The grain market started off the week with some helpful estimates coming out of the USDA’s World Agricultural Supply and Demand Report, which showed lower stocks for corn and soybeans. That could be thanks to continued strength in the export market, according to Randy Martinson, president of Martinson Ag Risk Management.
He discussed the ups and downs of the week with Randy Koenen of the Red River Farm Network during the Agweek Market Wrap on Friday, May 16.
Headlines of the week added volatility including news of biofuel-blending estimates, weather and strong export demands.
Koenen said export sales have been stellar. Martinson agreed that it was unexpected how much soybean demand there has been.
But what keeps a lid on U.S. corn prices seems to be the impressive crop expectations in South America. Reports from South America are that the crop is getting even bigger than expected.
For the wheat side, the Wheat Quality Tour in Kansas showed a good winter wheat crop in the making. Martinson said the southern Plains has a good crop but not great.
All these factors are at play, yet it seems the market remains range-bound, according to Koenen. Poor weather conditions could bring about a change in this market, Martinson said. After intense heat, now comes a stretch of cool weather.
“So if that lingers longer than the seven to 10 days that's in the forecast now, which would take us to almost to the end of May, you know, if that lingers into June, that's going to start to turn to be friendly, because all of a sudden we're losing growing degree days,” Martinson said.
While some talk of growing degree days are already coming up, parts of the northern Plains, mainly those along the James River Valley in North Dakota, are struggling to get seed in the ground. This could be an area that sees some prevented planting, as some areas there have not been worked yet.
Overall, weather could be a big factor looking ahead, as stocks are much tighter than first expected.
“So if we lower that yield at all, that certainly is going to be supportive,” Martinson said.
Livestock topping
Martinson thinks the cattle market is likely at its top. He does not think this means the market will go straight down from here, but some retracement is needed.
Demand remains strong, supplies remain tight and cash is still holding a premium looking ahead. News of the New World screwworm moving north in Mexico is another shot in the arm for the cattle industry, as it closed the border for cattle movement. That’s about 100,000 head of cattle each month that aren’t coming to meet the U.S. demand.
Looking ahead, Martinson said as the cattle market falls below $300, it opens the market up to a downside for feeder cattle. To fall below $285 in the front months could cause the market to sell off.
Lean hogs have reached above $100 per hundredweight. That’s a good sign and one that indicates demand. Talks with China are helpful to that market, as it is hoped that China will buy more U.S. pork.
Koenen brought up news that Brazil confirmed its first case of avian flu on Friday. China is now restricting chicken imports from Brazil. Martinson predicts that the news could help sell more pork to China in the absence of some of the chicken imports.
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)