Yeager: This is the Friday, January 26, 2018
version of the Market Plus segment.
Joining us now is Sue Martin.
Hi, Sue.
Martin: Hi there, Paul.
Yeager: Alright, so I cut you off in meats.
I'm sorry.
We still had pork bellies to discuss.
Really that's all on the brain for me is the pork
market right now because of pork bellies.
That was one report I read this week that said,
that's what is driving this market.
Is that really the case or what's going on with hogs?
Martin: Well, everybody loves bacon I guess.
Yeager: Do they really?
Martin: I guess.
The hog market has had a good run and I think it's
getting a little bit where it needs to correct back a
little bit.
It looks like some of the early Easter buying is
over.
And so the product is kind of softening.
But it doesn't matter whether we're exporting
beef, exporting pork, we're sending meat out the
door.
And so I think when I look at the hog market, we
might get a little bit more of a pullback but I'm
also hearing talk that Canada has a big problem
in PRRS.
And so when some say, well we were supposed to have
all these hog numbers, where are they at?
Maybe we're not getting as many in from Canada
originally and therefore that number still drops
down a little bit, it may be that our June market is
a good hog market where the June market on cattle
maybe isn't so good.
Yeager: Okay, something to watch there.
Another thing to watch is cotton, the old Frank
Sinatra song is, And Now the End is Near.
Are we facing that in cotton?
We had a selloff this week.
Martin: Well, I look at cotton and I think it got
over 83 cents.
And to me as a producer I would suggest making some
cotton sales.
I'm not saying it can't still push higher.
But you're not an early comer in here, you'd be
coming in, in the latter part of this move so I
don't think that would be a bad thing.
I definitely, if I was a cotton producer I'd be
making some sales or at least putting some put
strategies under this to floor that market for you.
Economies are picking up globally and that means
more demand for cotton, which China's a big
producer of cotton, clothes and what have you,
so demand should be on the uptick and that's a good
thing.
But at the end of the day I would be marking some
hedges.
Yeager: Alright, time to make some money.
You know what also it's time to do?
Time to answer some of those Twitter questions.
You can find Sue at @futuresinfo?
Martin: @futurescashinfo.
Yeager: @futurescashinfo on Twitter.
You can find us @MarkettoMarket.
Baloo found us and wants to ask you, and yes his
picture is Baloo from Disney, if NAFTA goes away
and Mexico goes elsewhere for their corn, how long
do you think it will take the market to work itself
out?
And he's saying, use the example of the Holstein
fat market last year after Tyson quit buying.
What is your thought on NAFTA?
Martin: Well, first off, Holsteins did fall back
after Tyson quit buying and the price got awfully
cheap.
But, you know, when you get something cheap
somebody else sort of wants it and we're
shipping Holsteins to Canada.
So there's a market for Holsteins now and I think
prices will be going higher.
As far as NAFTA goes, I don't see it going away.
I'm kind of, this is no political pitch, but I
sort of feel that President Trump may be on
the right track.
While NAFTA was very good for us and we don't want
to, we're worried, uncertainty builds concern
and what have you, but I also think we need to make
the playing field a bit better.
And the only way we can balance this trade deficit
a little bit is to try to rework some of these
agreements.
And what do we owe Mexico, $63 billion or something
like that?
Yeager: Give or take.
Martin: So, we need to rework it.
Not far from here Maytag left and went to Mexico.
Well, we need to start bringing some of these
companies back or else if they want to keep them
then how about they do use some American made parts.
Yeager: And that's one thing, and that is what I
had a friend tell me yesterday, we were
discussing commodities and he says, well what about
manufacturing?
Manufacturing was a big loser.
NAFTA talks just this week what they might discuss,
sanitary, government procurement, autos,
dispute settlement, dairy, lumber.
Corn and soybeans, you don't even hear anything
about the discussion of NAFTA.
Intellectual property, it's such a small part of
that.
It's a bigger picture in things.
Martin: Yes, but good for dairy.
That's awesome if they're going to rework it for
dairy.
Yeager: Because Canada has been having some major
issues, we're having major disputes with Canada when
it comes to dairy.
Martin: You know, there's something else here, when
we talk about Mexico or Canada, for example,
especially and Australia and New Zealand and some
of these other countries, well the things that
they're shipping into us now with the dollar down
that isn't so attractive as it once was.
That could also kind of slow up the push to send
things south a little bit.
Yeager: Alright, well let's go south down my
paper here a little bit.
Fran in Nebraska, and no it's not Fran McCaffery,
but it's @FrantheMan44.
Will there be an opportunity to price corn
or soybeans later in the spring?
Martin: Yes.
Yeager: Higher than we are what you're thinking here
in the next week?
Martin: Oh absolutely.
One thing that could happen is the bean market
could, okay, on the beans, since 1964 we have only
had four times in the past that we've had carryouts
over 400 million bushels, and of course we're at 470
right now.
I'm not going to say it's not a concern to see
Brazil with 114 million metric ton potential.
They've got a lot of crop yet left from this last
season that is unsold, just like our farmers have
a lot of corn and some beans.
Okay, but the bottom line is that when we look at
these markets, in years similar with high
carryouts like this, I went back and looked at
them and then you also have a year of an 8 and
they tend to have a pattern and I have a
hundred years of data on that, so they do tend,
there is a tendency to drop down into April.
A year ago's pattern, we put a low in, in January,
rallied 80 cents, maybe 90 cents, fell back down,
came back down to April for a low, rallied 50
cents, went on down into June and put a low in
actually for the year there.
Then we bounced and came down into August for our
final test of an 84 year cycle low.
Then in January of this year we've had 48, 50
month cycles, part of derivatives of that 84
year, that we have stuck some lows in.
So the market has rallied nicely.
I don't see us falling apart in beans unless
something happens that Brazil comes at us and we
have a trade war thing happen with China.
Yeager: Well now, you bring up a point in China,
about ten years ago, last decade it was a 37/34
split, U.S./Brazil importing to China.
Right now it's 57/31 on favor of China.
They have taken our market and then some.
Martin: Well, they have.
And that's going to happen as we continue to grow
globally.
But the world is growing with such huge demand
around the world, it's not just China, we've got
Europe and I think that when we look at what's
going on, look at Argentina, the world's
largest crusher in soy meal, and they don't
export beans as aggressively.
They're more of a corn competitor than they are
beans, but they're having their share of issues.
And biodiesel, ethanol demand, China is growing
there, Brazil is growing in ethanol and Argentina
is growing in biodiesel.
What about India?
India is a huge country that is making big strides
and changes in energy and what have you.
Yeager: Ah, energy, it's like you're looking ahead
on the piece of paper.
You're cheating, Sue.
Martin: Oh am I really?
Yeager: A little bit.
Playhard in Dike asked this, but I want to throw
up Minda's question, @grainsgirl.
And she's talking about watching for new China
import corn demand.
Do they have to get okay with GMO before we expect
significant imports from them?
But what I want to really focus on here is, should
we be getting excited about them importing corn
for ethanol?
I think I read this morning ethanol is the
cheapest it has ever been in China right now.
Is that good for U.S.
producers?
Martin: Well, if ethanol is the cheapest in China
that it has ever been that might not be good, it
might be good for end users I guess because by
2020 they have to be ten percent added, E10, and
they have 11 provinces already that are there.
So they are making that stride.
They really are trying to make the initiative to
have cleaner air.
And they're going to keep working towards it and I
think they have tried this once before but this time
I think they're really serious and I think it's
going to happen.
I think you're going to see a huge increase in
corn demand.
Right now though keep in mind, Ukraine is down in
production.
Argentina looks like they're heading south in
production.
Brazil looks like they're heading south in
production.
We're looking at less acres.
And then you look at China and they've got junk.
So they're going to need more.
So to me if we come off with a little hint of a
weather issue, I don't care if we've got --
Yeager: You don't care how much the stock is or the
carryout?
Martin: No, because I think we're going to be
eating it up, we're going to use it.
Yeager: Interesting.
That's a good theory.
Martin: Not to mention livestock numbers are up
-- Yeager: Right, and we'll get back to the
livestock discussion that we had on the show.
Now ethanol, we had the report on ethanol this
week, we have a one billion stock, that's a
record here domestically.
So we're making a lot of it, the product is out
there, can easily go out the door once it is
already made.
Martin: Look at crude oil.
Yeager: Okay, yes I have a crude oil question.
How much higher are we going on crude before you
get into your thought?
Martin: Well, I wouldn't be surprised, we've been
up over 66, we might get up into the 70s, that
would not shock me.
In fact, we might even get more pushing because once
we went through 62.50 there wasn't much above us
up for a ways.
But as crude oil keeps getting higher that is
certainly making the ability for the market to
percolate and kind of stoke the ethanol
production because gasoline, E85 is going to
be in much better demand.
Yeager: Because it will be cheaper.
Martin: And on top of it did you notice natural gas
this past week?
Yeager: Another 8% I think this week, yeah.
Martin: That March contract jumped like no
other.
We're starting, if you haven't noticed this week
felt like it more than any time here recently, you'd
think it was a full moon.
But the markets have really started to kind of
start to awaken.
The continuous commodity index broke out from a
downtrend line from the 2011, 2012 highs.
We have trend indicator moving averages that are
just on the cusp of turning positive as well
and turning into an uptrend.
Well, that's weighted, that index is weighted
with agriculture.
And you look at how this past week everything was
cattle of course were all over the place, they seem
to be lately, but you had beans being more active
and then you had a 15 cent break in a heartbeat,
wheat was starting to push.
It's just like it's starting to come alive.
And I've been in this business a few years, but
there was an old saying when I first started in
his industry, oats lead, or oats know and wheat
leads.
And if you look at the last year those were the
two markets -- Yeager: And oats has been a story
here recently.
We could get into that.
But I want to ask one final question, or maybe
I'll even think of one more after that.
But I'm going to ask Bret's question.
This is very specific now and it goes back to our
livestock question.
Bret's asking, should I continue to run yearlings
on corn stocks until the end of March or get them
to the sale barn now to maximize profits?
Martin: Well, if he was watching the show ahead of
time he already knows my answer, hang onto it.
I think, I know that he says the end of March, boy
if you can shove them into April that would be great.
Here's the thing, if you take February fats and
push them up, now we might chatter here seasonally a
little bit, markets are behaving pretty season
right now too so if feeders do tend to get a
little bit of a correction as we move into February
and then they turn around and take off again, fats
do, feeders do too, so if we can get a pretty decent
close on the Feb contract we've got the same
playbook that we had a year ago that goes
something like this, higher highs are made in
April, feeders move up in April, you break cattle
down into June and probably all the way into
August and then you've got a good fall.
Yeager: Alright, sounds like a good way to end.
Sue Martin, thank you so very much, always enjoy
the discussion, good to see you as well.
Martin: Thank you.
Yeager: Alright, that's Sue Martin, one of our
regular market analysts.
Thank you so much for watching this Market Plus.
And I want to remind you to join us again next week
when we'll check in with South Texas farmers and
ranchers rebuilding after Hurricane Harvey and Ted
Seifried will sit across from me here at the Market
to Market table.
So until then, thanks for watching, listening or
reading.
I'm Paul Yeager.
Have a great week.
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