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Grains: Buy the Rumor, Sell the Fact · 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.
• 0:22
  SPEAKER_02: Well, good afternoon, everyone.
• 0:24
  SPEAKER_02: This is Lucas Peters filling in for Mike Minor in the ProAG podcast studio today.
• 0:32
  SPEAKER_02: And with me I have Jaden.
• 0:34
  SPEAKER_02: Jaden, how's it going?
• 0:35
  SPEAKER_01: It's going real good, Lucas.
• 0:37
  SPEAKER_02: Well, today is December 19th.
• 0:40
  SPEAKER_02: So for those of you out there, you have six shopping days left till Christmas.
• 0:46
  SPEAKER_02: So be sure you're getting your loved ones something special here in the next uh in the next few days.
• 0:52
  SPEAKER_02: Uh but something uh uh a little less exciting, Jaden.
• 0:57
  SPEAKER_02: Uh we're gonna talk a little bit about the uh the markets and specifically around the soybean market.
• 1:03
  SPEAKER_02: Man, we have not had a very good stretch in soybeans here for the last, well, really last couple weeks.
• 1:10
  SPEAKER_02: Um but uh what about this week?
• 1:12
  SPEAKER_02: What was the uh bad news this week in the soybean market?
• 1:15
  SPEAKER_01: So yeah, Lucas, interestingly enough, we're$1.20 off our soybean highs.
• 1:20
  SPEAKER_01: That's kind of crazy to say after the uh quite large rally we had in this market, but kind of interesting.
• 1:27
  SPEAKER_01: So last uh last week, Friday, we kind of found out.
• 1:29
  SPEAKER_01: So as the as the government starts to catch up, you know, after their shutdown on the government reports, so the commitment of traders report from last Friday kind of showed something very interesting.
• 1:40
  SPEAKER_01: So as of November 18th, which is the day we made our soybean high in that market, we were 229,000 long on the funds for soybeans.
• 1:50
  SPEAKER_01: And just just for reference, our record long on that is 253,000.
• 1:55
  SPEAKER_01: So to me, uh that really explains why we had that, you know, that big rally that you know everyone's like, well, what the heck?
• 2:02
  SPEAKER_01: China, you know, normally they buy 25 million metric tons.
• 2:05
  SPEAKER_01: Why is this bullish?
• 2:07
  SPEAKER_01: Well, as we can see, the funds were buying buying that market up, and and the way it looks now after you know pulling back a dollar twenty, it looks like maybe maybe they're fleeing that market because of, you know, not a real clear picture going forward with you know Scott Bessett moving back the deadline for that twenty f you know, that twelve million metric tons, and just looking at South America weather right now, you know, Brazil's pretty well planted there on the soybeans, and um from from what I can see, the not really seeing anything too concerning from a weather standpoint um looking at Brazil.
• 2:41
  SPEAKER_02: Yeah, so it definitely seemed like that run-up we saw kind of post-harvest in the soybean market was the classic market cliche of buy the rumor, sell the fact, right, Jaden, that uh they the news on China was coming.
• 2:55
  SPEAKER_02: We had talked about it coming, hints were coming out, and so the funds were definitely stepping in and buying that up, uh, causing the causing a nice rally there after harvest, after some good yields, after um yeah, kind of a a boring uh uh summer in the soybean market, and now all of a sudden we got a deal and well now it's not good enough and ratship and sell enough, so we're gonna get out of this market, right?
• 3:19
  SPEAKER_01: And interestingly enough, China they've been pretty steady on um purchasing these soybeans.
• 3:24
  SPEAKER_01: Um, some some people saying out there they're about half of that 12 million metric tons on progress.
• 3:29
  SPEAKER_01: You know, the USDA has only confirmed maybe 40% of it, but we have been seeing steady sales, and despite that, we're we're still we continue to fall lower in this market.
• 3:39
  SPEAKER_02: Yeah, and and and it as we've talked before, like when you're dealing with China, you have to uh kind of wait and see what they actually take, right?
• 3:47
  SPEAKER_02: Not just what they say they're gonna take.
• 3:49
  SPEAKER_02: But where we were at all year long, where there was no activities, just having some of those active sales here over the last few weeks is good.
• 3:56
  SPEAKER_02: So definitely good for the market.
• 3:58
  SPEAKER_02: I mean, they're they're in, they're buying, uh, that's good.
• 4:01
  SPEAKER_02: It's just like you said, Jaden, we maybe we had a little bit uh of a you know, by the rumor, and we went up a little bit too high, and now the fund's coming out, and there's not a much not much of the real world fundamental traders in there to cause the uh the market to rally much or or or sustain the rally that we had going.
• 4:18
  SPEAKER_02: So now we're just gonna initially need this thing to level off and steady out.
• 4:22
  SPEAKER_02: I I know that's where a lot of us are sitting.
• 4:24
  SPEAKER_02: We will saw it run up and now we've seen it come down, and following the roller coaster of grain marketing, now we're all praying that we get a little bump up.
• 4:32
  SPEAKER_02: So we'll see what happens there.
• 4:34
  SPEAKER_02: Uh corn market, uh, I guess a little less negative than soybeans, so let's spin that positive.
• 4:40
  SPEAKER_02: Uh, but uh Jaden, tell us what was going on in the corn market this week.
• 4:44
  SPEAKER_01: So uh another interesting thing, uh I think you know, when we were rallying in that soybean market, it seems like soybeans and corn are really closely tied together, but it seems like now they've kind of separated themselves and are kind of trading, you know, separate news now.
• 4:59
  SPEAKER_01: Uh corn market, I mean, hate to be honest, but it it continues to be very boring.
• 5:04
  SPEAKER_01: Uh the what's kind of keeping the corn market up here, I think, is is our demand.
• 5:08
  SPEAKER_01: Our demand has been awesome.
• 5:09
  SPEAKER_01: So, you know, this week we had the largest ethanol production of 1.131 million barrels um per day.
• 5:16
  SPEAKER_01: So that that was really good to see.
• 5:18
  SPEAKER_01: And the the exports, they've been fantastic, and we continue to export a lot of a lot of corn and a lot to Mexico to, you know, um feed those feeder cattle that you know normally are over here on our side.
• 5:31
  SPEAKER_02: Yep, borders closed, so they gotta feed them something, right?
• 5:33
  SPEAKER_02: No, I it is very interesting the corn market of you know, kind of in in uh comparison to the soybean market.
• 5:41
  SPEAKER_02: Um, you know, corn, we need the demand to stay really, really strong because we planted 99 million acres and we had really good yield.
• 5:50
  SPEAKER_02: There's a lot of bushels out in the countryside, at least in our neck of the woods.
• 5:55
  SPEAKER_02: And it's surprising how well that's held up in the eyes of the soybean market coming down.
• 6:01
  SPEAKER_02: Uh I I think that is, I guess, speaks well of the strength in the corn demand.
• 6:07
  SPEAKER_02: Um the the worrisome part is that demand still that has to stay there for quite a while.
• 6:13
  SPEAKER_02: We got a lot of bushels to eat through, so we need Mexico to keep buying, we need ethanol to still grind uh a lot of bushels, and and that's gonna start getting kind of difficult if crude oil doesn't uh turn around and we're gonna need something to spark this a little bit further, it feels like, but it's kind of maybe that's just where we're at in the grain markets now of corn kind of losing a f little bit on the week uh is kind of good news, right?
• 6:39
  SPEAKER_02: It's it just feels like there's more strength that market than than what I thought there was, especially with where soybeans have gone here recently.
• 6:47
  SPEAKER_01: And and looking at you know, next year's, you know, soybean to corn ratio, so November 26 divided by you know December of 26, we're at a 2.32.
• 6:56
  SPEAKER_01: And you know, the 2.4 mark is kind of what we look at for making that decision.
• 7:01
  SPEAKER_01: So anything over 2.4, we're we're favoring plant soybeans next year, and on anything under favoring plant corn.
• 7:08
  SPEAKER_01: So that ratio is really starting to favor more corn acres next year.
• 7:13
  SPEAKER_01: So I I think that um bundled with you know the the bridge payment we're supposed to get here after the first of the year, I think we could see a pretty hefty amount of corn acres next year.
• 7:22
  SPEAKER_02: Yeah, that'll definitely be a topic here over the next few months uh at through these winter months before planting of these corn soybean acres.
• 7:30
  SPEAKER_02: It was last year, and we ended up planting a whole bunch of corn acres, and it seems like we're gonna play out similarly.
• 7:37
  SPEAKER_02: Like uh even fertilizer prices have come down recently, and so now the guys that have that you know 80 or quarter that they are kind of not sure on what to do with that price ratio you just talked about, Jaden, and fertilizer coming a little lower, maybe the depending on the spring weather prospects.
• 7:55
  SPEAKER_02: Uh yeah, right now I'd say that acre's leaning corn, but of course we got a long time uh before that.
• 8:00
  SPEAKER_02: And and you did mention that bridge payment, uh Jayden.
• 8:03
  SPEAKER_02: So let's uh jump into everybody's favorite topic, government program talk.
• 8:09
  SPEAKER_02: Uh so this week on government program talk, we uh let's talk about the bridge payment.
• 8:14
  SPEAKER_02: So there was a little confusion early in the week of well, is there a deadline to sign up for this bridge payment?
• 8:20
  SPEAKER_02: No, there is not.
• 8:21
  SPEAKER_02: In fact, there is not going to be a sign up the way it sounds.
• 8:24
  SPEAKER_02: Uh, the only thing you had to do this week is make sure your 2025 planted acres were certified at the FSA office.
• 8:33
  SPEAKER_02: And most of the guys in our area uh, of course, did that back in May, June, July.
• 8:39
  SPEAKER_02: And uh unless something needed to be changed, uh your acres are certified, you're good there.
• 8:45
  SPEAKER_02: Uh, reading some stuff this afternoon, of course, we still do not know the exact dollar amounts uh per commodity per acre breakdown on the bridge program.
• 8:56
  SPEAKER_02: Um none of that has been released.
• 8:58
  SPEAKER_02: USDA put a note out today uh that they expect to release those amounts the week of December 22nd.
• 9:06
  SPEAKER_02: Of course, now the federal government has closed the 24th and 26th, so that leaves them Monday, Tuesday to do that.
• 9:12
  SPEAKER_02: Uh otherwise, of course, they can release them whenever they want, so maybe it'll be a week after that.
• 9:16
  SPEAKER_02: But the farmer, the American farmer is supposed to have that money in his uh account by the end of February 2026.
• 9:24
  SPEAKER_02: So whatever the amounts will be, they will be, and uh they will be in your account early 2026, uh, which kind of leds to what Jane was talking about, a little cash infusion right before uh spring planting, uh at least the planting stages uh stages start.
• 9:43
  SPEAKER_02: Uh the other uh uh program we have out there that I've been getting a lot of questions on is the SDRP2 payment.
• 9:52
  SPEAKER_02: And so if you remember SDRP1 was issued uh for farmers that had crop insurance claims in 2023 and 2024, uh either one of those years or both.
• 10:03
  SPEAKER_02: Uh if you had a claim, uh those payments were made off SDRP1 back in August September time frame or July, August, September.
• 10:12
  SPEAKER_02: Uh now we aren't we are on to the SDRP2 program, which uh is for all those acres of crops that did not have a crop insurance claim in 2023 and or 24.
• 10:25
  SPEAKER_02: And what's going on is FSA took all the information you certified for crop insurance, recalculated your guarantees uh to 90, 92.5%, or 95% uh coverage, depending on what crop insurance level coverage you bought.
• 10:42
  SPEAKER_02: And now you are uh going in and seeing uh if you have a potential payment on that program.
• 10:50
  SPEAKER_02: Uh so most of the numbers that I've double checked for guys, uh the numbers that we've certified on the crop insurance forms match those forms for SDRP2.
• 11:00
  SPEAKER_02: The big thing is here, I I thought the FSA was going to mail those forms out.
• 11:04
  SPEAKER_02: They are not.
• 11:05
  SPEAKER_02: So if if you think you might potentially might have a loss, call your FSA office, ask for that form, and uh then you can sign it and send it back.
• 11:15
  SPEAKER_02: Uh all the any payments that are issued are being paid at the 35% level, same as SDRP1.
• 11:23
  SPEAKER_02: Uh and if you do not want those payments by the first of the year because of tax freezes, you want that in the start of 2026.
• 11:31
  SPEAKER_02: All the FSA personnel I talked to said don't turn your form in until after January 1.
• 11:37
  SPEAKER_02: The deadline is April 30th, so we do have lots of time on that program.
• 11:41
  SPEAKER_02: About$16 billion allocated to it.
• 11:44
  SPEAKER_02: Um, very little has been paid out so far, uh, but I would expect those amounts, the payout amounts to creep up here uh dramatically in the next uh few weeks.
• 11:53
  SPEAKER_02: So definitely double check with the FSA office on the SDRP2.
• 11:58
  SPEAKER_02: Watch for the bridge payment uh amounts here uh coming up next week, hopefully.
• 12:03
  SPEAKER_02: And then of course uh we did have a little bit of news of what's next.
• 12:07
  SPEAKER_02: Um, you know, that was one of the topics that uh again I was reading some information uh coming out of Washington, DC this afternoon.
• 12:16
  SPEAKER_02: So if you look at 2025, uh we will have the bridge payment, right?
• 12:21
  SPEAKER_02: That's gonna be the bridge of 25 to 26 markets.
• 12:24
  SPEAKER_02: That's how they're spending it.
• 12:26
  SPEAKER_02: That now in 26 we'll have our trade uh policies in place and we'll be good there.
• 12:32
  SPEAKER_02: Um there was roughly 40 billion dollars of losses.
• 12:37
  SPEAKER_02: Uh this was a Texan Texas AM study in 2025 for grain farmers, and so the bridge payment covers uh like what uh 25% of those losses.
• 12:50
  SPEAKER_02: Okay.
• 12:51
  SPEAKER_02: So if you are a uh math guy, you're like, well, of 25%, I still lost a whole bunch of billions of dollars.
• 12:58
  SPEAKER_02: What's the next program?
• 13:00
  SPEAKER_02: I don't know, but the fact that there is still that many losses or that many losses being calculated by our friends in Washington, DC would suggest that there is another program coming.
• 13:11
  SPEAKER_02: And the fact that we've had an ad hoc disaster payment every year since 2017 uh bodes to think that there will be another program coming for the 2025 uh crop in mid uh 2026.
• 13:26
  SPEAKER_02: No details, strictly Lucas's speculation.
• 13:29
  SPEAKER_02: Uh, so we'll uh have more information as we learn about it.
• 13:33
  SPEAKER_02: Um with that, Jaden, I guess anything else you want to wrap up on?
• 13:38
  SPEAKER_01: Uh no, not really, Lucas.
• 13:39
  SPEAKER_01: I I would just encourage everyone, you know, maybe reach out to risk manager um before this January Waza report's gonna be a big market move you're here in the beginning of January, uh January 12th, to be exact.
• 13:53
  SPEAKER_01: So uh I believe there's a lot of level of of uncertainty heading in this report, and I think it's really important to get in contact with your broker to get a plan together before that report.
• 14:02
  SPEAKER_02: That sounds like great advice, Jaden.
• 14:04
  SPEAKER_02: Uh, look forward to that, and I guess let me be the first to wish everybody a Merry Christmas uh next week, and we will talk to you all later.