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WASDE recap and market reaction · Professional Ag Marketing Podcast

• 0:03
  SPEAKER_00: You're locked in to the Grain Market Talk Podcast.
• 0:07
  SPEAKER_00: Fast updates, market movers, and the grain news you need right now.
• 0:12
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:22
  SPEAKER_02: Today is September 11th, and I got Mike Minor with me today.
• 0:26
  SPEAKER_02: How's it going, Mike?
• 0:27
  SPEAKER_02: Not too bad, Jaden.
• 0:29
  SPEAKER_02: Today we're going to talk about the WASI report.
• 0:31
  SPEAKER_02: So we had our September Wise report today, and we had some interesting price action involved around that.
• 0:37
  SPEAKER_02: Mike, what can you tell me are your key takeaways after this report today?
• 0:41
  SPEAKER_01: Yeah, a lot of it had to do with price movement.
• 0:44
  SPEAKER_01: I'm going to start there because before the report, we had some very interesting trade action through a lot of these different commodities.
• 0:51
  SPEAKER_01: Let's start with the corn and soybeans.
• 0:52
  SPEAKER_01: If you pulled up a chart, Cade.
• 0:54
  SPEAKER_01: You can see we closed down about three cents today on the December corn at 530.
• 0:59
  SPEAKER_01: But really we've been off for quite a while here since the 2nd of September.
• 1:04
  SPEAKER_01: We uh got up to a high there just under 550 on Dece Corn.
• 1:08
  SPEAKER_01: And uh today we pulled as low as 523 there.
• 1:11
  SPEAKER_01: So we've had a little bit of a pullback, and uh we saw some pre-report positioning.
• 1:16
  SPEAKER_01: We're down quite a bit ahead of the report, Jaden, and some of the sell-off that we've been seeing, I feel like, was a little bit of pre-report positioning.
• 1:24
  SPEAKER_01: The managed money's built up a record long position in corn and very close on soybeans.
• 1:29
  SPEAKER_01: So seeing a little bit of a pullback there, just pre-report positioning, I think was worth noting that they took some off in case the report did show something extremely bearish, which it really didn't.
• 1:40
  SPEAKER_01: The report came out uh somewhat at expectations across the board, and uh they s they quickly, after the report, put a lot of the positions back on, it seemed as we ran back up in price pretty quick.
• 1:53
  SPEAKER_01: And then towards the end of the day, it kind of backed off again, which was a little bit surprising how that happened.
• 1:58
  SPEAKER_01: But uh when I look at the estimates, if Cade pulls up just some of the reports with what we saw, uh ending stocks on corn for the 26-27 carry out came in at 1.567.
• 2:09
  SPEAKER_01: Uh, that was just barely above the average trade estimate of 1.52.
• 2:13
  SPEAKER_01: And on the soybean market there, that one came in at$310 million.
• 2:17
  SPEAKER_01: That was above the$298 they expected.
• 2:20
  SPEAKER_01: And now the both of those were down from last month's numbers, uh, which is worth noting.
• 2:26
  SPEAKER_01: Uh big part of that had to do with corn coming in at a 178.5 yield.
• 2:30
  SPEAKER_01: Uh, when I look at that number, it was right where it should have been, I thought, very close to expectations.
• 2:35
  SPEAKER_01: I thought 178.2 was an average trade estimate, and uh seeing a slight decrease in and around that two, two and a half type area was very close to what Stonex had uh uh had thought about as well in their numbers.
• 2:48
  SPEAKER_01: So it tracks, I think the yield is shrinking from last month and the month prior.
• 2:54
  SPEAKER_01: Uh going into the next report, October normally you see a lot of movement.
• 2:58
  SPEAKER_01: So it'll be interesting to see if they uh what direction they go from that one.
• 3:02
  SPEAKER_01: As I think being four or five above what Pro Farmer was in their report should be about right, I think, Jaden, going forward.
• 3:10
  SPEAKER_01: So the funds historically, if you look at what 9.6% stocks to use ratio would be, which we have now, I believe, that would put you right about where we're at on price.
• 3:20
  SPEAKER_01: So if I had to guess, you know, at a 178 yield, uh, you know, what are the funds expecting uh today for uh for an average yield?
• 3:29
  SPEAKER_01: Uh what price does that give us?
• 3:31
  SPEAKER_01: I think we're about there.
• 3:32
  SPEAKER_01: I think we're comfortable where we're at.
• 3:33
  SPEAKER_01: I think if you get below this level, then we quickly shoot up into a level where we have to ration uh demand using price.
• 3:40
  SPEAKER_01: So I think it gets pretty sketchy, pretty hairy if we get much of a lower yield there.
• 3:45
  SPEAKER_01: But above this level here, you know, I think uh you could still end up with a 180 corn yield this year if uh if we see an increase here in the next report or so.
• 3:54
  SPEAKER_01: But at this point, it's a pretty volatile situation.
• 3:57
  SPEAKER_01: Trade seems to be very aggressive, they're trading hard each and every day.
• 4:01
  SPEAKER_01: Over the past week, as we waited for this report to come out, though, I will say uh we traded oil and and wheat news quite aggressively each day.
• 4:11
  SPEAKER_01: It seemed like if oil and wheat were up, the corn market wanted to follow suit as well.
• 4:16
  SPEAKER_01: And now with record high diesel prices and crudals back over$100 on the WTI there uh towards Thursday, Friday of this week, you know, we're seeing a substantial increase.
• 4:27
  SPEAKER_01: And inflation's been brought into question as well.
• 4:30
  SPEAKER_01: Uh, you had a CPI report this morning that came out hotter than expected.
• 4:34
  SPEAKER_01: And next week you've got a FOMC meeting where Warsh is gonna come out and try to take his swing at it and either tell us that inflation's a problem and we need to raise rates, which it's a 90% chance we raise rates, uh, according to analysts today in next week's report.
• 4:49
  SPEAKER_01: Or is he gonna come out and say inflation's a problem, but we're still not gonna do anything about it because it's uh temporary because of this war that we've engaged ourselves in with Iran?
• 4:58
  SPEAKER_01: Both of those are potentials, uh, but the uh Fed seems to be very split over this decision coming up, no matter what they do.
• 5:06
  SPEAKER_01: So it'll be interesting to see that.
• 5:07
  SPEAKER_01: And as I talk about inflation, that that's a problem or it comes into the commodities because one, if we do raise rates, US dollar goes up, that's typically bearish on the on the uh commodities uh in the export sense, which demand's built up very greatly at this point.
• 5:23
  SPEAKER_01: But two, if you know, crude oil is running here, I mean, usually that tries to drag corn and soybeans with it from a fuel energy standpoint as well.
• 5:31
  SPEAKER_01: And inflation, if they want to buy commodities because they're concerned about inflation, well, corn's been bought quite aggressively along with that as well.
• 5:39
  SPEAKER_01: So Wazdere port today, just the first uh step at a few reports here that are gonna matter to it going forward.
• 5:47
  SPEAKER_01: Uh we'll watch harvest progress coming up this next week as well as that's picking up.
• 5:51
  SPEAKER_01: But this Wasdirport, from my opinion, came out very close to expectations.
• 5:55
  SPEAKER_01: It it wasn't necessarily bearish.
• 5:58
  SPEAKER_01: We continued to show a shrinking U.S.
• 6:01
  SPEAKER_01: crop for both ending stocks as well as yield, and uh it looks like this grain situation is still pretty tight here in the United States and globally as well, Jaden.
• 6:11
  SPEAKER_02: So, Mike, you really hit on the corn side of things.
• 6:13
  SPEAKER_02: So overall, we kind of think with where price is today, we're pretty, you know, fair valued with with our stock given stocks to use ratio.
• 6:21
  SPEAKER_02: But on the soybean side of things, what were your quick takeaways there?
• 6:24
  SPEAKER_01: Well, China bought a lot of soybeans this last week.
• 6:27
  SPEAKER_01: I think one million metric ton or so just this last week in in their numbers.
• 6:31
  SPEAKER_01: So they're uh really progressing with their sales ahead of this uh meeting on the 24th between President G and Trump here coming up, and they've been buying pretty aggressively ahead of that.
• 6:42
  SPEAKER_01: Uh if they continue to, and their numbers do look more accurate that they could buy 25 million metric tons of soybeans this next year, uh, that export number that the USDA is using has to grow.
• 6:54
  SPEAKER_01: And you saw the first glimpse of that today, I would argue, with their increase in exports helping offset some of that bigger yield that they came out with.
• 7:01
  SPEAKER_01: So I think that was warranted.
• 7:03
  SPEAKER_01: It tracks well.
• 7:04
  SPEAKER_01: But if China does come out and buy anywhere close to what they're expected to, you know, you could probably add another seven, six million metric tons on these uh export numbers that they've currently got out of the United States total.
• 7:17
  SPEAKER_01: So from that perspective at least, I think the uh the soybean number is still comfortable at 310 million.
• 7:24
  SPEAKER_01: I think that's fine.
• 7:25
  SPEAKER_01: But I still think there's a possibility that um if China does what they say they're going to do and buy as many soybeans that they're gonna, if crush continues to stay hot and if you know we have any further fluctuation in production, that balance sheet could be sneaky tight uh coming up compared to what we've been seeing.
• 7:43
  SPEAKER_01: So the soybean one is something to watch.
• 7:46
  SPEAKER_01: It's comfortable for now, but uh corn, it seems like it looks like we've already got a pretty tight number there, under 10%.
• 7:53
  SPEAKER_02: So, Mike, you're going forward the next week after uh you know a wise report harvest is looming upon us.
• 7:59
  SPEAKER_02: What are you gonna be watching here going forward?
• 8:01
  SPEAKER_01: Yeah, I'm gonna be watching December corn.
• 8:03
  SPEAKER_01: Today we had a high of uh just under 45 uh 545 there.
• 8:08
  SPEAKER_01: I'm gonna be watching that old high we had at four at 549 and three-quarters on December corn.
• 8:13
  SPEAKER_01: So keep an eye on that high.
• 8:15
  SPEAKER_01: Um see if we can take out today's lows as well.
• 8:17
  SPEAKER_01: We had a massive trading range today, and uh, I want to see how we react in this upcoming week to that range.
• 8:24
  SPEAKER_01: If the funds decide that they don't want to be long corn in this type of capacity, you know, that type of a washout could uh could shrink price pretty aggressively.
• 8:33
  SPEAKER_01: And if they still think there's a possibility of a 1808 or higher yield, I mean uh$5 corn is in question, uh, in my opinion.
• 8:42
  SPEAKER_01: If we uh do believe that that yield is still gonna shrink going forward, it's hard to believe you don't take out that last high that we had and try to work higher.
• 8:50
  SPEAKER_01: So demand is still holding on for now.
• 8:52
  SPEAKER_01: It would take a pretty big jump in price to probably get rid of some of that, it looks like.
• 8:57
  SPEAKER_01: But I'm watching exports uh on the corn side as well going into this next year pretty aggressively.
• 9:02
  SPEAKER_01: For more immediate decisions, not just revolving around some price action here.
• 9:07
  SPEAKER_01: Uh basis questions are getting talked about quite a bit as we start to begin harvest.
• 9:12
  SPEAKER_01: And one of the easier discussions has been, you know, uh soybeans seem like a pretty easy answer to say if you got to sell one, sell the soybeans off the combine here.
• 9:21
  SPEAKER_01: Get them gone super early if you can this week, now, yesterday.
• 9:24
  SPEAKER_01: You've got very good early basis premiums uh for the soybean market.
• 9:29
  SPEAKER_01: So get rid of the soybeans in the cash market if a guy can and uh store the corn because it looks like there's pretty good carry going to March.
• 9:36
  SPEAKER_01: They're still in this board that would tell you they don't want your corn today.
• 9:40
  SPEAKER_01: They want it uh in that December, January, February type time frame to wait for that.
• 9:45
  SPEAKER_01: So those are a few of the more storage logistics, some of the things to wait for there.
• 9:50
  SPEAKER_01: Uh basis, I'm I'm really friendly on in the Western Corn Belt.
• 9:53
  SPEAKER_01: I could see that Thanksgiving to Christmas time frame still being an okay time of the year to try to get good basis levels.
• 9:59
  SPEAKER_01: But like I said, soybeans, if you can take advantage of any of the early basis levels, I'd try to get some of those gone as well.
• 10:05
  SPEAKER_01: My outlook, other than that, Jaden, is is just gonna be this uh very volatile, very volatile futures here.
• 10:12
  SPEAKER_01: Direction coming up this next week could tell us a lot.
• 10:15
  SPEAKER_02: Well, thanks, Mike, for all your insight.
• 10:17
  SPEAKER_02: Uh nonetheless, a lot of moving parts going ahead in these grain markets.
• 10:21
  SPEAKER_02: Um, everyone, good luck on starting harvest next week and let us know what you're seeing for yields.
• 10:26
  SPEAKER_02: Thanks for having me being on here, Mike.
• 10:28
  SPEAKER_02: Thank you, Jaden.