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Grains: Dec WASDE · 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 Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is December 9th.
• 0:25
  SPEAKER_01: I've got Pat back with us here today.
• 0:26
  SPEAKER_01: How's it going, Pat?
• 0:27
  SPEAKER_00: Good, Mike.
• 0:28
  SPEAKER_00: How are you?
• 0:29
  SPEAKER_01: We're not doing too bad.
• 0:30
  SPEAKER_01: The uh the special announcement today, we're going to be talking about the WASDA report that came out at 11 today.
• 0:36
  SPEAKER_01: I figured it was a great one to talk about.
• 0:38
  SPEAKER_01: It's a December WAS day, which sometimes that can be a little bit boring, Pat, but what did you think about the overall changes made in today's report?
• 0:45
  SPEAKER_00: Well, I think that you know the biggest point is to uh you know we're reminded again, not surprisingly, but reminded again that uh um the you know demand through the export sector and the ethanol sector continues to be very solid, and and so uh an improvement or increase of 125 million projected on the export front um tightens up that balance sheet just a little bit, Mike, getting getting inching closer to the two billion bushel uh projected ending stocks number and and allowed for pretty nice close here today, up four cents or so.
• 1:21
  SPEAKER_00: So just a little bit of support.
• 1:23
  SPEAKER_00: Uh um so by far that's the uh for sure the biggest thing that came out today, right, Mike?
• 1:28
  SPEAKER_01: Yes, something uh to compare to.
• 1:30
  SPEAKER_01: Last year we had a pretty strong demand report in December as well, so something to to kind of reminisce about in last year's report as well.
• 1:38
  SPEAKER_01: That that one was more of a little a little bit more of a shocker, I thought, because that was odd, right?
• 1:43
  SPEAKER_01: We're shrinking supply and increasing demand kind of at the same time there.
• 1:48
  SPEAKER_01: But last year's was a really, really big move, it seemed like, at least compared to what expectations were.
• 1:54
  SPEAKER_01: This one it seemed like the market pretty much took it in stride and kind of ran with it, uh, not too much for unexpected trade throughout the day.
• 2:01
  SPEAKER_00: That's exactly right.
• 2:02
  SPEAKER_00: Anything on the soybean side of things?
• 2:04
  SPEAKER_01: They actually didn't change a thing on the soybean balance sheet, really, and they left South America's production alone.
• 2:10
  SPEAKER_01: Uh, I thought maybe they would start to think about changing some of those numbers uh now that their crop year is really kicked off.
• 2:17
  SPEAKER_01: I would expect in the January report that'll be a little bit more of concrete evidence to say let's start adjusting some of those South America numbers, but at this point they left it alone.
• 2:26
  SPEAKER_01: So the snowy bean balance sheet is is a non-issue for sure, not starter.
• 2:29
  SPEAKER_00: And generally at this point, there's also um pr relatively benign weather as it relates to South America.
• 2:36
  SPEAKER_01: It's hot, and it's at the time of the year where they do get hot, and they started off of the season a little bit dry because after they wrapped up planting, they didn't get that monsoon type uh rain events to kick off the growing season, and they didn't get that really this year.
• 2:51
  SPEAKER_01: So they're gonna need to buy rainfalls through the growing season here a little bit more than they normally do, but the forecast is very precep heavy.
• 2:59
  SPEAKER_01: It looks like the areas that need the the rain is gonna get it at this point, Pat.
• 3:04
  SPEAKER_01: And I think if you look at a soybean chart, that it's pretty evident that's what they've been trading here the last week or so as we've taken off 50 cents uh on the soybean market, and as we transition to trading more Brazil weather and kind of away from, you know, we had buy the room or sell the fact, maybe going on with the Chinese trade deal and some purchases here.
• 3:23
  SPEAKER_00: And what are we seeing on the Chinese front as it relates to sales?
• 3:27
  SPEAKER_01: The big one I think is that it's been consistent.
• 3:30
  SPEAKER_01: They have small flash sales kind of throughout uh the the last month or so here now, since they've really uh uh buckled down and started buying U.S.
• 3:38
  SPEAKER_01: soybeans.
• 3:39
  SPEAKER_01: Uh the thing we're seeing though, when they first started buying soybeans, we were very competitive with the rest of the world on soybean purchases or on selling them.
• 3:48
  SPEAKER_01: Uh after our market went up a dollar and a half, basically, we priced ourselves out of the market quite quickly.
• 3:54
  SPEAKER_01: And Brazil prices went down after that as well.
• 3:57
  SPEAKER_01: So lately the sales have been a lot smaller.
• 3:59
  SPEAKER_01: We're only about 25% uh complete with the with the sale progress.
• 4:04
  SPEAKER_01: We need to hit their target.
• 4:06
  SPEAKER_01: So somewhere between three to four million metric ton, depending on what numbers you look at, out of the 12 million metric ton.
• 4:12
  SPEAKER_01: And last week, I know we talked about it, that that number now goes until the February, you know, whatever the end of the season peasant says is the end of season, I guess.
• 4:21
  SPEAKER_01: Yeah, it seems like a moving target, but nonetheless, they say they're on track for those.
• 4:26
  SPEAKER_01: Um, but at this point, just based on when the sales have been happening and how um how aggressive, it seems like they're still not gonna buy unless it just makes sense.
• 4:36
  SPEAKER_01: Like if we're cheaper, they're they step in and buy, but the moment we kind of get a little bit expensive, then it slows down pretty often.
• 4:42
  SPEAKER_00: So it's it's it's likely that China doesn't even really think there's a deal, right?
• 4:46
  SPEAKER_00: They're just going about their normal course of business.
• 4:48
  SPEAKER_01: The way that here is yeah, and that normal course of business would say by the time end of January hits, that's right, it the music stops.
• 4:55
  SPEAKER_00: Yeah, and so and so far from a basis um in the interior perspective, we're still seeing pretty wide basis levels on soybeans up in the northwest corn belt.
• 5:05
  SPEAKER_00: Um normal appreciation as we kind of move towards you know from the uh from from southwest Minnesota into into Iowa and you know towards the Mississippi River, we're seeing a little bit more normal basis level.
• 5:18
  SPEAKER_00: The liftings that are taking place going into China are coming um off center gulf, not a lot of activity off PW last I checked.
• 5:25
  SPEAKER_01: No, and basis reflects it.
• 5:27
  SPEAKER_01: Northwest, we're still backed up pretty hard.
• 5:30
  SPEAKER_01: And even the the lines at like the processors, it's three-hour long lines, and it's just uh it's bottled up pretty hard.
• 5:37
  SPEAKER_01: And there's just nowhere to for soybeans to go quick enough at this point in the Northwest Corn Belt.
• 5:41
  SPEAKER_01: So at this point, it seems like that we're not getting that really strong December-January push like we get some years to get you know processors to a very attractive basis level.
• 5:51
  SPEAKER_01: We just haven't really been able to do that yet as we grind through some of these soybeans.
• 5:56
  SPEAKER_00: You bet.
• 5:56
  SPEAKER_00: So maybe um we can get a little bit of follow-through um on the on the corn side of this thing as as we go uh throughout the balance of this week.
• 6:06
  SPEAKER_00: You know, we touched upon on our last podcast for our grain producers as it relates to you know that Dece corn uh area, Dece 26 and that 470 area.
• 6:16
  SPEAKER_00: We we tapped that not so long ago.
• 6:18
  SPEAKER_00: Maybe you get another chance at that here on this on this little little rally.
• 6:22
  SPEAKER_00: Not a bad spot, right, Mike, to be kind of thinking about uh uh making some moves for next year?
• 6:27
  SPEAKER_01: Yeah, especially when I start to look at what the next year's balance sheet could entail.
• 6:32
  SPEAKER_01: The USDA came out this last week and said they expect somewhere around 95 million corn acres.
• 6:37
  SPEAKER_01: Makes sense, couple million less than this last year.
• 6:41
  SPEAKER_01: And uh at this point, given everything we know about pricing, uh especially with the setback now we've had in next year's soybean price, uh that 470 area just every day looks more attractive to me, probably to start a risk management process.
• 6:55
  SPEAKER_00: Yeah, and they were using a 182 yield and that's uh little forecast outlook numbers as well.
• 7:00
  SPEAKER_00: And then and and while I agree with your acre observation, that seems reasonable, so did the yield and and uh and then kind of plugged in a very similar usage number to what we expect to use this year, which of course is a question mark as well.
• 7:14
  SPEAKER_00: But anyway, I I'm I'm with you, Mike.
• 7:17
  SPEAKER_00: It seems to be, you know, we're in a spot here when you're hanging more or less around that two billion bushel ending stocks number that it's pretty hard to uh sustain any rallies, frankly, until we get uh until we get uh something to change from a fundamental perspective.
• 7:32
  SPEAKER_00: And and uh and and really from the demand side of the equation, uh again, experts are really good.
• 7:39
  SPEAKER_00: Ethanol disappearance is is is in the area of maxing out, and it's uh generally hard to find a spot where we're adding animal numbers globally at this point.
• 7:49
  SPEAKER_00: And so um, and so it it comes back to the production side of things.
• 7:53
  SPEAKER_00: You mentioned how weather is somewhat neutral in the in the southern hemisphere today.
• 7:57
  SPEAKER_00: Um, and so here we sit a little bit sort of stuck in this little trading range, and and maybe maybe we sort of trade the top in these ranges, we need to pay attention to that.
• 8:06
  SPEAKER_01: Dare I say, this is an incredibly normal market now.
• 8:09
  SPEAKER_01: Exactly.
• 8:10
  SPEAKER_01: Like if you look at this week, it it's very, very weird.
• 8:13
  SPEAKER_01: You had a massive crop, now demand's starting to turn on, and we're exporting a strong amount of corn, so that that's one thing.
• 8:20
  SPEAKER_01: The next thing is we're kind of waiting on a South America weather rally.
• 8:23
  SPEAKER_01: They have some potential to maybe uh get a little spark there, but that's what we're waiting on.
• 8:28
  SPEAKER_01: Otherwise, a market just kind of drifting sideways here at a normal time of the year where we're supposed to do that.
• 8:33
  SPEAKER_01: So leave all the geopolitical stuff to the side.
• 8:36
  SPEAKER_01: Basically, if you look at the fundamentals and some of the bigger impacts on these grain markets right now, it it's like it's very normal, actually.
• 8:45
  SPEAKER_00: Exactly right.
• 8:45
  SPEAKER_00: In years like this, the opportunity is to manage carry, manage spreads, manage basis, and and uh hit your marks.
• 8:51
  SPEAKER_00: And so we look forward to the opportunity and engage with with anybody that has any questions that that uh you know we'd love to to uh spend some time and understand your particular operation and and help you make the right decisions for your business.
• 9:04
  SPEAKER_01: All right, thank you, Pat.
• 9:05
  SPEAKER_01: Things to look forward to the rest of the week, just the FOMC meeting results tomorrow.
• 9:09
  SPEAKER_01: Sometimes that shakes some money up uh across to all these commodities.
• 9:13
  SPEAKER_01: So more of some broad commodity uh flow there.
• 9:16
  SPEAKER_01: But thank you for your time, Pat.
• 9:17
  SPEAKER_01: I enjoyed it.
• 9:18
  SPEAKER_00: Thank you.