Latest / Professional Ag Marketing Podcast / Grains: Trade Update

Transcript

Grains: Trade Update · 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: Today is December 4th.
• 0:25
  SPEAKER_00: I've got Pat back with us here today.
• 0:26
  SPEAKER_00: How's it going, Pat?
• 0:28
  SPEAKER_01: Good, Mike.
• 0:28
  SPEAKER_01: How are you?
• 0:29
  SPEAKER_00: We're doing really good.
• 0:30
  SPEAKER_00: You know, I uh as we were trying to think about what to talk about on today's podcast, it really got me thinking about how boring the grain markets have been in the last, I'll even say, two days, let alone, you know, uh what you'd be looking at over the last couple months between geopolitical issues, uh crop size, things like that.
• 0:51
  SPEAKER_00: We're just ahead of a WASD airport that comes out next Tuesday where we know we don't change supply at all in that report.
• 0:58
  SPEAKER_00: And uh so far here, it seems like we're getting some China news here and there, getting some reports on exports here and there, but honestly, the corn market is kind of boring right now, Pat.
• 1:08
  SPEAKER_01: It is uh 20 cent trading range over the last uh month or so, and and uh um you know, kind of some outliers there on trade, at least for a couple days on the top end of that that range.
• 1:21
  SPEAKER_01: Um but if you go back uh just from a chart perspective, you go back to those lows established on on uh you know in the middle of August.
• 1:29
  SPEAKER_01: I mean, we've we are getting some higher lows.
• 1:32
  SPEAKER_01: There's a little bit of an uptrend intact there, right?
• 1:35
  SPEAKER_01: And and so, you know, I don't know.
• 1:38
  SPEAKER_01: It seems like we're gonna kind of have to stretch and squint here to try to develop too exciting of a of a um of a favorable setup.
• 1:46
  SPEAKER_01: Um, but um ethanol demand is really good.
• 1:50
  SPEAKER_01: Exports are solid, right?
• 1:52
  SPEAKER_01: There's still this whole question of mark, we don't need to talk about the feed residual category again on this podcast.
• 1:58
  SPEAKER_01: But but you know, there's some some questions on the feed side of things, but but you certainly can uh look towards the the uh the demand side of the equation as it relates to ethanol and exports and and at least see something halfway favorable there.
• 2:11
  SPEAKER_01: And again, and maybe the charts don't look too bad, Mike.
• 2:15
  SPEAKER_00: Fundamentally, we're seeing things that would support a little bit firmer corn market, right?
• 2:21
  SPEAKER_00: I mean, the spread between March corn and May corn now is up to seven cents carry is all.
• 2:26
  SPEAKER_00: So we've seen a lot of carry come out of the market, which is normally a good sign uh for strength in the corn market, just fundamentally.
• 2:33
  SPEAKER_01: Yeah.
• 2:33
  SPEAKER_01: The first thing we saw is basis narrow, which yeah, I mean you can that happens after harvest, right?
• 2:38
  SPEAKER_01: So that's that's not a big deal.
• 2:40
  SPEAKER_01: But um, boy, there's some segments of the market out here um in the Western Corn Belt that that basis uh appreciation has been pretty significant.
• 2:49
  SPEAKER_01: And so so narrower basis coupled with narrower spreads, you're exactly right, starts to show a little bit of indication here that at least underlying demand or cash demand is is is pretty decent here.
• 3:00
  SPEAKER_01: Um, you know, we're having a lot of discussion about you know what what row crop producer is going to do with his long.
• 3:07
  SPEAKER_01: Um, and and uh uh again, it's not uncommon for things to be pretty quiet here in the months of November and December.
• 3:14
  SPEAKER_01: And usually you see a little bit of a of a push-up in movement here after the first of the year, but I I suspect not so much at these flat price levels, right?
• 3:24
  SPEAKER_01: So so now we're back to talking about futures again and wondering about the possibility or probability of a little bit of a run here.
• 3:31
  SPEAKER_01: And I I suppose if there's something you could sort of wrap your brain around would be uh South America weather.
• 3:37
  SPEAKER_01: How's that look these days?
• 3:38
  SPEAKER_00: That should be the biggest thing now going forward for the grain markets.
• 3:42
  SPEAKER_00: South America weather is hot right now.
• 3:44
  SPEAKER_00: It's December, the beginning of it, so they're gonna start combining earliest portion in Brazil would be the end of January.
• 3:51
  SPEAKER_00: Export pretty much is heavy at the end of February, March this year.
• 3:55
  SPEAKER_00: They're kind of on track, they're a little bit behind, but nothing too crazy.
• 3:59
  SPEAKER_00: But it's very hot weather, and they're kind of getting rains to get by right now, Pat.
• 4:03
  SPEAKER_00: So it's it's that that's it's that same thing again this year where as long as they kind of keep getting rains in the middle of a rainforest, they should be fine.
• 4:10
  SPEAKER_00: But most of the time that kind of leads to some volatility at least along the way.
• 4:15
  SPEAKER_01: So so I would and and then I I I heard you guys talking, and and uh, you know, this week and we did get uh Disa 27 corn to pop up above that 470 area right at 470, I think.
• 4:28
  SPEAKER_01: And so um, so what do you think about that, Mike, as it relates to a new crop move?
• 4:32
  SPEAKER_00: I think it's the early stages of a new crop marketing plan.
• 4:36
  SPEAKER_00: You don't have to have the whole thing figured out right now, but having the first 25 to 50 percent kind of mapped out is is uh nice, you know.
• 4:44
  SPEAKER_00: Uh so I I've gone more option strategies a little bit up front here, and we can talk about that if you give us a call and go over some plans that fits your business best.
• 4:54
  SPEAKER_00: But a little bit more option heavy up front, and then as we start to get a level above levels around 470 or higher on de corn futures, that number starts to look decent from a profitability standpoint for most farmers.
• 5:08
  SPEAKER_00: I know like Chris Barron at AgView Solutions, he had his up uh all over the place this week.
• 5:13
  SPEAKER_00: Uh, he kind of has it around the upper 460s, that that's the level where it starts to make sense.
• 5:19
  SPEAKER_00: So I would stay right at this 470 in the in the eleven and a half dollar range on like November soybeans for next year.
• 5:26
  SPEAKER_00: That's what I would call the early phases of managing risk in 26 crop.
• 5:31
  SPEAKER_01: It makes good sense, and I appreciate your flat price observation there, and then and then would also just echo um that some options probably do make some sense, especially in this low vol environment.
• 5:42
  SPEAKER_01: Yep.
• 5:42
  SPEAKER_01: Right?
• 5:43
  SPEAKER_01: And so, um, and and that too can be a seasonal thing, but you know, we we we touched upon South America weather.
• 5:51
  SPEAKER_01: We've uh purposely avoided uh trade trump and tariffs um because there really isn't much to talk about there that's that's that's logical or new, so we'll just let it be.
• 6:02
  SPEAKER_01: But but um we really don't have a lot of volatility in this market today, and that's how we started this podcast, and maybe it's a good way to end it.
• 6:08
  SPEAKER_01: But we just say that um um you know in a in a low volatility environment like this that maybe options make a little bit more sense and and uh paying attention to the carry and trying to manage that opportunity uh it also makes some sense and and uh and then also being cognizant of of spreads narrowing and basis narrowing here is is is another indication that we should be thinking about what to happen in this cash market.
• 6:31
  SPEAKER_00: And another perspective too, we know the least we know right now about the 26 crop.
• 6:38
  SPEAKER_00: So if I'm gonna have that price wrong, now's the time versus you know, next October, we we kind of know what crop we got out there by then.
• 6:46
  SPEAKER_00: So it that makes me lean a little bit more towards ops and options too, just in case some some wrenches get thrown in the middle of the thing uh during this next spring.
• 6:56
  SPEAKER_01: Yep, and remember that spot fundamentals would suggest that you know 435 corn is the right price.
• 7:02
  SPEAKER_01: And we're talking about 470 corn out there, and it's there it's out there, it's inflated for the reason of um encouraging someone to to to hold inventory.
• 7:12
  SPEAKER_01: And so um you know you need to be you need to be careful that if you're ignoring that opportunity, you're you're not only suggesting or thinking that something's gonna change fundamentally, but it's gonna change fundamentally enough to offset that carry, and those are that's a pretty important uh uh component of of this uh uh market action that one needs to consider.
• 7:30
  SPEAKER_00: Outside market activity has been um erratic at times, and I'll I'll say at times, because it's not crazy every day, but you will see days where it seems like the equities and uh currencies and energies and commodities in the ag sector, they all kind of trade and are influenced by each other or by the same thing, I should say.
• 7:53
  SPEAKER_00: And I've I've noticed that probably it seems like once a week that you'll have all egg sectors trade higher.
• 7:59
  SPEAKER_00: Like today, you had hogs, you had cattle, you had corn, you had soybeans, all trade higher.
• 8:04
  SPEAKER_00: The SP 500 was higher.
• 8:05
  SPEAKER_00: So there's some interesting things where it's not everyday pat, but it seems like money flow, it it kind of picks a day once in a while, something happens, and all of a sudden we rush in.
• 8:14
  SPEAKER_00: And I say this because next Wednesday we'll get the FOMC meeting results as well for uh for our next December rate cut.
• 8:21
  SPEAKER_00: So at the end of the year here, we're gonna have some big things come through, uh big headlines with reports and uh figuring out how the end of the year is finalizing.
• 8:30
  SPEAKER_00: But the one thing we did have was last week was one of the biggest shopping experiences that we'll have throughout the year, uh especially online.
• 8:39
  SPEAKER_00: We had Black Friday and then Cyber Monday this week.
• 8:41
  SPEAKER_00: And um the consumers did not disappoint whether they have the money or not is to be debated, but they did go out and they spent a lot of money, Pat, which is a good sign for our economy.
• 8:51
  SPEAKER_00: So I think that's been a uh a healthy step in the in the hopeful direction, at least for consumers.
• 8:57
  SPEAKER_01: Absolutely agree with that.
• 8:58
  SPEAKER_01: And and uh we had the opportunity to listen to uh um Brett Stewart from Global Agrichens give a great presentation last night here in Laverne, thanks to everyone who uh was able to attend, great turnout last night.
• 9:09
  SPEAKER_01: And and uh we talked about just that, didn't we?
• 9:13
  SPEAKER_01: That uh um you know the U.S.
• 9:15
  SPEAKER_01: economy, while concerned longer term as it relates to debt load and and uh and you know federal debt and all of those things, we we we continue to see a U.S.
• 9:25
  SPEAKER_01: consumer that's resilient enough, at least as it relates to being uh um supported to the to the uh commodity complex.
• 9:34
  SPEAKER_01: Uh um you know, beef prices uh would would maybe would would lead the way on that.
• 9:38
  SPEAKER_01: But but all of those things, Mike, I I think are important components of this.
• 9:42
  SPEAKER_01: And and uh you know, we're still gonna be in a situation here where it seems as though the Fed is is uh um motivated on rate cuts and uh um and all of that's inflationary, right?
• 9:54
  SPEAKER_01: And and and uh and and that type of environment uh it's not it's not bad to be in the in the business of of uh of of producing commodities.
• 10:03
  SPEAKER_00: All right.
• 10:04
  SPEAKER_00: Well, thank you for your time today, Pat.
• 10:05
  SPEAKER_00: Thank you for everyone who stopped by last night.
• 10:07
  SPEAKER_00: I had a great time.
• 10:08
  SPEAKER_01: Thank you.