Today I was interviewed by Bryce Doeschot on Market Journal. We discussed the corn, wheat, soybean, and cattle markets. My interview with Bryce begins at minute 11:26 of the show. WATCH THE INTERVIEW HERE.
Bryce Doeschot: Up next, let's talk about the latest activity when it comes to the grain market. Darin Newsom, senior bar chart analyst, is joining us today. Hey, Darin, thank you very much for the time.
Darin Newsom: I appreciate you having me on again, Bryce.
Bryce Doeschot: I hope you're having a good spring as we take a look at these markets. We begin with the corn market. On Wednesday, you summarized things saying the corn market might as well have been closed all day. That's a blunt way to put things.
Darin Newsom: Yes, it's going nowhere fast. there's a phrase I like out there. It's been used by a number of folks over the years, sharply sideways. That just seems to be what corn's comfortable doing right now. It doesn't have any reason to go up, doesn't have any reason to go down as far as the old crop market goes. We've seen basis a little bit, but we still have ample supplies to meet demand. We just have merchandisers pushing the cash market a bit, knowing producers are going to get pretty busy out in the field, so they're not going to be delivering as much to town. Most of the activity has been in the basis market. Futures just more than happy to go sideways right now.
Bryce Doeschot: Regular viewers know that we'd like to solicit questions here on the program. We had several of them come in, one on the soybean front, Darren. Somebody just asked, what's going on in the soybean market? Let's take a look at the chart. It's in that sideways trend, but generally trending lower. Your thoughts on soybeans?
Darin Newsom: Yes, it was interesting. I posted a chart of the day on it Tuesday afternoon, and when I started writing my piece, I was talking about how this old crop market was still in an uptrend, but then as I took a closer look at the chart, I think you could actually make the argument that the market is still in a downtrend, and this fits with what we see in the National Soybean Index, which is the national average cash price. If we go back a year ago, it completed a technical pattern on its monthly close-only chart, meaning its long-term downside target was $10.25. Tuesday evening, the index was priced at $10.90. We've still got some room to go down in the cash market, and if that's the case, I think it bolsters the argument that old crop soybeans still look like they've got some room to go down.
Bryce Doeschot: I've got a question to ask you on the wheat front, but first your general thoughts on the wheat complex.
Darin Newsom: Wheat is all over the place right now, and I think as we look at what's been going on in the winter markets, particularly in the new crop future spreads, we're seeing the commercial side getting more bearish, and so the bottom line is they're growing more comfortable with 2024 production, both hard red winter and soft red winter, certainly ties into some of the rain events that have moved through, some more that are expected this upcoming weekend and early next week. We'll see how all that plays out, but right now as we look, again, at the Kansas City and Chicago spreads, they're both covering bearish levels of calculated full commercial carrying. It just isn't going to allow these markets to move very much, to rally much, and any time they do see attempted rallies and buying interest come in, they're going to be met with pretty heavy selling.
Bryce Doeschot: Scott Rodin this week on the wheat front, looking at a historical context, the last 10, 15 years of the wheat market here domestically. It is curious your thoughts on where the U.S. as a wheat producer 10 to 15 years from now. a big picture question, Darin.
Darin Newsom: It is a big picture question, and if I go back 10, 15 years from previously, the idea was wheat was going to lose a lot of ground to corn, everything was going to go into corn because that was about at the boom of the corn market. I guess that was almost 20 years ago now, but the ethanol demand. If we go 10 years in the future, I think wheat's still going to be hanging on. I still don't think the U.S. is going to be planting as many acres. I think we're going to continue to see that decline. The biggest thing is, then it's going to come down to where is their water? Is there going to be water to continue to support more corn and more soybeans? Are we going to see, if there's not enough of that, there's not going to be enough water for cotton. That's going to be the one saving grace for the possibility of more wheat acres. The problem is, the world just doesn't seem to want U.S. wheat supplies at this point unless there's some sort of critical shortage around the world. They're just not interested in buying from the U.S. Yes, that's an interesting market to follow.
Bryce Doeschot: Anything on the livestock front when it comes to hogs or cattle that's piqued your interest over the past week? Yes, I think what's really
Darin Newsom: jumping out to me here is that there's a lot of inconsistencies on the commercial side, particularly in the live cattle. one day we see the commercials buying, we see the future spreads moving with nearby contracts gaining on deferreds, but they just can't keep it going consistently. By the time we get to the next day or the close of the next day, that sort of support, that support has evaporated and been replaced with some pressure. All of this lends itself to the idea that the market is probably topped up here and that, the longer term trends are down and we'll probably see these markets continue to go lower. I say probably because when it comes to cattle, sometimes you have to hedge your bets a bit. Fundamentally, they haven't changed all that much. There's still talk, we've got tighter supplies. We still have good demand. We can see that in the box beef markets, but just from an old, just the market overall just seems a bit top heavy up here. Seems like it has an easier time going down than up.
Bryce Doeschot: Darin, you're up in Omaha. I'm broadcasting from Lincoln. Feel the need to mention that because about a week or so ago, I guess probably more at this point, I could hear the groans and the sadness coming from your house as USDA came out with an announcement. The survey division saying they're going to stop several reports. Say that very sarcastically. A lot of our, I think all of our viewers know how you feel about USDA reports, but in particular, seems like the folks in the cattle side of things were particularly disappointed about the July inventory report being discontinued. Tell us, why does that not matter?
Darin Newsom: Simply all we have to do is look at the markets. let's look at, let's look at what the June, August, October December spreads are telling us. We can read everything we need to know about inventory there. If we combine that with what we can read in the feeder cattle spreads as well and the feeder cattle markets. all of the information is in front of us. We don't have, what we won't have is the made-up numbers because we all know those numbers aren't real. They just come up. Economists just come up with them from somewhere. The numbers aren't real. If we want to understand real supply and demand, real fundamentals, it's all right in front of us in the markets. We can look at basis. We can look at spreads. We can see how money flow is coming into or out of the market. That's all we need to know. understanding imaginary numbers really doesn't do anybody any good. All the hand-wringing and, rending of garments over the fact that USDA is going to drop some of these meaningless reports, I just don't get it. I just don't think they're that important to begin with.
Bryce Doeschot: I understand your perspective. That's why we have you on here. Darin, to get that few seconds to ask you your final thoughts. As we sit here, plenty really going to be ramping up over the next week or two. Your final thoughts?
Darin Newsom: Yes, I think it's going to be interesting to watch the weather here. Obviously here in mid-April we are just now turning the corner into, these markets are weather derivatives. Certainly, almost every conversation from here on out through December is going to start starting in with weather.
Bryce Doeschot: Thanks, as always, Darin, for joining us here on the broadcast.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
