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Grains: Market Update · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the egg 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.
• 0:24
  SPEAKER_00: Good afternoon, everyone.
• 0:25
  SPEAKER_00: This is Pat Von Tirsch with Professional Ag Marketing.
• 0:28
  SPEAKER_00: It's December 12th, and I have two distinguished guests this afternoon, both Mike Minor and Jaden House log, and we're going to have a little roundtable discussion today about what's going on in the markets.
• 0:40
  SPEAKER_00: And so, Mike, why don't you just start with some of the highlights, please, as we've gone through this week, maybe make a couple observations or two as it as it uh relates to market activity, and then unfortunately we're gonna have to touch upon uh uh a disappointing close for the week this week.
• 0:57
  SPEAKER_00: So why don't you take it away?
• 0:59
  SPEAKER_01: Yeah, some of the recent updates on this uh corn and soybean market, I would say, is we've started the week and and mostly finished the week through a very calm corn market.
• 1:09
  SPEAKER_01: It's been very uh uh very tight ranges, very uh very minimal uh trading headlines.
• 1:16
  SPEAKER_01: There really hasn't been a catalyst to drive these prices anywhere, up or down lately on this corn market.
• 1:22
  SPEAKER_01: We know more about the corn market now than we have at any point of the growing season, and the market's acting like it.
• 1:29
  SPEAKER_01: And it acts like it's very comfortable around this type of level, right around 440 to 450 on March futures, uh, right where we ended the week yet again.
• 1:38
  SPEAKER_01: The soybean market continues to be uh more the wild card.
• 1:42
  SPEAKER_01: We've taken off uh uh an ample amount on the soybean market in the past couple weeks here, after we've seen a really nice rally uh post any China buying news, trade war type uh level.
• 1:57
  SPEAKER_01: So we we've seen a retracement and the the soybean market continues to be the wild card from if there is gonna be a catalyst to drive these futures prices, it seems like that's gonna be the one that really headlines it here still.
• 2:09
  SPEAKER_01: So uh recently, some of the updates on soybeans, I would argue South America weather started to play a factor now.
• 2:16
  SPEAKER_01: Uh and uh other than that, we've seen consistent Chinese buying of U.S.
• 2:22
  SPEAKER_01: soybeans, which is something a little different to touch on.
• 2:24
  SPEAKER_00: Alright, so we'll get into the Chinese buying in a second here.
• 2:27
  SPEAKER_00: But Jaden, talk to us a little bit about South America weather.
• 2:30
  SPEAKER_00: What are we seeing out there?
• 2:33
  SPEAKER_02: Yeah, Pat.
• 2:34
  SPEAKER_02: So we we did have a little rough start to the South America weather, but as as of now, as of late, we we've really we've really um had some really good rainfalls here in Brazil and Argentina.
• 2:48
  SPEAKER_02: Um you know, the the 30% of the growing region in Brazil, there's that Mato Grosso area, and they've received, you know, 120% of their normal rainfall over the last two weeks.
• 2:58
  SPEAKER_02: So as of right now, as we start to shift to trading South America weather, there's really nothing that I'm too worried about from that perspective.
• 3:08
  SPEAKER_00: So that's uh sort of lends towards uh just this further um relatively tight consolidated range, um Jaden.
• 3:15
  SPEAKER_00: We just really, as you said, uh um a little bit of a concern initially, but uh been calmed as it relates to and and a critical part of their growing season, right?
• 3:25
  SPEAKER_00: Like if we were gonna trade weather, this is the time to do it.
• 3:28
  SPEAKER_00: And and there just isn't even really a developing story there, right, Mike?
• 3:32
  SPEAKER_01: Yeah, Koneb, they did make a small downward revision to the Brazil soybean crop estimate.
• 3:38
  SPEAKER_01: However, uh even at the revised new estimate, it's still a record crop by an incredibly large margin for Brazil.
• 3:46
  SPEAKER_00: Exactly right.
• 3:46
  SPEAKER_00: So let's talk a little bit about the um the Chinese and soybean purchases here.
• 3:51
  SPEAKER_00: Do you one of you guys want to give us just a little bit of a recap in terms of the numbers of what's been going on as it relates to sales?
• 3:57
  SPEAKER_01: We've got uh about 11 total flash sales on soybeans since October 30th.
• 4:02
  SPEAKER_01: That'd be 27% of the 12 million metric ton goal is made up uh so far.
• 4:08
  SPEAKER_01: If you uh forecasted their recent buying uh through the end of February, they're actually not far off track to reach that goal with some of the recent sale progress that they've had.
• 4:20
  SPEAKER_01: Um this week, for example, they would have almost hit the goal needed for a weekly amount to get that done by the end of February.
• 4:28
  SPEAKER_01: So actually, as of late, the slow, consistent, steady buying is starting to add up a little bit out of the Chinese side.
• 4:35
  SPEAKER_01: And that's only from flash sales and ones we already know about.
• 4:39
  SPEAKER_01: They're also catching up in the recent export reports as well, which we could see some smaller volumes continue to add on top of that, Pat.
• 4:47
  SPEAKER_01: So it's not a it's not a huge win for the markets, however, it shouldn't be much of a a uh a real red flag so far.
• 4:56
  SPEAKER_00: So, what concerns or what observations are we making these days as it relates to the global balance sheet?
• 5:03
  SPEAKER_00: I um you know we've been talking Trump this, trade that, tariff this and that for way more days than I even want to count right now, frankly.
• 5:13
  SPEAKER_00: And and uh um but and and there's been days where that's felt like there's some momentum building in this market as a result.
• 5:22
  SPEAKER_00: There's certainly been trade activity in in that that has um also reflected that.
• 5:28
  SPEAKER_00: But but at the end of the day, at the end of this whole process, what ultimately is going to change, right?
• 5:34
  SPEAKER_00: How how are we going to materially build a bull um uh case for the soybean complex um wrapped around either the two things we're talking about, either South America weather or Chinese purchases?
• 5:50
  SPEAKER_01: Well, the big story would be that ending stocks, the total amount of soybeans in the world continues to grow at a pretty consistent level.
• 5:57
  SPEAKER_01: Brazil is a big part of that.
• 5:59
  SPEAKER_01: They continue to grow their production year after year after year.
• 6:02
  SPEAKER_01: So the ending stocks continues to grow along with it.
• 6:05
  SPEAKER_01: Now the ending stocks have been going down in the last couple of years and look like they'll continue to do so.
• 6:10
  SPEAKER_01: I think biofuels will continue to play a big part of that.
• 6:13
  SPEAKER_01: We're finding more ways to use soybeans in in the world uh to get rid of them in a in a new way rather than just feeding them to a pig, for example, in China.
• 6:22
  SPEAKER_01: So that's one way of looking at it, I think, Pat, from a global macro perspective.
• 6:28
  SPEAKER_01: The good thing is we've just taken back a very large chunk of our price in the United States, which will make us more competitive.
• 6:36
  SPEAKER_01: So it should continue to be easier for China to continue to buy soybeans from the U.S.
• 6:40
  SPEAKER_01: versus someone like Brazil who they will have a record crop coming forward in February.
• 6:46
  SPEAKER_00: Well, at least it appears so at this point they have the opportunity for a record crop.
• 6:49
  SPEAKER_00: That's not in the bin by any stretch of the imagination yet.
• 6:53
  SPEAKER_00: Um and as we think about the domestic balance sheet, I think the last that we looked, we actually had a corn to savine ratio that that uh um that uh um uh gave us a little bit of a corn advantage as we think about about next year for acres.
• 7:09
  SPEAKER_00: Is that accurate?
• 7:11
  SPEAKER_01: Yes, I mean it it uh 95 million corn acres is what's expected.
• 7:16
  SPEAKER_01: That's still favoring corn, uh, you know, at 2.4 ratio.
• 7:19
  SPEAKER_00: Yep, exactly.
• 7:19
  SPEAKER_00: And so and so anyway, as and so that would be maybe another bull argument um if there is one to be built on on the soybean side of things, is is is there is the prospect, I suppose, yet of a weather concern in South America and coupled with uh maybe maybe uh um at least not an increase of significance in acres here in the U.S.
• 7:40
  SPEAKER_00: as we look forward.
• 7:41
  SPEAKER_00: Um the challenge though is I think is still this this this um the issue of it still being relatively hard to build an increasing demand base on the soybean complex side of things, right?
• 7:55
  SPEAKER_00: We're we're uh we're stretching and looking to think about how we're adding animal numbers anywhere on the globe today.
• 8:01
  SPEAKER_00: Um gets uh get that that part uh um it seems to be a bit of a fixture here uh recently.
• 8:08
  SPEAKER_00: And you mentioned you know biofuels and those sorts of things.
• 8:11
  SPEAKER_00: But I I mean the that that's run its course here just a little bit for the time being, I would argue, domestically.
• 8:16
  SPEAKER_00: And so um, and so one thing that we have learned through the years, Jaden, is that it's uh um that that bean demand generally is pretty inelastic, right?
• 8:27
  SPEAKER_00: And so it's it's pretty hard to flex into additional bean product demand when global supplies, domestic supplies doesn't really matter what we're talking about, when they start to build just a little bit here, and that's the case that we've been in, it makes it pretty hard, I I think, to get really comfortable.
• 8:45
  SPEAKER_00: We're just gonna be able to flex in some additional demand.
• 8:48
  SPEAKER_00: It's decent argument to be able to do that on corn, and one would argue that we're seeing that today, right?
• 8:54
  SPEAKER_00: We're seeing some uh a real nice uh um increase in in exports um and uh with lower values.
• 9:02
  SPEAKER_00: We're seeing a nice improved livestock sector with lower corn values, and so we're we're able to flex in into some additional corn demand here, but really struggling on the bean complex sort of thing.
• 9:13
  SPEAKER_00: So, Jane, do you do you do you maybe have a few comments for us as it relates to now internal or domestic fundamentals on the corn side of things?
• 9:23
  SPEAKER_00: Do you want to talk just a little bit about um about uh the impending uh January report and and what that might present for us?
• 9:31
  SPEAKER_02: Yeah, Pat, like you said here, we had a WASD report on Tuesday, and normally in the December report, there's not a big market mover catalyst in that report, and it was kind of the same this year for the corn and soybean side of things.
• 9:43
  SPEAKER_02: So they did end up increasing corn exports by 125 billion bushels.
• 9:48
  SPEAKER_02: So, like you said, yeah, we've we've been on a great pace, and Mexico's been our best friend on the on the corn export side of things.
• 9:54
  SPEAKER_02: But looking forward, I guess, um, like you said, the feed and residual number is gonna be that's gonna be very interesting in this January report.
• 10:03
  SPEAKER_02: Normally, you know, when they like to bring back that production number, they use that feed and residual number as their slush fund and they pull that right back just like they do with uh production at the same time.
• 10:14
  SPEAKER_02: So looking forward to the January report, I guess it'll be really interesting, and I think there's a very high-level amount of uncertainty going in this report.
• 10:24
  SPEAKER_02: As you know, we fell behind with the government shutdown and with the with the lack of government reports.
• 10:30
  SPEAKER_02: I I think there's probably maybe more unknown for this report than there normally is.
• 10:35
  SPEAKER_00: Absolutely, and and uh and so maybe to wrap up today's uh podcast, we should just finish with some observations as it relates to what's going on um in the cash market here and with spreads.
• 10:48
  SPEAKER_00: And so um we are seeing a seasonal tendency of basis to be firming this time of year, not at all uncommon uh between Thanksgiving and Christmas to see uh uh narrowing of basis levels um on both corn and soybeans, and and particularly corn as it relates to this particular topic, and also seeing the spreads narrow up a little bit too, right, Mike?
• 11:09
  SPEAKER_00: And so um, you know, we've had a lot of discussion from a merchandising perspective, what basis is capable of doing, especially as we turn the calendar to uh uh to to 2020 um to 2026.
• 11:22
  SPEAKER_00: Um we uh would expect that we would see um a bit more challenging movement if you're a buyer, right?
• 11:31
  SPEAKER_00: And and we would think that uh um that from a row crop producer's perspective that there should be some nice opportunities uh um to to to um have a little bit of leverage here, especially as we sort of wrap up the balance of of 2025.
• 11:47
  SPEAKER_00: And and so Q1 to 26, we're we're with it's going to be um we would expect basis levels to to remain somewhat narrow.
• 11:59
  SPEAKER_00: We would expect spreads to maintain somewhat um somewhat narrow as well, uh, especially if we're unable to develop some sort of a board rally movement, right?
• 12:10
  SPEAKER_00: And so um and so anyway, I that portion of this discussion, I don't know if you have anything to add on all that, Mike, but I do think that that that portion of the discussion is going to become pretty important and and uh and a key driver to um to the decisions that we want to make on the cash side of things as we as we look out over the next three or four months.
• 12:29
  SPEAKER_01: Block and tackle work going forward will remain uh more important than what it was probably the last couple years.
• 12:36
  SPEAKER_01: And it from a uh cycle perspective, it it would make sense from that.
• 12:40
  SPEAKER_01: So the last thing I would argue is going into 26 here that I'm really looking forward to is actually some of the recent data we got back this week.
• 12:49
  SPEAKER_01: You talked about how soybean price doesn't always make sense versus what their fundamentals are.
• 12:54
  SPEAKER_01: That that is shifting a little bit because we're using more domestically going forward now.
• 12:59
  SPEAKER_01: In fact, uh we just broke another record.
• 13:02
  SPEAKER_01: Uh we were 145 million bushels in new capacity added last year in the United States, and we're gonna add another 115 million bushels of crush capacity for soybeans in 25 and 26.
• 13:16
  SPEAKER_01: And for example, the October crush that we just had was 10% higher than what our previous record was.
• 13:23
  SPEAKER_01: So we do have strong meal demand that's helping that out, and that's gonna have to continue to find a home for that extra meal that we're uh using.
• 13:32
  SPEAKER_01: But as we go forward, as we shift away from more exports towards more crush, which you can really see in the past balance sheet, you should have more of a uh soybean market that should try to make sense for fundamentals, kind of like what you see in corn today with ethanol.
• 13:48
  SPEAKER_01: So going into 26, that's what I'm really looking forward to seeing is what impact that will finally start to have on the soybean market after we've added all this new capacity the l the last few years, I think, Pat.
• 14:01
  SPEAKER_00: Makes sense.
• 14:01
  SPEAKER_00: And so thank you for that, Mike.
• 14:03
  SPEAKER_00: Thanks for those uh those uh wrap up comments and thanks everyone for um taking the time to listen to our podcast this week.
• 14:11
  SPEAKER_00: Sure appreciate the opportunity to uh engage.
• 14:13
  SPEAKER_00: Don't hesitate to give us a call.