Latest / Professional Ag Marketing Podcast / The Dome of Doom

Transcript

The Dome of Doom · 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 involve 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.
• 0:24
  SPEAKER_00: Today is June 17th.
• 0:25
  SPEAKER_00: I've got Lucas Peters with Professional Ag Services here with us today.
• 0:29
  SPEAKER_00: How's it going?
• 0:30
  SPEAKER_01: It's going very well, Mike.
• 0:32
  SPEAKER_00: Awesome.
• 0:32
  SPEAKER_00: Well, it is Friday.
• 0:33
  SPEAKER_00: We're going into a long weekend, three-day weekend that we are not normally uh used to.
• 0:39
  SPEAKER_00: So we have a three-day weekend happening a couple weeks before the July 4th three-day weekend.
• 0:44
  SPEAKER_00: And uh we were talking weather going into it.
• 0:47
  SPEAKER_00: We traded hot and dry all week.
• 0:49
  SPEAKER_00: So that's gonna be one of the main topics of our conversation today.
• 0:52
  SPEAKER_00: The Dome of Doom, as you would put it.
• 0:55
  SPEAKER_00: Nice.
• 0:56
  SPEAKER_00: So we're gonna talk a little bit about that, but we're gonna get started with some outside market influences this week.
• 1:02
  SPEAKER_00: I'd say two of the biggest factors in the commodity markets this week were outside market influences and then the weather aspects.
• 1:08
  SPEAKER_00: So as we look at that, uh crude oil here today having an immediate impact on commodity prices, down about seven, seven and a half dollars for the majority of the day, down about eight and a half right now, uh, right before the close here on the grains.
• 1:24
  SPEAKER_00: So we've got crude oil back to$108 on this July contract, uh really rough day today.
• 1:30
  SPEAKER_00: I heard a couple different things that have got things stirring.
• 1:34
  SPEAKER_00: The uh Biden administration came out, saw the oil profits from the refiners, and said, you know what, you shouldn't be making that much money if we're all paying uh over five dollars for a national average gas price.
• 1:45
  SPEAKER_00: So he's gonna do everything in his power, I guess, to try to increase oil production in the United States.
• 1:51
  SPEAKER_00: And OPEC kind of came out now and said uh maybe they will too.
• 1:55
  SPEAKER_00: Then um in the other aspect of crude oil, you're talking about global economic slowdowns, and that worries them for uh consumption going forward here as the equity markets have really taken a hit.
• 2:08
  SPEAKER_00: Uh a sub about 23% sell-off from the high there at 4,800 earlier this year on the S P 500, backed off, uh kind of finding some support near that 3,600 type area, so a sizable sell-off in the equities.
• 2:23
  SPEAKER_00: And that's had its impact on these grain markets as well as in the beginning of the week we saw a massive move in liquidation on these grain contracts as the equities were starting to get really beat up after the Fed announced that they were going to uh move uh basis point seventy five points there and raise interest rates to try to stop some inflation.
• 2:44
  SPEAKER_00: Uh equities got beat up a little bit.
• 2:47
  SPEAKER_00: And uh managed money fund uh positioning, they were selling off the grains to trying to uh pay off their margin calls on the equity side of things.
• 2:56
  SPEAKER_00: And sounds like they got some midweek help with uh weather turning a little bit hotter and drier, and then the fund manager said, you know what, you better keep some longs there in the grains because of uh uh uh longer-term food inflationary pressure that is happening because of things like the Russia-Ukraine battle.
• 3:12
  SPEAKER_00: So they did find some some support, helped them get to the top end of the trading ranges.
• 3:17
  SPEAKER_00: July corn pushed$8 here on Friday.
• 3:21
  SPEAKER_00: Um November soybeans, about$15.5.
• 3:24
  SPEAKER_00: Continued resistance points, very key spots for these grain markets ahead of a three-day weekend here that uh we're trading hot and dry weather going into Lucas.
• 3:34
  SPEAKER_00: So uh historically, this could be a very um uh a very dangerous time, is what I'll say.
• 3:41
  SPEAKER_00: Is as we get into these three-day weekends, a lot can change on the forecast.
• 3:45
  SPEAKER_00: And uh it's getting late enough now.
• 3:48
  SPEAKER_00: You know, we we have the crops in the ground, and forma came out last week, said they found a million and a half more acres than the USDA had back in their March reports.
• 3:56
  SPEAKER_00: We'll get updated numbers on current stocks and acreage at the end of the month, but you're gonna start seeing a lot more come out here over the next couple weeks.
• 4:05
  SPEAKER_00: And all of a sudden, if we turn this hot, dry forecast from July to September to a little bit cooler weather, wetter weather pattern here uh that we started to see this week, uh, that would really tame some of these prices down, I believe.
• 4:18
  SPEAKER_00: So it's something to watch for seasonally.
• 4:21
  SPEAKER_00: There's a reason why July 4th is a good time target, and uh that three-day weekend kind of plays into part with that some of those years.
• 4:28
  SPEAKER_00: And uh just as we get a better forecast, get closer to the corn pollination time frame.
• 4:33
  SPEAKER_00: So in the upfront here, what do you think?
• 4:36
  SPEAKER_00: I mean, we needed a little bit of heat to help this corn crop around in in general, right?
• 4:40
  SPEAKER_00: But the the more worrisome part is basically Nebraska as a forecast, had uh drier and warmer conditions in the Western Corn Belt, and then um yeah, you know it this dryness continuing past just this little needed short-term bump.
• 4:55
  SPEAKER_00: But what do you got to say today?
• 4:56
  SPEAKER_01: Yeah, no, so you're you're you're right, Mike, of the I think what the market was looking at and trading uh and it's probably more worrisome, is that 30 to 90 day forecast that came out that Noah sent out and is hotter and drier more than the immediate term here of this weekend uh into early next week, showing some really extreme heat coming in.
• 5:18
  SPEAKER_01: Um you know that the the media likes to pump it up right, the dome of doom coming in this week.
• 5:25
  SPEAKER_01: It's very dramatic.
• 5:26
  SPEAKER_01: I do like that uh term, but uh if we're going to get a dome of doom, uh this is probably the right time of the year to get it.
• 5:35
  SPEAKER_01: I mean it extreme heat is never good for crop production, for livestock production.
• 5:40
  SPEAKER_01: Like we it's not good for us.
• 5:42
  SPEAKER_01: Uh I mean we're gonna all be sitting inside as much as possible because of it's gonna be hot and uncomfortable outside.
• 5:48
  SPEAKER_01: But from a crop standpoint, in most of our area, topsoil moisture is sitting really good.
• 5:54
  SPEAKER_01: Yeah, there's areas in Nebraska that uh are pretty dry, but Nebraska's kind of dry and they got irrigators to turn on.
• 6:03
  SPEAKER_01: They'll turn them on early this year to try to battle that.
• 6:07
  SPEAKER_01: And so with with topsoil moisture being good, their ground will be a little slower to heat up.
• 6:12
  SPEAKER_01: Uh we got crop progress this week uh has really shot up.
• 6:16
  SPEAKER_01: Uh just driving around the countryside, you know, corn, uh a lot of it's hitting that V6 stage this week.
• 6:24
  SPEAKER_01: So, you know, 30-inch rows, we're probably the end of next week, we're gonna be shading most of those rows.
• 6:30
  SPEAKER_01: Uh that helps keep the canopy cooler.
• 6:33
  SPEAKER_01: Uh, and also vegetatively, like if you get heat during vegetative stages of growth, it's not near as detrimental to yield as reproductive growth, right?
• 6:43
  SPEAKER_01: So there's no tassels, there's no silks, there's no flowers on the soybeans.
• 6:47
  SPEAKER_01: Um, so a little heat now uh isn't great, but it's not the end of the world.
• 6:53
  SPEAKER_01: Yeah.
• 6:53
  SPEAKER_01: Uh, you know, corn specifically, V6 is a pretty important time, right?
• 6:57
  SPEAKER_01: That's uh the growing point starting to hit above ground.
• 6:59
  SPEAKER_01: That's when we're determining the the ear sizes, numbers around, right?
• 7:04
  SPEAKER_01: Not length yet.
• 7:05
  SPEAKER_01: Um so it it's not I'm not gonna say that it's it's fine.
• 7:10
  SPEAKER_01: It's not good to be 104 degrees in the middle of June.
• 7:14
  SPEAKER_01: Uh, but it it could be a lot worse.
• 7:17
  SPEAKER_01: And so I I think just looking at Twitter, you know, there were some hot days this week, right?
• 7:21
  SPEAKER_01: And there was pictures on Twitter of Illinois of corn all rolled up and looking at the city.
• 7:26
  SPEAKER_01: I saw that.
• 7:26
  SPEAKER_01: That surprised me a little bit.
• 7:28
  SPEAKER_01: And so it's probably surprising, but like that's just the corn plant's normal defense mechanism against hot weather.
• 7:36
  SPEAKER_01: So next week, uh later next week, it looks like it's gonna cool down and uh down into the mid-80s in our part of the world.
• 7:43
  SPEAKER_01: Well, the optimum corn growing temp is 86.
• 7:46
  SPEAKER_01: So we're still gonna think it's pretty hot.
• 7:48
  SPEAKER_01: Corn plant's gonna love it, the leaves aren't gonna roll up and it's gonna look really good.
• 7:52
  SPEAKER_01: Uh, I think what we're gonna see maybe not so much here, but uh maybe a little further north where planting conditions were a lot wetter.
• 8:02
  SPEAKER_01: You're gonna see a lot of the planting sins show up this coming week, right?
• 8:06
  SPEAKER_01: Of mudded it in, smeared sidewalls, weak root systems, uh all of a sudden.
• 8:12
  SPEAKER_01: Or compaction problems, compaction problems, like it turns hot even though the soil's still pretty wet underneath, you're gonna see that corn look pretty tough.
• 8:22
  SPEAKER_01: But again, that's even further behind than here.
• 8:24
  SPEAKER_01: So you're probably in the V3, V4 stage up there.
• 8:27
  SPEAKER_01: Uh it's it's obviously more critical when we look forward to that July uh forecast and and the heat and the dry weather.
• 8:35
  SPEAKER_01: So they you know, one thing that uh if you kind of look at like where will the corn plant be, like if it's v6 now, under normal growing conditions, your average hybrid, you sh will be tasseling around July 15th uh in southern Minnesota.
• 8:53
  SPEAKER_01: Uh so if you if you're looking ahead to a key forecast, that's gonna be a key time to to kind of watch where does that forecast shake out mid to late July, uh, because that's when a lot of the corn belt belt will be tasseling.
• 9:08
  SPEAKER_01: You know, last year was probably a little earlier than that because we got planted early and June was hot.
• 9:13
  SPEAKER_01: So we pushed the crop along.
• 9:15
  SPEAKER_01: This year we got planted a little late, cool early.
• 9:18
  SPEAKER_01: Uh now we're getting the heat, so it'll it'll be mid to late July uh when we'll be uh right in the middle of corn pollination.
• 9:26
  SPEAKER_01: That's the time of the year when you get 104 degrees, uh you can really uh really hurt the corn plant and corn yield.
• 9:34
  SPEAKER_00: Well, this is a very typical thing to happen, I think.
• 9:37
  SPEAKER_00: Usually June, you get a hot and dry forecast at some point through the month.
• 9:41
  SPEAKER_00: The phones get a little bit scared, do a little bit of a weather rally, and then uh normally, you know, we end up getting that corn crop that we didn't know we'd get.
• 9:50
  SPEAKER_00: This year they're gonna bite on it a little bit harder, a little bit quicker every time we talk about dry weather.
• 9:55
  SPEAKER_00: We didn't get as many acres as we maybe wanted or needed, and with the tight ending stocks, we're gonna need a pretty good trend line crop here to to start building some of these ending stocks.
• 10:05
  SPEAKER_00: So yeah, we could see a little bump here or there off some uh off some dry weather and things like that as the markets are gonna bite on that and with global uh inflation on the food side of things, totally.
• 10:16
  SPEAKER_00: Um, but typical marketing 101 stuff here, I think, Lucas, we're just experiencing uh another normal weather rally when it comes into June.
• 10:25
  SPEAKER_00: So any uh insurance topics to finish things off today?
• 10:28
  SPEAKER_01: Yep, they'll can't have me in without a little plug for insurance, Mike.
• 10:31
  SPEAKER_01: But uh, you know, the one thing set this news for four minutes.
• 10:35
  SPEAKER_01: Yeah, no, I I'll I'll I'll do quicker in four minutes.
• 10:37
  SPEAKER_01: Uh you know, in a year like this where the crop was planned a little late, uh cool early, now we're really growing fast.
• 10:45
  SPEAKER_01: Like uh in our area down in Laverne or the surrounding areas, like we just got done with corn herbicide application.
• 10:53
  SPEAKER_01: Now we're putting out two or three leaves a week, growing really fast.
• 10:57
  SPEAKER_01: Potential is there for uh wind and green snap damage, right?
• 11:03
  SPEAKER_01: Anytime you take a corn plant and you make it grow really, really fast, uh you got a few other stressors on it with heat and herbicide working through.
• 11:12
  SPEAKER_01: Um, if whenever this heat breaks, it's generally we got a clash of hot and cold, right?
• 11:18
  SPEAKER_01: Yep.
• 11:18
  SPEAKER_01: And when we have that, what happens is usually severe storms.
• 11:22
  SPEAKER_00: Well, we've had plenty of those this year.
• 11:24
  SPEAKER_01: And so hopefully we're done.
• 11:25
  SPEAKER_01: Uh, but if the trend continues, which I know you like to look at trends, Mike, uh, you know, severe weather, really strong winds is not a good combination right now to hit the corn crop.
• 11:38
  SPEAKER_01: So I'm not saying anything's gonna break, it's just the potential's there to well, if you if you're looking at your corn crop, it looks really good, it's growing fast.
• 11:49
  SPEAKER_01: If you're worried about the wind, call your insurance agent, call call myself at uh Proeg uh here, and we can look at a wind policy.
• 11:58
  SPEAKER_01: That policy has to be written by July 1.
• 12:00
  SPEAKER_01: So we got a couple of weeks yet um to think about it.
• 12:03
  SPEAKER_00: But uh and you were probably fine up until about this point to get wind, you think?
• 12:08
  SPEAKER_01: Exactly.
• 12:08
  SPEAKER_01: So though most of the wind policies don't even go into effect until we hit this time of year anyway.
• 12:13
  SPEAKER_01: Um so now if you if your potential's good, price is good, you're looking to protect every single bushel, that would be the last uh step to add to your risk management uh for 2022.
• 12:25
  SPEAKER_00: Awesome.
• 12:25
  SPEAKER_00: Well, you hear heard it here first, folks.
• 12:28
  SPEAKER_00: If you need anything, please call Lucas or myself.
• 12:30
  SPEAKER_00: Please have a fantastic long weekend.
• 12:32
  SPEAKER_00: We'll catch you next week.
• 12:34
  SPEAKER_00: And thank you to all our listeners.
• 12:36
  SPEAKER_00: Please reach out to us from our website at professionalagmarketing.com or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 12:48
  SPEAKER_00: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.