Market Analysis with Dan Hueber

Paul Yeager: Corn and wheat kept big selloffs at bay with some technical and export support. 

For the week… 

The nearby wheat contract lost a penny and the March corn contract fell a nickel. 

Trade talk and a change in palm oil purchases helped the soy complex while rain returned to the forecast in Argentina.  

The March soybean contract gained 4 cents while March meal fell $1.10 per ton.

March cotton contracted $1.25 per hundredweight. 

Over in the dairy parlor, March Class Three milk futures cut 65 cents.

The livestock market was mixed. April cattle declined 30 cents. March feeders added $1.20 and the April lean hog contract shed $4.92. 

In the currency markets, the US dollar index lost 5 ticks. 

April crude oil fell 24 cents per barrel. 

COMEX gold expanded $59.00 per ounce, and the Goldman Sachs Commodity Index added more than 8 points to settle at 571 - 20.

Joining us now is regular market analyst Dan Hueber. 

Welcome.

Dan Hueber: Hi there. How are you?

Paul Yeager: I'm well, I'm well, I'm well. And I was reading some of your commentary this week, and you said if we would have the weekly lower close on the big three, that would open up some things. Two of the three happened. What's that tell you?

Dan Hueber: The stagnation. You know I think we've enjoyed really a very nice rally in these markets for the last seven, eight weeks and really since the middle of December. And it's all things, you know, we we've adjusted for some, adjustments in, lower production numbers of the corn meal, specifically a little bit of kick back into band. And but here again, I mean, that's what the function of the market, we should adjust for those changes within this plan demand picture. And then you need something new to make it go any further. And I think we've probably kind of exhausted that story at this point.

Paul Yeager: Wheat had its own movement. Then corn kind of gave it a boost. Right? But we kind of ran out of, I mean, even with the cold snap. Right? Again, we don't know the damage of the U.S. story. What is the story then in wheat?

Dan Hueber: Well, of course in wheat when it comes to winter kill, nobody really knows until we of course get into the spring and summer months. You know, where you've got kind of a dichotomy going in the wheat right now is when you look domestically, there's certainly nothing bullish. You know, when ending stocks continue to grow, I think we're going to be the highest we've been in probably the last 6 or 6.5 years, somewhere in that neck of the woods. But then if you look over at the global stocks, global stocks continue to contract. So you've got kind of a push and pull situation there. So you know, if other problems do develop with some let's say winter kill in Russia Ukraine maybe even in some of the European nations, you know, then you might be able to build on that story a little bit. But I think at this point in time, until we see something more concrete, it's going to be difficult to extend prices above and beyond where they've been already.

Paul Yeager: If you haven't sold, did you miss your window in this cycle?

Dan Hueber: Well, I think we're still there. I mean, we really have not lost much ground on wheat or corn, either one, particularly if you look at new crop corn. you know, it's really at the highest level that it's even with a little bit of loss today, it's at the highest level. We've been here in months. So no, I think, you know, right now is an opportune time to take advantage of this rally.

Paul Yeager: So in the old crop corn story, then, for what? What is left? We had a March rally. That was interesting, but has since gone away. Do you think the Bulls have left the building?

Dan Hueber: Oh, they haven't left yet. You know, in fact, even on the commitment of traders reports, the managed money is still very heavily long in the corn market. Of course, that isn't necessarily just in the front months. But I think they're starting to make their way towards the exits. Even the spread activity this week was not particularly encouraging. When you have a new crop gaining over the old crop. I mean, that is not necessarily a good sign for continued rally. So. So yeah, they haven't started running in March for the door yet, but it, you know, unless they get something fed pretty rapidly, you know, there's not much not much reason for them to stick around at this point either.

Paul Yeager: You kind of talked about the new crop there just a minute ago, but I want to go back to the new crop corn here. We kind of had a technical target, kind of like an eight month. If you draw the line on the chart. What does that mean?

Dan Hueber: Well, yeah. You know, there's actually a number of targets that were hit here this week. when you look at some of the longer term charts in December, corn than just the December weekly, we made some good Retracements tested some highs of a year ago. So, it, as much as anything, you know, there are areas to watch. There's nothing magic that says we have to stop at those zones. But that said, you know, next week we're going to hear some acreage estimates. I mean, granted, they're going to be statistical estimates that are going to be generated by a computer. But I think for all intents and purposes, where most people feel we're going to see, extra corn acreage out there next year. So unless you can back that up with a weather issue, you know, higher acreage, with ample supply, you know, not a burdensome supply, but an ample supply of corn. Then how do you really justify taking prices higher?

Paul Yeager: Well, the CoBank said this week that, yeah, we're going to have more acres. We're going to have resilient prices. You've got USDA form, not an official report. It's more of a discussion of things. Correct. However, it's kind of a wink and a nod, right, of some things to happen? 

Dan Hueber: To a large extent. If you look over the last several years, it's really been pretty accurate. So I mean, there is a lot of good things can computers can do statistically. And this seems to be one of them. So it, you know, I think the numbers that come out next week probably. You're not they're going to be set in stone by any stretch of the imagination. We've got a lot of weather in front of us, but, you know, they're there. you can almost take them to the bank as well.

Paul Yeager: In the soybean pits, it has been a lot of technical signs because the fundamental news has been hard to come by.

Dan Hueber: Well, positive fundamental news is hard to come by. You know, there's fundamental news out there. Export sales. We did bounce back a little bit here this last week, but sales have really drifted off. We know the South American harvest is going to just continue to pick up pace. They're going to take a larger and larger share of the current business that's happening. Yes. The report that came out last week was that last week or here? You know, as far as the supply demand, it really, you know, you could say it was a little bit positive for the beans that the carryout was not as high as expected, but it's still growing each year. So it's just not as overwhelming as we once thought it was.

Paul Yeager: So walk me through the palm oil, soil, soy meal issues and how that's influencing this complex right now? 

Dan Hueber: Well, you know, and of course, palm oil did have the bright spot this week. And it did give our bean oil just a little bit of a bounce. Really did not do a great job of sustaining it. So I, you know, it's probably more just, you know, something new with a little bit of a flash in the pan. But of course, when it comes to the spreads, I mean, if we have a strong bean oil market, chances are you're going to offset that with some sales and meals or you've got meal really just kind of floating around your contract lows. So, and I think even in the oil market, you mean, like you say, 2 or 3 days ago, it really looked like we could have taken off, and it just kind of fell back into the same zone. So I think it's more of a stagnant market than anything that's really developing for a year. A big push to the upside at this point.

Paul Yeager: Well, what you just said stagnant, which means you print your reigning on my question before we get to it here, Dan in Nebraska wants to know, Dan, what is the outlook for the commodity super cycle for grains?

Dan Hueber: What a great name for me. We don't, I don't think we're when it comes to the major super cycle. And I'm assuming that's kind of what he's referring to. I think we're several years away from that yet, you know, it's years. 

Paul Yeager: Years? What has to change?

Dan Hueber: We're going to have to develop a major change in the entire fundamental picture. You know, right now, everything we have there, we've known for years, we know what the ethanol picture was and that the ethanol truly was the stimulus for the last major super cycle when it came to corn, you know, where's the next one coming from? We know that's a constant in the market here. At this point in time. We may have a little shift a year in, year out as far as how much corn is actually used for ethanol. But as a whole that's factored in there. We're not seeing any major changes in the livestock industry, so it's going to have to be something new. Or, you know, somehow or another, we're going to eliminate a major growing portion of around the world. And right now, I'm not sure where that would be either. You know, it's Argentina has their problems, but they aren't going away by any stretch of the imagination.

Paul Yeager: So I think the corporate term is we're going to put a pin in that, because I have some more follow ups that will get in the Market Plus. I need to move the livestock here as we wind down. Cattle on feed report came out today 102, 101 98. What do those numbers mean?

Dan Hueber: Really exactly what the trade was expecting, you know, and every single category. And plus, you know, you're looking at placements a little bit higher. I didn't really have a good look at the weight breakdown there, but I mean, that would tend to say we're going to have some more beef available for market down the road here. So it's, I think the big question in the livestock market, both cattle and hogs, at this point is can we sustain the demand? And, you know, each of enjoyed some very substantial nice rallies and are showing signs that, you know, we're, we're backing away from, wanting to eat quite as much of this product.

Paul Yeager: The cattle chart that's on now, that is a trend below that 193, off the 208. That was numbers we just haven't seen. Right. Are we going to get close to that number again. Above 200?

Dan Hueber: Above. Well you know not that we I think we'll see a rebound back towards that area to go, but to go back to the 200 level again, I think that might have been we said we set the precedent, we set the new record and we might not see that for sometime, for in the years ahead.

Paul Yeager: And would that be one of those, major fundamental changes would have to happen to change that market?

Dan Hueber: Well, you know, and of course, when it comes, you know, not that we don't use a fair amount of corn when it comes to feedlots and cattle, but I mean that, you know, grow up to picking the numbers back, you know, it's first going to impact primarily within grass. And of course, you'd have to see a lot of cattle come back, that, but, boy, you're talking about years and development to make that happen. So it's,

Paul Yeager: Well that, that market's been a year years long story.

Dan Hueber: Oh, certainly.

Paul Yeager: And the hog market has had its own story where it had enjoyed a run up. And then, is this reality or is this a pullback before we snap higher?

Dan Hueber: I think you've got some concern. You know, I think we're really seeing a breakdown yet necessarily in the exports, although they've been a little bit flaky since the beginning of the year, a little bit soft. but I think, you know, there's concerns about what the economy's going to do or concerns about a number of layoffs that we've, of course, been hearing about here in the last week and that continues to grow. And I think that the concerns on the, in both of these markets is can we continue to sustain the retail side of this at this point, you.

Paul Yeager: Know, yeah, the hog I mean, the hogs have been dealing with, you know, weaker domestic demand. There's been I think some, some longs have liquidated their positions.

Dan Hueber: Certainly, certainly, you know, starting to back away from those markets. So it, and, you know, all markets particularly have had a good year. We had about a 4 or 5 month run here at this point in time. So yes, we're going to stretch it out. We get a little bit too top heavy. We have to come back and kind of wash those markets out and see where we stand. But you know, to come back to the same levels that we just did, you know, we better find some really solid demand to make that happen. And I don't know where that's really going to come from at this time.

Paul Yeager: All right, Dan, good to see you.

Dan Hueber: Likewise. Thank you.

Paul Yeager: Thank you for the time and the insight.

Dan Hueber: My pleasure.

Paul Yeager: Thank you, Dan Huber everyone. 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.

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