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Pre Report Mindset · 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 involve substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Miner.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is September 8th, and I've got Jeff with us here today.
• 0:26
  SPEAKER_01: How's it going, Jeff?
• 0:27
  SPEAKER_01: Good afternoon, Mike.
• 0:29
  SPEAKER_01: Good deal.
• 0:29
  SPEAKER_01: Well, let's talk about a few fun things today.
• 0:31
  SPEAKER_01: Let's talk about start with an easy one, Minor.
• 0:33
  SPEAKER_01: Alright, I'll take an easy one off the bat.
• 0:35
  SPEAKER_00: Has crude.
• 0:37
  SPEAKER_00: I found kind of fell asleep on the at the wheel on this crude thing.
• 0:40
  SPEAKER_00: So this thing has gone up a bunch this week.
• 0:42
  SPEAKER_01: Easy to do when cars driving themselves, Jeff.
• 0:45
  SPEAKER_00: Fair point.
• 0:46
  SPEAKER_00: So if we haven't been watching, if you've been too busy cutting silage, that thing's crept up to 87 and some change on the nearby here.
• 0:54
  SPEAKER_00: It's kind of been acting like uh it wants to stop going up here right around this$88 mark.
• 1:00
  SPEAKER_00: That's 86 on the dece.
• 1:03
  SPEAKER_00: Um does this matter, Mike, uh to our grain markets and such.
• 1:07
  SPEAKER_01: I think it does.
• 1:09
  SPEAKER_01: You've uh had quite a connection, I think, for um connection between crude oil going higher and ethanol, for example, as we've ran crude oil up higher here over the past, say, since about the end of June, we've finally started to post some decent ethanol grind numbers since then.
• 1:30
  SPEAKER_01: And what's happening is I think there's a bigger development here where you're seeing crude oil work its way towards, let's say,$100, I think could be a very realistic expectation that a lot of people are trying to work their way towards uh with this crude oil on the WTI.
• 1:45
  SPEAKER_01: When you do get that, that has a direct correlation with profitability on ethanol.
• 1:51
  SPEAKER_01: And that from a seasonal perspective would be really important, I think, as you get into a new crop, as the river levels in the St.
• 1:59
  SPEAKER_01: Louis area start to dive lower again from a seasonal perspective, which could hurt exports for corn.
• 2:05
  SPEAKER_01: That makes profitability better for ethanol plants in the eastern uh United States.
• 2:11
  SPEAKER_01: So I think going forward, the ethanol market is being really supported by crude oil right now, and that's helping that's being a little bit of a dark horse, really the only positive thing going on in corn demand, I think, right now, Jeff.
• 2:24
  SPEAKER_00: And that's got to be trading along 105, 106 million a week.
• 2:28
  SPEAKER_00: Um they had a couple, was it last week that are down a little bit?
• 2:32
  SPEAKER_00: Um, but that sure seems to be where they want to be from a profitability standpoint, and that's that's gonna be a tick better than what the USDA's got plugged in currently.
• 2:41
  SPEAKER_01: Yes, and if you go back to$100 on crude oil, I do think that's gonna allow the funds to float back to buying corn a little bit easier.
• 2:51
  SPEAKER_01: Sure.
• 2:52
  SPEAKER_01: When I look at uh the end of September, um, well, the end of August when we pulled September off the board for corn, we saw open interest drop a lot on corn, like we've talked about in the past couple weeks.
• 3:03
  SPEAKER_01: That money flow could potentially come back in if we get a good report on Tuesday.
• 3:08
  SPEAKER_01: If crude oil keeps wanting to go up, I think we could see some more money flow go towards these commodities.
• 3:14
  SPEAKER_01: Um a couple things are gonna have to line up.
• 3:17
  SPEAKER_01: Uh, you know, the US dollar right now is kind of surging.
• 3:20
  SPEAKER_01: Uh we've put quite a bit back on this US dollar, which is gonna make our exports less competitive out of the United States.
• 3:28
  SPEAKER_01: Uh that could keep some of the money flow out uh of uh of these commodities, unless it sounds like inflation isn't stopping.
• 3:36
  SPEAKER_01: If inflation's not stopping, crude goes back to 100 and then gas, you know, we kind of I've heard$4 at the pump now, uh a little bit more then.
• 3:45
  SPEAKER_01: So when you're starting to look at that again, and maybe money flow does come back into some of these commodities because of inflation again.
• 3:52
  SPEAKER_01: Because a soft landing looks like it could be happening right now to where the United States isn't gonna push themselves into a recession or a major recession, which would impact commodity prices a little bit.
• 4:04
  SPEAKER_00: Yep.
• 4:04
  SPEAKER_00: Well, that certainly seems to be in the trend that we're on at the moment.
• 4:08
  SPEAKER_01: Uh so we mentioned this report next Tuesday, Jeff.
• 4:12
  SPEAKER_01: We've got a WASD report coming out.
• 4:15
  SPEAKER_01: Uh what do you think some of the expectations are for that report that you see that we could focus on?
• 4:20
  SPEAKER_00: Well, I was I guess I was pretty happy with uh where the expectations were coming in here.
• 4:25
  SPEAKER_00: I I've got no complaints with them.
• 4:28
  SPEAKER_00: Um I think uh obviously the main question on everybody's mind and the market's mind, I believe, will be on uh the the yield expectations here on corn and soybeans, of course.
• 4:39
  SPEAKER_00: So you know we've got expectations all over the board, right?
• 4:42
  SPEAKER_00: As far as the range and and yields go.
• 4:46
  SPEAKER_00: Um I was it looks to me like most of what we're seeing uh expectations on corn yield coming in, what at that 173 and a half, right?
• 4:55
  SPEAKER_00: Yep.
• 4:56
  SPEAKER_00: Down from a little over 175 on last month's um bean yields not quite taking a full bushel off the soybean yields, uh, puts that just uh above one fifty compared to the one fifty, or excuse me, fifty bushels compared to fifty-one last month.
• 5:17
  SPEAKER_01: And fifty like under fifty, that high forty-nine area, that doesn't seem crazy to me, but for them to take off, you know, they were uh fifty-two the month before that in July.
• 5:30
  SPEAKER_01: So for them to take a couple bushels off in that time frame might be a stretch.
• 5:34
  SPEAKER_01: I'm a little bit worried about.
• 5:36
  SPEAKER_01: The the weather definitely wasn't conducive at the end of August for higher soybean yields, which concerns me a little bit on where they could come in.
• 5:43
  SPEAKER_00: For sure.
• 5:44
  SPEAKER_01: But that's gonna be a major talking point for sure.
• 5:46
  SPEAKER_01: Is that line if you come in below 50 or not?
• 5:49
  SPEAKER_01: Because about a range of expectations is 49 and a half about.
• 5:53
  SPEAKER_00: So they do have ending stocks printed here still in the what mid-250s?
• 6:02
  SPEAKER_00: Yeah, 207.
• 6:04
  SPEAKER_01: 207 is what they expect.
• 6:06
  SPEAKER_01: 245 was what August was for ending stocks on soybeans.
• 6:11
  SPEAKER_01: So they think it's gonna be a little tough to break that below 200.
• 6:15
  SPEAKER_01: And I honestly think that once you do get ending stocks below 200 million bushels on soybeans, if you start to drop yield to make that happen, you're probably gonna just gonna start dropping exports after that point to try to keep it somewhere around 200 at this point.
• 6:31
  SPEAKER_00: Aaron Powell That'd be pretty easy for them to do with uh expectations or current pace on soybean uh sales being behind last year.
• 6:40
  SPEAKER_00: Very true.
• 6:44
  SPEAKER_00: Um in September here.
• 6:45
  SPEAKER_01: From a more major macro perspective, when I look at the US ending stocks being really tight and a higher US dollar compared to the rest of the world with a uh an advantage over us from an export perspective, along with the fact that they have wider or bigger uh ending stocks for global on soybeans, uh, is gonna make it tough, I think, for uh to be competitive on the global stage for soybeans going forward.
• 7:13
  SPEAKER_01: So that'll have to play into this as well, because a lot of us have got this tunnel vision so far, I think, where we focus on our U.S.
• 7:20
  SPEAKER_01: ending stocks, and boy, if we get it to 150 million bushels, it's gonna be really tight for the U.S., which is right.
• 7:27
  SPEAKER_00: We're gonna have$15,$16 beans is what that math would tell you.
• 7:31
  SPEAKER_01: But we may not have that type of reaction if global stocks are in a better place than they have been historically.
• 7:37
  SPEAKER_00: So there'll be it'll be easy to trim back the the export demand.
• 7:41
  SPEAKER_00: Um I'm I'm guessing we'll trim back the the yield, but I guess time will tell on that.
• 7:47
  SPEAKER_00: The only the reason we would be wrong, and the analysts would be wrong, is if the the weather the first half of August was so good that that actually bumped our yield or the national yield, and then now we took it back down.
• 7:59
  SPEAKER_00: That's not our that's not our opinion, I don't think.
• 8:03
  SPEAKER_00: Um, but that's all that's gonna keep the Tuesday estimates uh pretty interesting.
• 8:08
  SPEAKER_01: Definitely.
• 8:09
  SPEAKER_01: What else you got for me today, Jeff?
• 8:11
  SPEAKER_01: What do you want to talk about?
• 8:12
  SPEAKER_00: Well, we're gonna have to talk about cattle, Mike.
• 8:15
  SPEAKER_00: You can't have$195 cattle futures and not talking about it on uh what's probably arguably I would say the most popular ag culture podcast out there.
• 8:27
  SPEAKER_00: Right.
• 8:28
  SPEAKER_01: Steady as she goes, right?
• 8:29
  SPEAKER_01: That cattle market, not necessarily making huge leaps and bounds at once, but we just claw a little bit higher each day, don't we?
• 8:35
  SPEAKER_00: It has been an interesting week.
• 8:37
  SPEAKER_00: You know, we've we've consistently, boy, going back to last spring, all summer, um, traded at a positive basis.
• 8:45
  SPEAKER_00: So what that means is you've got the cash market, of course, being quite a bit higher at times than where the nearby futures are.
• 8:52
  SPEAKER_00: Always futures always anticipating cash to drop um in the coming weeks, right?
• 8:57
  SPEAKER_00: And that and it and that some of those as some of those weeks it was right, some of it wasn't.
• 9:01
  SPEAKER_00: It really flip-flopped here in the past week or so.
• 9:04
  SPEAKER_00: So we do now have uh$1.83 October um nearby futures, and you've got a southern bid that's still in that 180 um spot.
• 9:15
  SPEAKER_00: So they're anticipating a$3 rally down there.
• 9:19
  SPEAKER_00: The other thing that's um transpired over the past week or two is we've really narrowed in the northern bid compared to the bigger.
• 9:26
  SPEAKER_01: I was just gonna say that 185 or 183, even in the north, isn't nearly as competitive.
• 9:32
  SPEAKER_00: That's right.
• 9:32
  SPEAKER_00: That's so that's putting our northern bid here at an even basis, which all of that is very common for September.
• 9:39
  SPEAKER_00: It's just we've we're not in common times, right?
• 9:43
  SPEAKER_00: But what what that's really means is as the front end has gotten more optimistic, um, they also have pushed some more optimism into these deferred cattle futures.
• 9:54
  SPEAKER_00: So that's you know now why we're seeing 187 on the D, and you're up over a buck ninety um on February, and we've only seen that just a sprinkle of times.
• 10:05
  SPEAKER_00: And uh then, of course, the famous 195 record highs again on the April board, Mike.
• 10:13
  SPEAKER_00: Um continued to see some pretty impressive numbers on on cattle.
• 10:18
  SPEAKER_00: But as you hit new highs again in the cattle market, and it I don't it doesn't matter the way things are set up here.
• 10:24
  SPEAKER_00: Um, we get pretty interested in these spring months.
• 10:26
  SPEAKER_00: They're carrying a bunch of premiums to the nearby stuff as far as hedging opportunities, especially floors, floors with some sold calls, all that stuff makes a bunch of sense here, of course.
• 10:36
  SPEAKER_00: Contracted calves that are coming in here in October, or some small weight crossweights, um crossbreeds that are going into next summer.
• 10:46
  SPEAKER_00: That all that all looks really good at this uh upper 180s creeping into that 190 territory, Mike.
• 10:54
  SPEAKER_00: It all it all makes quite a bit of sense with uh you know$4 or$5 low or upper high five dollar to upper$4 corn here.
• 11:04
  SPEAKER_00: Um that all pencils pretty well, of course.
• 11:07
  SPEAKER_01: What's the longevity of this cattle market look like, Jeff?
• 11:11
  SPEAKER_01: When you look at how long these high prices can last, what's your take on that and the stage of the cycle we're in from a very macro perspective?
• 11:20
  SPEAKER_00: From a very macro, if you just step back and stare at the cowherd numbers and stare at the heifer retention uh numbers, it looks like it's gonna be a long time.
• 11:32
  SPEAKER_00: We really haven't trimmed back um our on-feed numbers in any great degree.
• 11:38
  SPEAKER_01: As in a year or two or three.
• 11:40
  SPEAKER_00: Yeah, it's a year plus for sure.
• 11:42
  SPEAKER_00: Um and I'm not saying the market's gonna go up for a year plus, right?
• 11:46
  SPEAKER_00: That's the other thing that's gonna get interesting is at some point we're going to find kind of some a new high here, and we're probably gonna mess around for a while, is what the heifer retention stuff suggests.
• 11:58
  SPEAKER_00: You know, our last cycle, this thing went up straight up, and obviously got way too high.
• 12:04
  SPEAKER_00: Demand eroded, imports came in, and we all know the story of what happened there.
• 12:09
  SPEAKER_00: There, and and if you made me guess today, I would still be telling you that's what's gonna happen on this cycle too.
• 12:15
  SPEAKER_00: But as you look at the speed at which we're um reluctant to replace heifers, meaning that we're just gonna continue to erode the cow herd the way it looks, or at least flatline the cow herd versus put this V bottom in and immediately start building back the herd.
• 12:33
  SPEAKER_00: It doesn't look like we're not seeing any signals of that happening.
• 12:36
  SPEAKER_00: So, what that could mean is you spend more time at high levels.
• 12:41
  SPEAKER_00: That doesn't mean it needs to go up, it still means it can drop 10 bucks without any problem.
• 12:47
  SPEAKER_00: But this might have a different look to it as we start to look at some shorter numbers.
• 12:54
  SPEAKER_00: You might look at them for multiple years versus automatically and immediately correcting this market.
• 13:00
  SPEAKER_01: Alright, any final thoughts for our listeners this week, Jeff?
• 13:04
  SPEAKER_00: I think that's all I've got on my mind for now.
• 13:06
  SPEAKER_00: I know the other thing we're looking at, uh end users, um, don't forget about the corn market, don't forget about the meal market.
• 13:14
  SPEAKER_00: I think there's some things there to maybe take advantage of in front of Tuesday's report.
• 13:20
  SPEAKER_00: Um Grain Guys, Mike, much to do there.
• 13:23
  SPEAKER_00: We've kind of looking at undercrop insurance guarantees and not a lot of activity.
• 13:29
  SPEAKER_01: Undercrop insurance guarantees makes me want to see what Tuesday's gonna do.
• 13:32
  SPEAKER_01: Let's put it that way.
• 13:34
  SPEAKER_01: Thanks for joining us, Jeff.
• 13:35
  SPEAKER_01: And thank you to all our listeners.
• 13:37
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 13:41
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:46
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:52
  SPEAKER_01: See you next time.