Market Analysis with Sue Martin

Paul Yeager As harvest hits full stride, commodities are being stored and the end user appears to have come calling, bidding up prices. For the week.. The nearby wheat contract added 27 cents, while December corn rallied 15 cents. The soybean trade dealt with some flushing of long positions while harvest rolled on.  The November contract fell by 9 cents and December meal shed $9.10 per ton. December cotton expanded by 3 cents per hundredweight. Over in the dairy parlor, November Class Three milk futures increased 18 cents. The livestock market was mixed. December cattle lost $1.25. November feeders cut $4.02 and the December lean hog contract gained $1.80.  In the currency markets, the US dollar index gave up 6 ticks. November crude oil sold off $7.78 per barrel. COMEX gold lost $19.60 per ounce, and the Goldman Sachs Commodity Index shed more than 34 points to settle at 574 - sixty. Joining us now is regular market analyst Sue Martin. Hey, Sue.

Sue Martin Hi there.

Paul Yeager Everybody. So excited. Excited when you come on to the show, but you're wearing all black, so I'm taking that as a are you trying to tell us something here for the. But we'll start with we you have to be somewhat positive about wheat after the week.

Sue Martin I am.

Paul Yeager Or am I misreading something.

Sue Martin No, I'm positive wheat you know the wheat market has been hit so hard and, you know, the open interest or the funds to manage money is probably the most short they've been in years. And on top of it, they've been that way for quite some time. But you have a situation going that first off, you look at the weather and even in the U.S. are hard red winter wheat and you know, and the soft red wheat, maybe the softer it's doing a little better with some moisture, but is still dry in some of those areas.

But the hard red hasn't caught much gratification. So we're still in drought conditions. You look at Australia in drought conditions, you look at Argentina, drought conditions, and they were even saying, you know, I think it was a Rosario grain exchange said that if they didn't catch rain within two weeks and of course there's very little in the forecast that they would have to probably lower their yield production or production number down from 15 million metric tonnes.

So their drought is still ongoing. And then you have Russia in the southern portions of the country hot and dry now, and that's wheat country. And then you have central Ukraine dealing with the same thing. So it looks like all of a sudden and Russia is price. You know, the reason we've been down in the dumpster for so long is because Russia needing to fund a war has been undercutting everybody. And all of a sudden now they're not. And we're the best game in town.

Paul Yeager Usually when China comes calling, does that mean that they think that the that's a good price. You take that?

Sue Martin Oh, absolutely. They think it's a good price. But again, we're just more competitive than everybody else in the world right now, which is a spark of good news. The one thing I think that's going to help really run this wheat market and wheat, you know, there's a saying in wheat, they don't you know, they don't take any prisoners because they kill them all.

And that might be true this year. But I think the wheat market is also you know, everybody's kind of gotten a little bit tone deaf on Russia, Ukraine war. But I think that's going to be changing here as we go towards December. I look for as bad as Ukraine gets and trains the pilots for those F-16s that we're sending over, all of a sudden, it's not just going to be Russia pushing on and hitting, you know, the Danube River or the ports.

Odessa, Mykolaiv, is small. You know, all of a sudden, I think we're going to see that Russia is going to be getting hit pretty hard, too.

Paul Yeager Let's move to corn for a minute, if we could. In the relationship with wheat, do you think that corn is along for the ride or operating independently here?

Sue Martin I think corn is along for the ride for the moment. I think that, you know, we got up to 499 this week and we did break out of that sideways range, which was nice. And usually when you go sideways like that after a long break, the market normally will break out the top side. I've noticed various bears in various clearing firms have turned a little bit more back to neutral, not as negative.

I think that the corn market, we're just getting really good start into harvest. We're going to hear more yields. I think that crop's going to be very much all over the place. And yet corn made pollination and that was a big one.

Paul Yeager Yeah, we don't make that. That's a different story. Let's go to the right at the end of pollination time. December corn. We had not closed about $5 since August one and it not closed above 490 since August 28. So we take out both of those or almost take out the one, take out the other. Do you anticipate we're going to somehow push back up on this December contract above $5 next week?

Sue Martin I do. I don't know if it'll be next week. I think it could be because of the fact that I think that markets got stops building above $5. And again, the short position in corn is fairly hefty. And so sometimes, you know, it takes a reversal with fund money that sets the bottoms and turns those higher. You know, the carry out go didn't come back as strong but the barrel say well but ethanol has reached its peak you know for the industry maybe true but if we can get some usage towards jet fuel, that would be a big positive.

And then I think also we have to keep in mind, I still think exports will pick up. I think one thing we're dealing with or trying to grasp is that we're no longer number one in the world when it comes to corn exports being exports. Brazil has unseated us and I think that's doesn't feel so fuzzy, you know, warm and fuzzy.

Paul Yeager Warm and fuzzy. You, me. Okay. But it does provide some stability in stability. So how do we navigate those waters?

Sue Martin Well, I think that one thing we have to be very mindful that the market has gone from inverted to a caring charge market and farmers are beginning stuff this year. They're bidding their crops. And that's going to make the the commercials, the end users have to bid for it. And but still, when you have a farmer holding the grain, you know, we're going to get a chance to make some marketing. But I think they need to do some flooring under this.

Paul Yeager Are you storing or selling beans off the combine? Soybeans?

Sue Martin Well, here's the thing with beans. I did a study today and I was try it and I could have had a little more to it. But in since 1971. So the last, what, 22 years we have or excuse me, the last 50 years, 51 years, we have had basically looking at the month of May, soybeans will be like May of 24 contract in years of where we've had tighter beginning stocks like we have right now.

And even on that September stocks report, we still tighten supply. We're less than the year before. So as long as we remain less than the year before, the studies logit. And in years of that, there were 22 out of the 51 that we had this setup. And you look at the October, whatever that high is in October for the November or excuse me, the May contract.

And it was interesting out of those years, only two ended up not exceeding the October high for the May contract, whatever that high was for that may and one was steady, the rest all made higher highs. And many times it came like in March, February, March and of course, April, May, the ultimate low off of the October from that October high, the ultimate low. Many times was in November. But out of those 22 years, every one of them retracted back from the October high. At some point.

Paul Yeager Will dive into that a little more in market. Plus, I need to get to livestock because live cattle continue to reverse and give back a lot of these gains. When you see this chart pop up on the screen and heading down. So what do you see?

Sue Martin Well, first, I don't like red. I like green, but I will have to say I'm still bullish cattle, really, and I'm very bullish cattle. But, you know, for now, okay, it's interest rates, the hikes so that started to affect buying feeders is more costly. Of course. The other thing is, is that you have all this talk about, okay, like the stock markets had a tough week or so.

And so the you know, there's an old saying as the stock market so goes cattle and you have a lot of competitive meats out there, the poultry industry, the pork. And so that's I think right now trying to play a little bit of havoc on us. But seasonality, you normally will take feeder cattle and sell them back into October some years.

We've even made it into November. But I think around October 14th, somewhere in there, we're going to try to stick to low. And what might happen is we may have seen a low today or very close to it and then start to chop around and meander. But ultimately, I believe this market's going much higher. We have yet to go through what is called the whiplash effect in cattle, and that's when you start seeing a hold back of heifers for breeding purposes. And so then that tightens supplies even further.

Paul Yeager Okay, Again, like more livestock, because I have a couple more questions. And the hog market just this week was I'm sore from looking at it. Is this going to continue this whiplash?

Sue Martin Well, it's been very whiplash thing. I thought it was interesting. Probably three weeks ago, something like that, we had an entity that had bought 4,500 April puts. And I thought that was like, well, why would you spend $90,000? And I think it was around $0.05 that he paid for them or something like that. So why would you spend $90,000, $40 out of the money?

And that was a fair amount. And I think it's kind of like what does he know? We don't what would it be? I think it's the concern of African swine fever hitting the US. And I'll talk more in and ...

Paul Yeager Market Plus with we've done a good job teasing that. Thank you so appreciate.

Sue Martin You bet. I love it when you're all right.

Paul Yeager Thank you. Hold it there. We're going to pause this analysis and continue our discussion about these markets in our market Plus segment, you can find both analysis, what you just heard and plus on our website of market to market dot org. Our portability keeps you in the loop and us in your cab truck or ears this harvest season.

Follow our YouTube page for full shows Market Plus and the MtoM podcast. Hit Subscribe at YouTube.com Slash Market to Market right now. Next week we take a deep dive into a new round of government data with a panel discussion. Thank you so much for watching. Have a great week.

Announcer Market to Market is a production of Iowa PBS, which is solely responsible for its content.

Announcer What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because of Pioneer. Our name is our mission.

Announcer Sukup Manufacturing. Celebrating 60 years of innovation as a family owned and operated manufacturer of grain storage, drying and handling equipment out of Sheffield, Iowa. Learn more at Sukup dot com tomorrow.

Announcer For over 100 years, we've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.