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Grains Slide Into the Weekend · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:23
  SPEAKER_00: I've got Pat here today.
• 0:25
  SPEAKER_00: How's it going, Pat?
• 0:26
  SPEAKER_01: I'm doing well.
• 0:27
  SPEAKER_01: How about you, Mike?
• 0:28
  SPEAKER_00: Not too bad.
• 0:28
  SPEAKER_00: Well, it's January 26th, Pat, and we've got a broad range of things we can talk about today.
• 0:34
  SPEAKER_00: Should we start off with the grain markets?
• 0:36
  SPEAKER_01: Sounds good.
• 0:37
  SPEAKER_00: Alright, well, looking at a pretty rough go here yesterday, the grain market uh really traded some bearish information on this uh soybean market specifically, Pat.
• 0:48
  SPEAKER_00: And I mean you could pretty much list about any bearish item you could possibly trade right now, and we dang near hit it la yesterday.
• 0:55
  SPEAKER_00: So uh we were down over 25 cents at one point and kind of started off, you know, the the strength on the overnight was killed pretty quickly yesterday morning when we saw export sales come out and they're incredibly disappointing, which I feel like we've been waiting for that a little bit, right?
• 1:10
  SPEAKER_00: Brazil had a pretty poor crop right away, kind of hurried things along, got some recent rains, and now their crops have started to hit the export market.
• 1:18
  SPEAKER_00: So uh I feel like yesterday was a good uh indication that you're looking at Brazil probably selling more aggressively going forward here.
• 1:26
  SPEAKER_00: And their crop conditions have been improving, so we traded that a little bit.
• 1:30
  SPEAKER_00: And really, funds just aren't willing to step in front of this soybean market and buy ahead of the Brazil harvest here as that starts to pick up as February is kind of that main time frame for harvest pat down in Brazil.
• 1:41
  SPEAKER_00: And you know, board crush margins were poor here yesterday for the US and China.
• 1:47
  SPEAKER_00: We had some technical damage, we failed to trade over the 20-day moving average.
• 1:51
  SPEAKER_00: Um that kind of furthered along some machine selling.
• 1:55
  SPEAKER_00: And then real recently here off this rally, we had uh we had some pretty decent farmer selling actually on both corn and soybeans that had contributed to yesterday's weakness as well.
• 2:06
  SPEAKER_00: And and then to kind of put the cherry right on the top, Pat, you're looking at uh some rising concerns with on Tuesday night, it was a pretty clear indication now that Donald Trump is probably gonna be a Republican candidate.
• 2:19
  SPEAKER_00: And now we've started to see more articles come out about uh cheaper Chinese electric vehicle imports into the U.S.
• 2:26
  SPEAKER_00: and how that's gonna hurt the auto industry, Pat.
• 2:29
  SPEAKER_00: And really, Trump has taught started talking again about increasing China tariffs if he's elected president.
• 2:35
  SPEAKER_00: And I feel like yesterday we finally got to trade some of that for the first time.
• 2:40
  SPEAKER_00: So it was a rash of just really poor information that piled onto the soybean market after we had a just a smidge of a rally, Pat.
• 2:49
  SPEAKER_01: Yeah, that's uh that's a real nice recap from internal fundamentals up through external fundamentals that are impacting um commodity demand here, Mike.
• 2:59
  SPEAKER_01: So I appreciate your observations and would just echo some of the things that you said as it relates to um we certainly are experiencing wider basis levels in Brazil this week.
• 3:10
  SPEAKER_01: Uh, and so um it does make sense that um the export sales report this week was struggling just a little bit.
• 3:18
  SPEAKER_01: Uh we're not quite as competitive uh as we used to be uh as it relates to trade.
• 3:25
  SPEAKER_01: Um also some observations or forecasts of uh smaller uh pork production going forward in China.
• 3:33
  SPEAKER_01: Uh so there's been some liquidation um in in uh in inventory over there, which uh you know certainly could lead to softer input commodity demand uh into China as well.
• 3:46
  SPEAKER_01: Um also some improved forecasts for the size of the Argentine crop.
• 3:51
  SPEAKER_01: And so, again, to your point, all of those things are are internal uh in inside the bean complex uh internal fundamental um considerations that are just uh leaning towards the the bearish side.
• 4:05
  SPEAKER_01: And and then when you kind of start to think about how the US is positioned uh going forward here with what um is become pretty obvious that we're gonna be building ending stocks pretty significantly year over year, you start to look for where those outs are at and where are we gonna start to rebuild some demand uh on in the bean complex or the corn complex.
• 4:32
  SPEAKER_01: And in previous stages of this type of a cycle, we could look towards that export space as a spot where we could improve or increase our demand.
• 4:43
  SPEAKER_01: And as the world has experienced more of a deglobalization, which kind of started with Trump's first term, to your point about uh um the Republican uh uh nominee potentially, um we we certainly have been in a in a in a de globalization sort of of a mode here for six, seven, eight years.
• 5:04
  SPEAKER_01: And so, and so that out when we start to build stocks um here year over year domestically, that export out isn't uh is quite an easy lever to pull.
• 5:15
  SPEAKER_01: And frankly, it's true, right?
• 5:17
  SPEAKER_01: That Brazil has has improved, increased its production relatively significantly, relatively recently, and a good portion of their production now is moving uh into the export market, specifically into that China market.
• 5:36
  SPEAKER_01: And so, and so we we don't have as as easy relations with China today as what we did before.
• 5:42
  SPEAKER_01: And and so it's gonna be a little bit harder, I think, to pull that lever and uh and to to uh to move some of that grain, at least out of that destination.
• 5:51
  SPEAKER_01: That's the bad news.
• 5:52
  SPEAKER_01: The good news is is that is that uh you know that Mexico market's been a really good one.
• 5:57
  SPEAKER_01: Corn sales were pretty good this week um uh in into Mexico and in a bit of an offset to everything else that's going on there, in spite of you know, some concerns about GMO and white corn and all those sorts of things.
• 6:10
  SPEAKER_01: Right.
• 6:10
  SPEAKER_01: So so anyway, I I I I think I think all of those things are right and make sense in terms of of of the reason why we we may be sold off here just a little bit.
• 6:20
  SPEAKER_01: Um what do you think, Mike, as it relates to just technically?
• 6:24
  SPEAKER_01: Have you spent much time looking at charts there?
• 6:26
  SPEAKER_01: I I'm uh I'm a little curious as to as to what kind of I suppose damage that we might have done as we kind of wrapped up this week from a technical perspective.
• 6:35
  SPEAKER_00: You know, when I looked at it, yeah, we had that initial kind of break lower after we failed to break above that 20-day moving average.
• 6:42
  SPEAKER_00: But now when I I look at the soybean market in particular, uh we haven't quite damaged that last low that we put in here recently on soybeans.
• 6:52
  SPEAKER_00: But I mean, if we get below that again, you're looking at another 75 cents lower till the the old May lows we put in for those contracts.
• 7:01
  SPEAKER_00: So it it there's quite a bit of room here, and that's that that range of 75 cents is where I think the really uncomfortable positioning starts to get farmers into.
• 7:13
  SPEAKER_00: Because like even right now, if you've got 1125 break-evens on soybeans, you can kind of sell November beans above 12 bucks here and kind of still make things work.
• 7:24
  SPEAKER_00: But if we slide another 50 to 75 cents ahead of a time frame where we typically rally, the U.S.
• 7:30
  SPEAKER_00: farmers gonna be in a really hard position, Pat, to decide uh, you know, what levels we start to really take advantage of further marketing opportunities.
• 7:39
  SPEAKER_01: Yeah, and we're certainly looking forward to having the conversation on an individual basis in terms of margin opportunity and and and all of that for producers, and and again would invite anyone to to uh engage us in in those conversations.
• 7:52
  SPEAKER_01: But to your point, Mike, we are um in the midst of what likely is a little bit of a of a of a of a shift in in terms of opportunities and and and in the last two or three years the the uh we didn't have to be quite as spot on as it relates to you know executing um against uh um against objectives here, and and it's gonna become increasingly more important in a tighter margin environment to to to make sure that we're that we're doing that.
• 8:23
  SPEAKER_01: And so, you know, I I would just say too as I look at the corn chart and and where it's at technical technically and those sorts of things, is that um the good news is is that is that um uh after that initial sell-off coming off of the bearish um January report, um March corn had a pretty nice little recovery here and now back down again today.
• 8:46
  SPEAKER_01: But at least we're still loitering around, hanging around that 450 area, which is more or less the level that that December uh worked itself down to as it was uh uh getting into into delivery.
• 8:59
  SPEAKER_01: And so um so the good news is, you know, if you uh the the bull in the room would point out that we have had a rash of bearish news thrown at this market over the last two or three weeks, right?
• 9:14
  SPEAKER_01: Record crop in the U.S., um improved crop prospects in Brazil, and yes, the market went down, but it hasn't really gone down any more than uh just the cost of carry, if you will, right?
• 9:29
  SPEAKER_01: And and so it's uh you know, this March contract is settling into kind of where December went off.
• 9:34
  SPEAKER_01: And so, and so again, I you know, from a real crop producer's perspective, I would just you would take a look at that and and recognize, or at least say, um, that we do have a market that is is going to trade weather and is a little sensitive to things, but you know, we're and so it there there may be some opportunities that present themselves going forward.
• 9:53
  SPEAKER_01: We just need to know uh how or what opportunity makes sense for our business and be ready to execute on it.
• 9:59
  SPEAKER_00: That definitely makes sense because the if you look at where the short positions have come from, it's from the spec money.
• 10:06
  SPEAKER_00: So I mean they've built up a huge 270,000 contract managed money net short.
• 10:11
  SPEAKER_00: So if we give them a good enough reason to cover some of those up, that would provide something like that opportunity you just mentioned, Pat.
• 10:18
  SPEAKER_01: Indeed.
• 10:18
  SPEAKER_00: All right.
• 10:19
  SPEAKER_00: Well, thank you for your time this week.
• 10:21
  SPEAKER_01: Thank you.
• 10:22
  SPEAKER_00: And thank you to all our listeners.
• 10:24
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 10:27
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:32
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 10:38
  SPEAKER_00: See you next time.