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Ag Market 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 egg 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 May 31st, Pat.
• 0:25
  SPEAKER_01: How's it going today?
• 0:26
  SPEAKER_01: Good.
• 0:27
  SPEAKER_01: How are you, Mike?
• 0:28
  SPEAKER_01: Doing really good.
• 0:29
  SPEAKER_01: Well, we had a interesting week in the in the commodity markets this week.
• 0:33
  SPEAKER_01: We had a four-day week, a little bit shorter because of Monday's holiday there.
• 0:37
  SPEAKER_01: Uh corn market ended a little bit on a rough note here.
• 0:40
  SPEAKER_01: We tried being up uh on the overnight here going into the weekend, but clo a little bit of a rough close, down four at the close today on D's corn, 467, right at that support line.
• 0:51
  SPEAKER_01: The uh November soybeans down five today, eleven eighty-four.
• 0:55
  SPEAKER_01: And then livestock markets had a little bit of a tough time here too.
• 0:58
  SPEAKER_01: So down about a buck thirty-two on that August cattle there, one seventy-eight.
• 1:03
  SPEAKER_01: And then we had the lean aug market, the sole egg commodity pretty much green across the board today.
• 1:08
  SPEAKER_01: Uh, but just barely.
• 1:09
  SPEAKER_01: It didn't give us much room.
• 1:11
  SPEAKER_01: What did you think about the uh commodity markets in the egg sector this week, Pat?
• 1:15
  SPEAKER_00: Well, Mike, I mean, to start out this short week, I mean, we had December corn, you know, it traded above that four ninety area, and um like the high of the day that day was four ninety-three, and and um the the previous high on this spring run uh was back on May 15th at 496 and three-quarters.
• 1:34
  SPEAKER_00: And so, you know, we were at the top end of that range, and really all week this week, um we kept talking the bullish talk, I would argue, right?
• 1:44
  SPEAKER_00: A lot of discussion about um planting delays kind of right on the five-year average, but that's not really fair either, because 2019 is in that information, right?
• 1:56
  SPEAKER_00: And that one, you know, clearly was behind.
• 1:59
  SPEAKER_00: And so, you know, so we got a little bit of a of a of a of a problem finishing off this this uh you know the getting this crop in the ground and and uh you know some possibility of prevent plant acres and those sorts of things.
• 2:13
  SPEAKER_00: But you know, you say all of that, and we still managed to lose 20 plus 25 cents, you know, from the highs, you know, trading this week.
• 2:22
  SPEAKER_00: And now here we are, sort of like smack dab in the the middle of this range that we've been in.
• 2:28
  SPEAKER_00: I mean, we you know traded under 450 briefly at the end of February, traded above 490 briefly here in the month of May, and and now kind of solidly in the middle of that range in that 467, 470 area.
• 2:41
  SPEAKER_00: And as you say, there's a couple lines of support there just just right below this market that it's gonna be pretty important for the bulls in the room to to uh uh see some support there.
• 2:52
  SPEAKER_00: But you know, we're we're oscillating back and forth between uh you know plant in the dust, the benzel bust, and and uh and rain makes green for the old farmers almanac sayings here.
• 3:04
  SPEAKER_00: But uh, you know, Mike, I I don't know.
• 3:06
  SPEAKER_00: I mean I I I can appreciate um taking a little weather premium out of this this market this week.
• 3:14
  SPEAKER_00: Um boy you look at those drop monitor maps year over year and it looks pretty impressive.
• 3:18
  SPEAKER_00: And so yeah, we've got some crop to plant yet, and we are fighting some moisture here, but that's uh a certainly uh better than the alternative, which is being concerned and and flight and fighting the absence of of subsoil moisture, which clearly has been replenished here.
• 3:33
  SPEAKER_01: Less than five percent of the corn production is experiencing a drought, and even I I would have to say, even that five percent, the stuff in Iowa over there, I'd be real surprised if if that's considered a drought much longer here, Pat.
• 3:46
  SPEAKER_01: The uh how about some of the other markets here?
• 3:49
  SPEAKER_01: Uh uh we can do a broad commodity view wrap-up too at the end, but the livestock market's kind of had a rough end of the week here, especially cattle.
• 3:57
  SPEAKER_01: I I know we've uh taken three straight pretty big days off here after last week's close.
• 4:03
  SPEAKER_01: Uh we kind of started the week off here with cattle uh trading uh just about four or five dollars higher than where we finished off here.
• 4:11
  SPEAKER_01: Uh anything you gotta say about the meat sector here today?
• 4:14
  SPEAKER_00: Well, it's a tough time.
• 4:16
  SPEAKER_00: I mean, I the I think the outside markets or the outside concerns, just meat demand in general, uh consumer behavior, consumers' ability to uh um you know to deal with inflation issues and and uh you know wage inflation not keeping up with all of that.
• 4:35
  SPEAKER_00: I and the stock market was also down hard this week.
• 4:38
  SPEAKER_00: And so um I think that's what impacted the cattle market specifically more than anything, and we're kind of seeing that.
• 4:45
  SPEAKER_00: I mean, ground beef um values are remaining firm, middle cuts are are are weaker on the pork side of things.
• 4:52
  SPEAKER_00: We see that too, and trimmings uh seem to be showing some pretty good strength here and pretty good demand for some of those lower, perceived lower value cuts.
• 5:00
  SPEAKER_00: And so um I I think those are all reasons to be a little bit concerned about the outside influence on these commodity markets and and um and certainly part of the sell-off here.
• 5:13
  SPEAKER_00: The cattle complex specifically, Mike, uh um the discount that even June futures is showing to cash trade this week is is pretty interesting and a bit extraordinary.
• 5:22
  SPEAKER_00: Pretty pretty nice basis levels there for you know for feedlots that have some hedge positions on.
• 5:28
  SPEAKER_00: So um so at any rate, um yeah, we we certainly have a a futures mark on the livestock side of things that that is showing um either a greater than normal discount to spot fundamentals, or at least in the hog complexes um um side of things, now getting more in line with what's going on with spot fundamentals for the longest time here, really for the last six or seven weeks, the hog futures market has showed a pretty good premium to relatively solid spot fundamentals and and really have got that that more in line here over the last couple weeks.
• 6:01
  SPEAKER_01: Any final thoughts for us this week on the podcast?
• 6:05
  SPEAKER_00: Mike, just flip back that direction and and if you want to just talk a little bit about what's going on specifically with new crop, and I also would interested in your thoughts as it relates to what's going on in the you know the the the growing regions of of uh Russia Ukraine.
• 6:22
  SPEAKER_00: You know, that area is the uh um uh a large contributor to world wheat trade and some concerns about weather there as well.
• 6:30
  SPEAKER_01: For sure.
• 6:30
  SPEAKER_01: Let's start on that.
• 6:31
  SPEAKER_01: Uh the wheat market kind of ending the week right at the bottom end of that uptrend that we've put on.
• 6:36
  SPEAKER_01: But obviously, wheat has had a really strong, very nice rally and uh has been cut short here over the past probably four trading sessions.
• 6:45
  SPEAKER_01: We've hit some pretty key resistance levels.
• 6:47
  SPEAKER_01: We pretty much got rid of uh the net short position we had in the in the wheat market.
• 6:52
  SPEAKER_01: So a lot of our rallies have been getting rid of those short positions, and and now we've kind of stalled out here for a little bit, you know, with uh July spring wheat about seven and a half dollars.
• 7:03
  SPEAKER_01: And that was a really nice recovery spot, really nice retracement spot to pull back to.
• 7:07
  SPEAKER_01: It makes a little bit more sense with where that's trading now relative to some of these other futures like corn price, which for a while their wheat was historically undervalued, and a big part of that rally's been stemming from the the problems that we've had in the southern part of Russia, which is specifically where a lot of their wheat production is located.
• 7:27
  SPEAKER_01: And over the last handful of years, Russia's made up over about a quarter of our world wheat exports, so they've become a much bigger player in our wheat markets globally.
• 7:37
  SPEAKER_01: And a lot of the stocks actually on our global balance sheet still sit in Russia or China.
• 7:42
  SPEAKER_01: And uh two, you know, when you start talking about believing numbers and w the inconvenience of how where those stocks are sitting uh tend to be quite great with some of the things going on in our world today.
• 7:53
  SPEAKER_01: So that's uh worth noting that for the first time in 12 years, Russia is having a weather problem in in that part of the world.
• 8:00
  SPEAKER_01: So that's a significant change that we've had in the grain uh um complex, I'd I'd think here through the last couple months.
• 8:07
  SPEAKER_01: And uh that's been one of the bigger bulls in the room, especially for corn.
• 8:11
  SPEAKER_01: I I still think as wheat's uh went higher here, that's gave corn some support on some of these up days and helped them get rid of a fair amount of short positions.
• 8:19
  SPEAKER_01: And you could put wheat or uh soybeans right alongside of that now.
• 8:23
  SPEAKER_01: With if we do start to get rid of some world feed wheat, uh soybean meal starts to replace that in the global market share.
• 8:30
  SPEAKER_01: So uh you wouldn't think about it, but the three are kind of connected one way or another on a global scale here as some of these major exporters start to have significant problems.
• 8:40
  SPEAKER_01: And I I'm a little bit more curious now just what type of appetite someone like China has going forward.
• 8:45
  SPEAKER_01: Uh I saw they lifted some of the bans that they had on Australia for exports.
• 8:50
  SPEAKER_01: Um, they're starting to prepare a little bit for some buying.
• 8:53
  SPEAKER_01: They've uh started to buy uh rumored buy a few things from the United States here for the first time in quite some time, but in general, they're gonna want to continue to do business with Russia, with Brazil, uh, probably with Australia going forward, probably not as much the United States if they don't want to.
• 9:11
  SPEAKER_01: Uh however, they uh obviously they love a bargain buy once in a while if they can, and with the premiums dramatically raising out of Brazil for their export values on soybeans still, uh, some of our products, after a little bit of a sell-off, have got a little bit more competitive globally.
• 9:26
  SPEAKER_01: But uh when it comes down to it, we still need to see some uh export sale opportunities in newcrop, and we're still below what we experienced basically during the trade war uh and when it started in 2019 for newcrop sales.
• 9:40
  SPEAKER_01: So those should start to really pick up at this time of the year, and we just haven't seen that really yet, Pat.
• 9:46
  SPEAKER_00: Yeah, it's gonna be an interesting time and and uh um yeah, I appreciate your recap on on all of that, and we'll just have to see what um what what what uh happens as we go forward here.
• 9:58
  SPEAKER_00: I uh any pork producers that are listening here looking forward to uh next week at the uh the World Pork Expo down in Des Moines and and uh certainly would uh invite anyone to to stop by our tent down there um at the Iowa State Fairgrounds uh Wednesday and Thursday of next week.
• 10:13
  SPEAKER_01: And that's a huge event, right?
• 10:15
  SPEAKER_01: Like a lot how many people go to that thing.
• 10:17
  SPEAKER_00: Yeah, absolutely.
• 10:17
  SPEAKER_00: That's a good question.
• 10:18
  SPEAKER_00: I don't know the the answer off the top of my head, but it's uh very well attended and and uh uh a sight to see for sure if anyone's uh um happens to be in the area.
• 10:27
  SPEAKER_01: All right.
• 10:27
  SPEAKER_01: Well, thank you so much, Pat.
• 10:28
  SPEAKER_00: Thank you.
• 10:29
  SPEAKER_01: And thank you to all our listeners.
• 10:31
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 10:34
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:40
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 10:46
  SPEAKER_01: See you next time.