Market Plus: Jeff French

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Howell: This is the
Friday, September 6, 2019 version of the
Market Plus segment. Joining us once again
is market analyst Jeff French. Jeff, welcome
back to the table. French: Great to
be here, thank you. Howell: Jeff, you’ve
done a great job so far. This is your first time so
I just want to give you some shout out for that. French: Thank
you very much. Howell: Okay, Jeff, so
during the Market Plus segment we like to ask our
social media questions. And we were finishing up
our discussion there at the end of the show
talking about the U.S. dollar. We’ve got a question here
from Chris in Wisconsin that came to us on
Instagram saying, with the U.S. dollar reversing does that
give us an indication of a seasonal low
in the grains? French: It could. But with the demand, the
export demand the way it is right now I just don’t
see the dollar is going to be that much of an impact. And it’s really
not that high. It has been higher. It’s high but it could
definitely go higher. The one thing I would like
to say, the corn and beans with this selloff we are
competitive on the world market. Corn out of the Gulf is
probably $5 to $15 a ton cheaper than
South America. So even with the strong
dollar you will see some demand and the export
inspections, that is what is actually leaving your
country, in the beans this week were really friendly. It was 1.2 million metric
tons, most of it going to China. So these lower prices,
even with the strong dollar, will
attract demand. Howell: Jeff, you
mentioned there the export inspections are the ones
that are actually going out of the country. Have we started to see
an uptick in soybean purchases from
China heading out? French: The purchases, no. They are — President
Trump says they are required to and he wants
them to buy beans, but we have not seen big
Chinese purchases. So they are buying
these cheap beans. It would be foolish
if they aren’t. They are on sale. But yeah, we have seen a
little bit of uptick of what’s leaving the
country, but actual export sales not so much. Howell: Okay, since we’re
talking about beans here we’ve got a question from
Tim in Altamont, Illinois. He said, should I cash out
my November soybean put? French: Well, I’d like to
know what strike level it’s at and has it
doubled, tripled in value? From a risk management
standpoint we can roll it down, take profits, have
less value into those puts. But I would not sell
outright that put until you actually contract your
physical beans because if you do that and prices go
lower you’re going to lose that value. So don’t sell it until you
actually sell your cash soybeans. Howell: Since we’re
talking about the sales here I want to talk about
old crop and new crop sales. First let’s talk about old
crop because I know some producers are still
sitting on some old crop soybeans, old crop corn. Should they be looking to
get rid of that crop in lieu of harvest season
starting up here? French: Well, they’re
probably going to have to, to make space. And unfortunately if
they’re doing it now they’re going to be doing
it at maybe not the bottoms but it looks
like it’s a bottom. It’s definitely on
a big selloff here. I mean, $1.20 selloff in
the corn, I can’t advise selling cash at
those levels. This is a market where
that type of selloff you might be looking for
places to purchase corn for a long-term. But yeah, it’s
going to be tough. If you have old crop still
in the bin and you’re forced to sell it to
make room I would just definitely reown it with
the cheap calls, they’re just very cheap right now
as the market has tanked here recently. So I would definitely
reown it out to March. You want to get at least
out to March to get through the final crop
report in January. That’s when we’ll have the
final yield, the final acres and the final tally
of how big this, or how small this crop
actually is. So if you’re going to
sell it get it reowned. Howell: What about
new crop, Jeff? We’ve got a question
here from Jon in Ohio. He said, should we be
locking on corn on futures for January/February
of 2020 already? French: Not at these
levels, I’m not advising it, and I kind of
touched on it before. I don’t like selling a
market after a $1.20 selloff. That type of action is
probably meant to be bought. We’re actively rolling
down puts, puts have gained a lot of value
obviously on this selloff. If you don’t plan to sell
it and you want protection buy that weekly option,
that gets you through that September USDA report. They’re 3 to 5
cents a bushel. And have the downside
locked in because if for some reason they increase
the yield, who knows, it’s the USDA, so that would
lead to another leg lower and you will be glad
that you have those puts underneath your
unsold bushels. Howell: Hopefully the USDA
doesn’t mess with the market that much and
increase yields, but let’s say they don’t, we
continue to see them either keep yields are
this level, maybe change them a bushel
or two lower. Jeff, can we make back
that $1.20 that we’ve seen from our recent highs? Will we make
that back ever? French: That’s going
to be challenging. That rally was on a
perceived shortage of supply. That perception is gone. Could we have
a smaller crop? Yeah, but we’re still
going to produce a sizeable, good crop. And with current demand
right now we’d have to get all those trade deals done
and we’d have to have a much smaller crop than
what is out there. I’m not going to say never
but it’s going to be unlikely. Howell: What is a more
realistic rally that we could see after the
combines start rolling here? French: I don’t think 40
or 50 cents in the corn, 60, 70 cents in the beans,
I don’t think that’s unrealistic at all. We’ve beat this market up
pretty good down here and I think we could rally. Howell: Okay, the next
question then is not how much we’re going to rally
but when we’re going to rally. We’ve got Gary in Wilton,
Iowa wants to know how soon after those combines
report poor yield will the markets respond? French: I think once we
get halfway harvested is realistic. But you’ve got to look at
history, this is a late year, it’s going to take a
while to get this crop in and if you look at other
late years, which we do, it’s pretty close to 1993. That was a late
crop maturing year. The USDA didn’t start
dropping yields until November of that year and
that is really when that market took off. So it might be until
November or until we get 50%, 60% harvested and
those yield tallies are just simply not there
but we’ll see here soon. Howell: Jeff, if I’m a
producer and I have some corn that I haven’t sold
ahead should I be looking at some commercial storage
hoping to wait for a rally? French: If you do that
definitely keep something in place below, be long
a put in case this thing goes. But yeah, I don’t want
to turn too bearish down here. We’ve had a good selloff
here and again, I’m using this selloff for my end
users and for my livestock producers to actually buy
some corn and buy the physical feed needs. So I don’t like selling
into this downturn right now. Howell: We had another
interesting question, Jeff, and that was, with
these lower grain prices why haven’t the meat
markets been rallying on these attractive
feed prices? French: But there’s
something to say, obviously the cattle is
something different right now with the plant
closure, there’s too many animals right now for
our capacity and we are holding back animals here. We’re going to work
through that but it’s going to take some time. I’ve been around cattle a
long time, it’s the same cheap corn, cheap cattle,
that typically goes hand in hand. The cattle I know we’ve
had a pretty messy selloff here lately but we’re in
a year where we’ve had record number of cattle on
feed for now six straight months. So we were pretty current,
this fire has stopped that, and we might have a
little bit more pressure to the downside here. Howell: Okay. Jeff, I’ve got a little
bit of a softball question for you for the last one
here coming to us from Scott in Augusta,
Wisconsin. He said, when will the
good old days of farming come back again? Is there a future
for young farmers? French: Yeah there
is, always there is. But we need to start
moving this supply. We have a lot of it and
the demand right now is very low. But yeah there’s a future,
there’s always going to be a future, people need to
eat, American farmers feed the world so I don’t
see that stopping. Yeah, I’m optimistic. There can’t be too much
more negative news that can be built into
this market I hope. So yeah, there’s
definitely a future for young farmers. Howell: Jeff French, thank
you so much for joining us. French: Thanks
for having me. Howell: Join us again next
week when we’ll look at a family business that has
found the right ingredient and Ted Seifried will join
us at the Market to Market table. Until then, thanks for
watching, listening or reading. I’m Delaney Howell. Have a great week!

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