I joined Michelle Rook on AgWeb's Markets Now this morning to offer my analysis of the agricultural markets, with a detailed focus on corn, soybeans, silver, interest rates, and the stock market. Watch the full interview here.
Michelle Rook: Welcome to Markets Now. I'm Michelle Rook with Darin Newsom, senior market analyst with Barchart. Seeing quite a bit of red on the board in the ag sector this morning, with the exception of hogs, but the green's all in negative territory. Darin, let's start out there because corn and wheat got a little pop yesterday on what looked to be a little geopolitical risk premium. Back down this morning, so probably just some profit-taking?
Darin Newsom: Yes. Either that or just the realization that geopolitics haven't changed, and the fundamentals haven't changed in the markets. To me, there is still some concern about US supplies as we look out towards next planting season for the 2026 US crop. Vendors are going to stay tight. There's not going to be a lot of bushels moving to town. If we can somehow keep solid demand underneath the market, we can see that in the May, July spread. I think it's covering something like 24%, 25% calculated full commercial carry at yesterday's close.
That's a bullish level. There is some concern out there. Not that the US is going to run out of corn anytime soon, but available supplies might tighten up during the next planting season. I don't think the politics have changed. It certainly doesn't look like the fundamentals have changed. The idea if demand can stay strong, mostly on exports, but possibly also see an uptick in feed demand, I think that'll be what keeps a floor underneath this market.
Michelle: Let's talk about corn specifically. We popped above the 200-day moving average yesterday. I think we're trading back below it here this morning. You bring up a good point about corn because export demand has been on record pace. Demand in general has been good, but not enough. It's not good enough to overcome these big supplies. We're stuck price-wise, aren't we?
Darin: Yes, we are. We did see the national corn index climb above $4 here at the end of November for the first time, I think, since last spring. Certainly, seeing a little bit of momentum build. Basis remains weak, which-- If we take everything into account, and we've seen the index rally a little bit, but basis has stayed weak, that tells us that, again, we do have some solid demand out there. There is a search for supplies. It's just that there's plenty of supplies to be had.
That's what keeps a lid on the basis market right now. We'll have to watch that as we make our way through the winter quarter. The question is what happens if this demand starts to go away as we make our way through winter. Then what happens? Because we're still going to have plenty of bushels on hand. If some of those start to come to town, particularly at the beginning of the new year, then we could start to see some weakening of the market in general.
Michelle: There's a lot of people pinning their hopes on the idea that we are going to see lower yields in the January report, but that's not a given at this point, is it?
Darin: [laughs] My idea is who cares? That's just playing pin the tail on the donkey. It's ridiculous to even talk about. We already know what the supply is. We don't know the actual numbers, but we can see, again, if we look at the actual market and we look at the future spreads, what they're telling us, we know we have ample supplies. I don't care if yield was 195 bushels per acre or 165 bushels per acre. It doesn't change the real fundamentals of the market. That's what so few in this industry actually understand.
Michelle: For sure. Soybeans, let's talk about that market. We've been drifting the last three days here because we essentially, even though there's been rumors and P&W bids have actually solidified a little bit yesterday, there's talk of China export business, but we haven't seen any flash sales. This market, is it still trading, then? Is it still waiting for that China business?
Darin: This is where the soybean market gets interesting, is that we see what looks to be commercial activity overnight and then nothing happens over the course of the day, for the most part. This tells us that there could be some Chinese business going on. The question is, is it just on the future side, or is there some physical bushels being bought? My guess is there's probably a few. Again, the US is a secondary supplier. This is the time of year when US tends to make its sales. The fact that we're seeing a little bit of a bump in the P&W basis, again, not overly surprising.
There are supplies across the Northern Plains. That's where the US basis tends to be the weakest, and so they're moving to port. They'll probably start moving over to China here in the not-too-distant future. Now, again, US weekly export sales and shipments numbers are still running a month and a half behind. It's going to be another couple months or at least another month before we get caught up there.
As far as these, what looks to be business overnight, China's not stupid. Their buyers have been doing this for centuries. What could be happening is the sales are being made, but they're below reportable levels. We aren't going to get those flash sales. It doesn't mean it isn't happening. It just means that it's below reportable levels. At some point, when the weekly export sales and shipments numbers ever get caught up, then we might actually see that there was some seasonal business being done.
Michelle: Yes. I was going to ask you about that if they were maybe trying to fly under the radar with these lower buying amounts, but you just addressed that. It's a really good point, I think, that you've made here. In the meantime, until we get more export business, China or otherwise, we are continuing to drift.
Darin: Yes. Certainly, we know Bangladesh and Vietnam are game-changers, as you put it. [laughs] We know they're going to replace all the business that we've lost over the last decade with China. I think last we looked, I think Bangladesh had, what, 11 million bushels? Yes, it's a game-changer.
Michelle: Yes, and we're above Brazil's price. Some of that business is probably being diverted over to Brazil from those other countries. All right. The other thing I wanted to talk to you about this morning, we do have the Fed meeting coming up next week. Certainly, there's a lot of posturing already for a quarter-point rate cut. Talk about, again, what that means for the commodities sector. Will it mean a lower dollar?
Darin: Yes. Historically, that's what the tie has been is the key fundamental of any country's currency is the interest rates. If that country's interest rate's coming down, it should weaken that country's currency. We would think another 25 basis point cut, and that's what the futures market is telling us, the Fed Fund Futures Forward Curve is telling us, is to expect next week, it should weaken the US dollar. Now, having said that, that should provide support to commodities tied to the US dollar. We're not seeing it. As you said right off the bat this morning, there's a wave of red across the commodity complex here Wednesday morning.
Now, that's because there hasn't been an official announcement of a cut. Markets building it in, dollars under pressure, commodities can't go anywhere. Why is that? Because there are political reasons outside of economic reasons. We know that that is what continues to influence supply and demand. It continues to influence the algorithms, whether or not they're being triggered into buying or selling. It's all about headlines. It's all about social media posts and historic thoughts or traditional thoughts of economic ties to various markets, intermarket relationships, and so on. A lot of those have been thrown out the window of late.
Michelle: I feel like the stock market and even the Fed Forward Futures Fund, or whatever you call it, has been trading more of this idea that, "Hey, we're going to get a new Fed chair that's going to be really friendly to lowering interest rates." Am I reading that wrong?
Darin: No, I think that's right. I like the way that you put that. It's a very correct way of saying it. The next Fed chair will basically do what he's told to do. Chairman Powell has been an independent voice. In my mind, he's done a fine job. He was a little slow to start raising rates. We all know why, back the first term, the sitting president. That's not going to be an issue going forward.
What the president wants is what the president's going to get, because we know during this last campaign, he said he wanted the last say on any interest rate move, any interest rate decision. That's probably what's coming in 2026. The idea is that it is going to continue to lower interest rates, weaken the US dollar. Quite honestly, there's really only one outcome when you weaken your currency, and that is higher inflation.
Michelle: For sure. Kevin Hassett obviously is the man, it looks like, that's going to get the job, and it feels like the market has been trading that favorably as to interest rate cuts, to your point. All right. The other thing that's happened, let's talk about a few other policy things. Of course, the president has been trying to get crude oil or energy prices down to lower the inflation risk, but talk about what's happening in that crude oil space.
Darin: It's been interesting because all of this diversion with headlines and posts about a possible war with Venezuela, we are, we aren't, we are, we aren't, theoretically, that should have sparked some buying in the crude oil market because, honestly, that is Venezuela's number one export, others will argue other things. That is their key export, and it didn't do anything.
Either the market knows this is all just talk, this is all just bluff, this is all just a divergence, or there's something else brewing. There's something else brewing in OPEC, OPEC+, and so on. It's going to be interesting to watch. I was expecting more of a reaction this week than what we've seen since the news somewhat broke this past weekend, and neither the Brent crude market or the West Texas Intermediate market has moved this week.
Michelle: Is it possible that that is because it looked like maybe we were going to broker some sort of Russia-Ukraine ceasefire, and that would mean taking Russian sanctions off of their crude oil for the Western nations? Is that a possibility of why Brent crude could not move?
Darin: Yes, that's certainly a possibility. It was interesting watching some global financial news this morning, that the ceasefire talks are going on between the US and Russia. There's a key player missing in all of this. I find that interesting that Ukraine has not been invited to the negotiation table. Again, I don't think any deal is possible, at least any lasting deal is possible without inviting one of the key players.
Michelle: One last thing I wanted to ask you about. You wrote this morning that the Trump administration is rolling back the Biden administration fuel economy standards. Talk about what that could mean for the silver market as well as biofuels.
Darin: We've seen silver on a record rally. You do some digging and some research on this, a lot of this has come from increased demand from electric vehicles. It's a key component in many of the parts of these electronic vehicles. This has just been sending the market screaming higher. I think it crossed something like $58 for the first time in history here earlier this week. We've seen that. Now we're going to have to keep an eye on this. If the sitting administration rolls back fuel standards to previous levels, and all of a sudden there's not the focus on EVs, at least here in the United States, we should be able to see this in the silver market.
A bigger question here domestically is, does this mean anything for ethanol demand? Because these are overall fuel standards. What the US administration is trying to say is they want more gasoline-driven vehicles on the road and fewer electric vehicles. If they're going to want more gasoline, does that mean higher ethanol demand, or are we going to see, as this administration tends to do, more refinery hardship waivers put out so that there's less ethanol used as a percent as well? I think things are going to get interesting here over the coming months.
Michelle: Yes, and biofuels policy has already been in question here with this administration. All right. Some interesting things to chew on here this morning. Darin Newsom, senior market analyst with Barchart. That's Markets Now.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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