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WASDE & Prop 12 · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Miner.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is May 12th.
• 0:24
  SPEAKER_01: I've got Pat with us here today.
• 0:26
  SPEAKER_01: How's it going, Pat?
• 0:27
  SPEAKER_00: Good afternoon, Mike.
• 0:28
  SPEAKER_00: How are you?
• 0:29
  SPEAKER_01: Very good, very good.
• 0:30
  SPEAKER_01: Well, we had a Wazday report today.
• 0:32
  SPEAKER_01: We're gonna cover that a little bit, and then we're gonna wrap up the show today talking about the uh Prop 12 news and uh kind of go over that with our listeners this week.
• 0:41
  SPEAKER_00: Alright, thank you.
• 0:42
  SPEAKER_01: Alright, let's talk about the Wazday Report here today.
• 0:45
  SPEAKER_01: We've had uh a lot of bearish activity through these grains really since the start of the year.
• 0:51
  SPEAKER_01: I ran the numbers here to start off the day, Pat, and we are off about a buck on December corn now since January 3rd to start off the year, and then almost$2 now on November soybeans that we've lost since January 3rd.
• 1:05
  SPEAKER_01: Uh we piled into this report through this week with some more bearish activity.
• 1:10
  SPEAKER_01: Looked like the uh funds had been anticipating a pretty bearish report going in with the way planting pace has looked.
• 1:18
  SPEAKER_01: Uh there wasn't a whole lot of bullishness that we could really see going into the report, and the uh funds really traded it like that before the report.
• 1:27
  SPEAKER_01: So we did receive a WASD report from the looks of it that was on the higher end of pretty much all of the expectations, whether it was U.S.
• 1:35
  SPEAKER_01: production using trendline yields, or whether it was uh world-ending stocks uh for this next upcoming crop year, uh pretty much all the way across the categories.
• 1:46
  SPEAKER_01: We had uh had reached the higher end of expectations here.
• 1:50
  SPEAKER_01: So a little bit of a bearish report through today.
• 1:53
  SPEAKER_01: What did you take the report as?
• 1:55
  SPEAKER_00: Well, you know, Mike, actually, as you're you were describing eloquently the uh a good summary of the report that came out today, um I just pulled up my uh nearby weekly continuous corn chart and and uh while old crop, the nearby option month, uh is printing at 633 today, uh newcrop uh broke through Newcrop December corn broke through that 510 level, um at least traded down, yeah, yeah, closed below 510 actually.
• 2:25
  SPEAKER_00: So we haven't broken the$5 barrier maybe yet, but the last time nearby corn was this low, uh you go back to September 13th of 2021, and so you know, a good year and a half or so since we've had uh nearby corn futures below five bucks.
• 2:45
  SPEAKER_00: And uh, you know, we're approaching that at least new crop corn futures approaching that level pretty aggressively here this week.
• 2:52
  SPEAKER_00: And so um and so anyway, a lot of the things that the the first balance sheet uh gave us um for for the new crop marketing year, the 23-24 crop year, uh, as you mentioned, the futures market had anticipated or priced in, not surprisingly.
• 3:09
  SPEAKER_00: Um I was a little surprised at the 181.5 yield.
• 3:13
  SPEAKER_00: I thought maybe uh the government would choose to fade that trend line number just a little bit, especially given the fact that we've had a little trouble achieving uh uh much better than that uh or we well to achieving trend line yields for a couple years in a row now.
• 3:29
  SPEAKER_00: Yeah.
• 3:30
  SPEAKER_00: Right.
• 3:30
  SPEAKER_00: And so so anyway, um, you know, this is uh um what seems to be a relatively optimistic production number um relative to our ability to perform in the last couple years, and maybe that doesn't matter at all, right, Mike?
• 3:45
  SPEAKER_00: Yeah, and so I think it is important now to uh make the observation in terms of what the numbers say, and then just talk a little bit about what's happening out there today.
• 3:55
  SPEAKER_00: And so, you know, we have received some uh beneficial moisture in the northwestern corn belt.
• 4:02
  SPEAKER_00: Uh if you lay uh you know the last uh two weeks worth of rainfall uh on top of the drought monitor map, it'd be pretty nice, right?
• 4:11
  SPEAKER_00: It's synced up pretty well, and so um that's probably also lending a little bit of pressure uh to the corn complex.
• 4:19
  SPEAKER_00: Uh we've all uh seen the cancellations that have taken place um as it relates to exports uh on old crop.
• 4:27
  SPEAKER_00: That's probably lending also a little bit of pressure uh in in those futures markets.
• 4:32
  SPEAKER_01: They reduced 75 million bushels on that old crop balance sheet for exports, so that kind of saw that coming a little bit too there.
• 4:39
  SPEAKER_00: Yep, and so that adjusted uh uh carry into new crop, which lent to the the uh the more bearish tone on new crop as well.
• 4:47
  SPEAKER_00: And so so anyway, there's a lot of different stuff piling on in that space and and creating um and creating uh uh well approaching a two-year kind of low water mark on on what uh at least new crop corn is is trading up.
• 5:00
  SPEAKER_01: And when I look at it, a couple of the big takeaways, 2.2 billion bushels on corn for ending stocks for this next upcoming marketing year.
• 5:08
  SPEAKER_01: Um quite a few things have to go right to get there, kind of like you talked about with yields.
• 5:13
  SPEAKER_01: So hopefully that's one of the bigger or biggest numbers we'll see here on that ending stocks number on corn going forward.
• 5:20
  SPEAKER_01: Um that'll be interesting to watch.
• 5:22
  SPEAKER_01: And then the uh soybeans for the world balance sheet, 122 million metric tons there.
• 5:29
  SPEAKER_01: That was a pretty big number they posted well above the average trade estimate.
• 5:33
  SPEAKER_01: Big part of that was Brazil, and they're expecting some pretty big crops out of South America, the rest of the world, uh, and us as well.
• 5:41
  SPEAKER_01: So we'll see what happens with all of that.
• 5:43
  SPEAKER_00: Isn't that fascinating?
• 5:44
  SPEAKER_00: We we uh the marketplace and the talking heads uh about markets are so focused all winter long on Argentine and their problems and the soybean meal market and all those things.
• 5:56
  SPEAKER_00: And and we just like we all kept saying that, right?
• 5:59
  SPEAKER_00: They well the crop in Brazil's pretty good this year, right?
• 6:03
  SPEAKER_00: And and and yeah, that's a little bit of a problem for soybean meal processing.
• 6:07
  SPEAKER_00: It's uh there you know, some production issues uh uh upstream from from processing facilities on the coast of Argentina.
• 6:13
  SPEAKER_00: But the Brazilian crop's pretty good, right?
• 6:16
  SPEAKER_00: Yeah, it got being the news all the way through.
• 6:19
  SPEAKER_00: And as those numbers get confirmed, and then as you mentioned, uh a world-ending stocks number now projected that outside of even the range of estimates, it's pretty interesting.
• 6:29
  SPEAKER_00: And it's I tell you, Mike, it's one of those, I mean, soybeans uh through the years, there's so many times where that balance sheet doesn't just correct or doesn't just like move back to like it's either tight or there's either one too many beans or there's one too less.
• 6:47
  SPEAKER_00: Does that make sense?
• 6:48
  SPEAKER_00: Like we're always fine line.
• 6:49
  SPEAKER_00: Yeah, it there really is a there's a the inelasticity of demand on on soybean products is alive and well.
• 6:56
  SPEAKER_00: And so, you know, usually now when this thing turns over and you start to get um a building stock situation, at least uh based upon prior history, I would argue that we're gonna keep keep building those stocks now for a period of time.
• 7:11
  SPEAKER_01: And you gotta take some of this with a grain of salt.
• 7:14
  SPEAKER_01: I mean, it's so far out.
• 7:15
  SPEAKER_01: This is tough, we're talking about crops we're planting right now, their yield potential, and then how we're gonna use those crops once they're harvested for the next year.
• 7:24
  SPEAKER_01: So obviously, this balance sheet's gonna change a ton by the time it's done with, but this was our first big look at it after the uh egg outlook forum.
• 7:32
  SPEAKER_01: So what do you think about yesterday's news here, Pat?
• 7:36
  SPEAKER_01: Uh, we're gonna address this a little bit through today's podcast.
• 7:39
  SPEAKER_01: The U.S.
• 7:40
  SPEAKER_01: Supreme Court preserved uh the California Humane Pig Confinement Law there.
• 7:44
  SPEAKER_01: So walk through that with me.
• 7:46
  SPEAKER_00: Yeah, so uh NPPC and Farm Bureau um filed an appeal with the U.S.
• 7:51
  SPEAKER_00: Supreme Court uh asking the the Supreme Court to uh repeal uh or not allow for the state of California uh to enact legislation passed back in 2018 that dictated production practices for pork products, fresh pork products that are sold into the state of California.
• 8:16
  SPEAKER_00: And so uh we the pork producers lost uh that that appeal.
• 8:21
  SPEAKER_00: Uh the announcement uh came through this week, so California is now free to enact uh their legislation.
• 8:28
  SPEAKER_00: And as a pork producer um and as as a uh as a group and a team here at ProAg that has the pleasure to interact with with various different types of producers and a lot of hog producers and and all of that, we uh um acknowledge the I guess the current uh challenging margin environment that the pork production systems are in today.
• 8:53
  SPEAKER_00: And this uh adds another layer of challenge and expense and tightening margins on top of what has been a challenging margin environment anyway.
• 9:04
  SPEAKER_00: And so um the ability to trade uh product uh freely between states took a hit today.
• 9:11
  SPEAKER_00: Um the consumers in California took a hit today, and that's uh is I think sort of lost a little bit in this whole discussion is that uh the uh the uh elitist zealots that pushed this thing through in in California a few years ago um just rose um raised the price of food for some folks that that uh I could argue could have a little bit of a challenge affording who already had high prices of food.
• 9:37
  SPEAKER_00: Exactly right.
• 9:38
  SPEAKER_00: So on top of all the other inflation, now um you have uh an elevated cost that uh um that as a pork producer we're I really struggle with the uh um with the reasoning behind all of that.
• 9:49
  SPEAKER_00: Nonetheless, it's uh um it is now time to uh move on with the opportunity of meeting what um customers' needs are from a pork producer's perspective.
• 9:59
  SPEAKER_00: But again, just worth noting, I think that uh some of the challenges associated with uh um um different states enacting different laws and impacting production practices in other states is an interesting uh legal precedence that I'm sure will be reviewed uh in the future.
• 10:16
  SPEAKER_01: What should uh pork producers do now after this news this week?
• 10:20
  SPEAKER_01: What's the first step here you think in your opinion?
• 10:22
  SPEAKER_00: Yeah, good question.
• 10:23
  SPEAKER_00: I think, first of all, we're you know, we're gonna learn a little bit more in a pretty short period of time as it relates to um the process for enactment of this provision in California.
• 10:34
  SPEAKER_00: Um and so uh we'll collect more information, but in the meantime, it's appropriate, I think, you know, to continue to work through exercises of of uh uh managing margin in in spots where the opportunity presents itself and preserving equity in spots where that's necessary as well.
• 10:55
  SPEAKER_00: And so different risk management strategies can be applied as it relates to uh uh uh managing equity positions and and uh sure look forward to the opportunity to visit with producers about that.
• 11:05
  SPEAKER_01: All right.
• 11:05
  SPEAKER_01: Thank you for your time today, Pat.
• 11:07
  SPEAKER_00: Thank you, Mike.
• 11:07
  SPEAKER_01: And thank you to all our listeners.
• 11:09
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 11:13
  SPEAKER_01: Check out our other podcast as well, Professional Ag Marketing, that's released every Friday.
• 11:18
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 11:24
  SPEAKER_01: See you next time.