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Full Market Recap · 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 Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_00: Today is May 6th.
• 0:25
  SPEAKER_00: I've got Pat Von Tirch with us here today.
• 0:27
  SPEAKER_00: How's it going, Pat?
• 0:28
  SPEAKER_01: It's going good, Mike.
• 0:29
  SPEAKER_01: How are you?
• 0:30
  SPEAKER_00: Very good, but what a wild week for news and uh market moving events.
• 0:35
  SPEAKER_01: You know, Mike, I come to look forward to our Friday afternoon chats here, and we're now we're gonna talk about like we as if we know what the market's gonna do.
• 0:43
  SPEAKER_01: This will be fun, won't it?
• 0:44
  SPEAKER_00: Well, that's exciting.
• 0:45
  SPEAKER_00: Everybody else does it.
• 0:46
  SPEAKER_00: Why can't we?
• 0:47
  SPEAKER_00: That's right.
• 0:49
  SPEAKER_00: Well, uh we're gonna have a pretty full uh wrap-up of commodities today from corn, soybeans, a little bit of wheat, some outside market influence, and then uh we're gonna touch on some main topics with uh hogs today.
• 1:00
  SPEAKER_00: How's that sound, Pat?
• 1:01
  SPEAKER_01: Sounds great.
• 1:02
  SPEAKER_00: Awesome.
• 1:03
  SPEAKER_00: Well, in the corn market, we had a uh hot start to the week here after the crop progress report only came out at 14% planted.
• 1:11
  SPEAKER_00: We've been a little bit slow on the plant progress.
• 1:13
  SPEAKER_00: They're hoping for a little bit more.
• 1:16
  SPEAKER_00: Uh last year at this time we were 42% planted, 33% as an average.
• 1:21
  SPEAKER_00: So uh looks like we're gonna get some more done this next week as a weather uh it has some sporadic rains, but it's gonna be uh a little bit uh warmer weather and uh guys can get out in the field a little bit more next week.
• 1:33
  SPEAKER_00: Pat, do you have any comments on planning progress this far?
• 1:37
  SPEAKER_01: Yeah, it doesn't matter.
• 1:38
  SPEAKER_01: I and that's that's a great conclusion.
• 1:41
  SPEAKER_01: Next point.
• 1:41
  SPEAKER_01: Yeah, exactly.
• 1:42
  SPEAKER_01: I we talk about this every year as if there's like some question whether or not uh the corn crop is gonna get planted and and uh it will, of course.
• 1:51
  SPEAKER_01: Uh it will be a little bit late, of course.
• 1:54
  SPEAKER_01: But um the the the probability of that having a major impact or even really any impact on final yields here in the U.S.
• 2:04
  SPEAKER_01: still low probability, I would argue.
• 2:06
  SPEAKER_00: Yeah.
• 2:06
  SPEAKER_00: And it was interesting because as we say that, I mean, we had corn down basically 20 cents most of today.
• 2:13
  SPEAKER_00: On I couldn't find much besides news of it's gonna be good planting next week, right?
• 2:18
  SPEAKER_01: That's right.
• 2:18
  SPEAKER_01: And I do think there's a couple other points that's put some pressure on this corn market over the the last week, and and so it is about planning progress, I suppose.
• 2:28
  SPEAKER_01: It is also about um, you know, the the the the chatter coming out of uh Brazil on that second corn crop down there seems to be improving.
• 2:38
  SPEAKER_01: We've seen a couple private analyst estimates, and and they maybe uh were a bit more optimistic than than some of the disaster stories that we've heard about over the last couple of weeks with with the rain shutting off there uh towards the end of their their growing season.
• 2:53
  SPEAKER_01: So, you know, maybe there's a little bit uh uh bigger crop uh coming out of Brazil than what was advertised the last couple weeks.
• 3:00
  SPEAKER_01: Um and then the last thing is just China and the fact that they still have a ton of corn on the books for old crop.
• 3:08
  SPEAKER_01: And you know, there's a couple different uh uh folks that have made the observation this week that like even if they did pick up the pace here, we're just not real sure that logistically they could pull everything they have on the books today uh uh you know during the summer, especially given their port shutdowns due to trying to manage their COVID concerns and those sorts of things.
• 3:28
  SPEAKER_01: And so anyway, there's really maybe like three things that are going on there in the corn market that's taken us now over 30 cents off their highs, you know, on December.
• 3:38
  SPEAKER_01: And so um I we I wonder if we don't see just a little bit of follow-through on that as we go through the next week or two and and see a little bit of a correction here.
• 3:48
  SPEAKER_01: I just say all of that to say this.
• 3:50
  SPEAKER_01: I mean, I you still have a a global balance sheet on feed grains that's pretty tight and likely projected to be even tighter for next year.
• 4:01
  SPEAKER_01: And so um when that monthly supply and demand report comes out here in 10 days or so, uh it'll be the USDA's first uh, I guess, official estimate on a balance sheet for new crop.
• 4:13
  SPEAKER_01: Um, but it uh is probably going to echo uh the observations that we've been trying to make for a while here is that boy, you plant less than 90 million corn acres this spring, uh, even if you do achieve uh a 180 yield, which is trend but a record.
• 4:30
  SPEAKER_01: Uh if you export as much corn as what we are going to this year, next year, you're tightening that balance sheet year over year.
• 4:38
  SPEAKER_01: And I and so we talk about planting delays and all that stuff, and I kind of make fun of make fun with it, but would just say that uh the biggest issue as it relates to the corn market and uh this spring so far is the probability of us really struggling to get more acres.
• 4:57
  SPEAKER_01: And so, at least at least relative to March intentions.
• 5:00
  SPEAKER_01: And so I think that's gonna be the storyline as we go here.
• 5:03
  SPEAKER_01: Uh the the need for a trend line or better crop uh in the northern hemisphere, US in particular, is uh is very great here with a tightening balance sheet.
• 5:15
  SPEAKER_01: And so the the uh the market's gonna be very sensitive to any weather concerns that might pop up as we go.
• 5:22
  SPEAKER_00: In next week's report there uh as we head into that, um, we've seen really good demand here recently, so it'll be interesting.
• 5:29
  SPEAKER_00: I think a lot of the focus points will be on that.
• 5:31
  SPEAKER_00: You know, when it comes to yield, uh they'll just use trend line acres, they'll use what they had from the last report.
• 5:37
  SPEAKER_00: So it'll be a lot of focus for next year's uh crop balance sheet for the first time coming out on the demand side.
• 5:44
  SPEAKER_00: And then don't forget about the world uh numbers as well as the Brazil numbers could be pretty volatile in that report.
• 5:49
  SPEAKER_01: So that reports on Thursday next week.
• 5:51
  SPEAKER_01: Yeah, so that'll be that that'll be uh intra- You're right.
• 5:53
  SPEAKER_01: That's a great point.
• 5:54
  SPEAKER_01: It'll be interesting to see how that uh um what what's uh USDA's guesses on the Brazil Brazilian crop on that report as well.
• 6:01
  SPEAKER_00: Yeah.
• 6:02
  SPEAKER_00: And then on the other side of grains here, you know, many countries going into uh this Russian-Ukraine battle that they've been having, uh they've kind of looked towards other sources for their uh uh for their grain uh imports.
• 6:14
  SPEAKER_00: So uh a lot of them had been looking at India in the recent weeks, and it kind of came out this week that due to a deficit in their supply, they had a really hot March and April.
• 6:24
  SPEAKER_00: Um, they could be potentially uh holding back exports going forward if that crop does start to shrink a little bit.
• 6:31
  SPEAKER_00: But it's worth noting that's the second largest wheat crop they're probably ever expecting this year with increased acres.
• 6:37
  SPEAKER_00: Kind of were expecting it.
• 6:39
  SPEAKER_00: They had a little bit of a taste of exports last year for kind of the first time, because they normally don't export anything.
• 6:45
  SPEAKER_00: So it'll be interesting to see what India does uh going forward on the wheat side, because uh we saw Kansas City wheat up 50 cents yesterday, and you know, corn market was kind of down the last couple days, so that was interesting.
• 6:58
  SPEAKER_01: Right.
• 6:59
  SPEAKER_01: So there's a little bit of a dichotomy going on there to your point, but in addition to that, this is the second week in a row now where we've had uh you know palm oil you know two weeks ago and now and now wheat uh here where you have a country that's uh doing a little bit of hoarding or some concern about allowing for free markets uh to occur uh via export.
• 7:19
  SPEAKER_01: And so um that's uh certainly an indication of of many people becoming increasingly concerned about exactly what we're talking here, right?
• 7:29
  SPEAKER_01: You've got balance sheets globally that continue to tighten here, and you're you're right.
• 7:36
  SPEAKER_01: It's uh you know the Russian-Ukraine uh crisis is bringing a particular acuteness to this discussion.
• 7:42
  SPEAKER_01: But um, you know, in addition to that, we're not getting perfect rather weather in different growing regions really for a couple of years now.
• 7:49
  SPEAKER_01: So we've had some struggles from a production perspective all across the globe.
• 7:53
  SPEAKER_00: And it's funny how all these things are comnected a little bit there too, because even on the outside market influences here, commodities were kind of supported here late in the week after the EU said that they might put sanctions on Russia for their energy imports.
• 8:08
  SPEAKER_00: So like you just said, everything is kind of starting to mix together.
• 8:11
  SPEAKER_00: And uh um it'll be interesting to see how the outside market influence uh happens uh as well.
• 8:18
  SPEAKER_01: Yeah, absolutely.
• 8:19
  SPEAKER_01: And and along those lines, if we just maybe wanted to jump into that, Mike, you know, we had uh maybe you want to comment for for everyone uh what uh uh what the feds decided to do this week on interest rates.
• 8:34
  SPEAKER_00: Yeah, so they raised 50 basis points, which was basically just as expected, or half a percent increase in their meeting.
• 8:41
  SPEAKER_00: And uh as we move forward into June, they had kind of shut down the idea of making rate hikes more than that in the future.
• 8:49
  SPEAKER_00: So they they thought that was maybe uh more bullish news on the stock markets, but uh, you know, they they said maybe half a point was about right there, or 50 basis points was about right.
• 9:01
  SPEAKER_00: So as they move forward to try to uh kind of curb inflation with that, um, it really hit the the stock market for one.
• 9:09
  SPEAKER_00: Uh that's really gone down over the past few days, and uh more talks about uh the Fed uh being highly attentive to reacting to inflation and uh kind of spurring some of the conf uh spurring some concerns down the road uh that they've talked about in the past.
• 9:26
  SPEAKER_00: So this was a big step for them as you know a lot of people came out and said this was probably past due, but um they're getting uh getting some of these rate hikes done.
• 9:35
  SPEAKER_00: And with this um and with uh uh them trying to get their balance sheet in order, this really supports the the interest rates, which supports the US dollar going up.
• 9:45
  SPEAKER_00: So that US dollar as that goes up, it's gonna make anything with a US origin export look a little bit less attractive in the future.
• 9:53
  SPEAKER_01: So that's a pretty important point, right?
• 9:56
  SPEAKER_01: We've got the dollar trading as high as it's traded recently.
• 10:00
  SPEAKER_01: It's uh if it if it goes much higher than this, we have to go all the way back to 2000, 2001, 2002 in that area to uh find levels that we've traded higher than this.
• 10:12
  SPEAKER_01: And so um for those of us that uh are in the game of exporting commodities, which that's probably everyone listening on this call.
• 10:21
  SPEAKER_00: I hope so.
• 10:23
  SPEAKER_01: Um just say that uh um that's a concerning thing, a strong U.S.
• 10:28
  SPEAKER_01: currency.
• 10:29
  SPEAKER_01: And so um, you know, the the the the thought process would be is that is that that's going to continue to maintain itself as long as we continue to have increased uncertainty as it relates to geopolitics globally and the actions to your point that the the Federal Reserve is with the Fed that the Feds are taking as it relates to interest rates.
• 10:52
  SPEAKER_01: And and keep in mind that I mean uh what the feds are doing when they raise interest rates, they're trying to create a recession on purpose, right?
• 11:00
  SPEAKER_01: I mean, we're they're they're trying to slow down economic activity, and so it's a pretty dangerous game that gets involved here in terms of uh of them meandering their way through this minefield the right way that it doesn't uh um cool things off from an economic activity perspective uh too quickly.
• 11:19
  SPEAKER_01: So as you mentioned, dollar on trading on highs, stock market trading on lows.
• 11:25
  SPEAKER_01: Um it's been a while since we've been this low in the stock market too.
• 11:28
  SPEAKER_01: The previous two or three times that we've been down to these levels, it's held.
• 11:32
  SPEAKER_01: So we'll see.
• 11:33
  SPEAKER_01: And then we say all of that, and by the way, crude o' is now trading on kind of uh, I mean, it's trading the top end of the trading range.
• 11:40
  SPEAKER_01: It's been in for a while, and that has more to do with how we started this conversation, which is the you know, the Europeans uh uh making or placing more sanctions on on Russian energy, and so awful lot of things going on from an external perspective, but um net net of it all, um, a strong dollar and a slowdown in economic activity, generally that's not a great uh uh sort of underlying support for commodities.
• 12:07
  SPEAKER_00: How about the livestock?
• 12:08
  SPEAKER_00: Uh, you know, if we touch on hogs here a little bit this afternoon, uh we saw a pretty hard sell-off for a while there and finally found a little glimmer of hope and uh found some technical bounce there.
• 12:19
  SPEAKER_00: Uh what do you got to say about the hog complex uh in in general?
• 12:24
  SPEAKER_01: Yeah, it's uh so so you're right, we did see a fair amount of volatility in in hog futures again this week, uh significant correction from the the highs that we're trading at here.
• 12:36
  SPEAKER_01: But you know, the it it the the uh I think the real storyline on hogs is that there isn't really a storyline on hogs.
• 12:44
  SPEAKER_01: I mean we've had a CME index that's been locked into a hundred bucks since the first part of March, and that still hasn't traded.
• 12:53
  SPEAKER_01: I I don't remember a time where we've been as stagnant as we are.
• 12:57
  SPEAKER_01: We keep talking about five percent less pigs, and there is.
• 13:01
  SPEAKER_01: We keep talking about how good demand should be with M2 money supply and and uh you know people getting out and and and all those things.
• 13:09
  SPEAKER_01: But supply and demand are almost perfectly aligned here, must be.
• 13:12
  SPEAKER_01: We can't move the index from 100, we can't move uh cutout you know outside of a one 105 to 110 sort of a range.
• 13:20
  SPEAKER_01: And so sooner or later we'll break out of that.
• 13:22
  SPEAKER_01: We're not gonna be at 100 bucks forever, of course.
• 13:24
  SPEAKER_01: But um, boy, in the meantime, here you got this this futures market that's bouncing around all over the place like there's some something happening, and and we just keep trudging along from a from a cash and cutout perspective on a pretty straight line here.
• 13:38
  SPEAKER_01: So anyway, I'm I'm expecting as we go forward here that that uh we'll see a slight appreciation and index as we go into the summer months, which we normally do.
• 13:48
  SPEAKER_01: Uh and so um, you know, one thing Mike, I would just say maybe this is one step back on everything, but you know, in these volatile times, high prices, low prices, all of these things, it does seem like seasonals have worked pretty well, right?
• 14:03
  SPEAKER_01: And the season there's a strong seasonal tendency for us to to get some some risk management opportunities on all commodities, you know, coming up here in the May-June time frame.
• 14:14
  SPEAKER_01: Historically, it's a good time to be thinking about such things.
• 14:16
  SPEAKER_01: And and maybe this year won't be any different.
• 14:19
  SPEAKER_00: Interesting observation there about the seasonals.
• 14:22
  SPEAKER_00: One wouldn't maybe have expected that with all of this volatility and kind of black swan-like events.
• 14:28
  SPEAKER_00: Any uh finishing touches today's show.
• 14:30
  SPEAKER_01: Uh thanks everyone for taking the time to to to listen to Mike and I talk through these markets here.
• 14:35
  SPEAKER_01: We uh appreciate the opportunity to engage with anyone, and and please don't hesitate to give us a call if you have any questions that would be uh specific to your operation.
• 14:46
  SPEAKER_00: And thank you to all our listeners.
• 14:48
  SPEAKER_00: Please reach out to us from our website at professionalagmarketing.com or check out our newly added hog specific podcast named Hog Market Talk that's released every Thursday.
• 15:00
  SPEAKER_00: Trading commodity futures and options involve substantial risk and loss that is not suitable for all investors.