5 things you need to know in the week ahead

Narrator: Hey podcast, be sure to listen in for 5 things that you may have missed this weekend that will affect the week ahead: China, the report, weather throughout the world, short-term stabilization, and cash basis effects. Enjoy.

Chris

Barron: Hey everybody, this is Chris Barron and Duane Lowry. Welcome to the Ag View Pitch. And welcome, Duane. How's it going this evening or this afternoon, I guess?

Duane

Lowry: Good, Chris. How is everything there?

Chris

Barron: Pretty good. Today was shop cleaning day. So trying to get my head wrapped back around what's going on with the markets and kind of what you think there. So sometimes we got to do the, the other stuff too. But what do you think? And as we go into the market here tonight and into the upcoming week after that kind of surprising report?

Duane

Lowry: Well, if I'm really honest, I'm not exactly sure what to think. If I look at all the things that could possibly be inputs and then throw it into a pot, mix it together, and try to come up with a conclusion, I'm not sure I have one. But I think we can break it down into a few different segments. First of all, let's set aside the reports for just a second from Friday. Over the weekend, President Trump met with President Xi, and by most accounts, that meeting went better than expected. And there was some progress made and start— trade talks will resume again. That doesn't necessarily mean a fix. But it is an interesting combination that the— on Friday, China did come in and buy over 500,000 tons of U.S. beans.

And then it's interesting that on Saturday, President Trump appeared to give up what would be seen as a fairly significant concession in terms of that he's going to allow US tech companies to sell goods to the Chinese tech firm that's been in the news. And domestically in China, that's going to be played as a, as a big win for for President Xi and a concession by President Trump. I'm not sure how much of that really was a concession and how much of that, by the time the details worked out, you know, really was a concession. But nonetheless, that's how it's being portrayed. Considering the marketplace didn't really care about this meeting, and every time we have one of these meetings, Trump comes out and says how much agricultural goods every China is going to buy and people are getting kind of numb to that.

But I do think it is possible that this might be the time that that proves to be correct. So I think that's kind of a supportive item tonight. And I think it's probably something that if it's, if it's true, we'll be, we'll see signs of that here during the next several days. And I guess I'm somewhat optimistic that we'll see that. That would be a pleasant surprise if we got, if we do get that, get some business out of that. As far as the weather is concerned, I find it difficult to know how to react to weather. The trade in general looks at weather as being non-threatening. And everything is assessed for the crops that are in the ground right now. And as they're growing right now, with no assessment being made about, you know, how far behind they are, anything else, they're just looking at the here and now.

And I think the the weather gets a fairly non-threatening or somewhat beneficial type of spin. If you go to Europe, you get weather spin that's a little bit less, a little bit more threatening. They've been dealing with a lot of heat. Some of the temperatures are gonna ease back, but they still have expanding moisture dryness stress areas. That's true for the former Soviet Union., as well. Um, so globally I'd say weather is maybe a little bit supportive. And, uh, then you go back to the reports and, uh, as the weekend has had a chance to digest this, you know, nobody has any faith in, in Friday's USDA acreage data, but the, this industry has a way of trying to give credibility to these reports even when they don't seem like they deserve credibility. And by that I mean that the price action tends to kind of back it up over the next few days.

In this particular case, if we stabilized here, that would be a plus in the case of corn. Does that mean we trade below Friday's low or not? There's nothing magical about Friday's low. We certainly can. My suspicion is we'll come in here tonight, well, everything will be higher tonight. Maybe not by very much, but I think it'll be up. And then we'll see if we can hold together and stabilize. I think in the case of beans, I think the market is probably going to gain some momentum. I think there's more short covering to take place. When people drive around this weekend, they have to be wondering where USDA is coming from. They still have to see all the crops that are delayed in maturity and advancement. Beans are small almost everywhere, and some yet to be planted, yet to emerge. And these facts on the ground are not changed by Friday's report. Cash basis was stronger yet Friday afternoon.

So that storyline hasn't changed. And so there are some of those types of realities, but I'd like to think the market can quickly recover Friday's losses in corn, but I'm not sure that's really thinking ahead. Instead, it might be thinking with my heart. So I'm struggling to figure out how to handle this short term. But I'm fairly confident that we will go back and revisit the highs that we made in June. And I'm kind of optimistic we're probably going to make higher highs than that level. But it's kind of difficult to have that opinion without looking over your shoulder a little bit after Friday's reports.

Chris

Barron: Do you think some of the people in the marketplace here are going to think if we see them, the corn market in particular, trending a little bit lower over the next week or so and just kind of staying under pressure and, and going down a little bit, you think that's going to be viewed as a buying opportunity? Or do you think it is a buying opportunity, or what's your thought there?

Duane

Lowry: Well, let's look at it slightly different perspective. I don't think the trade is going to look at selling weakness here as an opportunity. Now, as far as whether weakness is a buying opportunity, it might be, but nobody's going to feel real confident or comfortable with that until a few days pass, because like I've said before, we trade money, and everybody knows that Friday's price action caught corn longs by surprise. And, you know, we might have a little bit of liquidation to go through. But even after Friday's sell-off, unless you were a buyer just in the last couple of weeks, if you were a buyer from any time before that, you know, you're probably still not anywhere close back to your entry point. But there's always, you know, recent buyers that the market has to digest. And that's what what we're going to deal with. So I think weakness is probably a buying opportunity.

But people are going to give respect to the price action from Friday, even if they don't particularly agree with the report. So people won't have confidence in stepping up there and buying that thing until we get maybe a few days down the road.

Chris

Barron: Gotcha. Any other comments as we move into this week that you can think of? We can keep this one kind of short, but you know, till we learn a little bit more here Monday as we go into the week than any other final comments.

Duane

Lowry: Friday after the report in the podcast, I mentioned that one of the main things I was looking at was to see how cash basis performed. And if it didn't suddenly show signs of weakness, then the marketplace was telling you they really didn't have a lot of confidence in what USDA said. And Friday afternoon, cash basis tone was firmer in the east. And strengthened some additional. So that's one day's vote. We'll see how it is over the next few days. But I think that, you know, it's going to be very interesting to see whether China does step in here and buy something. If they do, I think that suddenly gives credibility to the idea that markets don't have a lot of downside room to go here. And so we'll see if that happens. If the corn market is going to weaken based on liquidation pressures, it's going to happen before we go into the July 4th break.

If we're not able to put much weakness down before that timeframe, it's hard for me to believe that we're going to get much of a break here until we get a better handle on what USDA is really telling us about the acreage story and about the prevent plant. So, you know, in a lot of ways, we're going to be out here, you know, trying to figure out what's going on and have a lot of uncertainty for all the way into the August 12 crop report. And it's just not good enough in this business to look at what we think we know to be reality on the ground. We have to look over our shoulder at what USDA says, even if we don't agree with it. And And we also have to respect price action and price action Friday was not good. And it's important that this price action stabilize rather quickly and avoids building any downside momentum. I think it will stabilize.

But right now it's just thinking that it will stabilize. It's important to see 2 or 3 days from now, did we actually stabilize? That's what's going to be important.

Chris

Barron: You bet. Well, thanks a lot, Duane. I think we'll probably reconvene here Monday afternoon, later on in the afternoon, and kind of see how, how things shook out throughout the night, kind of discuss what things might hold for the rest of the week. So anyway, thanks everybody for joining us on the Ag View Pitch, and, and we will be back again here soon and talk to you again. Thanks everybody.

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