In my recent interview with Michelle Rook of AgWeb's Markets Now, I discussed why we're seeing the prices of corn and soybeans slide, the outlook for wheat, the surge in cattle prices, the declining prices for hogs, and my outlook for crude oil. Watch my interview here.
Michelle Rook: Welcome to Markets Now. I'm Michelle Rook along with Darin Newsom, Senior Market Analyst for Barchart. We ended Friday with the livestock futures mostly higher except for some of the deferred hog futures over in the grain trade, mostly lower except for a few week contracts. Darin, let's start off talking about corn and soybeans. Was this mostly a function of just some improving weather, or was this some profit taking, or what?
Darin Newsom: To me it looks like it was very low-volume trade on Friday so we didn't see a lot of interest in the way the markets were moving. I think it's a little bit of everything you mentioned. We've got the Goldman roll starting early next week. It's going to be moving and that could cause the contracts to move as well but we've also got weather, and as we come out of the holiday, there's going to be a lot of interest in what the extended weather forecasts are, and right now they look more beneficial for both corn and soybeans. From a technical point of view, these markets are both in long-term downtrends, so nothing's really changed there. As we look at monthly charts, they just keep grinding lower until there's some reason for traders to step back in and buy.
Michelle: Let's talk about the technicals here. First on soybeans, because I think we've got May beans back below the 100-day moving average, but back below $15 here. Do you see a little bit more retracement in that market yet?
Darin: I think so, yes. I think there's still some room to go down. As we closed out the week, we saw pressure coming from both non-commercial and commercial traders, and it was probably the latter that might have been more interesting but again, you can't get too far ahead of ourselves because we were just seeing the May-July [unintelligible 00:01:40] almost 40-cent inverse.
The fact that it gave some of it up back, some of it back late in the week, not a huge surprise. What we have to watch for is continuation of that. If we see basis weakening and these spreads starting to weaken, then there is going to be a concern that the old crop market simply has run out of gas, and that does open the door to some more downside room technically on the charts.
Michelle: Now May corn, back below the 650 mark. I think we've taken out the 100-day moving average there as well. Are we going to continue to slide in that market?
Darin: I would think so, yes. Again, for the same reasons that we talked about, fundamentally the market is still bullish. We know that we've got inverted spreads, we know we have strong basis, but the most recent export sales and shipments just show we're not making any headway when it comes to shipments. We're still 34% behind a year ago what we shipped. There's a lot of work that has to be done, and I just don't know that we're going to have time or available bushels to get it done.
Michelle: No doubt. Soybean exports. We didn't talk about that when we were talking about soybeans, but those have slowed down quite a bit too, haven't they?
Darin: They've slowed down quite a bit. If we believe the pace projections that we put together every week. We're still running 3% of head, but total sales have slowed down. Weekly shipments that we see have slowed down. It would not be too surprising to see us move back to par with last year and possibly start to slip a little bit behind.
Michelle: We do have lower weekly closes for all three wheat exchanges. Minneapolis wheat got hit the worst despite a 50-year low in spring wheat planting intentions up in that area. Doesn't feel like this market really wants to keep any weather premium in it.
Darin: Yes, it was a bit of a surprise because everything we hear from the northern plains, there's still feet of snow across much of the area, so planting is just a distant hope at this time. We'll see if anything happens in April, maybe May. We're already expecting fewer acres. We already know that the long-term fundamental outlook's still bullish if we look at inverted spreads, but there's just no one interested in buying Minneapolis wheat at this point.
Michelle: HRW isn't much better. You get a 28% rating on the winter wheat crop, which is historically low. HRW really doesn't want to put weather premium in either though, does it?
Darin: I think the reality is most folks know that those crop condition numbers are just completely made up anyway. We've known for quite some time that the hard red winter crop is in trouble. Again, if we go to the July-September, July-December spreads, they're inverted. We know the commercial side's looking at a small crop already, and we're just in early April. Right now, again, traders just are not interested in buying wheat. They know that even when it's dead, it's going to produce something.
It's almost like they're taking a wait-and-see approach to this.
Michelle: It's been a tough market. Now, on the flip side of that, cattle had a stellar week. New contract ties in both live and feeder cattle futures on Friday with some record cash up in the north. How far do you think we're going to push this thing with these tight supplies?
Darin: Impossible to put a top on this thing right now. A couple weeks ago, it looked like the futures market was trying to top out and then we switched right back to where cash was the leader. As you mentioned, cash has gone to record levels. As long as the cash market's wanting to push this thing, it's impossible to tell really how high it might want to go. I still don't see it as a tight supply situation yet. I think one could be coming down the road.
If we look at the April-June and June-August spreads, they're certainly not indicating a fear of running out of cattle anytime soon. To me, this is more of a demand issue. We look at the boxed beef, again we look at the cash market, and everything's telling us that we've got incredible strong demand as we make our way through spring and into the grilling season of summer.
Michelle: I'm with you. We're not even into the tightest supplies yet. Hog market, we had a very strong marketing year high for exports this morning. China was a big part of that, but we didn't get much reaction in the board again.
Darin: Very difficult to find anyone willing to stick their neck out on the hog market right now. Every time it tries to rally, even if it's just for a day or two, the bottom just falls out of it. We've seen it time and time again over the last number of weeks. It occurred a couple of times this week as well. As we headed into the weekend, yes, there was a little bit of buying if it carries over into next week. I still think there's a bit of concern about the tensions between the US and China. Much of it's probably being overplayed at this point, but I think there is that concern in the back of everyone's mind. Again, just keeps the buyers out of the market at this time.
Michelle: New contract low in June. Hopefully we're going to get rid of that situation pretty soon. Let's end on crude oil because we had the gap higher after the OPEC Plus cuts. Talk about what the chart pattern looks like, now and if we're going to keep going higher.
Darin: This is something I've been talking about on social media and so on. I've been doing this for 35, 40 years and I've never seen a pattern like this. As you mentioned, we gapped $5, $6 higher on the open Sunday night, and then all day Monday, Tuesday, and Wednesday, and Thursday, the market just didn't go anywhere. It had just flatlined and it's consolidating.
It's almost like it's just stuck in a very tight range after posting that gap. Could we go $10 up? Sure. Could we come right back down and go $10 lower? Certainly. There's just no real way of telling where this thing might want to go. I think a lot of it's going to have to do with what's the next headline, but it's fascinating to watch, particularly the longer that it sticks in this area.
Michelle: I know, but crude oil overall has been kind of a poor performer compared to expectations, hasn't it?
Darin: In general, it has, yes. We saw a lot of money move out of crude oil over the last couple of months. Again, as we head into the summer driving season, we're starting to see some commercial buying coming back into the market. It is still fundamentally bullish long-term. It would not be surprising to see some investment or some fun money coming back in as well. It looked like it was going to happen this week, and it just hasn't been done it yet.
Michelle: All right, thanks so much. That is Darin Newsom with Barchart and 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.
