Market Analysis with Kristi Van Ahn-Kjeseth

Paul Yeager

War uncertainty in Ukraine, coupled with a wetter forecast in Brazil influenced the last week of trading for 2023. For the week, the nearby wheat contract added $0.12 while March corn lost $0.02. An earlier than usual harvest in Brazil helped form trade in the soy complex. The March contract shed $0.08 and March meal declined $5.10 per ton. March cotton expanded by  $1.24 per hundredweight.

Paul Yeager

Over the dairy parlor Feb class three milk futures improved $0.15. The livestock market was lower. February cattle fell $0.03. March feeders cut a $1.30 and the February lean hog contract dropped by $3.37. In the currency markets, the US Dollar index lost 42 ticks. February crude oil declined $2.06 per barrel. COMEX gold improved by $11.20 per ounce, and the Goldman Sachs Commodity Index lost almost 12 points to settle at $536.35.

Paul Yeager

Joining us now is regular market analyst Kristi Van Ahn-Kjeseth. Kristi, good to see you again.

Kristi Van Ahn-Kjeseth

Yes, great.

Paul Yeager

I know you saw those pictures of the storm.

Kristi Van Ahn-Kjeseth

Yes.

Paul Yeager

And you missed most of the ice.

Kristi Van Ahn-Kjeseth

Yeah. By the time it got to us, it was moisture. So but my sister does live in Fargo. And so when she came back, you could get to Fargo, but you can get anywhere past that. And that's when the ice really happened. But, you know, you woke up in the morning and it was icy. But by the time it melted and honestly, things there's not a drop of snow around us.

Paul Yeager

You have had more moisture in that region of the world and we had more moisture finally falling in the southern wheat belt. Is that having any influence in the trade of wheat this week?

Kristi Van Ahn-Kjeseth

I don't think too much. I think wheat is probably focusing a little bit on those outside factors. It really looks like things in Ukraine and Russia are really ramping up. Sounds like maybe kind of the hottest strikes you've seen from Russia since the start of this war. So I think that's impacting a little bit more. But I think when everything shakes out, the moisture that's come in for winter wheat country is going to be that damper on it, that you're going to kind of say, hey, we can get here.

Kristi Van Ahn-Kjeseth

But remember, there's probably a decent crop coming because of that moisture.

Paul Yeager

Late in the week, you kind of mentioned Ukraine as a story that became back to a little more of the serious mode of things. Are you anticipating that that will be a major factor moving into the first quarter of 24?

Kristi Van Ahn-Kjeseth

Yeah, I would say that if if there was going to be these big items that really push the market for Russia, Ukraine is probably going to be one of those items. We know that there are issues there. Really all the risk premium has been taken out of that because grain has still been able to flow out of there.

Kristi Van Ahn-Kjeseth

It's really you look at tenders there cheap out of Russia when you come to their wheat. So it's put a damper on it. But now you're kind of bumping that back up and having that escalation. I think it'll play into the first quarter of the year.

Paul Yeager

Lower dollar for I think three weeks in a row for the week doesn't seem to be helping wheat. Why not?

Kristi Van Ahn-Kjeseth

No, not quite yet. But I think you'll get there. I think eventually that US Dollar is really going to make an impact on our markets and we need it to. Right? We're coming into Corn's hottest export season, right? So soybeans kind of had their story. They got through their uncertainty. But moving forward, I anticipate that U.S. dollar making a big impact on corn as we enter our big heavy export season.

Paul Yeager

It's almost like, you know, the pattern, what we're going to do, let's get into corn. This is an old crop question that came in this week via social media. And this is from Seth in Iowa. And he wants to know what is the best strategy for commercially stored corn in the current market?

Kristi Van Ahn-Kjeseth

Yeah, I think this is a great question and something that needs to be talked about. I think you take it two different ways, like are you paying storage on your crop or are you not paying storage on this crop? If you're coming in here and you're looking at it and you're saying, Hey, I'm paying X amount of cents a month and it seems to be a little bit on the spending side because of interest rates the way they are right now.

Kristi Van Ahn-Kjeseth

There are some options to come in here and say, hey, if basis is good, you're not happy with the price. Let's look at some options because corn options are really, really cheap when you look at them. But if you're not paying storage on that, if you're on free DP, I would be tempted to kind of just wait it out a little bit to see what we can get.

Kristi Van Ahn-Kjeseth

But I do think that some sort of risk stance should come before January 12th. That's a big report with a lot of data and so I would do something to protect that before then.

Paul Yeager

This airs before the market opens in the new year or so. We won't have a chance. So in those first 12 days of ‘24, what am I doing with my old crap corn? What's a good strategy?

Kristi Van Ahn-Kjeseth

Yeah, I think really there's multiple ways to look at it. Is it on the farm or is it at the elevator? Are you paying storage? Are you not paying storage? Corn right now has a lot of flexibility around it. I think that there's not a lot of traders that are active right now into the corn market either. So I think corn has its moment to shine if it wants to moving forward.

Kristi Van Ahn-Kjeseth

Right. So there's a lot of things that have to line up for corn. But when you look at it, corn has its good export season like I said, coming up, you have not really even tapped into the story for us safrinha crop in Brazil, that gives you some ability and there's a lot of numbers that come out quarterly stocks, I think will be a big focus number for corn come January to see where we're using that.

Kristi Van Ahn-Kjeseth

So there's a lot of moving dynamics. But I think the biggest thing is just to make sure you don't like carry decay happen in the market. We initially started to see that where the march corn started to slide down to December perked back up. But it seems like we're really struggling to get through that 4.80 mark for March Corn But if we can get above that target $4.93, $5.03.

Paul Yeager

So December corn, though, does it concern you if, say, next week we dip below $5?

Kristi Van Ahn-Kjeseth

It does, yeah. So not only December ‘24, but December ‘25. So I think a lot of people don't want to focus two years out. There's a lot of things that can happen between now and December of ‘25, but you have two of those years that have above $5 futures. And when you look at a chart, December ‘25 is actually at that top end of the range where if you look at any other charts of corn, it's a much different situation.

Kristi Van Ahn-Kjeseth

So really focusing on those two and seeing where your your break evens are because I think a lot of producers might not like lower fives, but it's profitable. And if you haven't started, I know this time frame is not the best time frame seasonally to be selling corn this far out. But I do think you know just responsibility wise is something that you could look at.

Kristi Van Ahn-Kjeseth

We saw this year get to a 40 cent carry, so let's say we're getting $5.10 on the board, get a 40 cent carry that's $5.50 out to July. And so it's those type of things that you really have to work through. The last few years, it's been easy to make some marketing decisions. It's been fun to make those marketing decisions.

Kristi Van Ahn-Kjeseth

You couldn't really do anything wrong. This is where you have to kind of put some things together and really think through some processes.

Paul Yeager

Can you make mistakes in soybeans, too? Right now?

Kristi Van Ahn-Kjeseth

I don't think so. I mean, not for old crop soybeans. I know it's not $13.80, I know it's not $14. But where you look at it, you know, most of this is profitable. I think also it gives you that ability to extend cash flow and not pay those high interest rates and maybe buy you some time if you're holding on to the corn and wheat.

Kristi Van Ahn-Kjeseth

That's the way we viewed it. I am concerned with soybeans. So if you're going to consistently close below $13. So we've gotten, you know, a little bit of teases below that $13 mark. And then you see it come back. And it's kind of like that game. How many times are you going to break the ice before you really explode lower below that?

Paul Yeager

The holidays are always a good time for family to get together and hear different strategies from people. There are some who told me over the last few days I haven't sold yet. I missed my chance.

Kristi Van Ahn-Kjeseth

Yeah, we're talking corner soybeans or soybeans. No, I don't think so. You know, as long as we hold $13, I think that you really have those targets of $13.40-$13.80. The issue that I'm looking at for soybeans right now is that we've worked through a lot of the problems. So we know that they're not going to have as great of a crop in Brazil that we initially thought they would have.

Kristi Van Ahn-Kjeseth

However, you put Brazil and Argentina together, it's going to take something drastic to change the dynamic year over year and give you a less of a problem.

Paul Yeager

However, I, I struggle to find valid, confirmable, reliable information out of South America. How do I sit and watch to know what's credible? You see the tweet of someone going through a field saying, this is terrible. It's, you know, it's zero, right? How do I make sense of any of this? In my plan, let’s say for new crop decision making.

Kristi Van Ahn-Kjeseth

Yeah, I think social media can sometimes be the death of of marketing. Right. That when you're consistently seeing somebody portray the same message I think you should be a little bit aware of that. You know if you're consistently bullish or you're consistently bearish, I think people need to look at that and say, Hey, am I getting that full spectrum of news that I should be looking at?

Kristi Van Ahn-Kjeseth

And then when you come in here into the next direction and kind of look at and say, hey, what is the difference between, you know, Brazil and Argentina? Last year, Argentina did not have that crop. It came out this week that the crop ratings are through the roof for Argentina. Granted, they're just wrapping up their their planting progress.

Kristi Van Ahn-Kjeseth

So, I mean, it's a little bit of a different situation. But the the conditions that are there right now are spelling a good crop there. You put those two together, it's got to take some drastic, drastic cuts in Brazil to change that dynamic coming out of South America to be worse year over year.

Paul Yeager

Do you anticipate I mean, this is both a corn and soybean answer, I guess. Right? But the early harvest on beans tell you that there is a rally coming here in beans or corn.

Kristi Van Ahn-Kjeseth

I don't know if it really tells me much of that. You know, I'm not anticipating that. I think what I'm looking at right now is that Brazil is such a drawn out process for harvesting that we're just starting to get the first sets of tidbits as far as that harvest progress, those yields. And we're going to get a lot of it over the next two months. And so it really gets spaced out.

Paul Yeager

Let's go to livestock, as this has been quite the story, to see this market deteriorate into Christmas and now all of a sudden we digested that cattle on feed report rather quickly. Yep. What did that tell you?

Kristi Van Ahn-Kjeseth

Yeah. I think when you look at cattle and feed, it was, you know, you kind of got bits of information that you could pick because you got cattle and feed and cold storage, right? So you could pick out things that you wanted to play into the friendly parts, you could pick out things that you wanted to play in the bearish sentiment of it.

Kristi Van Ahn-Kjeseth

But I think everything kind of trumps it. And you come and you talk about kind of interest rates heading maybe towards a cut. They were pretty adamant on seeing that happen. You talk about some new recent highs in the stock market in the Dow. All of those things should be friendly to the cattle markets. The charts are starting to look really good.

Kristi Van Ahn-Kjeseth

We have not confirmed upside price currently out for both live cattle and feeder cattle, but we're getting really close to that in the charts look really good. Possible positive divergence. So if we could probably get, I would say anywhere from $2 to $5 higher next week, you really do open up those price targets. That gives some topside, you know, price counts to those markets.

Paul Yeager

What's my strategy then?

Kristi Van Ahn-Kjeseth

Yeah. So right now we kind of moved aggressively after that cattle and feed that nasty one. And then we've been a little bit patient here. We started to look at some calls to possibly sell into your deferred contracts are starting to hold some premium that we're looking at, but we're really being patient to see if we can activate those price counts to the topside.

Kristi Van Ahn-Kjeseth

And I think next week will show us a lot of that.

Paul Yeager

Feeder wise, again, it's a story of we had it in the weather, story about, you know, re sell off in those herds and now repopulate. Right. What are you anticipating in these cattle on feed reports moving forward.

Kristi Van Ahn-Kjeseth

Yeah, I think there's so many places you can take this. But one of the biggest things is that besides this ice storm that you've had, you've seen some really favorable conditions. I think you're going to start to see some weight being put on for cattle and you're going to see some retention. But I think that retention can cause holes down the road.

Kristi Van Ahn-Kjeseth

And so I do think that overall over the next year, you have that friendly bias that's into the cattle markets. But one thing we need to know is that it seems like there's plenty of beef in Brazil, there's plenty of beef in Mexico, and that's going to be a constant battle for us. I think the big thing to focus on is, you know, are we going to have this good condition moving forward on the outside factors for us demand and right now, whether you believed it could happen or not for a soft landing, I think the signs are pointing towards it being actually something that we could feasibly see, and I think that would be helpful.

Paul Yeager

In the hog market. I'm going to guess, I guess the hog producers ready to see ‘23 go away.

Kristi Van Ahn-Kjeseth

Yes.

Paul Yeager

Do we have a better chance of a repeat in ‘24 or a whole different story?

Kristi Van Ahn-Kjeseth

Yeah, you know, this is a little bit on the tricky side. So you have multiple stories for hogs. I think one of the things hurting hogs the most is managed money has been aggressive sellers of hogs and sometimes you just can't fight that. So they're near record short holdings either. It's been brutal, but that ends up being a little bit on the friendly thing because you're going to say how many times are they going to continuously short this market?

Kristi Van Ahn-Kjeseth

So hopefully they ease up on that. You see them go more towards a neutral stance, but the prices out your deferred contracts right now for hogs, seasonally, they're supposed to get a little bit of bounce. We haven't seen them, but they're decently holding their values. And I think that's important to look out to those summer contracts and see where those prices are right now.

Kristi Van Ahn-Kjeseth

But on the flip side, nearby cash is not doing anything to be a friend to hogs right now.

Paul Yeager

Now you're talking like an economist on the other hand. On the other hand. But on the other hand, for the hog producer, do you see is this a short term thing that they just have to kind of work through in a year, or is this kind of the new normal?

Kristi Van Ahn-Kjeseth

Yeah, I think it's something we're going to battle for a while. The waits you look at litter count, I think that's one thing that's hurting this market as well. Weights with some more seasonal weather. It's been warm in the majority of places. I think that's going to be a constant battle as well. Freezer stocks are ample. So you're going to have information that consistently is weighing on hogs. But to me, those deferred contracts look pretty good right now.

Paul Yeager

All right, Kristi, thank you so very much for your time. I appreciate it.

Kristi Van Ahn-Kjeseth

Thank you.

Paul Yeager

All right, Kristi Van Ahn-Kjeseth everybody. So hold on there, though. We're going to pause this analysis, continue our discussion about these markets in our Market Plus segment, you can find both analysis and plus on our website, which is markettomarket.org. Our YouTube channel is quite the place. There's updated content two times a week with our Market Plus, our stories, and our MTOM show podcast. Follow today and know when we post and be the first to watch our content by heading to YouTube.com/markettomarket. Next week, we'll look at the high school class work, returning dividends to the community.

Paul Yeager

Thank you so much for watching. Have a great week.

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