Latest / AG Bull / AG Squawk with Davis Michaelsen | Mike Castle | USDA Math

Transcript

AG Squawk with Davis Michaelsen | Mike Castle | USDA Math · AG Bull

0:10
SPEAKER_00: Friday's USDA report bombshell put the hurt on corn futures, and whatever opinion you may have about the veracity of those numbers, these are what we're working with now.
0:24
SPEAKER_00: It's a markets Monday, and we'll talk it all through next.
0:39
SPEAKER_00: From behind the big blue, bodacious microphone of Ag Bull, your pal Davis Michelson here on your Monday.
0:46
SPEAKER_00: Let's see, it's October 12th already, everybody.
0:49
SPEAKER_00: Thanksgiving is coming right up.
0:51
SPEAKER_00: Columbus Day today, apparently.
0:54
SPEAKER_00: And so happy Columbus Day to one and or all.
0:58
SPEAKER_00: I've got Mike Castle from Stone X to join me today when I talked to him last week and said, Hey, Mike, why don't you come on the show?
1:06
SPEAKER_00: It'd be great to have you again.
1:08
SPEAKER_00: He's a terrific guest.
1:09
SPEAKER_00: Love having him.
1:10
SPEAKER_00: And I sort of made the joke at that point.
1:12
SPEAKER_00: This was like Wednesday, maybe I don't remember.
1:15
SPEAKER_00: It was earlier last week.
1:16
SPEAKER_00: I said, and hopefully USGA will give us nothing to talk about.
1:23
SPEAKER_00: And it was not to be.
1:25
SPEAKER_00: Not to be.
1:26
SPEAKER_00: Quite the quite the report day on Friday.
1:28
SPEAKER_00: Although, you know, we're on the plus side of unchanged in corn today.
1:33
SPEAKER_00: So that's something.
1:34
SPEAKER_00: I got a lot of questions about, not necessarily the report, although I want to make sure that that I give Mike a chance to fill us in on what he saw in the report that maybe others didn't see.
1:46
SPEAKER_00: Maybe he's got some perspective, some weird number from from the back page.
1:51
SPEAKER_00: I don't know what he's got to share with us on that.
1:54
SPEAKER_00: I definitely want to get a piece of that action.
1:56
SPEAKER_00: But I also do want to talk more about, you know, we're into harvest now.
2:00
SPEAKER_00: This is the middle of October, as I said.
2:02
SPEAKER_00: What does that mean for us?
2:04
SPEAKER_00: And what do we what do we do now?
2:07
SPEAKER_00: If you didn't catch Friday's program, I talked with Tommy Grassaffee, and he was just loaded with positivity and pulling out all sorts of little other details about why this was not necessarily the end of the world and how there were still positive things in the markets.
2:26
SPEAKER_00: So do check that out.
2:28
SPEAKER_00: The Egg Bowl T-Rex himself, bringing the heat for our Friday.
2:32
SPEAKER_00: It's a great show.
2:32
SPEAKER_00: It was a great conversation.
2:34
SPEAKER_00: And I think it was the very first one that we went over an hour.
2:37
SPEAKER_00: It was like an hour and two or three minutes or something like that.
2:40
SPEAKER_00: You know, Tommy's usually so short on words, which, you know, it was surprising to me that we went that long.
2:46
SPEAKER_00: Speaking of short on words, I'm going to move on to begin the show.
2:50
SPEAKER_00: Glad that you're here.
2:51
SPEAKER_00: Ag Squawk in the afternoon, everybody.
2:53
SPEAKER_00: If you're not an AgBull subscriber, we'd love to have you visit AgBull.com, AgBull.com, and join our premium side there.
3:02
SPEAKER_00: We'd uh we'd be grateful to have you along for the ride.
3:05
SPEAKER_00: And by the way, I just got a picture.
3:06
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3:11
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3:17
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3:28
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3:39
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3:43
SPEAKER_00: All right.
3:44
SPEAKER_00: I got to get to this.
3:45
SPEAKER_00: Since we're talking with uh with Mike Castle from Stonex, I thought I would pull something that I found in the news stream today from another Stone X guy that you probably know and love, Josh Linville.
3:57
SPEAKER_00: I'm just gonna jump right into it here.
3:59
SPEAKER_00: Questions have arisen regarding the supply of available nitrogen for post-harvest applications.
4:05
SPEAKER_00: Cesar Delgado, Backroads of Illinois podcast host, talked with Josh Linville from Stonex, who said, quote, it's a big deal.
4:14
SPEAKER_00: Three of the world's biggest urea supporters, Iran, Qatar, Saudi Arabia, are behind the Strait of Hormuz.
4:21
SPEAKER_00: The same three are big anhydrous exporters.
4:26
SPEAKER_00: Saudi Arabia, he says, is a major phosphate exporter.
4:29
SPEAKER_00: So just looking at those three, that's a massive loss.
4:33
SPEAKER_00: And with the attacks that went on this weekend, it doesn't look like it's improving anytime soon.
4:37
SPEAKER_00: But the problem is, Linville said, the fact that so much natural gas comes from that body of water, and that gas goes to feed nitrogen production facilities around the world.
4:47
SPEAKER_00: Problematic there.
4:49
SPEAKER_00: And he did note that we're already beginning to see some shutdowns in European production just for the expense and just the difficulty acquiring natural gas in Europe.
5:01
SPEAKER_00: He goes on, the word wasn't much better for phosphate.
5:04
SPEAKER_00: Linville told Delgado, quote, normal market things that help drive prices lower are not working because the cost of production is weighing on us really heavily.
5:15
SPEAKER_00: That's the cost of producing phosphates and nitrogen, especially.
5:19
SPEAKER_00: And just to run the table, Linville lamented the trade TIFF with Canada as a possible source of support for potash prices.
5:26
SPEAKER_00: Canadian supplies account for roughly 90% of the potash supplied here in the United States.
5:32
SPEAKER_00: And uh the back and forth continues between the president, the President Trump, and the uh the government over there in Canada.
5:40
SPEAKER_00: Once again, as with the Iranian situation, as with the Russia-Ukraine situation, no end in sight here.
5:47
SPEAKER_00: I hate to be pessimistic about these sorts of issues, but we've also got to be realistic.
5:53
SPEAKER_00: My advice with all of the uncertainty around fertilizer supplies and prices, get in touch with your preferred local retailer, ASAP.
6:02
SPEAKER_00: If you have not already, you need to pick up the phone and call your FERT guy.
6:06
SPEAKER_00: And it might not hurt if it's the same person.
6:08
SPEAKER_00: While you got him on the line, talk a little bit of diesel.
6:11
SPEAKER_00: If you've still got LP needs and it's been wet in your area, just get the conversation going.
6:17
SPEAKER_00: You don't want to be the last one in line when it comes to your anhydras, especially, but phosphate here as well.
6:24
SPEAKER_00: Now, those prices on phosphates don't seem to be going down.
6:27
SPEAKER_00: I'll update you as soon as I get fresh numbers on the fertilizer prices, as you know I often love to do, even if the news isn't that great.
6:36
SPEAKER_00: But we are of the mind that you've got to face these things head on.
6:40
SPEAKER_00: Check off variables on your production list.
6:44
SPEAKER_00: That's the key to managing risk is knowing what you're dealing with so you can put together a plan.
6:51
SPEAKER_00: Once again, I'll just say for the folks in the back, get in touch with your preferred fertilizer retailer and your preferred diesel fuel retailer, ASAP, and just have a conversation.
7:03
SPEAKER_00: Figure out where you're at, especially if you're nervous about it.
7:06
SPEAKER_00: Soothe your nerves a little bit.
7:07
SPEAKER_00: It'll make you feel better.
7:08
SPEAKER_00: Even if the news isn't, oh no, uh we got we got$300 anhydras here for you.
7:14
SPEAKER_00: It's not gonna be that.
7:15
SPEAKER_00: But even if it isn't that, just knowing will help you be able to put together a plan and get you some sleep at night.
7:22
SPEAKER_00: Get you some sleep.
7:22
SPEAKER_00: I'm tired today, and I know it's miserable when you can't sleep.
7:26
SPEAKER_00: Miserable.
7:27
SPEAKER_00: All right.
7:27
SPEAKER_00: Uh let's move on to the markets.
7:29
SPEAKER_00: Tale of the ticker.
7:30
SPEAKER_00: Corn and winter wheat futures were higher out of the opening gate, although both faded through the first hour of trade.
7:36
SPEAKER_00: Soybeans took a glance at the upside, but dropped roughly eight cents before stabilizing.
7:41
SPEAKER_00: Cattle futures were under pressure as Lean Hog Futures posted mild to moderate gains.
7:47
SPEAKER_00: By the way, the Dow early on pushed back above 52,000 this morning in early trade.
7:54
SPEAKER_00: Let me just hit my equities screen here.
7:56
SPEAKER_00: Yes.
7:57
SPEAKER_00: Oh, not by much.
7:59
SPEAKER_00: Still above 52,000 by a hair.
8:04
SPEAKER_00: Barely holding above 52,000, but still in positive territory there on your Dow.
8:09
SPEAKER_00: Rounding into the lunch hour, corn futures were still on the good foot, one to two cents higher.
8:14
SPEAKER_00: Both soybeans and winter wheat had come off session lows.
8:17
SPEAKER_00: Cattle futures remained under light selling pressure, with lean hogs still moderately higher.
8:23
SPEAKER_00: So let's do talk about those settlements.
8:25
SPEAKER_00: I've got December corn up three and one quarter cents at 4.83.
8:30
SPEAKER_00: Your November soybeans down four and one quarter cents at 12.87 and three quarters.
8:36
SPEAKER_00: Soybean meal, heck of a day there.
8:38
SPEAKER_00: Heck of a move.
8:38
SPEAKER_00: Tommy just put out a video on there for the premium side on the soybean meal at contract highs, I believe, is what that's all about.
8:45
SPEAKER_00: Soybean oil was higher as well.
8:48
SPEAKER_00: Let's go over to your winter wheats where the Chicago was up one and one quarter cents at 672 and a quarter.
8:55
SPEAKER_00: The KC was lower, down four cents in the December KC wheat at 7.15 and one quarter.
9:03
SPEAKER_00: Over to my livestocks tab, I've got November feeder cattle futures, 85 cents lower.
9:08
SPEAKER_00: Actually, not too bad a recovery off session lows today for the feeder cattle, 341.10 at settlement.
9:15
SPEAKER_00: Your live cattle were mixed 45 cents lower on the December fat cattle, 226.60.
9:22
SPEAKER_00: But you look out from the de's to the feb.
9:25
SPEAKER_00: Your feb's up a dime.
9:26
SPEAKER_00: April's up 35 cents.
9:28
SPEAKER_00: So mixed price action in the fat cattle.
9:30
SPEAKER_00: And finally over to the lean hogs, who get the efforts award of the day.
9:35
SPEAKER_00: December Lean Hogs 55 cents higher, 68.37 and one half.
9:42
SPEAKER_00: Out to the feb up over a dollar.
9:44
SPEAKER_00: Dollar five higher in the February Lean Hogs 70 and 30 at settlement.
9:50
SPEAKER_00: All right.
9:50
SPEAKER_00: Let me just take a moment to thank our sponsor, Plus500.
9:53
SPEAKER_00: My squad and I use Plus500 T4 software.
9:57
SPEAKER_00: In fact, I was just using it just then for real-time quotes, accurate settlements, a host of dandy features.
10:03
SPEAKER_00: Plus 500, but I'd like to say thanks to plus 500.
10:08
SPEAKER_00: And with that, there's the theme music.
10:21
SPEAKER_00: Is my math right on that, buddy?
10:23
SPEAKER_00: Yeah, I believe that is correct.
10:24
SPEAKER_00: It's good to be back.
10:25
SPEAKER_00: Well, we sure appreciate your time and your perspective.
10:28
SPEAKER_00: I particularly I particularly appreciate the clarity with which you discuss especially report details, the re the ramifications of the reports and what have you.
10:42
SPEAKER_00: So I'm anxious to talk with you today, but uh I'd also like to know how'd the weekend go.
10:46
SPEAKER_00: Did you do anything cool?
10:47
SPEAKER_00: Did you just kind of chill at home?
10:48
SPEAKER_00: Did you go so what how'd your weekend go?
10:51
SPEAKER_01: Well, you know, it started off very good.
10:53
SPEAKER_01: Then about more than three quarters into the Nebraska game, things kind of took a turn for us.
11:00
SPEAKER_01: And after that, I had to uh go build a shelf in my shed to kind of you know take out my frustrations elsewhere.
11:06
SPEAKER_00: Yeah.
11:07
SPEAKER_00: Did that help?
11:08
SPEAKER_00: Did it help?
11:09
SPEAKER_01: Uh you know, it it allowed me to be angry at something other than Nebraska football, which was a net positive, I would say.
11:15
SPEAKER_01: And you know, after that things got back to normal.
11:18
SPEAKER_01: So good fall weather.
11:19
SPEAKER_01: I mean, other than being almost 90 degrees, can't complain, you know.
11:23
SPEAKER_00: I think that's gonna switch on us, though.
11:25
SPEAKER_00: I think Tuesday night, and I've got uh I'll be out and about on Tuesday night doing some stuff.
11:30
SPEAKER_00: It looks like right when it's gonna start start raining here, and then then she's supposed to break for us and be a lot cooler by the weekend.
11:37
SPEAKER_00: I'm curious, you said build a shelf.
11:39
SPEAKER_00: You did you you you build her from scratch from stuff you had laying around, or did you have a kit?
11:43
SPEAKER_01: I no, it was from scratch.
11:45
SPEAKER_01: I just went to Home Depot and got some two by floors to frame it in.
11:49
SPEAKER_01: I did have the existing plywood, so it was kind of just building the the frame to support the shelf, basically, but did some reorganization, you know, it was a good thing, I would say.
11:59
SPEAKER_00: Circular saw or a table saw?
12:02
SPEAKER_01: Circular saw.
12:02
SPEAKER_01: I'm not at the house.
12:04
SPEAKER_00: Yeah, yeah.
12:06
SPEAKER_00: That's some manly stuff right there.
12:07
SPEAKER_00: Circular saw.
12:08
SPEAKER_00: I love it.
12:09
SPEAKER_00: I love it.
12:10
SPEAKER_00: Well, as I mentioned earlier in my my lengthy opening monologue, I had emailed you last week asking for uh some of your time today, which you very generously offered.
12:21
SPEAKER_00: And I made the comment hopefully USDA will give us nothing to talk about.
12:27
SPEAKER_00: And that I don't know if there's if there's a whole lot to talk about there because what's done is done, Mike.
12:33
SPEAKER_00: And as I mentioned in in my intro, I mean, these are these are the numbers that we're dealing with now, no matter how one feels about it.
12:42
SPEAKER_00: Now, Stonex put out a 182 just a just a week prior there.
12:47
SPEAKER_00: So I I don't know.
12:49
SPEAKER_00: Did did you find the corn number surprising?
12:52
SPEAKER_01: I mean, it was pretty close to the Stonex customer survey estimate.
12:56
SPEAKER_01: If I had to go my own personal gut feel, I would have said probably something in the like mid to low 179.
13:03
SPEAKER_01: So maybe a little bigger than you know what I was personally anticipating.
13:07
SPEAKER_01: But once again, the Stonex customer survey ends up being incredibly close.
13:11
SPEAKER_01: It was last year as well, kind of a similar setup where it looked like this huge outlier to the upside with kind of the rest of the market concentrated in a similar range, and then you get this big upside surprise.
13:23
SPEAKER_01: And you know, as far as like corn ending stocks go, I know that looked like a huge surprise, but we had them pegged at 1.895.
13:29
SPEAKER_01: So overall, maybe I wouldn't say overly shocked, but clearly the market was not anticipating this big of a move.
13:38
SPEAKER_01: I don't think they were expecting to see an increase at all at that at this point.
13:42
SPEAKER_01: So overall, obviously you saw the price reaction immediately.
13:47
SPEAKER_01: You move to limit lower, but I do think it was encouraging, like you kind of alluded to in the intro there, that it's not necessarily the end of the world.
13:55
SPEAKER_01: And I think not just Friday, but the follow-through price action here today kind of, you know, helps in that vein as well, right?
14:02
SPEAKER_01: I think what you saw was this initial massive sell-off of that managed money length, with a lot of that legitimately just being like headline reading algo trades, and you get a big bear surprise, you get this immediate selling pressure of these funds trying to sell over one another with all of that length here, kind of gives you that inherent risk coming in.
14:23
SPEAKER_01: But again, as cooler heads kind of prevailed, you work your way through that balance sheet, see the increases on the demand side of things.
14:29
SPEAKER_01: And overall, I think you're kind of getting back to this point of okay, maybe this wasn't as you know, wildly bearish as we expected.
14:37
SPEAKER_01: Certainly a lot heavier fundamental picture now moving forward.
14:40
SPEAKER_01: But again, I do think it's encouraging to see some bounce back after that initial drop.
14:45
SPEAKER_00: Yeah, I would tend to agree.
14:47
SPEAKER_00: Let me ask you about just something sort of psychological.
14:51
SPEAKER_00: I'm really interested in psychological factors within the market.
14:54
SPEAKER_00: The the higher corn yield pushed the total production number up from a 15 handle to a 16 billion handle.
15:02
SPEAKER_00: Is there something about crossing over that that makes you know a 16.1?
15:07
SPEAKER_00: I don't recall what the exact exact figure was, but how different is a 16.1 than a 15.9?
15:14
SPEAKER_01: I think it's really the more like psychological blow comes on the stocks to use falling back above that 10% mark.
15:22
SPEAKER_01: That's really that big psychological barrier that kind of flips.
15:26
SPEAKER_01: You get below 10, which we did there very briefly.
15:29
SPEAKER_01: That brought in a ton of bullish fodder.
15:32
SPEAKER_01: All of a sudden, that market sentiment shifted decidedly more bullish.
15:36
SPEAKER_01: And then obviously you kind of get that reversal now back to, I believe that puts it at about 11.3% for 26-27, which historically speaking is not like we're, you know, overly bearish by any means, especially when you factor in, you know, a two plus billion previously, right?
15:53
SPEAKER_01: You now have a much heavier beginning stocks number.
15:56
SPEAKER_01: So you are still looking at a drop during the year, right?
16:00
SPEAKER_01: We're using more than we're producing.
16:02
SPEAKER_01: So overall, that is still kind of the tone of demand remains constructive moving forward.
16:08
SPEAKER_01: And that may sound counterintuitive in the US, but you got to keep in mind this ongoing energy shock is driving a ton of biofuel inclusion outside of the U.S.
16:18
SPEAKER_01: I know we on the soybean side of things are using way, way more soybean oil to produce biofuels.
16:24
SPEAKER_01: We're certainly feeling it there.
16:25
SPEAKER_01: The corn side, you're kind of pulling teeth just to allow E-15 sales year-round, right?
16:30
SPEAKER_01: We're not getting increases in our domestic blending mandates, but a lot of other countries around the world are, and that is supportive to U.S.
16:38
SPEAKER_01: ethanol demand on the export side.
16:40
SPEAKER_01: It also ties in other places like Brazil having to keep more corn at home, which makes the U.S.
16:46
SPEAKER_01: more competitive on corn exports.
16:48
SPEAKER_01: So overall, there is still a supportive demand picture, but you know, the US individual, you know, fundamental picture domestically is much heavier.
16:59
SPEAKER_01: Obviously, again, still more of that strength is what's happening elsewhere in the world.
17:05
SPEAKER_00: When was it, gosh, is it going on a week and a half now?
17:09
SPEAKER_00: Let's call it two weeks ago when we got the small grain summary and that and that whole report out on, I believe that was that Wednesday, there was a bearish surprise in there for corn.
17:22
SPEAKER_00: And I thought, oh, well, there's the flush.
17:24
SPEAKER_00: There's the flush.
17:25
SPEAKER_00: And then Friday comes, another flush.
17:28
SPEAKER_00: Just when I think there can't be any more flushes, there's another flush.
17:32
SPEAKER_00: Has did Friday's maneuver shake out enough week longs?
17:39
SPEAKER_00: Maybe those who weren't super committed to it, maybe those looking for an excuse to, you know, to hop out for a little bit.
17:47
SPEAKER_00: Is there more flushing that needs to be done in this corn market?
17:50
SPEAKER_00: Because they, you know, they don't go up forever, obviously.
17:53
SPEAKER_00: Somebody told me that once.
17:54
SPEAKER_00: I'm pretty sure it's true.
17:57
SPEAKER_01: Yeah, it is kind of the classic adage of high prices cure high prices, right?
18:02
SPEAKER_01: And one area that that's really shown up is how slow our export sales pace on the corn side has been for 26-27.
18:10
SPEAKER_01: Inspections are off to a record start.
18:12
SPEAKER_01: And coming in, you know, we normally would have gotten another update today, but with Columbus Day, we'll get that data tomorrow.
18:18
SPEAKER_01: But we have exported more corn, like physically left the country in the first five weeks of the new marketing year than we ever have in history.
18:26
SPEAKER_01: We beat last year by about 4.5% at this time, broke the record from 2016.
18:32
SPEAKER_01: But the sales side of things is down about a third versus last year's pace at this time.
18:38
SPEAKER_01: And what is encouraging and what I think is kind of supporting the corn market here today is when you get that break in prices, how much demand steps forward?
18:47
SPEAKER_01: And that's really going to be the big question in my mind now.
18:51
SPEAKER_01: And overnight, or I should say, you know, Monday in other parts of the world, we saw a flurry of tender announcements on the corn side of things, specifically mostly in Asia.
19:02
SPEAKER_01: And that's encouraging because there's probably a lot of pent-up demand out there with buyers that have been sitting on the sidelines and watching those prices run higher and have basically just been waiting to see a break in prices.
19:15
SPEAKER_01: Now that they get one, how much do we get sold here in the next couple of weeks?
19:19
SPEAKER_01: I will also say the export sales report this week will be the first one that captures that post-SEP 30 drop in prices.
19:26
SPEAKER_01: Do we see a big uptick there?
19:28
SPEAKER_01: That's something to watch closely.
19:31
SPEAKER_01: You know, even tying into Friday's WASDI report, USDA cut EU corn production by 2.6 million tons down to 48 million.
19:39
SPEAKER_01: They had moved higher previously, which I didn't think made sense.
19:42
SPEAKER_01: They're kind of now more in line with what a lot of your local European estimates would be.
19:47
SPEAKER_01: And the reason I bring that up is because, in the context of Ukrainian shipments still remaining cut off this weak EU corn crop, their corn import demand moves higher.
19:57
SPEAKER_01: If they can't get it from Ukraine, the US is going to be in that mix, especially in the context of that big Brazil corn-based ethanol program.
20:06
SPEAKER_01: So the two main destinations I would watch, I know I mentioned the Asian ones, they are going to be important.
20:12
SPEAKER_01: But in terms of, you know, big customers who have not come back in as meaningfully yet in 26-27, Mexico, our top destination.
20:20
SPEAKER_01: They're going to be a price-sensitive buyer.
20:22
SPEAKER_01: And then Spain, they're probably kind of waiting for local harvest to wrap up, get through the fall, and assess needs.
20:29
SPEAKER_01: But does this break in prices start to bring them back into the market?
20:32
SPEAKER_01: Again, their top source for corn imports would normally be France.
20:36
SPEAKER_01: They don't really have it this year.
20:37
SPEAKER_01: So we sold them, I think, around 200 million bushels of corn in 25-26.
20:42
SPEAKER_01: I think they only have like 10 million or so on the books right now.
20:45
SPEAKER_01: That's another one I would kind of keep an eye on.
20:48
SPEAKER_01: But I do think there's going to be a lot of intrigue specifically on the demand side of the balance sheet here in the next few weeks.
20:54
SPEAKER_01: So I would keep a close eye on seeing either whether it's USDA daily flash sales or just the weekly export sales report.
21:01
SPEAKER_01: The market does need to see some confirmation of that break in price and of the issues going on elsewhere around the world actually translating into an impact for the U.S.
21:11
SPEAKER_01: balance sheet.
21:12
SPEAKER_00: Yeah.
21:13
SPEAKER_00: You mentioned the the bright spot of biofuels demand.
21:18
SPEAKER_00: I think I read just this morning that ethanol, ethanol exports are set for a for a third record year in a row.
21:26
SPEAKER_00: Check me on that, Mike, because I just read it real quickly.
21:29
SPEAKER_00: But you know, farmers used to talk about, well, we'll uh we'll feed it to the cows, we'll feed it to the hogs, and we'll walk it off the farm.
21:37
SPEAKER_00: Well, maybe what we'll do here now is turn it into go juice and ship it overseas.
21:42
SPEAKER_00: That's a source of demand that that maybe people don't always think about that you have already mentioned.
21:46
SPEAKER_01: Yeah, it absolutely is.
21:48
SPEAKER_01: And that's like I know we've been stuck at this E10 mandate in the States forever, but Brazil last year implemented E30, that's 30% ethanol, blended together gasoline.
21:59
SPEAKER_01: After the war breaks out, they obviously are very reliant on imports from the energy side of things, and their prices move significantly higher.
22:08
SPEAKER_01: What do they?
22:09
SPEAKER_01: Have a lot of.
22:09
SPEAKER_01: They have a lot of corn.
22:10
SPEAKER_01: Let's put that to use.
22:11
SPEAKER_01: So they already upped the mandate to E32.
22:14
SPEAKER_01: The testing of E35 is now formally underway.
22:18
SPEAKER_01: That's a fairly recent development as well.
22:20
SPEAKER_01: And again, like I mentioned, that just means inherently more corn that has to stay at home in Brazil to satisfy domestic demand.
22:28
SPEAKER_01: And that opens up the you know room for the U.S.
22:31
SPEAKER_01: to step in on the export sides, on the corn itself, and also also on the ethanol, right?
22:37
SPEAKER_01: Brazil is a big one, obviously.
22:38
SPEAKER_01: India is another big one to keep in mind.
22:40
SPEAKER_01: They're using a lot more.
22:42
SPEAKER_01: A lot of Southeast Asian countries are moving towards heavier biofuel inclusion.
22:46
SPEAKER_01: And the reality is everywhere that's doing this is really reliant on energy imports.
22:51
SPEAKER_01: As long as that is disrupted or even longer term, knowing that that disruption is possible, you're seeing them incentivized to try and figure out ways to increase their domestic fuel supplies.
23:03
SPEAKER_01: And in some cases, that means either importing the fuel, specifically ethanol in that version, or on the corn side of things.
23:11
SPEAKER_01: So that's kind of why, you know, with all of these things still happening globally from a geopolitical perspective that disrupt the energy markets, it kind of keeps support under your grains and oil seeds because of that reason.
23:24
SPEAKER_00: I might be asking you something that that you don't feel quite prepared to talk about.
23:29
SPEAKER_00: And that's fine if it's not your lane, because it certainly isn't mine.
23:32
SPEAKER_00: But I I remember talking to Jeff Cooper, and sometimes I like to joke around.
23:37
SPEAKER_00: Maybe you've heard that.
23:38
SPEAKER_00: And I asked him tongue in cheek.
23:40
SPEAKER_00: We were doing a panel discussion, and I said, Is there something something special about them cars they're driving down in Brazil that they can use higher blends of ethanol than that that just doesn't work here in the United States?
23:51
SPEAKER_00: And it got a mild chuckle, whatever.
23:53
SPEAKER_00: But I think the question is valid, and I almost feel like here in the US, ethanol's biggest problem is is the American fuel consumer.
24:02
SPEAKER_00: Is that fair to say?
24:03
SPEAKER_01: I think there's a lot more you're trying to figure out like a good political way to answer this, but I think the energy lobby, the refining lobby in America is much more powerful than the ag lobby.
24:16
SPEAKER_01: So getting those changes pushed through from a policy perspective is much more difficult here than it is a lot of other places in the world.
24:26
SPEAKER_01: Like, I hate to just keep going back to Brazil, but they're the prime example of this, right?
24:30
SPEAKER_01: They have a very ag heavy economy.
24:32
SPEAKER_01: What are we going to do with our domestic policies?
24:35
SPEAKER_01: Choose to support that.
24:36
SPEAKER_01: So you do have to have the infrastructure in place.
24:40
SPEAKER_01: And obviously that's difficult too.
24:42
SPEAKER_01: Like it just put simply, a lot of states don't have that many pumps selling high, you know, ethanol blends, right?
24:48
SPEAKER_01: We can't all be Iowa.
24:50
SPEAKER_01: But I do think it's encouraging to see some places actually increasing that.
24:54
SPEAKER_01: Even California is increasing.
24:56
SPEAKER_01: Like, I don't think it's a mandate.
24:58
SPEAKER_01: I think it's again just allowing sales.
25:00
SPEAKER_01: But it is encouraging to see that, I guess, voluntary side of increased blending happening.
25:06
SPEAKER_01: I know there's always this push that it's going to be more expensive.
25:10
SPEAKER_01: We got to keep giving these guys, you know, small refinery exemptions, even if they're not small refineries.
25:16
SPEAKER_01: We're not undergoing hardship.
25:18
SPEAKER_01: But I do think that incentive is there to increase ethanol inclusion because again, what is the real problem you're trying to address is fuel prices to the consumer.
25:28
SPEAKER_01: Go to the gas station, which which blends are the cheapest, right?
25:31
SPEAKER_01: I know there's a lot of talk of, oh, that you know, compliance cost is whatever.
25:35
SPEAKER_01: Okay, well, the cheaper fuel is the one with higher ethanol, right?
25:40
SPEAKER_01: Seems pretty simple.
25:41
SPEAKER_01: I know there's a lot of argument, there's a lot of incentive to try and dispel that, but that is, you know, at least from a consumer perspective, what we're seeing, right?
25:50
SPEAKER_00: Yeah, yeah, indeed.
25:52
SPEAKER_00: All right.
25:53
SPEAKER_00: Well, I I want to get over to the soybean conversation, which may be maybe a little less sexy than than the corns here.
26:00
SPEAKER_00: I feel like, you know, whether it's right or not, I feel like the trade, ever just it feels like soybeans, everybody kind of thinks they have a little better handle on what's going on with the beaners, and maybe maybe actually better than expected.
26:13
SPEAKER_00: But first, let's talk just a little bit of technical on the corn market there.
26:20
SPEAKER_00: When I asked if there's another flush lower, do you have a number in mind or is Stone X dealing with a number that we might call next support the worst case scenario?
26:32
SPEAKER_00: We get another massive flush, the bottom falls out of corn.
26:36
SPEAKER_00: What's what's the bottom end of our risk trough here, Mike?
26:41
SPEAKER_01: Whew, it's always tough to say like what is the absolute bottom, right?
26:45
SPEAKER_01: Uh, you certainly don't want to be the one that ends up.
26:49
SPEAKER_01: You're not gonna call it absolutely tank.
26:51
SPEAKER_00: Um exclusive here, Mike, for crying out loud.
26:55
SPEAKER_01: The next big area of support specific to like the December contract would be probably in the low 460s at this point, which again, you're you know, 20-ish cents away from there today.
27:06
SPEAKER_01: So, overall, I think that also kind of speaks to okay, we've probably priced in the most optimistic expectations already, kind of gotten that beaten out of us with again an extra 173 million bushels added in because of the revisions on that CEP 30 report.
27:23
SPEAKER_01: So you are inherently coming in with a much heavier balance sheet.
27:26
SPEAKER_01: The big yield makes it look even worse.
27:29
SPEAKER_01: Keep in mind that is not the final yield number.
27:31
SPEAKER_01: We will see adjustments moving forward.
27:34
SPEAKER_01: And again, there's still a lot happening elsewhere in the world that is supportive to the demand side of the equation.
27:40
SPEAKER_01: So it does feel like there is still a significant amount of managed money length that is sticking around.
27:47
SPEAKER_01: And again, there's the actual fundamental side of that with these globally supportive factors I've already mentioned.
27:53
SPEAKER_01: The other thing to keep in mind is we still have to figure out when does that pass through from the producer to the consumer happen in inflation data.
28:03
SPEAKER_01: Because there's no way that a big share of this managed money length coming in, or one of their biggest reasons, is the inflation trade, right?
28:11
SPEAKER_01: Funds, managed money loves to get long the commodities during times of inflation.
28:16
SPEAKER_01: If you're watching a bunch of really niche macroeconomic data, like an econ nerd like myself, you're seeing the writing on the wall of all these price pressures that are already hitting the producer level.
28:29
SPEAKER_01: And ultimately, that historically translates to a pass-through to the consumer.
28:34
SPEAKER_01: So we'll get an update on September CPI.
28:37
SPEAKER_01: That's consumer level inflation on Wednesday and then PPI Thursday.
28:41
SPEAKER_01: But I do think there's a fair amount of length that is waiting around to see when that inflation story really returns.
28:47
SPEAKER_01: And truthfully, it's hard to see it not happening at this point.
28:51
SPEAKER_01: Again, you mentioned, you know, the issues with diesel supply in the world.
28:54
SPEAKER_01: Everybody ends up feeling that eventually, right?
28:57
SPEAKER_01: But it does take time for that pass-through to happen.
29:00
SPEAKER_01: It's not truck is paying more for diesel, immediately they can pass freight rates along and their suppliers pass it along, and so on and so forth.
29:08
SPEAKER_01: It takes time for that pass-through to come to the consumer level.
29:11
SPEAKER_01: So that is one thing I still would caution is you see the kind of writing on the wall of a buildup inflationary pressures just waiting to make its way into the CPI, that could kind of keep some managed money around and also just broader geopolitical uncertainty, right?
29:28
SPEAKER_01: Especially as you come into an earnings season, specifically with all of this money thrown at the AI trade.
29:34
SPEAKER_01: If you get anything that feels disappointing, or if you get any of these managed money folks that say, hey, we feel kind of toppy up here, they can rotate that money out and put it in the commodities, and you can kind of get that support even without the fundamental story.
29:48
SPEAKER_01: So I do think the fact that they still have a good amount of length at this point speaks to some of those outside market influences, and that's kind of something to also keep in mind.
29:59
SPEAKER_00: Well, let's I'm looking over here at the SP under some light pressure here.
30:04
SPEAKER_00: Oh, notification just came up.
30:06
SPEAKER_00: S P under some light pressure, the triple Q under light pressure today, the Dow uh hanging on just above 52,000.
30:16
SPEAKER_00: I uh I like that move back above 52.
30:19
SPEAKER_00: Is there anything in that that that is to be divined?
30:24
SPEAKER_01: You know, I think it is kind of just a the money wants to stay in equities.
30:30
SPEAKER_01: There's a lot of rotation between where they want to be, right?
30:33
SPEAKER_01: Again, going back to these risks of these massive tech evaluations.
30:37
SPEAKER_01: Yeah, at what point does that feel like too much?
30:40
SPEAKER_01: Do I want to stay in stocks, but maybe find a different category in?
30:44
SPEAKER_01: I think that's kind of why is specifically that Dow Jones versus like the NASDAQ, which is really your more tech heavy major index.
30:52
SPEAKER_01: You've seen that spread between those two make some very wonky moves.
30:56
SPEAKER_01: And I do think it's a reflection of that money wanting to stay long the equities, but trying to find new homes in which to be there because you keep seeing these blowout earnings reports, right?
31:07
SPEAKER_01: Everyone has all this fear that the you know tech bubble uh is going to pop, and then it doesn't, right?
31:12
SPEAKER_01: You continue to outperform on earnings, but every three months we kind of get these same nerves, right?
31:18
SPEAKER_01: Of quarterly earnings seasons are coming up.
31:20
SPEAKER_01: We're gonna have very lofty expectations.
31:22
SPEAKER_01: Can they continue beating them?
31:24
SPEAKER_01: Eventually, you know, you think we got to disappoint eventually, right?
31:28
SPEAKER_01: You can't just outperform continuously for the end of time.
31:31
SPEAKER_01: So that is something to keep an eye on, too.
31:33
SPEAKER_01: But overall, you know, in terms of macro data, we got nothing today, with it being Columbus Day.
31:39
SPEAKER_01: So overall, you're also just kind of trading geopolitics.
31:42
SPEAKER_01: I know there was a lot more escalation over the weekend.
31:45
SPEAKER_01: And other than that, everyone is waiting for the big banks to kick off earnings tomorrow.
31:50
SPEAKER_01: They got more Wednesday.
31:51
SPEAKER_01: There are some big chip manufacturers reporting later this week.
31:55
SPEAKER_01: So there is a lot of, I guess, I don't want to say nerves, but maybe nerves is the right word for again entering this earnings season.
32:03
SPEAKER_01: Can we see this insane progress continue?
32:07
SPEAKER_01: And then how does the market react after that?
32:09
SPEAKER_01: Yeah, yeah.
32:10
SPEAKER_00: Almost a non-sequitur coming in here out of left field.
32:13
SPEAKER_00: There's a wounded goose coming in at 12 o'clock right now, Mike.
32:18
SPEAKER_00: But I'm I'm just sort of curious.
32:19
SPEAKER_00: I've seen the change in media around the whole ag biz.
32:24
SPEAKER_00: And it seems like uh everybody has access to cameras and microphones.
32:28
SPEAKER_00: You got a dandy microphone right there in front of you.
32:31
SPEAKER_00: I wonder what kind of offerings does uh does Stone X have that have you adopted into the video age here?
32:39
SPEAKER_00: You is Stonex got its own own podcast, weirdos over there.
32:43
SPEAKER_00: Maybe you're that weirdo.
32:45
unknown: We do.
32:46
SPEAKER_01: We do have a a YouTube channel that's stonex underscore official, I believe.
32:50
SPEAKER_01: They'll be thrilled that I throw that out there.
32:53
SPEAKER_01: We do put stuff out.
32:54
SPEAKER_01: I try to do a video a week, sometimes it's harder.
32:57
SPEAKER_01: You know, last week I had a couple webinars, like obviously USDA report that kind of complicates it.
33:02
SPEAKER_01: But there are a ton of very smart people at Stonex that put stuff out.
33:05
SPEAKER_01: So I do recommend checking out that channel.
33:08
SPEAKER_01: We do have commentaries that are free to access.
33:10
SPEAKER_01: There is plenty of stuff out there, and then obviously for clients as well, we offer a massive amount of information, enough so that truthfully, I don't even know all of what's available because Stone X is so big and so diverse at this point.
33:23
SPEAKER_00: I don't believe that for a moment.
33:24
SPEAKER_00: I think you've got your hands around all of it, and I appreciate that about you.
33:28
SPEAKER_00: Stone X underscore official on YouTube, is that right?
33:32
SPEAKER_01: I believe that's correct.
33:33
SPEAKER_00: Okay, okay.
33:34
SPEAKER_00: You could just get the Google Maker going too and look for uh for Stone X on YouTube.
33:38
SPEAKER_00: That's excellent.
33:39
SPEAKER_00: Well, I I sure have a blast uh in this new medium, and uh you seem to like it as well.
33:44
SPEAKER_00: You do a great job, and to to be able to back that up with information like that, which Stone X uh uh collects and digests, it's it's really something.
33:55
SPEAKER_00: So everybody don't be afraid to check out uh Stone X on YouTube.
33:59
SPEAKER_00: Let's move over to Los Soybeans.
34:02
SPEAKER_00: I have the feeling that everybody thinks, you know what, the soybean crop, yeah, pretty decent.
34:07
SPEAKER_00: Yields are okay, it's maybe even better than expected.
34:11
SPEAKER_00: Down below 13 again here, not by a whole lot, but the market just kind of seems comfortable and quiet.
34:18
SPEAKER_00: Your thoughts on soybeans?
34:19
SPEAKER_01: Yeah, that's another one where the domestic balance sheet is actually very tight, but the global side, there are some potential pressures there.
34:27
SPEAKER_01: Obviously, again, the edible oil story, soybean oil does benefit from that, whether it's sunflower oil from the Black Sea that's cut off, whether it's issues with palm production because of the strong El Nino.
34:39
SPEAKER_01: But the other elephant in the room on that is this massive Brazilian crop.
34:43
SPEAKER_01: It is kind of worth noting, you know, we're in this strong El Nino.
34:47
SPEAKER_01: The expectation is to see pretty bad impact to Brazil's production, so to speak, right?
34:53
SPEAKER_01: They're historically below trend yields during these strong El Nino.
34:57
SPEAKER_01: But so far in September, I will point out their centerwest region had their wettest September since 2009.
35:05
SPEAKER_01: Even the driest part of the country, the Northeast, it was their wettest September since 2022.
35:10
SPEAKER_01: They are off to a phenomenal start this growing season in terms of soybean planting and early emergence.
35:16
SPEAKER_01: Things look very, very good down there.
35:18
SPEAKER_01: I definitely think that's weighing on the market here to start the week, especially again with an absence of news elsewhere.
35:24
SPEAKER_01: You're kind of forgetting that Brazil is entering their growing season as well.
35:28
SPEAKER_01: And it's not to say that those risks still don't exist, right?
35:31
SPEAKER_01: We're in the middle of planting season.
35:34
SPEAKER_01: There's an entire growing season ahead of us.
35:36
SPEAKER_01: But that fear of seeing the impact and specifically a delayed planting start that would delay the following corn planting, their Safrina corn crop, is kind of being reduced right now because of how favorable the start to their year has been.
35:51
SPEAKER_01: But from a US balance sheet perspective, that Brazilian competition can kind of fall back in the context of most of if well, effectively all of these Chinese purchases being done for political favor, not because we're more competitive.
36:08
SPEAKER_01: So overall, that is also supportive on the demand side.
36:12
SPEAKER_01: If China actually does follow through with those 25 million tons of purchases, you have to ration demand here in the States, right?
36:19
SPEAKER_01: Even with a bigger yield, you still kind of tighten up that balance sheet with China buying these big volumes because we are crushing so much.
36:28
SPEAKER_01: Again, tying right back to that biofuel story from the beginning.
36:32
SPEAKER_01: This is the first year in history the biggest demand category for soybean oil in America is biofuel, right?
36:38
SPEAKER_01: It's no longer just for the food markets, it's now for the fuel markets.
36:42
SPEAKER_01: And the same thing I've been talking about with all this support for biofuel demand globally and that inherent increased demand for grains and oil seeds rings very true in soybeans as well.
36:54
SPEAKER_01: And soybeans being able to close Friday in the green after all of that selling pressure, again, I think speaks to that positive fundamental picture.
37:03
SPEAKER_01: And again, encouraging outlook kind of moving forward, but there are still those kind of global factors that are more bearish to keep in mind.
37:11
SPEAKER_00: Okay, very good.
37:12
SPEAKER_00: I I think I mentioned earlier on that uh Tommy had put up a video about soybean meal hitting contract highs.
37:19
SPEAKER_00: I don't even know if this is from today.
37:20
SPEAKER_00: I'm not super tuned in to the to the rest of the soy complex.
37:25
SPEAKER_00: That was untrue.
37:26
SPEAKER_00: Soy meal apparently did hit contract highs, but he was on the cow guy.
37:30
SPEAKER_00: It wasn't an exclusive for our subscribers.
37:33
SPEAKER_00: Soy meal hits contract highs.
37:35
SPEAKER_00: Question mark, Mike.
37:37
SPEAKER_01: Yeah, I think honestly, this has kind of been one area where those prices have outperformed expectations for a considerable amount of time.
37:46
SPEAKER_01: And the you know, most recent pressure is largely a function of how delayed the harvest was here to get started.
37:52
SPEAKER_01: But there has been a tightness in soy meal that I don't think a lot of people expected coming into this.
37:58
SPEAKER_01: And part of that probably is a function of all these crushed plants selling all of this meal in advance, thinking, okay, we're gonna lock in these massive margins because we have this new biofuel program.
38:08
SPEAKER_01: The meal is kind of an afterthought.
38:10
SPEAKER_01: And I think we're finding out that's really not the case.
38:13
SPEAKER_01: There has been very stiff demand for U.S.
38:16
SPEAKER_01: soybean meal, whether that's export or domestic market.
38:20
SPEAKER_01: So, overall, I think the fact that you had the slowest start to soybean harvest in Iowa, who is also the state with the most crush capacity, is certainly a big part of that.
38:31
SPEAKER_01: Nebraska, similar story, right?
38:32
SPEAKER_01: A lot of your hearts of soy processing are in the places that could not get beans when they needed them.
38:38
SPEAKER_01: And I do think that has a pretty serious impact on that, right?
38:42
SPEAKER_01: If you can't find the beans, you can't produce the meal.
38:44
SPEAKER_01: So if you already have it committed, you've got to get it bought in from somewhere.
38:48
SPEAKER_01: And obviously, we've seen a considerable amount of strength because of that, which again, from the big picture perspective, we're crushing more beans than ever, we're making more meal than ever.
38:57
SPEAKER_01: Shouldn't that mean lower prices?
38:59
SPEAKER_01: And clearly that has not been the case to this point.
39:02
SPEAKER_01: A lot of global factors in play there too.
39:04
SPEAKER_01: But I do think seeing harvest play catch up, and again, because of the holiday, we won't get crop progress today.
39:11
SPEAKER_01: So we won't be able to touch on progress from last week, but I do expect to see a very big week of catch up given how dry it was last week, save for Iowa, which again kind of adds back into that.
39:23
SPEAKER_01: They kind of caught that rogue system there last week that a lot of the Midwest missed out on.
39:28
SPEAKER_01: Other than Iowa, I think you'll see a massive week of catch up in terms of harvest progress, specifically favoring soybeans.
39:35
SPEAKER_01: You know, I think you'll see catch-up on corn harvest, soybean harvest, and winter wheat planting, but particularly soybean harvest.
39:42
SPEAKER_01: I think there is going to be the most incentive to run heaviest there, not just from a quality perspective, but also from a market perspective.
39:50
SPEAKER_01: There were crushers having to pay insane numbers on the basis side of things, like a buck fifty plus over as high as two plus dollars over in some areas just to find soybeans because no commercial elevator wants to carry beans through the end of the year.
40:06
SPEAKER_01: Farmers historically don't either.
40:08
SPEAKER_01: So it creates the situation where we are crushing more soybeans.
40:13
SPEAKER_01: We have more soybean demand in that late summer window than we ever have because of this massive expansion and crush.
40:20
SPEAKER_01: And the market's gonna have to figure out a way to pay space to hold on to those beans.
40:25
SPEAKER_01: And again, it's one of these things where you kind of wonder will the crushers learn their lesson and try to be a little more proactive in procuring that, you know, late summer window ahead of time, or do we just get back into the situation where everything is on this just-in-time inventory, we're just waiting to see the crop come off and hope that Mother Nature cooperates.
40:46
SPEAKER_01: But I do think that is kind of a question that needs to be addressed here at some point, or else you could have a very similar situation play out here, you know, as we continue to grow that crush capacity.
40:58
SPEAKER_00: I get the sense that despite encouragement over the the size of the soybean crop, that the the play right now for for those who have it available might be a basis play on soybeans.
41:12
SPEAKER_01: It would probably depend on where you're at.
41:14
SPEAKER_01: I think a lot of those big numbers are gone at this point because so much harvest progress was made last week, at least here around us.
41:22
SPEAKER_01: But you know, that's not to say there aren't some areas, you know, where they have been wetter and where you know the plant is kind of again not covered because of the delays.
41:31
SPEAKER_01: If those opportunities are still there, it is a prime one to take advantage of.
41:35
SPEAKER_00: Yeah, for sure.
41:36
SPEAKER_00: Okay, we're gonna start wrapping it up here really quick.
41:39
SPEAKER_00: I want to go to some strategy stuff before we uh move on.
41:45
SPEAKER_00: Last Monday I was speaking with an analyst, it was Markets Monday because everyone loves a little alliteration.
41:54
SPEAKER_00: And the thought then was well, especially on corn, it kind of feels like wait and see time, and in fact, maybe wait for that market flush and then a chance to re-enter the market and own some some of the upside there.
42:10
SPEAKER_00: I think beans we're probably pretty happy to continue to wait here right now.
42:16
SPEAKER_00: Corn, can we afford to wait?
42:20
SPEAKER_01: That is a very difficult question at this point.
42:23
SPEAKER_01: A lot of it is going to depend on like your individual situation, your individual cash flow needs, that kind of thing.
42:30
SPEAKER_01: But when we talk strategy, one thing that I actually really would like to tie in, you mentioned Josh's comments on the fertilizer side of things to start here.
42:40
SPEAKER_01: One strategy that I would love to see you catch on more is treating those inputs and outputs as a connected product, right?
42:51
SPEAKER_01: Looking specifically at that ratio between the inputs with the outputs to identify those more advantageous actual margin opportunities, right?
43:02
SPEAKER_01: Everyone wants to pick the high of the year in the grain market.
43:05
SPEAKER_01: That is so much easier said than done.
43:07
SPEAKER_01: If that is your strategy, you are going to be disappointed more often than not.
43:12
SPEAKER_01: But the thing is, you mention all these, you know, supply risks on the fertilizer side of things.
43:17
SPEAKER_01: Look at the nitrogen markets, for example.
43:20
SPEAKER_01: If you look at the ratio of urea today versus where corn's at, and obviously it does look worse given the slide in prices that we've seen after SEP 30, after Friday's WASDI, that relationship is still not horribly out of whack.
43:35
SPEAKER_01: Before that Friday report, the urea and D27 corn ratio.
43:40
SPEAKER_01: Again, you're the stuff you're buying this fall or this winter is to grow the 27 crop.
43:46
SPEAKER_01: It's already time to be thinking about that.
43:48
unknown: Yeah.
43:49
SPEAKER_01: Looking at those prices together did not look that bad.
43:52
SPEAKER_01: Whether it was urea, UAN, and hydris, pretty much in line with the five year average coming into Friday's WASD.
43:59
SPEAKER_01: That's on the corn side of things.
44:00
SPEAKER_01: Look at wheat, very similar.
44:02
SPEAKER_01: KC wheat with the rally you've seen there, obviously taking some of that back.
44:07
SPEAKER_01: Specifically, urea does look.
44:09
SPEAKER_01: Very reasonably priced right now in relation to grain prices, which I get the sticker shock, right?
44:15
SPEAKER_01: I started my career as a merchandiser buying grain from farmers.
44:19
SPEAKER_01: I know that that grain price is never high enough.
44:21
SPEAKER_01: As someone who worked on the fertilizer team here at Stonex, I know that fertilizer price is never low enough.
44:27
SPEAKER_01: So instead of trying to buy the low in one market and sell the high in the other, take an opportunity to layer in, identify those margin opportunities after we got summer fill programs in nitrogen this summer and saw that correction in prices.
44:42
SPEAKER_01: The market has given us an opportunity to lock in nitrogen needs for next year and actually lock in margin, right?
44:50
SPEAKER_01: That is very difficult, right?
44:51
SPEAKER_01: You don't always get that chance.
44:53
SPEAKER_01: So when you do, you kind of have to be paying attention to it.
44:56
SPEAKER_01: There are other sides that are still very ugly.
44:59
SPEAKER_01: Phosphate, I can't sugarcoat it, does look bad.
45:02
SPEAKER_01: And I wish I had an answer to say I think it's going to get better.
45:05
SPEAKER_01: But the reality is there are so many supply constraints for the precursors, which you again you mentioned.
45:11
SPEAKER_01: I will point out sulfur is really the ugly one there.
45:14
SPEAKER_01: That is very contingent on the Strait of Hormuz, anhydrous, the ammonia side of things, there's just not the alternative routes like there are on the granular products.
45:23
SPEAKER_01: So ammonia, which again is an input to phosphate production, very constrained.
45:28
SPEAKER_01: Phosphate looks ugly.
45:30
SPEAKER_01: Potash is very cheap.
45:32
SPEAKER_01: As long as we can play nice with Canada, there is no reason that should change.
45:36
SPEAKER_01: So for the folks that apply PK together, that helps offset it to some extent.
45:41
SPEAKER_01: If you average that potash and DAP, again, that combined ratio on both corn and wheat is roughly in line with the five-year average.
45:49
SPEAKER_01: So again, this is not the time of year that you're typically thinking about what am I already doing in 27?
45:55
SPEAKER_01: I'm probably more worried about harvesting my crop right now.
45:59
SPEAKER_01: The market is giving you opportunities to lock in margin.
46:02
SPEAKER_01: It is a good time to take advantage of it.
46:05
SPEAKER_01: And I think it kind of also speaks to the bigger topic of just the market is going to give you opportunities at times where most people are not looking for them, if that makes sense.
46:16
SPEAKER_01: And I do think that late summer period, specifically on the fertilizer side of things, is historically one of the best buying opportunities you're going to see.
46:24
SPEAKER_01: And we did get that again this year, again, excluding phosphate.
46:28
SPEAKER_01: Phosphate is very ugly.
46:29
SPEAKER_01: Not much we can change about that, unfortunately, until the situation in the Middle East is resolved.
46:35
SPEAKER_01: But I do think that ratio-driven approach is going to be something that I hope to see catch on more moving forward.
46:42
SPEAKER_01: I know it's something that we push a lot, but there are products out there to, you know, lock in that relationship and again try to maintain margin moving forward because that is ultimately what keeps folks in business.
46:55
SPEAKER_00: Yeah, and I I guess, and I got to wrap us up here.
46:58
SPEAKER_00: We're we're we're gonna be going on too long here if I'm not careful.
47:02
SPEAKER_00: I could talk to you all day.
47:03
SPEAKER_00: It's a Mike Castle from Stonex, but I thought I thought for sure we'd have had this Iran thing figured out by now.
47:09
SPEAKER_00: I thought this Russia-Ukraine thing would have been figured out by now.
47:12
SPEAKER_00: I thought all sorts of stuff because I was thinking about the midterm elections.
47:16
SPEAKER_00: You know, you gotta calm this stuff down, you gotta help out the farmers, you gotta well we're looking at not quite record diesel prices, but freaking expensive diesel prices, and and it's still, I mean, you know, we had had more more with the the the Middle East over the weekend, and so I think hoping for a quick and quiet resolution to both of those those conflicts may be maybe the wrong wrong thing.
47:42
SPEAKER_00: I'm I'm surprised.
47:44
SPEAKER_00: I I figured there would be a plan in place that would get this over quickly, and maybe there was and it just didn't work.
47:49
SPEAKER_00: I don't know.
47:49
SPEAKER_00: I don't know.
47:50
SPEAKER_00: But Mike, in sum, I feel like, and you you were talking about sort of averaging things together.
47:56
SPEAKER_00: I think if we average our entire conversation today, the the net, the final answer underneath the big black line is hey, we're we're still in a pretty decent spot here.
48:07
SPEAKER_00: Is my math right on that?
48:09
SPEAKER_01: Yeah, I mean, again, it's not the end of the world.
48:12
SPEAKER_01: Is it a lot more difficult to see meaningful rallies moving forward with all those extra bushels on the balance sheet?
48:18
SPEAKER_01: Yes.
48:18
SPEAKER_01: But again, it's not like we're talking about 350 corn at this point, right?
48:23
SPEAKER_01: We are still elevated compared to some of the lows that we've seen here.
48:27
SPEAKER_01: Again, we're well off the highs of 22, for example, but there are margin opportunities to be had.
48:33
SPEAKER_01: I think that is very important to take advantage of when the market gives it to you.
48:38
SPEAKER_01: And, you know, kind of the same story, right?
48:41
SPEAKER_01: You kind of thought we would see something wrapped up before the midterms to kind of provide that certainty.
48:47
SPEAKER_01: And it doesn't look like anything's gonna be settled before then.
48:50
SPEAKER_01: So, with that context, a lot of these disruptions and their downstream impacts are still in play, and we kind of have to plan accordingly.
48:58
SPEAKER_00: Yep, absolutely.
48:59
SPEAKER_00: Mike Castle from Stonex.
49:01
SPEAKER_00: Hey everybody, make sure and check out Stonex's commentaries on uh on YouTube.
49:06
SPEAKER_00: Uh, if you're like me, I like to you know put it on and and uh watch.
49:10
SPEAKER_00: I do a lot better with that with retention than uh than reading.
49:14
SPEAKER_00: Reading is hard sometimes, it's just just too hard.
49:17
SPEAKER_00: It's uh it's warm today in in Kansas City.
49:21
SPEAKER_00: Would you agree, Mike?
49:23
SPEAKER_01: Oh yeah, yeah, nice summer day in October.
49:26
SPEAKER_00: I make it 88 degrees, head for a high of 89.
49:29
SPEAKER_00: Gonna be uh hot again tomorrow, and then she cracks.
49:32
SPEAKER_00: Supposedly, according to the uh the weather folks here in KC, uh it'll crack and then be cooler by the weekend.
49:39
SPEAKER_00: I wonder, does I see you've got your Stone X polo on there?
49:42
SPEAKER_00: Does uh Stonex make uh flannels?
49:44
SPEAKER_00: Have you got a Stone X flannel?
49:45
SPEAKER_00: You might need it coming up.
49:47
SPEAKER_01: I I don't think we have flannels, but that's a good idea, actually.
49:50
SPEAKER_00: Just the thought.
49:50
SPEAKER_00: Just the thought.
49:51
SPEAKER_00: Talk with the marketing folks over there.
49:53
SPEAKER_00: The National Weather Service says remnant moisture from tropical storm Rachel will persist over portions of the Great Basin in southwest today, bringing a potential of heavy to excessive rainfall, well above average, and potentially record-breaking temperatures will develop across the plains and Midwest early this week, spreading into the lower Mississippi Valley and southeast midweek.
50:14
SPEAKER_00: And folks, looking at this map here, yeah, that's a lot of deep orangey red, brick red, I would almost call it.
50:22
SPEAKER_00: But that's uh that's deviation from normal.
50:26
SPEAKER_00: That's not there, aren't necessarily set numbers on there.
50:30
SPEAKER_00: So uh we're looking at at 90 in KC here, down into Texas, 90, 92, 93, over in Nashville, around 87 degrees, just hotter than normal for a little while.
50:42
SPEAKER_00: So hang in there for a couple of more days.
50:45
SPEAKER_00: Looks cozy up in in North Dakota, though.
50:48
SPEAKER_00: Shout out to Northy D.
50:50
SPEAKER_00: Um, Mike, before I let you go, let's get to some items of mild interest for uh October 12.
50:55
SPEAKER_00: Today's uh we're coming to you from 2026 in the year 1810.
51:01
SPEAKER_00: Oktoberfest began.
51:04
SPEAKER_00: That's Oktoberfest with a K in Germany.
51:07
SPEAKER_00: The Bavarian royal family invited the citizens of Munich to join the celebration uh of the marriage of Crown Prince Ludwig of Bavaria to Princess Teresa von Sachschen Hildebergenhansen, something like that, and that's how Oktoberfest was born.
51:25
SPEAKER_00: I did not know that.
51:26
SPEAKER_00: In 1960, Nikita Khrushchev famously pounded his shoe on a desk at the United Nations General Assembly.
51:35
SPEAKER_00: Are you do you know?
51:36
SPEAKER_00: Do you remember what he said?
51:37
SPEAKER_00: It was a big moment in history.
51:39
SPEAKER_00: Have you got the quote?
51:40
SPEAKER_00: I don't.
51:41
SPEAKER_00: We will bury you, said Khrushchev.
51:45
SPEAKER_00: Cold War was uh was hot back then.
51:48
SPEAKER_00: And finally, the show this might hit you right in your youth spot.
51:54
SPEAKER_00: I don't know.
51:55
SPEAKER_00: The show was called Full House because Danny Tanner had to deal with three of a kind and a pair.
52:04
SPEAKER_00: I never realized that before.
52:06
SPEAKER_00: It's got nothing to do with the uh this date in history, but he had three daughters and two grown men hanging around, DJ Stephanie, and Michelle, and then of course uh John Stamos as Jesse and then Joey.
52:18
SPEAKER_00: Um is all I've got to say about that.
52:24
SPEAKER_00: Mike Castle.
52:25
SPEAKER_00: Thanks once again uh from Stone X for being with us here today on XWalk.
52:29
SPEAKER_00: I sure appreciate the heck out of you, brother.
52:31
SPEAKER_00: Would you come back again sometime when we really, really need the good stuff?
52:34
SPEAKER_01: Absolutely, always happy to join.
52:36
SPEAKER_01: It's always great being with you guys.
52:37
SPEAKER_01: I appreciate it.
52:38
SPEAKER_00: Mike Castle from Stone X.
52:41
SPEAKER_00: And of course, as always, thanks to Trade the News for the view behind the quotes.
52:46
SPEAKER_00: Look to trade the news.
52:48
SPEAKER_00: My crew and I use Trade the News for useful news that you can actually use.
52:52
SPEAKER_00: Use Trade the News.
52:54
SPEAKER_00: And of course, may I direct you to AgBull.com where you will find all of the dandy features we are happy to lavish upon you as a premium subscriber.
53:03
SPEAKER_00: Once again, you don't have to become a brokerage uh customer at that point.
53:08
SPEAKER_00: Just just subscribe to our premium services and we'll send you, you know what, you subscribe for a year.
53:14
SPEAKER_00: Jed comes through.
53:15
SPEAKER_00: Jed comes through with the picture of the Ag Bull uh Bluetooth speaker there that we're happy to send your way for a one-year subscription.
53:22
SPEAKER_00: Only 250 big ones.
53:24
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53:26
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53:27
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53:28
SPEAKER_00: 25 bucks a month, 855-737 Farm for the details, Ag Bull.com.
53:35
SPEAKER_00: Well, I want to thank you for uh watching everybody.
53:37
SPEAKER_00: Thanks once again to Mike Castle from Stonex Jed.
53:40
SPEAKER_00: Back first thing in the morning to start your Tuesday, and then uh I think I'll just talk to myself tomorrow.
53:45
SPEAKER_00: We'll run down some news stories and uh talk about what's gonna come up in the rest of the week.
53:50
SPEAKER_00: I'll see you tomorrow for more Ag Squawk.