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Bottoms Up · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the egg markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is November 3rd, and I've got Pat back with us today.
• 0:27
  SPEAKER_01: How's it going, Pat?
• 0:28
  SPEAKER_01: I'm doing well.
• 0:29
  SPEAKER_00: How are you this afternoon, Mike?
• 0:31
  SPEAKER_01: Very good, very good.
• 0:32
  SPEAKER_01: Well, we're looking at a uh we'll start with the corn market here a little bit today, talk about some outside influences going on in the marketplace as well, and uh, we'll just see where the podcast takes us today, Pat.
• 0:43
  SPEAKER_01: Sounds like a plan.
• 0:44
  SPEAKER_01: All right, so the corn market ended on a pretty strong note here.
• 0:47
  SPEAKER_01: Something we haven't really seen for quite some time.
• 0:49
  SPEAKER_01: Close seven cents higher today on Friday.
• 0:52
  SPEAKER_01: Uh closed up at 477 on December futures.
• 0:56
  SPEAKER_01: So market really put in a nice double bottom, kind of going back to September 19th, before we found some support there.
• 1:03
  SPEAKER_01: And uh really looking at some of the the trade action here towards the middle to end of this week, there was a lot of outside influence.
• 1:11
  SPEAKER_01: You know, the lower jobs number drove equities pretty high uh in the past two days here.
• 1:17
  SPEAKER_01: The US dollar took a nice tumble over the past two trading sessions, something we haven't seen in a while.
• 1:23
  SPEAKER_01: And that drop in the dollar, that was the lowest we've seen in the dollar index since September 20th.
• 1:29
  SPEAKER_01: So uh right around that last time where we've found that bottom as well on the corn market.
• 1:34
  SPEAKER_01: But this sell-off, a little supportive for U.S.
• 1:37
  SPEAKER_01: ag exports pat, which it looks like we're getting a little bit more competitive with uh on corn and soybean exports globally.
• 1:44
  SPEAKER_01: Um partly due to our future sell-off we've had, the the USD backing up a little bit now again, and then uh maybe South America running out of some of their supplies as as well, that are readily available for for China here.
• 1:59
  SPEAKER_01: So we had a few things go on there.
• 2:00
  SPEAKER_01: We still need to set we've seen some export activity out of the grains, but still not enough for what's really needed to hit the USDA's expectations yet.
• 2:10
  SPEAKER_01: But what's your take on some of the trade action that we saw this week?
• 2:14
  SPEAKER_00: Yeah, good recap.
• 2:15
  SPEAKER_00: And as you're as you're you're saying that, I'm wondering is is the corn market is it tied to crude oil?
• 2:20
  SPEAKER_00: Is it tied to currency?
• 2:22
  SPEAKER_00: Is it exports?
• 2:23
  SPEAKER_00: Is it uh is it energy or or feed?
• 2:26
  SPEAKER_00: What's the what's the main driver here in terms of of moving this this this corn market around?
• 2:32
  SPEAKER_00: And the other thing that I'm I'm thinking about as you're describing that is well looking back to I guess that October 20th area, um, which wasn't that long ago when corn was trading over five dollars, and and uh so it kind of poked its head up, poked its head outside of the top end of the trading range we've been in since the first part of August.
• 2:54
  SPEAKER_00: And now here uh yesterday and a little bit today, we were poking our feet below the bottom end of the range that that uh this market's been in since the beginning of August.
• 3:06
  SPEAKER_00: And so um, you know, it's been the theme for a while here now.
• 3:11
  SPEAKER_00: We've talked about how amazingly um boring and unvolatile uh this market has been for an extended period of time, and now we're starting to whip around a little bit, at least um bouncing outside of this trading range that we've been in on both sides here in a in a short period of time.
• 3:30
  SPEAKER_00: And so um that probably means something, right?
• 3:33
  SPEAKER_00: From from the perspective of we're we're fixing to move one direction or the other, so to speak.
• 3:39
  SPEAKER_00: And and so as we as we think about all of that, I I do think it's uh but I mean we we don't know what the market's going to do, of course, but but um the the probability of of lower currency stimulating some export demand, that's a real thing.
• 3:57
  SPEAKER_00: Maybe you should just talk about that for a little bit, Mike.
• 3:59
  SPEAKER_00: Why why are why is the dollar trading on six-week lows here?
• 4:04
  SPEAKER_01: Yeah, and uh partially looking back at some of the uh outside market influence we had this week, uh uh we had a uh Fed release their minutes here, and uh, you know, it looks like they're they've been doing a hiking cycle here, and that that maybe looks like it's partially over.
• 4:23
  SPEAKER_01: Powell came out in the middle of this week and said uh they weren't gonna raise it this month for interest rates are gonna hold steady again.
• 4:30
  SPEAKER_01: Uh, but they were still maybe thinking that they could raise them potentially in January, maybe not even December.
• 4:36
  SPEAKER_01: So that was uh that was one of the things where it's like, well, shoot, it uh they left it the same this month, but they still didn't rule out further hikes in the future.
• 4:44
  SPEAKER_01: So they were maybe a little bit disappointed about that.
• 4:46
  SPEAKER_01: Dollar rallied up a little bit more, and then after the US jobs report came out and showed a little bit of cooling and US unemployment is rising a little bit, uh some of those indicators are potentially triggering uh a recession rule that you know, going back in history, if this happens, you likely fall into a recession.
• 5:07
  SPEAKER_01: So after we saw that unemployment rise, I think that's scaring the US dollar a little bit lower today, Pat.
• 5:14
  SPEAKER_00: Yeah, I agree.
• 5:15
  SPEAKER_00: And I and I also think that um you know tenure treasuries tra touching five percent this week, highest 10-year treasury rate in 32 years, is I if I remember correctly.
• 5:27
  SPEAKER_00: Um that's also a reminder for market participants that um that's a pretty um strong incentive for slowdown in economic activity or or uh at least a slowdown in in reinvestment, those sorts of things, with with uh um with with tenure treasuries uh uh going up that high as it relates to uh um to to returns are at five percent or so.
• 5:51
  SPEAKER_01: So and if you pause on that quick, I mean if you go back to when a lot of people refinanced whether it was their business homes, etc., on their loans, a lot of those refinanced at lower rates than that.
• 6:04
  SPEAKER_01: So I feel like now that we're getting back up over five percent, you know, it's not as easy to say that, oh yeah, we're totally gonna take it if it's seven or eight percent.
• 6:12
  SPEAKER_01: And like you said, you can double your money over ten years, right?
• 6:16
  SPEAKER_01: But five percent's probably getting okay to start stalling some money flow out there and just say, you know what, let's let's take our five percent and you get reports like this come out, uh maybe we'll wait for a little bit and see what happens here in the stock market.
• 6:32
  SPEAKER_00: Yep, no question.
• 6:33
  SPEAKER_00: And so I it just little indicators that we're that we're we're we're getting inching ever closer to the to this uh to the recession word or inching ever closer to a slowdown in economic activity, all those sorts of things is is uh potentially uh uh some real good reasons as to why we're seeing some cheaper currency there.
• 6:52
  SPEAKER_01: And before we talk about soybeans, I do think that's one of the reasons why energy, I just feel like crude oil's been incredibly disappointing.
• 6:59
  SPEAKER_01: I mean, trading at$80 here uh after some of the activity they've had, that's probably one of the main things holding the ceiling back on crude oil.
• 7:08
  SPEAKER_01: You saw cattle take some risk off here recently as well.
• 7:12
  SPEAKER_01: Um I think we've seen some money flow uh cap some of these commodity ceilings recently.
• 7:19
  SPEAKER_01: The soybean market quietly uh I I shouldn't say quietly, but it it feels quietly uh rising here.
• 7:26
  SPEAKER_01: 1351 on the Jan uh soybeans expiration today, which that's gonna be our bidding front month now.
• 7:33
  SPEAKER_01: I mean, you're starting to see a lot of processor bids start to show some pretty decent uh cash values again for for soybeans here, Pat.
• 7:42
  SPEAKER_01: And right after harvest, um I'm curious to see what people are gonna do with soybeans at these levels, but I'm also a little bit curious on what your take has been on the soybean market because it seems like I've I've struggled to find a lot more news on on some of the reasons why, for example, we were up 23 cents today, Pat.
• 8:02
  SPEAKER_00: Yeah, I I'm I think the the the real quick, simple, short answer to that question is is that I think there's a little more concern about about South America weather than maybe what uh the the common talking points are.
• 8:18
  SPEAKER_00: I mean I I uh that uh that that stat that you showed us at the beginning of the week, Mike, where Argentina is experiencing the second driest in 30 years, uh Jan through September, right?
• 8:35
  SPEAKER_00: So this Jan through September time frame is the second driest in 30 years in Argentina, and that's the explanation for a challenging crop last year, but also the realization that we really haven't fixed that situation too much at all.
• 8:53
  SPEAKER_00: And Brazil did, right?
• 8:54
  SPEAKER_00: Brazil's weather pattern changed, and they ended up with a a productive crop last year, and by most accounts, have the opportunity to be off to a good start this year.
• 9:06
  SPEAKER_00: But Argentina still remains um stubbornly dry down there, and you know the the meal market uh led the bean complex uh rally today, uh meal itself up uh over 15 bucks, dies meal 1580 higher today on on Friday here, November 3rd.
• 9:26
  SPEAKER_00: And so just a reminder, Argentina, third largest exporter of soybeans, but the largest exporter of soybean meal, a lot of processing, soybean processing facilities on the coast down there.
• 9:38
  SPEAKER_00: And so, so Mike, I think that's the answer.
• 9:41
  SPEAKER_00: Like the other stuff that's happening, cheaper dollar, all the stuff that we were talking about, providing some support for corn.
• 9:48
  SPEAKER_00: It's true for soybeans too, but I think there's a little bit more going on as it relates to concern about weather, particularly in Argentina.
• 9:56
  SPEAKER_00: And then on top of that, just the glow, the the balance sheet is tighter, right?
• 10:01
  SPEAKER_00: Just relatively speaking.
• 10:02
  SPEAKER_00: Like there's you know, the the the US balance sheet and the global balance sheet on oil seeds in general, soybeans in particular, is tighter than what uh than what corn is.
• 10:12
  SPEAKER_01: Let's talk about the proteins here a little bit before we wrap up, Pat.
• 10:15
  SPEAKER_01: The hog market in particular, we we did find some strength here recently after about the end of October.
• 10:22
  SPEAKER_01: Uh, let's talk about what you saw out of the hog market here this week.
• 10:26
  SPEAKER_00: Yeah, I uh I the the hog market is like the corn market in the sense that it's it's recently become more volatile.
• 10:35
  SPEAKER_00: We've had uh well, three days this week of dollar plus moves um up and down, and so we are getting a little more volatility into that that market as well, some more erratic money flow.
• 10:47
  SPEAKER_00: But I would just say that that uh spot fundamentals, especially when you look at it through the prism of the fourth quarter here, are really still doing pretty good.
• 10:57
  SPEAKER_00: Um, composite cutout is hanging in there pretty well.
• 11:01
  SPEAKER_00: Export sales report have been reasonably good.
• 11:04
  SPEAKER_00: Cold storage report from 10 days ago or or so was pretty decent.
• 11:09
  SPEAKER_00: Um, so all of those things I think would suggest that we're we're managing the seasonal increase in supply, I guess, like I said, reasonably well.
• 11:19
  SPEAKER_00: The futures market has come back in line with spot fundamentals, and meaning that that the nearby contract is more normal relative to spot fundamentals today from a basis perspective.
• 11:30
  SPEAKER_00: And we are still seeing some slightly wider than normal um um spreads, uh kind of that deceas forward uh time frame.
• 11:38
  SPEAKER_00: And so I just say all of that to say this.
• 11:40
  SPEAKER_00: I think this hog complex is uh observing a frustrating lack of liquidation, if you will, on the supply side of things, given the uh uh the tight margin environment the industry has experienced for an extended period of time, but cautiously optimistic as it relates to what's happening on the demand side of the equation.
• 12:02
  SPEAKER_00: And then when you flip that question over to beef, it's uh it's it that is interesting as well.
• 12:09
  SPEAKER_00: Um reviewing some data again this morning, reminding ourselves that you know we're four or five percent lower on beef production this year compared to last year.
• 12:21
  SPEAKER_00: We're experiencing some relatively decent margins in the in the the space, lower input costs with lower corn, all those sorts of things.
• 12:31
  SPEAKER_00: And we're still not keeping heifers back, right?
• 12:34
  SPEAKER_00: As a percent of total harvest uh uh heifers are still 43 or 44 percent, which is about as high as it gets.
• 12:41
  SPEAKER_00: And so um, so so if we ever get to the point where you start to try to rebuild that uh that uh that cow herd again, uh we're gonna have even tighter beef supplies going forward.
• 12:52
  SPEAKER_00: So then I flip back to the hog side of things, you know, tighter protein supplies here in the U.S.
• 12:58
  SPEAKER_00: when you consider um uh beef, poultry, and pork, a little bit of a competitive advantage uh on the export side of things, particularly when you compare U.S.
• 13:07
  SPEAKER_00: pork prices to European pork prices, all our reasons for some cautious optimism.
• 13:13
  SPEAKER_00: We just got to work through what what is historically a challenging time of year anyway, and then particularly challenging this year because of the the the tight margin environment we've experienced over the last year.
• 13:26
  SPEAKER_01: All right.
• 13:27
  SPEAKER_01: Well, thank you for your time today, Pat.
• 13:28
  SPEAKER_01: Thank you, Mike.
• 13:29
  SPEAKER_01: And thank you to all our listeners.
• 13:31
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 13:35
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:40
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:46
  SPEAKER_01: See you next time.