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Report Week · 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 Miner.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_00: Today is March 31st.
• 0:25
  SPEAKER_00: I've got Pat back with us here today.
• 0:27
  SPEAKER_00: How's it going, Pat?
• 0:28
  SPEAKER_01: Good, Mike.
• 0:29
  SPEAKER_01: How are you?
• 0:30
  SPEAKER_00: Fantastic.
• 0:30
  SPEAKER_00: Well, we've had an interesting report week here.
• 0:33
  SPEAKER_00: It's uh Thursday afternoon.
• 0:35
  SPEAKER_00: We wrapped up the day's trading uh after uh a couple interesting reports here on the grain side of things today.
• 0:41
  SPEAKER_00: We had the quarterly stock grain stocks report today, as well as the prospective plannings report.
• 0:47
  SPEAKER_00: And then yesterday we had the uh quarterly um we had the uh quarterly hog and pig report there as well.
• 0:54
  SPEAKER_00: So we've got uh three interesting reports to talk about today and a lot of market movement.
• 0:58
  SPEAKER_00: How's that sound?
• 1:00
  SPEAKER_01: Sounds good.
• 1:01
  SPEAKER_00: Awesome.
• 1:02
  SPEAKER_00: Well the quarterly stocks report came out today, very close to expectations, pretty much all the way across the board.
• 1:07
  SPEAKER_00: Uh I think we could cut it pretty close with that, Pat.
• 1:10
  SPEAKER_00: There was uh not very much excitement when it comes to the quarterly stocks numbers on the corn, soybeans, and wheat really.
• 1:16
  SPEAKER_00: So do you have anything really to talk about with that, you think?
• 1:20
  SPEAKER_01: Or no, I just the only comment that we would make as it relates to old crop is um what's not happening.
• 1:27
  SPEAKER_01: Uh so first of all, to your point, the stocks number is as expected.
• 1:32
  SPEAKER_01: We also are seeing okay shipments from a corn perspective, but we're not really seeing any new sales, and so the popular opinion was that we were going to tighten up this old crop balance sheet uh as a result of less movement of uh of wheat out of the U Russian Ukraine region, and and maybe that'd pick up exports a little bit on corn from the US.
• 1:56
  SPEAKER_01: And you know, we're five weeks into that conflict over there and haven't seen a noticeable change yet as it relates to uh sales on the books.
• 2:05
  SPEAKER_01: So I don't know how important all that is.
• 2:06
  SPEAKER_01: We'll keep an eye on it for sure, but it's uh uh it certainly aren't seeing much today as it relates to to much movement or change at all in the old crop balance sheets.
• 2:16
  SPEAKER_00: That'll be something to watch over the next couple months, and then we should, you would figure, have a pretty good idea by the time May comes around, right?
• 2:24
  SPEAKER_00: For planting progress for Ukraine, for the United States, and for any export activities up until that point.
• 2:29
  SPEAKER_00: Uh should have a good idea.
• 2:31
  SPEAKER_01: Exactly.
• 2:32
  SPEAKER_00: Um the other report here on the grain side of things, the U.S.
• 2:35
  SPEAKER_00: planning of uh major crops here, the corn number was kind of the big mover and a shaker today.
• 2:40
  SPEAKER_00: We came in at 89.5 million acres.
• 2:43
  SPEAKER_00: Expected, uh they were expecting at 92, so a little bit less corn acres.
• 2:49
  SPEAKER_00: And on the soybean side of things, we saw a higher number than expected.
• 2:53
  SPEAKER_00: 91 almost, it was ninety point nine five million acres versus eighty-eight point seven expected.
• 2:59
  SPEAKER_00: So those were the two big uh topics they talked about today.
• 3:02
  SPEAKER_00: Really had the markets moving.
• 3:04
  SPEAKER_00: Uh close of the day a lot weaker on the soybean side of things, uh, down about 40 45 cents all the way across the board or so on the soybeans after that report came out.
• 3:14
  SPEAKER_00: And then uh the corn, we did trade limit up for a little bit on those front months, but we backed off here towards the close, uh, up only about 27 and three-quarters on that December contract.
• 3:24
  SPEAKER_00: But uh closed new highs on the contract, 680 just shy of 684 on December corn.
• 3:30
  SPEAKER_00: And uh what do you think about the report's initial reactions today?
• 3:34
  SPEAKER_01: Well, completely flipped the balance sheets around.
• 3:38
  SPEAKER_01: And so, you know, when you guys uh when when uh you and uh Macy Mike were going through the uh uh what ifs on the 22-23 balance sheet uh a couple weeks ago uh and using the average trade guess on on corn and soybeans or the average trade guess on on corn around 92 million acres or so.
• 3:59
  SPEAKER_01: Why we were seeing a balance sheet or projected balance sheet for next year's corn very similar to this year, close to a 10% stocks to use ratio, about a 1.5 ending stocks number.
• 4:13
  SPEAKER_01: So so I guess in the whole scheme of things, reasonably comfortable.
• 4:18
  SPEAKER_01: Well, you plug in an 89.5 million planted acres, normal abandonment, 180 trend line yield, everything else on change on usage.
• 4:26
  SPEAKER_01: Now we're down to a billion bushels or a 6.8% stocks to use ratio.
• 4:31
  SPEAKER_01: So that's a that's a big change uh on the corn balance sheet with uh two and a half million or so less acres than what was uh planned or budgeted.
• 4:41
  SPEAKER_01: So that's a big deal.
• 4:42
  SPEAKER_01: And then not surprisingly, uh the opposite uh reaction uh on the bean side of things.
• 4:49
  SPEAKER_01: When we were plugging in only 88.5 million acres or so, uh, we were uh gonna drop ending stocks down to 150 million or so, uh relatively tight stocks to use ratio there as well.
• 5:02
  SPEAKER_01: Uh now we start talking about 91 million bean acres, why uh 300 million ending stocks or 6.5% stocks to use ratio, a much uh more uh comfortable uh situation.
• 5:15
  SPEAKER_01: And so uh the new crop markets, corn versus soybeans, was trying to buy corn anyway, by trying to buy corn acres anyway, uh, and then today's market action uh significantly changed that.
• 5:28
  SPEAKER_01: I I heard you observing earlier.
• 5:29
  SPEAKER_01: And so you're exactly right.
• 5:31
  SPEAKER_01: I mean, I uh the market's job now is to uh is to try to uh uh encourage people to consider corn on on the last uh few acres there that are sort of free agents yet.
• 5:43
  SPEAKER_01: So we'll see how that plays out.
• 5:45
  SPEAKER_01: But um 89 million uh acres on corn is gonna make for a pretty tight situation all the way through here, and really, you know, no margin of error or the necessity of above trend line yields, that kind of thing.
• 6:00
  SPEAKER_01: So um if that's all we had to talk about with markets, it's pretty friendly.
• 6:04
  SPEAKER_01: And uh, of course, there's a lot of other things that are going on.
• 6:07
  SPEAKER_00: You know, going into this report, I wasn't as concerned as maybe uh is what I would be usually years.
• 6:13
  SPEAKER_00: This is usually a really big report, most years, and but we've got so many other things going on right now between the Ukraine exports, Ukraine production, China's uh smaller wheat production, it sounds like out of their crop.
• 6:27
  SPEAKER_00: Um you've got a food inflation, food security problems.
• 6:30
  SPEAKER_00: I don't know, there's just a lot of other things going on recently that I think made a lot of people look over this report a little bit.
• 6:37
  SPEAKER_00: And like you said, there's a lot of other things in the big picture that uh will m probably have pretty significant market impact over the next few weeks, but uh gotta keep the fundamentals in check, right?
• 6:48
  SPEAKER_01: No question.
• 6:49
  SPEAKER_01: So now more than ever, you're you you kind of described the three levels of of risk and opportunity that's in these markets today, and I would just I guess I would just reiterate them.
• 6:59
  SPEAKER_01: I mean, the the the base fundamentals, which mostly that's what we're talking about today.
• 7:04
  SPEAKER_01: How many acres are gonna plant?
• 7:06
  SPEAKER_01: How much corn's in the bin?
• 7:07
  SPEAKER_01: How big is Brazil's second crop of corn, which by the way seems to be pretty good at this point, getting some moisture.
• 7:13
  SPEAKER_01: What's China gonna do?
• 7:14
  SPEAKER_01: How many acres can get planted in Ukraine?
• 7:16
  SPEAKER_01: All those things are are relatively um, I guess, normal fundamentals.
• 7:21
  SPEAKER_01: What's the weather gonna be like in the northern hemisphere as we go through this growing season?
• 7:25
  SPEAKER_01: Um but in addition to that, uh the great experiment of uh printing money during a what hopefully is a once-the-century uh pandemic, and then the corresponding reaction to that as it relates to inflation, and then the Fed's response and the uh and the and the government's response to to uh those inflationary figures and concerns is certainly something that is and will continue to impact commodity markets in a significant way.
• 7:55
  SPEAKER_01: And then, as you mentioned, uh Mike, we've got uh uh what uh is also potentially a global altering event as it relates to available food supply with the conflict that's taking place in Russia and the Ukraine.
• 8:11
  SPEAKER_01: And so now more than ever, uh a lot of balls in the air, a lot of volatility, a lot of opportunity for row crop producers and and livestock producers alike.
• 8:21
  SPEAKER_01: And uh now more than ever, uh very important to have a good firm understanding of what costs you have locked in, what your cost of production is, and uh what uh what your potential opportunities are because without having uh those things uh in our hip pocket, it's gonna be really hard to make some decisions here as we go forward.
• 8:44
  SPEAKER_00: You got that right, and there are a lot of balls in the air right now.
• 8:46
  SPEAKER_00: You ain't kidding.
• 8:48
  SPEAKER_01: No doubt about it.
• 8:49
  SPEAKER_01: And so I think just to kind of wrap up the grain side of this thing, that's the best takeaway we've got.
• 8:54
  SPEAKER_01: And I uh fortunately, from the from the uh perspective of managing risk, we've got a a pelithera of tools in our toolbox to do just that.
• 9:05
  SPEAKER_01: And we look forward to the opportunity to initiate some discussions with with anybody out there that'd like to talk about you know utilizing maybe some short-term option strategies to uh get us into the growing season here in the in the northern hemisphere and and uh make sure that we're defending opportunities while well make sure that we're defending margin while we're still keeping opportunities uh available to us.
• 9:29
  SPEAKER_01: So um I think that's probably the best advice that we can give from a real crop producer's perspective today, Mike.
• 9:36
  SPEAKER_00: Very interesting.
• 9:37
  SPEAKER_00: Uh one last thing about the uh Planted Acres report here.
• 9:40
  SPEAKER_00: Um very interesting.
• 9:42
  SPEAKER_00: We've only seen this kind of happen twice before in our record keeping where we would potentially have more soybean acres than corn.
• 9:50
  SPEAKER_00: So just an interesting side note to kind of end off with on the grains there.
• 9:54
  SPEAKER_00: How about the hog side of things, Pat, and the report we had this week?
• 9:57
  SPEAKER_01: Yeah, bullish report yesterday, and of course the markets uh ended up uh trading uh trading lower.
• 10:02
  SPEAKER_00: That'll make you scratch your head.
• 10:04
  SPEAKER_01: Yeah, that's uh by the rumor, sell the fact, I guess.
• 10:06
  SPEAKER_01: But uh um hey look, I mean we've we've talked a lot about the supply side of this thing for quite some time.
• 10:13
  SPEAKER_01: We've been into less pigs since the midpoint of last year.
• 10:17
  SPEAKER_01: Um and uh this this is the third report in a row that has uh been bullish and uh and uh lower expectations than even than even average trade guess here.
• 10:32
  SPEAKER_01: And so uh we continue to struggle as an industry with health.
• 10:37
  SPEAKER_01: We continue to see as expected that we're not seeing significant growth on the uh on the breeding stock side of things.
• 10:46
  SPEAKER_01: And so from a hog producer's perspective, uh this is I guess a good reiteration of of the uh of what many of us uh I guess feel pretty good about is is that the supply side of this thing is you know we're on the right side of the cycle from a from a hog producer's perspective as it relates to that, and and don't see uh any time in the foreseeable future at least that uh uh that's going to change much.
• 11:12
  SPEAKER_01: Um so so that's that.
• 11:14
  SPEAKER_01: So you know, sort of, again, a solidification of what we hoped was right on the on the supply side of things.
• 11:21
  SPEAKER_01: Uh going forward here though, um perhaps the most important uh uh news of this week is what's happening on the demand side of the equation.
• 11:31
  SPEAKER_01: And this is the first week uh this year that cutout has traded below a year ago.
• 11:36
  SPEAKER_01: And so both of them are still elevated levels.
• 11:38
  SPEAKER_01: We had elevated cutout levels all year last year, extraordinary pork demand a year ago, uh, first half of the year uh because of some pretty decent exports into China in particular.
• 11:51
  SPEAKER_01: The second half of the year uh we enjoyed uh a few less pigs around, uh, but in addition to that, we also experienced pretty good disappearance uh on pork domestically, primarily through the retail sector.
• 12:07
  SPEAKER_01: And so as we started out this year and gone through the first quarter of the year, um we've we've experienced decent demand, but I I think a pretty good chunk of of the elevated cutout numbers uh has been the result of five, six, seven percent less pigs.
• 12:24
  SPEAKER_01: And so um I think the market on the sales side of things has sort of settled into these tighter supply numbers, and now we're gonna have to defend these higher cutout numbers on uh from a demand perspective.
• 12:37
  SPEAKER_01: And I I'm wondering, uh, you know, cutouts have been struggling for about a month now, been pretty flat for a while here.
• 12:44
  SPEAKER_01: You can just defend that with a seasonal sort of a thing as we get into spring, things will get better.
• 12:50
  SPEAKER_01: But uh it's been going on long enough now and trending again sort of now below a year ago.
• 12:56
  SPEAKER_01: Uh gets me a little bit concerned that that uh that consumer dollar, well, there's plenty of it there, right?
• 13:02
  SPEAKER_01: You've shown me plenty of uh data about the the amount of dollar, the M2 money supply and the amount of amount of money in consumers' pockets is still record high.
• 13:11
  SPEAKER_01: But we all know there's a a lot more competition for those dollars today.
• 13:15
  SPEAKER_01: Higher fuel price prices higher everything, right?
• 13:19
  SPEAKER_01: And so um uh it does appear as though that uh that maybe the consumer is starting to hold back a little bit on some of its on some of his or her protein spending habits.
• 13:30
  SPEAKER_01: So we'll see how that plays out as we go through the summer.
• 13:32
  SPEAKER_01: But I'm just a little bit concerned, especially at some of the levels that this market was trading at uh off the report this morning.
• 13:40
  SPEAKER_01: Boy, you're gonna have to sustain some consistently higher cutout levels than a year ago, which was high enough uh to defend uh what that market's trading at.
• 13:50
  SPEAKER_01: So still a wonderful margin opportunity out there for for the hog producer and and something that uh uh continues to deserve some fairly uh serious consideration.
• 14:01
  SPEAKER_00: Is there a timeline you have uh for those concerns about cutout going into the summer, you think?
• 14:06
  SPEAKER_01: Yeah, I I I think if if we don't start to see some some relatively decent appreciation uh as we wrap up the Lenten season and uh move into last half April, first half May, and uh better weather and and buying up for uh Memorial Day weekend and those sorts of things.
• 14:27
  SPEAKER_01: We don't start to see some some better disappearance at higher values, you know, within the next uh thirty to forty-five days.
• 14:35
  SPEAKER_01: I think it's gonna become uh a bit more concerning for sure.
• 14:39
  SPEAKER_00: Well, we'll have to circle back on this by uh by a month then.
• 14:42
  SPEAKER_01: Sounds good.
• 14:43
  SPEAKER_00: All right.
• 14:43
  SPEAKER_00: Thank you for joining us today, Pat.
• 14:45
  SPEAKER_00: I appreciate your time today, and thank you for all of our listeners out there.