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Its a global market · 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.
• 0:24
  SPEAKER_01: Today is May 25th, and I've got Pat from Professional Ag Marketing with us here today.
• 0:29
  SPEAKER_01: How's it going, Pat?
• 0:30
  SPEAKER_00: Good, Mike.
• 0:30
  SPEAKER_00: Where are you from?
• 0:31
  SPEAKER_01: I am from Rutland, South Dakota, and I am from the middle of nowhere.
• 0:36
  SPEAKER_00: Yeah, that's really good.
• 0:37
  SPEAKER_00: What are we going to talk about today?
• 0:39
  SPEAKER_00: Speaking of middle of nowhere.
• 0:40
  SPEAKER_01: Well, middle of nowhere, I think it's a perfect topic to talk about then.
• 0:44
  SPEAKER_01: It's a global market today, Pat.
• 0:46
  SPEAKER_00: Absolutely.
• 0:46
  SPEAKER_00: Let's talk macro, huh?
• 0:48
  SPEAKER_01: Yeah, there was plenty that impacted the markets from all over the world, whether it was U.S.
• 0:53
  SPEAKER_01: planning progress here in our back door, even north of Rutland, as we see slow planning progress in both Canada and North Dakota hold things up, but the rest of the United States seemed like they made some pretty good progress, huh, Pat?
• 1:05
  SPEAKER_00: South of Rutland, planning progress is pretty good.
• 1:07
  SPEAKER_00: North of Rutin, Rutland a little slow.
• 1:10
  SPEAKER_01: Exactly.
• 1:10
  SPEAKER_01: It's that simple.
• 1:11
  SPEAKER_01: And since we all know where Rutland is, that'll be easy.
• 1:14
  SPEAKER_00: So Yeah, the first person that uh looks up Rutland, South Dakota on their map and gives us a call will get a treat.
• 1:23
  SPEAKER_00: I'm not sure what the treat is, but there will be a treat.
• 1:27
  SPEAKER_00: And you better not have the last name minor.
• 1:29
  SPEAKER_01: There you go.
• 1:31
  SPEAKER_01: That's your qualifications.
• 1:32
  SPEAKER_01: That narrows it down in that part of the world.
• 1:34
  SPEAKER_01: So US corn planning progress, 72% uh versus 89% complete.
• 1:41
  SPEAKER_01: I wasn't surprised to see it over 70%.
• 1:43
  SPEAKER_01: A lot of people were going at the at the weekend time frame there.
• 1:47
  SPEAKER_01: Seemed like it was really time to get things done uh uh pretty much across the entire United States.
• 1:53
  SPEAKER_01: So seven pen seven percent behind normal, still not that bad.
• 1:56
  SPEAKER_01: You know, we're catching up.
• 1:57
  SPEAKER_01: That was a big week.
• 1:58
  SPEAKER_00: No, it was a very big week.
• 2:00
  SPEAKER_00: And and uh um I don't think while the market uh I would say clearly based upon its reaction isn't too concerned about the the 7% behind.
• 2:09
  SPEAKER_00: And and by the time we uh we make this recording here on Wednesday, I suspect that we have a pretty good chunk of that uh caught up with already.
• 2:18
  SPEAKER_00: And and so we joke a little bit about uh about where uh where we're talking about in west central South Dakota, but um uh east central South Dakota, sorry.
• 2:30
  SPEAKER_00: But we would be um, you know, really anything north of Watertown is still struggling, anything north of Marshall on the Minnesota side, and then kind of kind of west of Hutchinson, Minnesota.
• 2:40
  SPEAKER_00: So anyway, just I just say that to say this.
• 2:42
  SPEAKER_00: The area of concern is becoming quite isolated as it relates to planning progress.
• 2:47
  SPEAKER_00: And so now it you know the market is transitioning from planning progress to crop development and and uh condition scores and all of that, and and generally um off to a pretty good start, it seems.
• 3:00
  SPEAKER_00: And even uh parts of Nebraska, well, really all of eastern Nebraska that's been uh showing up fairly prominently on that drop monitor map has received some nice moisture, major rain event uh uh in that area of the corn belt uh last Tuesday and then repeated again over the weekend and again today.
• 3:18
  SPEAKER_00: I was just talking with someone down in that down down there.
• 3:21
  SPEAKER_00: So um pretty good rains in some areas that needed it.
• 3:24
  SPEAKER_00: Uh a little warmer temps in the eastern corn belt for some areas that needed that.
• 3:28
  SPEAKER_00: And so so so far we're getting a pretty good uh recipe for success in crop development.
• 3:33
  SPEAKER_00: And as a result of that, uh uh December corn uh on on uh as of this taping here Wednesday afternoon, uh trading around uh 723, which is uh well, not about what forty some cents off the highs?
• 3:50
  SPEAKER_01: Yeah, 765 was kind of the top end of that range last week.
• 3:53
  SPEAKER_01: So we did dip into the lower sevens here at the beginning of the trading session today, which we'll talk about in a little bit.
• 4:00
  SPEAKER_01: So that was a pretty significant setback in a week time frame there.
• 4:03
  SPEAKER_00: Yeah, it is, and and from these levels though, probably not too surprising, and and uh it's not at all uncommon for us to see a little bit of a correction, I think, as we get uh get that first phase of weather concerns uh kind of behind us in terms of planning progress.
• 4:18
  SPEAKER_01: Exactly.
• 4:19
  SPEAKER_01: Normal two-week uh forecast there should help guys get wrapped up and uh we had a few other bearish things kind of hit us that helped with that sixty cent drop-off or so uh talk of China buying Brazil corn.
• 4:30
  SPEAKER_01: That definitely helped Pat.
• 4:32
  SPEAKER_01: What do you think about their situation right now when it comes to global exports and uh the U.S.
• 4:37
  SPEAKER_01: kind of falling out of the market here a little bit?
• 4:39
  SPEAKER_01: Our high US dollars starting to show a little bit of uh uh showing a little bit of weakness with uh commodity prices here out of the United States origin.
• 4:48
  SPEAKER_00: Starting to be an issue.
• 4:49
  SPEAKER_00: We uh we uh talked a couple weeks ago about this game of uh uh nasty game of musical chairs and who's gonna cry uncle here in terms of uh allowing for this uh a tighter corn balance sheet, both domestically and globally, try to get through a a relatively tight uh feed grain situation.
• 5:10
  SPEAKER_00: And and uh for a while there uh it looked as though someone domestically, hog farmer, uh cattle producer, ethanol, ethanol uh producer, uh, was going to have to try to to to uh constrict some of their use to try to get this balance sheet on corn to fix.
• 5:27
  SPEAKER_00: But to your point, maybe we're starting to see that move around a little bit to that export market.
• 5:33
  SPEAKER_00: Stronger U.S.
• 5:34
  SPEAKER_00: currency coupled with um really an improving second crop in Brazil, I think is a reasonable observation, at least from from the levels uh that were that were being talked about.
• 5:45
  SPEAKER_01: Time for problems down there definitely running out.
• 5:47
  SPEAKER_00: Yeah, exactly.
• 5:48
  SPEAKER_00: Exactly.
• 5:49
  SPEAKER_00: So yeah, so maybe we'll you know the USDA on their on their first forecast for next year, the next crop year last week, did suggest uh a hundred million drop year over year in terms of exports.
• 6:03
  SPEAKER_00: And initially when I saw those numbers, I kind of questioned it as it relates to uh especially when you you know the con the concerns uh uh as it relates to Ukraine and them being able to move move uh feed grains out of that country and and wondering how you could get a drop in uh in US exports year over year with that uh backdrop in mind.
• 6:22
  SPEAKER_00: But maybe higher currency, better uh better crop in in Brazil, maybe it gets covered up a different way.
• 6:29
  SPEAKER_01: Exactly.
• 6:29
  SPEAKER_01: And we also had another headline in the grains here on the overnight that really helped to sell off this morning that mostly we recovered from as corn only closed down two cents on the day, which was kind of nice to see.
• 6:41
  SPEAKER_01: But uh we saw some news that Russia will now allow humanitarian food vessels to be shipped from Ukraine Pat.
• 6:49
  SPEAKER_01: So uh corn did not take that well, wheat prices did not take that well.
• 6:53
  SPEAKER_01: But uh then later on they kind of said, you know, don't forget about the uh the sanction deal.
• 6:57
  SPEAKER_01: We we kind of need some help on that if we are gonna do this.
• 7:01
  SPEAKER_01: So what do you think about them?
• 7:03
  SPEAKER_00: Yeah, as long as the uh the the humanitarian uh uh vessel that the check is written in rubles and written to Vladimir, I'm sure they'd be more than happy to accommodate.
• 7:13
  SPEAKER_01: They need a little help there.
• 7:15
  SPEAKER_01: So soybeans are put under some pressure this week, too.
• 7:18
  SPEAKER_01: It's been a pretty big sell-off in that market here as November's back down around that 1512 type area, kind of the middle bottom end of the range there, but saw a couple of really bad days after Biden said that uh the US will use troops to defend Taiwan, so don't forget about China.
• 7:34
  SPEAKER_01: We can always make them mad one way or another, too, Pat.
• 7:38
  SPEAKER_00: Did he know what he was saying?
• 7:40
  SPEAKER_01: I hope so.
• 7:41
  SPEAKER_01: Well, whatever the teleprompter told him to say.
• 7:44
  SPEAKER_00: Yeah, that's a concerning thing.
• 7:46
  SPEAKER_00: And and uh we seem to be uh um having a little trouble managing uh uh one issue, let alone uh uh creating a second one.
• 7:55
  SPEAKER_00: And so um I poke a little bit of fun at uh our our uh our current leader there, but uh I am a little bit concerned about uh um about uh ever-changing uh global dynamics here and the impact that uh that uncertain uh geopolitics could have on on commodity prices going forward.
• 8:16
  SPEAKER_01: Well, when we start talking about geopolitics and all these outside markets and the influence on agriculture, we've got a lot of stuff going on in the outside markets here real recently that I'm sure is uh on our administration's mind here as we've still talking about interest rates.
• 8:32
  SPEAKER_01: Fed's fighting inflation with raising interest rates.
• 8:35
  SPEAKER_01: Uh markets given us some pretty good info so far on that that we could have peaked already in the short term.
• 8:41
  SPEAKER_01: We see the 10-year treasuries back well below 3%, which was kind of surprising immediately after their last rate hike.
• 8:48
  SPEAKER_01: And uh we have a lot of inflation and Fed probably built into this yield curve.
• 8:52
  SPEAKER_01: So uh when we start looking at kind of uh the SP market's reactions to this, this was actually our seventh straight week of losses on the SP 500, which is the longest since 2001.
• 9:05
  SPEAKER_01: That's only happened twice since 1980.
• 9:08
  SPEAKER_01: Interesting.
• 9:08
  SPEAKER_01: That's kind of interesting with the SP, and that's slid or getting closer to bear market territory with a 20% drop from their highs.
• 9:16
  SPEAKER_01: They're kind of keeping an eye on this like 3,800 type level, a close below that.
• 9:21
  SPEAKER_01: Then they're really gonna be saying, you know, okay, we're in a bear market, it sounds like.
• 9:25
  SPEAKER_01: And um, when we start talking about the SP levels, you know, we've got some other things coming out this week that could be uh impacting that as well.
• 9:33
  SPEAKER_01: With uh the economic front, they're gonna have the Fed minutes coming out this afternoon.
• 9:38
  SPEAKER_01: That'll hopefully give them a better idea on interest rates and uh the pace and amount of the rate hikes that they'll be looking forward into 2022.
• 9:47
  SPEAKER_01: So uh they they'll maybe trade that a little bit.
• 9:49
  SPEAKER_01: But overall, they're really worried right now, these uh these equities are about the status and uh health of the uh the global economy for and specifically here right in our back door.
• 10:02
  SPEAKER_01: Uh you've got um GDP estimates coming out again for the first quarter this week as well.
• 10:08
  SPEAKER_01: And when we start talking about a few of these numbers, you know, a recession is basically talk of an economic decline over several months or years even.
• 10:18
  SPEAKER_01: Um and when we start talking about what that means, they're either talking about gross domestic gross domestic product going down, rising levels of unemployment, falling retail sales, and then some other measures of on income and manufacturing, basically.
• 10:34
  SPEAKER_01: And a lot of that news we'll be getting here this week.
• 10:37
  SPEAKER_01: So when we start talking about unemployment, you know, um, well, we're pretty far away from seeing anything in unemployment that's too earth-shattering yet, but we have talked about like in last week's podcast that, you know, maybe maybe we are reaching a point now where some of this money's running out a little bit as we saw the M2 money supply kind of stable out or fall a little bit even this last month.
• 11:00
  SPEAKER_01: And we're seeing a few bit more people run to some uh run to some jobs uh here than we were seeing anyways.
• 11:07
  SPEAKER_01: Falling retail sales, we're definitely seeing that out of the uh out of the businesses that are releasing um their uh out of the businesses that are releasing uh some of their earnings here from the last quarter as you're looking at Target and Walmart and uh all these companies from the retail side of things are really getting blown up here in the past few days.
• 11:29
  SPEAKER_01: Walmart shares fell like 20%, some of their biggest declines in a while.
• 11:33
  SPEAKER_01: So it'll be interesting to see as all these things start hitting the market here, you know, um tying that back into agriculture.
• 11:40
  SPEAKER_01: Corn's directly tied to its hip with crude oil and uh demand there as we see really high crude oil prices, high gas prices.
• 11:48
  SPEAKER_01: I mean, it's hard to fill up a pickup when it's almost two hundred dollars with five and a half dollar diesel, right, Pat?
• 11:54
  SPEAKER_00: So Yeah, it's a real challenge.
• 11:55
  SPEAKER_00: And I I'm afraid that um well, I mean the Fed continues to telegraph how they're going to approach this, and they're gonna continue to raise interest rates until they see inflation drop below four percent.
• 12:10
  SPEAKER_00: Am I right about that?
• 12:11
  SPEAKER_01: Yeah.
• 12:11
  SPEAKER_00: Well, by the time inflation shows that it's dropped below four percent, we're gonna do some real carnage in this economy.
• 12:20
  SPEAKER_00: It's too late.
• 12:21
  SPEAKER_00: And so um and so anyway, I um we waited too long to raise interest rates and and and uh and it certainly appears as though uh we're gonna wait too long to lower interest rates.
• 12:36
  SPEAKER_00: And so I'm I think the unfortunate result of all of that uh is is that we're going to um experience a pretty significant slowdown in economic activity.
• 12:46
  SPEAKER_00: And I and and I appreciate you know everything just rattled off there, Mike, because I because we might be starting to see that already.
• 12:54
  SPEAKER_00: I mean, we might already be starting to see a slowdown in economic activity when when uh Target's earnings are down by a third and Walmart's are down by 20 percent and Target's inventory is up forty-three percent or something like that.
• 13:08
  SPEAKER_00: I mean it's just uh um those are some real concerning things that we're already starting to see out there.
• 13:12
  SPEAKER_00: And so um I'm not saying the stock market correction is justified or not, um but just saying that uh earnings forecasts have been below expectations here and and it's understandable why when you like you said, when you're when you're paying five and a half bucks for diesel, something's gotta give.
• 13:29
  SPEAKER_01: And when we talk about things giving as well, you know, the commodities for these bigger funds are sp very speculative positions to begin with as they try to hedge against inflation and whatnot.
• 13:40
  SPEAKER_01: And if inflation isn't gonna be much of a worry here to come after a recession, then well, maybe a record amount of longs in the corn market, maybe they don't have to be there anymore.
• 13:50
  SPEAKER_00: That's right.
• 13:51
  SPEAKER_00: And uh yeah, then you start paying attention to internal fundamentals with that's kind of how we started today's podcast, was making some observations as it relates to that.
• 14:00
  SPEAKER_01: Awesome.
• 14:00
  SPEAKER_01: Any final words for our listeners this week?
• 14:02
  SPEAKER_00: No, I just the only thing we'd just say is is that you uh you know, this is the time of year where historically it makes some sense to be uh transferring over ownership or taking some uh some risk off the table here.
• 14:14
  SPEAKER_00: So from a real crop producer's perspective, I I encourage you to take a look at that.
• 14:18
  SPEAKER_00: Also keep a very good eye on basis levels here.
• 14:22
  SPEAKER_00: There's uh been some some uh uh interesting opportunities, um, especially on the bean side of things here recently, particularly in the Western Corn Belt.
• 14:30
  SPEAKER_00: So if you want some advice on that or want to take a little harder look at it, please don't hesitate to give us a call.
• 14:35
  SPEAKER_01: Especially before a large group of these people wrap up harvest and get to trucking again.
• 14:41
  SPEAKER_01: Thanks, Matt.
• 14:42
  SPEAKER_00: Thank you.
• 14:43
  SPEAKER_01: And thank you to all our listeners.
• 14:45
  SPEAKER_01: Please reach out to us from our website at professional eggmarketing.com or check out our newly added Hologon Hog Market Hog that's released every Thursday.