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Planting In A Wheat Rally · 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.
• 0:23
  SPEAKER_00: Today is April 26th.
• 0:26
  SPEAKER_00: I've got Lucas with us.
• 0:27
  SPEAKER_00: How's it going, Lucas?
• 0:28
  SPEAKER_01: It's going good.
• 0:29
  SPEAKER_01: Glad to be back in the podcast studio with you, Mike.
• 0:31
  SPEAKER_00: It's been too long.
• 0:33
  SPEAKER_00: We've got some fun things to talk about.
• 0:35
  SPEAKER_00: We're going to talk about uh planning progress here a little bit, GDP report, and then we're going to talk about the uh wheat market.
• 0:41
  SPEAKER_00: So let's get started.
• 0:42
  SPEAKER_00: How are things looking in the uh country for you, Lucas, when you see planting progress?
• 0:47
  SPEAKER_01: Yeah, so the the planting progress, at least, you know, kind of start locally, I guess.
• 0:52
  SPEAKER_01: Um, you know, it's really all over the board.
• 0:55
  SPEAKER_01: This has been a kind of a strange start to the planting season, uh, as I can remember.
• 1:00
  SPEAKER_01: We have some customers that raced out and planted soybeans right away.
• 1:05
  SPEAKER_01: We had some customers go plant corn early.
• 1:08
  SPEAKER_01: Um, and we got some customers that are done with corn, some that are done with soybeans, and some that just started here uh Tuesday, Wednesday before this latest uh round of rain that came in here last night and today.
• 1:20
  SPEAKER_01: Um, so kind of all over the board, but generally I want to say southern Minnesota, uh, just talking to some customers, is probably in that 40 to 50 percent planted on the west side, probably a little further along the further east you went.
• 1:35
  SPEAKER_01: Um, they uh Fairmont East, I know they're probably maybe pushing 60-70 percent.
• 1:41
  SPEAKER_01: They got started a little earlier and didn't get quite as much rain.
• 1:44
  SPEAKER_01: Uh, you know, that slowed us down a week ago.
• 1:47
  SPEAKER_01: Um, and so that's a really good progress to start that early.
• 1:51
  SPEAKER_01: As you move into the Dakotas, very similar uh situation.
• 1:55
  SPEAKER_01: A lot of guys just getting started here uh this week before the rain, kind of holding off.
• 2:01
  SPEAKER_01: Maybe it was a little too early.
• 2:03
  SPEAKER_01: Uh soil temps still running in the mid-40s, and then all of a sudden this week it's felt like, yeah, let's get going before this uh uh inch to two inch rain that was forecast to move in.
• 2:14
  SPEAKER_01: Um, so yeah, kind of a nice start.
• 2:18
  SPEAKER_01: Anytime that you can get 30-40 percent planted in these areas in April sh generally should mean good things, right?
• 2:26
  SPEAKER_00: And near perfect planting conditions, too, right?
• 2:29
  SPEAKER_01: And that's I think what what uh surprised me and why I thought we'd see more people going earlier because the the field conditions were so good.
• 2:39
  SPEAKER_01: Like the um the soil condition was good, it was dry on top, moisture underneath, uh exactly how you want to get the plant started.
• 2:48
  SPEAKER_01: The the only thing that maybe you're like, well, because of this would be the soil temperatures.
• 2:53
  SPEAKER_01: You know, four-inch soil temps were running in the 40s pretty much all week until we hit some of these sunny, warmer days here lately.
• 3:00
  SPEAKER_01: Um, but of course, now we're gonna fall back again, uh, probably into the upper 40s with this rain and cool temps over the weekend.
• 3:07
  SPEAKER_01: But um generally I'd say great start to the planting season.
• 3:13
  SPEAKER_01: Um, you know, as we kind of move out of that into uh other areas, I know uh, especially when you look eastern Iowa, Illinois, Indiana, Ohio, you know, that area has gotten some rainfall.
• 3:26
  SPEAKER_01: I know guys are started over there, um, but probably not as far along as here, which maybe isn't that unusual, I guess, right?
• 3:35
  SPEAKER_01: Talking to some customers uh in our office in eastern Iowa.
• 3:39
  SPEAKER_01: It's like it's not uncommon for us to get going up here, uh, but a little bit before them down there.
• 3:44
  SPEAKER_01: That's just kind of the way it goes.
• 3:45
  SPEAKER_01: When you're further north, you want to get it in early because you never know when that season's gonna end.
• 3:50
  SPEAKER_01: Um, and so then we we got a good start, and now as we sit here today uh in Laverne, it's raining outside still.
• 3:58
  SPEAKER_01: We've gotten about uh three-quarters of an inch of rain so far in Laverne area, pretty general um half inch to an inch across a lot of the our our close area here, the tri-state area.
• 4:12
  SPEAKER_01: Um, but you start looking at where this is gonna set up the system over the next three days of precip, and we we probably gonna get another half inch uh Sunday the way it looks.
• 4:24
  SPEAKER_01: So, all told, probably inch, inch and a half across a big chunk of our area.
• 4:29
  SPEAKER_01: Over three days, though, like you can ask for much more perfect rainfall.
• 4:34
  SPEAKER_01: Um, the heavier rains look like they're gonna set up uh eastern Iowa, Missouri, Arkansas.
• 4:40
  SPEAKER_01: You know, there's got places over there where they're forecasting four to six inches of rain.
• 4:45
  SPEAKER_01: Not ideal, obviously, when you get that much rain.
• 4:48
  SPEAKER_01: Um, and so that definitely gonna slow things down next week.
• 4:52
  SPEAKER_01: It uh even though it is dry, especially you look at eastern Iowa, really the only spot on the drought manager man uh monitor, except maybe for Kansas, uh those two areas, only spots that really stick out as being dry, and those two spots are gonna get some pretty significant rain here this weekend and into early next week.
• 5:13
  SPEAKER_01: So um so something to watch on plant net planting progress next week, I think would reflect a slower progress.
• 5:20
  SPEAKER_01: Uh but I think it's important to remember whenever we get started planting, we want to finish, right?
• 5:26
  SPEAKER_01: So so you're like, oh, or delayed now.
• 5:29
  SPEAKER_01: The I was just kind of reminding myself before we started talking that you know what is considered late planting.
• 5:37
  SPEAKER_01: Uh really corn uh maintains a hundred percent or ninety-nine percent yield potential planted through May 15th.
• 5:47
  SPEAKER_01: Okay, that's still over two weeks away as we sit here today.
• 5:51
  SPEAKER_01: Um we still got lots of time to catch a dry spell and wrap this up.
• 5:55
  SPEAKER_01: Soybeans oddly is is about the same.
• 5:57
  SPEAKER_01: And so I think that's kind of interesting as we've seen this phenomenon lately of planting soybeans early and first a big notice this year with that.
• 6:06
  SPEAKER_01: Especially this year.
• 6:07
  SPEAKER_01: I I would agree with that.
• 6:08
  SPEAKER_00: And and two planters, a corn planter and a soybean planter.
• 6:11
  SPEAKER_01: Yeah, that's doing one of each at the same time.
• 6:14
  SPEAKER_01: Exactly.
• 6:14
  SPEAKER_01: And and that's from a seed dealer's perspective, boy, that gets kind of hard to manage, right?
• 6:19
  SPEAKER_01: Now usually you would get one out and then work on the other, and now it they're both going out at the same time.
• 6:24
  SPEAKER_01: But because of, uh, when you start looking at, I was looking at some research from the University of Minnesota, the uh yield potential on soybeans starts going down drastically once you get past May 15th.
• 6:37
  SPEAKER_01: So it really justifies what farmers have seen lately of if I plant my beans earlier, they generally yield better, and the data would suggest that as well.
• 6:46
  SPEAKER_01: So uh again, good start to the planting year, um and ideal conditions, nice rain.
• 6:53
  SPEAKER_01: Uh, hopefully next week we can get a little warmer temps, get the sun out, dry it out, and we can wrap this thing up for 2024.
• 7:01
  SPEAKER_01: Um, so Mike, I got a question for you.
• 7:04
  SPEAKER_01: Uh, this week we not only do we have all the the agronomy and the planting uh stuff going on, but we got some uh some general economic news concerning GDP and inflation that that wasn't really good, was it?
• 7:17
  SPEAKER_00: No, and I'll try to wrap it up in a bow.
• 7:20
  SPEAKER_00: Like I'll try to make this as simple as I possibly can.
• 7:22
  SPEAKER_00: And uh what we saw was the US economy is slowing.
• 7:27
  SPEAKER_00: You saw US GDP advanced to an annualized uh 1.6%, and that was slower than all the projections.
• 7:35
  SPEAKER_00: Now, at the same time as you see that US economy slowing, you see inflation jumping.
• 7:40
  SPEAKER_00: First quarter uh core inflation measure accelerated to 3.7% as a rate.
• 7:47
  SPEAKER_00: So it dampens our soft landing hopes for sure.
• 7:52
  SPEAKER_00: And looking forward, just from how this impacts all of us as US citizens who borrow a lot of money, especially in the farm industry, it you're probably not gonna have a rate cut now until later on into 2024 if you're gonna get one at all.
• 8:07
  SPEAKER_00: So now you're looking at maybe one rate cut in November or December instead of, you know, a month ago, we are still looking at three rate cuts uh the rest of 2024.
• 8:18
  SPEAKER_00: And that would be uh kind of wrapped up in a bow of what I think uh that report had shown us yesterday between the GDP number and now what we see with inflation and what that means going forward for us, Lucas.
• 8:32
  SPEAKER_00: So you're not likely to have any cuts.
• 8:34
  SPEAKER_00: You might even have some people saying we need to raise an interest rate or so, um, uh have one jump, and then uh you know, at a time now where GDP is advancing uh very slow.
• 8:46
  SPEAKER_00: So now you have inflation over GDP, and that's always a problem because we're going negative now year over year, technically, with that statistic.
• 8:54
  SPEAKER_00: And I mean we're using 3.7, and that's probably real inflation's probably more than that.
• 9:00
  SPEAKER_01: Yeah, exactly.
• 9:01
  SPEAKER_01: We were talking about that before we started, right?
• 9:03
  SPEAKER_01: Like you start looking at all these costs that aren't go don't go into that number.
• 9:08
  SPEAKER_01: Yeah, exactly.
• 9:09
  SPEAKER_01: Uh that number, we're all spending more money uh on everything, it seems like, and and that's starting to get reflected.
• 9:16
  SPEAKER_01: So, like as as you look uh at the egg markets, of course, like you said, uh for for guys borrowing a lot of money or borrowing any money, uh the likelihood of those rates going down probably dwindled with this report.
• 9:29
  SPEAKER_01: Is there uh like how about uh other effects that you see uh on the egg markets, or are we gonna start to see it here over the next few weeks?
• 9:38
  SPEAKER_00: Yeah, so the the way you could see some of these things spill over into actual markets is you know the direct correlation with the SP 500.
• 9:46
  SPEAKER_00: We've taken off a pretty good chunk here on that uh over the past couple weeks as we've realized we're probably not gonna have the rate cuts at once, along with, you know, we've had some earnings come out that haven't been absolutely spectacular.
• 9:59
  SPEAKER_00: Um that'd be the first thing.
• 10:01
  SPEAKER_00: You tie in crude oil to this and and the demand for crude oil going forward, if we are gonna start losing money uh a little bit faster now with inflation over GDP.
• 10:11
  SPEAKER_00: Um the crude oil market and the wheat market have had an 80% correlation with each other nearly over the month of April.
• 10:18
  SPEAKER_00: So with those two being tied very closely together because of people trading tensions in the Middle East uh aggressively here and that impacting uh crude oil because Iran uh exporting three million uh barrels uh or uh producing three million barrels, or uh, or whether it be something along the wheat side with uh exports flowing out of that part of the world and the Black Sea and the tensions occurring with Russia and Ukraine.
• 10:45
  SPEAKER_00: Um, we've also got something a little bit more important, I think, when it comes to our own individual prices, which is the the Black Sea weather problem.
• 10:55
  SPEAKER_00: And we've looked at uh a wheat market now that's carried incredibly large net short positions for a long time, and uh same on the corn side, and uh, we've seen the weather pattern start to trend dry in Russia and in the southern United States.
• 11:11
  SPEAKER_00: So even today's rains are a little bit too far northeast for the the wheat to really get some rainfall that's needed for to improve conditions again, which you saw took a 5% hit this week and good to excellent ratings for winter wheat in the US.
• 11:26
  SPEAKER_00: Um you're focused on those two areas, and and Russia trending drier is probably the most important force on the grain market right now I can think of, other than our own weather uh developing in our growing season going forward.
• 11:38
  SPEAKER_00: And so they're a little dry.
• 11:40
  SPEAKER_00: They're running out of uh some export supplies, I think, uh uh going forward here.
• 11:44
  SPEAKER_00: Their premiums are starting to rise.
• 11:47
  SPEAKER_00: Uh you've got countries like India, which are awaiting an election uh to really start to buy imports of uh of uh commodities uh so they don't make their own farmers mad.
• 11:57
  SPEAKER_00: That'll happen in the month of May, most likely.
• 12:00
  SPEAKER_00: Uh we're looking at a few things like that really starting to line up, and the wheat market finally took notice of it and just said, okay, that's it.
• 12:06
  SPEAKER_00: I'm gonna cover up some of these shorts.
• 12:08
  SPEAKER_00: And you know, we rallied the the Kansas City uh wheat contract there in those front months nearly a dollar in the last week, um, if you go all the way back to the lows.
• 12:18
  SPEAKER_00: So low to high, almost a buck on that market, you know, 50 cents to 80 cents probably on the average of all those wheat markets is kind of what we went up this week.
• 12:26
  SPEAKER_00: And and when I look at the corn market, it reacted not very strongly to that.
• 12:32
  SPEAKER_00: If you would have told me that wheat was gonna go up a buck in a week, I would have said corn should have been up 30 cents, you know, and we're up 15.
• 12:38
  SPEAKER_00: So that's really disappointed disappointing, especially when I know that there's gonna be strong farmer selling if we go up another 10 cents on corn.
• 12:46
  SPEAKER_00: It's really gonna start to slow it up a little bit.
• 12:48
  SPEAKER_00: So my hopes of hitting that 502 gap on December corn, for example, uh, it keeps diminishing a little bit each day that we get a wheat rally and corn just doesn't respond in a very strong manner, uh, Lucas.
• 13:01
  SPEAKER_01: Yep, and so like is that kind of why you just said uh you'd think corn would be up 30 in the week.
• 13:07
  SPEAKER_01: Like is is the reason behind that just the selling that we saw this week?
• 13:11
  SPEAKER_01: Like we didn't have a big rally, but the little bit of rallies we get, we always get farmer selling, don't we?
• 13:17
  SPEAKER_00: A little bit.
• 13:17
  SPEAKER_00: And it was contract expiration time frame here with May coming off the bar and board as well.
• 13:21
  SPEAKER_00: That probably forces a hand a little bit.
• 13:24
  SPEAKER_00: I mean, we saw 15 cents, so it is what it is.
• 13:27
  SPEAKER_00: But I would have liked a few more of those uh corn contracts to get covered up, and and we just haven't seen that quite yet.
• 13:33
  SPEAKER_00: But corn doesn't have a reason to either yet.
• 13:35
  SPEAKER_00: I mean, we gotta find the bullish reason to really push us a little bit harder, and at the end of the day, uh, it's most likely gonna have to just be a a weather forecast at some point that's gonna say it's gonna be really hot and dry in June or July or something like that.
• 13:48
  SPEAKER_01: The current forecast for planting conditions sure doesn't look like we're gonna get a bullish story out of it.
• 13:53
  SPEAKER_00: So yeah, and soybeans, I mean, uh they probably could get thrown right in that boat as well because we do not have a new crop export sale to China yet on soybeans.
• 14:01
  SPEAKER_00: It's actually less than what we had at this time of the year during the trade war.
• 14:04
  SPEAKER_00: It's really sad.
• 14:05
  SPEAKER_00: So uh soybeans are gonna have to find some demand from China as well to get any fire lit under that market, and you could throw corn right in there too, but exports are okay for corn, and uh ethanol hasn't done anything too traumatic here lately.
• 14:19
  SPEAKER_00: So uh really at this point we're just looking to add a couple more bowls into that uh corn and soybean market to give us that spring pop.
• 14:26
  SPEAKER_00: But I'm a little disappointed in in the corn market this week, I think, with what wheat did on its own.
• 14:32
  SPEAKER_00: Yep, I would agree with you, Mike.
• 14:33
  SPEAKER_00: All right.
• 14:33
  SPEAKER_00: Well, thank you for your time today, Lucas.
• 14:35
  SPEAKER_00: And thank you to all our listeners.
• 14:37
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 14:41
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 14:46
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 14:52
  SPEAKER_00: See you next time.