Market Analysis with Dan Hueber

The word of gov on Friday reported lower production in Brazil and Argentina while wheat exports were higher. For the week, the nearby wheat contract was up 41 cents and the July corn contract added a dime. USDA cuts to production numbers for Brazil caused a brief flurry of activity but ultimately the final session closed near even with last Friday. The July soybean contract gained 4 cents while July meal shed 30 cents per ton. July cotton shrank by 61 cents per hundredweight. Over in the dairy parlor, June Class Three milk futures surged higher again, this time by $1.25. The livestock market was lower. June cattle fell 53 cents. August feeders cut $3.85. And the June lean hog contract subtracted 57 cents. In the currency markets, the US dollar index added 26 ticks. June crude oil was up 2 cents per barrel. COMEX gold improved by $66.70 per ounce. And the Goldman Sachs Commodity Index was up almost 5 points, to settle at 578.70.

Yeager: Joining us now, regular Market Analyst and coiner of the phrase, word of gov, Dan Hueber. I like that, Dan.

Hueber: It kind of sums it all up.

Yeager: What did the word of gov say to you today?

Hueber: Really was nothing shocking in there. If anything, I would say the Brazilian bean crop was not reduced and they are well above most of the private estimates out there. So, maybe something you can look forward to later. Or, maybe the USDA knows something we don't know as far as what the production is down there. But I don't think that's the case. But outside of that, the domestic number is a little bit positive as far as carryout, projected carryout. Nothing that you would look at and say bullish by any stretch, particularly in the long-term picture in the soybean market, both domestic and global. But the market is coming into the last few weeks the market we know was heavily short and this is the time of the year sometimes it's a little bit challenging to be on the short side, which I think some large specs have found out here recently.

Yeager: Folks who have your vocation were discussing this afternoon that they didn't agree -- first they said they agreed with your sentiment on soybeans, the thinking that looks a little bit more bearish, then somebody else said no. But there was this concern that maybe there wasn't enough cut out of Brazil and their production. What do you see?

Hueber: Oh, and I tend to agree with that. The challenge is you really can't cut enough to turn the situation to one that is truly positive. Some of the estimates I've seen, I think the USDA was 152 today, I don't remember the exact number, I've seen some as low as 145. And even if you sliced it off that far, you're still looking at 13, 14 million metric tons more than a year ago. You're 500 million bushel. So, like I say, we're not going to slice that much out of it. And I say, when you look at total South American crops, so it's just not a situation you can ultimately make bullish unless we really ran into a serious, serious weather issue here.

Yeager: And the Argentinean strike is not necessarily going to reflect in a USDA report given it's so new, and neither is, I guess this is the question, neither does the weather from the last two weeks?

Hueber: The weather over the last two weeks would not fit into this number, no. But that said, and I had read some reports this week that southern Rio de Grande do Sul region where they're having so much rain and flooding and various things at this point. You might be able to take 1 to 2 million metric tons off because of that. But here again too, 1 or 2 million metric tons is not going to change it to a bullish scenario.

Yeager: Are the bulls still in the wheat market?

Hueber: Well, I don't know if the bulls have really been in the wheat market.

Yeager: You don't think so?

Hueber: I think you've had a lot of shorts who have wanted to get out of the wheat market and is translated back over in the corn and wheat. But once you scratch the surface on any of these it's hard to find really a bullish story. I think we came in overly loaded to the negative side and I think those people have been scattering for the hills. We, interestingly enough, and it did comment this morning in the news wire, if you go back and look at the old voice from the tomb story that supposedly is kind of a forerunner to seasonal type trades, May 10th is when you're supposed to sell wheat. So, if you had waited until May 10th, not a bad move here this year.

Yeager: I'm also picking up from you that maybe we should sell on May 10th because I don't hear from you saying we can move much higher.

Hueber: When I look at the wheat, I think outside of shorts coming out of the market, I don't see much there that you would really consider long-term friendly. So yes, I think it's probably a time to make a move. The conditions, granted, conditions can change quite a bit, but certainly nothing overly concerning there. So, I would be on the sell side at this point.

Yeager: One more question on wheat, but it's going to transition to corn and beans. And this is Matt in Iowa who submitted it, I believe this one is from Facebook. Thank you. Will the wheat continue to help corn and soybeans higher? Or will they go their own way lower?

Hueber: I would tend to think we're going to transition to where corn, maybe to a lesser extent beans, are leading the charge higher, which might help support wheat a little bit, but I don't think wheat is the leader. And if anything, it could start acting as the anchor that tempers any much more enthusiasm in the corn or soybeans.

Yeager: What moves corn higher then?

Hueber: Here again too, confronted with the same problem. I haven't seen the commitment of traders here this afternoon, and granted that's always a few days behind, we are still sitting with a very heavy short position on large specs and managed money. So, as you look over the next 30, 60 days, you're still at your greatest risk position in the growing season. So, I think maybe a little bit of delayed planting concern there. But I think that will be the driving force as we take these people out. Generally, they'll come away from shorts until you get to the end of June. If there's no major issue growing condition wise at the end of June, first of July, they'll come right back in again.

Yeager: For that deferred December contract, speaking of planting delays, which we talked about a couple of times earlier in this program, are we to the point yet that that's a concern to traders?

Hueber: Oh, I think it has probably aided some of the rally, but I don't think it's a considerable concern at this point in time. So, it's always challenging to rally a market, a grain market, on too much moisture. That's good for crops, isn't it? Rain makes great, right? So, not that it hasn't encouraged a little bit more of the short covering, but I don't think it has turned anybody to a bull. And I think a lot of people are kind of thinking, well, if we lose a little corn acreage that just becomes all the more bearish for soybeans, so it kind of tempers that enthusiasm itself.

Yeager: If you have positions both in July and December and you're sitting on some old crop and you think you should move some new crop, am I moving on either one of those? Is there one you like better?

Hueber: I think we're, the old crop, hopefully you don't have much of a position there, but I think if you extend any higher next week, I certainly would be considering parting with that. For some time, actually if you go back to the beginning of the year when we opened trade on January 2nd or 3rd, whatever the date was, December corn gapped below $5. We have never revisited that. And I think we'll get up and we'll test that $5, we'll try to fill that gap, I think it's $5.03. And much above and beyond there I think you really would have to have a more substantial weather issue to make that happen. So, sure, in that $4.90 to $5 range I think it's time to start rewarding the new crop as well.

Yeager: When you kind of transition into soybeans, there are some similarities. You mentioned that wheat might not pull corn and soybeans along, corn and soybeans might do it themselves. What do you see soybeans doing?

Hueber: Similar scenario, although I think less of a friendly story, less of a concern, particularly when it comes to planting delays and that type of thing. The South American issues, both Argentina and Brazil have probably helped kind of prop that up, allowing people to take a little more risk off the table looking into the summer months. I think the upside is kind of limited there as well. Using that same scenario, when corn gapped under $5, beans gapped under $12.50, new crop beans, it was $12.44, $12.45. Sure, I think we could get there and maybe we could put a $13 in front of the beans. But I think anything between $12.50 and $13 I think it's time to reward.

Yeager: I asked Sue last week, are beans in the teens possible? And she said, yes. Do you see beans in the teens possible in 2024?

Hueber: We're saying?

Yeager: November.

Hueber: $13, sure. In that realm. I think that's a possibility. But I think it's the upper side of the range, again, without a significant weather issue.

Yeager: That's what you see as the big story is the weather issue there?

Hueber: Yeah, I think demand we're just not in the ballpark at this point in time. And world supplies, we're not in the ballpark at this point.

Yeager: Speaking of world, we had issues on Friday with the White House and China, a couple of things, electric vehicles, a large tariff coming, rumors of potential tariffs against Chinese used cooking oil. That might be friendly to some things in the United States. How do you see it?

Hueber: As far as U.S. demand, we're basically their buyer of last resort to begin with. They'll come to us if we're cheap enough. So, I don't think it upsets the apple cart that much. If they need the product and we're the cheapest, they're going to buy it from us. That's just the way the Chinese operate. They won't certainly look to us first. But, if need be, they'll buy what they need. I think there is part of the issue with China, we already know they have displaced South American product in lieu of U.S. product. And then take the next step further where they are very, very deliberately trying to trim back on their hog industry. So, you've already reduced the amount of demand from that nation to begin with. So, again, I think there's where I have a difficult time finding a positive picture, particularly when it comes to feed grains.

Yeager: And it being an election year, you don't see that playing politically in changing things?

Hueber: Domestically? Not really. Again, I don't think Biden thinks he has the farm vote to begin with, so why try to change that?

Yeager: Cotton wise, that had been for a while an export story, then it became a domestic story. Then if you looked at the weather maps, the last several weeks the Delta has been pretty wet. Is that doing anything to the crop?

Hueber: It has not. Well, I shouldn't say not doing anything to the crop, but it certainly hasn't done anything to stimulate prices. In fact, we pushed into new lows for the year. So, I think they're assuming the acreage is going to be there this year. And, of course, even that fits in with if it gets in early enough, this is delaying it now, but could have been some double crop with soybeans. But boy, we're going to have to find some export business there again because domestically it's just not cutting it at this time.

Yeager: Did you see any positive news though that the cotton market didn't slide any further south, like it had been on that pace for a while this week?

Hueber: Of course, all markets at some point just run out of people wanting to, we've pushed it far enough, why keep beating a dead horse? When you find a bottom, of course bottoms never come because the news is bullish, you've become tired of trading the same old negative news. And we're probably reaching that point in cotton.

Yeager: Are we reaching that point in live cattle, negative news, too much of it?

Hueber: I don't know if I'd go that far. I think the cattle market is very indecisive at this point, I don't know if they really know which way to turn. I kind of tend to think that cattle, granted a lot of balls in the air here at this point in time, a lot of concern about what is going on with the avian flu and that type of thing, but I think the biggest concern here is people are still pushing back against what they're paying at the grocery stores at this point in time and I think beef is the one that could probably suffer the worst if we really start to see a cutback on what people are spending on groceries.

Yeager: But for the longest time, we're still buying nice cuts of meat.

Hueber: Oh absolutely, it's still a treat and of course it's still delicious to eat, so hard to turn away from that.

Yeager: Feeder cattle wise, we do have a question we'll get to in Market Plus about feeder cattle, but I'm going to ask you this one. Do you see this consolidation, is this a consolidation that we're seeing right now in the feeder market in the August contract?

Hueber: Feeders and fats both, I think they're both at a very indecisive point and looking for something new to come in from the outside. I wish I had a better feel for the cattle market right now. But, like I say, I think they are just in flux, they don't know which way to turn.

Yeager: I was asked a couple of times last weekend about cattle and I kind of looked at them and said, from what I'm hearing from the people that sit across from me, they think the top might be in for the near-term.

Hueber: Well, and I would say it's probably long-term, considering what we saw last year in the cattle market. Conversely, what the cattle enjoyed last year the hogs didn't and of course they have kind of come back around. And I kind of tend to think that the hogs could be the ones picking up the slack for the livestock industry this year.

Yeager: But the hogs were the slack this week.

Hueber: This week, but we'd had a pretty substantial rally over the last two to three months, so due for a corrective pullback. But right now, I don't think it's anything more than that. Just a correction, the normal seasonal trend up into the summer months I think is still with us.

Yeager: But was there any particular reason for hogs this week moving lower?

Hueber: Oh, I didn't see anything big within the numbers. So, again, I think it was probably just lack of new interest coming in. We need to retrace to some lower levels before we attract the buying interest once again.

Yeager: We're still kind of in that range. Is there any one of those three of the livestock we mentioned? I'm thinking you're saying hogs you think has the best outlook for the rest of '24?

Hueber: I would tend to say if I was going to be in a spread position it would be hogs against cattle, long hogs against short cattle.

Yeager: And the dollar, do you think that's done moving in the direction?

Hueber: Two weeks ago, it came back --

Yeager: 10 seconds, sorry.

Hueber: All right. Two weeks ago, the dollar actually had a big reversal to the downside. The last time we did that we spent about six, eight weeks moving lower. I think we could see something comparable, but not a disaster.

Yeager: Okay, thanks, Dan Hueber. Good to see you, appreciate your time.

Hueber: My pleasure, thank you much.

Yeager: That's Dan and we're going to pause this conversation with Dan and continue our discussion about these markets in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org. Being a member, or in this case being a subscriber, has privileges, especially when it comes to our content. You will be the first to know when we publish to YouTube when you ring the bell and allow notifications on any of our stories, podcasts or full program. Join the gathering at youtubelcom/markettomarket. Next week, the push for genetic diversity in livestock. Thank you so much for watching. Have a great week.

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.