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Pro Farmer and Belly Crash · 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 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 August 25th, and I have Jeff here with us.
• 0:26
  SPEAKER_00: How's it going, Jeff?
• 0:27
  SPEAKER_00: Good afternoon, Mike.
• 0:28
  SPEAKER_00: Things are going well.
• 0:29
  SPEAKER_00: Awesome.
• 0:30
  SPEAKER_00: Well, this week the grain market was mainly focused on the ProFarmer Crop Tour going across the United States here.
• 0:39
  SPEAKER_00: Caught some interesting observations out of that, obviously.
• 0:42
  SPEAKER_01: What was your overall take, Mike?
• 0:45
  SPEAKER_01: Can we kind of step through that kind of state by state, if you will?
• 0:49
  SPEAKER_01: Obviously, you were on the road uh, what was that, two weeks ago now?
• 0:53
  SPEAKER_00: Yep, two weeks ago.
• 0:54
  SPEAKER_00: So um I'm gonna start off by talking about something fairly obvious, which was we experienced two very different crop tours, the Pearl Farmer Crop Tour and myself.
• 1:07
  SPEAKER_00: And I'm gonna start it by saying that pretty much the night before I left on the crop tour, it had rained everywhere I went that day.
• 1:16
  SPEAKER_00: Then it rained everywhere I went the next day, and the next day, and the next.
• 1:20
  SPEAKER_00: Or it rained on me in the field, and it was cool, brisk, nice 75 degrees.
• 1:26
  SPEAKER_00: I didn't I think I checked one field without the boot mud boots on, but we probably needed them still.
• 1:32
  SPEAKER_00: Yeah.
• 1:33
  SPEAKER_01: Some of the pictures I seen this week were a little bit different than that.
• 1:36
  SPEAKER_00: A little different, you know, a hundred degrees uh pretty much across the corn belt, three straight days during the crop tour.
• 1:43
  SPEAKER_00: And it's gonna be a little bit different, whether we like it or not, based upon the weather we experienced.
• 1:49
  SPEAKER_00: And you know, like uh they did post that okay, their final yields were 172 for pro farmer versus the USDA's 175.1, and uh last year Pearl Farmer expected a 173.3.
• 2:06
  SPEAKER_01: So they did come in pretty close to last year's.
• 2:10
  SPEAKER_00: Last year's number was fairly close.
• 2:12
  SPEAKER_00: Yep.
• 2:14
  SPEAKER_01: Exactly.
• 2:14
  SPEAKER_01: Okay.
• 2:15
  SPEAKER_00: So they were close with this estimate to what they posted that they thought it was last year.
• 2:20
  SPEAKER_01: Um state by states I was looking at throughout the week, I thought they were uh posting numbers higher than where they were coming in a year ago.
• 2:31
  SPEAKER_01: Yep.
• 2:32
  SPEAKER_01: Pro Farmer 2 are being higher this year than than last year, but they're they came in just a tick lower.
• 2:37
  SPEAKER_00: And it makes sense.
• 2:38
  SPEAKER_00: And the funny thing is that I always observe with these estimates is you'll have uh states all over the board.
• 2:44
  SPEAKER_00: They'll be higher than the USDA in this one and lower than this one, but it all shapes to be somewhat close by the end of it.
• 2:50
  SPEAKER_00: For them to be three bushels lower, not really a whole lot for them to complain about with where the USDA is currently at today, especially while they did it during a hundred degrees straight through three days.
• 3:02
  SPEAKER_00: The you know, Karen Braun also had something posted on Twitter I saw where they said, you know, these estimates include the results from the tour, but they also include other factors like weather, maturity, areas outside of the tour's average, etc.
• 3:18
  SPEAKER_00: So they they threw that disclaimer in there too that you know it's not just based all off the crop samples they pulled.
• 3:24
  SPEAKER_00: Uh they they try to kind of fiddle with the numbers to make it somewhat close to the USTA anyways.
• 3:31
  SPEAKER_01: Well they understand they don't see the whole crop.
• 3:33
  SPEAKER_01: Exactly.
• 3:34
  SPEAKER_01: I think that's part of what they're trying to adjust for, right?
• 3:36
  SPEAKER_01: They you get you almost cover more ground than they do.
• 3:40
  SPEAKER_01: Um they just they dig in deeper, I would say, on in the ground that they do cover, they probably they do a a wider uh sampling.
• 3:50
  SPEAKER_01: Exactly.
• 3:51
  SPEAKER_01: Yeah, but they they don't they don't cover a large portion of the corn belt, obviously.
• 3:56
  SPEAKER_00: Exactly.
• 3:57
  SPEAKER_00: And uh you know when they come out, and I saw something too that the Pro Farmer Tour last year when they came out, it was like 168.1 when they first came out for their estimate on the crop tour.
• 4:08
  SPEAKER_00: So they was lower than than what they did have here, you know, for their final number anyways.
• 4:15
  SPEAKER_00: Okay.
• 4:16
  SPEAKER_01: But they adjusted as the week went on, basically.
• 4:20
  SPEAKER_00: Yeah, so we'll see how this all shakes out.
• 4:22
  SPEAKER_00: Obviously, ProFarmer coming in at a 172.
• 4:25
  SPEAKER_00: When I kind of go through the state breakdowns and look at the big ones that I could see big question marks on from the the samples they took, the ones that mainly stand out to me are the one Indiana.
• 4:39
  SPEAKER_00: They found a 180, and you know, the USDA was at a tide record yield, I was at a record yield, and they were 15 bushels below that.
• 4:48
  SPEAKER_00: So it's like that one, I don't know where they really found too bad of a crop.
• 4:52
  SPEAKER_00: So I was curious about that one.
• 4:54
  SPEAKER_00: And then Nebraska for them to come in, the 160s, I thought didn't do justice to what weather they have had occur over the past month.
• 5:04
  SPEAKER_00: So um they found some pretty poor samples out in Nebraska that I was surprised about.
• 5:09
  SPEAKER_01: Um that one seemed to bleed into Western Iowa too.
• 5:13
  SPEAKER_01: I I thought their Western Iowa results were yeah, I I would say that one just kind of depends what portion you hit.
• 5:20
  SPEAKER_01: I mean, we know it's spotty in a large portion of northern Iowa, western Iowa, but I thought that one came in pretty low.
• 5:27
  SPEAKER_01: They were at 169, I think, for the versus 180 last year.
• 5:32
  SPEAKER_00: Yeah, and the you know, 182 for all of Iowa.
• 5:37
  SPEAKER_00: I'm a little little low on that number too, I think, compared to the USDA's 203.
• 5:44
  SPEAKER_00: Um it's an East versus West discussion, right?
• 5:47
  SPEAKER_00: In Iowa this year.
• 5:48
  SPEAKER_00: Exact flip-flop.
• 5:50
  SPEAKER_00: Um a little surprised with how low they are, I guess, on that.
• 5:54
  SPEAKER_00: So you start plugging some of these numbers in, and it is interesting.
• 5:58
  SPEAKER_00: It was after about the first day, I mean, you start to plug in, they're at 173 already at that point.
• 6:04
  SPEAKER_00: And I felt like it they were probably gonna come in closer to 171, 170 with some of the states they were posting.
• 6:11
  SPEAKER_00: So for them to come out, you know, where they did at 172, I thought was um reasonable for them to be historically three to six bushels below where the USTA does end up being.
• 6:23
  SPEAKER_00: So um that was a pro farmer tour this week, you know, impact going forward.
• 6:28
  SPEAKER_00: Obviously, um we're gonna be talking more about the seasonal pattern uh of corn futures here.
• 6:34
  SPEAKER_00: The the corn futures historically like to make a low um in the end of August or early September.
• 6:40
  SPEAKER_00: So we'll see what happens this year.
• 6:42
  SPEAKER_00: You know, back in 2013 we put our low in in November in the middle of the month.
• 6:47
  SPEAKER_00: Uh we've had a pretty high correlation in prices between 13 and this year.
• 6:51
  SPEAKER_00: So it'll be interesting to see if we continue to follow 13 lower from here on out in these uh corn markets and and soybeans, Jeff.
• 7:01
  SPEAKER_00: Any final thoughts here on grains before we kind of bounce into finishing up with some hog talk?
• 7:07
  SPEAKER_01: Well, I I know that uh for myself at least it's been it's I've had to continually talk myself out of uh kind of swinging the the yield estimates in my own brain pretty aggressively this week.
• 7:20
  SPEAKER_01: And I I think it's important to make sure, you know, whatever backyard we're looking at, right?
• 7:24
  SPEAKER_01: We've got some folks that are in some really good uh corn areas, and their corn crop probably didn't change too much this past week.
• 7:31
  SPEAKER_01: We've got some other areas that uh the crop really came along this week.
• 7:36
  SPEAKER_01: Um the leaves and and husk uh really changed, uh, stocks really changed and ears um falling falling down and pointing at the grounds.
• 7:45
  SPEAKER_01: I think we have to try to obviously keep that all in mind and and try to maintain a level head and a level perspective.
• 7:52
  SPEAKER_01: But um I I guess for me, uh I I would have said probably when that rain came through and you were doing your crop tour, you were alluded to this some mic, but you know, I would have been saying okay, 175 and and probably a better chance of it getting larger than that um than versus smaller.
• 8:09
  SPEAKER_01: I I would think I've flip-flopped on that.
• 8:12
  SPEAKER_01: I think you know 175 is still seems to make a lot of sense when you peel back a bunch of the layers as far as the national yield goes.
• 8:20
  SPEAKER_01: But if anything, today I'm saying the opposite.
• 8:23
  SPEAKER_01: If if we miss it, we're probably gonna miss it to the downside a bit.
• 8:27
  SPEAKER_01: Um sure like to believe it, it probably doesn't have to be um smaller than last year, I don't think.
• 8:33
  SPEAKER_01: So to me, that's kind of where we're we're settling in.
• 8:36
  SPEAKER_01: Somewhere's in this 174, 175 mark.
• 8:40
  SPEAKER_01: What what's your thoughts?
• 8:41
  SPEAKER_01: Uh uh nuts and bolts of it here, Mike.
• 8:44
  SPEAKER_00: Nuts and bolts, I would say 170, one, one seventy-seven.
• 8:49
  SPEAKER_00: Either way, I I don't think you get a lot of difference out of the corn futures with anywhere in between that.
• 8:55
  SPEAKER_00: Because even with the Pearl Farmer number at 172, you're still sitting at 2.1 billion bushel ending stocks plus.
• 9:02
  SPEAKER_00: So that's below that's sub-4 corn historically.
• 9:05
  SPEAKER_00: Um, I have a hard time believing this is gonna impact the futures market.
• 9:10
  SPEAKER_00: So uh finish, yeah, the finish isn't going as well as what I had hoped it would at the beginning of the month getting rained on.
• 9:18
  SPEAKER_00: Um, you know, there are some spots who have just missed out a little bit too long here, and then this this week is gonna hush or hurry some stuff up pretty quick towards the end of harv or the beginning of harvest, and uh that's not a really good sign for Phil.
• 9:32
  SPEAKER_01: Okay, so that's it's we're gonna move past the probe farmer.
• 9:34
  SPEAKER_01: We're probably gonna start moving past the yield um, probably weather too.
• 9:39
  SPEAKER_01: Yeah, and and so you I know you've you've done some presentations this week and and really started focusing in on some of the seasonalities versus um bigger picture cycles of the corn market, and and you alluded to that here just a couple minutes ago, Mike.
• 9:55
  SPEAKER_01: But why don't you dive in, start throwing some some specific numbers at us, if you will, or ranges, and and maybe dig a little deeper into your thought process as you've um presented that to a couple different crowds here this week or two.
• 10:08
  SPEAKER_00: Yeah, so when you look back the last five years, your seasonal has got pushed back a little bit farther.
• 10:14
  SPEAKER_00: Or uh if last five years was August 22nd for the average low in the December corn market, last 10 years you would be looking at an average low seasonally of September 4th.
• 10:24
  SPEAKER_00: So you're looking at seasonals there.
• 10:27
  SPEAKER_00: Um when we start to look at longer-term fundamentals, we're still sitting at a high price compared to where we historically have been, right?
• 10:37
  SPEAKER_00: Above$5 is uh my specific number that I'm kind of targeting there.
• 10:43
  SPEAKER_00: So um the corn market, I think, has two decisions to make.
• 10:46
  SPEAKER_00: The first decision is uh do you follow the seasonal and you put a low in here and trade higher?
• 10:52
  SPEAKER_00: And this is as low as we go in the near term, or do we continue this transition towards fixing uh prices, getting out of this uh tighter stocks above$5 price that we've experienced over the last two years and go back towards bouncing around$4 range, and something we're more accustomed to over the last few years.
• 11:15
  SPEAKER_00: And when I start to look at that portion of it and see what stage of the cycle we're in, you know, I start all the way back at basically the mid-1950s, from 50 to about 1972, you experienced prices right around that dollar to a dollar fifty, and it stayed pretty tight through that range.
• 11:34
  SPEAKER_00: And then, you know, we had 1973 happened and the gas crisis, and we really had some nice inflation pull us up into that 150 to about$3.50.
• 11:46
  SPEAKER_00: And we spent a lot of time from 1975 until about 2005, really, in that stretch.
• 11:53
  SPEAKER_00: That was a really long cycle.
• 11:55
  SPEAKER_00: When you start to look at what corn prices did in between 2008 and then about you know, 2020 here, um, we spent a lot of time right around$4 and uh$3 to kind of$450 is a range.
• 12:13
  SPEAKER_00: And um each something I see in each one of these cycles is there's one or two big pops that we spent above that trading range.
• 12:23
  SPEAKER_00: And then a few years later, wherever that pop had occurred, that's where we spent the next trading range, spending time.
• 12:29
  SPEAKER_00: So in the 80s and 90s, we had a pop there into the fours and fives right in the middle there.
• 12:36
  SPEAKER_00: Um the next cycle we spent was right around that four and five dollar range, for example, in the 2000s.
• 12:42
  SPEAKER_00: And then the next cycle here, now if we start looking at that, we've spent a lot of time between 450 and$8 between 2010 and 2014.
• 12:52
  SPEAKER_00: Um, you know, if we start to talk about what stage of the cycle we're at, this could be a really important spot because we're right at the bottom side of that channel essentially.
• 13:02
  SPEAKER_00: So this could be are we continuing this channel where it's a wider one from$3 up to$8 that we're gonna spend time in?
• 13:10
  SPEAKER_00: Or are we gonna find a new floor here around$4.50 and bounce higher from here?
• 13:16
  SPEAKER_00: So if we do, from a seasonal perspective, find some support here on corn and we stay higher, it'll be really interesting to see what that channel looks like going forward the next five, 10 years.
• 13:28
  SPEAKER_00: Because right now, I'm surprised we're still at around$5 with 2.1, 2.2 billion bushels of corn, whatever it ends up being.
• 13:37
  SPEAKER_00: The market's known since May, you know, it really since February.
• 13:40
  SPEAKER_01: It's not changed much.
• 13:41
  SPEAKER_00: It really hasn't.
• 13:42
  SPEAKER_00: We've kept a pretty big balance sheet through.
• 13:46
  SPEAKER_00: Yeah, it has been.
• 13:48
  SPEAKER_00: But we've held it above five bucks pretty much the entire time.
• 13:51
  SPEAKER_00: So it'll be interesting to see if that holds or not, and if we're in a new cycle here that uh we've spent time in for probably the last two years, or if we're just creating a very, very wide cycle between three and eight dollars, and then it's good luck, everybody, basically, when it comes to making marketing decisions, right?
• 14:09
  SPEAKER_01: That is the that is the question.
• 14:11
  SPEAKER_01: Did you just have two a couple years of some smaller crops and a little bit of enhanced demand?
• 14:17
  SPEAKER_01: Um or yeah, you know, you look at the last time, uh the 1970s example there, Mike, when pretty rampant inflation.
• 14:27
  SPEAKER_01: Kind of stuck around that, didn't it?
• 14:28
  SPEAKER_01: Yeah, that that definitely stepped up to a new a new level.
• 14:32
  SPEAKER_01: So I almost gotta believe there's some of that into this corn market as well.
• 14:37
  SPEAKER_01: But yeah, I I think the the next few months will be really interesting as far as a bigger picture goes here.
• 14:42
  SPEAKER_00: I know three dollars would hurt a heck of a lot worse in let's say two years from now than it did back when we saw it in like 2019.
• 14:51
  SPEAKER_00: Yeah, for sure.
• 14:52
  SPEAKER_00: That would just crush people with what we've seen with equipment costs and labor and family living.
• 14:58
  SPEAKER_00: Um stuff has got so much more expensive.
• 15:01
  SPEAKER_00: So uh I would say uh once you get back, if you do to that$3 range, that uh that would be very rough times in agriculture, I think.
• 15:09
  SPEAKER_01: There'd be some adjustments taking place on the acre level.
• 15:12
  SPEAKER_00: Yep, definitely.
• 15:13
  SPEAKER_00: Definitely.
• 15:14
  SPEAKER_00: What do you want to say to wrap up the podcast today, Jeff?
• 15:16
  SPEAKER_01: Well, we better hit on these pigs, Mike.
• 15:18
  SPEAKER_01: It's one of the more wild days that we've experienced in the hog market uh in quite some saying something.
• 15:25
  SPEAKER_00: Very little time for that today.
• 15:27
  SPEAKER_00: That's all I'm gonna say.
• 15:28
  SPEAKER_01: It's it it's that's very fair.
• 15:31
  SPEAKER_01: Um, I'm not sure if it's completely unexpected what's taking place today.
• 15:35
  SPEAKER_01: Um, but just it's just a lot of crazy things happened.
• 15:37
  SPEAKER_01: You know, first off, we're sitting here uh midway through the session or so.
• 15:41
  SPEAKER_01: Well, it must have been a little earlier than that because before the 11 o'clock report came out, but we basically ran these hog features right back up to exactly where they finished the week last week.
• 15:53
  SPEAKER_01: So this whole week, you know, we were pretty down in the mouth, kept you know experiencing some lower seasonal prices as far as cash and and to some degree cut out until you know last night uh cut out actually being up about four dollars, uh, largely because of the bellies.
• 16:09
  SPEAKER_01: There's a couple of other primals were helping participate there as well.
• 16:13
  SPEAKER_01: So the market really ran with that um right up until the uh 11 o'clock AM report came out and showed the belly market down 50 bucks, and then it of course it gave away all of the gains that it had received throughout the day um and and really kind of settled in at one time, trading in October over a dollar fifty lower.
• 16:38
  SPEAKER_00: Uh the three o'clock report wasn't any better, was it?
• 16:41
  SPEAKER_01: Yeah, and that's that's the what everybody was looking at.
• 16:44
  SPEAKER_01: There was some pretty good volume on the morning report, so it started we started thinking, oh shoot, this could definitely hang around a little bit.
• 16:52
  SPEAKER_01: But yeah, the three o'clock here, fifty-eight and a half dollars lower on the belly.
• 16:57
  SPEAKER_01: That's after being up, I think about eleven dollars yesterday.
• 17:00
  SPEAKER_01: So it puts it at just a hair under uh$123.
• 17:05
  SPEAKER_01: So, you know, what we've been looking for, we we've kind of been looking for a day like this, unfortunately.
• 17:11
  SPEAKER_01: Um, maybe not to quite to this extent, but you know, we're you look at a seasonal graph of bellies, um, and they like to come down about right now.
• 17:21
  SPEAKER_01: It's it's very much par for the course.
• 17:23
  SPEAKER_00: Talk about ripping the band-aid off, though, huh?
• 17:25
  SPEAKER_01: Yeah, they didn't hit that market's crazy, amazing.
• 17:29
  SPEAKER_01: Um, how you can go from you know 180 bucks 24 hours ago to deciding that you gotta take a third of the price away.
• 17:37
  SPEAKER_01: I guess that's that's why they don't trade them on the uh futures markets anymore, Mike.
• 17:42
  SPEAKER_01: But one too many bellies is one too many bellies.
• 17:46
  SPEAKER_01: So I'm hopefully we can get some of that back, a very big adjustment.
• 17:51
  SPEAKER_01: The last two years we have not.
• 17:52
  SPEAKER_01: We've made a big adjustment like this 30-40 bucks, and they stayed here and and kind of started um trading a new market basically uh after we get into September.
• 18:04
  SPEAKER_01: But I wouldn't expect uh any huge drops from here based on what we've seen the past years, but that is what's gonna be front and center in everybody's mind, of course, is you know, do we have to take these bellies back to 85 bucks, kind of where we started in last spring?
• 18:21
  SPEAKER_01: And you know, there's gonna be uh um some good indicators here in the next two weeks, probably, as to really what does this demand look like as we ramp up the hog kill.
• 18:34
  SPEAKER_01: Um, you know, can we be a little similar, somewhere closer to what we've become accustomed to the last couple of years, or we gotta go back down to some of the doldrums that we saw last spring?
• 18:44
  SPEAKER_01: So stay tuned on that, Mike.
• 18:47
  SPEAKER_00: Alright.
• 18:47
  SPEAKER_00: Well, thank you for your time today, Jeff.
• 18:49
  SPEAKER_00: We'll see you next time.
• 18:50
  SPEAKER_00: And thank you to all our listeners.
• 18:52
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 18:55
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 19:00
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 19:07
  SPEAKER_00: See you next time.