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WASDE and Hog Update · 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 September 16th.
• 0:25
  SPEAKER_01: I've got Jeff from Pro Ag here with us.
• 0:28
  SPEAKER_01: A lot of fun stuff to talk about today, Jeff.
• 0:30
  SPEAKER_00: And September 16th, I think the uh the weeks are starting to speed up a little bit, Mike.
• 0:36
  SPEAKER_01: At least that's the way the uh fields look out there.
• 0:39
  SPEAKER_01: All of a sudden we got some combines starting to roll through the countryside in this part, anyways.
• 0:44
  SPEAKER_01: We've got some early soybeans kind of coming out and uh some corn that's fifteen percent and thirty-five percent in the same field.
• 0:52
  SPEAKER_00: So yeah.
• 0:53
  SPEAKER_01: It uh a little bit early yet, but you're gonna really start seeing.
• 0:57
  SPEAKER_01: We got some rain locally here last night, and I think after this weekend here, you'll probably see a lot of people going next week at some point.
• 1:03
  SPEAKER_00: That's what I'm kind of thinking, either nibbling on a few beans or getting into some pretty wet corn, and we're still seeing a pretty positive basis um in the areas that are corn deficit for sure.
• 1:14
  SPEAKER_01: Yeah.
• 1:15
  SPEAKER_01: People are gonna try to take advantage of that.
• 1:17
  SPEAKER_01: Too bad a lot of dryers are still trying to get fixed and grain bins, and I know uh everybody's tr struggling to get some combines back, it sounds like that normally don't, so that's been holding some people up, I know.
• 1:31
  SPEAKER_01: However, this week was far from a boring week across any of the commodities equities.
• 1:36
  SPEAKER_01: Monday, we'll start with we had a WASDA report, and uh soybeans were the real big shocker on that one.
• 1:42
  SPEAKER_01: We came in 50.5 on yield, bottom end of the range of estimates.
• 1:47
  SPEAKER_01: We also took harvested acres down 600,000 on that one.
• 1:52
  SPEAKER_01: So we really got this thing down to pipeline levels on uh ending stocks for this uh next year, and we did start to see some demand rationing by the time we got to that number out of this report, too.
• 2:04
  SPEAKER_01: Uh so we are starting to see a little bit more of that.
• 2:07
  SPEAKER_01: Uh they did not move the average price estimates on that though, I thought which was interesting.
• 2:13
  SPEAKER_01: So they expect rationing to occur, but the average price is gonna stay the same.
• 2:17
  SPEAKER_00: The the more important than the WASD, Mike, don't you think the price action this week was incredible?
• 2:23
  SPEAKER_01: By far.
• 2:24
  SPEAKER_01: And I think the corn was a good example of it.
• 2:26
  SPEAKER_01: Before the report, they were expecting a 172.5 corn yield.
• 2:31
  SPEAKER_01: We came out at that exact corn yield.
• 2:33
  SPEAKER_01: They maybe weren't expecting the drop in acres necessarily, but for corn to close up fifth uh 11 cents on Monday after that report was pretty friendly.
• 2:46
  SPEAKER_01: However, it helps when soybeans close a day up 70 cents I think down to November.
• 2:52
  SPEAKER_01: And really strong price action.
• 2:54
  SPEAKER_01: The interesting part I've been looking at is okay, we were 76 cents higher.
• 2:58
  SPEAKER_01: That's a huge move, but it just basically went right back to the top end of the trading range and stayed there.
• 3:04
  SPEAKER_01: We really didn't break out of any ranges this week at all.
• 3:07
  SPEAKER_01: I mean, if you go back, the last highs on November soybeans were about 15.08 and 15.05, and for us to get there uh early Tuesday up to 1508 and three quarters, we just went to the top end of the range.
• 3:20
  SPEAKER_01: Same on corn, we bounced up against$7, couldn't quite break through that one.
• 3:25
  SPEAKER_01: We had a lot of uh contracts waiting to sell at$7 there if you looked at the market depth.
• 3:31
  SPEAKER_01: So very interesting price activity and uh trade after the report, like you said, Jeff.
• 3:37
  SPEAKER_01: Any comments on that?
• 3:38
  SPEAKER_00: Well, I was just uh I was just quite shocked by the the reports.
• 3:42
  SPEAKER_00: I mean, obviously the marketplace uh saw the beans as a big surprise.
• 3:45
  SPEAKER_00: I also saw the corn as quite a big surprise.
• 3:48
  SPEAKER_00: I was in the camp that they probably wouldn't adjust the acres a ton and that they wouldn't adjust the yield a ton.
• 3:54
  SPEAKER_00: Um so not disagreeing with the yield number or anything like that.
• 3:59
  SPEAKER_00: We've definitely seen some erosion over there in the back half of the growing season and way back to you know the end of July there, Mike, when you went out and and did the crop tour, you came back and um we could start to see the that the eastern belt was not going to make up for the western corn acres, especially.
• 4:18
  SPEAKER_00: So and it and it didn't get any better um from there on, right?
• 4:22
  SPEAKER_00: But besides that, extremely bullish um reports, in my opinion, and then to see some yeah, sideways not busting out of any ranges or anything um on the marketplace.
• 4:36
  SPEAKER_00: I I guess you and I talked a lot about that this week, Mike, and it's just a tough time for grain markets to rally, isn't it, from a calendar standpoint?
• 4:46
  SPEAKER_01: It is October 2nd would be your seasonal low average here going back the last 10 years.
• 4:51
  SPEAKER_01: So we are getting to that point of the point of the year where it's gonna be tough to get funds behind this thing.
• 4:56
  SPEAKER_01: We do have uh managed money longs up to about 210,000 contracts here.
• 5:02
  SPEAKER_01: So we did add uh about five thousand last week, it looked like, but uh to get them too much uh too excited past this point, we're gonna have to start worrying about some of the outside market influence.
• 5:12
  SPEAKER_01: So if we start getting over to some of that, you start looking at Tuesday's CPI report, all expectations for that were to drop and start seeing inflation actually get slowed down here, and we actually went up a point one percent.
• 5:26
  SPEAKER_01: So that was a little bit of a shock.
• 5:27
  SPEAKER_01: It really has hit things like the equity markets, the SP has bounced uh back to the lower end of the trading range.
• 5:34
  SPEAKER_01: You saw money flowing out of that, running towards things like hogs, I believe, this week, which we're gonna cap off the podcast talking about that.
• 5:42
  SPEAKER_01: And then you saw crude oil take a pretty big hit, you saw the US dollar bounce really hard from that again towards the top end of the range.
• 5:49
  SPEAKER_01: You saw gold, silver take a big hit, you saw grains the rest of the week after Monday take a big hit.
• 5:55
  SPEAKER_01: So we really saw some more, we went back from necessarily hitching inflation.
• 6:00
  SPEAKER_01: Now everybody thinks we're gonna push ourselves back into a recession again.
• 6:04
  SPEAKER_01: And I think uh the back half of this week's trade, you really saw that this week, Jeff.
• 6:08
  SPEAKER_00: Yep, I definitely would agree.
• 6:10
  SPEAKER_00: That's probably that's also part of what's putting pressure on the grains.
• 6:14
  SPEAKER_00: I do want to just take a quick step back because from a big I think there's some big picture lessons here that we kind of skipped over, Mike, and you mentioned it.
• 6:22
  SPEAKER_00: We had to cut the demand down on the corn side in order to get the supply to fit into the into the spreadsheet, right?
• 6:30
  SPEAKER_00: Yep.
• 6:30
  SPEAKER_00: Um so let's let's park that in the back of our mind, and I think it's okay to let that um tighter supply and demand situation uh influence our marketing decisions going forward.
• 6:43
  SPEAKER_00: So I I think you you take this year's crop and and if we would have grown something closer to a trend line, we'd be talking a lot different tune today because of the stuff you're talking about, and also the headwinds that you're gonna get from an export standpoint on the dollar.
• 6:59
  SPEAKER_00: But the fact of the matter is, is this crop has come in a good eight bushels under trend, um, and we've got less acres on the corn side, and the bean side, you know, we're not out of the woods there as far as tightness in the S D.
• 7:14
  SPEAKER_00: But um none of that's maybe new information.
• 7:18
  SPEAKER_00: I just think it's more solid, so that's that's why we're not going straight up on the on the markets.
• 7:24
  SPEAKER_00: But I think it's okay to be a little bit more optimistic as we look to you know position ourselves into the winter on old crop.
• 7:32
  SPEAKER_00: Um, I think it's okay to be a little more optimistic as you consider what you want for coverage on next year's crop.
• 7:39
  SPEAKER_00: And I know something you've been hitting on the past year or so, Mike, is to watch the seasonals.
• 7:44
  SPEAKER_00: And I think that's gonna be really good advice uh on next year's new crop, corn and beans again, is is be a little bit on the patient side.
• 7:52
  SPEAKER_00: Let's make our sales when in the time of year when they're normally uh um hitting their highs next spring.
• 7:58
  SPEAKER_01: I really like that.
• 7:59
  SPEAKER_01: That's kind of why I've been leaning more towards some more option-based strategies.
• 8:03
  SPEAKER_01: You could get some really nice windows today, so please give us a call on that, especially on some of this 23 corn.
• 8:09
  SPEAKER_01: Uh, a lot of input changes there going into this next year, a lot of risk.
• 8:13
  SPEAKER_01: We continue to talk about that, so don't mean to keep beating that drum over and over again, but it's something guys should really be looking at for some uh windows into this next year to buy yourself some time until we get to May, anyways.
• 8:26
  SPEAKER_01: How about uh the rest of the week, Jeff?
• 8:28
  SPEAKER_01: We kind of started high tensions in the railroad industry and ended tensions in the railroad industry.
• 8:35
  SPEAKER_00: Very high tensions in the beginning of the week for sure.
• 8:38
  SPEAKER_01: And it's interesting because you have something like that come into the marketplace at the beginning of the week, and it was during a time frame when you're trading 76 cents higher on Monday on soybeans after a WASD airport.
• 8:51
  SPEAKER_01: Yeah, you had so many other things going on, the CPI numbers, that it's almost like we didn't even get time to trade that on either direction.
• 8:59
  SPEAKER_00: I I would agree.
• 9:00
  SPEAKER_00: I would agree.
• 9:01
  SPEAKER_01: And it probably could have been a really bad standpoint if we started to back things up in the United States for basis or end users trying to get rid of ethanol or whatever the case may be.
• 9:11
  SPEAKER_01: Um we avoided that one and kind of got lucky probably on that front.
• 9:16
  SPEAKER_01: So not much more to say other than that.
• 9:19
  SPEAKER_01: But uh how about towards the back half of the week, Jeff?
• 9:22
  SPEAKER_01: We had a export report come out yesterday that gave us four weeks worth of data.
• 9:27
  SPEAKER_01: I wanted to touch on that a little bit on the grains here.
• 9:30
  SPEAKER_01: We didn't see anything too interesting.
• 9:32
  SPEAKER_01: Corn was a little mixed.
• 9:34
  SPEAKER_01: Uh soybeans had a pretty decent report out of it, actually, so that maybe helps some of their price action.
• 9:39
  SPEAKER_01: Uh still, though, we we continued to slide after Monday's big update.
• 9:44
  SPEAKER_01: Um you have some other stuff going on with the US dollar like we talked about that's been putting some pressure on it, and uh maybe it's a little hard to get too excited about exports right now, seeing that, but um, we did see some nice export numbers out of soybeans here recently.
• 9:59
  SPEAKER_01: The uh hog side though, those numbers got updated as well, Jeff.
• 10:02
  SPEAKER_01: Uh, any updates on that?
• 10:04
  SPEAKER_00: I think on the livestock thing is similar situation as uh the corn and somewhat the soybeans.
• 10:10
  SPEAKER_00: It just kind of came in as expected.
• 10:12
  SPEAKER_00: We didn't see any huge purchases, you know, kind of been waiting to see if China's gonna step in on the pork side of the equation.
• 10:20
  SPEAKER_00: Um they were there, but nothing big.
• 10:22
  SPEAKER_00: It was just kind of as expected.
• 10:24
  SPEAKER_00: Um, no real big movers and shakers of several weeks of export information coming out uh on Thursday this week.
• 10:31
  SPEAKER_01: Yeah, so pork uh export sales probably classified as good yet.
• 10:35
  SPEAKER_01: Keep production moving, not backing anything up, and uh China finally seeing a little bit more consistency there, but nothing to get excited about yet.
• 10:44
  SPEAKER_00: I think the big news in the hogs this week, and and we've been talking about this quite a bit, is more on the supply side and the packer leverage side.
• 10:54
  SPEAKER_00: So we talk about you know the three fundamentals supply, demand, and packer leverage.
• 10:59
  SPEAKER_00: Well, packer leverage going forward in that business is a really big deal.
• 11:04
  SPEAKER_00: Um, and so we're watching Saturday kills really closely after Labor Day here.
• 11:09
  SPEAKER_00: This week it looks like the USDA pegged us at 75,000 for tomorrow, the the Saturday after Labor Day.
• 11:17
  SPEAKER_00: Um that's gonna be a hundred thousand less than a year ago on the same set.
• 11:23
  SPEAKER_00: So I it well uh it's the big debate as to how many pigs are out there and how fast the packers gonna kill them.
• 11:31
  SPEAKER_00: So week over or year over year, excuse me, this week we're gonna be about four percent down on the kill.
• 11:38
  SPEAKER_00: Um that in itself maybe isn't uh super bullish or that exciting, but the fact that you know the the cash market felt fairly firm.
• 11:50
  SPEAKER_00: Now, week over week we didn't really increase the values a ton.
• 11:54
  SPEAKER_00: The top side went up by a couple bucks um going home today versus last week, but you know the averages didn't the but the what we're kind of feeling from the um packer side this week would say they're still sniffing around a little bit, have some needs um for late this week, you know, early in the week.
• 12:13
  SPEAKER_00: They've definitely got some needs for next week yet.
• 12:16
  SPEAKER_00: Um so we we didn't fill that smaller kill um super easily, which I think is the big takeaway from this week, and maybe why the someone that's the fundamental reason behind the money flow coming into the hog market in my mind.
• 12:32
  SPEAKER_01: So when I start to look at it, you know, strength in hogs towards the end of the week, then I mean it was it really supported that much by cash and cutouts, you think, or was there something else going on besides that?
• 12:47
  SPEAKER_00: I I call it the undertones, and I know I sound I know that sounds a little bit weird, but that's what it is to me.
• 12:53
  SPEAKER_00: It's it's the feel of the marketplace.
• 12:55
  SPEAKER_00: So no, the cat you look, you you look at the cutout and the cash values, and cash we you know that's more awful an indicator of supply more than like a true value that that matters a ton.
• 13:09
  SPEAKER_00: But I really like kind of the feeling of the marketplace right now, and that these packers aren't just swimming in pigs going into the fall, nice weather, um, and killing significantly less than a year ago.
• 13:23
  SPEAKER_00: And that that's gonna be you know, one one data point doesn't make a trend, is is what we always say.
• 13:29
  SPEAKER_00: So it's one week's worth of information.
• 13:31
  SPEAKER_00: Next week things could be completely different, Mike.
• 13:33
  SPEAKER_00: That has a tendency to happen to us um this time of year, but this week was quite optimistic on the supply versus what the Packer wanted to get dead.
• 13:44
  SPEAKER_01: Well, the futures obviously got pretty optimistic here.
• 13:47
  SPEAKER_01: We closed last week, the December was at 83.50, closed today out just under 88.
• 13:52
  SPEAKER_01: That's a pretty nice improvement week over week, kind of uh counter-seasonal almost too, right?
• 13:58
  SPEAKER_00: Well, an 88 just under 88 on the December hogs is right next to ridiculous, Mike.
• 14:03
  SPEAKER_00: I mean, there's just no business for these winter pigs to be sniffing 90 bucks.
• 14:08
  SPEAKER_01: That one had to surprise some people.
• 14:10
  SPEAKER_00: For sure.
• 14:10
  SPEAKER_00: If you haven't got your if you don't like your position on your winter hogs today, you're getting another chance to do something about it.
• 14:18
  SPEAKER_00: You need to take a hard look at that.
• 14:20
  SPEAKER_01: Any closing thoughts for our listeners this week, Jeff?
• 14:23
  SPEAKER_00: Just uh you never know what an interesting week is gonna come out of the woodwork, do you, Mike?
• 14:27
  SPEAKER_00: This one uh this one was kind of one for the charts, I would say.
• 14:31
  SPEAKER_01: Definitely.
• 14:32
  SPEAKER_01: And thank you to all our listeners.
• 14:33
  SPEAKER_01: Please reach out to us from our website at professionalagmarketing.com, or check out our newly added hog specific podcast named Hog Market Talk, that's released every Thursday.
• 14:45
  SPEAKER_01: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.