Yeager: This is the
Friday, September 4, 2020
version of the
Market Plus segment.
Joining us now,
Elaine Kub.
Elaine, we were talking
briefly before we came on,
the last time I've
seen you was March.
Think of how much has
changed since we saw each
other that first
weekend then.
It's just weird to think
about all sorts of things
but I hope next time
you're in the rotation
we'll see you in person.
We're getting
closer hopefully.
I want to start with the
dairy market because the
last two weeks have put
a dollar and change on a
market that normally
moves 10 cents, maybe 12.
But a dollar move, after
we'd had a run up, then a
run back down,
then a run up.
Help me.
What's going on?
Kub: Yeah, I guess we can
say it's still technically
summer.
You mentioned it goes up
this week but it's still
20% down from that
mid-July high.
That mid-July high was
really an interesting
scenario.
The whole thing
is interesting.
I think it's really
predicated on whether and
how much the government
is supporting these milk
prices on any given
week or any given day.
We could get into a
philosophical discussion
about how this is
a parallel to U.S.
farm incomes are expected
to go up in 2020 compared
to '21 only based on
federal government
payments really.
But whatever, that's the
driving factor behind the
dairy price volatility.
I don't think that the
fundamentals have really
had time to catch up to
the price levels, I don't
think those are
responding to each other.
Yeager: You said
philosophical, I think you
could also say the word
political too because that
could get into how you
feel about certain things,
right?
Kub: In some sense, but
not partisan, however you
feel about federal
government payments is not
even based on
party politics.
Yeager: Livestock market,
I didn't get a chance to
ask a question here that
we had come in and that
one was from Keith and
this is extending on what
we were talking about
in the cattle market.
He has been hearing two
different takes on the
market.
One says we'll see $115
or better by October, the
other says we'll be at $1
or lower because we still
have too many to
get slaughtered.
Which is more
likely to happen?
Kub: Could be both but I
definitely think that it's
true to say there is
ample supply or too much.
I guess too much
might be true.
So there's good demand.
There's good demand for
beef, those production
levels are good.
I think that beef
production is up about 7%
year over year right now
which sounds great, sounds
like it should be bullish
for cattle prices.
But fed cattle supplies
are up 9% compared year
over year.
So there's still just that
back log that has partly
been worked through, we've
always been projecting
that it would take until
about October to get that
COVID related back log
worked through and we're
just not there yet.
Weights are also high,
above 1,300 pounds when
they're coming into
the packing plants.
So it's just fundamentally
there is supply
bearishness there.
Yeager: What about the
consumer for beef, always
the consumer goes with
the low priced option?
There's also the theory of
there's some hesitation,
unemployment rate did dip
below 10%, there's likely
more people working
again, maybe a little
discretionary income
to spend on beef?
Kub: Yes, sort of.
I have, back in whenever
that was, we've lost track
of time, but March, April,
sometime in this COVID era
I did study whether or
not that's still true.
That used to be the case
that conventional wisdom
traders would say, stock
market goes up, beef
prices go up.
But today the stock market
itself is so widely
divorced from the average
American's actual economic
scenario, they're not
choosing to go out and buy
hamburger or choosing to
go out to a restaurant
meal based on what their
stock portfolio is because
the majority of Americans
don't have a stock
portfolio.
So stock prices aren't
really the leading
indicator here.
But you're talking about
employment overall or the
economic scenario overall
improving and that should,
yes, improve
beef's prospects.
But I don't think it's as
tightly related as it used
to be.
Yeager: Let's move to
soybeans and play another
game of guessing which
is more accurate.
Another question from
Aaron, he was on a roll
this week.
Aaron in Ocheyedan
via Twitter.
What is more
likely, Elaine?
$8 to $9 beans or $10 to
$11 beans come this winter
and 2021?
He says, I think South
American crop and the
weather there could
really be a big factor.
And then adds in La Nina
could get interesting.
Kub: Yes, so in the
near-term it does seem
that way.
It's dry.
There is this La Nina and
it is dry currently in
Brazil and they will be
looking into planting here
later this month.
But things could
certainly change.
If they get, it might be
late, the planting might
be delayed.
But as long as they get
the rain they will plant
and they will plant a lot.
The soybean prices right
now in Brazil are very
motivating to planting
record high acres in
Brazil.
So I think there is
certainly the potential as
we move towards February
and March there will be
bearishness in the global
soybean market but we have
some months to get through
when the United States is
the only one in town
selling soybeans and the
dollar keeps kind
of churning lower.
We do have some months to
get through when I think
we will continue heading
toward that $10 level but
I don't think it will be a
long lasting opportunity.
Yeager: We may touch $10
and it sounds like maybe
you're not real heavy
on touching $11?
Kub: No.
Yeager: It's going to take
a whole lot of things to
get to that.
Kub: Yeah, I'm still
confident the last time I
was on, oh $9.50
that would be crazy.
But I said something
strange would have to
happen and something
strange did happen, we had
a very dry August.
That was a legitimate
difference that we did not
know about in March and
the market has responded.
Yeager: We'll talk about
the $9.50 guy here in a
moment.
I want to move further
into soybeans by helping
someone who needs
a little help here.
LJ Fever in Southeast
Minnesota wants to know,
for people who forward
contracted too early in
the soybean rally, how do
you recommend trying to
participate moving
forward this fall?
Kub: I don't recognize the
concept of contracting too
early in the rally.
How are you ever
going to measure that?
If you sell anywhere
except at the absolute
pinnacle you
think you failed?
I don't think that's a
very productive way to
approach marketing.
We should approach
marketing as successful if
we lock in a profitable
price and I think it's
incredibly unlikely that
anyone up to now has sold
100% of their soybean
production or anywhere
near 100% of their
soybean production.
So they likely still have
more that they will be
able to sell and
participate in this rally
whether they want to do it
now or whether they want
to take some risk and ride
it out and see if it does
go higher.
So I guess if somebody has
sold 100% that might be
something you might not
want to do in future
years.
But if you have then you
can of course always rebuy
it on the board.
It's adding risk, it's
the opposite of risk
management, it's adding
risk but it can be done if
that is the rare scenario
that you find yourself in.
Yeager: Right, that's
adding an opportunity to
get back into
the market, okay.
Thank you,
Elaine for that.
Last question comes from
Phil in Ontario, Canada.
And before you put the
graphic up, Josh, you're
going to put it up anyway,
I'm going to talk a little
bit longer about this.
Phil asked a question the
last time you were on in
July I believe it was or
June asking about $9.50
beans, when we were
going to hit it.
So now he's asking about
the weaker dollar and
sticking your neck out.
So the weaker U.S.
dollar has aided U.S.
agricultural commodity
prices of late and
inversely boosted the
Canadian dollar and other
currencies.
What is your
call on the U.S.
greenback's value going
from now until January 1,
2021?
Kub: Yeah, the short-term
I don't have as confident
of a prediction but
long-term I'll tell you
that I feel confident that
the Federal Reserve feels
like lower for longer is
the direction of interest
rates and the dollar is
likely to continue with
that quantitative easing
to continue lower for
longer.
They have even introduced
this concept of the
averaging their inflation
target which to me
suggests that we could
potentially have very
volatile inflation changes
but it's unlikely.
The more practical thing
or the more pragmatic
thing to expect in the
near-term is that the
Federal Reserve could
just keep pumping in
quantitative easing and
really low, cheap interest
rates for a long time, for
periods of years under the
justification of an
average inflation target.
So the expectation is for
the dollar to continue to
go lower, that that's the
direction of the Federal
Reserve, with all of its
great resources, is going
to continue to
direct that.
Yeager: I think the dollar
was somewhere in the
lowest it has been in two
to three years here this
week or last week.
So the stock market has
lost quite a bit in the
last two days of trading.
What is the relationship
to commodities in the
sense of do we need to be
paying attention to that
as much as we move into
harvest for much of our
viewers?
Kub: I don't
know, not really.
Honestly to me that stock
market drop in the past
few days feels like a
blip, it feels like one of
these algorithmic things,
especially because it came
in right before the
Labor Day weekend.
I don't know but I think
it's entirely possible
that you had someone, some
group of someone's selling
for whatever reason, to
lock in some profit, get
some cash, whatever the
case may be, and that just
triggered an emphasis of
more of this because of
the algorithms that got in
on that and especially it
was driven by the tech
stocks that have been kind
of overpriced, you might
even call it a tech
bubble.
To me it feels like
something that we're not
even going to remember
two weeks from now.
Again, the Federal Reserve
has been so strong in
supporting asset prices,
equity asset prices, it
seems like I wouldn't
worry too much about the
stock market and I
certainly don't think that
it has significant effects
to the commodities in any
way.
Yeager: Before we go, does
Pigeon have anything else
to add?
Kub: I hope not.
I apologize again.
She barks all the time.
She just has opinions.
Yeager: Yeah, well, bark
twice if you think t sell,
right?
Is that how that goes?
Kub: That's the code.
Yeager: Elaine Kub,
thank you so much.
Kub: Thank you.
Yeager: Next week on the
TV show we'll look at how
ranchers are living
side-by-side with a
returning predator and
Dan Hueber will be in at
report time to
analyze the markets.
I'm Paul Yeager.
Thank you so very much for
watching, listening or
reading.
Have a great week.
