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Risk Off and COF · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the egg 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 Miner.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_00: Today is September 22nd.
• 0:26
  SPEAKER_00: I've got Nick with us today.
• 0:27
  SPEAKER_00: How's it going, Nick?
• 0:28
  SPEAKER_00: Good, Mike.
• 0:29
  SPEAKER_00: Good deal.
• 0:30
  SPEAKER_00: Well, we're going to talk uh about a couple different things today, but it's going to be mainly based on some of the reactions that we had this week in these commodity markets and uh talk about the Catalon feeder port.
• 0:41
  SPEAKER_00: How's that sound?
• 0:42
  SPEAKER_01: Sounds great, Mike.
• 0:44
  SPEAKER_00: All right.
• 0:44
  SPEAKER_00: Well, we had a little bit of news come through Wednesday afternoon, actually, but it impacted yesterday's markets with some heavy selling across a range of commodities that was mainly a result of ideas that the Fed's inflation flight will continue for the next coming months.
• 1:00
  SPEAKER_00: They agreed to pause uh and not raise rates here, but uh it in the coming months ahead, it sure didn't sound like they're gonna lower them anytime soon and uh still be trying to offset some of this inflation.
• 1:16
  SPEAKER_00: So it the the risk off move was definitely across many of these commodities and uh put a lot of the bear camps back in control for the grains, for lean hog market, for cattle, a lot of different sectors here.
• 1:32
  SPEAKER_00: I would say for the grains specifically, too, we did pile on with something I think that'll be uh uh uh worth noting here for many of these commodities, but uh we've seen a lot of sales from Brazil to China recently, Nick, on soybeans.
• 1:49
  SPEAKER_00: And one of the main reasons for that is definitely that we've had tight-ending stocks here uh over the past couple years, but we've also had this rising US dollar.
• 1:59
  SPEAKER_00: And uh for the grain markets, anyways, it makes us less competitive from a global export perspective with that higher US dollar.
• 2:07
  SPEAKER_00: But I'm curious to what you're gonna say about it from a beef export point of view.
• 2:13
  SPEAKER_00: What do you think about that and uh the impact our dollars had on exports, Nick?
• 2:18
  SPEAKER_01: Yeah, certainly um the beef export deal has been pretty sluggish for quite some time the way it is.
• 2:26
  SPEAKER_01: Um, you know, we think and or know that uh US beef prices are you know twenty-five to thirty-five percent higher than any other market or any other export market.
• 2:40
  SPEAKER_01: Oh wow, that's substantial.
• 2:42
  SPEAKER_01: Right, right.
• 2:43
  SPEAKER_01: So and then now with this dollar really making this move like it is, I think uh you could really see them beef exports fall off quite a bit.
• 2:53
  SPEAKER_01: We also think that imports will continue to tick higher as they have been here the last couple months, too.
• 2:59
  SPEAKER_01: So that you know that will that will certainly create some more supply available domestically.
• 3:05
  SPEAKER_01: Uh but um yeah, we'll see how long that that lasts with the with the dollar doing what it's doing.
• 3:12
  SPEAKER_00: Speaking about uh supplies domestically here, what did the Catalon feed report tell us today, Nick?
• 3:18
  SPEAKER_01: Well, I think the the the report itself, you know, it obviously the numbers were really close to estimates, nothing real earth shattering in those numbers.
• 3:29
  SPEAKER_01: And the you know the I think the the market should have a fairly neutral response next week.
• 3:36
  SPEAKER_01: What was very interesting though, I think, and we've been waiting for this for some time, but finally now uh when you when you kind of extrapolate the placement data, it does look like the month of December is gonna have about 90,000 headless uh fed supply available for that month.
• 3:57
  SPEAKER_01: Now that does not include any carryover cattle from that OCNOVE time frame.
• 4:02
  SPEAKER_01: We do believe we're probably backing some cattle up today with where the harvest levels have been and um and and also just the producer mentality out there, you know, that margin over feed where that's at, they're heavily advantaged to to add more pounds of beef to the cattle that are in the yards rather than go place some$2,000 calves.
• 4:23
  SPEAKER_01: So uh with that being said, I think we're gonna have you know a hole coming there in December, but um we're certainly gonna have some cattle up front that are gonna fill part of that, right?
• 4:35
  SPEAKER_01: And so it it's gonna be interesting how that leverage is gonna go there, right?
• 4:41
  SPEAKER_01: Is the producer going to be able to gain some leverage um as we work into that hole, or will the packer be able to manage that situation quite well, is all kind of the big question mark.
• 4:53
  SPEAKER_01: So far, the packer has been able to manage cash extremely well here for the last couple months, I would say, really hanging in this mid-180 range.
• 5:03
  SPEAKER_01: Uh, and now their margins have dropped off some here, I guess, with with choice beef dropping down to that back closer to that$300 level, and and cash cattle staying really similar.
• 5:14
  SPEAKER_01: Um, it it it's kind of a telltale deal of of where we're at, though, right?
• 5:19
  SPEAKER_01: You're you're in the third week of September here and steady cash.
• 5:24
  SPEAKER_01: There's obviously some some folks hanging on to some cattle because they're not typically they would be able to be lower in cash here through this time frame.
• 5:34
  SPEAKER_01: So um that's probably still coming yet.
• 5:36
  SPEAKER_01: It'll just be interesting how that all fits in with that uh November, December hole from the placement data.
• 5:44
  SPEAKER_00: Interesting.
• 5:44
  SPEAKER_00: You know, December cattle here spent most of the week consolidating after last week's all-time highs.
• 5:51
  SPEAKER_00: So uh traders did grow a little cautious ahead of this cattle on feed report.
• 5:55
  SPEAKER_00: I'm curious to see.
• 5:56
  SPEAKER_00: You know, you mentioned it should be a neutral reaction to the report news, but I I'm curious to see what uh buyers are gonna do after we got this report out of the way and if they uh try to put in some of those fresh new highs.
• 6:10
  SPEAKER_00: Uh I'm very interested to see what happens from here on out.
• 6:14
  SPEAKER_00: What else do you got on cattle here this Nick week or this uh week Nick that catches your eye?
• 6:21
  SPEAKER_01: Well, yeah, just that I guess you know, futures are in are in uh are in the hundredth percentile, right?
• 6:27
  SPEAKER_01: I mean these cattle futures are are extremely good, and and and even though um cash cattle has has rate stayed very steady here for the past while uh futures have have continued to gain ground.
• 6:42
  SPEAKER_01: I mean you got them, you know, that ape that April 24 deal just knocking on two bucks and then and then a ways out there, you know, like DISA 24, even trading that 198 level, just phenomenal levels uh that that are being offered, even though we've had a relatively stable cash market.
• 7:01
  SPEAKER_01: So I think producers gotta look at that at least take and and and look at putting some some uh coverage on cattle that are in the yards today with because uh because of we've already gained some appreciation and futures on these fall kiosks.
• 7:16
  SPEAKER_01: So um certainly be taking a look at that.
• 7:19
  SPEAKER_00: What else you got for us today, Nick?
• 7:22
  SPEAKER_00: Anything for some of the broader range commodities?
• 7:25
  SPEAKER_01: Well, I just think uh I I think you're gonna touch on it too, Mike, in the grain wrecks, but you know, with the with the ethanol margins where they are in this grain in the corn complex, um look for probably some lower DDG levels over time here.
• 7:40
  SPEAKER_01: I think they you know they're margin they're making gobs of money on the ethanol side of things, and and hopefully, well we know that we're gonna work into some lower cost of gains here very soon as we get into the new crop and and we're pretty excited about that.
• 7:56
  SPEAKER_01: Um certainly uh should look into I think some some contracts or or uh procurement of these distillers though as they as as they may you know offer some deals on that with with the with the good ethanol margins they got coming at them.
• 8:14
  SPEAKER_00: Definitely.
• 8:15
  SPEAKER_00: You know, we've seen a little bit of a drop in production real recently here, and we've seen such a drop off in ethanol stocks with these high margins, like you suggested, uh should see some really nice production going forward, and uh these ethanol plants are uh gonna be really competitive as well, so that'll definitely impact some Western Corn Belt basis levels, I think, going forward, and their aggressiveness with lighter books on today uh shouldn't surprise anybody going forward.
• 8:43
  SPEAKER_00: And seems like uh the harvest progress so far, Nick, it's surprising to me.
• 8:48
  SPEAKER_00: Two weeks ago, I would have thought by the time we got to today, we would would have seen a lot more harvest progress through the United States, especially right here in our area.
• 9:00
  SPEAKER_00: Um I'm a little bit discouraged about uh harvest progress so far.
• 9:05
  SPEAKER_00: I'm surprised we haven't seen more done, I guess, at this point.
• 9:09
  SPEAKER_00: Any comments on harvest progress so far?
• 9:12
  SPEAKER_01: Yeah, I would just echo that.
• 9:13
  SPEAKER_01: It seems slow.
• 9:14
  SPEAKER_01: It seems uh um you know, obviously the bean harvest is is very unique.
• 9:21
  SPEAKER_01: We got we got a lot of beans out there that the beans are dry, but the stems are are not fun to combine.
• 9:28
  SPEAKER_01: And so uh that's I think uh part of it.
• 9:31
  SPEAKER_01: You know, guys are wondering if they should move to corn or or or stay after these beans.
• 9:37
  SPEAKER_01: But um yeah, it is a it's a unique fall, that's for sure, Mike.
• 9:41
  SPEAKER_00: Well, a little bit of rain this weekend and the forecast for the Western Corn Belt, and we'll see after uh this weekend's rains how uh how many people get back out in the field here to really get a good start on things.
• 9:52
  SPEAKER_00: I expect definitely by the end of the month here to really have some significant progress done.
• 9:57
  SPEAKER_00: And that sets us up for the October Wazday report coming up in a few weeks.
• 10:02
  SPEAKER_00: I think it'll be uh imperative that we have uh conclusive results from Harvest Progress up until that point to really tell us something about where yields are at and and what we're seeing prior to that report.
• 10:15
  SPEAKER_00: So thank you for your time today, Nick, and we'll have you on next time.
• 10:18
  SPEAKER_00: Can't wait.
• 10:19
  SPEAKER_00: Yeah, thank you, Mike.
• 10:20
  SPEAKER_00: And thank you to all our listeners.
• 10:22
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 10:26
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:31
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 10:37
  SPEAKER_00: See you next time.