Paul Yeager: A few of the grains finally closed above the twenty day moving average Thursday - only to be extended with USDA’s report Friday. 

For the week …

The nearby wheat contract fell 39 cents and the May corn contract added a dime. 

China went looking for soybeans this week, but not for the American grown product. 

The May soybean contract still added 43 cents while May meal improved $12.20 per ton.

March cotton shrank by $4.29 per hundredweight. 

Over in the dairy parlor, April Class Three milk futures fell $1.07.

The livestock market was mixed. April cattle gained $2.25. April feeders put on 37 cents and the April lean hog contract declined $2.25. 

In the currency markets, the US dollar index fell 132 ticks. 

April crude oil lost 17 cents per barrel. 

COMEX gold increased $129 per ounce, and the Goldman Sachs Commodity Index bumped up more than four points to settle at 560-85.

Joining us now are market analysts Ross Baldwin and Jeff French.

Ross: Baldwin: Thanks for having me, Paul.

Jeff French: Great to be here.

Yeager: We're going to start with you, Jeff. A report today from the government, a little bit of initially nothing and then it was something. What happened?

French: Well, it was yeah, it was a pretty quiet report. I mean, it was for the corn and beans, if you look at it exactly the same as last month. The only change on the corn balance sheet is they lowered the on farm price $0.05 down to 475. They did raise the wheat carry out by 15 million bushels on a reduction on the exports. But yeah, not too much news, not really a, you know, big mover in the market. But we did see some things happen that were positive. We had corn and beans close above the 20 day moving average here this week. On the beans, that's the first time that we've seen that since November 22nd on the corn. That's the first time that we've seen it since December 15th. So that was a good sign. You know, it's one day. I'd like to see some follow through next week. But this is the first time that I would say in three or four months that the funds will be not as comfortable being short record amount of contracts down here.

Yeager: Does that add to the volatility then?

French: Yeah, You know, it's been kind of a steady, pretty orderly sell off, but we've definitely turned a corner here. Again, it's one day and I want to see some follow through but the technicals and seasonally we should be grinding higher here. But you know, we'll get into planting. They might work at lower during that if we get clear window during planting. But, you know, it's one of those days that we've been looking for and it's definitely a good sign. So good to see.

Yeager: In the wheat market, the big story again is Russia dumping. Really? You could probably use the word dumping a product on the market, lowering the global picture. How long can that continue? And do you see it continuing?

French: Well, it's gone longer than I anticipated. I mean, they're selling below $200 a metric ton right now on the world market. You know, Egypt tendered this week, Bulgaria actually one that contract. But then Egypt came out a couple of hours later and canceled the tender. You know, most likely it's going to go to Russia. It will be a private transaction. But also on the wheat, we had two cancellations out of China, of U.S. wheat. You know, U.S. has bought anywhere from two or excuse me, China has bought anywhere between 2 to 3 million metric tons of U.S. wheat. They've canceled four cargoes so far. That was a big market mover. But on Friday, we were able to close higher after making new lows for much of the day. We actually had a key reversal higher, but we missed that by about a penny. So it's one day it's extreme oversold. But when a market does not move against bearish technicals and fundamentals, maybe the sell offs over. So we need more to confirm that.

Yeager: Watching the weather piece, looking at the drought monitor, looking at wheat growing areas, is there any advice you have for U.S. wheat producers and what they should be doing right now?

French: Well, wheat country right now, I mean, last year this time, 50% of it was in drought. Now it's down about 15%. So there has been moisture. Moisture is going through right now. But yeah, it's a long growing season ahead of us, but the conditions are some of the best that we've had here in the last five years.

Yeager: You mentioned corn over the 20 day moving average Thursday, but we also have to deal with Brazil's weather not threatening and playing on the market. Do you contend that the movement at the end of the week is a technical one?

French: I do. And again, I go to that fund position. You know, they were short 340,000 contracts two weeks ago. We've come down, made our low right there right before March 1st. Right there on that John Deere low when all the payments are due March, March 1st. So it looks good. I think we can rally this May contract up to 448 and a half. There's a double top up there, but it's going to be a grind. I mean, at the end of the day, we still have a 2 billion bushel carry out that will weigh on this market. But you have the funds with a large short position and that door is only so big if everybody wants to exit.

Yeager: So, Ross, I guess the question then becomes in the livestock sector, can the livestock sector, did it already contribute to eating into some of this demand and carry out that Jeff's referring to?

Baldwin: I don't. Given the 15% stocks to use, I don't know that the livestock sector, we have the amount of animals in this country to eat and the carry out in a meaningful way that we're dealing with on the corn side of things. But yeah, there's no question. I mean, we're feeding quite a few cattle right now.

Yeager: Jeff, do you need livestock to contribute more to this situation?

French: Absolutely. I mean, we've seen on feed numbers and they're going to continue to grow. I mean, the second quarter is expected to see the largest numbers of cattle that we'll have to deal with. But yeah, I mean, we all take it. I mean, the hog herd has been decimated here the last 18 months.

French: We'll see if that's able to grow. But absolutely, we need all the demand that we need. We need to grow corn demand by probably 4 to 500 million bushels here this next year.

Yeager: That can't all be done by livestock. It's going to have to be something else. We're going to have to see. I mean, you mentioned China earlier. China's not been a big buyer of corn in the past. Occasionally they dip their toe in. Did we get low enough to attract their attention?

French: Well, we haven't had any confirmation of it. I mean, the exports have been solid. I mean, they have been good. I mean, you have right now Mexico being our number one buyer. I mean, Mexico right now, they have 17 million metric tons on the books. I mean, that's more than they've ever had on the books right now. And all that non-GMO talk is out the window. So price will definitely bring out demand. No question about it.

Yeager: All right. Let's start with cattle for a minute, if we could. Ross, when you look at this situation, one of it's always that ying and yang two things.

Cattle have continued to be strong by our live cattle, continuing to rally.

Baldwin: The sheer fundamentals of the market that we have. Just underlying the underlying support. You have all cattle and calves in this country. We saw in the January inventory report it's the tightest since the early 1950s. The U.S. cowherd is the smallest since the early sixties. So we moving forward every month that goes by really for 24 and even out into 25 and 26, potentially the numbers get smaller, which does back into the earlier question. I mean, we do not have enough livestock in this country for, you know, to create 4 to 500 million bushels of corn demand. But these numbers and we saw it in the cash market here this week, cash was solidly higher. We've had cash trade, call it to 2 to 3 higher when how many people are looking for it to be that much higher.

And it boils back to the tightness in the cattle markets.

Yeager: Are you seeing the Packers be aggressive in some of their bidding right now?

Baldwin: We saw them very aggressive this week. And the interesting thing is, over the last three weeks, we've really seen the Packers ratchet up on slaughter. And this week, this week was below 600,000. Again, I believe that makes the third straight week of less than 600,000 head slaughter, which is I mean, that's a meaningful cutback. This is a time of the year that demands it's not our peak demand season, but we're getting closer and closer. And so the fact that they have slowed their change speeds is dramatically as they have. And cash is putting on 2 to $3 this week. I think that shows you the tightness in this country and what's very interesting to me is the live trade was 185 to 187 this week. Dress trade was extremely wide to 92 on the low end majority took place at 295 and there was some as high as 300, 300 dresses as high as we traded last year. Call 188 189 live the highest we got to last year. We're back within a stone's throw of last year's highs. And I think that shows you the tightness in the Fed market.

Yeager: Jeff had answered this question a couple of weeks ago when he was here, but I asked if we were stalling out for another run higher. I'll ask you the same question.

Baldwin: Fat cattle futures. Yeah. So we got up as close as we've been to that gap on April Fat's we talked about earlier, looked like in the first 30 minutes of trade today we would go fill that gap. It's open at 19027, I believe the high today was one 8995 and we failed had a reversal April cattle, I believe June cattle. They did hold their 20 day they held yesterday's low. They still don't look bad technically. Have we stalled out? I think we need to see cash probably get up to that 88 for April two to get going up to the 190. So I'm not super bullish. April futures just for the moment.

Yeager: Let's go to feeders for a moment because tied into what Jeff had said and what you about said, where do you see any hold back in the lots right now? Is there anybody or are they trying to sell into profits that are up there?

Baldwin: No question ranchers are selling and the profits that are out here, it hasn't taken very long. And you have feeder cattle prices across the country back near the all time highs. And so we are moving feeders into these feedlots. And I think you're going to see that. And the next cattle on feed report, we will see aggressive placement placements. Now that is a little bit of shuffling numbers around from last month where placements were really light. It was due to the weather that limited sale barn runs this next month. Cattle that would have been sold in January, they're getting sold in February, but we are aggressively selling feeder cattle

Yeager: I want to ask Kurt, in Ohio, we've got a question. Go ahead, Jeff. 

French: Well, that placement number, as we talked about, I mean, when you broke it down per state, you had Kansas and Texas down 15% and then Iowa, Minnesota, South Dakota during January, where they actually increased numbers on the placements. So I don't know how that math all works out with the weather that we saw.

Baldwin: Correct. And the interesting thing for like, say, Kansas, I believe they were 77% placement on the January one. They did not have good weather and so it was they weren't moving and then wanting to play something just given what the conditions were doing but it was some wild numbers.

Yeager: This is a little bit of a tie question to both of the things I've just asked. But Kurt in Iowa had a question, With the cow herd as small as it is, how much more upside remains in live cattle? Will the Texas wildfires have any meaningful impact on prices?

Baldwin: So how tight the numbers are? How much upside is there? I really think when you get as we work out and I'm probably more optimistic, Q3 and Q4 of this year further out down the curve because that is when the numbers tighten and if there are going to be the months that go above the magical $2 number that everyone continues to talk about, it will be those deferred contracts down the road. How high can we go? I do think we can make a run down the road above $2. I, i know there's some analysts in the market and I have a lot of respect for some of these guys and they're expecting some prices to work well into the $2.

Yeager: Okay.

Baldwin: The second part of your question, the Texas wildfire. Yeah, I mean, our prayers go out to everybody that's dealing with that. Absolutely devastating. The number that I have heard, the cows that have been losses pushing 20,000 head there. It's gut wrenching to hear something like that because I've seen ranchers interviewed that have lost their entire cattle, heard that they've spent the last 20 years say, building up to. So it is absolutely devastating for the producers that are involved in that. But in the big picture for the markets, I don't think it has a huge impact on the markets. The crazy part is, though, is we we can't we're not in the position to lose 20,000 head of cattle. As with what things look like right now.

Yeager: The small numbers that you referred to. Yep. All right, Jeff, you get to start with the question here as well. Tom and Kevin kind of asking the same thing here. Online beans going up. Are we in a dead cat bounce?

French: You know, I think we go up here. I mean, Brazil is over 50% harvested. So I think a lot of that harvest pressure, we've seen it. And you just look at the last three weeks, we've held that 1150 area. It's kind of been a magnet where, you know, we go below it and then we come right back up to it. And then today's action, you know, close and $0.30 off the lows from the day above the 20 day. This chart is pointing higher. We've got to get through the $12 mark. We'll probably test 1195. But if we get above that, we could probably see 1240. That'd be a dollar off the contract lows of the move. And that's where I'd be looking to make some sales are.

Yeager: Yes, I was away from most of the agriculture world last week, but I had time to see some chatter on Twitter last Saturday, Sunday about these charts, all looking like, why aren't they going to go higher again? I asked you that technical question. Is this a technical move right now?

French: Yeah, I think it is. But also seasonally, you make it low, you know, right into February, into March, we start to get into some weather and some planting. And then at the same time, how much more can they throw at this market? I mean, they've thrown everything and, you know, how long are the funds going to stay? Record short this crop as we enter the growing season, I just don't see it. And again, I said it before. I mean, this is the first time that they're going to feel a little uncomfortable over the weekend being short all these contracts.

Yeager: Let's move, if we could, Ross, in the last couple of minutes here about hogs, because we've seen the meal be attractive for exports. We've also seen the pork product be attractive to exports. What do you see in hogs right now?

Baldwin: The hog futures markets had a heck of a rally. I mean, it had been such a tumultuous year. 23 had been for hog producers here domestically. And the Chinese hog producer went on the better part of two years losing money. So we've been in a slow liquidation mode between the US and China and the Hog market clearly put a bottom in a while ago. I know that's an obvious statement, but we've had a heck of a rally and it's how much about like corn recently, how much more bearish news could you throw at it while there was some liquidation going on. So looking at the hog fundamentals are kind of interesting because exports have been solid. Mexico's been a very aggressive buyer of U.S. pork. China's been a buyer of U.S. pork. And when you we also look over to China, they're there feed prices, meal and corn prices are at three year lows. And so it China did come out here a week ago, I believe it was last week, and they started saying that their hog herd is smaller than it had been. But I think when people have been looking at some of the things occurring across the hog market and China's milk prices and their corn prices, they were already starting to wonder what is going on with China's hog herd. So I do think, I think we still got time to work through this. But when you look at summer month hogs back over a dollar, June, July, I mean, they've got as high as a dollar, $3 for I think we're building and there is a hogs have a story here. I mean I do think it's more the last half of the year where this thing gets exciting. But it also it does make me feel a little encouraged with high priced beef. If the hog market can get a story and get these prices working higher.

Yeager: And I'm encouraged he can fill right to the very end of things. Ross, thank you so very much. Jeff, thank you as well. I appreciate it, gentlemen.

Baldwin: Thanks, Paul.

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