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Transcript

Derisk · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag 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 March 28th.
• 0:25
  SPEAKER_01: This is gonna be a last podcast uh for March here, Jeff, and then next week we're already into April and we'll be planting in no time.
• 0:34
  SPEAKER_00: Yeah, there's uh there's some activity going on already this week, but this moisture might slow us down a little bit, at least uh in the northern part of the I heard some corn going in the ground today, actually.
• 0:46
  SPEAKER_01: Don't really don't quote me on that, but I yep, I did have some corn going in the ground today in in Minnesota here.
• 0:53
  SPEAKER_01: So a little aggressive, but hey, I uh I've starting started to hear it at least.
• 0:58
  SPEAKER_00: Yeah.
• 0:59
  SPEAKER_00: No, well I'm conditions are really good, no doubt.
• 1:02
  SPEAKER_00: This is I keep thinking to myself, you know, we've got a couple years that we've had this much work getting done in March.
• 1:09
  SPEAKER_00: One was last year, which that turned out pretty decent for um folks unless they got a little too wet, and the other one was 2012 that I can remember that we did this much work in March.
• 1:20
  SPEAKER_00: So it's gonna, you know, one of the other scenarios will play out here, or somewhere in between, possibly.
• 1:25
  SPEAKER_01: So let's talk about the markets.
• 1:28
  SPEAKER_01: Yeah, corn market today.
• 1:30
  SPEAKER_01: May corn futures dipped down to 442, closed 11 cents higher than that, actually up three cents today.
• 1:36
  SPEAKER_01: So a pretty good uh turnaround in the corn market ahead of uh Monday's uh quarterly stocks report and acreage report that'll be coming out.
• 1:44
  SPEAKER_00: The soybean market is big will that be a mover and a shaker, Mike, the acres, or have we talked enough about it?
• 1:50
  SPEAKER_00: And you know, if we come in there in the 94-95 area, we've kind of priced that all in already.
• 1:56
  SPEAKER_01: You tell me.
• 1:56
  SPEAKER_01: I I honestly think it'll be a mover and shaker either direction.
• 2:00
  SPEAKER_01: Like, even if it's low, like will the trade just say, uh, that was an inaccurate representation, it'll be 95 and choose that way, or if it comes out at 94 or low, it maybe they will trade it hard and bullish.
• 2:12
  SPEAKER_01: So I I it's very difficult for me to even say how the market's gonna react given whatever number we get.
• 2:19
  SPEAKER_01: Which normally that's not the case.
• 2:21
  SPEAKER_01: I mean, if uh if most of the time if it falls under estimates, you know, it's a bullish thing, it's pretty easy to see.
• 2:27
  SPEAKER_01: But this time I I'm just very curious on how the trade will actually take the news.
• 2:32
  SPEAKER_00: Yeah, no, that's uh that's exactly right.
• 2:34
  SPEAKER_00: It it's uh the one thing you got going for you is you're putting uh you know bouncing off those same lows that we put in on the third on the fourth of March, right?
• 2:42
  SPEAKER_00: And the then the nearby low pretty solid compared, you know, we've got to go back to the first of the year to find the prices that were lower than that.
• 2:51
  SPEAKER_00: So you've you've got some recent trend kind of going for you, I would argue.
• 2:56
  SPEAKER_00: Um so if you come in with the acres as expected or tick higher, maybe it doesn't have to go a lot lower, but just a lot of things kind of leaning hard on that uh corn market these days, isn't there?
• 3:10
  SPEAKER_01: Yeah, I didn't want to see Maycorn dip below 446 too bad.
• 3:13
  SPEAKER_01: We got down to 442 today, so I felt like the floor kind of came out from under us there, but uh, I guess we finished.
• 3:20
  SPEAKER_01: We closed pretty decent versus that anyway, so we'll see how we react.
• 3:24
  SPEAKER_01: It'll now it'll just come down to the trade that we get and the news we get on Monday.
• 3:28
  SPEAKER_00: So you've pushing that many acres over to the corn sector, obviously, beans, um most of that's gotta come right out of beans, right?
• 3:36
  SPEAKER_01: So that's why I think the last two days we've been up and I mean some of these months 20 cents on soybeans now over the past two trading sessions.
• 3:43
  SPEAKER_01: And uh, I'd say that's probably a big majority of the reason why we saw that.
• 3:47
  SPEAKER_01: I did see some other headlines that maybe pushed a little bit given the biofuels maybe looking a little bit uh more bullish or getting implemented at a higher rate here going forward as well.
• 3:59
  SPEAKER_01: We'll see what the uh administration does there, but a few positive things to kind of close out the week for demand on uh corn and oil seeds at least.
• 4:09
  SPEAKER_00: Obviously the next thing that we'll come along with is the tariff discussion will be very hot and heavy next week.
• 4:18
  SPEAKER_01: I mean really Wednesday came out already, I think, Jeff, with Trump saying 25% on autos and uh anything coming into the United States, whether it be a part or a vehicle.
• 4:29
  SPEAKER_01: And when you look at the correlation of the agriculture sector, it didn't seem to move the market a ton right away.
• 4:36
  SPEAKER_01: But if you look, our two largest car manufacturers that are importing into the United States are m uh as a country are Mexico and Japan.
• 4:46
  SPEAKER_01: And Mexico and Japan are two largest corn buyers from the United States.
• 4:50
  SPEAKER_01: They buy 52% of our current corn exports.
• 4:53
  SPEAKER_00: They're also our largest um uh pork purchasers as well.
• 4:57
  SPEAKER_01: Yeah, big trading partners uh could have some major ramifications throughout the egg sector there if they decide to retaliate in some way, which uh I up until this point they really haven't, right?
• 5:07
  SPEAKER_01: I mean quiet.
• 5:10
  SPEAKER_01: The markets haven't really tried to even move off that news, which has been a little surprising.
• 5:14
  SPEAKER_01: And then, like you said, next week on what the fourth, Jeff, that we're supposed to start uh on Tuesday.
• 5:20
  SPEAKER_00: Tuesday or Wednesday.
• 5:22
  SPEAKER_00: Yeah, that will get implemented.
• 5:23
  SPEAKER_00: Plenty of discussion going on Monday already.
• 5:26
  SPEAKER_01: Which the last few times you've come up to that date, and pretty much the day before, night before, it seems like it gets extended a month, or you know, the last time what it it was extended that of that week, right?
• 5:37
  SPEAKER_01: Delayed.
• 5:38
  SPEAKER_01: Yeah.
• 5:39
  SPEAKER_01: So it maybe the market will expect something like that again, and once we kind of get the fact, then maybe the markets will care a little bit more by that point.
• 5:47
  SPEAKER_00: Well, they're they're caring more um, I believe, than what I thought they would.
• 5:52
  SPEAKER_00: I think the hog market this week was a perfect example, Mike.
• 5:55
  SPEAKER_00: Um obviously we've we pushed into some you know right up against some of these short-term downtrends that we're watching here, especially like on the June chart I'm staring at here.
• 6:07
  SPEAKER_00: Um, but I tell you what, we came in here the tail end of the week here.
• 6:11
  SPEAKER_00: We had a what I think is about as bullish hogs and pigs report or a supply report as what you can get.
• 6:19
  SPEAKER_00: You had the uh estimates all kind of leaning towards one to one and a half, almost a two percent increase in pigs, uh, whether that be on the ground in the inventory or you know, um pigs per litter or sow herd size.
• 6:37
  SPEAKER_00: And so everybody's leaning kind of that way.
• 6:40
  SPEAKER_00: The the report came in uh lower in pretty much all of the categories, some cases over two percent lower than what the pre-report estimates were at, um, bottom of the pre-report estimate ranges in many situations.
• 6:54
  SPEAKER_00: You know, that should even even in today's world, it seems like that should give you a good dollar fifty to two dollar rally in these hog futures.
• 7:04
  SPEAKER_00: And that's the way them so this was you know yesterday, uh Thursday afternoon.
• 7:09
  SPEAKER_00: Today's trade we started that way.
• 7:11
  SPEAKER_00: We spent a good chunk of uh the first hour, hour and a half at a buck fifty to buck eighty something higher on most of the summer months, and you know, we're looking at that thinking, well, this makes sense.
• 7:22
  SPEAKER_00: We've we've pushed that market pretty hard to the downside, um, bullish supply report, uh, good buck and a half to two dollar rally.
• 7:31
  SPEAKER_00: That all seems to make a lot of sense.
• 7:33
  SPEAKER_00: Well, that thing really faded pretty hard today, Mike.
• 7:36
  SPEAKER_00: Um, we didn't close very well at all on the pigs.
• 7:40
  SPEAKER_00: Um, it doesn't look like a disaster from like a chart standpoint or anything like that, but when you consider the trend going into a supply re a bullish supply report and then kind of to die off like it did today, I think is a really good example of what these tariffs are doing to these futures markets.
• 7:59
  SPEAKER_01: It's kind of like when your parents have that discussion with you where they're not mad at you, they're just disappointed.
• 8:05
  SPEAKER_01: And that's what the hog market is here after this.
• 8:08
  SPEAKER_01: And we had that with cattle at the beginning of the week, too, right?
• 8:11
  SPEAKER_01: Where we had really a nice positive reaction for about 10 seconds on Monday morning after the report.
• 8:18
  SPEAKER_01: And then, I mean, by mid-morning already, we had already started trading negative after that report.
• 8:24
  SPEAKER_00: So I think the other thing going on there, I don't know how much of that's tariff related.
• 8:28
  SPEAKER_00: The hog one, I'm I'm quite confident heavy tariff discussion.
• 8:32
  SPEAKER_00: I think there's things other um markets can learn from that hog market right now, as that as that topic is can is concerned.
• 8:41
  SPEAKER_00: Um, the cattle, that's also there's probably some tariff stuff in there.
• 8:46
  SPEAKER_00: There's some economic stuff, which I wouldn't mind getting your opinion on here in a minute for the week.
• 8:52
  SPEAKER_00: But there's also that's a great example of a market that's extremely bullish, but it takes good news every day to feed that bull.
• 9:01
  SPEAKER_00: And that's what we really got going on in the marketplace.
• 9:04
  SPEAKER_00: We had such good um fundamental news last week, the last week Friday, between cash prices and cattle on feed being pretty bullish, to um you know, the meat prices continuing to go higher this week, and we really just can't do anything.
• 9:22
  SPEAKER_00: And it's because it's just it's hard for to to gain that um buying support here.
• 9:29
  SPEAKER_00: You know, who wants to go along cattle over two bucks?
• 9:33
  SPEAKER_00: It's it's hard to find enough money to flow into that marketplace.
• 9:37
  SPEAKER_00: So that one will be interesting going into next week, also because it looks like uh we're maybe not quite done with the cash trade here, but it looks like we're gonna be kind of steady on the week.
• 9:48
  SPEAKER_00: So it's gonna be a bit of a, you know, what's that cattle market gonna do with basically no news?
• 9:53
  SPEAKER_00: It'll be interesting into next week.
• 9:55
  SPEAKER_00: But um, hit on the financials, financials, the equities a little bit, Mike.
• 10:00
  SPEAKER_00: Anything that stuck out to you there this week?
• 10:02
  SPEAKER_01: Yeah, so a couple major reports came out this week, one of them being consumer sediment, which the consumer sentiment dipped below 60 in that index for the first time since 2022, the end of the year.
• 10:14
  SPEAKER_01: And that historically, once you get below about that 60 type category, one, it has a pretty decent correlation with soon after you'd normally have a recession for one.
• 10:24
  SPEAKER_01: Two, uh, that's typically going to be a decent time in buying equities.
• 10:29
  SPEAKER_01: But that'd be one thing.
• 10:31
  SPEAKER_01: So the consumer sentiment report uh this afternoon or this uh today was quite disappointing.
• 10:37
  SPEAKER_01: Uh stock market down heavily 2% in just the day alone.
• 10:41
  SPEAKER_01: Um, but the reasoning for this is still quite simple.
• 10:45
  SPEAKER_01: Investors are still just on edge about tariffs, and it's as simple as that.
• 10:49
  SPEAKER_01: And uh we're in an environment of uncertainty, and people are focusing in on kind of the worst case scenarios, and they're choosing to take risk off or de-risk would be another word for it, especially after we've had such an amazing run through uh through so many of these assets that are super risky.
• 11:08
  SPEAKER_01: Uh some of those being like when you look at PE ratios when Tesla's at 136.
• 11:14
  SPEAKER_01: Uh Jeff, I don't know if you remember this back from uh investments class in college, usually a good PE ratio would be around 13 or 15 or 19, not 113 or 15, just to put that into perspective.
• 11:27
  SPEAKER_00: Well, if you want to talk about disappointment, you would look at my professor who taught the investment class.
• 11:32
  SPEAKER_01: Okay, all right, all right now.
• 11:34
  SPEAKER_01: But it the uh when it comes to de-risking, I think that was very easy to see.
• 11:39
  SPEAKER_01: The NASDAQ was kind of the heart of it.
• 11:42
  SPEAKER_01: So that's where we've seen massive assets uh take off and have uh uh in immense returns year over year.
• 11:49
  SPEAKER_01: So a lot of m easy money has gone into those, and a lot of easy money now looks like it's came out of those tech darlings.
• 11:56
  SPEAKER_01: So when it comes to the sell-off we've had, really that's what it is.
• 11:59
  SPEAKER_01: It's just people are on edge about tariffs.
• 12:01
  SPEAKER_01: Uh they're worried about inflation because of tariffs still.
• 12:04
  SPEAKER_01: So the gold market's been running up, money's been running away from the equities.
• 12:09
  SPEAKER_01: Uh very um, it's simple trade, but yet now you tell me when that trade's gonna happen or like when they choose that today's the day that we're gonna trade that.
• 12:19
  SPEAKER_01: That's the part that always surprises me or can be hard to see, is that next week, maybe after we already know something was gonna happen for what a month now that tariffs would come on April 4th, maybe the fifth they'll actually decide to really trade it hard and care about it.
• 12:36
  SPEAKER_01: That's the tough part I see out of all this, Jeff.
• 12:38
  SPEAKER_00: That's for sure.
• 12:39
  SPEAKER_00: That is for sure.
• 12:41
  SPEAKER_01: When the investors are gonna care about the news that we already know about.
• 12:46
  SPEAKER_00: Well, I would say keep your head down and try to continue to make you know the best decisions that we can and and you know, nothing nothing too radical and kind of stay out of the ditches type of a thing, as far as what you as you think about risk management um um and you know how to position your business going forward is is about all we can do, make the best decisions we can and make sure we don't get too caught up in what the latest taglines are.
• 13:15
  SPEAKER_01: And you know, the uh David Cole was one of the main speakers in some of the events with like Bayer and whatnot this week, and he's big on working capital.
• 13:24
  SPEAKER_01: Keep a lot of working capital, 15, 20 percent, something along those lines.
• 13:28
  SPEAKER_01: And that's important, not just for like equities, we're down around that 10% setback uh, you know, normally every three and a half years, which going right back to about 2022 was the last time we saw a 20 plus percent correction.
• 13:42
  SPEAKER_01: We're kind of due for that again.
• 13:44
  SPEAKER_01: Um, it's nice to have working capital in those times.
• 13:47
  SPEAKER_01: It's also nice to have working capital if you know we do go through a cycle where we have a tough time in commodities here going forward.
• 13:55
  SPEAKER_01: Uh, there's been some talk about commodity super cycles and things like that because of inflation.
• 14:00
  SPEAKER_01: I'm not really in that camp, so to say, maybe just a few of the medals and things like that.
• 14:04
  SPEAKER_01: But um, keeping working capital around, I think, is going to be important here over the next few years, too, Jeff.
• 14:11
  SPEAKER_00: That sounds like good advice, Mike.
• 14:13
  SPEAKER_01: All right.
• 14:13
  SPEAKER_01: Well, if you guys need anything, please give us a call here at Professional Ag Marketing.
• 14:17
  SPEAKER_01: Thanks for being on the show today.
• 14:18
  SPEAKER_01: And thank you to all our listeners.
• 14:20
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 14:24
  SPEAKER_01: Check out our other podcast as well, Professional Ag Marketing, that's released every Friday.
• 14:29
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 14:35
  SPEAKER_01: See you next time.