Latest / Professional Ag Marketing Podcast / Record Prices and Report Week

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Record Prices and 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 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 31st.
• 0:25
  SPEAKER_00: I've got Jeff with us here today.
• 0:26
  SPEAKER_00: How's it going?
• 0:27
  SPEAKER_01: Hey Mike, doing pretty well.
• 0:29
  SPEAKER_00: Awesome.
• 0:30
  SPEAKER_00: Well, we had quite the week here.
• 0:31
  SPEAKER_00: We had multiple reports.
• 0:33
  SPEAKER_00: Uh new prices on cattle coming out we're going to talk about.
• 0:36
  SPEAKER_00: So let's talk about cattle.
• 0:38
  SPEAKER_00: Let's talk about the grain reports, and uh we'll make it through what we can today with all the fun stuff going on this week.
• 0:43
  SPEAKER_00: How's that sound?
• 0:44
  SPEAKER_01: Let's talk about cattle.
• 0:46
  SPEAKER_01: I like the sounds of that.
• 0:47
  SPEAKER_00: Record prices, huh?
• 0:49
  SPEAKER_01: Yeah, so we're nudging right up against 2014 levels.
• 0:53
  SPEAKER_01: That's what all the excitement is about, no doubt, in that part of the world.
• 0:57
  SPEAKER_01: And we got there in a pretty fancy way.
• 0:59
  SPEAKER_01: You know, we were kind of just kind of slipping along there the last two weeks.
• 1:03
  SPEAKER_01: Um, Packards were trying to buy cattle cheaper.
• 1:07
  SPEAKER_01: Um, we thought maybe they were getting fairly close to the knife.
• 1:10
  SPEAKER_01: You know, there's some cattle that were getting some shorter shipment dates and some things like that.
• 1:15
  SPEAKER_00: So you're talking cash.
• 1:17
  SPEAKER_01: Yep.
• 1:17
  SPEAKER_00: Record prices.
• 1:18
  SPEAKER_01: Yep, both uh and uh it's arguable if they're record or not.
• 1:23
  SPEAKER_01: I think the meat bids probably did hit a record, but um we're right up against them, Mike.
• 1:29
  SPEAKER_01: Yeah, it's uh so it's kind of an interesting um week on that front, and that's gonna be mostly like four bucks better than last week, I guess, is what I was thinking.
• 1:39
  SPEAKER_01: That kind of snuck up on us, huh?
• 1:41
  SPEAKER_01: Yeah, that thing, so it it charged higher.
• 1:43
  SPEAKER_01: Um really strong market.
• 1:44
  SPEAKER_01: All you know, it started there yesterday morning, Thursday morning, and I don't think we traded much today, but I think they had some pretty solid bids through today uh on Friday as well.
• 1:55
  SPEAKER_01: So we'll see once you know that that market uh has a tendency in past years at least to get us all excited going home on Friday, and then they spend a couple weeks trying to take some of their money back.
• 2:09
  SPEAKER_01: So it'll be interesting if we just plow forward um on cash, or if we go, you know, a pretty common theme for cash cattle trade would be one week on, two weeks off.
• 2:19
  SPEAKER_01: So it's possible, you know, we had a big week this week.
• 2:22
  SPEAKER_01: They buy a lot of numbers that pushes them out away.
• 2:25
  SPEAKER_01: They take a couple weeks and try to work that price lower.
• 2:29
  SPEAKER_00: But you know, we're these prices warranted, you think?
• 2:33
  SPEAKER_01: I think they're they're higher than what uh I would have guessed they would be for the supply um shortening that we've seen so far.
• 2:42
  SPEAKER_01: So far.
• 2:42
  SPEAKER_00: So it seems pretty early.
• 2:44
  SPEAKER_01: I think it's I think it's very early.
• 2:46
  SPEAKER_01: All right, that's what I thought too.
• 2:47
  SPEAKER_01: The only thing about it is it's the right time of year.
• 2:50
  SPEAKER_01: Um, you know, you're March going into uh April, a lot of weather issues.
• 2:55
  SPEAKER_01: Um very possible we push some of the you know the April end of April May cattle.
• 3:00
  SPEAKER_01: It could be getting pushed back a little bit because of growth.
• 3:03
  SPEAKER_01: Um but I think some of it's just the anticipation.
• 3:06
  SPEAKER_01: Packers being a little bit nervous of what's coming.
• 3:09
  SPEAKER_01: Um there's some pretty strong signals, I think, to suggest we could drop this kill.
• 3:14
  SPEAKER_01: You know, it's been running a couple percent lower than last year.
• 3:17
  SPEAKER_01: We could we could drop it another, you know, to four to five percent lower than last year as you get towards the tail end of April.
• 3:24
  SPEAKER_01: So some of it's some anticipation.
• 3:26
  SPEAKER_01: I I really believe that.
• 3:28
  SPEAKER_01: And always makes a bit of a dangerous market, right?
• 3:30
  SPEAKER_01: It can always disappoint you a little bit, but um I think for now let's uh chalk it up to a win for the cattle feeders on this week.
• 3:39
  SPEAKER_00: Confidence-wise, it does help, and I do think there's a correlation here.
• 3:43
  SPEAKER_00: The stock market S P 500's back above 4100, even 4200 in some of those months.
• 3:49
  SPEAKER_00: Uh that puts a Dow about 33,500-ish.
• 3:53
  SPEAKER_00: So when I look at it from that perspective, stock markets really bounced back here recently.
• 3:58
  SPEAKER_00: We've had some easing of the bank concerns.
• 4:00
  SPEAKER_00: I think that's maybe helped to get some funds back behind the cattle market, too.
• 4:05
  SPEAKER_01: That's mostly we just haven't had any banks go broke lately, right?
• 4:08
  SPEAKER_01: Is that kind of a theme?
• 4:11
  SPEAKER_01: Which is good news.
• 4:12
  SPEAKER_01: I mean, that's good news.
• 4:12
  SPEAKER_01: Every day that goes by, everybody gets a little bit more confidence.
• 4:15
  SPEAKER_01: I think you're yeah, you're right as far as the uh outside markets go here.
• 4:19
  SPEAKER_00: How about the grain markets here?
• 4:21
  SPEAKER_00: We had uh two reports this week today, actually.
• 4:24
  SPEAKER_00: We had the quarterly stocks report come out.
• 4:26
  SPEAKER_00: We had the prospective plannings report.
• 4:29
  SPEAKER_00: So what do you got to say about a couple of those, Jeff?
• 4:31
  SPEAKER_00: Take your pick.
• 4:31
  SPEAKER_01: I'll push it right back at you, but I would just say, you know, the report in my mind that doesn't get as much attention um on this March 31st date is the quarterly grain stocks.
• 4:43
  SPEAKER_01: As I stare at those, Mike, I I'm kind of interested in those numbers.
• 4:47
  SPEAKER_01: Why don't you throw your take out on those?
• 4:50
  SPEAKER_00: So um not to throw a ton of numbers at you here, but basically what we're summing up is that the quarterly stocks came in below the average trade estimates for corn and soybeans, and also below last year.
• 5:02
  SPEAKER_00: So historically, these are pretty tight situations.
• 5:04
  SPEAKER_00: I mean, we're going into the summer time frame here with less corn and soybeans than we had last year.
• 5:10
  SPEAKER_00: And I think that could be concerning in some some aspect.
• 5:13
  SPEAKER_00: Now, I do believe it's worth uh mentioning that we've expected this a little bit, and then the other aspect of it is uh demand's been down compared to last year as well.
• 5:24
  SPEAKER_00: That's fair.
• 5:24
  SPEAKER_00: That's fair.
• 5:25
  SPEAKER_01: The trend is maybe not in in favor in this situation as far as trend and uh for higher prices.
• 5:31
  SPEAKER_00: But tight is tight, nonetheless.
• 5:33
  SPEAKER_00: So it it is a report that got the attention of the markets.
• 5:37
  SPEAKER_00: I mean, uh seeing uh corn doing what it did today, uh we had the close on May corn up quite a bit here, up 11 uh 660 on the May, and then uh soybeans too up 31 cents today at the close.
• 5:50
  SPEAKER_00: So the markets reacted well in those front months and uh really painting a picture going into the summer, which could be worrisome with you know a big inverse in the market on corn and soybeans.
• 6:00
  SPEAKER_00: I know that's a little bit concerning.
• 6:02
  SPEAKER_00: Basis picked up quite a bit on this last pullback.
• 6:06
  SPEAKER_01: You look at basis and then you look at these quarterly stock numbers on corn, probably way more so than soybeans.
• 6:12
  SPEAKER_01: I know we're in the wrong place on the globe and all that stuff um from a from a basis standpoint, but we've seen that basis sneak into quite a bit larger geography in the last two weeks.
• 6:24
  SPEAKER_01: Yes.
• 6:24
  SPEAKER_01: Into some places that have some pretty good crops now posting 30 over, 35 over type corn bids.
• 6:33
  SPEAKER_00: Um, I will say that part of this is the fact that a majority or a good portion of the corn compared to normal uh in situations like this in the past, the corn is sitting in farmers' hands.
• 6:47
  SPEAKER_00: So that makes us interesting because I know that we're getting into the time of the year where planners start rolling and it's a little bit harder to move corn, but now like uh as I work through a lot of m risk management decisions here, it's a tough line between, well, I'd kind of like to sell it today at seven cash, for example, on corn, but at the same time, I can't really get it there by the time planning's over with.
• 7:11
  SPEAKER_00: And then I'm off the July with that big inverse, and I'm I'm taking a 15 cent hit at least from what I'm seeing, and I've got to carry it that far, so it's like, okay, now what do I do?
• 7:22
  SPEAKER_00: So that's a really tough situation, I think, that is gonna limit farmers' abilities to say, well, let's lock in basis and see what happens, or uh, let's lock in futures and see what happens.
• 7:33
  SPEAKER_00: Um, you know, if you're gonna hold it at this point, you pretty much just gotta hold it, it seems like.
• 7:37
  SPEAKER_00: So that's an interesting uh thing working through these uh risk management decisions on the old crop, but nonetheless, you're gonna start working off of 8% interest on operating notes now, wet prime.
• 7:49
  SPEAKER_00: Uh you're gonna be looking at really expensive cost to carry uh getting into the time of the year with an inverse.
• 7:55
  SPEAKER_00: Market-wise, uh, if I'm looking at a book, it tells me I shouldn't probably hold on to grain too long.
• 8:02
  SPEAKER_00: But uh we'll see with a lot of farmers having deep uh pockets this time around, uh, we could see some bins with some doors welded shut here as we get through planning.
• 8:13
  SPEAKER_01: Last comment on the stocks part, Mike.
• 8:15
  SPEAKER_01: Um corn quarterly stocks, lowest since 2013.
• 8:21
  SPEAKER_01: So that puts a decade on you know that uh lowest quarterly for this time of the year at least.
• 8:27
  SPEAKER_01: Soybeans not as much.
• 8:29
  SPEAKER_01: Um still very tight.
• 8:30
  SPEAKER_01: Yeah, still a tight situation.
• 8:32
  SPEAKER_01: It's probably in the bottom 40% the way it looks, um, looking at some of these graphs here.
• 8:38
  SPEAKER_00: How about the acres, Jeff?
• 8:39
  SPEAKER_00: Uh you know, we came out, this was as of March 1st.
• 8:42
  SPEAKER_00: So if you look back to that time frame, the market was really telling you to plant corn.
• 8:47
  SPEAKER_00: So for them to come out and say 92 million acres of corn, in my opinion, was no surprise versus a trade estimate closer to 90.88.
• 8:56
  SPEAKER_00: I thought ninety-two sounded right for that time frame.
• 8:59
  SPEAKER_00: Um the market maybe was a little bit bearish with the reaction today to that number.
• 9:05
  SPEAKER_00: Could have been worse.
• 9:06
  SPEAKER_01: Yeah, I I think so.
• 9:07
  SPEAKER_01: And I think some of it's you put that on the put that on your spreadsheet on your balance sheet and doesn't help.
• 9:14
  SPEAKER_01: Yeah, 92 million acres uh brings quite a bit of corn to the table.
• 9:18
  SPEAKER_01: Yeah.
• 9:18
  SPEAKER_01: Now I'm kind of interested in the state-by-state break now.
• 9:22
  SPEAKER_01: I don't know if you're North Dakota.
• 9:26
  SPEAKER_00: A twenty-seven percent increase or something like that.
• 9:29
  SPEAKER_01: Yep, twenty-seven percent increase in North Dakota.
• 9:32
  SPEAKER_00: They've had more snow than last year, just for what it's worth.
• 9:34
  SPEAKER_01: Uh they've had more snow today than I think they had last year.
• 9:39
  SPEAKER_00: Some truth to that.
• 9:40
  SPEAKER_00: So it'll be interesting to see where the planted because remember, this is just expected or perspective.
• 9:46
  SPEAKER_00: So it uh take it with a grain of salt here, is this is what they're expected to plant.
• 9:51
  SPEAKER_00: Uh, you know, this puts them just shy of 180 million acres, which between corn soybeans, which would be the most we've ever planted for one.
• 9:59
  SPEAKER_00: So they're pretty much looking at a situation with very limited prevent plant or um, you know, uh uh looking at uh lost acres at all there, Jeff.
• 10:09
  SPEAKER_00: What do you gotta say about that as we go into the spring?
• 10:11
  SPEAKER_01: Well, also in some double croc acres, you know, I think that's gonna be some of the storyline here.
• 10:18
  SPEAKER_00: That's gotta help the soybean number out.
• 10:19
  SPEAKER_01: Yep, I think that's where you're getting some of those acres.
• 10:21
  SPEAKER_01: And all those come with fewer um or smaller yields, of course.
• 10:25
  SPEAKER_01: North Dakota observation, the double crop on the soybeans all kind of pointing towards maybe gonna have a tougher time hitting our trend line yields, but there's still acres.
• 10:35
  SPEAKER_01: And an acre is gonna yield something, um, even if it's a double crop or something like that.
• 10:41
  SPEAKER_01: So, yeah, I think we're pushing pushing towards more acres.
• 10:45
  SPEAKER_01: Not a huge surprise, I think, on either side of the coin, and agree with all your comments uh on this on the corn.
• 10:52
  SPEAKER_01: And that that hasn't changed a lot, right?
• 10:54
  SPEAKER_01: We're still pushing uh you know, at the end of March here, just 30 days later, I know fertilizers change around corn prices have changed quite a bit since then, but we still looking for uh corn being a bit of an advantage in a lot of geographies, Mike.
• 11:08
  SPEAKER_00: Yeah, I would argue they've got a significant advantage still, because the cheapest acre you're gonna plant is probably the one you don't have fertilizer bought for today, which you know any switched acre from soybeans to corn is that.
• 11:20
  SPEAKER_00: So uh it's still a decent opportunity to plant corn, I think, at these numbers.
• 11:25
  SPEAKER_00: Uh still pretty tight stocks to use ratio overall, as we saw in the quarterly stocks report today.
• 11:31
  SPEAKER_00: Um it makes a situation, I think, still that uh it didn't ruin our prospects of having a weather rally or weather premium this this summer, and I think that'll give some guys some hopes of saying, you know, I can maybe see a six dollar number again after the market really kicked us in the teeth there for a little while.
• 11:50
  SPEAKER_01: Have your plan ready, and we should get some opportunities to execute it.
• 11:55
  SPEAKER_00: Definitely.
• 11:55
  SPEAKER_00: Alright, thanks for joining me today.
• 11:57
  SPEAKER_01: Thank you, Mike.
• 11:58
  SPEAKER_00: And thank you to all our listeners.
• 12:00
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 12:03
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:09
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:15
  SPEAKER_00: See you next time.