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Trump and Ethanol · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the egg markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:23
  SPEAKER_00: Today is January 17th, and I've got Jordan Wrecker back with us.
• 0:27
  SPEAKER_00: How's it going, Jordan?
• 0:28
  SPEAKER_01: Oh, it's going good, Mike.
• 0:29
  SPEAKER_01: Just trying to stay warm before the Arctic blast rolls through this weekend.
• 0:33
  SPEAKER_00: It is an Arctic blast, and it this is really we're starting to pay for it now.
• 0:38
  SPEAKER_00: It's been so warm.
• 0:39
  SPEAKER_00: My dad always talks about like, oh, the weather's gonna average out, and we're gonna pay for it later, and it looks like it's coming, isn't it?
• 0:46
  SPEAKER_01: Yeah, winter is definitely on its way is what it looks like.
• 0:49
  SPEAKER_01: And you know, like you said, you know, usually it kind of averages out, and uh we really haven't had much snow here yet, so all that fog we had a couple of weeks ago, I'm I'm really anticipating some big shots of snow as we kind of get into March, is what the way I feel like we're gonna get leveled.
• 1:05
  SPEAKER_00: Yeah.
• 1:06
  SPEAKER_00: It's funny because if you think about it, only varying the average temperature of an entire year of like, you know, a degree.
• 1:15
  SPEAKER_00: That's not that much, really.
• 1:18
  SPEAKER_01: No, no, it's really not.
• 1:19
  SPEAKER_01: Yep.
• 1:20
  SPEAKER_00: Alright, let's start with.
• 1:22
  SPEAKER_00: We've got a few fun things to really talk about here today.
• 1:24
  SPEAKER_00: Uh, we're gonna start one off with uh Trump and President G uh and kind of what they've had going on.
• 1:31
  SPEAKER_00: So we've seen crazy market volatility and specifically the corn and soybean markets here over the past week.
• 1:38
  SPEAKER_00: Last Friday, the va the volatility factor just skyrocketed on soybeans after the report came out, and it stayed pretty high as we've seen almost double-digit gains or losses almost every trading session since then.
• 1:52
  SPEAKER_00: And today was no exception.
• 1:55
  SPEAKER_00: We saw a uh double-digit day most of the day higher in the soybean market off news that Trump and the president of China have been able to make some trade talks based upon uh what's going on with TikTok, uh, trade, fentanyl, and uh just kind of, you know, war gee warning us about Taiwan a little bit, us talking about uh uh the trade situation and kind of the leverage we have to display there.
• 2:21
  SPEAKER_00: But it sounds like it didn't go too bad, Jordan.
• 2:23
  SPEAKER_00: It was uh uh actually a boost to our markets on Friday going into the inauguration weekend, which is an odd thing to see out of the two of them meeting or making headlines on such topics.
• 2:35
  SPEAKER_01: Yeah, it really was, you know, a nice day on corn, almost up uh ten cents there.
• 2:40
  SPEAKER_01: Um soybeans up uh really well them themselves after being down quite hard yesterday on you know talks of some more uh rain chances kind of moving through Argentina.
• 2:50
  SPEAKER_01: So um, you know, this Trump and China talk uh very welcome to the market, right?
• 2:56
  SPEAKER_01: Uh you know, um anticipating you know a little bit of tariffs kind of coming at us, but you know, as we've kind of moved closer here, you know, we we've already seen the the roadmap that has happened with Trump and tariffs in China, right?
• 3:11
  SPEAKER_01: And with his last presidency.
• 3:13
  SPEAKER_00: So yeah, I've got PTSD from it.
• 3:15
  SPEAKER_01: Yeah, yes.
• 3:17
  SPEAKER_01: But so we you know we've learned from that, right?
• 3:21
  SPEAKER_01: And and some of these trade partners have too.
• 3:24
  SPEAKER_01: And you know, I think we're kind of seeing that today, right?
• 3:26
  SPEAKER_01: Um, you know, China knows very well that you know Trump is not uh bluffing on some of the talks that he's had.
• 3:33
  SPEAKER_01: So, you know, things will probably move much quicker this time than what they have in the past, and I I think today's kind of a a sign of that.
• 3:40
  SPEAKER_01: And you know, on the on the corn market to kind of you know get rid of a little bit of you know this this bearish uh tariff talk, you know, really push the corn up, and you know, the funds are are diving into the corn market, like you said, right?
• 3:54
  SPEAKER_01: And we're probably gonna be close to a record long here as we kind of move forward over these next few weeks is what it feels like on corn.
• 4:00
  SPEAKER_01: Now, you know, the the story is kind of building um on corn, right?
• 4:06
  SPEAKER_01: With last week's uh WASD report where you take four bushels off the crop, um and you know, now we're kind of looking at trying to curb demand, right?
• 4:16
  SPEAKER_01: So, you know, kind of leading into this year after you know that August time frame, September time frame, we were looking at some pretty good ending stocks and you know felt like we needed to build demand, and now all at once we kind of rip that rug out from underneath us and you know pull some production down, and now it feels like we need to kind of cut demand.
• 4:33
  SPEAKER_01: So this corn definitely feels like it's you know trying to leg higher to to try to curb that demand because you know it isn't uh demand isn't like a light switch, it just doesn't turn on and off, right?
• 4:43
  SPEAKER_01: So you got to kind of get price to move to to really uh shut you off.
• 4:47
  SPEAKER_00: Yeah, last week was definitely a surprise to a lot of people, but it somehow the funds really got it right this time.
• 4:53
  SPEAKER_00: You know, they s they got rid of a record net short position in July till now and added you know two hundred and fifty thousand contracts long or some number around there for managed money.
• 5:03
  SPEAKER_00: And so far they've kind of got it right.
• 5:05
  SPEAKER_00: Uh we were able to stop a price floor around four bucks and demand kicked on and now production got cut, like you talked about, and a 1.5 billion bushel uh ending stocks is quite different than the 2 billion we had most of the year.
• 5:19
  SPEAKER_00: So going into next year it leaves things a little bit more vulnerable to some upside, and that's where it starts to get interesting here uh talking about 95 million corn acres next year, and can we achieve a 180 plus yield?
• 5:34
  SPEAKER_00: Is that even possible yet?
• 5:35
  SPEAKER_00: Things like that at least become uh you know talkable again rather than before it was like holy cow, we're gonna be we're gonna have corn coming out of our ears.
• 5:44
  SPEAKER_01: Yes, for sure.
• 5:45
  SPEAKER_01: And you know, like you said, the market's gonna have to work for that, right?
• 5:48
  SPEAKER_01: Yeah.
• 5:48
  SPEAKER_01: Um, you know, you're gonna we're gonna need you know 94 and a half million acres and a 181 yield, a little bit of reduction in demand will get you to just back over two billion bushels, but the market needs to work for that.
• 6:01
  SPEAKER_01: Um so that's what I'm interested in kind of seeing over these next uh few months is how hard does new crop corn work for that.
• 6:08
  SPEAKER_01: Because you know, like a day like today, you you take the front month up 10 cents, but December corn is just kind of creeping along down there.
• 6:15
  SPEAKER_01: I think it was up four three, four.
• 6:17
  SPEAKER_01: Yep.
• 6:18
  SPEAKER_01: Yep.
• 6:18
  SPEAKER_01: So you know, I I definitely feel like we're gonna need to see some see some legs there on on uh DS 25 to try to get that you know four million acre bump is what it feels like to me.
• 6:29
  SPEAKER_00: So talking about demand on corn, especially, we're looking at ethanol, very interesting right now situation going on in the cash market, Jordan.
• 6:39
  SPEAKER_00: One of the things that's been happening is we've seen a nice rally in the corn market and a lot of selling going on here.
• 6:46
  SPEAKER_00: So basis is starting to weaken up in this cash market.
• 6:49
  SPEAKER_00: But something that really caught our ear this year, uh this week, especially throughout, you know, Northwest Iowa and southern Minnesota, where some of these bids are relatively strong still compared to normal for the rest of the United States, is that we are seeing uh bids start to really back off in the front and further out into the summer still holding somewhat strong bids or uh attractive bids that are getting some selling attention.
• 7:15
  SPEAKER_00: But that wasn't necessarily the whole story today, was it, Jordan?
• 7:20
  SPEAKER_01: Correct.
• 7:21
  SPEAKER_01: Um, so you know, a couple of different things to unpack there with uh with what uh you're kind of looking at there, Mike, right?
• 7:27
  SPEAKER_01: You know, ethanol um, you know margins and you know, some plants kind of idling is what we've been hearing over the past uh three weeks.
• 7:36
  SPEAKER_01: But you know, as we've kind of rallied on on corn, farmer selling has picked up.
• 7:42
  SPEAKER_01: It's it's been pretty good since harvest, right?
• 7:44
  SPEAKER_01: You know, much better than what we've seen uh last year.
• 7:47
  SPEAKER_01: So basis levels have widened out significantly with this market rally to you know uh 30 to 32 under is what it kind of seems like in this I-90 corridor, which you know, two weeks ago would have been you know closer to like 17 under.
• 8:04
  SPEAKER_01: So probably taking at least half of the rally back out with basis.
• 8:08
  SPEAKER_01: Um because you know, the farmer's been a been a pretty good seller of that, and you know, end users, you know, what what I've been reading are long two to three months worth of corn is what it what it kind of seems like.
• 8:22
  SPEAKER_01: Yep, yep.
• 8:23
  SPEAKER_01: So, you know, they're not gonna want to take uh a whole lot more risk than that, so they're gonna continue to widen those basis levels, is what it looks like to me.
• 8:30
  SPEAKER_01: Now, to go along with that, the ethanol side has kind of been flipping.
• 8:36
  SPEAKER_01: Um, you know, the the ethanol um plants have been you know grinding really hard.
• 8:41
  SPEAKER_01: Um, you know, this week again they ground 111 million bushels, so they really didn't back off much this week.
• 8:46
  SPEAKER_01: To meet the USDA's estimate, they need to be doing about 104, but you're seeing stocks in increase, and that's what I I watch a lot.
• 8:54
  SPEAKER_01: You know, once you start to see those stocks on ethanol increase, um, you know, when they kind of hit 26 million barrels, then you really start to see ethanol grind slow down.
• 9:05
  SPEAKER_01: And we're we're close.
• 9:07
  SPEAKER_01: I mean, we've jumped from 21 uh million barrels there last uh month to twenty-five now, and you know, I could see twenty-six there next week is what it what that kind of looks like.
• 9:18
  SPEAKER_01: Um so you're starting to see some ethanol plants starting to idle.
• 9:22
  SPEAKER_01: Um, you know, hearing I hearing of three of them is what what I've heard at least.
• 9:27
  SPEAKER_01: Yep.
• 9:28
  SPEAKER_01: In just our local area.
• 9:30
  SPEAKER_01: Correct.
• 9:30
  SPEAKER_01: In just the local area.
• 9:31
  SPEAKER_01: So that too is pretty negative basis, right?
• 9:34
  SPEAKER_01: When you kind of kick a couple of those big uh big uh net users uh out of the market, right?
• 9:40
  SPEAKER_00: Yeah, I mean it sounds like uh a few different items, but natural gas is definitely one of the headline items in the spot market.
• 9:48
  SPEAKER_00: You know, most ethanol plants at this point probably have enough of a long built on natural gas that they can grind still for a little bit comfortably.
• 9:56
  SPEAKER_00: However, any new purchase bushels of corn are being hedged against a natural price or a natural gas price that is, you know, in the spot market$29 in some cases, which is uh incredibly high compared to the futures at$4, for example, Jordan.
• 10:11
  SPEAKER_00: So what are you hearing ethanol plants doing with that?
• 10:14
  SPEAKER_01: Yeah, so specifically, I mean, one of the plants that I have heard about idling is you know putting that uh putting that uh natural gas back on the market, you know, thinking that they can kind of go idle here and you know do some maintenance and at the same time, you know, uh sell some natural gas and just kind of make a margin off of that is is what we're hearing.
• 10:33
  SPEAKER_00: We haven't seen that for some time, have we?
• 10:35
  SPEAKER_00: When's the last time you've seen that type of shift?
• 10:38
  SPEAKER_01: Yeah, so the last time we kind of heard about you know things like this happening would have been you know Russia-Ukraine when that first kind of came on and you know seeing a a bit of a bump on the on the energies at that point.
• 10:50
  SPEAKER_00: Yeah, for sure.
• 10:51
  SPEAKER_00: Well, a lot of interesting things to talk about.
• 10:52
  SPEAKER_00: It's gonna be a really big weekend.
• 10:54
  SPEAKER_00: There's no trade on Sunday night or Monday during the day.
• 10:57
  SPEAKER_00: Uh that's MLK Day, and then we've got uh we've got inauguration that day as well.
• 11:02
  SPEAKER_00: So we will see Monday night as the grain markets open back up, Jordan.
• 11:07
  SPEAKER_00: I I would expect uh Tuesday to be quite an interesting trade day across the board, whether it's stock market, energy market, uh corn and soybeans, you know, hogs.
• 11:18
  SPEAKER_00: We're seeing more activity on the tariff side here recently get talked about.
• 11:22
  SPEAKER_00: So I am very curious.
• 11:24
  SPEAKER_00: Uh I don't know if I should be excited or fearful of what Monday night's gonna show us, but it's gonna be an interesting trading week next week, to say the least.
• 11:33
  SPEAKER_01: Yes, it is.
• 11:34
  SPEAKER_01: I'm uh excited to see it.
• 11:35
  SPEAKER_01: We'll maybe see some fireworks there on Tuesday.
• 11:38
  SPEAKER_00: All right.
• 11:38
  SPEAKER_00: Well, thank you for your time, Jordan.
• 11:40
  SPEAKER_01: Thank you.
• 11:40
  SPEAKER_00: And thank you to all our listeners.
• 11:42
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 11:46
  SPEAKER_00: Check out our other podcast as well, Professional Ag Marketing, that's released every Friday.
• 11:51
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 11:57
  SPEAKER_00: See you next time.