Market Analysis with Sue Martin

Expanding drought conditions in the Southern Plains while any glow in last week’s USDA reports faded in double-sided trading. For the holiday-shortened trade week, the nearby wheat contract dropped 17 cents, while the May corn contract sold off 17 cents. The post-report rally retreated as the size of the Brazilian crop came a little bit more into focus. The May soybean contract fell 13 cents, while the May meal contract lost $11.70 per ton. May cotton expanded 42 cents per hundredweight. Over in the dairy parlor, May Class three milk futures dropped 48 cents. The livestock market was mixed as June cattle improved 97 cents. May feeders added 15 cents. And the June lean hog contract cut $3.45. In the currency markets, the US dollar index lost 67 ticks. May crude oil added $5.19 per barrel. COMEX gold went up by $37.60 per ounce. And the Goldman Sachs Commodity Index gained almost 16 points to settle at 586.75.

Yeager: Joining us now is regular market analyst Sue Martin. Hey, Sue.

Martin: Hi there.

Yeager: This week you were writing a lot about the weather, specifically the wind. You saw just a few minutes ago on the program the drought conditions, specifically Kansas, Oklahoma, Texas. When is the weather market impacting the U.S. trade on wheat? Or has that already been factored into this trade?

Martin: I think that's been pretty much factored in. I think for wheat the weather that is going to affect it is more the colder temps, which we noticed KC wheat on Thursday was higher. And I think that helped instill that rally in the KC wheat versus the Chicago wheat, which weather there is turning drier which it so needs. But I think as we go forward temperatures are going to heat back up. But I think the Southern Plains might catch some showers, might be thunderstorm type activity. But I'm looking for a very warm shift in the weather that encompasses much of the Midwest on into the Eastern Corn Belt and all of a sudden maybe we have probably the second fastest planting season that we've seen.

Yeager: Well, we are expected, at least here, to warm up, go from the 40s to the 80s in about four days. What does that mean for the trade if we all of a sudden warm up and get this into the ground? Because we have a couple of questions about delays, delays, is that impacting us? Is that why the market maybe reacted a little lower this week because it saw the forecast?

Martin: I think so. I think the forecast had part of it. The market had had a nice rally, like a V bottom in beans and corn with a head and shoulders bottom. So, I think that was part of the reason our high was hit on Monday and we broke all week and we closed the week lower. Coming into next week we might start off on Sunday night maybe a little bit softer and trade both sides and maybe try to bounce before we start to ebb back lower again. I am looking for, let's put it this way, in the last 50 years, this is a follow up on Naomi's comment last week, in the last 50 years, 24% of the time the market has made lows in April to May. And I'm thinking we're into that. And I kind of go back to the year of 2020. We put lows in on April 21st. I have timing for April 21st this year and I think if we break into that it should strike a nice low. We've broken maybe in price because of the weather being ideal and planting takes off and runs and all of a sudden this concern about delayed planting and loss of acres in the Northern Plains like North Dakota, parts of Minnesota, will maybe take a back burner and we'll see the markets drop. And then all of a sudden the market says, whoa wait a minute, we're kind of getting a little dry here too and so what might happen is we put a low in here in April, lift a little bit into May. I have two dates in May that we could come back and take a look at this low, May 2nd or May 15th. And then we're strong right on into the summer.

Yeager: So, are you specifically talking all commodities or one in particular here with this timing? '

Martin: Basically, I'm looking more at corn and soybeans and the wheat market I think with the weather, if they catch some rains in Kansas and Oklahoma I think that is going to set the wheat market back. But I think our bottom is in on wheat and I think it's just a moment of time before we continue to try to work higher. Usually for wheat in April and May the reason we rally is because we're putting weather premium in because of cold temperatures. Now, granted, in Kansas there was some 25-degree temps, 27. So that might have put a little support under the market. But I think the wheat market might vacillate a little bit along with the corn and beans. But I think then it kind of turns and tries to push. But that will be a little counter seasonal on wheat.

Yeager: Specifically on corn then, if I'm a producer do I just turn the markets off for a little bit and focus on getting that crop in the ground? Do I have much positive news in the next six weeks?

Martin: Well, the one thing for corn producers, if you look at that stocks report, Iowa is very tight supplied on stocks, on corn stocks. They're tight on beans too, but tight on corn. And so, there's parts of Iowa where we're having to already pull from other areas. The basis levels usually improve as you go into planting season in a normal year. So, I think this is a year be it where we're at because I think we're going to pull in Iowa from the Eastern Corn Belt, like Illinois. And I think what happens is we see a really good basis as we go through the spring and producers might want to watch that basis to lock up a basis contract with the thought that maybe they try to sell in June or possibly July.

Yeager: All right, I have a general question here that I think encompasses both corn and beans that ties into I think a lot of the sentiment that you're talking. It's from our friend Phil in Ontario who, by the way, has had a whole lot of rain this week. They don't have any snow on the ground there left in Canada. But he's asking, has the bullish agricultural commodity environment of the last couple of years evaporated or is it simply eroding?

Martin: Neither, it's pausing. I believe that the markets -- when I first came out with my really enthusiastic optimism of $30 beans and $18 corn and wheat up to $40 or so I was thinking, what I missed was that China would stay in lockdown for three years or close to three years and it's the world's largest importer. So, that I think stalled us a little bit. Now going forward they're out of lockdowns. The one reason I think they went into lockdown, besides COVID, I think there were other reasons more pushing that agenda was that I think President Xi wanted to make sure he made it in and he didn't want any protesting. But more importantly, he knew how tight their food supplies really were. I believe in June of 2020 he was already warning the Chinese population to conserve, don't waste your scraps, don't throw away food, be very conservative and I think he realized by then that Sinograin, their managers of graineries had been lying and they were in trouble.

Yeager: I want to touch on beans real quick. Would you be worried if you were long beans this weekend given some of that China news, the Taiwan a little unrest? Am I going to have a hard time sleeping if I'm going in long this weekend on beans?

Martin: I think you might get a little bit of a bounce. But here's one thing in beans, when you look at the crush, and nobody really mentions the crush, but when you look at the crush margins, in the last five months those crushing margins have dropped $2.60 a bushel. And I would say in the last month or 30 days, 90 cents of that came. So, we wonder why the meal market is taking a drop, which was very supportive to beans, and why the bean market sort of melted here. I think that that crush will gain some footing. But you've got to remember, what has happened in this timeframe, it's African swine fever in China. And so, they aren't needing quite as many beans to crush right at the moment. And then you've got Argentina, yes, coming out with starting here with as we go into Monday, starting out with their soy peso initiative and it lasts through the end of April. So that I think was weighing on this market as well. But then you look, okay, the last two soy initiatives farmers sold the beans, the exporter got them. This time I think it could be the crusher that grabs them. But they're expected to move about 5 to 7 million metric tons of soybeans. And so, then you look at okay the crush margins have evaporated a little bit here. What if Brazil has more beans? For every million metric tons that they produce more they could account for 800,000 metric tons of soy meal that they could take care of in place of Argentina.

Yeager: Okay, livestock quickly. Long positions returning here for live cattle?

Martin: Oh, I'm very enthusiastic about cattle. Now, one thing I will say, not much higher we have Elliott wave 5s, major 5s above us, but there's like three of them. And they get up as high as $175. And that would be basis June. The good thing about the cattle market is, is that it's cash led and that is a hedger's dream. So, this is a beautiful market. We cleaned it out, which it probably needed badly, but we cleaned it out on the concern of the banking industry that happened back in March. And so, the market lost a lot of long liquidation there and now it's healthier so it's coming back but it's cash led and that is a very good market and it's also a bull led market where the fronts are leading the way.

Yeager: What about in hogs?

Martin: Hogs is a different story. Our supply, the hog and pig report evidently the trade was really negative. I wasn't maybe as negative as them, but they were really negative and the report came out pretty much in line with what they were seeing. I also think we're catching hogs coming in from Canada. But I will say this in defense of hogs, I think that's a market that 85 cents on the hog market and also we have aligned with the index, so I think that market has almost got itself clean. Is it ready to take off? I don't think so. But I also don't think I'd want to be selling it here. My monthly indicators that I follow are just absolutely dirt low and that tells me just to let that market prove to me it's turning and then go on it.

Yeager: Let it ride.

Martin: Yes.

Yeager: All right, thank you, Sue, appreciate your time. That's Sue Martin everybody. We're going to pause this analysis, continue our discussion and we are going to keep going about the markets in our Market Plus segment. You can find both analysis and Plus on our website of MarkettoMarket.org. By the way, both of these resources and everything we have is free. Our Instagram feed is about to perk up with spring field work images. Keep an eye on others' work as well by following us @MarkettoMarketShow. Next week, we're going to look at how climate change plays a role in more powerful storms that are striking the Midwest. Thank you so very much for watching. Have a great week.

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