Pearson: This is the Friday, June 2, 2017
version of the Market Plus segment.
Joining us now is Darin Newsom.
Darin, welcome back.
Newsom: Thank you, Mike.
Pearson: We did not have a chance to discuss the
cotton market on the program, off 40 some cents
this week.
What are your thoughts on cotton?
Newsom: To me it looks more of a seasonal play
than anything.
This is the time of year where we've put in our top
and it's kind of, you're still looking at the old
crop market, and it starts tumbling back down.
Sharp selloff, we went through some previous lows
if we look at the weekly charts.
What is going to interest me more as we start to
break away from the concerns over tight supply
and demand and old crop and start to focus more on
the new crop then I think we could get this market
to stabilize for a little while.
But it did sell off pretty hard.
We've seen some pressure coming from, a lot of it
coming from the commercial side of the market, some
from non-commercial.
So this could have, I would expect this to have
some carryover pressure into next week, maybe over
the next couple of weeks.
Pearson: Now, as you look out to the new crop on the
side of cotton, is the market starting to build
in any premium due to the constant wetness that has
been happening down in the South?
Newsom: I think that's where we're really going
to have to start watching, see if this Dec can start
to get some legs underneath it and if that
Dec-March spread starts, we start to see the carry
weaken a little bit, see the Dec start to pull away
from the March, that is going to mean we've got
some commercial buying coming in, that is going
to indicate that there is getting to be some concern
possibly of a smaller crop again in 2017 leading to
another year of tight supplies.
Pearson: Okay.
But we don't see that happening quite yet?
Newsom: It's just we've got to let this run its
course for a little while because we did push the
cotton market up quite a ways.
So the fact that it's letting off a little bit
of steam, this goes back to our livestock markets
as well.
It's the same sort of situation.
The market is going to have to let off steam
every once in a while and that is what, the cotton
market is kind of the result of that.
Pearson: Okay.
Now, we do have a lot of questions here from our
followers on Twitter and Facebook.
We encourage all of you to find us on those places,
follow us and shoot us your questions for our
fantastic market analysts.
The first one is from Bryan in Wahoo, Nebraska.
Bryan wants to know, does today's price movement,
Friday's price movement, tell us that Tuesday's
irrelevant crop conditions report was only relevant
on Wednesday?
Newsom: Was it even relevant on Wednesday?
Pearson: Well, that's the question, yes.
Newsom: To me, no.
To investment traders, maybe for about five, ten
minutes.
Pearson: Even that big drop in nationwide crop
conditions, corn down 14% good to excellent in
Minnesota -- Newsom: What is the correlation with
that and final yield?
There isn't one.
That's the issue.
This is the initial crop condition rating.
There is little to no correlation with final
yield.
I don't use the numbers at all as an analyst.
Now, there's traders out there who do, farmers love
these numbers.
Was there much relevance beyond Wednesday?
No.
The markets are trading the weather now.
We'll get another set of numbers on Monday, Tuesday
we'll see them react to them and then we'll be
back on our way.
We're going to stay in the same trends until
something major happens, something much more major
than weekly crop condition numbers.
Pearson: More major than weekly crop conditions and
apparently more major than predictions of rainfall.
Now it seems like this market wants to see
puddles in the field, rain on the ground before it
reacts.
Newsom: Okay, I don't know if we've got another
question that leads into this answer or this
discussion more and we could go on for another 30
minutes.
But why should the market get excited?
Why should investment traders get excited about
anything in the corn market right now if USDA
has already said in its May report that everyone
points to as written in stone, 15 months down the
road we're going to have 2.1 billion bushels of
corn on the books.
The last two years they have been spot on.
So you've got a prediction out there for 15 months
down the road of we're not going to have a tight
supply situation, if I'm an investor I'm looking
somewhere else, I'm going over to the cattle market,
I might look at cotton, I might even look at wheat
before I'd look at corn because I've already been
told.
And everybody praises the USDA, fine, this is what
you get.
They have already said we're not going to have a
tight situation 15 months away.
Pearson: And that actually does lead to a question
from Quentin, @thegraingrower on
Twitter.
Quentin's question is, is there any value to USDA
reports to the market?
Now, you have laid out the con side of that argument.
Is there a benefit to having these reports be it
crop conditions, be it quarterly grain stocks, be
it the intentions, any of that?
Newsom: We have to break these out into categories.
The reports that look back, the weekly export
sales and shipments, the quarterly stocks numbers,
these are backwards looking numbers and
they're useful.
We can see what we had on the books at that point.
We can do our analysis off of that.
When we make projections, not when we make
projections but when USDA makes projections and
tells the entire trading world exactly what's going
to happen, what's the value in that?
What other industry allows that to happen?
But this industry in particularly thrives on
it, they can't live without it.
So this is the result.
Pearson: Quentin's got another question for you,
still focusing on the USDA aspect.
Newsom: He must have known I was going to be on this
week.
Pearson: Well, yeah, so that's why we're glad
you're here.
So do you believe as a technical trader, as
somebody who watches the charts, takes your cues
from the market, do you believe there is a USDA
report that could break the market, the corn
market, out of its range this summer?
Could a USDA report be the catalyst to get this
market moving one way or the other?
Newsom: Sure, it's possible.
June, if we see some sort of miraculous reduction in
either old crop or new crop ending stocks that
could be what sends the buy signals to the
computers.
Pearson: Have exports been strong enough to get you
excited about that yet?
Newsom: Exports are, exports have been factored
in at this point.
Now, they're still running ahead of projections by
about 200, 300 million bushels.
So if that gets calculated in, but the problem is
it's not going to, it's not going to yet.
We might not see that until say next January.
So we've got the June report coming up and the
July and the August and so on.
In between that we actually have a report
that means something with the quarterly stocks
coming out and the adjustment on acres.
Pearson: June 30th we'll get quarterly stocks.
Newsom: That report to me out of this long list of
reports that we're going to have over the course of
the summer is probably the most important.
Let's see what we've done through three quarters as
far as demand goes, as far as pulling down our stocks
and what adjustments to acres are we actually
seeing as of June 1.
Pearson: Now, on the adjustment to acres, you
do talk to farmers all across the country both on
Twitter and in real life, what have you heard with
regard to replanting?
Have we lost substantial corn acres or at least
have we had to replant substantial acres?
Newsom: One of DNT's reporters, Emily
Unglesbee, wrote a great piece about how
replanting, it's still up on DTN, has reached
historic levels.
And she goes from across the United States,
particularly in the Central and the Eastern
Corn Belts.
But we've seen incredible numbers.
The market doesn't care.
Show where there is damage, show that just
because we've got replant we're going to drop yield
by 10, 15, 20 bushels to the acre.
It's not out there.
Let's see what the weather does the rest of the
summer, then maybe the market will get excited.
Pearson: Is having replants like this at
least setting the stage for more volatility in any
kind of a weather uncertain period?
Newsom: Again, I know you guys get a chuckle every
time I mention my column here on the show.
Pearson: It's on the bingo sheet.
Newsom: It's on the bingo sheet.
Pearson: Get your markets out, we're going to give
you a point here.
Newsom: The drinking game is how many times I'll
mention it each show.
But I talk about the seasonality of corn and
one of the seasonal factors that we see is
volatility towards the end of June starts to spike
and it tends to last up through the fall.
So it's just a normal thing.
Where does this come from?
Because seasonally non-commercial traders
cover their short position into the summer, during
the summer because of weather problems.
So it's not, again, not all that difficult to see.
Yeah, I'm expecting volatility to go up and if
it's done because of non-commercial buying
that's why I think we're going ot get a rally this
summer.
Pearson: Are non-commercials, the spec
funds, are they currently record short or still just
heavily short?
Newsom: Still heavily short.
There for a few weeks they reduced it, they added it
back to it as far as this most recent CFTC report
which is as of last Tuesday.
So, again, another report that looks backwards, it's
not all that useful.
But yeah, they're still holding a large net short
position.
Pearson: Okay.
Final question for you of our Twitter questions.
This one is from Richard in Belle Eagle, Tennessee.
He's on Twitter @belleagle1.
He says, and you have kind of alluded to this
already, do you see summer markets being Hot Fun in
the Summertime or the Summertime Blues?
Newsom: Richard knows me well, he knows how I,
again, like to tie everything into pop
culture, songs in particular.
So I would probably have to lean towards the
former.
I would say it's Hot Fun in the Summertime to a
certain degree.
Pearson: Are beans going to be Hot Fun in the
Summertime?
Newsom: Not as much because I think we're
going to be dealing with the supply of Brazilian
beans really working their way into the system.
Pearson: Are they going to, are Brazilian farmers
going to be willing to sell a hedge against
inflation?
Newsom: That's a great question and I've even
visited with Angie on Twitter about this very
thing with Brazilian corn and soybeans.
What is their incentive to sell?
I guess theoretically one would think that yeah
they're going to sell some of their crop and we're
going to see this huge supply of soybeans because
they need the cash and they don't have the
storage facilities that we have, the on-farm storage
facilities that we have.
So I would think that you're going to see some
sales, you're going to see increased supplies
available.
But we've still got good shipments going on.
And we've still got, as we talked about on the
program, this buildup of unshipped bushels growing
each and every week.
Pearson: It's something to be nervous about.
Newsom: A little bit.
Pearson: Before we let you go home we wanted to get
to you a commodity question of the week.
This comes from a student up at Iowa State
University.
And we want all of you who are students or just
grownups, you don't have to be a student, if you've
got a question get out your phone, send a video
and we'll get you on TV.
And if you want to learn more about this project
you can listen to the MtoM podcast #143.
So, Darin, here is the latest installment of our
college level agricultural student questions.
Craig: Is it worth going to college to get a degree
in ag business?
Newsom: You can almost take that question in two
parts.
Is it worth going to college?
Yeah.
I think so.
I've got two kids, one in college, one headed that
direction.
Is the degree that you get doesn't necessarily have
to be the job that you find interesting.
I think what I was always told in college and I
lived this is it doesn't matter what degree you
have as long as you have that piece of paper.
Employers like to see that piece of paper.
Now, whether or not that's still true I don't know.
It's been a while since I've been out in the job
market.
Pearson: But you don't have a degree in ag
business.
Newsom: I do not have a degree in ag business.
I started off in math at Fort Hayes State there in
Northwest Kansas.
After two years I realized I was going to flunk out
staying in math so I wanted something where I
could do two more years and be gone.
So I switched over to political science.
That entitled me to dump trucks for a number of
years after that.
So I didn't really use my political science degree,
still don't use my political science degree,
but I have the piece of paper.
So yeah, I think going to college, unless you're in
a situation where you know what you're going to do
and you might as well go in and start doing some
internships and this sort of thing and just getting
on with your life, I've known a lot of people who
have been very successful doing that.
But yeah, if you want to go to college by all means
it's a good thing to do.
Do you necessarily have to get a degree in ag
business to stay in agriculture?
No, not at all.
Pearson: And I would add as a follow up to that
because I know we have a lot of viewers at four
years schools but also at community colleges, I'm a
proud community college graduate, they've got
great programs at community colleges,
especially if you're not sure what your first two
years are going to look like anyway, save those
pennies.
Newsom: And just to throw this in, whenever I
interview folks coming into be an analyst with
DTN or whatever, I don't ask them necessarily about
what is their ag business background.
The thing I'm most interested in is whether
they like to read.
So even if they have something like a
literature degree but they find it interesting to be
in agriculture, that works for me because I'm more
interested in what they're actually interested in.
Pearson: Can you think.
Newsom: Can you think.
And that's what, you can prove that with any
degree, except political science, case in point.
Pearson: A lot of stuff to chew on, a lot of
thoughts.
Darin Newsom, thanks so much for taking the time
to join us.
Newsom: I appreciate you having me again.
Pearson: Join us again next week when John Roach
will sit across from me at the Market to Market table
and we will explore how catfish farmers are
fighting off foreign competition.
Until then, thanks for watching or listening.
I'm Mike Pearson.
Have a great week.
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