In this morning's interview with Michelle Rook of AgWeb's Markets Now, I discussed why we're seeing the prices of soybeans and livestock move lower, the corn market, my opinion about Russia's possible export ban, the Fed Fund rate hike, the U.S. dollar, gold, the hog market, and the cattle markets. Watch my interview here.

Michelle: Welcome to Markets Now. I'm Michelle Rook along with Darin Newsom, Senior Market Analyst at Barchart. We're seeing mostly lower livestock futures over in the green soybeans, continue their path lower, wheat, and corn. They're bouncing here this morning. I got to start off with the soybean market, Darin because we've seen quite a correction here in the soybean futures, but not only in soybeans but soybean meal and soybean oil. Is this all just fund liquidation, or is there more to it?

Darin: To me, it looks like the bulk of what's going on is fund liquidation. If we go back to the most recent CFTC, Commitments of Traders, it's important again, I look at the legacy futures only. It's the only one, and in my opinion, the only one that matters. We saw that they were still holding a very large net-long position in both soybean and non-commercials were holding a net-large net-long position in both soybeans and meal. These markets just had not been hit by the same sort of liquidation that we've seen in corn, crude oil, and so many others.

More or less, it was just their turn. We started moving through some support levels, algorithms were triggered, we get headlines, but headlines don't really amount too much of anything. What we're watching here is the actual market moves. They're just on a slide right now, and we're just seeing this money coming out of the market. Will it return? It's hard to say. Until we start to put the brakes on this, until they run out of the orders and get to a point where they're done liquidating, I just don't see the market changing its mood very much.

Michelle: We're also seeing markets implode in China, basically their soybean products, their soybeans are down. We've seen rapeseed prices taking hit as well. You're saying that's fund liquidation in all those areas, not necessarily anything fundamental?

Darin: No, I'm not saying that. There are some fundamentals going on, obviously. In China, we do have the African swine fever hitting the hog markets again or hitting its hog herd again. There are some fundamental keys to these markets as well. Whether or not it's feeding the fire of what else we're seeing as far as liquidation goes it's fine. If we look at the US market basis is still strong.

We saw the major live future spread move to something like a 21, 22 cent inverse. It's just incredible. We still have incredible demand right now for US soybean supply. The commercial side's just sitting back, letting funds drive this thing down, and they're buying what they need to when they need to. They're not forced to do anything in here. They can pretty much pick and choose when they want to step into the market.

Michelle: The funds are already short in the bean oil market. Man, they have really hit the gas on that thing this week. Why?

Darin: That is the head-scratcher to me, Michelle, because there still seems to be ample demand for bean oil most domestically and worldwide, but that market really has collapsed. To me, that was one of the triggers for the soybeans and bean meal on Thursday was the fact that we were pushing near-limit down in soybean oil. Don't really have a good reason for it. I'm sure some folks out there do. I'm not really sure what it is.

Michelle: Okay. Let's move over to the corn market. Obviously, we're getting a little spillover strength from wheat this morning, but we have seen the big inverse in the market. A lot of this has been due to China business with more business this morning. How long do you think this is going to continue?

Darin: It could easily continue for the next few months at least. Once we get into the second half of the marketing year, once we turn the calendar page from February to March, that's when export demand for US Corn tends to pick up, and that's what we've seen. Again, just as with soybeans, this May, July future spread has just exploded here recently. National average basis has gone to $0.10 over May futures. Hearing stories from the river markets, we're seeing $0.20, $0.30 basis jumps just as merchandisers are trying to find some supplies in this very tight supply situation, trying to find some supplies to move downriver for export.

They're just not there. Nothing has really changed. Again, this was one of the markets that get hit by heavy liquidation over the last month or so, tied with all the banking and everything else that caused such a fury. Now, it seems to be calming down, and commercials again, just as in soybeans, are willing to pick and choose where they want to buy and get some coverage on because we continue to see these sales coming in from China.

Michelle: Absolutely. What about the wheat market? Some double-digit gains this morning. Obviously, we're hearing that Russia may temporarily slow or stop their exports. Is that really driving this, or is this just all technical and money flow too?

Darin: That's what everyone likes to talk about. They want to point to the headline and get all excited and whoop and holler and this sort of thing. If anyone believes any headline coming out of Russia, I feel sorry for them. Second, we knew there wasn't any grain left for Russia to steal from Ukraine to begin with. There wasn't much wheat harvest last year. Certainly, there wasn't much that got planted. This coming harvest doesn't look so good for Ukraine either.

Russia has taken what it wants. Now, it says, "Okay, we're not going to ship anything because there's nothing left to ship." I don't know why anyone gets so excited about that. What we have to remember is the non-commercial position in Chicago wheat was incredibly large. They have recently pushed to like 50,000, 60,000 contracts net short. Just as with soybeans where we could expect some long liquidation, a short covering rally was going to happen at some point. It seems like after Wednesday's head fake or fake out here up to the downside, it certainly looks like the buyers have stepped back in.

Michelle: You bet. We were right for a short covering rally for sure. Financial markets, let's talk about the outside markets and what's going on there now or where you see us headed now that we're out of the woods of the Fed increasing their rate 0.25%. There's still fear about another rate hike what in May. Where are we going to go from here you think?

Darin: Yes, I think we will see another Fed fund rate hike in May. If we look at the Fed fund futures forward curve, always fun to say it's indicating and it has been indicating that we could actually start to see some decreases starting in June, so the second half of 2023. That'll make things interesting not just short-term. The US dollar looks to have turned a technical corner, may try to post a short-term uptrend now for a while.

That could put some pressure on markets like gold. That's been just screaming higher as well. If we see some buying coming into the dollar, a little bit of pressure on the gold market. I'm still not looking for any long-term trend changes here over the next couple months, but it certainly could happen. In the background, we still have money wanting to go back into global equities here in the US as well, and we'll see how that plays out.

Michelle: The meat sector has been beat up as well here, Darin, with the outside market concerns, the banking concerns, whatever you want to tag it on, but it looks like cogs how many days in a row we scored new contract loads. We're trying to bounce this morning, but are we starting to finally try to put a bottom in this market because we've tried to pick this several times now?

Darin: Yes, I wouldn't want to be the first one to buy back into the hog market. It teaches that lesson very quickly. Do hogs really need to have been pounded the way they are? Probably not. Fundamentally, again, just as in so many other markets, we've seen some commercial buying coming in. I think a lot of this was tied to the headlines of coming out of China. Again, it should not have pushed the US market this low. I still think we've got a solid cash market. We've got solid future spreads. It looked to be a bit of an overreaction on the fund side. We'll see if it starts to straighten itself out, see if funds start to move back to get in line with fundamentals again.

Michelle: Speaking of fundamentals, we still have very good fundamentals in the cattle complex, but again, the funds were long there, they've been exiting. When do we start to see a bottom in that market or this trend term?

Darin: I think there's still some room to the downside in both live cattle and feeder cattle. Predominantly in the feeder cattle market. They got way overbought. There's a big area underneath them now what could be called a vacuum, so once we've seen some selling come in. If the fundamentally feeder cattle never got that bullish, in fact, the spreads were still bearish. Again, that just leaves a lot of room underneath this market time and space for it to move lower. I think that's still a possibility. I would look for another few weeks at least for the May contract and so on, then the deferred contracts to continue to come down.

Michelle: Nice analysis. Thanks for joining us, Darin Newsom, Senior Market Analyst with Barchart, and that's Markets Now.

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