Yesterday afternoon I joined Tanner Winterhof and Delaney Howell on Ag News Daily to discuss the soybean, wheat, and corn markets. We also spoke about cattle prices, the war in the Middle East, the US dollar, and oil prices. LISTEN TO THE INTERVIEW HERE.
Tanner Winterhof: Today on Ag News Daily.
Darin Newsom: Including the grains and livestock sectors, are certainly watching what's going on over in the Middle East. If you pull the threads, where does it lead?
Tanner: Listeners, welcome back to a MarketMonday edition of the Ag News Daily podcast. Harvest is still on full swing. Delaney, we're trying to get-- I think there's parts of the state of Iowa that are trying to get wrapped up here before some rain comes.
Delaney Howell: I think you're right, Tanner, we're going to see some warmer temperatures for the rest of this week, too. That's certainly good news for folks trying to get harvest season done.
Tanner: It is for us, but there is freeze warnings in the forecast for North Dakota. There's also a chance of snow this week. We could see the first snow of the fall/early winter of 2023 as it comes. You're right, we're looking at warmer temperatures here in the Midwest that are going to potentially bring rain chances throughout most of this area. I think if you look at Iowa itself, majority of the state's looking at 30-40%, first half of tomorrow with a 70-80% chance tomorrow evening. It looks like warmer temperatures followed by a little bit of rain here in the Midwest.
Delaney: Absolutely. As we look at the week ahead of us here, it's also expecting to see some of the warmest temperatures here that we've seen in quite some time as forecasts are expected to be well above normal for the third week of October. The final full week here will bring above-normal temperatures across the Corn Belt. That's going to go into some dramatically colder temperatures following this final week here as we head into Halloween week, Tanner. That's going to be fairly chilly for folks, and certainly could make for an interesting harvest season.
As we think about harvest progress, Tanner, there was an interesting article on Successful Farming today, but Kansas is experiencing a lot of variability as far as yields go. The farmer that was interviewed in this article grows corn, soybeans, milo, and hay. He said his yields are really down after drought conditions impacted much of his operation. He said soybean yields are less than half of a normal crop and corn yields were predominantly below his average APH, Tanner. I think that story continues that we're hearing a lot of variability as far as yields go across the country.
Tanner: Yes, I had a conversation yesterday with a farmer in Nebraska that said their dry-land soybeans were anywhere from 6 to 20 and their dry-land corn was anywhere from 25 to 70. Either way, obviously being under pivot or in some type of irrigation benefited those acres quite well. Also saw a headline, Delaney, we've got our first bird flu outbreak of 2023.
A commercial flock, I believe around 50,000 birds, was cited to have avian influenza and infected by that transmissible bird flu in Buena Vista County, Iowa. That'll be something I'm sure we'll probably end up with another ticker that we'll keep track of again, Delaney, as to how many birds end up with this devastating flu.
Delaney: Yes, absolutely. I had not seen that headline. Glad you had that one, Tanner. As far as other headlines I do have, big news broke on Friday that the Navigator CO2 pipeline is no longer going to be in this calendar year or next calendar year, or any time in the near future. The company put out a statement on Friday morning saying they were canceling officially the 1,300-mile pipeline, Tanner, as they're experiencing quite a few different challenges across the space.
Less than two weeks after putting a permit on hold in the state of Illinois, they've officially canceled the $3.5 billion project, specifically stating in a company press release that due to the unpredictable nature of the regulator and government processes involved, particularly in the states of South Dakota and Iowa, they were not going to be moving forward with the project. Tanner, it sounds like the company itself is going to dissolve and is not something they're just pushing off into the future. It's completely off the table from what I understand.
Tanner: Yes, that's quite interesting. Obviously, not a good precedence for the other two pipeline companies that are trying to come across the Midwest. I'm sure there may be some more follow-up news as this story continues to break. We did get a headline from the Syngenta Group. CEO Erik will retire, but he will continue as an advisor and chairman of the board.
It looks like, Delaney, that he was in that role for almost eight years, and they've already got a replacement picked. Starting January 1st, Jeff Rowe, who is currently the president of Syngenta Crop Protection, Syngenta's largest business unit, will take that appointment. It looks like this was released on the 20th. Just recent news there to share, Delaney.
Delaney: Yes, absolutely. I had that headline as well, Tanner, but drawing in here some other news. We're back to the drawing board when it comes to getting a speaker inserted. We've seen quite a few folks vying for this position, and most recently, Ohio Representative Jim Jordan failed to capture the speaker votes needed during a third round of voting. He was at 194 votes in his third attempt, but he was in 200 votes in his first attempt.
He declined in votes as the rounds went on, but it's certainly a neck-and-neck race here as we see quite a few other folks vying for this position. Today is day 21 without a House speaker, and currently, nine lawmakers are in the race for this potential position. It's whoever gets to 217 votes first will win the gavel, Tanner, but it's certainly been a neck-and-neck race as we've seen lots of different folks vying for that. No clear winner as of yet or no clear path forward, but that's certainly going to impact other pieces of legislation, such as the farm bill. This was very quickly shot down, but House Agriculture chairman Glenn Thompson suggested to potentially cut $50 billion in other programs such as climate change and public nutrition to help pay for other top farm bill priorities such as crop subsidies and crop insurance. The proposal was very quickly rejected as you could have guessed, and a lot of folks pointed to long-running disagreements over the farm bill with time running out before the end of this year.
We still have no clear path forward as of right now and no new funding is available, so any initiatives are going to require some funding from elsewhere or offset in budget areas elsewhere. This is one of the largest, if not, I think, maybe the largest farm bill that would ever need to be funded in the history of the US, Tanner, so certainly isn't a positive step forward, but sounds like lawmakers are trying to get creative in where they find some of those dollars.
Tanner: Yes, it's going to be an interesting fallout because you're missing deadlines. I assume the next deadline that is looming is going to get missed as well. Last headlines that I had is, there is no ceasefire going on in Israel. Israel's military ramped up its aerial offensive against the Hamas group. There are more than 5,000 confirmed deaths in Gaza, 20 more trucks delivered vital humanitarian aid, coming from Egypt into Gaza. However, doctors are unable to use morphine and painkillers due to the lack of critical medical supplies.
We're continuing to see what the US's role may be in this conflict. The defense minister said it's preparing for a multilateral operation, air, ground, and sea to try and wipe out the Hamas, but that's what I had for headlines today.
Delaney: I have just a few other headlines here, Tanner, as we think about heading into the market section. Here's a fun piece of news for our listeners today as we now have seen four new individuals earn the title of Bin Buster for the National Wheat Yield Contest.
On Monday, the National Wheat Foundation announced this year's top wheat-growing contestants, and those included contestants in for main categories, Chris Gross of Reardan, Washington earned the overall award,
raising irrigated hard red winter wheat that yielded 211.98 bushels per acre, the second highest yield recorded in the contest's history, Tanner. That was an exciting one there.
Tanner: Yes, no kidding.
Delaney: I think folks will be happy with corn yields that high, let alone wheat. The next category was dry land winter wheat, that came in at 173.7 bushels per acre with Dick Judah of Hillsboro, Oregon. As we look at a few other awards here, yields ranged across the board from 170 to 129 in the lowest category. All in all, some pretty aggressive yields coming out of wheat country.
The last piece of news here I'll wrap up on as we head into chat markets was the release of the October Cattle on Feed report, which came out, of course, Friday afternoon after markets closed. As we look at Friday's inventory of cattle, we saw that for feedlots with capacity of 1,000 head or more, that totaled 11.6 million head as of October 1st. That's one percentage higher compared to October 1st of 2022.
As we look at inventory altogether, that 11.6 million number included about 6.95 million steers and steer calves, which is up slightly from the previous year. That group alone, the steer and steer calves, accounted for about 60% of total inventory. Heifers and heifer calves were also up compared to the year prior. Last thing I'll share here is placements and feedlots during September totaled 2.21 million head, which was 6% higher than 2022. All in all, they're a fairly positive report as you think about the number of livestock we have on feed here in the United States, Tanner.
Tanner: Yes, very good. Where are markets closing out at today?
Delaney: Great question. As we take a look here at markets heading into the final bell, December corn closed four and three-quarters cent lower at 4.90 and three quarters. Soybean's down 15.5 cents today to close at 12.86 and three quarters. December hard red winter wheat up half a cent at 6.70 and a half. December wheat in the Chicago contract up a penny at 5.87. Spring wheat in the December contract added eight pennies today to close it.
Folks, as promised, we're chatting today with Darin Newsom, the Senior Market Analyst at Barchart. Darin, thanks for joining us today. Excited to chat markets.
Darin: Yes, I always look forward to visiting with you, Delaney, and there's certainly been a lot going on.
Delaney: There is. I don't even feel like I fully know where we should start. Livestock had an ugly day today. We continue to see the risk sentiment from the Israel-Hamas conflict. Interest rates, where do you think we should start, Darin?
Darin: Yes, I think right now, the markets in general, including the grains and livestock sectors, are certainly watching what's going on over in the Middle East. If you pull the threads, where does it lead? How much worse is it going to get? It seemed like, the safe haven markets going into this past weekend, gold and crude oil were expecting Israel to invade and it didn't happen. They backed off at least initially here on Monday. Everything just kept falling now that I look at it. Everything seems to be on pins and needles. We've got that going globally. We still have Russia going on with Ukraine. Then here domestically, we've got the FOMC meeting next week. The dollar, I haven't looked up all of the news, but the dollar took a beating today. It was much weaker.
Some of it's end of the month coming up. Some of it's the FOMC meeting on October 31st with an announcement coming out on the next set, what's going to happen with interest rates on November 1st. Any avenue we could possibly go down, there's just so many things tugging on markets at this time.
Tanner: Yes, that's going to be the biggest thing right now overhanging everybody's head is the number of things that could go wrong. You mentioned a weaker dollar. Isn't that typically a positive move for commodity prices?
Darin: In general, if you were to ask an economist that question, which I am not, and Delaney knows me well enough, I take great pride in not being an economist, they would say yes, that's a deciding factor. I don't think that it is. It can at times direct the flow of money into commodities. If you see the dollar getting strong, then you see money coming out of commodities. If you see the dollar weak, then it's supposedly a buying opportunity.
There's too much going on globally right now to really say, "Look, these investment traders are looking at the strength and their weakness of the US dollar." I think there's too many other things that we have to take account of; the politics, the wars, the military moves, all of these things. It makes that connection between the dollar and commodities themselves a little weaker.
We can see days like today. It's hard to call it a risk-off day. I really don't know what to call it because I don't think there's any less risk as we head home Monday evening than there was Friday afternoon, but if you were to look around the marketplace, it certainly looks like that's the case.
Delaney: Yes, it does. You mentioned crude oil was slipping today, the dollar, et cetera. As we look at today's market price action, Darin, I definitely want to spend some time touching on-- I'm going to switch things up, be a little unorthodox here. I know grain is really more of your forte, but just the ugly sell-off that we've had now for multiple days in the cattle complex. Limit down days, a couple of them now expanded limits today. What is driving this move lower?
Darin: Yes. today was-- Probably bloodbath isn't the right word to use, but it was a train wreck today. It didn't matter. I guess the interesting thing is hogs held together relatively well. If we look at the cattle market, 99.9% of the industry is going to say, "Oh, this is a reaction to the Cattle on Feed report." Those numbers were as of October 1. We could see the size of the cattle being placed, the number of cattle being placed during September. If we looked at future spreads, deferred future spreads, particularly out in the Feb-April, we could see what the Cattle on Feed were by looking at the Dec and Feb spreads, and then what was being marketed with the October futures themselves. There wasn't any huge surprise. The placement numbers seemed a bit out of line. Was that the catalyst? There will be some that say it was, and it certainly looks like algorithms could've been triggered based on headlines associated with last Friday's Cattle on Feed report. We have to remember, live cattle had moved into a downtrend on weekly charts to begin with a number of weeks ago. Non-commercial traders were still holding a net long-- in the last CFTC commitment to [unintelligible 00:17:02] trade support, legacy futures only, the only one that counts, they were still net long over 78,000 contracts.
All of a sudden, you've got this large net-long position. You've got headlines that aren't bullish. You've got a boxed beef market that's not weakening, but it's not strengthening. For months, we've been talking about how live cattle, in particular, just look top-heavy. They've run out of gas. Who's going to buy live cattle up in the 180 to 190? Theoretically, if we look at price distribution, it's just way out of scale.
All of these things have come together. We gap down, we go limit down. Once these things start to slide, nobody's going to step in and start buying and it just builds on itself. The easy answer is, obviously Cattle on Feed. The reality is there was a number of bearish factors in play, including just being overpriced with an already large fund position, a fund-long position.
Tanner: Yes, and I'm glad that you explained that because I think my initial reaction was the report as well. Let's jump back into the grains. What are we seeing here for this week coming up? What should our listeners be paying attention to?
Darin: The biggest thing that we've got, coming up here in the-- it's just a carryover. We do have delivery against the November contract coming up next week. Again, if we just look at nothing more than just a technical side, Novabeans went into an intermediate-term uptrend a couple of weeks ago. On its weekly chart, still showing an uptrend, but late last week, it got a little bit overcooked, a little bit overpriced, not overpriced, but overbought on its short-term daily. What we're seeing here is just a continuation of what we saw at the end of last week with some contracts being sold, knocking the market back down, all perfectly normal within-- it doesn't change the uptrend unless we blow out the previous low. To me, it just looks like some money moving around. We know harvest is still going on. We've got decent demand popping up, seasonal for soybeans. We saw some big export inspections number on Monday morning. Again, this is seasonal, so it's nothing hugely surprising. Basis is still neutral, but firming.
In the corn market, it was interesting. We saw it blow past $4.99 and $5 late last week, couldn't get through $5.10. At Friday's close, we had fallen right back into that sideways trend that we've been in for months. To me, so far now, we could still call it just a sideways trend. We blew out the bottom, we blew out the top, and we're still where we were before. There's nothing going on in the corn market at this point. All eyes are on soybeans. Again, really the only play that I see is that we've just got some long liquidation, similar to what's going on in cattle. We just have some very short-term, long liquidation going on in soybeans.
Delaney: Yes, I appreciated your tweet this morning looking specifically at corn and the National Corn Price Index because it sounds like you're posing there still could be some bullish potential here as we wrap up and head into, like you said, delivery dates, rolling over to a new contract month. Walk us through why you think there's some bullish potential still.
Darin: Yes, again, if I just set the fundamentals aside, and I just look strictly at the technical picture, and I look at the long-term monthly, which is what investors might be looking at. In September, we saw the cash market, the Barchart National Corn Price Index, the intrinsic value of the market, just collapsed to a new low for this move. I think it got down to about 442, just a little above that. This month, it set a new low down about 441.5. We took out last month's low, and then we've rallied.
Now, if we close higher for the month, a technician or an algorithm is going to look at that and say, "Look, we've got a bullish spike reversal possible here," and that's on the long-term monthly chart of the intrinsic value of the market. From a technical point of view, and also the market's sharply oversold, we've got stochastics in single digits. All of these things are just mumbo-jumbo, but it tells us it's oversold. It's telling us that we could see a bullish reversal pattern on the monthly chart, long-term monthly chart, and that could bring some money back in. It could be indicating that demand for US corn is getting ready to pick up again because again, this is the cash market where we're seeing these signs.
Delaney: Just to jump in a little bit more about the cash market side of things, Darin, I know you track basis really closely across the country as well. Typically, during harvest, we see basis weaken a little bit. Are we seeing the same trends follow? Are there any areas in the country that are standing out to you right now of having unusual basis for whatever reason?
Darin: Yes, we're actually starting to see some basis in the Midwest actually start to firm because these bushels are getting tucked away. One thing US producers like to do is to not sell corn. Once we get the initial rush of harvest, so let's say once we get 25%, 30%, maybe a third of the way through harvest, those bushels were either contracted or sold, or they get sold across the scale, and then things start to get tucked away.
Merchandisers actually have to start pushing the market a little bit, and that's what we've seen. Historically, basis starts to flatten out in here and maybe start to strengthen against the December contract to the end of November. Not a lot, but just a little bit at a time. That's what we're seeing. the last couple of weeks, looking at national average basis, which takes everything into account, we've seen quarter-cent improvements.
It doesn't sound like much, but it's still interesting to see because I know, there are parts of the Midwest where we're seeing much stronger basis, and now we've got to go to the parts of the plains where the crop's been better than previous years, and basis might be weakening a little bit, a little weaker than it's been the last couple of years where they were a corn deficit area.
The net result is we're still seeing basis firm a little bit. It's weaker than it was last year, but we were basically out of corn at this point last year. We're seeing it firm a little bit, perfectly seasonal move. Now, we just have to see that demand continue to firm. If it doesn't, then I would expect basis to start to tumble again.
Tanner: I really appreciate this conversation. I enjoy MarketMondays, but I'm learning quite a bit today. Before we wrap up, is there anything else you'd like to share with our listeners?
Darin: Yes, again, I want to go back to one of the first things we talked about, and it's something that-- I know all the financial media companies and everything that they're talking about, next week's meeting, and I do think it's important, but what we have to keep in mind, this is about the FOMC. If the Fed raises rates again, it's not going to be the shock and surprise that everybody wants to talk about.
Let's remember, Chairman Powell said in June, after the June meeting, that we should expect at least two more interest rate increases in 2023.
We got one in July, we didn't in August, we didn't in September, so now we're at October, November, and there's only one meeting left, and that's the December meeting. There's at least a 50-50 chance that we see another increase. Will that send markets flying apart? It shouldn't because it should be factored in. For those paying attention, it should be factored in. If it doesn't happen, then it really puts the spotlight on December. The one thing that I really like about what the FOMC has done the last number of years is that it front runs these announcements. It tells you what the game plan is. It tells you what the moves are basically going to be well in advance to bring down as much of the chaos that folks try to create in these markets. It removes a lot of that uncertainty by basically laying out step for step what should be happening.
Delaney: Fantastic. Darin, well, for folks who want to pick your brain a little bit more or follow along with some of the great commentary that you share on Barchart, how can they find you?
Darin: Yes, two best ways to find me are go to darinnewsom.com, our own website, go to the services page. You can sign up for a free trial and see what I talk about, see how I analyze things. Also, go to barchart.com, go to the News and Authors page, and you can certainly find me. You can find all of the different articles and analyses that I've put up on Barchart and you can go through it. You can follow along and I'll be posting new pieces. Two best ways to find me is our site and our personal site, and certainly, barchart.com.
Delaney: Fantastic. Darin, well, thanks again for joining today. I certainly appreciate it.
Darin: I appreciate you guys having me on again.
Tanner: I still think it is one of my favorite days of the week, MarketMonday, getting us a good kick-off, things to watch. Thanks again to Darin for hanging out. We'll be back again tomorrow, listeners, so don't go too far. For today, Delaney, what do you say? Should we let the listeners go?
Delaney: Let's let them go.
More Grain News from Barchart
- Corn Continuing Lower into Tuesday – Harvest @ 59%
- Weaker Wheat Trade into Tuesday
- Soy Turns Around on Tuesday, Harvest @ 76%
- Soybeans Fall Into the New Week
