Market Analysis with Sue Martin

Paul Yeager:  The market had been taking the stairs up the last few weeks. This week, the elevator down was the trend. 

For the week… 

The nearby wheat contract lost 8% or 48 cents and the May corn contract dropped 36 cents. 

Tariff negotiations, sympathy moves and limited buying played out in the soy complex. 

The May soybean contract fell 32 cents while May meal declined $3.70 per ton.

May cotton contracted $2 per hundredweight. 

Over in the dairy parlor, April Class Three milk futures cut 41 cents.

The livestock market was mixed. April cattle decreased $1.30. April feeders added $7.07 and the April lean hog contract shed $4. 

In the currency markets, the US dollar index added 105 ticks. 

April crude oil fell 62 cents per barrel. 

COMEX gold lost $99.80 per ounce, and the Goldman Sachs Commodity Index subtracted more than 16 points to settle at 555 - even.

Joining us now is regular market analyst Sue Martin. 

Welcome.

Sue Martin: Hi there.

Paul Yeager: Well, high is a term that we don't have anything high. We have big losses in a lot of places tonight. Let's start with wheat. Which lost 8%. That's significant. Some of this was sympathy to corn. What else was it?

Sue Martin: Well, I think the, ag outlook forum was nothing but bearish on wheat with their numbers. Stocks as a percent of usage increased up to 41.2%. That seems rather big. And, you know, the carryout goes higher. And, I think that what we have here is a market that first off, we responded not only to sympathy with corn and the ag outlook forum, but also the fact that, you have, weather in Argentina, some catching rain, but their wheat production was pretty decent. You have Australia catching rain in some dry areas. So that was affecting the market. And then you have Russia, which right now is looking like some of them are the analysts are starting to inch up ever so little. So in their production. So just basically that was about it. And if you don't have something seasonally, wheat will try to pull back and then make another step forward. Also, you're catching rain and moisture in the Western Corn Belt and, and then of course rain in the south, on wheat as well. So, you know, right now it's a little too early to know what winter kill damage we really had.

Paul Yeager: Well, so you don't think we know? Because that was I think some of the discussion early in the week was, it wasn't as bad.

Sue Martin: Well, they don't really know. You know, the thing about wheat is it's kind of like viewed as a weed or a cat with nine lives. But this year, those temperatures polar vortex temperatures that covered soft red. Hard red. They were vicious. And they didn't just last for a few hours. They were there for days. And I have a feeling we're going to find out that when that crop comes out of dormancy, even though I'm being optimistic, I think we're going to find out that crops maybe not as good as they thought.

Paul Yeager: This is the word I'm going to use in a couple of these discussions. Is this market, though oversold?

Sue Martin: It's getting there. I think it could still do a little more if it so wishes. You know, we rallied and had a nice rally high here in February, and then we've given that up and we've closed lower for the month, I believe. So, I would say especially for the week, but, I don't think the rally is done, but I think it's going to take some time to get us set up to resubmit another leg up.

Paul Yeager: In corn, we have some factors that overlap, but that number from USDA really seemed to put the market on its ear. What changes the story now for corn?

Sue Martin: Well, first off, you know, part of the talk was, well, we're rallying because of inflation. We're going to have inflation. And they were looking at corn and thinking that, you know, what the USDA came out with was actually a game changer back in January. Well, we rallied $1.44. I’m going to cough here in a minute. We rallied $1.44 and I went back and there's including this year's rally would be 12 years since 1974. We've had three years where we went from an, you know, like a spike high down, put in our low and ultimately, which could take a year or 2 or 3 and then lift. And the best rally we had was, actually a $1.63 for a lead contract. Then it was $1.60 this year, $1.44. So we came in number three since 1974. So, you know, that's pushing the envelope pretty good. And when you've done that kind of a move, so quickly, you have to expect that you're going to run somewhere into some tough resistance. You had funds heavy long they it was interesting. I don't know on Friday here what they, did for the past week, if we showed that they reduced their position because a week ago they had increased their position after a week before that decreasing.

Sue Martin: So, you know, that helped put some of the pressure on the market too, as they started getting out. Another thing that I have heard is, some incentive of, producers looking at first off, we've got over 80% of the crop sold of old crop, and I'm not sure what the percentage would be on new crop, but I suspect this will be a year that before we get to the 4th of July or mid-July, I’ll bet we have a chunk of new crop corn sold.

Paul Yeager: Well, so there's a question about old crop, because I get to the new crop in a minute. But so I need to ask, Bradley in Nebraska's question of you, because he said March corn futures declined $0.30 as farmers were forced to price March basis contracts or roll them for $0.15 less. Will the market rebound in the next 30 days, or has the trend become a down one?

Sue Martin: Well, I think for now, the uptrend is has turned into a downtrend. And I think that, you know, looking at those years where we've had $1.60, $1.63, this one third largest since 1974 after a spike high. And then the correction be it last two years three years and then you get the reprieve. This one $1.44 from the very low for a late contract. I think that we haven't seen our low because we did a higher high here in February and closed the month lower. So I look for us to probably go down around 450 to 444, which is kind of where the ceiling was, that I was thinking we would have trouble at and then after that report, it just kicked on forward.

Paul Yeager: In beans, I used the word oversold earlier. Are we oversold yet in the soybean market?

Sue Martin: Not totally. We're getting there. I'm more friendly towards the soybean market. You know, the ag form or ag outlook, forum, came out and they showed us stocks to use ratio of 7.2%, a carry out of 320 million bushels for potential for new crop. That tells you we don't have a lot of room for error here. And I think what we're looking at is a spring that is, you know, that late Easter, late spring, kind of an old saying, March comes in like a lamb goes out like a lion. I think we've had four years of very nice early, easy planting springs. I think this one's going to be a whole lot different. Now, granted, last year, southwestern, Minnesota, northwestern Iowa had flooding and everything. But I think when we look at the bean market, Argentina, 30% of their soybean crops been hit with horrible flooding and heavy, heavy rain. That's not good for soybeans. Those rains were too late for the corn. And then you look at Brazil and center and southern Brazil are going very hot and dry. Granted, that's going to help them get their harvest done and also allow for the planting of the safrina. But we have to see the La Nina come to an end, and if it doesn't, just as fast as we think, they may have some issues too. Maybe not so much in beans just right away, but I think we've got potential for the bean market here.

Paul Yeager: Tariff is hanging over commodities, but it's also hanging over the live cattle market. Is this going to be a long tail of impact on cattle?

Sue Martin: Well, cattle made higher highs here in January and then the feeders especially. And then they fell back came back up. But you made lows here in, February and you closed the month lower. For me that means and I even think, the feeders came up and almost double top today with their highs and then came back and closed lower for the month. I think what we're looking at is a market that, usually when you have a market that makes a lower monthly close in February for cattle, you tend to push that forward into March. Sometimes it can move into early April. Another thing that with the demand for beef, you know, seasonally, of course, we soft through the month of February. That's a seasonal. But the one thing that concerns me is, is that when we look at the cattle market and the demand, you know, ground beef really helped carry us where we got. And of course, ground beef has broken 21% in value. But I'm wondering if this late Easter, you know, Lent starts on Wednesday of this week, and I'm wondering if that kind of comes into play with some of this demand.

Paul Yeager: And that and that impacts the hog market usually. But we also had China enter back into the at least talk about hogs. What else is influencing it.

Sue Martin: In the hog market?

Paul Yeager: In the hog market.

Sue Martin: Well, for one thing, again, that ag outlook forum predicted 3% more production or production of pork this coming year, this year we're in. I think that's ambitious. Unless we're feeding hogs heavier like cattle. Also, the efficiency for the sows and pigs per litter, which has been very efficient. I almost think that's a little too ambitious, but time will tell, because I don't agree with the USDA and what their numbers are, and we've got disease.

Paul Yeager: We'll cover that in market plus. Thank you, Sue.

Sue Martin: You bet.

Paul Yeager: Alright, Sue Martin 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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