On Friday I joined Michelle Rook on AgWeb's Markets Now. In our conversation, I gave my take on the recent action within the wheat, soybean, and corn markets. In addition, we talked about the cattle market and the stock market. WATCH THE INTERVIEW HERE.
Michelle Rook: Welcome to Markets Now. I'm Michelle Roque with Darin Newsom, senior market analyst with Barchart. Seeing a lot of green on the board on the grain side of things this morning. Hogs up, hitting more new contract highs. Crude oil is up. Cattle really one of the only places where we're seeing some red. Let's start off over in the grain complex this morning. We had a huge amount of demand that came at the market this morning. Mexico buying almost 31 million bushels of corn this morning. We also had some soybean business. Are we seeing the market reflecting that or is this maybe some positioning here with these grains higher ahead of the election?
Darin Newsom: I think it's a lot of different things, Michelle. You're right, I think some of it has to do with the uncertainty of the election. The global markets don't know what to make of US politics at this point. I get asked that all the time, what's going on and does it understand what's at stake? There's no good answer to that. We can look at the way global players are approaching this thing. We are seeing Mexico load up on some corn. Why? There's a threat of what? 300% tariffs and possible trade wars across the board with Mexico and other trade partners.
Yes, we are seeing some of the global players step in and are doing some buying. Again, we have no idea when this presidential election is going to finally be settled. It might not be till the end of December. It could be into January. Who knows? That's the US political system these days. There's a lot of uncertainty and traders, both commercial and non-commercial, just simply don't like uncertainty.
We also have low prices. It's something that we can continue to watch and monitor at the end of every day. I like to post an end-of-the-month look at national cash indexes and available stocks to use. The bottom line is the US still has plenty of grain on hand across the board in relation to demand. Buyers are going to look at that. They can see that prices are low, they can see that there's a lot of uncertainty, and they're going to get some coverage in place for Mexico. It's their primary supplies. For things like China with soybeans, it's their secondary supplies.
Michelle: If this is front loading, Darin, do you expect after the election maybe it halts, maybe we don't see it?
Darin: Yes. Particularly if it goes a certain way and one of the first acts is to start new trade wars or worsen the ones that are in place and put more tariffs on, then, yes, I think this could come to an end. I think it could come to an end quickly because, remember, these things all begin with executive orders. They don't have to go through any official congressional clearance or anything like this. Previously done on social media. It was announced on social media. That's how these things start. I think that global buyers are certainly aware of that and that it could happen immediately. Yes, I do think once the election, if and when it's ever actually decided, I think if it turns a certain way, yes, I think these sales will just shut off.
Michelle: We also should talk about as the broader context of geopolitical discussion, we're still watching what's going on with Iran and Israel. The energy markets have reflected that, haven't they?
Darin: Yes. It was interesting last weekend. Similar to today, we saw commercial buying going into the weekend due to the chance or the uncertainty of what was going to happen. Then we had Israel firing missiles at Iran, Iran getting upset and doing this sort of thing. Then when Monday came, Sunday night into Monday, we saw the crude oil market collapse. Again, just a sign of the times. The story that was attached to the selloff in crude oil was that not enough people were killed. That and enough supplies weren't destroyed, and so the market came down.
Fast forward to this Friday and it's almost a carbon copy. We see crude oil up a couple of dollars. We see commercial buying coming back in, why? Because we don't know what's going to happen this weekend. A lot of the global players need to see political change in the United States. They want to see political change in the United States. That's why we see violence. We see chaos ramped up every weekend ahead of the election. As you pointed out in the grains discussion, yes, it could carry over into post-election as well.
Michelle: No doubt. The other thing I would like to get into, we talked about demand coming at the market. Mexico in buying corn, China was in buying soybeans as well as unknown destinations this morning. Interesting that we saw India in buying, what? 30,000 metric tons of soybean oil. What's been going on with that veg oil market? Because palm oil has been hitting new highs. We've got bean oil hitting some new highs for the move above the 200-day moving average. Something's going on.
Darin: It's new demand. This is the sign of a demand-driven market. I've had this discussion with US producers. The evolution of the global diesel market is toward renewable diesel, and so vegetable oils across the scale, doesn't matter if it's canola, soybean oil, Malaysian palm oil, or palm oil from anywhere, these markets are seeing buying. If there's chances for a world buyer to step in and get some locked in, they're going to do it. Because, again, we can see this is the road that the market's on. This is the road that this particular aspect of the market is on.
We saw some soybean oil sold to India. Was I expecting on my bingo card coming into today's session was an export sale of anything to India? No, I didn't have that anywhere. They're part of the BRICS alliance. Why would they be buying? Of course, we've seen China in soybean oil or soybeans. We've talked about that. Now we expand that out to India buying some US soybean oil. Things are just going to continue to get more interesting.
Michelle: Yes, super interesting for sure. Weather, let's talk about that. We have some rains that are forecasted for the Southern Plains at the same time. You have the drought monitor, which is now expanded. We have a bigger portion of winter wheat country that is seeing drought versus last year. Is the market concerned about it at all?
Darin: Not yet, but I think it will be. As you pointed out, the latest US drought monitor basically is colored in from the East Coast to the West Coast north to south. As I pointed out yesterday in the discussion of it, it looks like a kid's placemat at one of the family restaurants where they provide crayons and coloring things. It is just completely covered in with a variety of colors. There really doesn't seem to be a lot of consistency. Here it's worse, there it's not, but the bottom line is almost from end to end, the country's showing some level, some reading of drought.
I do think it's going to be an issue. As we head into late fall, early winter, it's not first and foremost. With so many other things going on next week and this month, it's just not first and foremost on traders' minds. Now, that being said, I do think they're going to keep a closer eye on the developments in South America. In the Southern Hemisphere, this is the equivalent of May, and things start to get more interesting as we move into late spring, early summer. I think that's where the attention's going to go once we start getting towards the latter stages of winter here in the Northern Hemisphere. Then I think it starts to draw the attention back as we start talking about spring planting.
Michelle: Yes. I agree with you, but South America, at least Brazil, has been getting some rain. It looks like planting is picking up there. That's going to be a little bit of a headwind for this market, at least the soybeans, don't you think?
Darin: I do. We can see that in the May-July spread. We've seen the carry. It's not bearish, but we've seen a strengthening carry in the May-July future spread. This is a good read. This is one of our better reads on the South American situation, that the commercial side of the soybean market is getting a bit more comfortable. Again, we know China's been buying some secondary supplies.
We know there's a lot of things that could change here over the next few months with China's interest in US soybeans. Number one, it still comes down to what type of production, how large production is Brazil going to have in 2025? Again, looking at the May-July spread, there seems to be at least a growing comfort level. They're not completely comfortable with it yet, but a growing comfort level of what that production in Brazil might be.
Michelle: Cattle market, lower again here today. This would be the third down day for contracts like the December live cattle. Are we topping? Is this topping action, you think?
Darin: Certainly feels like it. Certainly looks like it on charts. As we look at things like the cash markets and so on, cash market seems to be a bit stuck as far as what's being reported, both north and south. If we look at the boxed beef markets, they had a strong run here for most of October, then backed off late in the month. We continue to see some pressure coming into Friday.
It certainly looks like this market could be topping out. If we want, we can tie this to what we saw in US stock markets at the end of October. That was a serious sell-off the last day of the month. We saw it in stock markets, we saw it in gold. It could certainly have a ripple effect over into live cattle, which could then also pull the feeder cattle market down.
Michelle: I thought you would probably try to tie those two together here. Let's talk about the bearish spike reversal on the monthly charts that we had in the S&P. Does it mean anything? Is that market starting to roll over, do you think, or again, was that just a play before the election?
Darin: All of the above. I know that doesn't help anybody, but if I'm just looking at this, if I eliminate all of the noise and all of the possibilities and all of the potential chaos and I just look at this from a technical point of view, that is bearish spike reversal that indicates the previous long-term uptrend has come to an end, and we're ready to go down for a year, maybe two, maybe more. That's what it looks like on the long-term monthly chart. Now, as we progress through October, what is seasonally a bullish month for US stock indexes, and we could go back and we could take out the previous high and eliminate the technical pattern that we saw at the end of October.
It closed lower for the month. It closed obviously lower for the day by 100 and some odd points, but it was still above the July settlement. There is some research out there that says this is an indicator of how the US presidential election should come out in November. Again, there was so many things going on. If we eliminate all but the technical pattern, it would tell us that this long-term trend is turned down. Can we believe it? I don't know. Again, with so much going on, it's hard to say absolutely that there's nothing but down coming for a while.
Michelle: I pointed out because it could impact money flow in terms of the ag sector for sure, but you could also just say, hey, it was the end of the month, maybe they took some profits, right?
Darin: They could. These markets have just skyrocketed and everything was overbought. All the stock indexes were overbought, gold was overbought, silver, and so on. The fact that they came under pressure isn't a huge shock if we just look at it, instead of technically if we just look at it from let's put some of this money in our pocket ahead of the uncertainty, and then maybe get back in afterwards.
Michelle: Sounds good. Thanks so much, Darin Newsom, senior market analyst with Bar Chart with 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.
