what it is unknown out there regarding Russia, I think it's going to pull the wheat prices lower.

Paul Yeager: Well, Brandon's question here is, what's the chance hard red winter wheat futures hit $7.

Jeff French: You know, if you can tell me how much rain Kansas is going to get during the month of May, we will be able to answer that.

Paul Yeager: But May of 25?

Jeff French: May of 25. Yes.

Paul Yeager: Okay. But they're supposed to get rain here in the next. I think I saw 10 to 14 days. Right. But that's a long way to predict. And it's a long way to hang a market on when.

Jeff French: Again, you don't kill the wheat crop in October. you know, we said that before, and that's.

Paul Yeager: Said to make sure you still have that line. That's a good one. I wanted to make sure you got two uses out of it. I think that was good. All right. Ross, we were discussing before we rolled here. I asked if there was anything you wanted to mention, and there was one word that stood out to you that was resilient in this cattle market. Hold that thought, Ross, because I want to ask Jeff the question first, though. Do you buy that? Livestock have been resilient to the sense that they don't make sense right now?

Jeff French: I mean, I don't know, maybe I don't think they make sense right now. They do not make sense. you know, they've closed higher for several weeks in a row. you know, stock markets been doing the same thing. So, demand remains incredibly strong. so the markets can do irrational things far longer than you can remain solvent. So, you know, they're going to do what they're going to do. And right now it looks like they want to move higher.

Paul Yeager: You said that slaughter has been really high. There's been some the weights are big. What else is making this market resilient?

Ross Baldwin: A lot of it boils back to the I think U.S. domestic demand is a lot stronger than we all give it credit for. Our exports have only been running 3 to 4% lower year over year, which is what the USDA is forecasting now. What's impressive is when weights are running consistently 20 to 30 pounds higher, the actual steer weights this last week are all new. All-time record high was 28 pounds above a year ago, and when you have slaughter running at the levels it has with weights running 30 pounds higher, you're adding back a tremendous amount of tonnage. Now. Slaughter year to date it's about three and a half, 3.8% lower year over year, but our beef production is only 6/10 of 1% lower because of the weights. Well, normally you wouldn't think that's all that bullish because the big weights are your front end loaded on cattle because you got a lot of days on feed. But where the cut out market sold off recently and we actually went below 300 on the choice cut out, I wasn't entirely surprised by it because of the big weights. What I will admit I've been surprised by is how quick the cutout has went back up to 320. We've put about $25 on in the cut out in like 20 days. It's been impressive, and for the cutout to bounce back like that, that is a reflection of demand. Because that cutout, if the Packers didn't back off, kills enough for the cutout to scream like that. If demand isn't out there, and I think the demand is still out and it shows the resiliency of this market.

Paul Yeager: Last thing, as we look at this harvest space, we talked about piles. We talked about pressure. a couple of lines about basis out there. Are you hearing anything that basis is abnormal for this situation right now, or is it kind of tracking to what normally happens in October?

Jeff French: You know, I think, you know, depending on where you're at your location, I mean, you'll know your basis better than anybody. But in my area, it's pretty normal. Right now. We're 20 to 25 under on corn and 40 to 50 under on beans right now. So I mean, it's, you know, pretty normal right now.

Paul Yeager: All right. That's Jeff French. Thank you so much. Good to see you Jeff. Thanks, Paul Ross Paul and thanks for making the trip.

Ross Baldwin: Thanks, Paul.

Paul Yeager: Good to have you here. Thank you everyone for watching. Next week we are going to have a simple strategy to lower temperatures and open up miles of new habitat. And we're going to have the analysis of our senior market analyst John Roach. Thank you so much for watching. And I also want to say, before we go, please subscribe to our new Market Insider newsletter.

Paul Yeager: You can find that on our website. And we'll tell you all the inside details of what's happening on the show. We'll see you next time. Thanks for watching. Bye bye.

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