Market Analysis with Sue Martin

Preparations for the holiday weekend may have taken steam out of big reversals in the trade. For the week, the nearby wheat contract added 24 cents and December corn gained a dime. More sales to China added optimism in the soy complex. The November soybean contract improved 27 cents while October meal strengthened $7.80 per ton. December cotton shrank 83 cents per hundredweight. Over in the dairy parlor, October Class Three milk futures added 62 cents. The livestock market was higher. October cattle improved $2.90. October feeders put on $3.37. And the October lean hog contract expanded $1.68. In the currency markets, the US dollar index added 143 ticks. October crude oil fell $1.18 per barrel. COMEX gold lost $11.50 per ounce. And the Goldman Sachs Commodity Index increased almost 7 points to settle at 537 even.

Yeager: Joining us now is regular Market Analyst Sue Martin. Sue, the reason I said what I said at the beginning of running out of steam, this is one of those weeks you didn't want to end if you wanted to see markets go higher.

Martin: That's right.

Yeager: Why is it that wheat has all of a sudden turned on a dime, maybe posted a key reversal? What's the big driver?

Martin: Well, I think first off, you look around the world and global supplies are tightening. You've had bad weather. In fact, they're fearing that the Argentine wheat crop is going to end up taking a pretty decent setback because the weather hasn't been ideal for them and they've had freezes. And then you look at Ukraine and production is down there and of course exports are down as well because of the fact that they've had the hot, dry weather. Russia unfortunately has had a little bit of everything. They've had -- to the Siberian side they've had way too much heavy rain and they're trying to harvest. And quality issues, that crop is dropping. And then the winter wheat was hit with drought and so their production is down. So, you look at Australia and they might have a few places that are struggling a little bit but basically, they'll be okay. So, you look around the world of production and basically wheat is downsizing pretty decently.

Yeager: So how long does this window last that we have to maybe make some sales if we have these troubled spots around the globe?

Martin: Well, for one thing in wheat you seasonally will tend to rally in September anyway. So, I think wheat has got a chance to still try to push further. We might make it up over $5.80 and possibly if it's good enough we can push a little harder than that. You've got Egypt coming back into the market. They're after that 3.8 million metric tons. The president is worried about the fact that they've got food shortages and I think they're building reserves. I think they're trying to get prepared because of the fact that bread over the past few months has gone up 20 cents a loaf and that is something that is a major staple in their country. So, I think it's just you look around the world, you look at wheat, it's a major food staple and I think with supplies going down and demand up that sets the stage here for this market to at least follow a very nice seasonal.

Yeager: If there were traders who took Friday afternoon off, the technical bots are going to look at a close of 4 as what? Is that opening the door to higher prices?

Martin: For?

Yeager: December corn, sorry.

Martin: Yes. I want to tie wheat with corn for a minute. Both of them on a weekly chart have Elliot wave and anyone who follows Elliot waves will understand what this means. But they both have a small Elliot wave 5 under this week's lows and a large 5. Corn has two of them, two large 5s side by side. 5s are what puts bottoms in. And so, I think both of them have that. We've gotten that deferred pricing contracts covered by the elevators and commercials. And we've got the market looking at -- beans do this too -- seasonally try to have a pre-harvest rally. And that pre-harvest rally can sometimes last into September 8th, 9th, 10th, 12th, right in through there.

Yeager: You don't think the markets knew that you were coming and they went bullish?

Martin: That would sure be sweet, wouldn't it?

Yeager: Wouldn't it though? Let's go long-term then. Let's look at this harvest. We talked about December already, but deferred months, do you see that I think Naomi Blohm said this week eight of ten of our harvest lows sometimes appear in September -- I've never seen one before September 1 -- did we maybe already stick that harvest low?

Martin: I have seen some in August. Beans especially will do an August low. I think when I look at the corn I could see where we could try -- and I know everybody wants to tie this back to insurance, that they want to rally the price of corn through October -- but when I have these 5s underneath me I think we priced in what was going to be a large crop and now with this ending of August weather it wasn't what we needed to end and I think the crop size is coming down. Another thing you have is in the Eastern Corn Belt there's reports of tar spot and also southern rust. And those are very detrimental to a corn crop. They can really drop your yields fast. And my understanding is the state of Indiana is one that is really at risk. And so, I think just all of this we priced in with the Pro Farmer Tour, the yields and what have you, and I think now the market is looking at something different. And I think another thing we have to remember, we have funds that have been short all year, they've had a wonderful year, and they are record short beans, corn and wheat. So, to have a rally, a short covering rally here, I think isn't out of line at all.

Yeager: Real quick, are we selling right now or are we holding for a little higher on corn?

Martin: I'm holding for higher.

Yeager: Okay. Beans, are we moving technically or fundamentally right now? We were at the 20-day moving average, which is usually a technical open door for higher prices, which is driving it most?

Martin: I think there's fundamentals here driving it, but there was also some technical. On a price projection it's called the rule of seven. We had a price objective on the downside of November beans at $9.53 and a quarter. The market got to $9.55 pretty close and now we've turned and we're responding to that. I should throw in a wave 4 on corn is $3.53 and a quarter. So just an FYI on that and that is base Dec. But the thing is in the beans I think we're finally waking up and starting to want to pay attention to Brazilian weather. Brazil's weather is horrific. It hasn't changed at all this whole season or whole year almost. They are still hot and dry in the center and center west and very hot and dry in the north. Now normally this time of the year they can be dry, but this is even accentuated and worse than almost worst on record. It's just horrible. And as we ended the week, they were looking at temps that could be 102 to 107 on Friday. So, I think we're paying attention to that because the Brazilian farmer is now looking at planting soybeans.

Yeager: And later than normal, right? Isn't that -- so that would also throw off some timing too.

Martin: Well, he will be later than normal probably because normally they weren't supposed to plant before -- I think it was in 2015 they made that rule that you're not to plant before the 15th of September because of Asian rust. Well, the now recently here they have raised that to at first, I had heard September 1st but it's September 5th they can start planting. However, farmers are struggling a lot in Brazil, just like in the U.S., and so they're probably not going to risk planting without moisture. So, they're going to wait and it's going to shove that crop out further. And the monsoon season I think starts in October. So, they'll probably wait and so that means later beans going in means later for the safrinha corn getting planted too.

Yeager: I want a question here, keep beans and corn in your mind for this one, and it came from Katya in Illinois. Would you rather store with the interest rates or sell off the combine with the hedge right now, given everything you've just said about corn and beans?

Martin: I would say store. The problem you've got is these carrying charge markets. The Sept-Dec got out to 80% of carry. So that spread got pretty wide. Now it has narrowed quite a bit here and I think we're around 22 cents or so here on Friday's close. But the thing is, I think you're going to get a chance to market as we go into 2025. I went back and out of curiosity I thought I'm going to look at what years of a five look like. And I looked at corn and I've got to tell you, years of five on a corn, first off, I'll tell you, I would say nine out of ten, actually eight out of ten it was a December low for the year and one year was November and then there was an outlier year of 1995 where your low came in January and you rallied the whole year. Well, that's going to take something pretty special I think going forward. And then on beans the one thing I noticed, yes, they tended to put their lows in sooner than corn, but I noticed that their highs were earlier, like it could be February, March, April, more times than not early.

Yeager: Okay, I need to get to livestock in two minutes. Real quick, live cattle, we had oversold signals early, then all of a sudden, we had a rally, then we had the end of the week. Are we done? Have we topped for now?

Martin: Well, I think one thing we've done here with the cash market to the futures is we're taking from an inverted basis and going to a normal basis where the futures are premium to the cash. I think we're doing that. And we're pretty close to it if we haven't already got it done at the end of this week. I also think than when I look at the product I think after Labor Day here I could see the choice especially in decline for a chunk of September. I think we're seeing a shift away from ground beef that is moving over and looking towards pork, ground pork. And I think that is one of the reasons the hog market has kind of found a little footing here. But the cattle market, one thing I've noticed is when I look at the chart on feeder cattle, I don't want to be short here for a little bit. I think that market is going to give us something.

Yeager: Wow, that's a little contrarian thoughts there. So, let's go to hogs then. You talked about feeders. Hogs have finally put a couple of weeks together. Is it because of what you just said with people looking at that market or is there something else?

Martin: I think there was more than the shift of demand for meat. I think it was also the fact that when the August went off the board, the October was $17 discount. And I think rather than selling into that, I think shorts covered, some might have bought it because of expecting a little bit better alignment. And I think we're in the process of doing that. I will also say an Elliot wave we're looking on October cattle, or hogs I mean, at a small c and a large 4. So that is something you don't buy into.

Yeager: Okay. All right, Sue. I've got to pause you right there but we'll keep going, okay?

Martin: Oh, I can't wait.

Yeager: I know. We've got lots for you, Sue. Sue Martin, thank you. We're going to pause that Analysis and continue our discussion about the markets in our Market Plus segment. You can find both Analysis and Plus on our website of markettomarket.org. We have something new for you. It's called the Market Insiders Newsletter. We will start each week with an email filled with behind the scenes information on the program, the stories around the tapings of the show, and what's ahead. Stay in the know and sign up at markettomarket.org. Next week, we'll start our series of lookbacks at the first 50 seasons of this program. We do want to thank you for watching and please 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.