I had the opportunity to discuss the soybean, wheat, and corn markets, along with the cattle market and the stock market, in an interview with Michelle Rook on today's AgWeb's Markets Now. Watch the full interview here.

Michelle Rook: Welcome to Markets Now. I'm Michelle Rook with Darin Newsom of Barchart. We saw mostly higher closes except for the hog market today. Darin, let's talk a little bit about the rally that we saw in the grain market, led by soybeans, which is a little counterintuitive considering some of the China news that we had on trade wasn't exactly the most positive today.

Darin Newsom: Yes, it really raises a question. We don't know why these things are doing what they're doing, but you're right. We get news from the US administration touting and spouting that, "Oh, we're working on trade deals with China and all these talks are going on and this and that and everything else. China comes out and say, "No, none of that's happening. That's just not true."

It didn't seem to matter the markets were buying. The traders were buying, particularly the noncommercial side. We've seen this over the last couple of weeks. If we go back to Monday's holiday delayed CFTC report, we see where funds actually moved to a long futures position in soybeans. Again, none of it makes much sense given what we think we know, but that's where the fun lies, is what we don't know. We do have to look at the markets and right now, trend certainly is, at least the short-term trend is up.

Michelle: We had already seen a chart breakout though in the beans starting on Wednesday and continued on Thursday. Do you think the funds just continue to buy on that momentum?

Darin: If we're going to apply technicals, if we look at the last number of trading sessions, we've seen this same momentum continuing to build. Rule number one, don't get crossways with the trend. Trend's turned up. Don't fight it. Don't jump in front of it. We'll find out the reason why at some point.

Michelle: The corn market was able to bounce after four days being down. Was it just a corrective bounce, do you think? Or was it strong exports on the weekly sales report, or underlying demand? Because those bull spreads are working there too, aren't they?

Darin: Again, to a certain degree. We did see the May gain on the July here, Thursday. Again, it comes with a bit of a grain of salt. If we look at basis, national average basis continues to run near its previous five-year low, weekly closes. I'm going to continue to call corn basis weak, particularly as we get ready to roll from the May to July futures contract.

There does seem to be this undercurrent of support. There is still solid demand for US corn. We're not going to run out of corn anytime soon. It seems, again, if we just look at the bigger picture, as I've long said, corn are the bonds of the grain sector. The fact they aren't doing, we aren't seeing the wide, wild swings usually that we see in soybeans and wheat, is more of corn's nature.

It's like studying the treasuries over in the financial sector. It does give you that backstop for trades in other market sectors.

Michelle: Do you think corn traded the wet weather at all, or is it just too early for that?

Darin: We can see that the commercial side just really isn't concerned. Now I know a lot of folks are, there's a lot of hand wringing and talking in this and that and everything else. If we look at the Dec, March, May spreads and so on, they're just neutral. They're not doing anything. We've seen a little carry build here and there over time in the new crop corn spread.

I don't think the actual commercial side of the corn market's all that concerned. I think it's generally understood, the crop's going to get planted. The US is going to grow plenty of corn and we still have ample supplies on hand to meet demand. If something happens, if there is a serious weather event that changes that, we'll see it, but we'll see it in the spreads first.

Michelle: The wheat market also a slight bounce, but we just scored new contract lows this morning in the wheat market. Do you think that was just short covering? Is that a little bit of a bear trap or what?

Darin: Any of those are fun things to say. I also like to call it a head fake. This is just pure characteristic wheat where it goes to a new contract low, it triggers some sell orders below the previous low. Everyone thinking, "Oh, we're just going to continue to go down," and then all of a sudden it just immediately reverses course. We've seen it time and time again.

This is one thing that hasn't changed with the move to algorithms. This is acting just like when pit traders used to hunt those stops and create the same sort of situation. To me, having watched these things for more than 30 years, it's always fun to see that situation develop. Now, does it change anything? Absolutely not.

Fundamentally, hard red winter wheat is about as bearish a market as we have in the entire commodity complex. That hasn't changed. It's not going to change anytime soon. Soft red winter is still bearish just to a lesser degree. Even spring wheat, spring wheat futures market is bearish as well.

Michelle: Although there was rain in the forecast and it looked like we pounded that wheat down into the ground this week, just as a result of that, do you buy into that part of the argument fundamentally?

Darin: I think so. I think we have to. These are still at their core. The grain sector is still weather derivatives. It's still made up of weather derivatives. When we see what could be called beneficial weather with rains across the Southern Plains for the most part, so the hard red winter growing area for much of the area, yes, that's a bearish fundamental.

There's a reason why the July-September and September-December hard red winter future spreads are both covering 95% or more calculated full commercial carry. If we want to change the topic ever so slightly, if we look at that hybrid May-July spread, it's coming up on the end of this variable storage rate tracking period.

It looks like the official storage rate's going to be going up here once this week comes to an end and the spread showing what it's showing. Then come May 19th, before harvest gets rolling, we're going to see higher storage rates because of how much wheat there is, because of how bearish these spreads are.

Michelle: Let's talk about cattle, because that market, as we've talked many a times, has been hinged to the stock market, S&P up today. Cattle came back after some early losses, but we couldn't make new highs in the back months of the live cattle. Do you think we will or not?

Darin: If we throw everything else out and we stick to rule number six, fundamentals win in the end, live cattle fundamentals, feeder cattle fundamentals are still bullish. We can see that through the spreads, we can see it in basis, we can see it in the cash markets. They're still bullish. We're coming up on a time of year where we've moved into grilling season, where there still should be solid demand for US cattle, for US beef. There is a fundamental reason.

Now, you mentioned it and you're absolutely right. There is a tie between the live cattle market and the US stock indexes. Since we posted Monday's meltdown, we've seen solid rallies in the three major indexes. Now, this brings to mind, I have all these little sayings, this brings to mind a possible Benjamin Franklin fish analogy. Guests and fish, markets start to stink after three days of moving against the trend.

If the trend is down, and we've just seen this bounce on what really are falsehoods being stated about trade and all of this, then it's very possible that as we close out the week and close out the month of April, that the three US stock indexes come under pressure once again.

Michelle: All right. You think the stock market, that might be a little bit of a head fake, because I was going to ask you, if the stock market keeps correcting, will money go back in there, or will we see it go into other places or risk aversion?

Darin: I think money's just going to continue to come out of equities right now. One of the best barometers is Warren Buffett here in Omaha. We know he's already moved a large chunk of his equities holdings over into cash, into treasuries.

In fact, I saw an article, I can't quote the numbers, but I think he is the world's largest, and I'm counting it, comparing it to other countries, he's the world's largest holders of short-term US T-bills. That speaks volumes about the uncertainty that we're seeing in the market, that there's these rallies that we see, these bounces that we see based on really nothing but words are going to get sold.

People are going to get out of them. They're going to use this as an opportunity to exit equities. I still think that they're going to be moving over into treasuries and other markets, more safe haven markets.

Michelle: Sometimes we talk about the agricultural space as being one where, like in the grains right now, they're seen as undervalued, that maybe they're a buying opportunity, but you don't think that the money is going to go over there yet.

Darin: I don't think we have the fundamental structure of these markets. We don't have the future spreads or the basis to warrant this invitation for large fund money to move into grains, which is, again, what puts this huge question mark by what's going on in soybeans.

Amidst all of what's going on right now, we have to remember that the next Fed meeting is coming up as well here in May. Chairman Powell's going to be under the gun once again. All indications are that US interest rates are going to stay unchanged. I think that's the smart play at this point. That fire is going to get heated up again over the next couple of weeks as well.

Michelle: For sure. Thanks so much, Darin Newsom with Barchart. That is where it ends 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.