Yeager: This is the Friday, May 25, 2018
version of the Market Plus segment.
Joining us now is Sue Martin.
Hello, Sue.
Martin: Hi there.
Yeager: I was rude and I apologize, during the
broadcast, cutting you off when we were just getting
going about livestock.
Where do you want to pick up?
We were talking cattle on feed and placements.
Placements off 8% from a year ago at this time,
marketing at 106%.
What are you reading in on these cattle markets?
Martin: Well, I'm looking at, talked on the show
about cattle on feed 120 days or greater and the
imports of feeders coming in from Canada and Mexico
which, if they continue with the drought up there
will we see that push cattle into the U.S.? I
don't think so.
I think the underestimation is the
death loss that we have seen in cows and calves in
Montana, Southern Canada, North Dakota and South
Dakota.
And I think that we have to keep in mind the heat
is not good for cattle up there and their pastures
are probably going to be stressed and we need to
watch that.
But the thing I'm watching is beef production and
beef production is expected to be sharply
higher.
And in years where it's up sharply in the first
quarter, like this year we were up drastically from
the first quarter of 2017, then in the second quarter
we're expected to be even greater over the first
quarter and the second quarter of 2017.
Well the year of 2006 is a year, there's only like
maybe three years similar to this, but the year of
2006 was one of those years that really compared
and once again cattle put a high in, in February,
broke down into April, put a low in, bounced, came
back and looked at that low maybe a little sooner
than it did this year and then they started to move
higher.
June kind of gradually moved up.
The August contract made new highs for the year,
for the calendar year before it was all said and
done, and who would have thought.
Now, the one thing I don't have is how much pork
production and poultry production did we have on
hand.
But our exports are phenomenal and domestic
demand is phenomenal.
And you look at our summer, it feels like it's
July.
Yeager: Yeah, we should be celebrating July 4th.
Martin: Exactly.
And so the grilling season, while it was late
getting started, has really taken off and done
a good job.
So I'm kind of of the opinion we've seen our low
for the summer and what I would suggest to producers
is that when August cattle get up, if they keep
pushing here and we can get them up around the
$105 area and maybe push over that and get up
towards $108 and it's going to take us some time
to get that done, then I would say buy some puts,
put some puts under you and floor yourself.
Maybe you have floored under the recent low.
But have some puts and leave that top side open
just in case because as we go down the road our
numbers are going to keep getting tighter and that
will probably affect us as we roll the year over into
the first quarter of next year.
So I guess I'm positive and it's hard to be
positive cattle and corn at the same time but I
guess I kind of am.
Yeager: We will talk about corn in a moment because
we have a couple of Twitter and Facebook
questions that I want to get into.
I unfortunately pinned you down on hogs to give a one
word answer and you said, not yes or no, but
uncoiling.
That to me says that's headed downward.
Why?
Martin: Well, I'm kind of concerned about hogs.
What would really help, and it has been
disappointing, but we haven't gotten something
closer to done for an agreement with Mexico in
NAFTA or even Canada.
Maybe 30% is what I've seen for a percentage put
on it and that's kind of disappointing because now
we may not get anything done until after the
presidential election which is in July and then
it pushes us out, it could even push us into
November.
That's kind of ironic but it's a little
disappointing because Mexico is a huge importer
of U.S.
pork and chicken although they put a ban on U.S.
chicken here recently.
But I just think even China would start taking a
lot more pork I think.
And so it's all about the demand and the usage,
although I did notice a chart today on boneless
butts or pork butts and they're higher than '17,
'16 in value at this time, but not as high as they
were in '15, but still second highest.
I mean, it's kind of interesting and I think
that goes back to these hot temperatures, it's
supposed to be the hottest May on record and I think
that compares to that and of course the growing
season how it has gotten off to a start.
Yeager: Oh, the smoking season with the butts,
that's what a lot of people like to do, that's
something they will do in their time.
Another thing they do is they spend time on social
media asking questions.
And Ernest in Nebraska sent us one via Facebook.
And it kind of ties into what we just discussed
when it comes to trade.
This one is more specific to China.
What commodity, grains, soft or meats, will
benefit most from a new, better trade deal with
China?
Martin: I'm going to say corn.
Corn and possibly rice.
Energy prices have pushed and therefore cotton may
be, and I'm kind of infringing on cotton a
little bit, but that may draw some attention
because it takes less to produce cotton clothes
than it does synthetics.
But I would have to say corn because the picture
is so bright, Brazil is using massive amounts of
corn for ethanol, they're really on a tangent with
ethanol production.
But China is gearing in that direction.
For the month of, well just take from the 1st of
the year to May 1st.
Yeager: Which is what our chart on the screen says
now, December corn.
Martin: China's imports were up 201.9%, almost
202%.
And if you take and look at from just the month of
April, Chinese imports were actually 1200% higher
this year than last year.
And then you look at what they were importing for
sorghum before they put that little kibosh on or
those import duties.
Yeager: The dance.
Martin: Yeah, the dance.
And so I think that corn is the one and the U.S.
has a lot of it.
What's interesting is foreign production
deficits for corn and for beans both, but corn
especially, was record high for '17, '18 leaving
the U.S.
out of the picture because we're the supplier, the
rest of the world had a record need for corn this
marketing year for old crop.
And we see that in our exports.
But then as we go into '18, '19, according to
WASDE, they're forecasting second highest, a little
bit of a pullback, which I think is rather
interesting.
But in the meantime I look at soybeans and kind of
the same thing.
So global demand is very, very good and I think that
is part of this demand driven market is going to
keep tugging and pulling.
But I think China will be taking corn because
they're making an issue about planting beans.
And they want to rebuild their reserves.
But have you noticed the new sales seem to be all
in new crop, which is kind of ironic, they need to be
buying new crop.
So I would say it's going to be corn because they're
going to be putting focus on corn as they need it
and Brazil might, one thing in Brazil that
happened here just this week was the government
fined the major importers, or exporters I should say,
like Cargill, Bunge and some of the smaller ones,
for I think what was it, $21 million fines for
buying beans from farmers who had tore up forests in
the Sertão area.
And so that is, and they have laws against that.
And so fining them, that might just sort of weigh
on acres next year.
And so what do they do?
Do they plant more beans at the expense of corn?
Maybe.
We'll see.
Yeager: Slow that expansion down of what
Brazil is supposed to take away from the United
States in the world game which is partially part of
Phil's question from Dresden, Ontario, Canada.
He's @Agridome.
In 2018, Sue, can we put the phrase beans in the
teens to rest?
Or does Mother Nature get the last word?
Martin: Oh, I struggle with beans.
I can see beans going to $11.19, $11.20.
I could see them possibly this year in 2018-19 maybe
up towards $12.
It would have to really be an evolving thing and I
would suspect if we had beans in the teens it
would have to be in 2019 calendar year.
Yeager: Okay, still in the teens.
That's still in the teens, 2019.
Martin: Yeah, I guess it is.
Yeager: That's not what it means, I know.
Martin: I think it will work though.
What's interesting is beans are always known to
be a speculator's market and also an inflationary
type market.
So that could change things a little bit too.
Yeager: Okay, so that's Phil's question.
Tim in Minnesota, @6dollarwheatguy, he's
asking, is what in a weather market?
Martin: Yes it is.
We hear more weather talk than you do in demand, so
to speak.
But I think that will evolve into that demand,
it will morph into that.
I think what's interesting is the $6 price, if you
take a look at an annual chart, so every bar on
that chart is a year, and you take it on KC wheat, a
10 year moving average happens to come in at
$6.06.
And ironically every year we tend to go to that.
Now, the last two or three years we haven't done it.
We've been in a range, so to speak.
And I think we're heading towards that, $6.06 and
then a wave 4 is around $6.53 for a lead contract
and that is based on a lead contract of KC wheat.
So I think yes.
I think we're heading back to test that $6.06 area.
Yeager: All right.
Brian in Illinois, @keyfarms13, with corn
hitting old contract highs and corn looking strong in
his neck of the woods, do you think corn, December
'18 corn, can hit $4.50 without much of a weather
hiccup?
Martin: I think it can because -- Yeager: Mostly
back on what we discussed earlier?
Martin: Yes, the demand.
Yeager: I was listening.
I just want to make sure that Brian gets his
question answered.
Martin: I'm really bullish corn.
Yeager: He can tell people Sue Martin answered his
question on Market Plus.
And you can do the same.
Watch us on Wednesday, Thursday and Friday on our
social media channels and we'll help you out how you
can participate in the show.
All right, two more things before I let you go, Sue,
oil and the dollar.
Oil was poised to stay above $70 for the week.
There's a march to $80.
Elaine Kub last week not buying that.
But all of a sudden OPEC says, you know what, we
might turn the spigot back on.
IS that really what is moving the market?
Martin: Well, I think the market had had a nice move
to begin with and $80 is kind of a psychological
barrier just like $70 kind of was.
But I also believe that when Saudi Arabia came out
and stated that, because they're going to pick up
the slack from Venezuela, who is a very good global
producer of crude, the best you can get, but
they're not paying their people to work so
therefore they're not working and therefore you
don't get it out of the ground.
Consequently, I think that that news was just enough
because the U.S.
has been pumping like no other and doing a good job
so I think that news was psychological enough to
kind of -- the more reason to give it a healthy
correction and we are.
And of course you're at your peak season for usage
for driving.
And so gasoline prices are high, higher crude oil
prices is kind of detrimental to
manufacturing.
So it's probably good to have a healthy little
correction here.
Yeager: And high U.S.
dollar as well this week, five and a half month
high.
Traditionally commodities don't go up that high when
the dollar goes that high.
Why is that theory out the window right now?
Martin: Well, mainly because we're in demand
driven markets.
And one thing quickly on China, and I might have
mentioned this before, but China, Xi Jinping comes
from agriculture, that is his background and
recently in the past year I think it was they got
the laws changed to where he might be able to stay
in -- Yeager: For a long time.
Martin: A long time.
He has an endeavor or an ambition, a goal to
eradicate poverty amongst all the people in China.
36% of the people in China live on $5 a day.
And I think about 43 million, that's about 493
million people, and I think around 43 million
people actually live on 95 cents a day.
And his goal is by 2020, ironically 2020, but I
think that is part of those five year plans they
have and that is how they keep arriving at 2020, so
he is already into this mission.
And to do that, that's going to take a lot of
food.
It's just going to command a lot of everything but
especially food.
And I just think that we cannot underestimate what
that endeavor is going to mean.
And they're also talking about doing away with,
first they had only one child per family, then
they moved to two children per family, now they're
talking about doing away with that and it's because
the less mouths you have to feed unfortunately your
economies don't do quite so well.
So they need more people to work and to -- Yeager:
To have a market.
Martin: Yes, to have a market.
There's another thing we're not paying attention
to is India.
India has a mission as well, that they're going
to put electricity, their electrical grid is going
to hit every village in the whole country.
That is huge and that means more food as well.
So when I look at the dollar going up, first off
I think the dollar moving higher is probably
temporary, I don't think it's a long-term thing,
but it has been doing quite well, which to some
degree is kind of helping Argentina and Brazil, to
some degree and also probably helping some of
these other countries do their exporting, compete
against us.
But on the same token I don't think it's a
long-term situation.
Yeager: All right.
Very good.
Sue Martin, now we can let you enjoy your holiday
weekend.
Thank you so much for being here.
Martin: Thank you for having me.
Yeager: Good to have you here.
And next week, not next year, she'll be back
before next year, we do want to thank you for
watching and we do want to let you know that next
week Delaney Howell will return.
Yes, she will be back from her academic endeavor that
she's doing.
We're also going to have Darin Newsom here and
we're going to talk about the Canadian dairy
industry and how it manages to stay in the
black.
So, for Sue Martin and the rest of the crew here at
Market to Market, have a safe and great holiday
weekend and we'll see you next time here for Market
to Market.
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