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Weather Market · 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 June 16th.
• 0:25
  SPEAKER_00: I've got Lucas Peters with us today.
• 0:27
  SPEAKER_00: How's it going?
• 0:28
  SPEAKER_01: Well, it's pretty good uh sitting here on a Friday looking at a three-day weekend, Mike.
• 0:33
  SPEAKER_00: That it is.
• 0:34
  SPEAKER_00: I'm afraid the markets are looking at a three-day weekend here too.
• 0:37
  SPEAKER_00: Uh they thought we deserved a break after this week, Lucas.
• 0:41
  SPEAKER_01: Uh I would say everybody probably deserves a little break uh after the last couple days, anyway.
• 0:47
  SPEAKER_00: I think so, at least in this industry here.
• 0:49
  SPEAKER_00: Uh, you know, just to wrap things up from uh from a price movement perspective, I mean, today we're bumping up against under$6 December corn of 23 again, which been a while since we fought back to the crop insurance uh price there, Lucas.
• 1:06
  SPEAKER_01: Yeah, so on December corn$591 was the crop insurance price that we set in February, and it completes the 51-year streak now of eventually December corn trades back to the crop insurance price.
• 1:22
  SPEAKER_01: Uh it was a 50-year streak, and I was actually looking back uh at our Reuters article uh that they put out that you know that might not happen this year.
• 1:31
  SPEAKER_01: Well, by gosh, guess what?
• 1:33
  SPEAKER_01: It happened this morning.
• 1:34
  SPEAKER_00: Today it happened, at least on corn.
• 1:36
  SPEAKER_00: Now, soybeans were off a little bit yet.
• 1:38
  SPEAKER_00: 13 uh 30s for most of the day here kind of got up into that uh 1340 area.
• 1:45
  SPEAKER_00: So we've got another 30, uh 40 cents to go there, 1373, but uh that's right, right?
• 1:51
  SPEAKER_00: Yep.
• 1:51
  SPEAKER_00: Yeah, so we got a little bit left to go on the soybeans.
• 1:54
  SPEAKER_00: Either way, though, that one uh when you start looking at the lows like on corn, we made a low, you know, middle of May at 490 on December, so we're a buck higher.
• 2:03
  SPEAKER_00: And then on the November soybeans here, we put in a low 1130.
• 2:08
  SPEAKER_00: So we are now two dollars higher than we were at that point today.
• 2:12
  SPEAKER_01: Man, that is crazy to think about of like basically one month ago, we were sitting here wondering what do we do now that all this opportunity was lost?
• 2:19
  SPEAKER_00: Two and a half weeks.
• 2:21
  SPEAKER_01: And and now it's came racing back in well, I mean, over the last couple of weeks, but really in the last two days.
• 2:28
  SPEAKER_01: Yeah.
• 2:29
  SPEAKER_00: Yeah.
• 2:29
  SPEAKER_00: So I I have no problem, I don't think, uh, in this podcast today, uh, knowing where we're gonna steer the direction of this podcast after a two dollar rally on soybeans and a one dollar rally on corn in the middle of June during a weather rally that's mainly happening in the eastern corn belt for at least that's what's getting them excited.
• 2:52
  SPEAKER_00: I'm not saying we're not a little bit dry in the western corn belt either, obviously, but uh that'd be where the focus is today.
• 2:58
  SPEAKER_00: And uh hopefully you and I on our farms only this weekend receive that rainfall that's coming at us here.
• 3:06
  SPEAKER_00: Exactly.
• 3:07
  SPEAKER_00: Yeah, so that's what we're looking at uh and to all of our wonderful listeners as well.
• 3:12
  SPEAKER_00: That's right.
• 3:12
  SPEAKER_00: Anyways, but yeah, so we're looking at a little bit of a weather rally here, Lucas.
• 3:17
  SPEAKER_00: What uh what are they getting all fired up about?
• 3:19
  SPEAKER_01: You know, when you well, obviously it's the the fact that Iowa and Illinois are basically in a hundred percent drought, right?
• 3:26
  SPEAKER_01: Well, the drought map reflects that a drought is expanding into the eastern corn belt.
• 3:32
  SPEAKER_01: We knew it was dry.
• 3:33
  SPEAKER_01: Uh we got planted quickly, right?
• 3:35
  SPEAKER_01: That's a sign that soil moisture conditions are a little dry, and then the timely rains that have been forecasted didn't show up.
• 3:43
  SPEAKER_01: And now it's getting to be kind of critical.
• 3:46
  SPEAKER_01: Um, you know, when we look, you know, it's kind of starting, let's start in southern Minnesota, right?
• 3:52
  SPEAKER_01: Uh like over the last week uh we've been or drive driven around a lot uh based on like World Pork Expo and things.
• 4:00
  SPEAKER_01: Um Southern Minnesota, you look at the drought monitor, we're clear, right?
• 4:04
  SPEAKER_00: And it reflects the small little bubble in southern Minnesota.
• 4:08
  SPEAKER_00: We're like the only white spot on the whole corn belt.
• 4:11
  SPEAKER_01: And when you drive down the interstate, it looks pretty good, doesn't it?
• 4:15
  SPEAKER_01: Yep.
• 4:15
  SPEAKER_01: So I mean it's reflective of if you get rain, the crop looks good.
• 4:20
  SPEAKER_01: Um you go into Des Moines last week, uh, the crop looks pretty good.
• 4:24
  SPEAKER_01: There are dry pockets all over, don't get me wrong.
• 4:26
  SPEAKER_01: Um, everybody understands that even in southern Minnesota, we got some rains a you know a week, a couple weeks ago, but you're gonna need those to those timely rains to continue in order to sustain the crop because subsoil moistures are pretty low uh even here.
• 4:44
  SPEAKER_01: So you got uh kind of the main states that matter uh showing up on the drought monitor, combined with the fact when you look at all these 10 to 14 30 day forecasts, there still isn't a lot of rain over those areas, is it?
• 5:01
  SPEAKER_01: So it's it's been dry, it is dry, and it looks like it's gonna continue to be dry, at least based on the forecast, and that's kind of where we're sitting at for getting everybody excited on on corn.
• 5:15
  SPEAKER_00: So the the forecast kind of pushed a little dryness into July, right?
• 5:19
  SPEAKER_00: But it for the most part, July and August look pretty wet still, don't they?
• 5:23
  SPEAKER_01: Yeah, so you look at um I think uh I saw something go across the the wire this morning of some 30, 60, 90 day forecasts.
• 5:31
  SPEAKER_01: Like the 90-day forecast shows you know uh average rainfall in the areas that are uh showing up is dry now, and above average, kind of in the western Iowa, Minnesota, Dakotas.
• 5:44
  SPEAKER_01: Um that would be a big change from where we are sitting today.
• 5:48
  SPEAKER_01: Granted, it's a long ways out, but it does make you feel good like this this pattern that's really wet in the west, which seems weird to say over the last few years.
• 5:58
  SPEAKER_01: Yeah, no kidding.
• 5:59
  SPEAKER_01: You got major flooding going on in the Texas panhandle and western Kansas and Western Nebraska, like eventually that pattern does have to shift a little bit.
• 6:11
  SPEAKER_01: Yeah.
• 6:11
  SPEAKER_01: Um and so the first place to hit it, of course, is a little bit into the Dakotas and western Iowa.
• 6:16
  SPEAKER_01: And now the key is does that get moved over further east?
• 6:21
  SPEAKER_01: Um there's a lot of uh uh different uh forecasts and things you look at to say over the next um at least short term, no, and long term maybe go back to average, just you don't see that above average number going there either.
• 6:36
  SPEAKER_01: You combine that with lack of precip, but also above normal temperatures starting to move into that area.
• 6:43
  SPEAKER_01: They that might be the one thing that's sustained them here uh in the short term is you know the the temperatures across some of those areas of Illinois uh and then going into Indiana were kind of average to below average uh last week.
• 6:59
  SPEAKER_01: And so now we start looking at the forecast, and that's gonna really ramp up.
• 7:02
  SPEAKER_01: Um so we we've all been through droughts before.
• 7:05
  SPEAKER_01: If you farm for any length of time, um you can sustain a little bit lack of rainfall if temps are cool.
• 7:12
  SPEAKER_01: Uh you get a combination of high temps and no rain, and that's uh not gonna be good conditions.
• 7:19
  SPEAKER_00: That La Nina transition to El Nino, that's kind of lining up with a lot of those uh forecasts, it seems like uh July, August, we're finally gonna get that shift of a little bit wetter weather, and I feel like that's why right away soybeans didn't really want to take off a ton either, because even if you push that back, you've still got August rains helping the soybeans.
• 7:38
  SPEAKER_01: That's I guess that was kind of my surprise too.
• 7:40
  SPEAKER_01: And maybe uh well, I mean, I think there was some other stuff on the soybean market, like more crush and and things, but uh and then you combine that, maybe a bunch of little things push it higher.
• 7:50
  SPEAKER_01: Um but you're right, like the soybean crop i early dryness isn't gonna hurt a soybean crop as much as a corn crop.
• 7:57
  SPEAKER_01: Yeah, correct?
• 7:58
  SPEAKER_01: So uh if these rains do come true into l later July and August, well the bean crop is probably can salvage itself, right?
• 8:07
  SPEAKER_00: Even if it moves back a little bit, it can save it.
• 8:11
  SPEAKER_01: And you're right on the El Nino, right?
• 8:13
  SPEAKER_01: On El Nino years should bring more moisture to the uh north centr and central plains.
• 8:20
  SPEAKER_01: But the unusual thing on the El Nino is the significant dryness in the east, right?
• 8:25
  SPEAKER_01: Like during the transition, that maybe is isn't that wonky things.
• 8:31
  SPEAKER_01: But you get some unwonky things going on, but uh the f what's really interesting is when you start looking at these longer term uh I was just happening to look at one on on before we came up here to do the podcast.
• 8:43
  SPEAKER_01: Like a 30-day rainfall projection.
• 8:46
  SPEAKER_01: And Illinois, a lot of Illinois is white.
• 8:48
  SPEAKER_01: Like as white being no rainfall.
• 8:50
  SPEAKER_01: No rain.
• 8:50
  SPEAKER_01: Like 30 days in June into July with no rain is that's probably well seems extreme.
• 8:57
  SPEAKER_01: It seems a little extreme, right?
• 8:58
  SPEAKER_01: Like eventually something breaks down and and storms trigger.
• 9:02
  SPEAKER_00: Well, if you look hard enough, you'll find the weather forecast that you want to find.
• 9:06
  SPEAKER_01: That's probably the biggest lesson, right?
• 9:08
  SPEAKER_01: Yeah.
• 9:09
  SPEAKER_01: Like we can sit here and say how dry it is, and oh my gosh, there's a drought, and corn's not gonna stop going up.
• 9:16
  SPEAKER_01: In reality, Mike, we probably should look at this rally, do something with it, and not just get caught up in the semantics, should we?
• 9:23
  SPEAKER_00: Took the words right out of my mouth that uh we don't get many rallies of this extreme at this time of the year.
• 9:32
  SPEAKER_00: Uh, but it's classic, uh, classic weather rally giving us a little bit of support today and a great opportunity to do something before a three-day weekend.
• 9:40
  SPEAKER_00: Yep.
• 9:41
  SPEAKER_00: And uh, you know, I think uh it's a really nice starting place for guys who haven't done a whole lot yet.
• 9:47
  SPEAKER_00: And even if you have done quite a bit, um, it's a nice spot to just add on a little bit more above the crop insurance price now.
• 9:54
  SPEAKER_00: Makes sense from a profitability perspective, too.
• 9:57
  SPEAKER_00: Now at these levels, we can make this work.
• 10:00
  SPEAKER_00: And uh seasonal perspective, it's greater in a weather rally in the middle of summer.
• 10:04
  SPEAKER_00: So uh some really nice opportunities.
• 10:06
  SPEAKER_00: And you know, something else we've seen here uh over this week has been the deterioration of basis and old crop here, which I think is worth mentioning today.
• 10:16
  SPEAKER_00: And in this rally, we've experienced huge farmer selling in the old crop, and that's really pushed many bushels back out on the market that's been locked in a bin, and what we found is a lot of elevators are getting enough corn bought to dang near get to new crop.
• 10:30
  SPEAKER_00: And with that being said, basis has deteriorated rapidly in in this part of the world.
• 10:36
  SPEAKER_00: It'll be interesting to see the week over week changes uh across a corn belt, but something like a 50 cent change off the September week over week is gonna be more common than we've maybe seen in a very long time decrease.
• 10:49
  SPEAKER_00: So something to watch on old crop basis levels here.
• 10:52
  SPEAKER_00: It uh with the rally, it's definitely forced uh a lot of sales, and you hardly ever see it where the market goes up this significantly in futures, but your cash price on old crop drops.
• 11:04
  SPEAKER_00: Yeah, it goes down.
• 11:05
  SPEAKER_00: It goes down.
• 11:05
  SPEAKER_00: I noticed a little bit of it.
• 11:07
  SPEAKER_00: That that was very odd this week, and it changing it multiple times a day.
• 11:12
  SPEAKER_00: So uh that's something to keep uh keep an eye on as well here.
• 11:15
  SPEAKER_00: If you got uh the rest of the bin to sweep out, anyways, don't be surprised about that drop.
• 11:20
  SPEAKER_00: And there can be a big difference between selling it at 8 a.m.
• 11:23
  SPEAKER_00: and three in the afternoon this week.
• 11:25
  SPEAKER_00: Yep.
• 11:25
  SPEAKER_01: So that's a good lesson learned.
• 11:28
  SPEAKER_00: Definitely.
• 11:28
  SPEAKER_00: Three-day weekend markets are closed on Monday.
• 11:31
  SPEAKER_00: They open back up Monday night, so a lot of time for those weather forecasts we all just talked about to uh change, adjust.
• 11:38
  SPEAKER_00: We put a lot of premium on this uh corn market, so we'll see if we get a uh turnaround Tuesday in in the down direction, anyways, next week as we get started.
• 11:47
  SPEAKER_01: Yeah, that's the the tricky part of weather um rallies, isn't it, Mike?
• 11:51
  SPEAKER_01: Yeah you can go up on uh a dry forecast, but you can go down just as quickly on a wet forecast or uh some surprise showers that pop out of nowhere going into a three-day weekend, and then followed by another three-day weekend, not too much longer, uh, looking ahead to the 4th of July.
• 12:08
  SPEAKER_01: So uh a lot can change in a hurry.
• 12:11
  SPEAKER_01: Uh, at least this week it's changed in a positive uh for the uh corn and soybean farmer.
• 12:16
  SPEAKER_00: All right.
• 12:16
  SPEAKER_00: Well, thank you very much.
• 12:17
  SPEAKER_00: And thank you to all our listeners.
• 12:19
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 12:23
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:28
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:34
  SPEAKER_00: See you next time.