Latest / Professional Ag Marketing Podcast / Outside Markets

Transcript

Outside Markets · 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 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 April 19th.
• 0:25
  SPEAKER_00: I've got Luke with us here today.
• 0:26
  SPEAKER_00: How's it going, Luke?
• 0:27
  SPEAKER_01: Very good.
• 0:28
  SPEAKER_01: Good afternoon, Mike, and thanks for having me on the program.
• 0:30
  SPEAKER_00: Can't wait.
• 0:31
  SPEAKER_00: We've got some uh little bit out-of-the-box things to talk about today.
• 0:35
  SPEAKER_00: We're gonna talk about some outside markets and some of the influence that's had on our commodities here, real recently.
• 0:41
  SPEAKER_00: So talk about the uh markets ending up this week.
• 0:45
  SPEAKER_00: July corn closed up almost 7 cents there, 443 on the end of the day.
• 0:50
  SPEAKER_00: The July soybeans up 16, almost 17, 1165.
• 0:55
  SPEAKER_00: That was a really good day.
• 0:56
  SPEAKER_00: Uh wheat markets, all three trading higher there.
• 0:59
  SPEAKER_00: The Chicago up 13 cents.
• 1:01
  SPEAKER_00: So really nice day out of the wheat market.
• 1:04
  SPEAKER_00: The live cattle, pretty much even at the end of the day.
• 1:06
  SPEAKER_00: Closed green, but not a whole lot of action there.
• 1:09
  SPEAKER_00: And the lean hogs up a buck, two bucks crossed the board.
• 1:12
  SPEAKER_00: Uh Luke, what what happened with the lean hogs today with their green day?
• 1:16
  SPEAKER_01: You know, uh, we we we we'd had a big sell-off in the lean hogs, right?
• 1:19
  SPEAKER_01: Which started I I think last Wednesday was kind of where we we pushed that down, which which was kind of a lot of different things going on.
• 1:26
  SPEAKER_01: Um, but outside influence is definitely you know part of that.
• 1:29
  SPEAKER_01: CPI reports, and I'm sure stuff you talked about last week on your podcast, and then the Iran-Israel conflict, and and maybe just a little cooling of fundamentals, um, maybe just not as steep a uh of increase in the cash and and cut out market.
• 1:44
  SPEAKER_01: And and then on top, I think just money flow.
• 1:46
  SPEAKER_01: We had we had managed money uh near record long before the sell-off last week, and we had index funds at record long, and and some profit taking occurred, but we we kind of worked through that, kind of consolidated a little bit, slightly under the 20-day moving averages this week.
• 2:01
  SPEAKER_01: And and you know, we we are coming up with the time with seasonally less pigs.
• 2:05
  SPEAKER_01: The market kind of knows that.
• 2:07
  SPEAKER_01: So we oh we just got a little bit of joy today, Mike, and and kind of closed up above the 20-day moving average there in the June, and yeah, and a couple bucks higher, and then uh to end the week.
• 2:16
  SPEAKER_01: So it was kind of a nice technical turn of the week to see us uh end with some green, Mike.
• 2:21
  SPEAKER_00: Definitely.
• 2:22
  SPEAKER_00: Well, if I start to go down this tangent here, Luke, uh stop me if I step out of bounds at all, but uh, I got a little bit different of a topic today, and and part of part of it is uh this idea that how much do fundamentals actually matter in these current markets, especially if I start focusing on uh the grains and probably cattle.
• 2:42
  SPEAKER_00: If we start with those two, they're pretty decent examples, and you could throw hogs slightly into the cattle as well, Luke.
• 2:48
  SPEAKER_01: But let's see where you this wild road takes us here, Mike.
• 2:51
  SPEAKER_01: For sure.
• 2:51
  SPEAKER_00: So as a as we look at uh news headlines and events kind of like what we saw last night again with Israel retaliating against Iran overnight with some missile strikes on the airbase.
• 3:02
  SPEAKER_00: Uh it continues to talk about lifting grains up a little bit and some of the macro markets, but uh I think it is really worth looking at what markets are trading uh aggressively, which ones are moving quite volatile in in times like these when you see headlines like this.
• 3:18
  SPEAKER_00: And last night and today was a perfect example of it, I thought.
• 3:22
  SPEAKER_00: And when we really look at uh the money flow in general, when we see uh conflicts rise over geopolitical events globally, uh we're seeing one, wheat and crude oil trade very closely together with one another.
• 3:38
  SPEAKER_00: Over the month of April here, we've had almost an nearly a 80% correlation between the two of them, which those two you could probably throw copper in there as well as we start to talk a little bit more about inflation and what traders buy uh during times of conflict, kind of like this.
• 3:55
  SPEAKER_00: And uh those are two of the commodities I thought that have been correlated very strong with one another and have been getting traded closely uh together.
• 4:04
  SPEAKER_00: And uh, you know, you could probably throw cattle in the stock market in with one another as well.
• 4:10
  SPEAKER_00: And uh it it all stems back to uh when we look at where we're at right now in this idea that we're probably not gonna rate or cut rates three times now.
• 4:22
  SPEAKER_00: Over the past week or two, we've probably had a realization in these markets, it sounds like that we're only gonna cut rates twice.
• 4:29
  SPEAKER_00: And what that's done is we've rallied this US dollar up over 106.
• 4:34
  SPEAKER_00: And some of these compet competing currencies have struggled.
• 4:37
  SPEAKER_00: The Brazilian real, for example, has gone lower, and that's put a lot of pressure on the soybean market recently, I believe, as we've drifted towards$11.50.
• 4:48
  SPEAKER_00: And now that we started to trade some of these other conflicts, we've started to support things like wheat and crude oil and the overnights.
• 4:56
  SPEAKER_00: And then if if you look at the soybean market taking a little step higher today, maybe the market's fully uh fully uh accepted this idea that okay, the US dollar ran up now.
• 5:09
  SPEAKER_00: We're probably only gonna make two rate cuts here going forward the rest of the year if that's the case.
• 5:14
  SPEAKER_00: Um, we're sitting a little bit better now.
• 5:17
  SPEAKER_00: So we see a little bit of a rally out of the soybean market.
• 5:20
  SPEAKER_00: Uh you've seen premiums out of Brazil start to rise here a little bit as well for soybeans, seeing a little bit more sales.
• 5:27
  SPEAKER_00: Um, it all stems back, I think, to the money flow and and some of the more macro uh situations taking place until we so we'll trade a lot of that, I think, until we get into this uh time frame where we start to trade the big what if, which which is weather for the grains, right?
• 5:44
  SPEAKER_00: For sure.
• 5:45
  SPEAKER_00: You you start to uh talk about uh is it gonna rain this summer or not in the United States or Brazil, and then we can start to trade a little bit more fundamental interior, get some more movement out of it.
• 5:56
  SPEAKER_00: But overall, the you know the markets uh are focused on a very macro set of uh fundamentals today, I think, when I look at this market.
• 6:05
  SPEAKER_00: And when we trade that weather maybe or uh trade these uh bigger outside fundamentals into this midsummer range, then we can start to trade some longer-term bearish things in this grain market again, like building balance sheets and all of those things.
• 6:20
  SPEAKER_00: So I feel like uh that's the way that the market's been trading here really recently.
• 6:24
  SPEAKER_00: It's been really fun to watch.
• 6:25
  SPEAKER_00: And uh I I think uh you know, Luke, those are a few of the things looking forward uh at these grain markets specifically.
• 6:32
  SPEAKER_00: And and I think hogs have been in with that just a little bit as well, Luke, as you look at uh the pattern or the path that we've been on.
• 6:40
  SPEAKER_00: You know, hogs have kind of rallied right along with the stock market here recently.
• 6:43
  SPEAKER_00: We set back on the stock market, you know, to five thousand bucks on the SP, and hogs had a little bit of a setback here before finding some strength again today.
• 6:52
  SPEAKER_00: So very interesting money flow patterns, I think, when I look at these commodity markets.
• 6:56
  SPEAKER_01: Yeah, I think so.
• 6:56
  SPEAKER_01: And I mean I'd say you know, it's on the hog and cattle, maybe more specifically, because we those are two commodities that actually have experienced very recently very high prices, right?
• 7:06
  SPEAKER_01: Corn and beans haven't received high prices recently.
• 7:09
  SPEAKER_01: But I and I just think everything you kind of said, and of course, having you know uh it was the cattle here in the last month or so, it's been the hogs, right?
• 7:18
  SPEAKER_01: But when we get a lot of long side position, that that's good for our markets, it raises our prices.
• 7:24
  SPEAKER_01: But I and you know, I think you look at the cattle market when it took this turn back one in March.
• 7:29
  SPEAKER_01: Now it had some fundamentals that were pointing towards toppiness, but but but avian influenza came, yeah.
• 7:35
  SPEAKER_01: And and and then, you know, again on the hogs, you know, we went up to above 110 in July, you know, and then some of the CPI inflation, I mean we said the headlines came.
• 7:43
  SPEAKER_01: And I guess the point is when when markets get quite a bit of premium like that built in, which is great, right?
• 7:49
  SPEAKER_01: But then if if a headline comes and it spooks some longs out and or makes them want to put their money elsewhere, that that sell button getting hit gets compounded, right?
• 7:58
  SPEAKER_01: So I think that's why, you know, on the hogs, we we probably overreacted.
• 8:02
  SPEAKER_01: It wasn't fundamentally driven why these hogs sold off in this kind of scale, right?
• 8:06
  SPEAKER_01: But when you've got this kind of money in and out, you know, and when things that can change either way, it can it can change things in a hurry.
• 8:13
  SPEAKER_00: Definitely.
• 8:14
  SPEAKER_00: Well, it was fun having you on the podcast today, Luke.
• 8:17
  SPEAKER_00: I'd say a few finishing thoughts here for it, a little bit shorter podcast, but uh continue to watch basis.
• 8:22
  SPEAKER_00: We've seen some really strong uh old crop basis levels here on these grains really recently, especially in the in the northwestern uh corn belt.
• 8:31
  SPEAKER_00: I'd keep an eye on that.
• 8:33
  SPEAKER_00: Notice the seasonal that we're going into with uh more focus now on planning progress and the planning outlook.
• 8:40
  SPEAKER_00: It looks like three, four weeks out, we should have uh continued very good uh weather for wrapping uh a good chunk of the planning up through that time frame after we get through this cold spell uh today and tomorrow.
• 8:53
  SPEAKER_00: So we'll keep a few of those things on uh on our minds here.
• 8:56
  SPEAKER_00: Keep an eye on uh the Brazil uh weather pattern as well, is they're about 90% harvested on soybeans at this point and kind of rolling into their uh drier season and rolling into their safrina corn crop as well, which makes up uh about three-quarters of their production on corn.
• 9:14
  SPEAKER_00: So we'll start to talk about a few of those things going forward.
• 9:17
  SPEAKER_00: It'll be an interesting time of the year coming up for especially the grain and hog markets, as we typically see some extreme volatility through these summer months, and can't wait to see what happens, Luke.
• 9:27
  SPEAKER_01: All right, have a good one.
• 9:28
  SPEAKER_00: And thank you to all our listeners.
• 9:30
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 9:34
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 9:39
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 9:45
  SPEAKER_00: See you next time.