Market Analysis with Sue Martin

Paul Yeager: Multi-year lows were met this week even as winter kill moved across the U.S. and rain forecasts turned drier in South America. 

For the week .

The nearby wheat contract lost four cents, while March corn dropped two cents. 

Technical resistance at $12 seems to be keeping the soy complex above that mark with questions still remaining about the size of the Brazilian crop. 

The March contract declined 11 cents and March meal shed $5.60 per ton.

March cotton expanded by $2.77 per hundredweight. 

Over in the dairy parlor, February Class Three milk futures fell 11 cents.

The livestock market was mixed. February cattle added $3. March feeders improved $4.25 and the February lean hog contract shed $1.15. 

In the currency markets, the US dollar index increased 99 ticks. 

February crude oil expanded 84 cents per barrel. 

COMEX gold cut $22.50 per ounce, and the Goldman Sachs Commodity Index lost more than 8 points to settle at 538-70.

Joining us now is regular market analyst Sue Martin.

Sue Martin: Hi there.

Paul Yeager: This wheat market, there's always seems to be certain things that are built into it, winter kill being one of them. So my question is really simple. What's going to prompt is to rally into February.

Sue Martin: Well, seasonality, first off, a lot of times you'll rally wheat into February, but the true time to rally is April, May. And the there's been analysts that are talking about the concern over some damage for winter kill. Now in parts of Kansas, you've got snow cover. And I think that winter kills important. But I wouldn't hang my hat on it because you don't know what damage has been done until the crop breaks from Dormancy.

Paul Yeager: Seasonality is one thing, winter kills another. How do I play my crop here? My planning in wheat moving forward for the next month?

Sue Martin: Well, I'm not wanting to make any cash sales at this time. The U.S. farmer wheat farmers holding about 28% of the crop on farm. That's not super bad. And I think that the indicators I follow that are proprietary are showing that this wheat market, it may still flounder around. But when you've got all the issues going on in the Red Sea, we've seen Algeria come in, take up to 900,000 metric tons, wasn't expected to take that much. You've got Egypt that's been coming in quite often to the marketplace. I think we've got other countries, too. But it seems like demand for wheat pretty good right now. And I think it could be part of the concern. One of not having enough supplies on hand. You know, that just in time inventory, which is all goes back.

Paul Yeager: Goes back a couple of years. Yes.

Sue Martin: Go back. But I think that with the wars breaking out in the Middle East, in the Red Sea area, and then you've got Russia and Ukraine and Russia is the world's largest exporter of wheat, I think that we're looking at a market that has potential.

Paul Yeager: To be a potential in corn. I mean, we're at three year lows right now.

Sue Martin: Well, I think we do. I think we put a low in on corn and wheat excuse me, corn and soybeans this week. And we had a target of 436 to 440, and we got down to 436 and three quarters and we kind of springboard out of there. And now we have a run away. I don't think Corn's going to run away, but I think you've got some lows stuck in here for a while. Remember, February is crop insurance month, and I think this market feed usage should be very good. I don't know if the February report will acknowledge it, but feed usage has been very good here so far. In January and everything I see February is not going to be a whole lot different. So I would have to say that's good exports. China in the month of December took 27.1. I think it was million metric tons and that was up about 6.6% more than a year. Before then of course, they're coming out of lockdown. You know, but they also have a huge supply of hogs that's been going through a liquidation. Some would think, oh, well, gee, they won't need as much corn or soy meal. Well, maybe we'll be surprised. I think China's supplies were low. And I think here's another country that I think is building reserves. And then you've got the situation where you look at China. And I think that we look at COFCO International Grain and they've been avid in exports or net exports. But the delivery process was like they were back in 2020. And I think that when I look at China, I think they've already this week, this past week, they accepted or acknowledged six more GMO varieties. And I think previously there might have been 17.

Paul Yeager: So then how does corn ward off any lower lows? But then look at beans, how they stick and hold off on 12? You kind of just said a whole bunch of things that sometimes playing to both of those markets are all of those factors that you just talked about at play in soybeans as well?

Sue Martin: Well, yes. Now, beans, the trade. I know the public seems disappointed that the beans didn't do better in December and what have you, But the market was telling you something when it closed lower for the month of November after our nice rally in October. And then you took out November's low in December. What's it saying? You know, the market's always right. And I think the bear side of that equation is, well, yes, and it's all over the place. What you hear for estimates, you know, we've got some really low balls in there. I think we've priced in the 150 area, although CONAB And of course, USDA is not there yet. But I think that when you look at the bear in Brazil or the bear in the trade, he's saying, well, but look at Paraguay, look at Argentina, and Argentina's coming back full bore this year.

Sue Martin: Well, by the time and South America or Southern Brazil maybe has picked up a little more, So they'll make up for these losses that we're seeing in central and northern Brazil and especially in Mato Grosso. Maybe, maybe not. You know, when I look at Argentina, remember, they were importers of Brazilian beans. They might not be needing to be importers this year. And so that's one thing I think that when I look at Argentina's crop, you know, they've got a very progressive president now. And I think that he's resisting, you know, he's not going to do business under the yuan or Brazil's willing to. But I think that's where the bear came from, is that we're compensating enough to make up for it. So instead of just looking at Brazil, we're looking at South America in mass.

Paul Yeager: Right. So, Phil, I got to let you know, that was part of your question Sue was answering there. I want to move to livestock here for a minute. We talk about the weather and how cold it was. We were looking at weights coming in this week. It's not going to be a long term cold snap, is it? And and does it have a long tail, though, at the the Packer door?

Sue Martin: Well, for one thing, the packer I think is still killing in the red. And so now that he's passed this not being able and he was creative about thinking maybe less numbers so he slowed his processing or killed out. But then we went through this weather and we had all these animals sitting in feedlots heavier than normal or what they should be. And of course they've given up some of that weight. I've heard $60 up to $100. The other thing you're going to see is problems with feet, with hoofs. And I think that when I look at the packer, he's done a creative job. The problem is, is that now that we have the weight loss, okay, but take the weight loss and what was it versus a year ago? We might come in $18. Right now we're running about $18, I believe over 23. And when we get into February, we might look back and we look at this weather and we might still be $18 over, I should say, over 22 and now over 23. So because the weights dropped in the latter part of 22 and then 23, of course, we had heavier weights, we're starting to manage those weights now. So I'm looking at cattle. I could see the market still pushing a little higher here, although the packer maybe is going to be a little resistant, and especially with the warmer weather, the cut out drops. But demand for beef domestically seems like it's slowed a little bit.

Paul Yeager: Well, kind of that news of the retail sales at the top of the show, that's always one of those factors in there. And you exclude certain things when we get to Consumer Reports which will be coming soon. I want to circle back to something you said earlier about the lower feed costs. That's the one bright side of a down corn market is the cattle feeder. See it the same way?

Sue Martin: Well, he might not, it might not be cheap enough for him, but the thing is, cattle prices are beautiful compared to what they were a year ago at this time. So we've got that. The problem is you have those input costs and the producer was making good money here in the fourth quarter of last year. And now with these animals losing all this weight in the feedlots, they're giving back some of that profitability.

Paul Yeager: And our cattle on feed inventory was 2% above last year and on placements we were 4% below. So really nothing for you in that?

Sue Martin: Exactly. It was just a neutral report. I think the more important thing is going to be the cattle inventory report at the end of this month. I think that's going to be showing us less cows and beef cows especially, and also probably calves, smaller calf word.

Paul Yeager: In the final seconds. You already kind of talked about China's reduction in their hog market. Is there anything U.S. hog producers can look for? Sunshine wise?

Sue Martin: No, I think demand for pork is pretty decent right at the moment. But when I look at the hog market, I think that I'm amazed that we haven't liquidated down more hogs. And what the reports show. I look at China and China's got record production, pork production, 50, almost 58 million metric tons this last year. And I look at their largest pork producer and they I think they dropped 10% from the year before. And then you have the second largest one, a whopping 58% less in the fourth quarter.

Paul Yeager: All right. We'll pick it up in a moment. Thank you, Sue. You bet. Good to see you. Hold on, because we are going to keep going on this analysis and continue that discussion about these markets and our Market. Plus, you can find both analysis and plus on our website of market to market dot org. A reminder a good email goes a long way to getting our attention.

Paul Yeager

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