Market Plus: Dan Hueber

Howell: This is the
Friday, September 27, 2019 version of the
Market Plus segment. Joining us once
again is Dan Hueber. Dan, welcome back. Hueber: Thanks very much. Howell: Dan, we’ve got a
great list of questions set up for us today. You mentioned during the
main program the U.S. dollar and that has really
been holding us back on U.S. exports. So a question here
from Terry on Twitter. He wants to know what
factors could lead to a weaker U.S. dollar? Hueber: One of the biggest
challenges right now I think the dollar probably
would have weakened already if we were not
in this battle of the currency markets. You’ve had the European
Union basically throwing some stimulation into
their markets and cut interest rates as has been
the case in other nations. Yes we are seeing interest
rates move lower. Probably the biggest way
to see it drop would be a harsher cut or a surprise
cut in the interest rates but that doesn’t look
like that’s something the Federal Reserve has in the
cards here at this point in time. So as much as anything I
guess if we started seeing some economic signs
finally that yes there are some indications in some
of the global businesses that the trade war is
slowing down the economy, the tough part about it
is even though the dollar probably should have
broken already we are kind of that reserve currency. So when people get nervous
about a Saudi Arabia oil attack or something of
that nature they tend to rush in and buy the
dollars and here again too if we’re paying any kind
of an interest rate it’s better than some of the
zero or negative rates around other places in the
world so that just keeps attracting money
into the dollar. Howell: Dan, I think that
segways in nicely to another question coming to
us from Chris in Bowling Green, Kentucky, looking
at commodity rallies. He said, Japan and Taiwan
both make big purchases and prices still struggle
so what kind of sales do U.S. commodities need to
see a price rally? Hueber: Well, of course
when you look at countries like that they’re really
pretty — looking at Mexico, Mexico bought
some great quantities. They’re almost taken for
granted because they are such consistent
buyers out there. I think at this point in
time we need to start capturing some
non-traditional markets, certainly opening up if
we can see China open up again that would be a
great step forward to the soybean market. Corn exports have really
been a very sour spot all year long, that has just
been one of our nemeses of ours, any price
recovery in there. So here again South
America, Brazil in particular, had a record
crop of corn this year, Argentina had a pretty
solid crop, so it’s just a very competitive nature
right now and again with the dollar maintaining the
strength it has we have just not been where we
need to be in that world market to remain
competitive. Howell: Dan, with all
those factors, especially in the corn market, you
talk about a 2 point whatever billion bushel
carryover, you look at these poor export markets,
now maybe a potentially better crop than what we
were expecting back in April and May. Is there any reason for
corn prices to go higher? Hueber: Well, one we have
factored all those things in so those are all known
entities and realistically should be well mixed into
the batter at this point in time. So number one is yes we
have kind of raised the expectation of what
this crop could be. Really the proof is going
to be in the pudding and let’s not forget there is
one more element and I’m not saying this
necessarily has to happen this way but in October
the USDA will review the acreage numbers once again
and they potentially will make some adjustments
on acreage. And of course that has
kind of been forgotten about at this point but it
has really been a bone of contention ever since the
end of June when they came up with the original
planted acreage numbers. So between that and we
really don’t have a great idea what this yield
is going to be yet. So yes we’ve got the USDA
out there close to 169 bushels, there’s a lot
of privates that are agronomists, strong
backgrounds in ag production that are down
towards 163 bushel. So we could still develop
some elements of surprise that would lift this
corn market out of here. Would it be a gang
buster to the upside? No that probably doesn’t
seem to be in the cards. But again let’s not forget
we have South America moving to the field right
now, not great conditions down there. Brazil the planters are
sitting because it’s just too dry of conditions and
not only does that delay the soybean crop, it
delays the second crop of corn in that nation and
all those things just fell into place last year that
really enabled them to put out such great crops,
corn and beans both. Those things aren’t lining
up quite as favorable this year. Howell: I want to go back
to the October report that is coming up that you
mentioned there with acreage in particular. What is the Dan
Hueber estimate? Hueber: I don’t know if
the USDA is going to necessarily drop the
planted acreage much at this point in time. But I think they probably
or at least have a decent probability of seeing the
harvested acreage number as the percentage of the
planted continue to be ratcheted down. So I haven’t tried to run
an actual number on it just yet but I wouldn’t be
surprised to see another half a percent or maybe
even a percent drop in the harvested acreage number. And I still think we could
see that yield ratcheted down just a little bit. Where harvest is happening
right now, Kentucky, Tennessee, places like
that I understand some phenomenal yields but boy
they have been the garden spot all year long. So it may be a different
story when we move into the heart of the Midwest. Howell: And that is what I
think everybody is waiting for to see what the heart
of the Midwest has as far as what is actually
in the field. We’ve got a question here
from Norlin in Hampton, Iowa. Is this as high as corn
and soybean prices are going to get this year? Hueber: If you’re saying
this year, you’re talking about the next twelve
months, or are we looking at through harvest time? Howell: I’m guessing
through harvest time. Hueber: I would say until
we find out some more information on exactly
where we stand with China in the next year, what we
have for yields, $9 beans is going to be a tough
number to get above. Now that said, we may not
break a whole lot more than 30, 40 cents
under there. It looks like it’s more
of a sideways pattern. Similar on the corn, I
think we could probably if we get some yield
adjustments or some yield issues certainly we could
push the corn a little bit higher than we did here
back into September. But yes, we’re not looking
at any kind of a runaway market to the upside. If we even got back into
the above the $4 range I think it probably would be
fortunate for at least the immediate future, when I
say immediate between now and the end of the year. I think if we’re going
to look at gains in the markets it’s going to be
post-harvest and probably post-New Year
at that point. Howell: Okay. So Dan, would you be
advising folks to store that grain then? Hueber: I think the
market is giving you the incentive to store, you’ve
got a reasonable carry after the month of July,
yes basis levels in many areas are better than
normal but on the same token it still looks like
there to be a pretty good return to storage. Now does that mean you
want to speculate on the price moving up? Not necessarily. The storage decision is
really what the market is telling you between basis
and spreads if you store or not store. But that said, with
particularly now when we start to see the wheat
starting to shape up a little bit, wheat tends
to kind of lead the corn market, so I think if we
see the wheat come out of the doldrums here that’s a
pretty good sign that corn will ultimately and
eventually follow. But how is the best way
to speculate on that? Probably not necessarily
holding all of your commodity unpriced
in the bin. If you want to have a
position on that I think you tend to be better off
at least money wise to do it with futures
or options. Howell: Dan, we had a
couple of reports, we’ve got a couple of reports
coming up, but we had a report on Friday, the
hog and pigs report. A question about that
came into us from Ryan in Humphrey, Nebraska on
Twitter wanting to know, how accurate do we feel
the pork exports are? And are they current
with the packers? And second, are all of the
carcasses that are leaving being accounted for
on the export report? Hueber: Well, granted we
get the weekly export sales reports, the total
numbers are usually about a 30 day lag in there so
I guess there’s always a little bit of hesitation,
a little question mark on how well they’re
being accounted for. I don’t have any, it is
all ultimately measured so it’s not like there is
this major black market out there that is trying
to sneak pork out of this country but I guess that
would show up in the warehouse numbers. So yeah, I think the
numbers are there but I think that whole idea that
yes we’re always kind of looking back 30 days to
see where we are in the pork exports, started out
the year with some great numbers but then the
combination of trade wars and not to mention the
strength in the dollar all year long has really just
waned that pork and beef both to where we’re really
pretty flat on the year. Howell: Dan, final
question for you. We are pre-report
coming out on Monday. What are your estimates
for that quarterly stocks report? Hueber: Again, usually not
a major surprise in that September crop report or
September stocks report. We’re looking at about a
2.4 million metric ton beginning stock I
guess you’d say. It probably, I would tend
to think we’re going to see the beans under a
billion bushels, which psychologically will be
a good thing, it’s still going to be compared
to what we’re normally accustomed to in the
soybean market 900 million bushel of beans is just
a pile of beans to work through. So granted we’ve already
projected something less than that for this next
year but that said that is the limiting factor. If it’s 2.4 or 2.3 it
really is insignificant on the corn because it is a
very comfortable supply as is 900 million
bushels of beans. Howell: Dan Hueber,
always a pleasure. Hueber: Certainly,
thank you. Howell: Join us again next
week when we assemble a blue ribbon panel to break
down the latest major government reports. Elaine Kub, Naomi Blohm,
Ted Sefired and Darin Newsom join us at the
Market to Market table. Until then, thanks for
watching, listening or reading. I’m Delaney Howell. Have a great week!

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