Market Analysis with John Roach

Yeager: The post-USDA trading sessions following a tighter fundamental picture were higher and extended after a phone call between the president-elect and president Xi. 

For the week …

The nearby wheat contract improved 8 cents and the March corn contract added 14 cents. 

The attention of the trade shifted back to South America where Argentina and Brazil faced different weather patterns. 

The March soybean contract gained 9 cents while March meal dropped $1.10 per ton.

March cotton expanded 60 cents per hundredweight. 

Over in the dairy parlor, February Class Three milk futures declined 4 cents.

The livestock market was lower. February cattle dropped $2.03. March feeders cut $1.35 and the February lean hog contract declined $1.42. 

In the currency markets, the US dollar index subtracted 40 ticks. 

February crude oil found $2.01 per barrel. 

COMEX gold expanded $27.20 per ounce, and the Goldman Sachs Commodity Index moved higher by more than 21 points to settle at 576.95.

Joining us now is senior market analyst, John Roach.  Welcome, John.

John Roach: Thanks, Paul. Nice to be here.

Paul Yeager: Good to see you. I look at the wheat market and I'm sure everybody else does. And it's become so dependent on Russia. What just happens if Russia stops exporting wheat and putting wheat on the market in the world? Does it? Well it respond? Are we to that point yet?

John Roach: That's due to happen actually, because Russia is due to cease their exports here for a little bit. And what they've done up to this point is they've been very aggressive sellers, same way with Ukraine. and we've just seen a lot of wheat get moved into the world, and now it's about to shut off. And so I think wheat will have some recovery. And the commodity funds are still major shorts as of a week ago. I don't have today's report, but as of a week ago, they were short of 150,000 contracts across the three wheat contracts. in a market where everything else is going up and, and we're seeing inflation, and you saw by the index, the commodity index, were inflating. And so I think that the wheat market is getting ready for, for a run up here, but we've got to get up above the trend lines in order to stimulate that fund buying.

Paul Yeager: What the magic question is, what's that timeline? So if I'm a wheat producer, how long do I need to sit here on the sidelines?

John Roach: we frequently will see a move up during this time of the year coming into February. We look for market peaks in February most years.

Paul Yeager: Okay, so we're close I think.

John Roach: So I think we think the bottoming process here, is complete. And now I think we get ready to have a run to the upside.

Paul Yeager: As we turn our attention to corn. Last week, that was the big story kind of out of the report, phones ringing off the hook on Friday into Monday and Tuesday. And then we kind of lost a little bit of steam. Was that about how you expected that to play out, given what the report was last week?

John Roach: Actually, the corn market has performed better than I thought it would. We've moved into a long corn, prior to the report coming out, and then the market surged after the report and, and we added to sales. We think selling into this rally is the right thing to do. The fundamentals have tightened. That's what the USDA told us. but what we've done so far since harvest is we've actually maybe since mid-summer, as we've seen a big advance on the amount of buying that's happened in the, in the grain market, for the cash commodity. And we've seen a big advance in the buying from the commodity funds, commodity funds are now up into, massive long position markets still trending higher. So they're still going to be buyers. but it gets to a certain point when they sort of run out of ammunition to put into that market, and we're not very far away from that. So we've really had a double up of buying both the user and the in the spec fund. And if you remember the last time I was on, in the fall, we talked about look for the users to buy in a bigger away because they were starting with very bare cupboards.

Paul Yeager: Right.

John Roach: And, and so they've had to go from a bare cupboard to stockpiling, so we've really put a lot of demand into the corn market, and we think it makes sense for a farmer to be selling some corn out of the bin. And we think it makes sense to sell a little bit of new crop corn that you're going to harvest next fall.

Paul Yeager: The old crop story was kind of one that developed midweek. And you're kind of it sounds like you're saying this is a great opportunity everybody. Great opportunity to sell.

John Roach: We think that. Yeah.

Paul Yeager: And then the new crop side. How heavy are you thinking that this needs to lean into some selling right now.

John Roach: Not very heavy 5 to 10% conservative yields. the bushels that you're going to need to take the town, work on those bushels.

Paul Yeager: Do you see the corn market doing, or facing some of those that the wheat always faces the dollar pressure? Do you see any dollar pressure on the corn market right now?

John Roach: Well, at, some, but, but we're kind of the only market in town, right now in corn. So if you want to buy corn in the world, you kind of have to come to America's price.

Paul Yeager: All right. Do you also get the sense of, ten, 5% right where you were last week and said, after the report, it becomes national. We look to the acres story for the next few days. Where do you see acres right now in ‘25. Do you see corn expanding, declining, holding pat.

John Roach: We're going to increase the corn acres this upcoming year, and we're going to decrease them because the job of the marketplace right now is to get farmers to reduce their soybean acres because of the big crop that's occurring down in South America.

Paul Yeager: Phone calls. That was the big story in the soybean market Friday.

John Roach: Well, it's a hope. You know, what we've lived with here for a while is a fear that when the president comes in, that we're going to put some sort of, of a tariff on China and they'll retaliate by not buying our crops and, and now we're kind of feeling like, well, maybe I mean, the market is feeling like maybe, maybe there will be some other kind of deal here and that won't happen. We're all guessing, we don't know what, what the extent of those phone calls are, of course. but when you have a market that's trending higher, you have funds that are continuing to buy and farmers made around of sales. And the interesting thing about farmer sales is when a farmer makes a sale and then the market moves up afterwards, they hesitate because it's like, okay, this is maybe got more power. And I covered my bills and I don't like the price. And so and so farmer sales, dry up in this kind of environment. And that allows the buyers to carry the market forward.

Paul Yeager: Would you like to read my text messages from farmers this week who were telling me they sold and then the market went higher and they got frustrated, but they did what I think they're told if it rallies to a certain point, you got a sell and it keeps continuing. So if I'm hesitant to pull that trigger, why should I not be hesitant or be make just sell and don't wait?

John Roach: Well, I think you have to sell into strength. And I wouldn't sell all my bushels. I mean, I think you have to keep some powder dry for what might happen in the spring of the year. You know, we may have problems in this country, but what you can't do is fail to reward a rallying market when we have plentiful supplies. And so, take advantage and make some sales. the market pulls back. You can come reown some bushels if you want to participate further, but you've got to pay bills and you don't want to wait and have to pay a bill when the market's in a valley.

Paul Yeager: Speaking of turning our attention, we talked about, what could go on with China, what's going on in Brazil, what's going on in Argentina, and what is the impact here for our soybean market?

John Roach: Well, the crop they're starting to harvest in Brazil. And the crops, a pretty good crop. it's maybe not quite as big as what it looked like it was going to be. But it's still going to be a very big crop, and we're going to have plentiful supplies. And when we look at the ending stocks forecast for this year, it's smaller than what we had, you know, two weeks ago before the USDA report. But it's still big. And it's going to take a weather problem somewhere, in order to get us out of this burdensome supply situation. Now, that weather problem could occur still in Argentina, but Brazil is kind of getting to the point where even when once you start harvest, there's it takes a harvest is a long period there. And so there are some beans that are still can be impacted. But, every week we go along there crop is more made and harvested and competing with us in the world. And they will take over the marketplace. And so maybe Argentina weather could, could give us a tightening of supply or we could have a weather problem, the United States and that certainly could happen, but it won't happen until maybe April. So. So we've got a long period of time here where we're in harvest of the biggest soybean crop in the world.

Paul Yeager: Therefore not controlling the narrative like we have been. That's correct in the past. All right. I want to take a question, Phil, in Ontario, question on X. He's saying November 25th beans and December 25th corn futures aren't showing me much. Well, mid-June for corn in August or will mid June for corn and August rainfall for soybeans still give us our best new crop pricing opportunities?

Paul Yeager: Or is right now good?

John Roach: Well, right now is a good time to get started. Again, we're talking maybe five, maybe 10%. We're not going after that market heavily, but we're starting because we're dealing with a weather problem. We're dealing with a time when we're relatively tight supplies, when the United States is the only market because Brazil's crop wasn't quite ready. And so we reward that market. There's two growing seasons in the world. One is now and another one is as we get into May-June in the northern hemisphere. So we like to reward a rally when we get a sell signal in the midst of the South American growing season, and then average those prices with making sales during our growing season when we're in the midst of a weather worry period.

Paul Yeager: Speaking of rewarding a market, is that what cattle producers did this week on live cattle?

John Roach: Well, we certainly have seen high prices in the cattle market and, and we've seen cattle move. The cattle story is still a very positive story, though. There's not really a bad part of the cattle story right now. What we worry about is that black swan kind of event or something that comes along that changes everybody's attitude. But right now, the attitudes are very, very positive. And the only thing that we can see to do is that you want to make sure you pay attention to your insurance program, protect some of the equity that you have in those cattle for some of the profits that you have in the cattle. because we have seen those disappear before.

Paul Yeager: And that's also kind of the story. And feeder cattle, too. It sounds like, the advice that we're hearing is let's put some defense in place, if you haven't already.

John Roach: Well, exactly. We pay attention to the cattle crush, which says, what? What's, the opportunity to buy feeder cattle, buy, feed and sell fats? How does that look compared to ten years worth of history? And between now and June, it's a single digit. In other words, it's the it's the lowest 10% opportunity that we've had in the last ten years. So that just says that if you're putting feeder cattle in, you've got to be careful here because it's a risky situation. When I was here in October, it was in the 90 percentile buying feeder cattle and putting them on feed on paper. And now we're clear down in the single digits. So it's time to be very cautious if you're buying feeders or if you need to sell feeders, it's a pretty good time to take them to market.

Paul Yeager: Yeah, the feed. But feed needs the soy meal contract is kind of been kind of had a little whipsaw to it right now. Is that helpful to the hog producer?

John Roach: We have a buy signal right now in soybean meal. So we think it is time to be buying a meal and accumulate some feed cover 90 days worth or more. because again, we're down at bargain price levels. And so you have to take advantage of that.

Paul Yeager: What else do you see impacting, the hog market right now?

John Roach: Hog market is being helped by the cattle market and our and our, broiler numbers are the tonnage is down here since the beginning of the year. hog numbers are down compared to where they should be. so we're a little bit concerned about, the numbers of on of hogs coming to town. but with the beef market as strong as what it is and, and the broiler numbers down a little bit, the hog market's holding in here. Not too bad. we think that, you know, we're going to go back and forth in that market. Pork is a pretty cheap meat right now. in comparison.

Paul Yeager: Yeah. Protein in itself I mean the egg price again, that's still a story. And we'll talk about it a little bit in Market Plus, John.

John Roach: Thanks, Paul.

Paul Yeager: We are going to pause this analysis 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.

If you’ve missed an episode on your local public TV station, or want to watch one of our feature stories again … subscribe to our YouTube channel and be sure to click notifications. You will receive our feed with access to all of our programs, stories and podcasts.  

Watch early and often when you head to YouTube.com / Market to Market. 

Next week, making the farm transition to the next generation in a non-traditional way. 

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

Announcer: Market to Market is a production of Iowa PBS, which is solely responsible for its content.

Announcer: What's next doesn't happen by chance. It happens when researchers and farmers work together to solve tomorrow's agronomic challenges. We're committed to creating what's next because at Pioneer our name is our mission.

Announcer: For over 45 years, Steiner Tractor Parts has shared your love of antique tractors. New parts for old tractors. Learn more at Steinertractor.com or at (877) 559-7887.

Announcer: Tomorrow. For over 100 years. We've worked to help our customers be ready for tomorrow. Trust in tomorrow. Information is available from a Grinnell Mutual agent today.

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.