Latest / Professional Ag Marketing Podcast / Crop Progress and Margin Protection

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Crop Progress and Margin Protection · 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 September 27th.
• 0:25
  SPEAKER_00: I've got Lucas Peters here.
• 0:26
  SPEAKER_00: How's it going?
• 0:27
  SPEAKER_01: Well, it's going good.
• 0:28
  SPEAKER_01: Thanks for having me back, Mike.
• 0:30
  SPEAKER_00: What a fun week we've had in the markets.
• 0:32
  SPEAKER_00: It's the beginning of harvest for a lot of folks out there.
• 0:35
  SPEAKER_00: We're going to talk about that here just in a moment, about harvest progress across the United States with all the people we talked to from the West Coast to the East Coast.
• 0:44
  SPEAKER_00: So we'll have a good update there.
• 0:46
  SPEAKER_00: And uh wow, what a market here recently.
• 0:48
  SPEAKER_00: We're up 20 cents currently as we talk on uh Friday afternoon uh just before noon.
• 0:54
  SPEAKER_00: We got November 24 soybeans at 1061, so that's came up quite a bit from the low even earlier today, uh, down to about that 10 uh 1034 area, so quite a range here, it seems like through most of these days.
• 1:08
  SPEAKER_00: The November 25, we're almost at 11 bucks again on the soybeans.
• 1:13
  SPEAKER_00: Uh corn trying to keep up.
• 1:15
  SPEAKER_00: We've got dies corn 419, gonna be some pretty strong resistance there, I think, around this 420 area.
• 1:21
  SPEAKER_00: And then we've got December 25 corn just over 450.
• 1:24
  SPEAKER_00: So really put on a really good rally here recently.
• 1:27
  SPEAKER_00: I feel like we've seen some interesting trade.
• 1:31
  SPEAKER_00: Uh, found some new technical buying in the soybean market.
• 1:34
  SPEAKER_00: We've regained most of yesterday's losses there, but latest forecast for Brazil is looking a little bit wetter.
• 1:41
  SPEAKER_00: I think this will be key going forward, Lucas, as we get into the early part of next week.
• 1:45
  SPEAKER_00: Uh it seems like that six to ten day forecast is what they focus on, and uh that'll put us right in about that range of where they're supposed to get a good bunch of those rains from October 5th through the 11th.
• 1:55
  SPEAKER_00: So keep that in mind over the long uh the weekend here.
• 1:59
  SPEAKER_00: And we've got the uh some suggested buying uh uh with concerns about inflation here, maybe on the soybean market.
• 2:06
  SPEAKER_00: Uh soybean demand on the meal side looks pretty strong.
• 2:10
  SPEAKER_00: That's probably helping the soybeans out a little bit here currently.
• 2:13
  SPEAKER_00: Corn futures pretty much following meal higher, I think, at this point.
• 2:16
  SPEAKER_00: We we found a little bit of selling just with the recent highs and with the Russian export price at a discount to basically everybody, especially the U.S., that makes uh uh stocks a little bit sharply higher.
• 2:29
  SPEAKER_00: So uh U.S.
• 2:30
  SPEAKER_00: stocks here, a little bit higher as well, and then we've had some profit taking across some of the other commodities.
• 2:36
  SPEAKER_00: But that's kind of what we're looking at at this point, Lucas, with a broad range of uh really big market moving events here throughout this week, uh playing a lot of ranges, really holding this uptrend and intact for a lot of these grain markets.
• 2:50
  SPEAKER_00: It's uh been a very volatile week across many of these commodities, corn, cattle, soybeans.
• 2:56
  SPEAKER_00: Uh, but tell us about what you've seen with crop progress and and what we've heard across uh the grain belt.
• 3:02
  SPEAKER_01: Yeah, you bet.
• 3:02
  SPEAKER_01: So uh harvest really kind of seemed to kick off in earnest for a lot of areas this week, and and we'll continue uh into the weekend and uh next week as you look at the forecast.
• 3:13
  SPEAKER_01: Really, unless you're in the southeast uh corner of the United States or east coast, uh getting a lot of rain with the uh hurricane coming through, but boy, Midwest, it uh it is pretty much free and clear for days and days to come.
• 3:28
  SPEAKER_01: Um I know a lot of the weather uh reports and things on Twitter is just rinse and repeat, right?
• 3:33
  SPEAKER_01: Like 80 degrees, sunny, tomorrow, 81, clear skies, sunny.
• 3:39
  SPEAKER_01: Uh so that's really helping uh harvest progress.
• 3:41
  SPEAKER_01: It's really helping corn dry down, saving some guys uh some propane uh bills in the in the future.
• 3:47
  SPEAKER_00: A lot more than I thought it was gonna be.
• 3:49
  SPEAKER_01: Exactly right.
• 3:50
  SPEAKER_01: And then, of course, on a Friday and you got green numbers on the screen, everybody feels uh pretty good.
• 3:55
  SPEAKER_01: Um, you know, as far as uh yield results and what we're seeing, I think the the trend so far on beans uh is is maybe kind of what we thought it like.
• 4:07
  SPEAKER_01: It was it we expected it to be a good crop.
• 4:09
  SPEAKER_01: The soybean crop looked good all year.
• 4:11
  SPEAKER_01: USDA was telling us it it was going to be a good crop.
• 4:15
  SPEAKER_01: Um, yeah, there's guys that are maybe a little disappointed, maybe they dried out a little too fast, but uh even talking to some farmers that are started in their worst field, right?
• 4:26
  SPEAKER_01: Because especially this year, it seems like soybeans, you know, if you think back to all that flooding and ponding we had early on in the year, kind of delayed some maturity on some little pockets in the field, and of course you see that now on maturity of you pull into a field to combine it, and you got a few of these areas that are still green.
• 4:45
  SPEAKER_01: Um so they're combining off the drier areas and uh happy with yields, maybe not setting records, but um, but really generally happy uh overall.
• 4:56
  SPEAKER_01: A lot of a lot of reports of 50, 60, 70 bushel beans, uh depending on where you're at in our geography.
• 5:03
  SPEAKER_01: Um, but kind of uh I would say at APH levels or five bushel above APH for a lot of guys that I've talked to.
• 5:10
  SPEAKER_01: Uh talking to some guys in like Southeast South Dakota yesterday.
• 5:14
  SPEAKER_01: Um, you know, they they uh they had a field of beans average 74, and they said two years ago their corn in that field averaged 65.
• 5:23
  SPEAKER_01: Like so it's they're finally uh kind of coming around and and getting some good yields there.
• 5:30
  SPEAKER_01: Um I had the opportunity this week to travel up to uh northern Minnesota, so got to see a lot of uh cropping areas and and harvest progress.
• 5:38
  SPEAKER_01: It seems like harvest is in pockets.
• 5:40
  SPEAKER_01: Like if you were in the pocket that maybe missed one of those rains in August, there's a lot of beans combined in that area.
• 5:46
  SPEAKER_01: You go a little further, they got a little rain, and you don't see many combines going yet, and a lot of still leaves still on the beans.
• 5:53
  SPEAKER_01: Um, and so I it's interesting uh as you travel and you see that, uh, but overall yields pretty good.
• 6:00
  SPEAKER_01: Uh a little bit of wet corn coming out, um, kind of the same same story as we saw in the silage appraisals.
• 6:07
  SPEAKER_01: Uh the uh the corn yields look to be really, really good, and expect that uh to keep shining as we harvest corn and get into maybe those uh those better fields than we're chopped for silage or done for wet corn.
• 6:21
  SPEAKER_01: And moisture-wise, uh you know, there's a lot of corn out here that's in this 22 to 26 percent moisture range, uh, depending on planting date and uh and heat units gathered.
• 6:34
  SPEAKER_01: Man, you you put uh another 10 days of above normal temps and a little breeze, like we got forecasted, uh, we should be dropping a half point a day on on some of this corn.
• 6:46
  SPEAKER_01: So the if uh I would say as soon as we get done with beans, we're gonna be rolling hard into corn, and there's gonna be a lot of uh 18% corn getting harvested.
• 6:54
  SPEAKER_01: Which when you think about the year, uh maybe not so much right along I-90, where our heat units were kind of generally right at the 30-year average.
• 7:04
  SPEAKER_01: Uh, but you go north uh and maybe into central Minnesota, North Dakota, northern Minnesota.
• 7:11
  SPEAKER_01: Um, you know, they were behind.
• 7:13
  SPEAKER_01: Uh they were like about seven to ten days behind on heat units, real nervous about what an early frost would do.
• 7:21
  SPEAKER_01: And all those worries have disappeared because most of the corn is at black layer or should hit black layer pretty quick.
• 7:26
  SPEAKER_00: And I worry about that a little bit too, though, because it just stopped.
• 7:30
  SPEAKER_01: Uh, a little bit, but uh if and I know you probably have dealt with this, I'd rather have it stop and go to black layer than have to deal with uh frozen uh corn uh in September.
• 7:41
  SPEAKER_01: You're not wrong about that.
• 7:43
  SPEAKER_01: So I don't yeah, I I think yeah, kernel size and all these other things that might happen on the corn crop that we're seeing in soybeans, uh maybe seed size a little smaller, hurting, uh taking this from like a wow type record deal to yeah, that's really good crop.
• 7:58
  SPEAKER_01: Uh we're gonna see that because of the uh kind of extensive dry streak we've been on here.
• 8:05
  SPEAKER_01: But overall, um, I think harvest is gonna progress pretty fast and uh looks to be pretty good, unless some of these long-term forecasts uh would change, but boy, they sure don't look like they are right now.
• 8:18
  SPEAKER_00: So we've heard pretty good things about soybean yields so far.
• 8:21
  SPEAKER_00: Not a whole lot really coming out on the corn.
• 8:22
  SPEAKER_00: I've heard some getting into the 18%, but you really gotta be picky.
• 8:26
  SPEAKER_00: Like you said, it's it's pockets here or there.
• 8:28
  SPEAKER_00: It's not like you draw a line, everyone south of it is combining, everyone north of it isn't yet.
• 8:33
  SPEAKER_00: Uh not a whole lot of that.
• 8:34
  SPEAKER_00: So uh what do you think about uh the insurance side at this time of the year here?
• 8:39
  SPEAKER_00: Uh margin protection got wrapped up.
• 8:41
  SPEAKER_00: What's a uh final thought on that before we kind of make the decision at the end of September here?
• 8:47
  SPEAKER_01: Correct.
• 8:47
  SPEAKER_01: So we uh September 30th is our decision date on margin protection uh that you have to be signed up for.
• 8:54
  SPEAKER_01: So uh next week Monday we're gonna wrap that up.
• 8:56
  SPEAKER_01: And and I know we had a podcast, what, a couple of weeks ago, talking about margin protection, and and so the the margin protection prices came in at 440 on corn, 1042 on soybeans.
• 9:08
  SPEAKER_01: Um, and we kind of wrapped up on margin protection, uh, talking about if if you feel that come February uh that corn and soybean price is more likely to go down, uh then you should step in and buy margin protection today.
• 9:25
  SPEAKER_01: You're gonna put a a pretty good price floor, uh 95% coverage uh under your crop, uh 25 crop now we're talking about, uh well in advanced.
• 9:37
  SPEAKER_01: And I know one thing we talk about in our office, uh especially this week, has been you know trying to move items from the unknown to the known.
• 9:45
  SPEAKER_01: Okay, and so we talk about this of if I've already bought fertilizer seed, paid my rent for 25, I know what my acres are going to be.
• 9:54
  SPEAKER_01: Those are all knowns.
• 9:55
  SPEAKER_01: The one unknown I have right now is pricing opportunities and buying an insurance product, 95% coverage like margin, you can put a lot of those bushels into the known category of what having some sort of price floor under them.
• 10:10
  SPEAKER_01: Um but what we've seen, Mike, uh in and maybe what's preventing a few guys from from looking at margin is ever since we set the prices for 25 on this margin protection product, the corn and soybean market has gone higher in 25.
• 10:27
  SPEAKER_01: And so uh that's where where our head was kind of at.
• 10:30
  SPEAKER_01: If you are looking to turn that into a known and and you could buy margin, if you think that there's an opportunity for price to stay a little higher, or uh you want to wait to the more traditional time to buy crop insurance of the spring, um uh ECO will be there and available to get us a 95% coverage on our spring policies, and that's just going to be cheaper than margin protection, a little less coverage than margin offers based on total dollars.
• 10:57
  SPEAKER_01: Uh, but those are kind of our our two talking points right now of if you like where the margin protection gives you coverage today, step in, get it signed up, get a floor under a lot of your bushels, and start looking at what to do with those bushels you have left to sell.
• 11:15
  SPEAKER_01: Um, but if you're if you think there's an opportunity, and maybe uh because of the the rally we're seeing in these grains, maybe we don't buy an insurance product on 25, maybe we go out and start selling some as we're looking at November 25 beans uh almost at$11 here today, Mike.
• 11:34
  SPEAKER_00: Yeah, I mean almost 11 bucks on No25 Futures, you're getting back to the area that's probably worth talking about it in the 11s on futures.
• 11:44
  SPEAKER_00: Uh anything under 11, it just not adding up very well, I think, for breakeven levels for this next year.
• 11:51
  SPEAKER_00: So anything above 11 it at least gets close enough.
• 11:54
  SPEAKER_00: So I'm I'm entertaining more option strategies out there that we can talk about.
• 11:59
  SPEAKER_00: But something like a three-way today for just an example of throwing out there is about 75 cents for that eleven dollar put next year, ten dollars gonna get you about thirty-two of that back, and then you go up and look at like a twelve dollar um put there at about or a twelve dollar call at about thirty-nine.
• 12:17
  SPEAKER_00: I mean, you're looking at something pretty decently affordable, you know, for that buck window each way.
• 12:25
  SPEAKER_00: Um not really gonna cost you much, it's pretty much even for that buck.
• 12:28
  SPEAKER_00: So I uh things like that rather than a margin protection, which is expensive, you know, across your whole farm is a large commitment, and you can only get paid on one margin or multi-apparel, not both.
• 12:41
  SPEAKER_00: Correct.
• 12:42
  SPEAKER_00: I typically February prices are gonna be better than normal uh, you know, that September time frame of an average any wage anyways, which our low actually looks like it came in during that time frame, just for an example, uh here this fall.
• 12:57
  SPEAKER_00: So a few things worth talking about, I think.
• 13:00
  SPEAKER_00: I I really like entertaining uh option strategies, things like that into this next year.
• 13:06
  SPEAKER_00: I think it's worth the wait.
• 13:08
  SPEAKER_00: Um, but that's just me.
• 13:10
  SPEAKER_00: It'll be interesting.
• 13:11
  SPEAKER_01: I think uh I I don't disagree with what you're saying, Mike, is that uh you look at margin protection, these prices uh you know aren't terrible, uh, but they aren't as high as they've been the last few years.
• 13:21
  SPEAKER_01: So it's hard to get guys excited about spending uh 30, 40 bucks an acre uh on a on a price that you kind of think can go up, and and we've seen it kind of go up here lately.
• 13:31
  SPEAKER_01: Uh one thing I do want to come back to on the 2024 price, as we as we were kind of just talking uh before the podcast started, Mike.
• 13:40
  SPEAKER_01: Uh the the corn rally has been right at about 30 cents from our low and and kind of where we're at today and the soybean rally was what?
• 13:49
  SPEAKER_00: Over a buck now.
• 13:50
  SPEAKER_00: I mean it's we're at 1068 now, actually, up 27.
• 13:53
  SPEAKER_00: It's really coming along.
• 13:55
  SPEAKER_00: So uh really really piling on the soybeans here.
• 13:59
  SPEAKER_01: Yeah, so so one thing to keep in mind on these 24 crop insurance policies is we're gonna start averaging the harvest price on October 1st.
• 14:09
  SPEAKER_01: So next week we'll start that averaging period.
• 14:12
  SPEAKER_01: And uh depending on where uh what happens during the month of October, because we'll take uh all the trading days in October and average the closes for uh December corn and November beans to get our harvest price for our revenue products.
• 14:27
  SPEAKER_01: Um, you know, that ECO coverage is one we talked a lot about last spring, and and it should work pretty good.
• 14:34
  SPEAKER_01: On soybeans, it's gonna start triggering at like 1097.
• 14:38
  SPEAKER_01: Uh but boy, we're we've really came a lot closer to that uh level than we were a month ago.
• 14:45
  SPEAKER_01: Uh so so if you were kind of figuring on, well, man, my mark my ECO policy is gonna kick in a big claim uh on my soybeans, we'll have to see what the month of October does.
• 14:55
  SPEAKER_01: But right now that claim is getting smaller every day with the uh with the way the price action is being by the minute here from the looks of it.
• 15:02
  SPEAKER_00: Since we started, soybeans are up about eight cents, so quite a quite a feat here today.
• 15:06
  SPEAKER_01: Yep, and corn, you know, we're gonna start kicking in in that 440 level.
• 15:10
  SPEAKER_01: So uh, you know, we're well got kind of in that 420 area uh today.
• 15:15
  SPEAKER_01: So again, we haven't even started the averaging process.
• 15:20
  SPEAKER_01: Uh we're gonna start it next week's, and a lot can happen in the month of October.
• 15:24
  SPEAKER_01: But just keep that in mind if you were banking on a big ECO claim um or a crop insurance claim because of price loss.
• 15:32
  SPEAKER_01: Uh these prices have came up quite a bit in the last uh couple weeks, and uh that is gonna affect your claim.
• 15:38
  SPEAKER_00: Pretty good price resistance here along this 423 area on these corn.
• 15:43
  SPEAKER_00: That's an old high there.
• 15:44
  SPEAKER_00: I think there's strong resistance right around 420.
• 15:47
  SPEAKER_00: You're gonna start talking a lot of$4 cash corn and above here out of the out of the field.
• 15:51
  SPEAKER_00: That's gonna spark some farmer selling, I would believe.
• 15:54
  SPEAKER_00: And and now soybeans well above uh 10 cash in a lot of areas too.
• 15:58
  SPEAKER_00: I think uh pretty strong resistance levels that are coming up here around 1080 on the November now, since we blew through 50 and 60.
• 16:06
  SPEAKER_00: Uh, a few things to really watch here, but big weekend.
• 16:09
  SPEAKER_00: We got tariffs kicking on today for the United States.
• 16:11
  SPEAKER_00: Watch that from the Biden administration, kind of a new deal there.
• 16:15
  SPEAKER_00: Uh see how China reacts or retaliates over the weekend if they do at all.
• 16:20
  SPEAKER_00: Uh, that could be pretty uh interesting.
• 16:22
  SPEAKER_00: And then also watch that weather forecast for Brazil here about the next six to ten days.
• 16:27
  SPEAKER_00: That's gonna be pretty key.
• 16:28
  SPEAKER_00: So very interesting markets to end out our week, and it should be very interesting Sunday night, Monday as well here to kick off next week.
• 16:35
  SPEAKER_00: Well, it's always good to be interesting, Mike.
• 16:37
  SPEAKER_00: Yeah, that it is.
• 16:38
  SPEAKER_00: We what a week here out of these grain markets and livestock as well, with Hogs and Pigs report coming out yesterday.
• 16:44
  SPEAKER_00: We'll give you an update on the hog market podcast here uh next week.
• 16:48
  SPEAKER_00: Uh some interesting things there, and uh, we'll have to see what uh Jeff, Luke, Pat, what they all thought about that here in next week's podcast.
• 16:56
  SPEAKER_00: Thanks, Lucas.
• 16:57
  SPEAKER_00: Thanks, Mike.
• 16:58
  SPEAKER_00: And thank you to all our listeners.
• 17:00
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 17:03
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 17:08
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 17:15
  SPEAKER_00: See you next time.