Yeager: This is the Friday, April 7, 2023 installment of Market Plus.

Sue Martin is with us.

Sue, I kind of had to skip over feeders, shouldn't have, it's a significant market right now.

How much longer can this last?

Martin: Well, I think with the feeder market let's say that we start to catch some rains and if we catch some rains I think it's going to start more like maybe July or sometime in July that we start catching rains, changing the pattern a little bit.

If that happens and the prices have gotten pretty lofty, which I think will happen, you're going to see at some point a hold back of heifers for breeding purposes for the pastures.

And that is just going to stimulate even more the feeder market.

So, I'm very friendly to the feeder market and as far as the cash market right now I think the cutout is going to go over, I think we'll see choice go over $300.

And packers started chasing cattle this week, they had to.

The one thing about all this winter weather that we had, not only did we have a death loss with some of it, but also it just tightened even more the numbers and the amount of beef production we're looking at because of the fact that weights dropped and we were running around 15, 18 pounds under a year ago.

And I do think with the forecast and the changing of going to more milder, warmer weather coming in, two things are going to happen.

One, I think our weights might start to bottom and base out, which will be a good thing.

The other thing is we're also going to hit a grilling season after some of the weather we've had this year that people are going to have those grills out working and that is going to put good demand under this market.

Yeager: Those die-hards, they don't let a little snow get in their way, Sue.

They keep going.

Martin: They put the garage door up.

Yeager: That's right, put the garage door or just put the big tent up.

I do have a specific question here about live cattle.

Joel in Iowa asked us on Facebook, how much longer before we see another massive cattle herd reduction?

And how will the markets respond?

Bullish?

Bearish?

Or meh?

Martin: Well, we're already down 700,000 head from a year ago at least.

And I think should we go into where this hot, dry spell adds more concern you may see more liquidation of cows and calves.

But at some point we're going to hit a moot point and then we're going to start looking at can we have reason to turn around and bring this back.

It's going to be interesting because this cattle market right now we're dealing with tight supplies, we've seen beef cow liquidation, we've got feeder numbers tight and the demand is huge for them, but then you look at '24 and maybe things start to get a little better but then in '25, Dr. Owen Taylor would say '25 is when you're going to get hit with a drought, a major one.

So, we'll see what happens.

Those are all ifs.

And there's an old saying, if ifs ands and buts were candy and nuts we'd all have a Merry Christmas.

So, we'll see what happens.

But I think that we have, there's going to be some time before we really see this cattle industry seeing a growth back in numbers.

And there's that whiplash effect that we'll probably see.

When we start holding back the heifers then we'll have to start watching that because that's usually a peak and then you start coming down as the market looks ahead at more numbers.

Yeager: So, numbers will be an indication there.

Martin: Exactly.

Yeager: All right, you did kind of cover the blizzard question with some weights.

So, I want to give you a chance to follow up a little bit on what Phil in Dresden, Ontario was asking you.

He was asking about the bullish ag commodity environment of the last couple of years and you said that we have paused instead of evaporated or simply eroding.

But you have more to answer on that one.

Martin: Well, I think our pause, and I kind of alluded to about China being it took longer for them to be back in the marketplace and they're getting their footing and they said right along that it would be almost into the second quarter or so before they would really start to see a change and I think that is very true.

So, what we're looking at is probably they're going to be more aggressive coming in the last half of this year as we move through '24.

Then in '24 you put the demand pull, for example, on this year's soybean crop because of the demand for renewable diesel and biofuels, even in ethanol, but on the beans it's those two and we've got plants coming online that we will have, we're going to have a huge pull.

Now, some will say, well you can get them out of Brazil.

Well, Brazil is also going through that.

And in the meantime, they're also going to try to make up for Argentina's loss here.

And then you've got them shipping to China.

My big concern would be I think we're going to see the $30 beans.

I was the one on this show years ago, I won't say how many years, but years ago I was the first one that talked about beans in the teens and my timing was off a bit but we got there.

I still think we're going to see $30 beans.

Yeager: So, the question is when?

Because initially your comments were for '23, or now.

You said during the show a little later.

Are you looking -- are you going back to that '25?

Martin: I'm thinking so.

I'm thinking it may take us into '24, '25.

Weather will play a part.

But I think it's a demand driven situation.

Here's the other thing, with China coming on deck, I think there's still a lot of countries around the world that are trying to get reserves built because they found out that just in time inventorying was a mistake and so now China is coming on deck and they're the biggest one that will step in front of them.

So, we're in demand markets and they're going to be here.

And demand markets are harder to quantify.

Supply you can see, demand you can't, it's elusive.

But the other thing we have to watch is India, the second largest population in the world and they're looking at some tough weather and maybe some drought coming at them too and they've already had some issues as well.

Yeager: So, put in those two factors, look at 2025.

Martin: I'd say and watch '24 because that is going to be a huge demand market for beans.

Yeager: Okay, well, I guess those are the commodities but there's other factors at play in the economy.

Mike in Carlton, Nebraska asked us via Twitter this week, what are your thoughts regarding natural gas and also the Fed on interest rates in the next three to six months?

And then he's asking, should I lock in the rest of my diesel needs for summer irrigation?

So, answer his diesel question first.

Martin: Okay, I would say yes.

I would be locking in my diesel.

Yeager: What do you think about natural gas?

Martin: I would definitely be locking in natural gas.

Let's say you're a touch early, you aren't going to be wrong by very much.

We've had a huge decline in natural gas.

My indicators on monthly data are absolutely buried, again sort of like hogs, I wouldn't sell them and so I think yes, I would be buying your natural gas.

And then as far as interest rates, I think interest rates are going to still creep a little higher.

It will be interesting to see the labor or jobs report because quite honestly part of this country seems to be making up for where we've had losses.

I'd say okay, one fourth is losing and three-fourths is still gaining.

So, I'm not sure we've seen that much of a job loss yet.

Yeager: Well, there was a story this morning I happened to see, so we're recording this on Thursday, which means the job report comes out Friday, so you have to kind of put in I'll hold my mouth and you can say what the report was.

The job changes are shifting because the tech sector is losing.

We're gaining some still in restaurant and hospitality.

Those are not the same jobs, but manufacturing, the President went out on the road this week about manufacturing because manufacturing continues to struggle a little bit back in this country.

We are trying to bring things back domestically.

So, given higher rates, are these jobs going to be found for people building houses?

I think you're going to tell me no.

I think you're going to tell me that there's other factors, sectors of this economy.

Where are they going to be that have job increases?

Martin: Well, I do think to some degree it is going to be in the manufacturing.

The problem with manufacturing, what has driven our inflation?

It has been the fact that you couldn't get the products and they weren't able to get the people to work.

Well, if you quit paying people not to work and I know some of that has disappeared, but we have more work to do on that, get these people here.

If you're going to bring the immigrants in, get them working, make them work and get it set up that they can.

Yeager: Okay, well let's talk China one more thing, this is our last question.

Glen in Ohio asked you on Twitter, other than our unpredictable trade with China, what other global issues could significantly disrupt our grain trade?

Martin: Well, the biggie would be China and Taiwan.

And of course, with the premier President of Taiwan being in the U.S. and meeting with McCarthy this week and China not like that, well I don't think China is in a place to do anything just yet.

And they really don't have the right to tell us what we can and can't do on our own soil.

We wouldn't be able to do it with them.

I think it's going to happen maybe but I wonder if it isn't still pushed out when they have their feet fully planted.

Remember, African swine fever has cleaned out 10% of their sow herd at least.

So, they're in need of food.

That's the first major.

They're a huge importer of energy.

So, I think China will do it when the setting is right for them.

But they're just getting their feet on the ground.

It's not going to be for a little bit yet.

But when that happens, the concern is then okay, now what happens?

Do we put sanctions on them?

Do we export to them?

Or do they just say, we don't need you because we've gone around the world.

Yeager: We've gone around the world, we've set up things in South America, we've set up things in Africa.

Martin: Yes, which Africa, by the way, is also turning dry.

Yeager: Yeah, a lot of weather stories.

We'll have you back and we'll discuss it again and see how it shakes out.

Sue Martin, good to see you.

Thank you.

Martin: Nice to see you.

Yeager: All right, that's going to do it for Market Plus.

Next week, we're going to look at climate change and how it plays a role in more powerful storms striking the Midwest and we'll have Mark Gold.

He'll analyze the grain markets.

Thank you so much for watching.

Have a great week.

We'll see you next time.