Demand is the name of the game for markets right now, but how that demand is translating to prices is different for different commodities.
Exports have been decent, I mean, you know, whether it be for corn, or whether it be for soybeans, even new crop wheat sales have been decent,” said Randy Martinson of Martinson Ag Risk Management on the Agweek Market Wrap. “So we are seeing some activity take place on the export market.”
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Martinson and Randy Koenen of Red River Farm Network first discussed how recent pleasant weather has helped improve the look of the crop but that more warmth will be needed to push things along. Some replants will be necessary nationwide, and there may be significant prevented planting acres or acres switched out of corn into soybeans or sunflowers in certain areas.
But a big focus of the week was on demand and how it’s translating to final prices. In corn, “that July contract just seems to struggle,” Koenen said.
Martinson said it appears talk of a big crop in South America, specifically the safrinha corn crop in Brazil, seems to be the focus rather than the fact that demand has been strong for U.S. corn.
“It’s likely USDA is going to have to increase exports in their June report. That comes out next week,” he said. “But yet the market is not paying any attention to it. They’re watching as that that demand is going to slip away. It’s going to go to Brazil, and that our supplies are going to increase, which you know right now, I think that’s a little premature as far as the corn is concerned.”
“It almost seems like the funds just want to sell this thing,” Koenen said.
Martinson agreed and said that while weather has been good, planting delays and corn not getting planted or getting drowned out could lead to a decrease in corn acres by as much as 2 million, though USDA probably won’t change those numbers or yield numbers anytime soon.
On the soybean side, tariffs and trade talk have continued to drive the market, Martinson said. Reports of conversations between U.S. President Donald Trump and China President Xi Jinping have calmed some nerves, he said. Several countries have indicated they’re looking at increase imports of U.S. ethanol, soybeans and beef, which has helped the market, he said.
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“So that’s positive for our marketplace,” Martinson said.
Also positive is support for the wheat market, he said. That includes wet conditions in China causing problems for the crop there, wet conditions in the southern Plains, some needs for uncommon replants in spring wheat in the north, dry conditions in Canada and continuing conflicts in Ukraine and Russia.
Replanting spring wheat is especially unusual, Martinson said.
“I don’t really remember it in the 25 years of me doing crop insurance. I don’t remember anybody replanting spring wheat,” he said.
Martinson expects weather will be a main driver for the grains as the market transitions from planting into growing season.
“It’s going to be tough for this market to stage a rally, but you know any weather issue will cause the market to push,” he said.
Meanwhile on the livestock side, supply and demand continue to rule.
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“That cattle market just continues to march higher,” Koenen said.
Both live and feeder cattle set all-time highs this week, and Martinson called the market strength “unbelievable.”
“This has been since early September that this rally has been taking place with only three setbacks right now, you know, counting the one that we just had here a little bit ago,” he said. “But you look at the size of this rally and the numbers that we’re seeing right now — it’s one for the record books.”
That’s been driven by extremely tight supplies of cattle — both due to shrinking inventory in the U.S. and a closed border with Mexico due to New World Screwworm — and continuing consumer demand.
“And that’s what, in my mind, is just amazing is how resilient that cash retail demand has been,” Koenen said.
“It keeps going, you know. Exports have been slowed down a little bit because of the tariffs and the situations that we’re seeing there with the negotiations. But for the most part, yeah, it’s domestic demand, and it continues to be extremely strong. Now, you know, again, supplies are a little tighter, but we still see that the average consumer is still going to the restaurant, is still going to the grocery store and buying beef,” Martinson said.
The beef market has pulled the pork market along with it, he said.
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“So as beef rises, pork’s got to go with it, and we’re seeing a lot of contracts well over that $100 level right now. So pork is now going along for the ride,” he said.
The cattle inventory report coming out at the end of July will give an idea of whether there is any herd expansion happening in the U.S., which Martinson said “will really be kind of the telltale sign of this market can hold its strength.”
(The Agweek Market Wrap is sponsored by Gateway Building Systems.)