Market Plus with John Roach

Paul Yeager: Welcome back to the table for the Friday, October 25th, 2024 installment of Market Plus. John Roach is with us. John, I was not fair to you at the end of the television show asking you quickly the dollar, all your thoughts. The dollar has rallied 40 ticks, then 60 ticks, then this. And I think I saw a word to describe it this week: Hot. What is a high dollar, an expanding dollar mean to us? Is that telling us anything right now?

John Roach: Well, I mean, if you have to flip over to why is the dollar strengthening? And if you notice the T-bills are strengthening, or the, the rates on T-bills are going up. very unusual. The government cuts the short term by 50 basis points. And yet the long term rates, the, are actually moving higher. And so that means it's a better place to put your money because of rates. In addition to the international conflict. I mean, it feels to me that the international conflict is heating up. and, and I think that that, that that's being represented with where do you want to put your money, where do you what have your cash? And the United States still is a better place to have your cash than many other countries.

Paul Yeager: Well, we've seen, our stock market, you know, north I mean, I mean, really, if I would have told you 1980, John Roach, we're going to see a stock market at 40,000, you would have probably laughed me off the stage. Right. And now that.

John Roach: Have been a high forecast, it.

Paul Yeager: Would have been. And now we think if we dip below 40, the sky is falling. I mean, there's money there. When does the money return to commodities or is it already.

John Roach: There and the money's on the sidelines? I mean, there's plenty of money in the stock markets on the sidelines. So, and the, the commodity market, we haven't seen the spec funds, which is really the group that we pay attention to. And we're really expanded their moneys very much. I mean, they had record net short positions, in the, in the summer. And, but at the moment they're, they're very close to being neutral. They're still short but not but not big shorts. And so we really don't have the money in the commodity market either. I think on the sidelines more than, than anyplace else.

Paul Yeager: What draws it back into commodities?

John Roach: Inflation and you know, you're the lead in we talked about what the commodity index was doing. It's moving higher. And I mean, I think that's the direction that we're in and we don't have any economic policies that would suggest that we're not going to inflate some more.

Paul Yeager: I've heard it's an issue on the campaign trail.

John Roach: Well, they're talking about.

Paul Yeager: It, but talk about it.

John Roach: But, but both parties are not coming up with really a solution to stop it. I mean, there's some there's some hoped for solutions, but nothing that the marketplace can sink its teeth into when you're trying to buy something today.

Paul Yeager: But we've also seen inflation be a global issue. It's not just a United States thing, is it? It's worse. I mean, is it going is the, is it easy to solve this anywhere?

John Roach: I don't think there's any easy solutions because the easy solutions have all been tried.

Paul Yeager: Because what happens if China puts more money? I mean, we were disappointed a couple of weeks ago in commodities when China didn't put money into their economy. And that usually seems that usually fuels inflation. So maybe that was a good sign for inflation. Then what the Chinese didn't do is that too crazy of an idea?

John Roach: Perhaps. Perhaps. But, what's to me more important is what's China going to do with Taiwan? That's the thing that's everybody is really standing on foot to foot with it. And if you remember, it was just a few days or a week ago, you know, that they had the huge, demonstrate portion of their power. China did a flying the jets around Taiwan and so forth. And so, so that's the bigger concern. And that's a, we don't know what their intentions are, but we but we suspicion that if they're going to do something, the time frame for them to do it is probably in the short term, not the long term.

Paul Yeager: Well, that's one geopolitical I'm going to go backwards here in our questions because that makes me think Paul and I was question is probably what we should talk about first. Then should we be locking in prices for spring fertilizer and fuel, given some of the world instability that you're referring to.

John Roach: Perhaps? I mean, we had some opportunities. We actually published a fertilizer letter and we had our people buying fertilizer, while back and, in our last, letter that we went out, we talked about finishing up vertical fertilizer purchases. So, yes, as you get some pullback anytime you need to be accumulating some. And we think the same thing with fuel, we had buy signals on fuel.

John Roach: And we think that accumulating fuel makes good sense. we think that in an uncertain time do the things that, you know, that make sense. And, and so as you're looking at your, at your situation, go ahead and do those things that look like they make sense if something doesn't look like it makes sense. Wait a little bit because who knows in this environment it could things could certainly change. And so people ask about, well, should I sell next year's crop? Should I, should I rush out? And my response is would you normally do that in the normal. No. Normally they wouldn't do that. They're doing it out of fear. And it may be justified, but there'll be a lot of time between now and a year from now, you know, to be able to make those decisions. And there'll be two crops that we have to deal with. So what we're saying is, in times like this, you do the things that make sense.

 

Paul Yeager: Well, it takes time to develop a weather market when it comes to drought. And Gary in Wisconsin wants to know “Most of the U.S. is still very dry. At what point does this become concerning to the market, or are supply so large it takes a poor ‘25 crop before any worries start?”

John Roach: Now. We can get worries immediately. I mean, that's part of what allowed the markets to pop up here, was worry about the South American weather. and now when those worries diminish a little bit, the market sags back down a little bit. the, I lost the question, Paul.

Paul Yeager: Well, that's all right. We're talking about dry.

John Roach: And the dry. The dry in the United States will start to have an impact in February.

Paul Yeager: But you look at that drought monitor and go back. I think I wrote it a couple of weeks ago where it went from the best we'd had in a decade to. We're back to dry everywhere.

John Roach: We did a webinar this morning and I put the last three years, drought maps up and it's and it's less dry this year than it was last year in the year before in pockets, however, there's a wider spread area that it has, a beginning of drought situation. It goes across all of the major, corn growing states.

Paul Yeager: And part of my thought is how quickly, though we went into this is that of a concern, because this was seemed it's literally we shut the tap off on the 1st of August and didn't get rain. I mean, that's really kind of what it felt like. And a lot of the Grain belt.

John Roach: It's a concern to anybody raising crops, but it's not a concern to the market.

Paul Yeager: Yet. Okay. Fair enough. but Zachary in Iowa wants to know. John, here's the big question. “Where's the corn? He goes seriously? You know, supposedly there was these record amounts still in beans? I'm pretty sure farmers didn't add that much on farm storage.”

John Roach: Well, that's a good question. How was the crop actually smaller? And we'll know more about that in January. and, and we'll see that that's certainly a possibility. We know beans shrunk for sure because the moisture just disappeared. And, so that may be the case. The thing that I think is, is most important right now is that the whole world is short bought.

John Roach: And we've just seen recently, in the last 30 days where they've started to step up their purchases. And I don't think they're going to purchase on a routine basis, you know, on a monthly basis, going out because there's too much concern. And the prices are cheap enough. So I think we'll advance a lot of our total export business will get advanced and we'll and we'll, we'll be looking at our export business 30 days and I go, Holy cow, look how big that is. And I think that gives us some opportunity for some price advance moving into,the into the fourth quarter.

Paul Yeager: Okay. So then how do I, is there anything I need to do right now then to take advantage?

John Roach: I think if a, if a farmer's holding inventory just hang on. If he can find a way to hang on to it and at least cost that you can do. Normally you wouldn't rush out to sell corn or soybeans in October. That's just not, you know, don't do that. And, and typically we'll have some better prices with some what of some worry out of the South America.

Paul Yeager: Because we could get, you know, I if I'm hearing you, if the fourth quarter we're getting into December into January and then we see these ridiculously large sales that have happened, that's likely going to send the market higher, right?

John Roach: Well, people will extrapolate that on out in the future. And that's liable to be a mistake, because it's not that we're expecting big expansion in demand. I just think we're going to concentrated into a relatively short period of time.

Paul Yeager: So then we're back to what we had, earlier this year where the volatility where, you know, used to be you talked about 2 to $0.03 was the big movement. We were at 20 to 30 every hour it seemed.

John Roach: Don't expect that okay. Expect a slow but not so slow small back and forth trading range where we get down to the lower side. The buyers are there. You get to the upper side, the farmers are there with.

Paul Yeager: More turtle, less hare. That's the one.

John Roach: More turtle, less hare.

Paul Yeager: You can use that. That's for free. 

John Roach: I like that.

Paul Yeager: Maybe I'll use that in the newsletter on Monday. Let's ask one last thing here. Given what you've just said, Mike and I’s question then what are we thinking here for soybean pricing and corn pricing targets?

John Roach: Bear in mind the United States has big supplies increasing from what they were last year. In the case of beans, the world has that too. So we're dealing with a big supply kind of a market, which means you're going to have to take prices you really don't like. but when they start to work in the budget, you got to be taking them. Take the bigger yields. Hopefully you've got the bigger yields. Multiply times a smaller price, make your budget work.

Paul Yeager: Any last thoughts before we go? Because I've, I always ask all these questions but I never ask you what's your what's not a question but you know what's on your mind now.

John Roach: You've caught me completely flat footed here.

Paul Yeager: I have, do you anticipate that this election will impact markets differently than any other, or is it going to be just like most of the other elections?

John Roach: This one is going to be different from all the others, I think. And there's just lots of difference between the two different parties and then the direction that they want to take the country. And so yes, I think it, and at the moment Trump is showing is leading and, and his economic ideas, I mean, they're completely different from normal. And so, so it'll be very interesting to see how the market reacts to this. if that happens.

Paul Yeager: We'll see how it is when you come back. We'll know how this thing turned out. We'll talk about it from there. John Roach, good to see you again.

John Roach: Thanks, Paul. Great to be here. All right.

Paul Yeager: That's John, our senior market analyst. And I have a reminder for you to get signed up for our new free newsletter at markettomarket.org. Next week we are going to talk about big ideas to help feed the world. And we'll have the commodity market analysis of Arlan Suderman, thanks for joining us and have a great week.

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