Market Analysis with Dan Hueber

Yeager: The Black Sea Region dominated the headlines and the trade for the week. The nearby wheat contract was even while the December corn contract added 15 cents. Outside markets and major weakness in the vegetable oils limited the soy complex. The January soybean contract improved a nickel December meal gained $6.30 per ton. December cotton decreased $1.22 per hundred weight. Over in the dairy parlor, December class III milk futures gained a penny. The livestock market was mostly lower as December cattle was even January. Feeders cut 92 cents and the December lean hog contract lost 65 cents. In the currency markets, the U.S. Dollar index dropped 129 ticks. December crude oil fell $6.53 per barrel. COMEX gold weakened $7.50 per ounce and the Goldman Sachs commodity index lost almost 19 points to finish at 616. 75. Joining us now to provide some insight, one of our old regulars, Dan Hueber. Hi Dan.

Hueber: Hello.

Yeager: Black Sea Region Instability. It seems like we've talked about this a lot. The wheat market this week specifically, it seemed to be very sensitive to do we have a deal, do we not on allowing these exports.

Hueber: True.

Yeager: How much longer will that story hang over this market globally?

Hueber: Well, I mean, until this war is finally settled or, uh, or, uh, there's some kind of a peace arrangement, it's always gonna hang over because it's, you know, we, we say one thing, we do another, but I mean, realistically, every time we get a news story now, the impact seems to be a little bit more muted. So I think, you know, we, we, we've grown accustomed to it enough than, you know, we know bushels are still moving. They're significantly less, and of course they would've been in any normal year. But, uh, but sure, I mean, I will get a little blips here and there. I mean, two weeks ago it was, well, we're gonna, we're gonna back outta the agreement. Well, we rallied for a day then pretty soon that was forgotten about. And, you know, here this week, well, we have a, we have an agreement, so markets broke a little bit, but then came back. So I can say I, I think they're really just kind of grown a little bit tired of, uh, getting whipsawed around by those kind of news stories.

Yeager: Domestically we're set for a whole bunch of snow in Buffalo.

Hueber: Mm-hmm.

Yeager: That's pretty far from wheat country,

Hueber: Certainly

Yeager: But it's cold and wheat country with no snow cover. That's why I bring up the, the snow.

Hueber: Oh, sure, sure.

Yeager: Are we more sensitive now domestically to the weather story?

Hueber: Well, you know, I think if we were a more of a dominant player in the world wheat market that would probably be a 'yes.' But we're not, I mean, we're, we're a bit player. I mean, we're residual supplier when need be. So it, uh, yes, we, we add into the overall world picture. But, uh, you know, Argentina's issues are probably just as critical as ours are this year. I mean, they've had a, uh, a really difficult beginning to the growing season. Their wheat crop is not looking too good down there. But it, uh, you know, overall, you know, Europe looks like it's getting off to a good start on winter. I think the, the, uh, French today rated their winter wheat planted and 98 percent good to excellent. So it's, uh, you know, it's, a lot of parts of the world are looking pretty good.

Yeager: Which wasn't the story last year.

Hueber: Oh, no. Right.

Yeager: It was very poor dry conditions. Uh, let's go to corn. Uh, that was the market that looked like it was going to have the best week, and it, and the numbers played out, um, uh, December corn up to percent, 15 cents. The harvest low in Dan.

Hueber: Uh, you know, I think temporary low. I mean it, uh, you know, not that it, uh, at some point down the road, we won't be able to go lower than this, but I think, you know, we have, we pushed down, we tested some pretty good support. Uh, you know, really if you went back to about Wednesday this week, it was kind of questionable, you know, looked like corn could even break down another 15 or 20 cents, was able to recuperate and then finish the week strong. So certainly, I think it says we probably have that, uh, that year end, that harvest low bounces back up maybe into December, possibly even to the January production reports. But you know, here again, too, I mean, it's just not a, uh, granted Mexico phenomenal buyer of corn the last week or so. But, uh, but that said, you know, we're not really being overrun with demand here at this time.

Yeager: Yeah. We're still behind on, uh, the, the trailing pace that USDA has said we're gonna have on export. So given that those two factors, Mexico and other export sales, what's a range you see, let's say in this March contract that you see moving forward?

Hueber: Well, you, you know, I think if we get 20 cents higher than we are today, you know, we've, we've probably maxed out what we're gonna do on, uh, we'll, how long

Yeager: Would that be before we to reset 20? 

Hueber: Oh, yeah. You know, you know, granted, as I had commented, even this morning on the newsletter, usually we talk about, you know, who gets the Thanksgiving Turkey, and, uh, you know, right now, who, who is it? You know what I mean? The markets have been so stagnant for months, but I would say probably by Christmas. Yeah. We should have those kind of rallies in there. Maybe, maybe we'll test it back and forth several times. I mean, that's realistically all we've done for the last two to three months is just trade back and forth and back and forth in the same range. So it, uh, I don't see anything in the news right now that takes us out of there.

Yeager: We'll discuss Turkey more in Market Plus. Yes. Uh, because I did have that question from your newsletter this morning I wanted to ask you about. Let's move to soybeans, uh, because we have, uh, China and Brazil instability politically especially Brazil on the presidential transition. We just saw the story about China. So my question is, I guess, again, as a global one, is that the biggest story right now in soybeans?

Hueber: Absolutely. I mean, we know China has been a substantial buyer in U.S. Beans as of late. Now granted, I think the big thing that's probably gonna keep the beans market supported for a while is they, they still probably need to price the majority of these beans, and they won't do that until they actually start loading it. But, you know, they are, they're gonna, they're gonna pick up the supplies they need from us probably through the end of the year as they assess what's happening in South America, most specifically in, uh, in Brazil. I mean, Argentina just had some challenges, although things are improving a little bit down there right now, if, uh, Brazil produces the type of crops that are projected to happen, you know, 151, 153 million metric tons of soybeans, you know, the demand's gonna go right back there. And we're, we're probably looking at a, uh, uh, a pretty dier outlook into next year on the soybean market. But, you know, there, there's your million dollar question. What will the Brazilian weather be for the next two months? Uh, right now, off to a decent start.

Yeager: So, so Scott in Augusta, Wisconsin, he already answered your question there. So I'm gonna follow up now, Dan, with a range question. Sure. What's this? Well, again, I'll use the deferred month that we talk about. These things are in a pretty tight range. We're about to see the range in the last four months really fall much tighter. What's the range moving forward for the next four months?

Hueber: Oh, I really think you, um, you know, I think, I think the range really stays the same. We've been $13.60, $13.70 on the downside to, uh, maybe a $14.30, $14.25 -30 on the upside. I think we stay within there. Uh, again, unless there is a, a major weather issue with materialized down there, I think that caps us on the upside.

Yeager: So the range stays home on the range, home in the range. Is that what it would be? Uh, let's talk about this cattle on feed report. Yes. We need to kind of dive into this one because there's a, there's a bigger story that's developing, uh, initially on feed, uh, 2 percent below - 98 percent. What's that tell you?

Hueber: Well, I mean, I, you know, one, I think the people are looking at the economics and saying, you know, it's, why, why risk the money here? At this point in time? We've had a, we've had a pretty good year up to this point. You know, probably the bigger number or the more friendly number was the placements. If I don't, if I recall, were 4 percent down. Is that right? Yeah. I mean, so, uh, uh, you know, looking out into the future, and you've already got a market that seems to be pretty tuned to, uh, reacting to the bullish news. I think that could be the catalyst that maybe gets us into, uh, some higher highs. Are we gonna get carried away to the upside, you know, with the, uh, with the, all the inflationary scare that's already out there with the talk of recession, yeah, I don't think people are gonna go wild on, on what they're doing at the meat counter, but that certainly doesn't mean we couldn't see February cattle work up into the $158, $159 range any time.

Yeager: To, to button up the placed, uh, placed in October, 94 percent on feed, 98 percent, marketed 101. Let's go to the, you, you mentioned the meat counter. We saw box beef have, uh, a little better week. There's this discussion of, I'm not buying the prime, I'm going down the line, going down the line. Do you see that?

Hueber: Well, you know, certainly I think people are, are, uh, they're gonna watch their Ps and Qs when it comes to what the money they spend. You know, you haven't really, um, you haven't seen people really pull back dramatically as you were, as you were viewed earlier. Retail sales still 1.3% better last month. You know, that said, those numbers have continued to, to slack a little bit each month. You know, they're not quite as strong as they were, you know, back in the middle of the summer. So, uh, so yeah, it's, the demand's not gonna go away. I mean, and, and again, the good thing is, you know, all meat, I shouldn't say good. The all meats are high priced, you know, compared to each other or compared to historical averages. So it's, uh, it's not like I can go to, you know, get these extreme bargains here or there unless somebody's running some kind of a feature to get you into the store to buy their other goodies. But it, uh...

Yeager: Well, that's the, that's the story in the retail picture. Walmart had a good third quarter because a bunch of their businesses become groceries. And people are going to Walmart to shop to save money on groceries, because food has gotten higher. Target, I believe, was off 52 percent year over year. Now last year, it's kind of how we started the show. Retail sales had been up because the retailers are pushing everybody to shop. So that's a little bit of a bloated factor, but bloated is one thing, inflation is another. Does the pressure of food weigh over this market more than the interest rate does?

Hueber: Oh, you know, it, you know, and granted, not that interest rates don't affect us in so many different categories, but, but yeah, I think food takes precedence over everything else. I mean, it's, uh, interest rate is part of the picture, but unless you're out borrowing money or, you know, if you have a ridiculous amount of credit card debt, which is, you know, interest rates are gonna hit you hard all the time, if that's the case to begin with. But, but sure. I mean, I think the, uh, the food price is gonna tend to make people, you know, be, be, uh, bargain shoppers and, and just like you say, you know, of course the target thing is, is interesting, and I think that's probably more a reflection of targets management, that they've not necessarily held their inventories as well as Walmart

Yeager: Well, Kohl's had the same problem. They had a, they they miscalculated on what they were going to buy, and we weren't buying what we had been.

Hueber: And what the consumers wanted at that point, so, correct.

Yeager: All right. So given that those over large picture, if I'm a producer at home looking to expand a cattle herd, knowing what I know could be coming, am I buying, trying to find some feeders right now?

Hueber: The, uh, you know, and again, I guess I probably wouldn't, uh, wouldn't go too heavy as far as the weights on there, but, but sure. I mean, I think it's, you know, if the economics are there, if you have the, the feed stuff's available to do it, why not? I mean, I think the moving into the first quarter of next year looks pretty respectable.

Yeager: All right. Hog market, uh, that was, uh, looks like the bulls are kind of hanging around there.

Hueber: You know, a similar situation there. I mean, we've, uh, you know, and granted, I think part of this is predicated on some hope that China is gonna be a, uh, a little stronger buyer or a pork out there, which may or may not be the case. We know, I mean, the hog industry has just been in flux over there between health issues and unprofitability and now shortages of, of meats. So chances are they will be a buyer in there. But boy, we have already pressed up to some, uh, pretty lofty levels in the deferred contracts. Not that we couldn't get higher, uh, not, not that we haven't traded higher than this before, but boy, very rarely. So it's, um, uh, you know, granted, the, the hog and pig report the last, we'll get another one here in December, but I mean, you know, the hog industry was not really expanding. So, I mean, keeping the numbers in checked, uh, keeps, keeps the outlook at least, uh, positive. But boy, to push a lot higher than we have already here, I think's gonna be difficult.

Yeager: Our outlook is, we have to say goodbye. Okay. Goodbye, Dan.

Hueber: All right. Very good.

Yeager: That's, uh, Dan Huber, and we're gonna put a pause on this analysis and we're gonna continue our discussion and answer more of your submitted questions at our Market Plus segment. Find that on our website of markettomarket.org. That's in Podcast Form and also on YouTube. All of these resources, by the way, are free. The easy season for great images is when there is work in the field for planting or harvest. Now is when we find out how creative our friends can be and then share their work with you. Plus we have content of our own available right now at Market to Market Show on Instagram. Give us a follow there. Next week, we will look at how food insecurity is still plaguing America. Thank you for watching. 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.

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