Latest / Professional Ag Marketing Podcast / COF and Crop Tour

Transcript

COF and Crop Tour · 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 August 23rd.
• 0:25
  SPEAKER_01: I've got Jeff with us here today.
• 0:27
  SPEAKER_01: How's it going, Jeff?
• 0:28
  SPEAKER_00: Good afternoon, Mike.
• 0:29
  SPEAKER_00: Going good?
• 0:30
  SPEAKER_01: Awesome.
• 0:30
  SPEAKER_01: Well, we have a fun few things to talk about today.
• 0:32
  SPEAKER_01: We're going to talk about it.
• 0:34
  SPEAKER_01: Oh, yeah.
• 0:35
  SPEAKER_01: We're going to talk about the catalog feed.
• 0:37
  SPEAKER_01: We're going to talk about some outside market news.
• 0:39
  SPEAKER_01: We're going to talk about the ProFarmer Crop Tour.
• 0:42
  SPEAKER_01: Where do you want to start?
• 0:44
  SPEAKER_00: I think uh since it's been going on all week and kind of top of mind, ProFarmer Tour, Mike, can we do a little bit of compare and contrast kind of what we were following there versus what you saw, what the USDA is uh showing up with on their latest yield estimates?
• 1:00
  SPEAKER_01: Yeah, let's uh get going on that anyways.
• 1:03
  SPEAKER_01: So the USDA came out uh, you know, uh record yield by six bushel on corn, uh record on soybeans.
• 1:12
  SPEAKER_01: We've been looking at a larger crop throughout most of this month, kind of the end of last month as expected, that will get an above trend line type yield.
• 1:22
  SPEAKER_01: Um the pro farmer crop tour came out and uh a lot of their stops at first um had brought up a lot of controversy about being well below the USDA, and typically they are, but this year it sure seemed a whole like a whole lot below the USDA.
• 1:37
  SPEAKER_01: And uh the Pro Farmer Crop Tour, they estimated uh soybean crop uh immensely higher at 54.9 bushels to the acre.
• 1:45
  SPEAKER_01: So that was a huge, huge expected crop, Jeff, compared to the USDA.
• 1:50
  SPEAKER_01: That's big.
• 1:51
  SPEAKER_01: Yeah, that was big, and they they they had pod counts basically higher at every stop.
• 1:56
  SPEAKER_01: That one was pretty clear to them that they were gonna come up with a higher uh estimate on the yield for soybeans.
• 2:02
  SPEAKER_01: Makes sense.
• 2:03
  SPEAKER_00: We've had really good weather through August, but great weather, and pretty much uh anybody that we visit with, you know, um everybody seems to be a believer in this bean crop.
• 2:14
  SPEAKER_00: It it definitely looks good.
• 2:15
  SPEAKER_01: That balance sheet is gonna be ugly.
• 2:17
  SPEAKER_01: I mean, we had over 500 the way it was before a million ending stocks, and some people are saying it should have been higher with what demand has been.
• 2:26
  SPEAKER_01: So I yeah, that one could be a huge number uh coming forward if they do raise yield at all there.
• 2:32
  SPEAKER_01: The corn side of things, still not that bad.
• 2:34
  SPEAKER_01: Uh ProFarmer came out at 181.1, so pretty much right flat at trend.
• 2:41
  SPEAKER_01: Uh nothing to to really scoff at there that I think was expected.
• 2:45
  SPEAKER_00: Yeah, and quite a bit higher than you know, one of the things we looked at all week is um you know their estimates pretty much across the board.
• 2:52
  SPEAKER_00: Minnesota definitely was a that was your X factor for those guys, you know.
• 2:57
  SPEAKER_00: But they they were continuing to post levels on uh corn as and then of course soybeans that were higher than last year.
• 3:04
  SPEAKER_00: So, you know, I think that all fits pretty well with what uh what you saw, what we've been thinking, what the USDA has been printing, wouldn't you say, Mike?
• 3:13
  SPEAKER_01: Definitely, you know, the the Iowa number like that they came out with at 192, yeah, that's a long ways below the 209 that the USDA's at.
• 3:20
  SPEAKER_01: But that was still a record for the ones that they found.
• 3:24
  SPEAKER_01: So it uh just to put that into perspective, anyways, uh yeah, just uh kind of give a range.
• 3:29
  SPEAKER_01: So Pro Farmer Tour found very good crops, above trend line basically on both crops for the most part.
• 3:35
  SPEAKER_01: There uh we'll keep an eye on some of these deteriorating states, like maybe Nebraska's getting a little bit too hot, too dry, uh, from some reports there.
• 3:43
  SPEAKER_01: Minnesota, obviously, a lot of wiggle room there between the 164 and uh the uh the bigger USDA 185 unchange from last year.
• 3:52
  SPEAKER_01: So keep an eye on a few of those states in Ohio as well, a little bit dry out there.
• 3:56
  SPEAKER_00: I think the big part of that discussion, Mike, is you know, we're not we're not trying to make a mountain out of a molehill, if you will, but it's just it's important to realize where the market is compared to what to where the to what the news is talking about, right?
• 4:11
  SPEAKER_00: So this we're so focused on this crop is very large and getting bigger.
• 4:18
  SPEAKER_00: Um so now if we if we just trim a little off the edge here at the very end of some dryness, that could, you know, I I would say, and because the futures are as low as they are, um, especially especially on corn, you could start to put a bottom in here with the news flow just changing a little bit, is is the best way I can think of to describe that.
• 4:39
  SPEAKER_00: So it's it's probably not a huge deal, but as far as where the market's sitting, I think it could matter um and might stop the erosion that we're starting that we're seeing on these grains.
• 4:51
  SPEAKER_01: Um outside market news this week, pretty uh pretty important things going on there as well.
• 4:58
  SPEAKER_01: Uh we had the uh Jackson Hull meeting uh today, actually, that uh conference in Jackson Hull, Wyoming.
• 5:06
  SPEAKER_01: And uh basically uh Powell said today that the time has come for policy uh to adjust and it looks like rate cuts are in our future, Jeff, here when it comes to the Fed.
• 5:17
  SPEAKER_01: So we've got three more uh meetings left in this year of 2024 in which they could do so.
• 5:23
  SPEAKER_01: Uh-huh.
• 5:24
  SPEAKER_01: But at this point, it really seems like uh we we are at a turning point, a pivot here for the Fed, and we'll start cutting rates probably in September here, and most likely in November as well.
• 5:36
  SPEAKER_01: So uh just reconfirming kind of what everyone's been pricing into the market here lately, I think, Jeff.
• 5:43
  SPEAKER_00: Yeah, and it's you know, we've continued to get some uh small bits and pieces of economic news that suggest that this economy is slowing.
• 5:52
  SPEAKER_00: Um, you know, I I would say, like you say, almost as expected, probably, but you know, it's uh it doesn't seem to be quite it doesn't have the spark that it did here maybe like three, four months ago.
• 6:04
  SPEAKER_00: It seemed like anytime we had bad economics results, um the market immediately um went and started pricing in rate cuts, and and then that got fairly bullish things like the stock market, and you know, the stock market's up good today, and and everything feels pretty good from a market standpoint.
• 6:20
  SPEAKER_00: So it's a we're still in this little bit of um you know bad economics news is maybe still a little good for the market, but for the large part, we're seems like we're past that phase where you know people are expecting rate cuts.
• 6:35
  SPEAKER_00: Um, and then I would dare to go as far as you know, if we if in long term here, months down the road, if you continue to see the economy weaken, eventually that will probably get a little hard on some of these markets.
• 6:48
  SPEAKER_01: Well, right now they are pricing in a quarter cut in September and then a 50-point cut into November.
• 6:55
  SPEAKER_01: So we'll see how that goes going forward.
• 6:58
  SPEAKER_01: But the US dollar definitely taken out.
• 7:00
  SPEAKER_01: We are down to a very low level uh compared to recent history here.
• 7:06
  SPEAKER_01: Uh the US dollar index 100.7 today, making new lows on the move there.
• 7:12
  SPEAKER_01: So that looks like uh we're gonna try to break below 100 there pretty soon at this point.
• 7:17
  SPEAKER_01: And then uh the equity markets, like you said, bad news seems like bad news again, but the uh Dow up four or five hundred today, and the SP to close out our week up sixty or so, uh basically back up to old highs uh here on the move.
• 7:32
  SPEAKER_01: So what do you think about the Catalan feed report that we had this afternoon, Jeff?
• 7:37
  SPEAKER_00: Probably not going to be a huge factor.
• 7:40
  SPEAKER_00: I think some of the economic stuff that we're talking about, Mike, uh might be a bigger deal, quite honestly.
• 7:46
  SPEAKER_00: I think that's you know, as the catalyst that kind of can started this erosion here.
• 7:51
  SPEAKER_00: Uh, what was that?
• 7:52
  SPEAKER_00: Maybe just about a month ago, a little better than that.
• 7:55
  SPEAKER_00: We had a real tough week there that started with some economics um results, and then we kind of get into this spiral, of course, of you know, lower futures creating more willing sellers and creating a lower cash market.
• 8:08
  SPEAKER_00: And that's kind of the spiral that we've started and continued in here for the past you know four weeks or so.
• 8:16
  SPEAKER_00: Um cattle and feed report today after the close, we had six percent more placements than last July.
• 8:24
  SPEAKER_00: We did have a couple more days, um, you know, working days, if you will.
• 8:29
  SPEAKER_00: I that that's a big deal on you know kill levels, right?
• 8:33
  SPEAKER_00: Uh, but it and it's I think it has some effect on you know placements as well, not nearly exaggerated as much, but um six percent more last year in July was also a low uh placement year, so it was down seven or eight points um a year ago.
• 8:50
  SPEAKER_01: So so last year was the July report was the tightest we got.
• 8:55
  SPEAKER_00: Yes.
• 8:56
  SPEAKER_01: I mean that was that was a yeah, that was as tight as tight as tight got.
• 9:00
  SPEAKER_01: So really from here on out, it should be better now, shouldn't it?
• 9:03
  SPEAKER_01: When we start looking at these like kind of more bearish catalog feeder ports.
• 9:08
  SPEAKER_01: Yeah, I really fabricated.
• 9:12
  SPEAKER_00: That's what I mean.
• 9:13
  SPEAKER_00: Yep.
• 9:13
  SPEAKER_00: Yep.
• 9:13
  SPEAKER_00: No, I think that's exactly the the point to make here.
• 9:17
  SPEAKER_00: Um, but you know, all that said, um it's still gonna start showing, it's still gonna show up in our spreadsheets as more numbers than last year, right?
• 9:27
  SPEAKER_00: So and I don't think that's gonna cause any big problems.
• 9:29
  SPEAKER_00: You know, we've we were kind of starting to project a decent size hole starting to develop in that uh September, October time frame, so not too far down the road here, you know, strictly looking at placement data, um, which is extremely noisy when you try and broaden that out to when those placed cattle are actually going to be marketed versus when they're projected to be marketed, right?
• 9:52
  SPEAKER_00: But um I think we've got some room in the inventory to to fill up with a few additional placements here, so I don't think it'll be very scary for the market.
• 10:02
  SPEAKER_00: Um, that market seems to be trying to build the bottom, you know, very, very tough market futures situation to try to try to out guess here.
• 10:12
  SPEAKER_00: But you know, last couple days we really started to try to to support that thing here a little bit, and and we did that in some pretty negative fundamentals as far as the cash market goes.
• 10:22
  SPEAKER_00: The the willing sellers came out um in droves here this week and you know really pushed that cash market down um compared to last week.
• 10:31
  SPEAKER_00: I think we're gonna average somewhere in that 184 area.
• 10:35
  SPEAKER_00: Um, still looks pretty good against an October board trading 176, right?
• 10:41
  SPEAKER_00: Um, but you know, that basis, that gap is narrowed some this week, and we could see it if we're gonna support these futures, and if we continue to see the selling that we've seen in the cash market, we could definitely squeeze that gap aggressively next week.
• 10:57
  SPEAKER_00: And you know, for folks that have market ready cattle, that's a little bit of a concern to me.
• 11:03
  SPEAKER_00: You know, we've we've been chasing after trying to figure out how to take advantage of this hugely positive basis.
• 11:08
  SPEAKER_00: I'm I'm afraid we better be paying attention next week and and expect uh you know, if we were sh hoping for a ten dollar basis, we better be happy with a six or seven, I'm afraid.
• 11:19
  SPEAKER_01: Definitely a relevant conversation to be having right now on the cattle market, Jeff.
• 11:23
  SPEAKER_00: It's there's a lot of dollars in how we get these things marketed and when they get shipped and and how big they are.
• 11:29
  SPEAKER_00: It's uh it's not an you know, there's no easy answers there for sure.
• 11:34
  SPEAKER_01: And basis is the one kind of trying to make everything right for the producer at this point.
• 11:38
  SPEAKER_00: And it's uh a phynical thing.
• 11:41
  SPEAKER_00: It can it can disappear or or you know, it can come and go awful quickly when you have both cash and futures um you know working, it can it can change in a hurry.
• 11:52
  SPEAKER_01: What else are you thinking today, Jeff, before we wrap up?
• 11:56
  SPEAKER_00: I think that pretty much gets it.
• 11:58
  SPEAKER_00: You know, the other thing that might be related is to the cattle is on the hogside.
• 12:02
  SPEAKER_00: We had a pretty couple good days here, big technical moves, I think, on that October hogs.
• 12:07
  SPEAKER_00: Um I kind of feel like the livestock in general is feeling a little bit better, and I that might come back just to smidge into some of the economic and the rate cuts that you're talking about, Mike.
• 12:18
  SPEAKER_00: Um, but and we've also had some nice product value increases um both on the hog side as well as on the beef side.
• 12:25
  SPEAKER_00: So I think we're getting a little bit of buying in and ahead of Labor Day.
• 12:30
  SPEAKER_00: Personally, on the cattle, I'm a little disappointed.
• 12:32
  SPEAKER_00: I was expecting to see a little bit um higher values as we move towards Labor Day.
• 12:37
  SPEAKER_00: Hogs I'm pretty impressed with.
• 12:39
  SPEAKER_00: Um, we'll see what next week brings on all that's gonna be some pretty big important fundamentals, especially the cutout side on the hogs, Mike.
• 12:48
  SPEAKER_01: All right.
• 12:48
  SPEAKER_01: Well, thank you for your time.
• 12:50
  SPEAKER_01: If you need anything, please reach out to us at Professional Egg Marketing.
• 12:53
  SPEAKER_01: Thank you if we got to chat with you at Dakota Fest this week.
• 12:57
  SPEAKER_01: Another fun event there, and uh, appreciate everyone coming to say hi and give us a call.
• 13:02
  SPEAKER_01: And thank you to all our listeners.
• 13:04
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 13:07
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:13
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:19
  SPEAKER_01: See you next time.