Market Plus: Jeff French


Delaney Howell: This is
the Friday, December 20th, 2019 version of the
Market Plus segment. Joining us once
again is Jeff French. Jeff, welcome
back to the table. Jeff French: Thanks
for having me. Delaney Howell: Jeff. We’ve got, like I said
earlier, we’ve got Christmas next week, we’ve
got a lightened holiday trading session. What are you looking
forward to here? Commodities or otherwise
for the Christmas season? Jeff French: Well, I mean
we’re, we’re going to have reduced volumes. I mean it, it started here
this week, um, but we are starting to
see an uptrend. Uh, we took out some highs
here that we haven’t seen in months in the
wheat market. Uh, we had some big export
sales in the wheat market, six year highs that we
haven’t seen for a long time. Uh, so I don’t know, it
feels like the times are changing a little bit. Uh, we do still have
plenty of old crop supplies around here, but,
uh, the one big question that, you know, I want to
get through this holiday season and, and get to
the January, January 10th final production report. Uh, so we can actually
see, you know, how big, how small, uh,
the 2019 crop was. And it might continue
because there’s still a lot of corn, uh, up there
in the North that’s still standing in the field. Delaney Howell: Jeff, when
you look at the 2020 year, it’s been noted by some
analysts and forecasters that perhaps we’re
beginning here into an up cycle instead of a down
cycle that we’ve seen here for about five years. Do you think that that’s
the case that times are really changing
in that aspect? Jeff French: Uh, you know,
it were, due, I mean, if you look at cycles, um,
bear cycles, bull cycles, average five
to seven years. So yeah, we are entering
the, you know, the fifth year, six year of
this down cycle. Um, and it can
change quickly. Obviously the weather will
be the number one factor. But you know, these trade
deals that we’ve had, I mean, these are, these
were huge barriers, uh, that was blocking demand
for our commodity. So, uh, getting those out
of the way and getting them signed into law, uh,
could definitely start an uptrend. And it could be a game
changer here moving forward. Delaney Howell: Are we
starting to see an uptrend in the cotton market? Jeff French:
Yeah, absolutely. I mean we’ve, we’ve been
on a three month, uh, rally here up to
five, six month highs. Um, you know, you had the
funds, you know, they were pressing the short side,
they wanted to see the prices go lower, uh, with
no Chinese demand, no trade deal. Well now the prospects
of that is, is a lot more favorable. Uh, but also you had some
dryness down in Texas, West, West Texas cotton
crop was really rough. Uh, and then there’s the
expectation here going into 2020 that uh, cotton
could lose up to 2 million acres. Uh, so we need to demand,
hopefully we see that here with the Chinese
trade deal. Uh, we’re right up against
resistance, but you look at a may cotton taken out
70 cents, we could easily run that market up
to 74, 76 cents. Really quick. Delaney Howell: Jeff,
since you brought up the acreage discussion, we’ve
got a question in this week talking about
acreage, which seems crazy because we’re still 2019
here, but we’ve got a question here from Bradley
and Upland, Nebraska. And I’m going to add on to
just a little bit of his question here. But he said, could the
struggling wheat acres planted, not sprouted and
Kansas become corn acres next year. And I want to add to that,
if we do lose 2 million acres of cotton, what
commodity is that going to replace with? Jeff French: You know,
time will tell, uh, first part of the question, if
it’s planted wheat, uh, I don’t see them going in
and planting anything, you know, uh, digging that up,
you know, repairing it. I think the cotton or
the, excuse me, the wheat that’s planted in Kansas,
a lot of that ground, uh, is most suitable
to grow wheat. Um, and we are at an
estimated 110 year low acres, uh, that’s going
to be planted for 2020. So, uh, from that
standpoint, it is fundamentally bullish. Um, but we need to see
demand and demand here lately has been
lackluster at best. Uh, so we’ll just have
to see what happens here going forward. Delaney Howell: And what
about the cotton acres that you said could
see 2 million acres? Switchover? Jeff French: You know, I
think time will tell on that. I think this spring has
a potential to be a great acreage battle, uh,
because if we do get the Chinese trade deal and we
do see the Chinese demand, they actually follow
through with the deal. Uh, the beans are going
to make, in my opinion, a major run. And you know, the baseline
projections right now are 94, 95 million
acres of corn. I think the beans will
have something to say about that. If the Chinese come up,
just start buying the beans. Delaney Howell: Favored by
everybody to be the real winner here in the U
S China trade deal. I was looking at some, uh,
real results here from JCI at China’s top private
exporter, looking at, okay, what’s going to be
part of that $40 billion ag products or ag package. And we’ve got a question
here from Matt in North Dakota wanting to know, do
you believe the trade deal will give China the
confidence to buy our products and will they
purchase US beef again closer to the
pre-2003 levels? Jeff French: You know,
that’s a, that’s going to be hard to say because you
know, I, I believe trying to right now is
buying US beef. Uh, they are bringing
it in through Hong Kong. If you look at the weekly
exports, you see Hong Kong on there now it’s, it’s
not on a big level, uh, but they are buying it. Uh, but the one thing you
have to remember, um, uh, about China beef demand in
China meat demand, it is, it’s all hormone free. They have a very strict
policy on hormones and that takes a lot of our
cattle out of that market. But then if you look at
our all natural cattle here, um, when you compare
it to our competition, the Brazilian cattle are
still about 40% cheaper. So I think it will be, you
know, the, the spillover buying that we could
potentially see in the pork will definitely spill
over into the beef market. But Chinese, Chinese
directly buying from from us beef. Uh, we’ll have to see. Delaney Howell: Okay. Jeff, we’ve got another
question here from Tim and Crookston. Minnesota. What would disrupt
corn and soybean export projections for 2020? Jeff French: Uh, well,
what export inspect. Yeah. I mean the Chinese trade
deal would be the biggest thing. Um, but also a
disruption in production. Um, you know, if we have
less production, you know, that’s going to cut
into the exports. Um, but also the U S
dollar, if it continues to move at historic high
prices up here, uh, that will make all of
our commodities more expensive. So, uh, that will be the
number one thing, I think moving forward,
the trade deal. And the U S dollar on
the U S on the exports. Delaney Howell: Tell me a
little bit more about the US dollar and where that
currently sits and how that’s impacting
our exports. Jeff French: Well, it’s,
it’s been near all time highs here for awhile. It’s been very strong. Um, and that’s more
of a security issue. I mean, if you’re going to
hold dollars, I mean ours is the strongest in the
world, uh, but it had a big correction because the
Chinese trade deal, uh, that will make the Chinese
dollar a lot stronger and we saw that a
big correction. So, you know, maybe
that started something. Uh, but that will be a big
determining factor for our exports. Delaney Howell: Jeff,
we’ve got just one final question here for you
coming to us from Jamie in Spencer, Iowa. How long will the ride
continue up in prices? Jeff French: Well, I mean,
that’s something that we’ll just have to see. But you know, it’s, it’s
one of those things where if we are going to be
breaking out of the downtrend here and it’s
been long downtrend, um, you know, these trade
deals, I mean, if they are implemented correctly and
followed through, uh, I think it could be an
absolute game changer here moving forward. So, uh, hopefully it,
you know, 2020 is a great start to it. Delaney Howell: And Jeff,
this is just a question I have to end things besides
the trade deal with China. And besides the January
10th was your report, what are the other big
fundamental factors that you’re watching
here in 2020? Jeff French: Well, it’s
going to be the weather. I mean we are wet. Uh, we went into this
weather, uh, winter, extremely wet. Uh, so we’ll have to see
how spring, uh, develops because you know, to get
94, 95 million acres of corn in the ground, uh,
we’re going to have to have an early spring
and a dry spring. So, uh, right now it
doesn’t look that way, but we’ll just have to see. But it’s definitely going
to be the weather and mainly the wetness
that we’ve seen. Delaney Howell: All right. Jeff French. Thank you so much. Always a pleasure. Jeff French: Thanks
for having me. Delaney Howell: Join
us next week when we’ll explore how a hemp green
rush could make or break perspective farmers and
Tomm Pfitezenmaier is back at the Market
to Market table. Until then, thanks for
watching, listening or reading. I’m Delaney Howell. Have a great week. Trading in futures
and options involves substantial risk. No warranty is given or
implied by Iowa PBS or the analysts who appear
on Market to Market. Past performance is not
necessarily indicative of future results. Market to Market is a
production of Iowa PBS which is solely
responsible for its content.

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