I joined Michelle Rook on AgWeb's Markets Now this morning to discuss the current state of soybean, corn, and wheat markets. We also touched on the cattle market and the stock market. Watch the interview HERE!

Michelle Rook: Well, thanks for joining us for Markets Now. I'm Michelle Rook with Darin Newsom, Senior Market Analyst with Barchart. Well, we are seeing a lot of red on the board this morning in the grains and hogs, just a little bit higher in the cattle market. And Darin, let's talk about the grain trade, first of all. We're kind of poised right now after a week of higher weekly closes last week to have lower weekly closes in all the grains this week, right?

Darin Newsom: Yeah, it certainly looks that way, Michelle. Now, who knows how today is going to finish out. As a friend of mine likes to say, there's a lot of week left today. So, I mean, anything could still happen. We could see anything said out of Washington. So who knows? I mean, but yes, it certainly looks like we're going to see lower weekly closes pretty much across the board in the grain sector. And what this does is, you know, does this create a situation? Which week is the anomaly? Is it last week's, you know, bullish technical reversals? Or is it this week's, you know, recovery? Or is this all just part of, you know, normal technical patterns? Give us a lot to talk about this weekend, but I don't see anything overly dramatic. I don't see anything, you know, as far as crashing to new lows before the end of the day, but certainly it looks like we're headed towards lower weekly closes.

Michelle Rook: Right. And the corn market, and especially the corn market, I should say, has been dominated by weather and big yields, big supplies. And even though demand is good, we just don't have enough demand to chew through all of that.

Darin Newsom: That's certainly what it looks like. You're right, Michelle. Yeah, I've had the opportunity to do a little traveling around this week, going to a couple of different meetings, and have yet to see a field that looks bad. And I'm not saying that to try to influence the market. It certainly doesn't care what I think, but, I mean, just the reality of your eyeball test, you could see, you know, crops look good, you know, across the Midwest, parts of the plains. And visiting with folks, you know, they want to say it very quietly, but, you know, crop looks good. I mean, and there's just no getting around it. And, you know, again, it brings, you know, it brings home the point that these are weather-derivative markets and weather have been nearly ideal across most of the U.S. plains and Midwest. It's summer. So, yes, it's hot. A lot of these crops are finally getting some heat on them, which is what, you know, supposedly a lot of folks have told me that it needed. And there's plenty of moisture. We saw in yesterday's, or you saw me in Thursday's weekly U.S. drought monitor maps, much of the drought readings across, and for, you know, we want to believe them, but much of the drought readings across the Midwest have simply been erased. There just isn't a drought problem this year, you know, to create any sort of stress to the crops, corn or soybeans, and plenty of moisture, heat to finish things off. It's a pretty good combination.

Michelle Rook: So let me ask you about demand on corn, because export sales and shipments are ahead of last year's pace. We've had almost 23 million bushels of flash sales on corn the last two days. We're obviously at a price that's low enough to stimulate demand, but how much more demand do we need here to get prices to react?

Darin Newsom: Well, again, if we, if we go by what the market's telling us, we've still have, we still have room, you know, we, as you said earlier, we still have plenty of supplies to meet this demand. But what's interesting to me is, you know, what we're looking at now is we're getting closer to new crops. So we can basically focus on the new crop market. And we've seen the de-smarched future spread post a new low daily closure and strong carry this week. So that's telling us that the commercial side's convinced that we're going to have, or at least more convinced that we're going to have ample supplies right through the bulk of the early part of harvest. But when we get further out, you know, the question is what about longer term demand? What about new crop demand? And again, this is where we're seeing the sales being made. We're not seeing that same sort of pressure in the spreads on the March, May or May, July. So this is telling us that there's, I'm not going to say there's concern, but there's some interest further out that, you know, we could see again, because we know U.S. producers are going to put a lot of corn in the bin. They're going to sit and hold tight waiting, waiting for a rally. So there's some thought that available supplies later in the marketing year could start to tighten, particularly. And one of the reasons this could happen is because demand stays strong.

Michelle Rook: For sure. Okay. So the other thing that technically has happened both in corn and soybeans is we couldn't get through chart resistance areas. So the funds have decided we're going to do some liquidation, but there's really no reason here for the funds to buy in the grains right now, is there?

Darin Newsom: No, I mean, because again, if we just look at the fundamentals of this, there's nothing attractive about being in the grain sector. I know maybe over in bean oil or something like that, where we still have inverted forward curves. But other than that, there's just really no reason to be interested in the grains. So, you know, should they be, I mean, should funds be selling? Probably not at this point. I mean, one could make the argument that corn's holding in here probably a little too high if supplies look like they're going to be as big as they are. But the reality is things are said in Washington for the sole purpose of getting US stock indexes to rally. That's just the name of the game because we know that the White House has equated US stock indexes with the economy. So as long as the stock market's high, the economy's good. So things get said, quote unquote, trade deals with Japan, these sorts of things, all this kind of nonsense, and it gets the stock markets to rally. So as long as the stock markets are going up, there's no reason for funds, for large investment traders to show any interest at all in most of the commodities, unless those commodities have either won a safe haven part to them like gold or economic ties such as gold, copper or silver. But when the fundamentals are bearish, like what we're seeing in corn, soybeans and so on, wheat, basically what we're going to see is probably the funds starting to move to the sidelines, which could bring some support to corn, could bring some support to the wheat markets. But overall, it's just going to put some more pressure on soybeans.

Michelle Rook: Yeah. But right now what you're saying is it's been more attractive for the funds to put money over into the stock market. And so there's no, like we said, there's no reason for them to really be active in these grains.

Darin Newsom: There's no fundamental reason. A lot of this comes down to fundamentals. People say, oh, funds aren't interested in fundamentals, but they certainly are. I mean, it's not the old days. Supply and demand is the driver. And it's not imaginary supply and demand. It's real supply and demand, which we can all see in the markets every day. And we can look at that and say, look, the situation just isn't there to attract fund money at this point.

Michelle Rook: So the reaction that we have seen to these trade, I'll call them frameworks, the last, especially wheat, has been more positive in the stock market than it has been in the grains. It's been fairly muted there. Is that because these are just frameworks? We haven't seen any specifics about ag? Or is it because these purchases that are supposed to be part of this earn any bigger than what we're already doing for routine business?

Darin Newsom: Yes, to all of the above. I mean, there are no trade deals. That's not necessarily the truth that's being spread around. Basically, again, to get a market reaction and not in grains, but in the stock markets. And we can see by the reaction in the grains, the large players in grains, particularly on the commercial side, they know better. They know, again, this is just business as usual. The sales that are being made are sales that were going to be made anyway. The people that are not in the market, most notably China, isn't going to come back to the market all of a sudden and just start doing all this buying that everybody keeps saying. And I always find it interesting this time of year, about every summer, the hue and cry among ag industry in general is, oh, China is going to come in and save the market. Why? Why? What purpose do they have? What incentive does China have to step in and save the US market at this point? There isn't any. And there's no trade deals. There isn't going to be any trade deals. And if something does start to happen, we'll see it in the market first.

Michelle Rook: So is there anything in your mind that could change the trajectory or trend here of these grains?

Darin Newsom: The biggest thing is going to have to be, we're getting into late winter in South America. So to me, the biggest factor at this point is what's the weather going to be as we move into spring and summer for Brazil planting, for the Brazilian crops, for the Argentine crops and so on. That could certainly sway. And again, I want to point out that those deferred corn spreads. So if we continue to move along and we finish off the US crop pretty well and we get it tucked in, and then all of a sudden we move through harvest and we see this continued strength, maybe not stronger demand, but just the continued path of demand at this point. And we start to get an idea that maybe US domestic demand is also picking up possibly on the feed side. We can start to see these markets tighten up a little bit. We could see particularly in the corn market. So I think, again, we're going to see it in the markets themselves and the future spreads and basis. But if we're going to see a dramatic change over the next few months, it's probably going to have to come out of South America.

Michelle Rook: These pollination issues that we've seen and heard about, they're just not big enough, you think, in the corn market to change anything there?

Darin Newsom: Number one, there is no pollination issues. Let's look at it this way. The industry has to talk about everything. Let me put it this way. Everything always has to be bullish. There is no room for reality. So when the market is telling you there isn't anything overly bullish right now, they start making things up. So this time around, it's pollination. Next time around, it's going to be heat units. Next time around, it's going to be, I don't know, soybeans don't like wet feet or whatever the statement of the day is. There's no pollination issues. We can see that in the market. We can see it in the Sep-D spread. We can see it in the Dec-March. Pollination issues don't exist, but it makes people feel better when others talk about it.

Michelle Rook: Yeah, well, there certainly hasn't been much reaction in the corn market, that's for sure. Lastly, let's talk about cattle. We're up here this morning, down yesterday. Some squaring here, it looks like, ahead of these reports that we're going to get this afternoon from USDA. But how much do we need to take that with a grain of salt? Because especially the inventory report is going to be a look back to two years ago, isn't it, and compared?

Darin Newsom: Yeah, and I laugh, but okay, so we'll get the inventory numbers. And I've heard from folks in the industry, they just, they're wringing their hands with worry. How do we read these things? I mean, what do we have to compare them to this, that, and everything else? They're just numbers. They're old numbers. Upon release, even in the best situation, they're old numbers. And they tell us where we were a month, two months, whatever, six months ago. It's not fresh news. I hate to break it to people in the industry, but the folks that matter, the large commercial traders, the large non-commercial traders, the investment funds, they already know, they already understand fundamentals. They know, they can see fundamentals every day, just like I talk about all the time. So yes, we're going to get these numbers. Yes, the industry at large is going to trade them. They're going to, or excuse me, they're going to talk about them and they're going to get all excited and they're going to be worried in this and that and everything else. But the reality is we already know what supply and demand is. We can see what supply and demand is. My concern is the divergence that we're starting to see between the breaking boxed beef markets and the cash market, which has stayed strong and futures market, which continues to rally on non-commercial buying interest. This is creating a divergence, what I like to call a rubber band disposition. And when that rubber band breaks, it tends to snap back. And if fundamentals are starting to crack, if we've reached a tipping point, that could lead to a volatile top.

Michelle Rook: Yeah, that futures discount to cash especially and to where boxed beef is, is especially large for sure. All right. Thanks so much. Darin Newsom, Senior Market Analyst with Barchart.