Welcome to Markets Now. I'm Michelle Rook with Shawn Hackett of Hackett Financial Advisors. Friday's market closed pretty much higher in everything but part of the wheat complex. And Shawn, let's talk about corn and soybeans — a huge update in both because of the shock that we got out of the USDA reports. This was a game changer. Let's start off with corn: yield down four, almost four bushels per acre, ending stocks down to 1.54 billion bushels. Did that surprise you, with what we've been seeing with the spreads and what we heard from producers about harvest?
You know, I mean, I don't think directionally it was too much of a surprise. We know there were a lot of problems in the growing season last year. We know the very hot, dry weather — record hot, dry weather during, you know, the final phase of maturation — definitely drew down the corn moisture and the soybean moisture to a very, very large degree, losing yield. You know, and so it seemed to me like this was why the corn market had been rallying for weeks, surprising everybody, and this is sort of the culmination of where the market has been feeling we were going to go. And now we got this number, and this number is probably the final number we're going to get. I don't think there's going to be a lot of adjustment here going forward. From here on out with corn, it's second-crop corn out of Brazil, and it's how many acres are we going to plant. That's going to be what's going to drive the market now that we are at this point in time.
But you did close the corn market above another area of chart resistance, so let's talk about whether $5 is in the cards. Do you think we can get to that level in the corn market?
Markets like those round numbers, Michelle, whether we like it or not. It just seems that once you start getting momentum, they like those round numbers — at $5, at $4. And so it wouldn't surprise me if we get some momentum early next week with the funds, you know, trading momentum, moving the momentum, that we could get a push to $5. But it'd be hard-pressed for me to think that we're going to be able to go much beyond that, with as many acres as I think the estimates are going to be suggesting here in a little while that we're going to plant in the US, and assuming a normal crop, that would mean that this kind of minor supply tightness would be short-lived in the minds of the market.
And soybeans — we also got a cut there, a bushel per acre on yield and about 90 million bushels on ending stocks on soybeans, so down to 380 million bushels. How much higher do you think we can go there with that in mind?
You know, we went from massive oversupply to well-supplied, so that's good, that's bullish. But you know, we're not the only game in town. In fact, Brazil is a much bigger game in town now, and so they're certainly going to be harvesting a large crop. Obviously, there's still debate how large they're harvesting that crop, starting right about now. And with the real as weak as it is, and as prices down there, you know, as decent as they are, especially after this rally, they're going to be aggressive sellers into peak harvest here over the next 30 to 45 days. Very difficult to see July soybeans, for example, getting over $1 from closing, you know, around 10 and a half. I just don't think there could be that much upside despite today's report, and despite the fact that we will likely plant less corn — soybean acres in the US. That overhang has got to be eaten through before we can realize more than that.
And USDA did not change South American production numbers for either corn or soybeans in the report here today. Too early for them to do that?
It's too early for them to do that. I would say that, you know, the next report, they're going to get some physical numbers coming out of Brazil to tell them if they're right or wrong about where they stand. That would be the first opportunity for them to shift gears. Up through the January report, unless there's been some crazy, crazy wild weather situations, they tend to stick with statistics and they wait for the harvest to come in to make adjustments. The next report may be when they do that. I wasn't expecting that here.
And even with some of the problems we've heard about in Argentina, Brazil could likely make up for that, and we still would be at record levels. And if that confirms, how much pressure will that put on the soybean market? How low could we go?
Yeah, it's always a combined production, right? If Brazil's up and Argentina's down, but Brazil's up more, you know, it's total production. But my feeling is, unless the Brazil real were to rally like 10 or 15% from where we are at this price level at the heart of harvest in Brazil, I would think that the July contract could revisit or visit the mid-9s again — a price level that prior front contracts, you know, have liked to go to when they've been worried about oversupply. It wouldn't surprise me if we find that kind of a price level, assuming the crop doesn't get adjusted downward from here.
Right. And so we're going to trade that. Soybeans also are going to be maybe pricing in some tariff fears here when the new administration comes in as well, aren't they?
Yeah, in a very little bit, we're going to actually have President Trump get in office. His cabinet will eventually get in, hopefully within a 30- to 60-day window, and then tweets are going to roll every day about who says what, what they're going to do, negotiations. We went through this before, Michelle, the first time as president, and there's a lot of rope-a-doping that's going to go on, where they tweet at 4:00 a.m., says this, and somebody else says that, and the market's up and down. My view, you know, when you have a rally and you have an opportunity to sell and you have a price level that's better than it was before, I just think you need to be opportunistic, because we're going to have a lot of uncertainty, and uncertainty means selling rallies when you get them until you know more about exactly what's to take place.
