Market Analysis with Sue Martin

Paul Yeager:  A neutral to negative USDA report gave way to the market righting itself on a cheaper dollar, drier forecasts and rumors of renewed foreign purchases. For the week, the nearby wheat contract gained 12 cents, while September corn expanded 19 cents.   A bearish reversal in soybeans was countered by rumors of Chinese buying out of the PNW.  The August soybean contract jumped 53 cents, as August meal put on $21.00 per ton.  The nearby wheat contract gained $0.12, while September corn expanded $0.19. A bearish reversal in soybeans was countered by rumors of Chinese buying out of the PNW. The August soybean contract jumped $0.53 as August meal put on $21 per ton.  December cotton bumped up a nickel per hundredweight. Over in the dairy parlor, August Class Three milk futures increased 57 cents. The livestock market was in the green. August cattle put on $3.18. August feeders moved $1.22 higher and the August lean hog contract improved $1.05. In the currency markets, the US dollar index dropped 236 ticks. August crude oil gained $1.63 per barrel. COMEX gold added $31.90 per ounce, and the Goldman Sachs Commodity Index climbed more than 13 points to settle at 563.60 Joining us now is regular market analyst Sue Martin. Hello, Sue.

Sue Martin: Hello there, Paul.

Paul Yeager: I see all these pictures of wheat harvest and I see these farmers saying we're finally getting into the field, sometimes four weeks behind. What's that doing to the wheat market right now? That delayed harvest in spring or winter wheat?

Sue Martin: First the hard red winter wheat. I think that at first that was putting a little support under. But then you keep catching rains. And our forecast is that they will continue to get pretty good rains. So in Oklahoma, Kansas and up into Nebraska. So our take is that if they continue to catch too much, it could be a quality issue. And hard red winter awaits the protein wheat. So that would be a concern. But for now, everybody's saying, hey, it's adding in more bushels.

Paul Yeager: You have to take gifts where you can. So then when you look towards those spring contracts, you look at Minneapolis, that one has performed differently than the other two.

Sue Martin: Well, you know, the Canadian prairies certainly have their share of issues. And Canada competes on exports of wheat and they raise a lot of spring wheat. And of course, so does North Dakota. And the dryness is kind of trying to work its way down into North Dakota. Saskatchewan certainly is having their share. I mean, they raised their one of the major producers of wheat in Canada. And then you've got the western side of Manitoba also having their share of issues. Alberta is getting saved a little bit. So the trade, it's really been watching that and focused on it. Their forecast hasn't changed. It calls for continued hot and dry. That's a big concern. And everybody wants to talk about the drought dryness in the Dakotas, Minnesota, Wisconsin.

You know, maybe on down into the northern half of Iowa. But there's more to that weather forecast.

Paul Yeager: Oh, and I think you'll get to that right now when I ask about corn. This USDA report, the negative response to the market then was replaced by a big positive bounce and were higher on the week. So does that USDA report matter?

Sue Martin: I think they've already dialed it in. I think the trade was disappointed that the yield didn't drop more, but our guess was around 177.5 because we felt this is as of July 1st and you haven't even taken the crop into task selling pollination or what have you. So I thought the USDA was right on, NASS was probably right on.

I think the yield still comes down. But the kicker and as I sort of just alluded to, the kicker is the weather services that we carry, we carry several different ones, but we have one that has really been pretty on target. Now, back in June, early June was talking about how we were going to turn cooler in the latter part of that last half or so of July on through August and get cooler through the fall, has done a total flip gone hot and dry.

Now, some of these forecasts that you see are starting to allude that we're going to see after the 20th 24, something like that, that will start turning a little bit warmer and drier. The forecast that I'm alluding to is talking about that this hot and dry pattern is actually going to hit the Eastern Corn Belt again. And estimating 77% of the Eastern Corn Belt coming back as hot and dry as they were in May and through June.

Paul Yeager: So at what point does the market reflect what you're talking about, what this weather is alluding to? And what do I do if I'm in that Eastern Corn Belt or if I'm in the Western Corn Belt?

Sue Martin: Well, I think they also alluded to about 28% of the Western Corn Belt. Not sure where that 28% is. Is it just west of the Mississippi? They've had a lot of good rains or is it back towards more the western side of Iowa? The northern part of Iowa might be that. But I will say this. I think the trade hasn't gotten back there yet because they are so focused on Canada, the Canadian prairies, North Dakota, South Dakota, you name it.

But they'll get there before long. I would say probably about the latter part of July, they'll start realizing this is probably here to stay.

Paul Yeager: And later, July has provided some fireworks in the past and so maybe we'll see it again. Let's move to beans here, because in the USDA report, a similar scenario in the sense of a surprise and a shock and then almost 180 the next day. So what does that tell you?

Sue Martin: Well, I think the disappointment I think the trade was too ambitious and expecting the yield to come down again. It's July 1st and August is bean month. And yes, beans are short in many areas, but beans are prolific. You give us some rain and they can surprise you. And short beans can produce better than you think. However, again, that forecast that's coming out is a big concern because that could really hit the bean crop hard.

And I think we could see in the August report maybe a slight cut. The September report is the one where I think the corn and the beans really come home and have that Jesus talk. You know, I think that and those reports in September could be very important. I think that the bean market, you know, 14 dollar beans is good price and we're having trouble getting there.

We keep pushing up to it, but our supplies are a little tight and in fact, they are tight. Although the USDA was creative and finding ability, they cut the crush and exports for next year. Well, maybe their mentality was, well, if you have less acres, you've got less beans. There's only so much of it to go around. So they cut that.

But I think when we look at this crop and it comes down with yields start to trickle down. And of course, if we get into August and we've been hot and dry and then we turn around and we maintain that in August, I think the bean market could be very surprising. $14.27 has been the high on November beans since December, and you'd even have to go back to maybe August or so of last year.

I think the bean market is very prolific. However, that is the market that attracts longs easier and the corn market, we've been down to $4.81, $4.81 and three quarters. The trade piled into a lot of shorts and got burned. And we have to remember, crop insurance price is $5.91. The last three years we've been over the February base price.

I don't see that happening this year. I think we'll be under it, but under it could be $5.50. You know, who knows? I think we still have lows coming.

Paul Yeager: Let's quickly summarize what you just said with a question from Phil in Ontario. At this stage of the game, do soybeans offer more hope than corn for price appreciation moving ahead?

Sue Martin: Well, boy, I think beans are going to have to have that weather push to stay back up over the $14 area. I could see us going to $14.05, $14.08, maybe $14.14, something like that. But I think we have to have that weather push. And right now we have Brazil's beans kind of stealing our thunder and yet export sales and shipments are still pretty good.

So we're doing okay there. I think that the one thing I view is as we go into ‘24 is that I think we're going to draw more bean acres back and we're going to lose corn acres. And maybe price does something with that, I don't think. And here's the other thing, crop insurance, soybeans were actually below the crop insurance base last year.

Contrary to corn. So, you know, does that mean it has to stay below? No. Beans could be the surprising thing. But we may be push up over $14. You know, here's another thing. I have indicators that I watch very closely. They've served me well. And those things on monthly data are turned long on half of them. And the other half is just sitting there waiting for a nudge.

And I think that's going to come. And when that does, that tells me and corn is not far behind it either. That tells me that these prices, maybe we make some lows here in August. I thought corn could make a low in August, some think early to maybe mid-August. I was thinking more like around August 23rd, 29th, something like that.

And then we start to work our way around a meander.

Paul Yeager: All right. I need to get to livestock very quickly for a few seconds. Box beef just had a some pullback, but yet we rallied to a near contract high. What's the nudge in cattle moving forward? Is it a nudge higher or lower?

Sue Martin: I think it's still back lower. I think what we're in is a cattle market that is volatile and it's whipping back and forth. One good example was this week when you had corn down off that report, like 20 some cents or more and feeder cattle dropped. And I thought, wait a minute, that's not a good thing. I think the market is whipping and you're seeing and I think it'll continue to whip while the product continues to drop.

Sue Martin: And I think we'll do that into August. That would be a friendly situation for the longer term on this cattle market. If we rally with new highs in the fats and feeders too, whatever, into August, that's usually not a good sign into October or November. But I tell you, the numbers, we have a decent supply of numbers right now. Here's the thing that's going to hit that cattle. Okay, if the rains fix the, you know, help out the pastures and this winter we see the whole batch of heifer's for heifer retention, for breeding, and that's what sends that market flying.

Paul Yeager:  All right. We'll get you some more predictions in a moment. Thank you. Thank you, Sue Martin. Here, we're going to pause this analysis, continue our discussion about these markets in our Market. Plus, you can find both analysis and plus on our website of markets and market dot org. These resources are free. Our YouTube page is the place to find our full program marketplace and the stories that we feature each week.

Paul Yeager: Subscribe to our feed of YouTube.com slash Market to market. Next week we see how drones are delivering unusual packages that help producers. Thank you so much for watching and have a great week.

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