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Weather Market On Labor Day? · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the egg 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 1st, and I've got Lucas Peters with us for the third time here starting out.
• 0:29
  SPEAKER_00: How's it going?
• 0:30
  SPEAKER_00: It's going well.
• 0:30
  SPEAKER_01: Thank you for having me back, Mike.
• 0:32
  SPEAKER_00: Good deal.
• 0:33
  SPEAKER_00: Well, we did end the day a little green on the corn market up three cents here at the end of the week.
• 0:38
  SPEAKER_00: But I'll tell you what, Lucas, it's been uh uneventful here, stuck around that 480 mark on December corn and soybeans unchanged on the day after a violent trade here most uh recently.
• 0:50
  SPEAKER_00: We've bounced around a little bit with some hot weather going into the end of uh the month here.
• 0:55
  SPEAKER_00: And let's talk a little bit about weather today, uh yield prospects with how the crop's hitting, some early yield and silage reports, and talk about some of that to start off the podcast.
• 1:06
  SPEAKER_00: And then let's go over and uh finish up talking about our favorite topic here at ProAg.
• 1:11
  SPEAKER_00: We're gonna talk about insurance too.
• 1:13
  SPEAKER_01: Yes, all right, hey, that sounds like a great idea.
• 1:16
  SPEAKER_01: All right.
• 1:17
  SPEAKER_01: Well, you know, like you just mentioned in the markets, the the talk has been about weather lately, which seems like a weird time of the year to be talking and caring about weather.
• 1:29
  SPEAKER_01: Um, but probably because we've looking at a pretty pretty strange and odd way to end the growing season, right?
• 1:36
  SPEAKER_01: Very much.
• 1:37
  SPEAKER_01: Um, you know, you you're coming off of the heat last week, and then we got a little cooler, and now we're looking at another Labor Day weekend of high temperatures, wind, lower humidity, uh, which is really pushing maturity on these crops.
• 1:53
  SPEAKER_01: Uh, you know, it's becoming evident every day you drive by your fields, the soybeans are maturing, the corn is is dying.
• 2:01
  SPEAKER_01: Um it's not the way you wanted to end the year.
• 2:05
  SPEAKER_01: Or I don't think it will be, right?
• 2:06
  SPEAKER_01: Yeah.
• 2:07
  SPEAKER_01: Like that's that's the hard part is we see it, we say, well, man, two weeks ago my corn was green, and now it looks like I could go combine parts of it because it's dry.
• 2:17
  SPEAKER_01: Um that's uh that's a weird way to end the year.
• 2:20
  SPEAKER_01: And I guess we'll find out when the yields come in if it actually did hurt our overall yield.
• 2:26
  SPEAKER_00: Um I mean that happens this time of the year anyways, but it it's obviously happening a lot faster.
• 2:33
  SPEAKER_00: And historically, when you've got that sped up like that, it that's not very conducive to higher yields when you speed up the fill process like that.
• 2:43
  SPEAKER_01: You're right.
• 2:45
  SPEAKER_01: And one and the I'm sure you've seen it on Twitter and social media and things, you you know, one of the easiest ways to compare a crop dying really fast is compare it to a frost, right?
• 2:56
  SPEAKER_01: Because frost will come in or light frost and and kill top of the plant or kill a few leaves or kill a low-lying area that got a little colder.
• 3:05
  SPEAKER_01: And what does that do the final yield?
• 3:07
  SPEAKER_01: Well, it's hard to pick exactly, but it's probably a five to ten percent uh yield hit, generally a little lighter test weight because starches didn't pack as well.
• 3:18
  SPEAKER_01: Um and and maybe you get a little, you know, that the cobs get a little funky uh because they just uh the kernels didn't finish completely on them.
• 3:27
  SPEAKER_01: Um very fun to combine.
• 3:29
  SPEAKER_01: No, it's not very fun to combine.
• 3:31
  SPEAKER_01: And and so we on years we think about that of either like low areas that got frosted, or in drought years we think of those uh sandy spots that kind of turn out that way, right?
• 3:41
  SPEAKER_01: So maybe that's what we're gonna see when we go out there this year and start harvesting.
• 3:46
  SPEAKER_01: Uh, but overall, yield-wise, uh yeah, in certain spots it's probably uh a 20 bushel swing.
• 3:53
  SPEAKER_01: Overall, I don't know if we're gonna see uh a big reduction across entire fields, but I think we're gonna see some.
• 4:00
  SPEAKER_01: Um because of this major late 90 degree tension.
• 4:04
  SPEAKER_01: And I'm not even sure it's the heat.
• 4:06
  SPEAKER_01: It's it's the fact that I mean it's 90 degrees in August.
• 4:09
  SPEAKER_01: Like that's not we say that out loud, that's not crazy, right?
• 4:13
  SPEAKER_01: Yeah, it's maybe a little crazier because it's the end of the end of August, first of September, as we're sitting today.
• 4:20
  SPEAKER_01: Um But I think what happened is the fact that we were really dry, right?
• 4:24
  SPEAKER_01: And we've gone through this stretch, an extended time period now of no moisture.
• 4:29
  SPEAKER_01: And no excess moisture, no excess moisture, and like occasional pop-up shower here or there, but otherwise we're rolling on 10 plus days of no rain, heat, and now we're getting a little bit more wind as well.
• 4:43
  SPEAKER_01: So uh not ideal way to finish the crop uh at all.
• 4:47
  SPEAKER_01: Um in I it does seem like it's an anomaly, right?
• 4:53
  SPEAKER_01: But talking to a farmer today, uh, and maybe this is more localized, he's like, Well, this is kind of the way 2021 in his mind ended up, right?
• 5:03
  SPEAKER_01: It got really hot and dry at the end, and everything kind of fell apart, and we had some down to corn and and other things.
• 5:10
  SPEAKER_01: Um it was kind of the way 2020 in a little bit, and in some areas last year was the same way.
• 5:17
  SPEAKER_01: So maybe we maybe this is becoming a trend.
• 5:20
  SPEAKER_01: Maybe it started a little earlier this year.
• 5:23
  SPEAKER_01: Maybe it was because the first half of August was cooler than normal.
• 5:26
  SPEAKER_01: So that makes it seem like this is excessive.
• 5:29
  SPEAKER_01: Um I guess we have to really crunch the numbers and put some data points together to determine is this an anomaly of a year or is this kind of a a trend we're seeing, or does this happen regularly enough?
• 5:43
  SPEAKER_00: I do think the end of next week it's gonna be really hard to keep a lot of farmers out of the field.
• 5:49
  SPEAKER_00: I think there's gonna be a lot of people that are like, okay, let's poke around.
• 5:52
  SPEAKER_00: That's probably earlier than normal.
• 5:55
  SPEAKER_01: You're right.
• 5:55
  SPEAKER_01: Like that's the the start of harvest is seems like it's gonna get pushed up.
• 6:00
  SPEAKER_01: Like the guys chopping silage.
• 6:02
  SPEAKER_01: Oh, a week, ten days ago, it's like, yeah, that's borderline too wet, and now today everything is is is dropping moisture so fast that the choppers can't cover the acres fast enough.
• 6:13
  SPEAKER_01: Exactly.
• 6:14
  SPEAKER_01: Uh your soybean fields, we you know that boy, some of these early beans are are maturing really fast and coming to the end.
• 6:21
  SPEAKER_01: Um so yeah, I I think we're gonna see harvest starting earlier.
• 6:25
  SPEAKER_01: Growing degree units would suggest we're 10 to 14 days ahead already.
• 6:29
  SPEAKER_01: Ahead of normal.
• 6:30
  SPEAKER_01: Yep.
• 6:30
  SPEAKER_01: Well, so if we start combining the middle of September, that's about 10 to 14 days ahead of normal.
• 6:37
  SPEAKER_00: So um and based on current conditions, it I mean things should move along very quickly.
• 6:42
  SPEAKER_00: It doesn't seem like hot out, we don't have to deal with a lot of dew in the morning.
• 6:47
  SPEAKER_00: It it's been pretty conducive, I think, to harvest conditions going forward.
• 6:52
  SPEAKER_00: Correct.
• 6:52
  SPEAKER_01: And I I not wet.
• 6:53
  SPEAKER_01: No, and and I think it's the the way you look at long-range forecasts right now, that there's nothing that's gonna suggest it's gonna slow down.
• 7:00
  SPEAKER_00: Exactly.
• 7:01
  SPEAKER_01: And so now you're getting to the point where if you even if you do get a rain, it's not helping the crop much.
• 7:05
  SPEAKER_01: I mean, beans, don't get me wrong.
• 7:07
  SPEAKER_00: Well the soybeans or the corn has proven it.
• 7:09
  SPEAKER_00: I mean, last week's massive drop in open interest with the September futures going into delivery, that would suggest that the money that did come in to belong, the corn market for weather problems in June, uh, that money has now left the boat and didn't re-enter into the December.
• 7:26
  SPEAKER_00: So that drop in open interest in corn, I I would suggest is uh the market's clear way of saying weather doesn't matter anymore for corn.
• 7:34
  SPEAKER_01: Yep.
• 7:35
  SPEAKER_01: And that'll be interesting once we get those early harvest results in, does it come back?
• 7:40
  SPEAKER_00: Yep.
• 7:40
  SPEAKER_01: Or you know, because typically we kind of set a low this time of year, right?
• 7:44
  SPEAKER_00: Yep, typically.
• 7:45
  SPEAKER_01: And so if we if we're putting in that low now, if you're looking for a reason on why the market might come back, which it traditionally does, it could be because this last two weeks of weather, which we thought isn't gonna matter very much, actually does.
• 8:00
  SPEAKER_01: Yep.
• 8:00
  SPEAKER_01: And and so we'll find that out.
• 8:02
  SPEAKER_01: You know, we're we're seeing a few silage appraisals coming in uh now, and and they're all over the board, just like we're thinking that the yields will be once the combines roll and as expected.
• 8:12
  SPEAKER_01: And and you're getting you know, uh sub 100 yields all the way up over 200, depending on who caught the shower, how were planting conditions, didn't do they have the population.
• 8:22
  SPEAKER_01: Where you paid the appraisal to go into the field at well, I don't know if anybody knew that, Mike, but but you're right, like it's uh there's so much variability.
• 8:31
  SPEAKER_01: Um, it's hard to to have that adjuster find a real representative sample.
• 8:35
  SPEAKER_00: Oh yeah, it's all over the board.
• 8:37
  SPEAKER_01: And so that's uh and our combines will tell the same story, and and we'll like you said, we're probably three weeks away from seeing pretty significant corn harvest pickup around at least locally.
• 8:49
  SPEAKER_01: Uh I I think we'll start seeing that in pretty honest in in September.
• 8:53
  SPEAKER_01: Um, so yeah, we'll uh we'll be here and and watching and seeing how the the uh yields come in.
• 9:00
  SPEAKER_01: Um you know, one thing to keep in mind as we are entering the harvest season is of course our insurance claim season as well, Mike.
• 9:09
  SPEAKER_01: Uh so we have uh of course, if we have low bushels, that's gonna have uh insurance claims, but we also have lower price on corn.
• 9:18
  SPEAKER_01: Like, where'd you say December corn was trading in the 480 range?
• 9:23
  SPEAKER_01: Like so our spring price on corn is at 591 if you bought a revenue insurance product this spring.
• 9:31
  SPEAKER_00: Um so you're talking a 472 with 80 percent.
• 9:35
  SPEAKER_01: Yeah, yep.
• 9:35
  SPEAKER_01: So uh with that uh price drop, your trigger yield um insurance term there, trigger yield be where a claim would kick in.
• 9:46
  SPEAKER_01: Well, that trigger yield is going to go up because you need more bushels at the lower price to meet your guarantee.
• 9:53
  SPEAKER_01: And so for most guys, kind of the easy way to think about it right now is if you're just shy of your APH, that's gonna be close to your trigger yield.
• 10:04
  SPEAKER_01: Okay.
• 10:05
  SPEAKER_01: So if I'm buying 80, 85% coverage and my APH is 220, okay, my guarantee is lower than that, right?
• 10:14
  SPEAKER_01: But this year, I might be able to combine 215 and still have a small insurance claim because the price drop is so significant right now.
• 10:24
  SPEAKER_01: Okay, so we won't start setting that fall price or that harvest price until the month of October.
• 10:29
  SPEAKER_01: So we still have a month before we even start.
• 10:32
  SPEAKER_01: Um, so that is something to talk about, and you could come in and talk to ProAg about it of ways that we can try to, especially if you think your yield's pretty low, um, maybe you got some silage ground, you got an appraisal, you got optional units, you're looking at a pretty significant loss right now.
• 10:50
  SPEAKER_01: Uh, you could come in and talk to Mike and some of the brokers in the office, and we could uh look at using some uh call options or futures to try to protect that indemnity that you have.
• 11:01
  SPEAKER_01: Uh, because if the price starts going up through October, now your insurance claim is gonna get smaller.
• 11:06
  SPEAKER_00: And a lot of us are gonna be planning to be done combining by October and on a beach in Mexico by then, anyways, Lucas, right?
• 11:14
  SPEAKER_00: If we're gonna get done early, we might as well make it worth it.
• 11:16
  SPEAKER_01: You are really optimistic that this fall is gonna go pretty well.
• 11:20
  SPEAKER_01: That's you know, generally, Mike, weather kind of balances out, so I'm a little nervous that snow's gonna be flying.
• 11:25
  SPEAKER_01: Yeah, I'll be in Mexico.
• 11:28
  SPEAKER_01: So you you better uh make sure you get your insurance claims turned in uh pretty quick uh so you can head to the Mexican beach.
• 11:34
  SPEAKER_00: But this is a serious topic that uh we have talked about a lot real recently here as we are approaching some pretty significant sell-off levels here towards a port, towards uh a lot of areas that have uh struggled on finding rains here this summer.
• 11:52
  SPEAKER_00: You could be in a pretty deep indemnity territory.
• 11:55
  SPEAKER_00: So I this is a a relevant conversation to have with your risk manager right now on protecting uh that crop insurance price.
• 12:04
  SPEAKER_01: Yep, and I and I think the the people that should do it or or or come or call us and talk about it would be if you have some silage cut uh or if you kind of can ballpark your yields and you're thinking my yield's gonna be about 10% below what it normally is, um and your fields are pretty consistent.
• 12:25
  SPEAKER_01: If you're optional units, uh that that helps as well.
• 12:29
  SPEAKER_01: Uh some way that we can kind of basically like you're thinking you're gonna have a loss and can kind of justify what that loss will be.
• 12:38
  SPEAKER_01: And and then we can try to work with you to protect that so that uh if the price does start going up in October, um, you don't miss an opportunity that we had here for to make a little money.
• 12:49
  SPEAKER_00: What else do you got for us today, Lucas?
• 12:51
  SPEAKER_01: Well, so the last thing I guess I have is uh we are in the time period for margin protection uh on corn and soybeans and wheat and rice.
• 13:01
  SPEAKER_01: Uh corn and soybeans obviously more uh important in our area.
• 13:05
  SPEAKER_01: And so the uh the margin protection product uh we've talked about for the last couple years, it's been around since 2018.
• 13:13
  SPEAKER_01: Um, but that product kind of uh protects your um the revenue side with corn or soybean price using a county yield and then subtracting expenses off of that, uh, and expenses being fertilizer and uh interest and diesel fuel uh along with a fixed cost number.
• 13:35
  SPEAKER_01: Um and so we're right in the middle of setting those margin protection uh prices for corn and soybeans on the revenue side and the expense side uh right now.
• 13:46
  SPEAKER_01: That that is set from mid-August to mid-September, so we're right in the middle of that.
• 13:51
  SPEAKER_01: And what we're seeing this year is you know, corn right now I think is 508 uh is the average for 2024 margin protection.
• 14:00
  SPEAKER_01: Uh soybeans are are I better double check that um soybeans are$12.94, and and so we are protecting a pretty decent price for 2024 corn and beans.
• 14:13
  SPEAKER_01: Um and on the input side, the fertilizer, our fertilizer prices are significantly lower than last year.
• 14:22
  SPEAKER_01: So urea, uh, which would go into the corn and wheat equation, uh is 338.
• 14:28
  SPEAKER_01: Uh and that has actually has fallen since the pricing period started in mid-August.
• 14:33
  SPEAKER_01: Uh you know, last year we were at 452.
• 14:36
  SPEAKER_01: Uh DAP 488, last year 507, uh, or excuse me, 607.
• 14:42
  SPEAKER_01: So that's a big advantage.
• 14:44
  SPEAKER_01: It's a it what's happening is you're allowing yourself to insure a bigger margin, right?
• 14:49
  SPEAKER_01: Yeah.
• 14:49
  SPEAKER_01: My prices are up pretty good, my expenses are falling, and so I can insure a pretty good margin in between.
• 14:57
  SPEAKER_01: Um, and if you're uh a type of producer that does not like to um buy inputs early, uh doesn't want to talk to Mike and use uh all the different pricing options that we have available to us on corn and beans, uh, and and willing to spend 40 to 50 to 60 bucks an acre on insurance to protect that, I think margin protection is something you should look at this year because you're gonna you're gonna have some protection built in for the 2024 crop.
• 15:28
  SPEAKER_00: And there's some really key words in there because you mentioned not locking in fertilizer.
• 15:33
  SPEAKER_00: You know, if you're gonna sell early and lock in fertilizer right now, the advantage really is gone then.
• 15:39
  SPEAKER_01: Correct.
• 15:40
  SPEAKER_01: So if that's I guess kind of where where my head is at.
• 15:43
  SPEAKER_01: If if the farmer's looking at this and be like, man, the fertilizer price pretty low, and maybe I should look at buying this because I got a big margin.
• 15:50
  SPEAKER_01: Just go buy it anyway.
• 15:51
  SPEAKER_01: Yeah, one thought would be go lock in your fertilizer.
• 15:53
  SPEAKER_01: Yeah, we're kind of on a trend where it's falling, unless you think it's gonna fall continually, uh, which I guess personally I don't.
• 16:00
  SPEAKER_01: If we're significantly lower than last year, pull the trigger, buy the fertilizer, and then go ahead and sell some of the 2024 crop to protect price.
• 16:08
  SPEAKER_01: Um, but that not, I guess that's the beauty of of the Pro Egg Office is we have a lot of different offerings and ideas to protect producers that have a different thought process on how they want to protect their operation.
• 16:21
  SPEAKER_01: And it can be, yeah, use some, you know, you could sell futures or buy some options, protect price, or you can look at buying margin protection and kind of protect the whole works uh if that fits your operation better.
• 16:32
  SPEAKER_01: But uh we'll have the final prices set here in mid-September, and then we can uh uh get some in margin protection quotes out if you're interested, and and we'd be happy to talk through.
• 16:42
  SPEAKER_00: And that'll have to be done by the end of SEP.
• 16:45
  SPEAKER_01: Correct.
• 16:45
  SPEAKER_01: So the sales closing date is September 30th.
• 16:48
  SPEAKER_01: So we got a month uh to decide on if we want to buy margin, and uh and yeah, we'll see you where everything shakes out and see how that fits our operations for 2024.
• 16:58
  SPEAKER_00: All right.
• 16:59
  SPEAKER_00: Thank you so much, Lucas.
• 17:00
  SPEAKER_00: Thanks, mate.
• 17:01
  SPEAKER_00: And thank you to all our listeners.
• 17:03
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 17:06
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 17:12
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 17:18
  SPEAKER_00: See you next time.