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Soy Frenzy · 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.
• 0:24
  SPEAKER_01: Today is November 22nd.
• 0:26
  SPEAKER_01: I've got Jeff with us here today.
• 0:28
  SPEAKER_01: How's it going, Jeff?
• 0:29
  SPEAKER_00: Good afternoon, Mike.
• 0:30
  SPEAKER_00: Everything's doing well the last decent afternoon before the weather changes in this part of the world, huh?
• 0:35
  SPEAKER_01: That it was.
• 0:36
  SPEAKER_01: But the markets weren't so decent today, were they, to us, Jeff?
• 0:39
  SPEAKER_00: No, we kind of had some things like crude getting beat up a little bit here today.
• 0:44
  SPEAKER_00: Uh well off the lows at least, but kind of been a tough downward trend on the a few of these outside market, hasn't it?
• 0:51
  SPEAKER_01: Definitely.
• 0:52
  SPEAKER_01: The hog market took a tumble yesterday down two bucks on the D's.
• 0:56
  SPEAKER_01: The cattle market seemed to be more red these days than not, as we're going sideways there.
• 1:02
  SPEAKER_01: Corn market, that's just been a snoozer.
• 1:05
  SPEAKER_01: That just wants to trade about sideways as can be.
• 1:07
  SPEAKER_00: So sharply sideways.
• 1:10
  SPEAKER_01: Like the market's focused lately.
• 1:12
  SPEAKER_01: We're going to continue to talk about soybeans this week to start off with.
• 1:15
  SPEAKER_01: Then we're going to talk about basis on corn and and some of the east versus west debate.
• 1:19
  SPEAKER_01: How's that sound?
• 1:20
  SPEAKER_00: Sounds good.
• 1:21
  SPEAKER_00: Why don't you start us out, Mike?
• 1:23
  SPEAKER_00: Give us an update on the Brazilian weather situation.
• 1:26
  SPEAKER_00: We're more focused in that part of the world than we are are in Argentina, correct?
• 1:32
  SPEAKER_01: Definitely.
• 1:32
  SPEAKER_01: So we're going to talk about Brazil and as a whole, this the southern tip of Brazil is a little bit wet.
• 1:38
  SPEAKER_01: The central and northern part is a little bit dry.
• 1:42
  SPEAKER_01: Right now, they would be about 70% planted on soybeans at this point, which would be uh umpteen percent behind normal, uh somewhere in the 80s uh would be normal for them at this time of the year.
• 1:54
  SPEAKER_01: So from a seasonal perspective, right now, uh, you know, if if uh they're just planting, if they're 70% planted, uh, you know, their critical growth time frame would be about January on their soybean crop.
• 2:08
  SPEAKER_01: That would be like their August, for example, like we experience.
• 2:12
  SPEAKER_01: So right now, I think we talked about Brazil a little bit on the overnight.
• 2:17
  SPEAKER_01: Uh, you know, soybeans were taking some overnight profits ahead of the holiday here.
• 2:21
  SPEAKER_01: Um, heavy rains were continuing for southern Brazil, and then some showers continued through central and northern Brazil.
• 2:29
  SPEAKER_01: So they're mainly talking about some questionable concerns with delays about their soybean planting right now, obviously.
• 2:37
  SPEAKER_01: And then uh they're talking a little bit about what their future may entail uh for uh outlook here for planting.
• 2:44
  SPEAKER_01: So, for example, their forecast, uh the extended forecast into December, still a little bit dry.
• 2:50
  SPEAKER_01: Um but it is so it is a little bit early to talk about Brazil weather compared to normal since it's right at the beginning of their planting season.
• 2:58
  SPEAKER_00: Fair.
• 2:59
  SPEAKER_01: But they've been pretty dry, and uh looking forward it is is a little bit dry.
• 3:03
  SPEAKER_01: They caught some rain this week, kind of helped pull back prices, but further out is more of December, January.
• 3:10
  SPEAKER_01: What are we gonna see in that time frame for longer term weather?
• 3:13
  SPEAKER_00: Longer term forecast or or um analysts you would say are watching the whole El Nino um situation and suggesting that's gonna continue to be a drier bias in the south in South America.
• 3:26
  SPEAKER_01: Yep, so that's gonna be something we're gonna continue to watch and trade probably through December, probably into January.
• 3:32
  SPEAKER_01: We'll we'll have a better idea.
• 3:34
  SPEAKER_01: But this is the very beginning of it, not the end of their weather pattern.
• 3:37
  SPEAKER_01: I mean, unless the rest of Brazil really gets rain from here on out, which it isn't forecasted to at this point.
• 3:43
  SPEAKER_00: One thing I I've I've been reminding everybody of, Mike, is you know, Brazil's got this issue of every year they add production also, right?
• 3:52
  SPEAKER_00: And pretty significant um amount of acres.
• 3:55
  SPEAKER_00: So the you know, every year is projected to be a new record year when they start the year.
• 4:01
  SPEAKER_00: So the first amount, you know, first couple chunks or bites out of the crop that we take from a weather perspective really just gets us back to a year-ago type levels.
• 4:10
  SPEAKER_00: Yep.
• 4:11
  SPEAKER_00: Um, and it takes something pretty special to take enough out of that production to actually start to get us, you know, what was it, two years ago we had a billion bushel um lower crop than what was expected.
• 4:23
  SPEAKER_00: Well, that takes it takes in a pretty special event, but they've they've started early on being pretty warm, pretty dry, haven't they?
• 4:30
  SPEAKER_01: Yeah, and all of the alternatives, you know, with their with their slower start, if they have to replant soybeans, I mean they could go do that.
• 4:38
  SPEAKER_01: Uh that's gonna reduce the corn saffrina corn crop acres going forward, or they'll just replant cotton on intended soybean acres.
• 4:46
  SPEAKER_01: So all of which would equal, you know, lower soybean acres and probably lower corn acres going forward for that next crop.
• 4:54
  SPEAKER_01: But the other thing I think that was on the overnight.
• 4:57
  SPEAKER_01: But during the day we didn't really talk about much weather uh for Brazil.
• 5:02
  SPEAKER_01: And I think partly the the bigger sell-off that we had today in the soybean market was we got weakness from the lower soybean oil futures when we saw that.
• 5:11
  SPEAKER_01: And that was following the lower crude oil futures, I think, uh personally here, Jeff.
• 5:16
  SPEAKER_01: And that had to that had really stemmed off of oil falling as OPEC, they had their meeting delayed, and that really dimmed the hopes for more production output cuts.
• 5:28
  SPEAKER_01: So they are waiting on hopefully OPEC can put some production cuts in place and and start to lower some stockpiles globally on oil.
• 5:39
  SPEAKER_01: You know, the U.S.
• 5:40
  SPEAKER_01: in the meantime, we rose another 8.7 million barrels last week on our report.
• 5:45
  SPEAKER_01: So right now in the United States, we're kind of swimming in crude oil all of a sudden from a production standpoint.
• 5:52
  SPEAKER_01: Yeah, production's been pretty strong, and uh now stocks are really rising.
• 5:56
  SPEAKER_01: So down another 5% or two or so on the WTI there, uh dipped below$74 a barrel.
• 6:05
  SPEAKER_01: Yeah, been a lot of pressure on that uh oil market, and I think that spilled over into the soybean market quite a bit, especially today, Jeff.
• 6:13
  SPEAKER_00: Makes sense, Mike.
• 6:15
  SPEAKER_01: Awesome.
• 6:15
  SPEAKER_01: So other than that, I mean when we look at uh some of the other bearish factors that had occurred in the soybean market this week, we tested that 1320 area on November 24 futures again, Jeff, and uh that had been the fourth time we've really done it.
• 6:31
  SPEAKER_01: Back in February, July, August, and now again in November, we bumped up against that 1320 ceiling on November 24 soybeans, and we failed to break through it.
• 6:42
  SPEAKER_01: So this is starting to become a problem from a chart perspective, from momentum.
• 6:47
  SPEAKER_01: And really, if you think about it, we're still only about 6% off their contract highs, going all the way back to April of 22 at 1380.
• 6:55
  SPEAKER_01: So at this point, we're kind of close on a week, right around 13 bucks on the November 24 futures.
• 7:03
  SPEAKER_01: This time of the year, whether you're in kind of December, January, I would like to be another month down the road to really uh make a seasonal observation that you know we're getting a weather rally from South America.
• 7:16
  SPEAKER_01: That means X amount of uh soybeans that I want to take advantage of and take risk off the table for next year.
• 7:23
  SPEAKER_01: Um I feel like we're not quite there yet from a seasonal perspective, and and that's maybe hesitated a lot of producers to making 2024 sales up until this point, with good reason, because you know we've had tight fundamentals here in the United States, we've had dry South America regions which are important for production, and then obviously the the expansion of the renewable diesel energy sector that uh could provide a nice jolt in uh production going forward or demand going forward for soybeans.
• 7:56
  SPEAKER_01: And when I look at where we're sitting right now from a chart perspective, only off the high 6%, you're very close to a seasonal uh target here, I think, on soybeans, taking some risk off the table.
• 8:08
  SPEAKER_01: I'm a little discouraged this week when we hit that ceiling again at 1320 and backed off, and I think uh we saw that in the futures here to close out the week too, Jeff.
• 8:16
  SPEAKER_00: Yeah, they definitely just run out of gas once they get up to the top end of the range here, um, especially on the you know, you mentioned the November in the back at 1320, but it's also very true on some of these front-end months um from a chart chart perspective.
• 8:32
  SPEAKER_00: But yeah, it's early um for soybean farmers out there, but it's also this weather rally is much earlier than I can remember one starting before uh talking about Brazilian weather this this early in the season is really impressive.
• 8:48
  SPEAKER_00: We all know um you plant in the dust, the bins will bust, right?
• 8:52
  SPEAKER_00: So if we do start picking up some rains down there, it's gonna it could end up being a little bit tough to catch a late term rally if we if we get the acres, um which is definitely also one of the question marks.
• 9:04
  SPEAKER_01: And remember, this is a different situation than last year.
• 9:07
  SPEAKER_01: Last year was an Argentina weather problem.
• 9:09
  SPEAKER_01: They're about half the crop size as Brazil.
• 9:11
  SPEAKER_01: So obviously, any problems in Brazil, it should be a bigger impact on the soybean market.
• 9:17
  SPEAKER_01: Uh the exports on the meal side, anyways, that's more important to Argentina there.
• 9:22
  SPEAKER_01: But let's talk about spreads a little bit, Jeff.
• 9:25
  SPEAKER_01: December corn to July corn, the spread now got out about 39 cents here to close out our week.
• 9:32
  SPEAKER_01: We've seen that spread really gaining in the corn market here recently.
• 9:37
  SPEAKER_01: Uh however, locally, we've seen basis levels start to get a little bit stronger on corn here locally.
• 9:44
  SPEAKER_01: Talk to us about this difference between what we're experiencing in our backyard in the Western Corn Belt and what someone in like Ohio or the Eastern Corn Belt is experiencing today.
• 9:53
  SPEAKER_00: Yeah, it's a really interesting market place, especially for nerds like us, Mike.
• 9:59
  SPEAKER_00: Um so the having these spreadsheets.
• 10:02
  SPEAKER_00: I'll take that as a compliment.
• 10:04
  SPEAKER_00: I don't know how else to take it, but um you know you look at the that we've been watching these spreads for a while, and obviously the big difference um in the in as far as carry goes this year is the interest rate cost, right?
• 10:18
  SPEAKER_00: And and expense of storing stuff is quite a bit higher than what we've experienced in in years past.
• 10:24
  SPEAKER_00: So we're all looking at saying, okay, we we have the potential from that standpoint to go to wider spreads than what we maybe ever have before.
• 10:33
  SPEAKER_00: Um you know the that's in the baseline.
• 10:36
  SPEAKER_00: We've seen that happen in the soybeans.
• 10:38
  SPEAKER_00: It didn't take place over there either until you got to the last few weeks.
• 10:42
  SPEAKER_00: Now we're starting to now we've seen that uh more in the corn market as well.
• 10:47
  SPEAKER_00: It's really the the big spread that's widened out has been, of course, against the uh December and the March, um, is where a lot of the activity is taking place.
• 10:57
  SPEAKER_00: So I think that's part of it is we're just we're able to go to some wider levels than what we have in the past because of the interest cost, because of storage cost.
• 11:06
  SPEAKER_00: Um that, of course, in much of the US gets uh is getting come is getting pushed back, I guess, from the producer standpoint, meaning that you know the the farmer has not been willing to sell, which has been tightening up basis in a lot of in a large portion of the growing area, which naturally would have those spreads come a little closer together.
• 11:31
  SPEAKER_00: So that's been kind of the the give and take here.
• 11:33
  SPEAKER_00: But I think what's happened here recently, which has gotten really interesting, is the eastern corn belt.
• 11:39
  SPEAKER_00: So you go, you know, really get into um eastern Illinois, Indiana, Ohio.
• 11:46
  SPEAKER_00: You had Indiana with a record yield this year, you had Ohio with a record yield this year, um, and good crops last year.
• 11:54
  SPEAKER_00: And they're really getting choked up right now, trying to get the tail end of harvest into uh into some bins someplace.
• 12:02
  SPEAKER_00: Bins are all full, the elevators are full, they're kind of down to um you know how fast can we rail it out, how fast can we grind it each day, and then let the farmers fill in that space again.
• 12:14
  SPEAKER_01: So we're not experiencing that in this part of the world.
• 12:18
  SPEAKER_00: We are not experiencing that in uh western Iowa and uh southwest Minnesota, that's for sure.
• 12:25
  SPEAKER_00: But um we'll jump over to that in just a second.
• 12:27
  SPEAKER_00: I would just say think about where the delivery systems are, right?
• 12:31
  SPEAKER_00: That's all still lined up on the Illinois River, um, basically right in the middle of Illinois is a chunk of the delivery spots, so you're not too far away from where this really burdensome supply, uh at least short term, is taking place.
• 12:46
  SPEAKER_00: And that's part that's the other half of why we can widen out these spreads to the levels that we're doing it.
• 12:52
  SPEAKER_00: We're much further away from that world, the delivery points is what I mean by that, um, than where some of the supply issues.
• 12:59
  SPEAKER_00: So there's some people out there, we've got some customers out east um you know that are saying they've never they never thought they would buy corn this cheap again, you know, 40, 50, even some case 60 under corn basis.
• 13:11
  SPEAKER_00: So two different worlds as you bounce over to our stomping ground here.
• 13:16
  SPEAKER_00: Obviously, we're experiencing very much the uh opposite of that.
• 13:20
  SPEAKER_00: Um, we've got very little farmer selling taking place, um, and we've got basis that has continued to strengthen.
• 13:27
  SPEAKER_00: So, one of my messages for the row crop folks um listening to this podcast, Mike, is don't get stuck straight in your backyard because you I can guarantee you the people raising corn in Illinois or in Indiana feel a whole lot different than what they do in Laverne, Minnesota, right?
• 13:46
  SPEAKER_00: Um, so this is somewhat local too, uh, where you've got with a little bit on the short end as far as uh crop size goes, especially in some specific areas.
• 13:59
  SPEAKER_00: You know, you go west of here, um, out into western, you know, middle of South Dakota, western Nebraska, and Kansas, um, North Dakota, all have really good crops.
• 14:09
  SPEAKER_00: Basis is weaker out there as well.
• 14:11
  SPEAKER_00: So you can kind of see like where we're right at the epic center of um tighter supply and demand compared to what you've got west of here, what you got way in the eastern corn belt.
• 14:21
  SPEAKER_00: But yeah, basis here short-term, um, and locally, you know, I would I would dare say we've put 8-10 cents on some of these bids uh week over week.
• 14:32
  SPEAKER_00: We've seen some ethanol plants um climb into the uh you know 15 to 20 plus over type of a thing, and they just don't have some of that's even on some short-term bids, so they don't have a lot of corn around them right now.
• 14:47
  SPEAKER_00: Um, our opinion is I correct me if you feel differently, Mike, but I think our opinion is the the corn is there.
• 14:53
  SPEAKER_00: There was enough corn.
• 14:55
  SPEAKER_00: Um it's kind of the the message that we were sending around when you know tail end of when the combine were were rolling here a few weeks ago.
• 15:02
  SPEAKER_00: It's not a huge crop, but there's enough corn.
• 15:05
  SPEAKER_00: Um, and it's really just you know waiting for farmers selling.
• 15:09
  SPEAKER_00: Farmers have the leverage today.
• 15:11
  SPEAKER_00: Um, and uh, you know, as soon as as soon as they start letting go some of the crop, I think we'll start to see this situation uh straighten out fairly rapidly, if if I may put that in there as I look at what some of these other geographies are experiencing there at the moment.
• 15:28
  SPEAKER_01: Any final thoughts for our listeners today, Jeff?
• 15:31
  SPEAKER_00: I think be careful on the corn basis thing.
• 15:33
  SPEAKER_00: Let's let's not get too bullheaded on this thing.
• 15:37
  SPEAKER_00: Um we've learned that in the cattle market recently.
• 15:40
  SPEAKER_00: It it's going straight up until the don't day it doesn't.
• 15:42
  SPEAKER_00: And I think this corn basis is similar to that, Mike.
• 15:46
  SPEAKER_00: I like your ideas.
• 15:47
  SPEAKER_00: Take a hard look at some of this soybean coverage.
• 15:50
  SPEAKER_00: Um other than that, I think uh let's just let's have a good Thanksgiving.
• 15:55
  SPEAKER_00: Make sure we, of course, you know, count our blessings, as we all know, we all have very many of them.
• 16:00
  SPEAKER_00: Think of those that are um having some health issues or other challenges in their personal life, I guess, but um, we don't have to look too far down the road and there's folks in worse shape, that's for sure.
• 16:12
  SPEAKER_00: Uh so happy Thanksgiving to everybody.
• 16:14
  SPEAKER_01: All right, and uh friendly reminder just make sure you remove your turkey from the freezer today.
• 16:20
  SPEAKER_01: That'll give you plenty of time to toss it in the trash and buy ham or a prime row, something along those lines.
• 16:26
  SPEAKER_01: So uh happy Thanksgiving and uh thank you for listening today.
• 16:30
  SPEAKER_01: And thank you to all our listeners.
• 16:32
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 16:35
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 16:40
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 16:46
  SPEAKER_01: See you next time.