Latest / Professional Ag Marketing Podcast / Reversal

Transcript

Reversal · 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 involve 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 March 21st.
• 0:25
  SPEAKER_00: I've got Luke Wells with us here today.
• 0:26
  SPEAKER_00: How's it going, Luke?
• 0:27
  SPEAKER_00: Very good.
• 0:28
  SPEAKER_00: How are you doing today, Mike?
• 0:29
  SPEAKER_00: We are doing very well.
• 0:30
  SPEAKER_00: So we're going to talk uh just a broad commodity overview here.
• 0:34
  SPEAKER_00: Uh we've got a lot of fun things to talk about, but not too much of one thing, Luke.
• 0:38
  SPEAKER_00: So how's that sound?
• 0:40
  SPEAKER_00: Sounds like a plan, bud.
• 0:41
  SPEAKER_00: Alright, well, look at today, let's just look back at kind of where uh we ended up the week here for a lot of these markets.
• 0:48
  SPEAKER_00: The cattle were kind of the main talking point here towards the end of the week.
• 0:52
  SPEAKER_00: Uh, if we don't have a key reversal in the in the feeder cattle market, for example, I I don't know what one is.
• 0:58
  SPEAKER_00: Yeah, that was a pretty big key reversal there that we saw.
• 1:01
  SPEAKER_00: New, fresh uh record highs there across a lot of those months, and uh we pulled back uh below the low from the last couple days at least, so at the close today, down over five bucks in the Jan 26.
• 1:13
  SPEAKER_00: So that one seemed to tip over for the time being here, at least.
• 1:16
  SPEAKER_00: That was kind of the talk of the town.
• 1:18
  SPEAKER_00: Uh, finally gave up a little bit there after running really hard.
• 1:22
  SPEAKER_00: Now, when I look at the cattle market, some observation that I I've really been looking at is the equities and and cattle normally like to trade together.
• 1:30
  SPEAKER_00: And if you go back to the equity market, the SP for for example, really the market started falling apart right about the 19th or 20th of February.
• 1:39
  SPEAKER_00: And we pulled back about 10%.
• 1:42
  SPEAKER_00: Now, if you look at live cattle or feeder cattle really since the 20th, we've done nothing since since then of really go up.
• 1:51
  SPEAKER_00: Uh, you know, since we put in our lows in those contracts about the beginning of March, uh, we've rallied immensely, almost a green close every day across both of those markets.
• 2:00
  SPEAKER_00: And while a lot of these markets, whether it be corn or soybeans or lean hogs, crude oil, we've taken a lot of money off the table.
• 2:09
  SPEAKER_00: We've uh traded uncertainty.
• 2:11
  SPEAKER_00: And normally when you would trade uncertainty and take risk off the table, you would focus on uh something you've got massive long positions in, which would be most of these egg commodities now, as we've been fighting against inflation.
• 2:24
  SPEAKER_00: So we've had a lot of uh long com uh long buyers in that aspect.
• 2:29
  SPEAKER_00: And then fundamentals have looked pretty decent in a lot of these commodities recently as well, uh particularly the the protein markets.
• 2:36
  SPEAKER_00: Now, as they've pulled money out uh of a lot of these markets, uh most folks would have probably figured that the cattle market would be right there with them because typically, one, equities and cattle like to trade somewhat together.
• 2:49
  SPEAKER_00: Um, if people can afford uh a good stake, that's usually pretty good for demand.
• 2:54
  SPEAKER_00: If they're feeling broke, they they feel like maybe uh maybe we can't uh eat out as much things like that.
• 3:00
  SPEAKER_00: So it's been to see those two go opposite of each other here for the most recent time was very interesting.
• 3:06
  SPEAKER_00: Now, today seeing the cattle finally tip over a little bit here uh at the top, seeing the equities find a little bit of a bottom here in the meantime, we'll see what market direction looks like for both of those going forward.
• 3:19
  SPEAKER_00: Uh however, that cattle market, I feel like this is a place where you're really gonna have to take a look at it and uh see where you're at cycle-wise.
• 3:27
  SPEAKER_00: If you go back all the way to the 1970s, in fact, Luke, yeah, you can see that there is a trend from each top of major highs pointing to about exactly where we ran to today in these feeder cattle markets.
• 3:40
  SPEAKER_00: So if you're looking at like a 50-year trend line history, we're right there at the top of these trends.
• 3:45
  SPEAKER_00: So it's a very interesting chart pattern.
• 3:47
  SPEAKER_00: If you wanted to uh go back and look at those, anyways, that's an interesting one.
• 3:52
  SPEAKER_00: The other thing here finishing out the week, Luke, would be uh the grain markets.
• 3:56
  SPEAKER_00: I think corn right now, you have a lot of uh sideways trade.
• 4:00
  SPEAKER_00: Really going back to about the beginning of the month, we haven't had a whole lot of volatility.
• 4:04
  SPEAKER_00: It's been choppy, but we just haven't created a lot of range.
• 4:08
  SPEAKER_00: It's been directionless.
• 4:09
  SPEAKER_00: So that makes a lot of sense from this ending point of the week towards the beginning of next week.
• 4:16
  SPEAKER_00: Here is one thing we'll be looking at next week is your end of month, your end of quarter, your quarterly stocks report coming out, and prospective plannings report coming out.
• 4:26
  SPEAKER_00: Major things all the way across the board, both uh outside market forces and both internal market forces.
• 4:34
  SPEAKER_00: So those are things that we're gonna be keeping an eye on and that will help give this corn market direction, something it's been lacking basically the entire month of March so far, as it just is searching for something to really point it in a direction up or down after this massive correction we had since uh really the middle of February, Luke, on this corn market.
• 4:55
  SPEAKER_00: So those are a few things I'm looking for out of the corn and soybean market to really impact uh going into the end of the month here.
• 5:03
  SPEAKER_00: The soybean market, very similar, same boat.
• 5:06
  SPEAKER_00: Um, you've pulled back to about 10 bucks on that November soybean contract.
• 5:10
  SPEAKER_00: Not a whole lot to really chat about, not a whole lot to get excited about.
• 5:14
  SPEAKER_00: The the one thing going into this next WASD report that we haven't done in the in the March report either, Luke, was um, as I'm focused on demand, ethanol margins aren't aren't fantastic by any means, but we continue.
• 5:29
  SPEAKER_00: We had another big grind week on ethanol again this week.
• 5:32
  SPEAKER_00: And sure, the disappearance is pretty good.
• 5:35
  SPEAKER_00: We've seen gas demand pick up and we've been able to shrink ending stocks a little bit, but they're still pretty high uh relative to history.
• 5:42
  SPEAKER_00: Um ethanol or uh exports.
• 5:44
  SPEAKER_00: Exports are are running uh fantastic versus USDA expectations, and uh I think uh at this point it they probably should have made an adjustment in the March report higher on demand out of exports for corn.
• 5:58
  SPEAKER_00: Now that that may come into uh a pretty decent timing that if we get to May and get to that WASDA report and they they have to uh use a bigger trend line yield like a 181, if they have ninety-five plus million acres on corn planted, let's say, um, they may need a little help out of the old crop balance sheet to keep that new crop ending stocks in check.
• 6:22
  SPEAKER_00: So that may be a a demand figure that they wait to adjust until that May report, but nonetheless, uh we've got some more exciting times coming at us for these grain markets, I think, from both reports and for now, you know, we get past prospective plannings and quarterly stocks, then all of a sudden it's gonna be boom, we're talking about planning conditions, planning pace, uh acres, all of the things that are uh gonna quite get exciting in these markets uh very quickly.
• 6:51
  SPEAKER_00: So this is not something to sleep on by any means.
• 6:54
  SPEAKER_00: But uh any final thoughts before I get into the final piece, Luke?
• 6:58
  SPEAKER_00: No, I think you sum that up really well, man.
• 7:00
  SPEAKER_00: So the big thing right now, my big kick, and I think ours in uh in the office, has been this this need to go over a marketing plan.
• 7:10
  SPEAKER_00: Right now is the perfect time.
• 7:11
  SPEAKER_00: You know what your acres are basically gonna be.
• 7:13
  SPEAKER_00: Your crop insurance decision has been made as a base.
• 7:17
  SPEAKER_00: Uh and now going forward, we uh we have to really look at what our targets are from a seasonal perspective and and what are some dates that we have to have coverage levels um done by.
• 7:27
  SPEAKER_00: That'd be the step one.
• 7:29
  SPEAKER_00: And then two, laying in an outline of what are some nice price points that look correct for both profitability for my operation, what would be uh reasonable for a move from this time frame until April, May, June, July through that stretch that we could reach to.
• 7:47
  SPEAKER_00: Look at uh you know, relative levels of crop insurance, like we've talked about.
• 7:51
  SPEAKER_00: You know, we we have a 470 crop insurance price.
• 7:54
  SPEAKER_00: Um, you know, look back in history and see how much we've advanced beyond that uh in the last 20 years, for example.
• 8:01
  SPEAKER_00: Start to outlay a marketing plan that fits your operation for both profitability from a seasonal perspective and uh just something that uh looks reasonable uh for actually hitting some marks and achieving those uh here this year going forward.
• 8:16
  SPEAKER_00: Right now is the perfect time to do it.
• 8:17
  SPEAKER_00: Before we get into planning, I uh I really like our marketing plan we put together this week.
• 8:22
  SPEAKER_00: We're gonna send it out in the grain recommendations uh today.
• 8:26
  SPEAKER_00: That'll be a must-read.
• 8:27
  SPEAKER_00: And I think uh if we get a chance here, please just give us an opportunity to come out and see you.
• 8:32
  SPEAKER_00: Uh come into the office, and all the same.
• 8:35
  SPEAKER_00: We would love to chat with you about a risk management plan for your operation going forward, because right now is a critical time for that discussion, Luke.
• 8:43
  SPEAKER_00: 100%.
• 8:44
  SPEAKER_00: All right.
• 8:45
  SPEAKER_00: Well, thank you for your time today, Luke.
• 8:46
  SPEAKER_00: Uh, if you guys need anything, please reach out and give us a call or go to our website at Professional Ag Marketing.
• 8:52
  SPEAKER_00: Thanks.
• 8:52
  SPEAKER_00: And thank you to all our listeners.
• 8:54
  SPEAKER_00: Please reach out to us at professional agmarketing.com.
• 8:58
  SPEAKER_00: Check out our other podcast as well, Professional Ag Marketing, that's released every Friday.
• 9:03
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 9:09
  SPEAKER_00: See ya next time.