Market Plus with Elaine Kub

Brooke Kohlsdorf This is the Friday, July 21, 2023 installment of Market Plus. And joining us now, Elaine Kub, back for more. All right. So we're talking about the heat again. That really is the headline. Absolutely. That’s what we've been talking about, the extreme heat in the Corn belt. Is it going to drastically affect the markets? That's what William in Sioux City is wondering.

Elaine Kub Well, it should. Right. When we believe that commodity markets are efficient markets, that they reflect reality instantaneously because all of the thousands of market participants are in there buying or selling and they they can observe what is going on out in the country and and make set the prices according to that. However, I think what we've noticed in the past few years is that there are so many other market participants talking here about funds and banks and folks in Chicago or New York, whatever, who are not out in Iowa, Illinois, and actually seeing the crops. And they really do trade based on the USDA numbers. And I'm not I'm not dissing the USDA numbers. They you know, they can't they can't go in and know what the yield is going to be yet because nobody can go into the fields and count kernels and rows yet. I mean, there's a reason why they are very careful about changing their yield projections.

I just am cautioning that even though, yes, this weather absolutely should be affecting the markets, I do think that the markets will lag because the markets will continue to follow these USDA numbers that are going to lag and perhaps never really reflect the yield losses that we're experiencing right now today. They may never fully reflect those until the grain stocks report in January of 2024.

Brooke Kohlsdorf Always just a few steps behind or weeks behind.

Elaine Kub But by nature, and it has to be that way been it's it's just funny that the markets themselves don't trade a little faster. So you're going to have to if you want to try and trade that, you're going to have to be very patient and have deep pockets, I think.

Brooke Kohlsdorf All right. Let's move on. Kevin in Wisconsin, what is the chance September corn goes up and fills that continuation gap on the expired July contract at 599 and three quarters?

Elaine Kub Oh, I think very, very slim. I mean, I'm not it's not nothing like, of course, the markets could move higher, but I don't think that it will try. And those inverted contractions, they fall off the board. The continuous chart doesn't necessarily need to go back and fill that gap because it's the end. The September contract is so funny on its own and it's trading like a new crop contract already.

I think effectively the futures market has moved on to trading new crop prices and the old crop is just on its own at this point Right now, just off in the wilderness.

Brooke Kohlsdorf It's a little world. Okay. When is this roller coaster of a thing called the market's going to make up her mind is what Matt in Iowa is asking her mind.

Elaine Kub Yeah, I like I like yes, I like the characterization. Well, you know, so the markets are trading the weather, which is good like that. I mean, I think that's a reflection of reality. So the question then becomes, when is the weather going to settle down and be normal or calm? And I don't think the forecast is expecting to see that.

And I don't think anybody can predict that. You know, the weather is so unpredictable. It's a very stochastic system. Nobody can really predict more than seven days out. So you have you have human behavior on top of weather. So you have two very chaotic phenomena on trading on top of each other, and you're not going to be able to calm that down in the summer. Certainly.

Brooke Kohlsdorf Let's get out our crystal ball. Yeah, Yeah. Take a look. Okay. So Phil and Ontario wonders, what does the Russian exit from the Black Sea Grain Accord really mean? What are the ramifications for competition in the global market for corn, oilseeds and wheat?

Elaine Kub Yeah, it means that there will be less shipments out. Shipments out of the Black Sea, including Russian shipments out of the Black Sea. I mean, I think their goal ostensibly was to try and get more Russian grain out onto the market. But whatever retaliation may or may not occur and I'm not a military analyst, don't ask me to predict that, but I don't think it will be a productive I don't think that they will achieve their goal productively.

So I suspect even at least in the relatively short term, it will limit the movement of grain out of that region if it doesn't get diplomatically resolved in some way within a few weeks or a few months, Then then you're talking about all of the implications that people have been worried about for the past 18 months for folks in Turkey and Middle East and North Africa, not to receive the amount of calories that they need to feed their populations.

So hopefully all of those people are working whatever channels they need to work to try to resolve this, because it's not good for anyone.

Brooke Kohlsdorf No. Okay. So Ken in Michigan is wondering, each time the wheat market has added premium due to Russia Ukraine issues, it's given back 100% of its grain. Is this time is this time any different? That's a good question.

Elaine Kub Yeah. No, I don't think this time is any different necessarily. I mean, if it if it really does go on for a very long time, then eventually, yes, the the tenders would start coming towards the United States or the shipping costs would allow U.S. wheat to move into some of these destinations in an economic way. But at this point, that's still not the case. And so not yet.

Brooke Kohlsdorf Okay. And lastly, Mike in Nebraska, anything new on Mexican, the Mexican GMO ban?

Elaine Kub Not that I know of. Do you know?

Brooke Kohlsdorf I don't know. Yeah. Let's ask Google. Where exactly?

Elaine Kub No, I haven't. I haven't heard much of that yet. And again, it goes to that same story about we just aren't shipping out as much in exports as we would ordinarily see. If you look a year to your export chart, it looks very disappointing. But because we have relatively scarce supplies or fairly tight supply and demand situations in this country, just for reasons of the past few years of less than ideal yields, you know, we're still seeing pretty favorable prices.

We're not crushed with supply and not exporting it. We just don't have very much supply and we're not exporting it. So, you know, prices are still there. This is not the end of the world price wise.

Brooke Kohlsdorf Okay, one more question. Actually, I lied. So given everything we've talked about with the weather and with Ukraine, what do you see as the the big story that we'll be talking about next week?

Elaine Kub Next week.

Brooke Kohlsdorf Did I put you on the spot?

Elaine Kub Yeah. And I just you know, I wish that I knew if the weather would suddenly change. And my understanding is that that ridge will continue that this will continue to be the big story that we'll just perhaps have a chance to see. You know, some early harvest reports coming up from the southern part of the Corn Belt or if you can start to see.

Yeah, like the evidence of of poor yield really coming into the market, then that would that would sustain the story. It's not a new story, but it's just a sustaining of the current story.

Brooke Kohlsdorf Yeah. Keep it going. Yeah. Okay. Elaine, thank you. Thank you. Always a pleasure. Well, next week we look at how the hay market is scrambling to stabilize itself as key growing areas struggle and commodity market analysis, with Matthew Bennett. Thanks for joining us and have a great week.  

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