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Transcript

Turn Around · 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: It's 10-4 Good Buddy Day.
• 0:25
  SPEAKER_00: How's it going today, Lucas?
• 0:26
  SPEAKER_01: Well, it's going pretty well, Mike.
• 0:28
  SPEAKER_01: I'm glad we're having a little fun on 10-4 Friday.
• 0:32
  SPEAKER_00: So we're going to talk about a few fun things today.
• 0:35
  SPEAKER_00: We've had some erratic markets here.
• 0:37
  SPEAKER_00: Lucas, where do you want to start?
• 0:39
  SPEAKER_01: Well, you know, I hate to uh start in the most boring place, Mike, but let's in the insurance world, since that's uh what uh I specialize in here at professional egg marketing.
• 0:51
  SPEAKER_01: But uh no, you know, as harvest rolls uh along pretty well here, a lot of soybeans kind of wrapping up and and uh switching over to corn.
• 1:00
  SPEAKER_01: Uh with the month of October starting this past week, we are starting the harvest price uh uh setting period for our corn and soybeans and a few other crops, but uh corn and soybeans being the big one.
• 1:14
  SPEAKER_01: Um so if you remember right, uh the projected price this spring that we set in February for corn was 466.
• 1:25
  SPEAKER_01: Uh after four days of averaging so far, we are at 429, so an 8% drop uh right there on corn and soybeans uh in the spring we set the price at$11.55, and currently we are at 1049 uh after the first four days, so uh 9.2% drop uh in price there.
• 1:49
  SPEAKER_00: So that's not gonna make a lot of people happy.
• 1:51
  SPEAKER_01: No, so the I mean obviously the price is down, uh, so that's not great.
• 1:57
  SPEAKER_01: Um, the other side of it is you know, a month ago when we've talked, the price was a lot lower than it is today, and so we're talking a lot of our ECO coverages and even high level of individual coverage, likely triggering a revenue claim if uh yields stayed pretty flat.
• 2:14
  SPEAKER_01: Uh, you know, I think what we're gonna see, and obviously we have the whole month of October to go, so markets can move and change.
• 2:21
  SPEAKER_01: So uh this is definitely not set in stone, but something to keep in mind is you know, we talked quite a bit of like this ECO 95% coverage kicking in uh on the 2024 crop uh as the price kind of stabilizes here around that 430 level.
• 2:39
  SPEAKER_01: Uh that uh it could trigger an ECO claim, but it's not gonna be a very big one uh on corn or beans, depending on what yields do.
• 2:48
  SPEAKER_01: And soybean yields as general has been kind of average for I would I would expect we'd see average when we start looking at county level yields.
• 2:58
  SPEAKER_01: Um corn, I think, could be a little higher than uh on average.
• 3:02
  SPEAKER_01: The one thing that we're seeing uh on the corn as guys are getting started is it is very dry compared to where we thought it was going to be.
• 3:10
  SPEAKER_01: Dry corn helps speed up harvest, uh saves propane gas and everything else.
• 3:16
  SPEAKER_01: Just easier.
• 3:17
  SPEAKER_01: It's it makes life easier, but it does rob bushels, right?
• 3:21
  SPEAKER_01: Because we're we're robbing water away from it.
• 3:23
  SPEAKER_01: So uh it is the good and the bad.
• 3:26
  SPEAKER_01: And looking at the forecast for, well, really in most of the United States, it looks like we're still gonna be uh drying it out more.
• 3:33
  SPEAKER_01: Uh you look at six to ten day, eight to fourteen day in the United States, it is uh below normal precip and above to way above normal temperatures.
• 3:44
  SPEAKER_01: Um makes harvest go really well, of except for the worries of uh fires, which uh starting to hear a few more of those locally, so uh definitely be careful as you're out there and get uh a plan in place in case the the worst happens on your farm.
• 3:59
  SPEAKER_01: But um, but yeah, that's kind of the the story in the uh corn and soybean world, Mike.
• 4:05
  SPEAKER_01: Uh I know speaking of weather, we were just talking a little bit about the South America forecast and and kind of the interaction that's had in the soybean market.
• 4:13
  SPEAKER_01: What are you looking at uh as we look to our neighbors in the South?
• 4:18
  SPEAKER_00: Yeah, I think it's uh worth mentioning this week.
• 4:20
  SPEAKER_00: You know, part of the weakness that we saw after the soybean market put in a high here uh kind of at the start of the week was we had some added harvest pressure.
• 4:30
  SPEAKER_00: Um but really I think you've looked at a rainfall forecast for the six to ten day that uh really entered for this Brazil uh crop that it had some concerns kind of in the central part of Brazil, a little bit west.
• 4:45
  SPEAKER_00: So when I look at where that rainfall is supposed to hit, it's been forecasted for a little while, but they typically don't give it a whole lot of weight when it comes to the markets until you reach the six to ten day forecast, because that's where the forecast becomes more accurate.
• 5:01
  SPEAKER_00: So that is staying in that forecast for kind of next weekend.
• 5:05
  SPEAKER_00: And if it holds here as we get closer, we could see some uh reoccurring weakness across these uh markets, especially in the soybean market.
• 5:14
  SPEAKER_00: And it it maybe got uh a little out of hand at the end of last week as well, because that hurricane or tropical storm reached a little bit further inland and was more extreme than they expected.
• 5:26
  SPEAKER_00: So it took uh power away from some of those soy processing facilities in the southeast U.S.
• 5:32
  SPEAKER_00: And that really helped soybeans go up last Friday and meal.
• 5:36
  SPEAKER_00: So the the price got exaggerated to the upside a little bit.
• 5:40
  SPEAKER_00: Now we are getting closer to that six to ten day forecast realizing itself for Brazil and adding some much needed rainfall for them as they plant.
• 5:50
  SPEAKER_00: So that's uh something to watch there.
• 5:53
  SPEAKER_00: I added the the harvest pressure as well this week.
• 5:56
  SPEAKER_00: Uh a large majority of farmers locally are finishing up this week on the soybeans, and uh that's gonna be a lot of those are going across the scale, getting sold right away.
• 6:06
  SPEAKER_00: Uh we've had a significant rally uh in both uh yeah in uh in the soybean market here recently, and we've got high interest rates as well, so the likelihood that you're gonna have to store a lot of corn this year looks real with that bigger crop, but then as well it's more expensive to to store the soybeans.
• 6:26
  SPEAKER_00: So that's kind of what we're weighing right now, I think.
• 6:29
  SPEAKER_00: The the bearish fundamentals just seem to be winning out towards the end of this week.
• 6:33
  SPEAKER_00: We'll see if uh you know funds continue to take a break here uh from short covering, or if farmer selling's just been that strong to kind of offset it, but it feels like a little bit of both here.
• 6:45
  SPEAKER_01: Yep.
• 6:45
  SPEAKER_01: But I would say I know we've talked in the office uh a lot, and you just mentioned it, a lot of our customers are selling beans right off the combine and getting them moved out off farm and and hauling them right to uh elevator or processor, and um definitely seeing some of that.
• 7:00
  SPEAKER_01: It's interesting on the South American weather, Mike.
• 7:03
  SPEAKER_01: It you you brought up a good point of as it, you know, we kind of saw this in the 8 to 14 day uh forecast before that they're supposed to get moisture uh down through Brazil area.
• 7:15
  SPEAKER_01: Now it's getting a little closer in the 6 to 10 day.
• 7:18
  SPEAKER_01: It's still kind of on the end of the 6 to 10 day forecast, so definitely something as we enter next week to keep an eye on uh to see how those patterns change and those forecasts change or materialize and see how that soybean market uh reacts.
• 7:34
  SPEAKER_01: Um and speaking of markets, there you know, there was a lot of uh interesting things going on in the world, and uh one of the terms that I love uh listening to and saying is geopolitical uh hotspots out there, Mike.
• 7:48
  SPEAKER_01: So what uh what what kind of uh action did we see in specifically the wheat and crude markets uh this week and uh with everything that was going on in the Middle East?
• 7:59
  SPEAKER_00: And uh the reason this matters is one, you know, the wheat market's been tied very closely to corn as in a grain itself, uh and particularly any Middle East tensions that may be arising uh that may impact the wheat market or crude oil, you know, that connects itself back through ethanol as well to the corn market.
• 8:19
  SPEAKER_00: So the three of them corn, uh wheat, uh crude oil, I mean you could even throw most of the eggs in there lately, even uh lean hogs, they've all been trading pretty closely together.
• 8:32
  SPEAKER_00: And that's why I think it's relevant to talk about this week because we've had some major changes and some major market moving events.
• 8:39
  SPEAKER_00: Yesterday, the volatility and the volume in the crude oil market was unprecedented.
• 8:43
  SPEAKER_00: We had uh a move in the crude oil market over three and a half dollars yesterday, which was the largest that we've had going back very, very, very far in those charts.
• 8:53
  SPEAKER_00: We typically don't get a day that moves over three dollars.
• 8:56
  SPEAKER_00: So it was a significant change day over day in the crude oil market.
• 9:00
  SPEAKER_00: Now that was uh mainly because of the possibility that Israel's retaliation against Iran for its missile barrage uh is likely to include the country's oil infrastructure.
• 9:13
  SPEAKER_00: So Israel has been uh playing defense so far using the Iron Dome as protection against Iran and uh and their bombing attacks in in m multiple different ways.
• 9:24
  SPEAKER_00: And uh so far that defense is held, but uh at this point there's been talks or worries that they're gonna move towards the offensive.
• 9:33
  SPEAKER_00: And this would be accurately really aggressive for them.
• 9:37
  SPEAKER_00: Um it's a likely known fact for for many of us that Israel has been destabilizing many of the countries around them.
• 9:45
  SPEAKER_00: And uh, in our opinion, uh with the strikes that they're targeting, that could add up to over a million and a half barrels a day of production that could be taken out by any strikes that Israel would do.
• 9:56
  SPEAKER_00: So yesterday this this caught the oil market a little bit off guard.
• 10:00
  SPEAKER_00: We had a massive rally uh through uh many of these commodities with buying coming in, uh particularly wheat and crude oil and whatnot.
• 10:10
  SPEAKER_00: But uh it's important to recognize the the cycle that we're in for commodities, because if you look, OPEC could easily increase production and offset that million and a half barrels of production a day.
• 10:23
  SPEAKER_00: Easily.
• 10:24
  SPEAKER_00: They have the capabilities of doing it.
• 10:26
  SPEAKER_00: They want to see prices run up anyways, towards a hundred.
• 10:29
  SPEAKER_00: They've kind of lost uh hope that it would do that, but if need be, they could easily increase that production.
• 10:35
  SPEAKER_00: However, other allies to Israel like the US, they're probably gonna discourage them from taking the offensive.
• 10:42
  SPEAKER_00: And in fact, it sounded like Biden was kind of going that route here today already.
• 10:47
  SPEAKER_00: This would put OPEC at an advantage.
• 10:50
  SPEAKER_00: And this is significant because that would put them back in control of the oil market.
• 10:54
  SPEAKER_00: And this is something that our nation has strived to take away from them since the early 2000s.
• 10:59
  SPEAKER_00: So, and all also to put on top of this, a particular election is coming up and that's only a month away.
• 11:05
  SPEAKER_00: So if we have rising, dramatically rising crude oil prices because we encourage Israel to go on the offensive, that's gonna make a surge in oil prices look very harmful to the Biden Harris administration.
• 11:18
  SPEAKER_00: So they're gonna probably try to steer clear away from that, along with the rest of the allies for them as well.
• 11:23
  SPEAKER_00: So we'll see here as we reach the uh significant resistance targets on crude oil near$74.5 on the WTI.
• 11:32
  SPEAKER_00: Uh we've seen significant retracement levels hit on corn, wheat, even uh, you know, some of these other commodities in the ag sector.
• 11:41
  SPEAKER_00: But it uh I'm very curious to see if uh we hold those resistance levels and kind of pull back now.
• 11:46
  SPEAKER_00: We did going into the weekend a little bit, so I think that's gonna be uh very important to watch that sector, that uh part of the world, uh, with you know the EU and their problems in production recently.
• 12:00
  SPEAKER_00: Uh Russians uh are still exporting a mass amount of product uh for wheat, especially, but they are running into a problem now uh with weather recently, so their prices will probably be going up significantly at this point.
• 12:15
  SPEAKER_00: Um it's gonna make uh increase across the rest of the world in a lot of these commodities in prices pretty significant if uh some of these trends continue.
• 12:24
  SPEAKER_00: So some of the price increase we've been having recently during the middle of harvest or the beginning of it been pretty counter-seasonal.
• 12:32
  SPEAKER_00: Um it's been pretty significant, but it'll be interesting to see as we hit some of these resistance areas if we pull back and if some of these tensions kind of die down and you get some of the rainfall back on it, maybe this is all the rally has for the time being.
• 12:45
  SPEAKER_00: I'm gonna really watch potential support areas.
• 12:48
  SPEAKER_00: We've created nice uptrends.
• 12:50
  SPEAKER_00: Are we gonna hold those uptrends in things like soybeans at 1029 on the November soybeans or 414 on the December corn?
• 12:58
  SPEAKER_00: So a few of support a few support areas I'm gonna be really watching going forward to see if we find any support levels or continue this uptrend that we've been working on, Lucas.
• 13:08
  SPEAKER_01: Yeah, no, that's uh that's good stuff, Mike.
• 13:10
  SPEAKER_01: And like you said, this is this is far from over.
• 13:13
  SPEAKER_01: This isn't a oh we got here and it's over because you start looking at some of these key dates coming up of you know October 7th, uh one-year anniversary of when Hamas attacked Israel.
• 13:23
  SPEAKER_01: Yep.
• 13:24
  SPEAKER_01: Uh, and also November 5th election in the United States coming up, both hot button issues, both uh uh important to especially the crude market, like you were just explained.
• 13:34
  SPEAKER_01: So uh far from over, important uh uh dates coming up.
• 13:38
  SPEAKER_01: Um, but I like how you phrased on some of those uh watch levels and things you're looking at uh over the next few weeks.
• 13:43
  SPEAKER_00: And then we had to cap the week off with a crazy jobs report that really skyrocketed the US dollar, and even the SP 500 reacted well to it in in an upward fashion as well.
• 13:54
  SPEAKER_00: So uh it looks like rate cuts, you're probably looking at two smaller ones now for the rest of the year after that report came out at this point.
• 14:02
  SPEAKER_00: So a few things kind of outside market-wise that have caught our eye in the commodity space that I think was worth talking about uh kind of in the middle of this busy season.
• 14:11
  SPEAKER_00: I think that was a good recap, Mike.
• 14:13
  SPEAKER_00: All right, thank you, Lucas, and thank you to all our listeners.
• 14:16
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 14:19
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 14:25
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 14:31
  SPEAKER_00: See you next time.