Market Analysis with Jeff French

Paul Yeager:  Better weather allowed for spring field work to be in high gear as a lack of moisture added to the picture.

For the shortened trading week… 

The nearby wheat contract lost 7 cents and the May corn contract cut 8 cents. 

Soybeans were helped by the weaker dollar and improving crude oil prices.  

The May soybean contract fell 6 cents while May meal declined $4 per ton.

May cotton expanded 48 cents per hundredweight. 

Over in the dairy parlor, May Class Three milk futures added $1.04.

The livestock market was higher. June cattle improved $7.28. May feeders put on $8.15 and the June lean hog contract increased $4.70. 

In the currency markets, the US dollar index weakened 82 ticks. 

May crude oil gained $2.79 per barrel. 

COMEX gold strengthened $76.50 per ounce, and the Goldman Sachs Commodity Index expanded by almost 20 points to settle at 538 - 45.

Joining us now is regular market analyst Jeff French. 

Welcome.

Jeff French: How we doing, Paul?

Paul Yeager: Well, I'm okay. If I'm in the Plains right now looking at the weather forecast. Still dry, still hot. Is that a factor now in this trade?

Jeff French: On the wheat?

Paul Yeager: Looking at wheat.

Jeff French: It's going to be soon. I mean, we're getting into, the season where it's very important and Kansas remains awfully dry. They've been dry for a long time, but it's wheat and wheat can come back from that. So if they don't get any moisture or reduced moisture here in the next month, the wheat’s got a story. But if you look at the action in the wheat, I mean, it just can't get anything going. And you look at the three year low at the U.S. dollar, you would have thought we would have been a little stronger. But I think you're seeing a kind of an inter commodity spread here. We had a nice rally in corn and beans here the last couple of weeks. They've used the wheat as that short leg. but anytime the wheat gets going, it just gets undercut by the Black Sea. I mean, they continue to undercut the world values.

Paul Yeager: So still, the story that it's been that for several years, it's still the Black Sea story. Are there new buyers on the market with these trade challenges? I mean, everybody seems to be sourcing things differently. Has that come to the wheat pits yet?

Jeff French: It hasn't, but potentially. I mean, we're expecting they're they've they've, you know, hinted that there could be some deals announced here as early as next week with Japan and the European Union. So we'll have to see. But yeah, potentially. And I think that's what the market is. The market this week was kind of in a pause mode. You know, we had a lot of volatility the last couple weeks. This week was definitely kind of a breather. Sit back. And producers were in the field. So that reduced the volatility as well.

Paul Yeager: So if you're a producer are you sitting back and waiting right now?

Jeff French: You know I'm not selling wheat down here. we'll put it on some protection on paper. But I just think this wheat, it looks like it's found a bottom. and with what potentially could happen and the weather, I would not be selling wheat out here.

Paul Yeager: So in corn, weather is quickly becoming a story for opposite reasons, right? Eastern Corn Belt. Supposed to get a lot of rain this weekend. Western Corn Belt still supposed to be dry. Rain was very isolated Thursday night in Iowa, across to Illinois. Where's the weather? When does the weather story become a story?

Jeff French: You know, I think the rain right now probably leans a little negative. I mean, rain right now. You know, helps us. I mean, the soil needs a little recharge. I think if you get, if you continue this wetness in the next month, it becomes a story. But I think the rain right now, and especially next week, the market will take that as beneficial.

Paul Yeager: Also muted movement this week in corn. Why?

Jeff French: Well, it had a big move. It was up 10 out of the last, or, 8 or 10 out of 11 days. The last two weeks. that was a big move. And then you had areas, especially along the river. You had some of those July contracts that were paying $5 cash corn. So I think you've seen a good rally. Producers tend to reward good rallies. I mean, we are taking advantage of it. $5 corn from where we were at, looks awfully good.

Paul Yeager: Let's talk about December corn. If we could, Phil. There's the December corn contract. Let's talk about Phil's question. If we could year from Ontario. And he wants to know, is there any scenario where December corn reaches $5 in 2025, or is it more or less plausible than beans in the teens?

Jeff French: Oh, there's a scenario. I mean, we're not, we're not that far away. I mean, it feels like we're far, but, you know, we're going into the growing season. and, you know, you go back to 2020, the intentions in 2020 were for 97 million acres of corn. Okay. We planted 92 million acres of corn. So let's see what happens here during the next month. Doing it actually 95 million acres in like we intended to? We'll have to see. But yeah, you reduce that that corn, acreage planted to 92 million acres and then you throw some weather into it. We could be over $5 very easily.

Paul Yeager: Okay, quite the scenario there. So let's say if I take old crop out of this, new crop, am I doing any positions here starting next week?

Jeff French: Well, I think you got to put some targets in place. I mean, we've come $0.35 off the lows. You know, we're not looking to commit bushels right now in the physical market, but we'll put some positions on paper right now. but I think you got to have targets in every $0.20, $0.25, you know, stepped up you know, because we got big resistance up here at 480. And if we do get the acres in the ground, I mean, there is a bear scenario down the road, down the road.

Paul Yeager: You know, where corn's planted. You know, some is planted, but there's this shift to plant some places beans before corn. So does that change the scenario of which market is more impacted by whether corn or soybeans early in the growing season?

Jeff French: Yeah, I think it is. I mean, you're right. I mean, the last five, ten years, it seems like everybody is switching to planting beans earlier. Now, this year we actually did corn, first. but yeah, I think it effects the bean market right now a little bit more with the wetness. But again, you know, we're sitting here, it's April 18th. It's awfully early still. You know, talk to me here in the next month and see. Well see where we're at.

Paul Yeager: Well let's talk about beans then. Because that $10 mark was, we didn't think we'd get back over it. and here we are now, a couple of weeks above it. Are we here to stay?

Jeff French: Well, I mean, the beans are interesting. As soon as China announced tariffs, I mean, beans. What did they do instantly? Rally $0.75. You know, the uncertainty in the market is really what scares these markets. And once we kind of had some certain things that were known with tariffs coming from China and nobody else, that's when we saw the market take off. So you know, you look at a bean chart I mean July up here at 1050 it's had a big rally. We've got through 1050. But we didn't stay above it very long. but also I just don't think there's too many old crop beans left in the producers hands. I think it's in the commercials. And so that's really when we can see it move higher. But, you know, the beans have a story here with 80 to 83 million acres. you throw a hot and dry August, you know, this bean crop, if it has any reduction in yield. I mean, there could be definitely a story there.

Paul Yeager: But the story wasn't a story for the longest time. People who sat in your chair for weeks would say, beans. Don't look how I don't know. It's not profitable. It's not anything. Again there's that. I've already made my planting acre decision, but is there still a few people out there who might pull the trigger and plant beans

Paul Yeager: instead of corn?

Jeff French: Possibly. But I think Mother Nature would have to dictate that. And it's just too early right now, for that scenario. So maybe in the next 30 days we get late into May, we could see some maker switch.

Paul Yeager: Okay. November. on that, deferred on that, again, is this one of those that you have targets on paper that you need to put on to protect yourself?

Jeff French: Well, I mean, you know, to break even, most producers need about $11 cash beans right now. So, you know, you have 1030 on the board. Mine is the basis. It's, you know, cash beans right now, probably 980 in most areas. So, I think we're going to be patient here for the time being. put some protection on paper. But we'll wait till the growing season and see what happens here this summer.

Paul Yeager: You want to put any water on? The rumor of China is now going to Brazil, and Brazil might run out of beans. Is there anything to that story that we need to watch?

Jeff French: Potentially? I mean, they had an excellent bean crop, but I mean, this is the time of the year where China is buying from Brazil. Anyways. So let's see what happens. I mean, there's going to be negotiations. You know, we've had a trade where, you know, for 40 years, the U.S. just finally decided to join the battle. So let's see what happens with these negotiations and hopefully they get some work down here.

Paul Yeager: Are we caught in trade at all with livestock, specifically cattle?

Jeff French: You know, I think the trade war benefits the cattle. I mean, if we're not bringing in beef or the actual feeder cattle from Mexico or Canada, that helps our domestic price. So, the cattle look good. I mean, that, you know, 210 to 12 cash prices. The cattle on feed report came out Thursday afternoon. You know, maybe a slightly a little bearish just because the 105% places. But the numbers are going to remain tight. And we're entering May and June is probably some of our tightest time frame of this year. but you look at the general economy, I just think, these prices are awfully expensive. you know, I just, I think the downside protection here in the livestock, all proteins is a must right now.

Paul Yeager: The retail side of this has been talked about by consumers either when it's pressured with a job or with high prices. It looks like now both of those factors at some point where does that, what's a signal that that is converging on livestock?

Jeff French: Yeah I mean box beef up here at 340. I mean, you're absolutely right. We were talking, you know, before the show, beef is noticeably higher. the lot that in the last couple of weeks, but, you know, when does that happen? You know, I think it's kind of a slow rolling, and we'll just have to see. But yeah, you look at the general economy, you look at car sales and home sales. I mean, those are at or near or below, you know, 2008 recession level. So, the economy feels like it's kind of slowing here, no question about it.

Paul Yeager: And when that happens, what does live cattle do? What does the box beef the cattle market normally do?

Jeff French: Oh, it moves lower. I mean, the consumer will go to cheaper protein alternatives and there much cheaper. You know you got obviously the pork but poultry right now is awfully cheap.

Paul Yeager: Well yeah. Let's look at feeders. You mentioned, 98% on feed,  105 placed, 101 fed cattle marketed. What one of those, you kind of hinted a little bit of those. Which one stood out to you the most?

Jeff French: It was the placements. Yeah. it came over about 2.5% more than expected. But we're coming off a month where the placements were down in the 80%. So, you know, simply the tightness is going to continue. It's going to be what the consumer demand does.

Paul Yeager: And technically, that chart has not held with history in this whole run up, Right? This is more of a fundamentally driven story for feeders.

Jeff French: Absolutely. And it's been a story that's been going on for the last ten years. I mean, this cattle herd is small and it's producers getting out of the business, but also Mother Nature, the southwest of this country has been dry for the last decade.

Paul Yeager: Heck of a run up in hogs this week, too.

Jeff French: Seven days higher in a row. I think you got to take advantage of it. I mean, you have June right here, right at the 100 day moving average, right below 9970, right below $100. That's big time resistance. I can't stress that enough to get some downside protection here on the hog.

Paul Yeager: Is that because you see it as a trade story or a supply story or something else?

Jeff French: I think this is correct, it was a corrective bounce. I just think, you know, again, it was kind of like the beans, once we, once the hog market knew what China was going to do, we had that relief rally seven days higher in a row. You don't see that very often. Get some protection in place.

Paul Yeager: All right. Let's look at crude oil for a minute. And the dollar, because those are two other factors that are always at play. You mentioned the heck of a run down in the dollar, which usually is good for commodities. But crude oil now has bounced back. Which one of those two factors is the biggest story we need to be paying attention to?

Jeff French: Well, I think, you know, depending on, you know, from your input side, you know, obviously we want cheaper diesel, so that's good to see. But, you know, you have this dollar now below. You know, it close it, I think 99.19 for the week here. you know, from a chart standpoint, this thing looks like it could go down to 92. Time will tell. But I think the main indicator will be is how long this trade war with China continues. But, yeah, it's good to see that diesel prices have come down. and I think this dollar could potentially work lower.

Paul Yeager: All right. Good to see you, Jeff. Thank you.

Jeff French: Paul, thanks for having me. And Happy Easter.

Paul Yeager: Happy Easter to you as well. That’s Jeff French everyone, and I want to say that we're going to pause this analysis, but we're going to keep going and discuss these markets. In our Market Plus segment, you can find both analysis and plus on our website of markettomarket.org. Subscribing has benefits and that includes our YouTube channel.

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Next week, navigating changes in labor policy.

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

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