This morning I was interviewed by Michelle Rook, on AgWeb's Markets Now. We discussed the wheat, soybean, and corn markets. I also answered her questions about cattle markets and crude oil. WATCH THE INTERVIEW HERE.
Michelle Rook: Welcome to Markets Now. I'm Michelle Rook with Darren Newsom, Senior Market Analyst with Bar Chart. We are seeing mostly lower prices on the ag markets this morning. Exceptions would be wheat and some of the deep deferred hogs. Darren, I want to start off just talking about exports this morning, first of all, because we had marketing year lows for both corn and soybeans. Do we need to read into that much because it was a holiday week?
Darin Newsom: Yes, just from the weekly numbers, I don't think we can read a lot into it. As you said, it was a holiday week and we could expect the same in next week's reports as well. I think if we look at the sum total or the marketing year totals at this point, I think that's where we really see some interesting numbers. Looking over at soybeans, so many folks in the industry want to talk about how bullish U.S. exports of soybeans are going to be. Total sales are still running 16% behind last year. Total exports are running sharply behind. The pace projection is running sharply behind last year as well and losing ground every week. Now, some of this is due because we don't have as many soybeans. Again, if we look at our available stocks to use at the end of December, it looks almost like we have double what we had the same time a year ago. That's available. It tells me if supplies are down, demand's down even more. That just hasn't come back yet. All of those waiting for China just to load up everything and save the U.S. market, it's just not going to happen. As long as they can pull soybeans from Brazil, they're just not going to step in and say, look, we're going to offer you a lifeline.
Michelle Rook: Yes. Conversely, wheat shipments have been running actually a little bit ahead of last year, haven't they?
Darin Newsom: They have. We're seeing some better exports in wheat and right now total sales are 2% above where they were the same week last year. Again, we have to remember what we're comparing back against. Last year was horrible for U.S. wheat shipments out of the U.S. So the fact that we've got a little bit of business going on, it's still not great. Basis is still a train wreck across the board, all three major markets. The bottom line is exports are a little bit stronger this year than they were last, at least as far as total sales go. We'll see. We'll see if we can build any bullish excitement in here.
Michelle Rook: All right. Let's pick some of these apart here. First of all, soybeans. New lows for the move again this morning and obviously we've been reacting this week to some rains in Brazil and some in the forecast. Technically, we have beat the market up. How much lower do you think we need to go here?
Darin Newsom: From a technical point of view, we can make the argument this market is oversold. We've got daily, weekly and monthly stochastics now below the oversold level of 20 percent. If we just view it as a weather market and all of a sudden Brazil, it's the equivalent of early July in North America across Brazil right now. Some of the key growing areas seem to be getting some rain. It looks like from a fundamental point of view, at least weather wise, if these are weather derivatives, there seems to be more room to the downside. We've gone to new lows for this move this week. We left a we left a six cent gap on most charts, weekly and daily charts. There is pressure coming into the market. Fundamentally, if we look at our fundamental reads, national average basis is average at best compared to weekly close only. Again, nothing spectacular there. The outlier is future spreads. We continue to see both the March, May and May, July spreads covering less than 32 percent calculated full commercial carry. That's a bullish read. It was earlier this week with Jan in delivery that Jan moved into an inverse versus March before backing off. A lot of interesting things going on, different fundamental reads. Technically, yes, certainly looks like we've got more downside.
Michelle Rook: The wheat market, Chicago wheat yesterday actually had a bullish outside day higher. Do you think we can keep that momentum going? What is driving the wheat market right now beyond this talk? we've had this lower dollar maybe helping out a little bit.
Darin Newsom: I don't know how much the dollar actually comes into play with grains these days. yes, wheat always faces the fact that, you can grow it anywhere in the world, it seems like. There's always plenty of competition. Sometimes it does come down to currency. I think politics, global politics are a much more important factor than currencies. Now, what I find interesting about particularly the Chicago wheat market is that on the days when it rallies like Thursday, when we see the market close higher, total open interest in the market continues to come down on the days it sells off. Total open interest continues to go up. I think it was Wednesday when the market sold off. We saw Chicago open interest increased by sixty six hundred contracts and decreased by about three thousand contracts on Thursday. This just tells me that funds are still playing in the market. There's not a lot of fundamental change in Chicago wheat at this point. We do have funds playing in the market. They're covering shorts. Just over a month ago, they were net short. Ninety seven thousand futures contracts. That's been trimmed to about thirty one thousand. It'll be interesting to see the next round of CFTC reports to see what they have to say. They have trimmed their position. Fundamentally, the market just hasn't changed all that much.
Michelle Rook: Okay, so you think a lot of it is just short covering that?
Darin Newsom: I do. Yes, that's a much shorter way of answering my very long or very long answer.
Michelle Rook: Same is true for corn. the question is the corn market just following wheat? Is it following the crude oil market or is this just short covering? Because we made contract lows earlier this week and the funds are really short.
Darin Newsom: I think what we could be seeing in the corn market is more of a seasonal move. I went into I went into Thursday's close thinking corn was just following wheat until I got to looking at the again at the open interest numbers and where wheat was dropping off because of short covering. Corn was actually adding I think it added something like twelve thousand seven hundred contracts as it was able to close like a penny and a quarter higher. That was interesting to me. The last two days it's rallied, it's added contracts. It looks to be more of a seasonal move. Bends are probably still locked up tight here this winter. Nobody's interested in the in the cash price at this point. Much like we saw a decade ago when the cash index posted a low monthly close in December 2013 and rallied up through April 2014, we could see something similar. I'm not a big believer in analogous years, but the patterns look similar. If Ben's stay locked up tight and we're able to, rally the cash market up through at least planting season, then vendors might open again and that could drive the market back down
Michelle Rook: heading into the summer. Yes, and that's interesting, Darren, because usually after the first of the year we get some sort of cash movement in corn because of, maveraging tax needs, cash needs, that sort of thing. Interesting. Okay, cattle market. We have been basically consolidating since the big update on Tuesday. It looks like the lower boxed beef values are winning out over some of this higher cash trade that we're
Darin Newsom: hearing. I think so. This boxed beef market is really interesting. I know that's a huge topic of debate is how important boxed beef is. To me, this is a reflection of demand for the product coming out of the plant. What we're seeing is the choice market is just collapsing this week. It was under pressure late in December as well. We're seeing continued pressure in this market. It's dropped something like twelve, thirteen dollars just the first few days of 2024. If we use this as an economic indicator, it is not a bullish sign for, the labor market here in early January, certainly indicating that demand is going away from the higher price cuts of beef and going back towards the cheaper cuts of beef, hamburger and so on that we're seeing in the select market. Select is down, but nowhere near to the degree that we're seeing in choice.
Michelle Rook: Okay, it's interesting that you mentioned that as we speak, let me get to a two shot here. As we speak, cattle are trying to come back here, but it's been a tough lift here. It seems like we'll see if we get any more cash trade to help support the market today. Let's talk about crude oil. We, briefly dipped under the $70 mark, but now are we back building some Red Sea premium or what has the crude oil market hired the last couple of days?
Darin Newsom: I see a couple of things going on in crude oil. Yes, we're going to be getting headlines. there's always some sort of fundamental headline that supposedly drives crude oil. The bottom line is, seasonally, this is just a time of year for crude oil to go higher. If, again, we look at the long term monthly technical chart, we see that it's still in a five wave uptrend. The recent three month sell off fits perfectly with that same pattern. Now we would expect, buying to come in. crude oil tends to rally, say, from mid-December up through early July, something along that line. We're just at that point when the market should start taking off. It could start to attract some investment money, particularly if grains aren't going to do anything. It could certainly draw some money away from there. If U.S. stock indexes start to stall out, they may be looking for some commodity plays again. Seasonally, it certainly looks like the energy sector could be appealing.
Michelle Rook: Okay. Thanks for joining us this morning, Dean Newsom, Senior Market Analyst with Bartrett. That is Markets Now.
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.
