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2022 Year Review · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:24
  SPEAKER_01: Today is December 30th, Lucas.
• 0:26
  SPEAKER_01: This is gonna be awesome.
• 0:28
  SPEAKER_00: Yeah, it's the end of the year, Mike.
• 0:29
  SPEAKER_00: Time to take a look back at uh what was 2022.
• 0:35
  SPEAKER_00: Awesome.
• 0:36
  SPEAKER_01: This is one of my favorite podcasts of the year that we get to do here.
• 0:40
  SPEAKER_01: So year end, quarter end, month end, and we're just gonna do a recap of 22, kind of everything that's gone on and uh kind of what we've forgot about or missed, and uh how we ended up and some of the things going into 23, Lucas.
• 0:56
  SPEAKER_00: Yeah, I mean, as I uh sit here and think of uh 2022, um, you know, the number one thing that I have on my mind, uh, and actually it bleeds into 2023, are how are the Vikings doing it, Mike?
• 1:13
  SPEAKER_00: I mean, every single week it comes down to the fourth quarter, they beat teams barely that they should blow out, they beat teams that they should probably lose to by a little bit, and then the good teams they get blown out.
• 1:26
  SPEAKER_00: Is it going to continue into 2023, Mike?
• 1:29
  SPEAKER_00: What do you think?
• 1:30
  SPEAKER_01: It is very, very irregular.
• 1:33
  SPEAKER_01: You are right about that.
• 1:34
  SPEAKER_01: This is uncharacteristic of them completely.
• 1:36
  SPEAKER_00: Yeah, it's uh uh best try to segue this into not all that different than the commodity markets of 2022, right, Mike?
• 1:47
  SPEAKER_00: Of boy, we kinda started out uh uh kind of flat and normal, and we had some ebbs and flows in between.
• 1:55
  SPEAKER_00: And like losing to the lions a couple weeks ago.
• 1:58
  SPEAKER_00: Yeah, exactly.
• 1:59
  SPEAKER_00: We got blown out a couple things.
• 2:01
  SPEAKER_00: Uh our our the hearts exploded uh when we beat the Bills, and and you look back at all the events that happened there.
• 2:09
  SPEAKER_00: It's amazing how you can relate a few of these things to whatever you want, and for whatever reason I picked the Vikings uh uh season here, Mike.
• 2:17
  SPEAKER_01: But well, if God is rooting for the Vikings here, you know that he's rooting for the Lions too, because they've been through a lot here.
• 2:26
  SPEAKER_00: So uh maybe next year, Mike.
• 2:28
  SPEAKER_01: Yeah, they did lose to the Panthers with Sam Darnold.
• 2:31
  SPEAKER_01: So we'll go on.
• 2:32
  SPEAKER_01: But nonetheless, when you go back to 22, like let's just take a moment here.
• 2:38
  SPEAKER_01: One of the big things right right away that hits you in the face is Russia invaded Ukraine February 24th.
• 2:44
  SPEAKER_01: That really kickstarted the year, I think, when looking at that.
• 2:48
  SPEAKER_01: Uh a couple other events, like you look at the assassination of uh the Prime Minister, the former Prime Minister of Japan there last summer, Queen Elizabeth II passing.
• 3:00
  SPEAKER_00: That's uh that's a big one, isn't it, Mike?
• 3:02
  SPEAKER_00: That had a big effect on our markets.
• 3:04
  SPEAKER_01: Or the fun time we had where the leader of the governing Conservative Party of the UK, Liz Truss, resigned after only uh 44 days.
• 3:13
  SPEAKER_01: Yeah, that was a shortest serving prime minister in UK history.
• 3:16
  SPEAKER_01: That was fun.
• 3:17
  SPEAKER_00: My my best one is the crypto crash and all the fun stuff going on with uh oh, what's his name, Freed.
• 3:25
  SPEAKER_01: Um that's gonna be a movie.
• 3:27
  SPEAKER_00: Yeah, like that's I I will admit I fell into the Bitcoin craze and have some of that stuff or had some of that stuff.
• 3:35
  SPEAKER_00: Um, but uh yeah, that was kind of a end of the street.
• 3:38
  SPEAKER_01: You mean where we had Terra Luna go down like 99.7% in a single week?
• 3:43
  SPEAKER_01: Exactly.
• 3:44
  SPEAKER_01: Yeah, that was fun.
• 3:45
  SPEAKER_01: So the crypto collapse, you mix that in there, Europe fuel crisis, uh, OPEC oil cuts, uh really interesting uh weather that we've had over the past year impacting the energy markets.
• 4:00
  SPEAKER_00: And I mean the US-China relations are in kind of tension, uh, well, really China and the world of uh, you know, their relationship with Putin and how is that affecting uh their global relationships.
• 4:13
  SPEAKER_00: Um, you know, pretty much everything, you know, you start thinking and to talking about all these items, boy, it it really comes down to the number one story is the Russia-Ukraine.
• 4:24
  SPEAKER_01: I sure think so.
• 4:25
  SPEAKER_01: A lot of stuff revolves around it.
• 4:27
  SPEAKER_00: Yeah, and and uh I mean, especially in the business we're in of commodities, like it's it's Russia-Ukraine and it's weather uh that to in my mind dominate the 2022 year.
• 4:38
  SPEAKER_00: Um, you know, we you look at all the uh different markets that that Russia-Ukraine uh in uh you know situation, the Russia invasion, how that uh triggered a lot of this commodity buy-up there at the beginning of March.
• 4:52
  SPEAKER_00: You know, we were we were talking a little bit before the podcast, you know, the the corn uh market specifically, how we're up about a dollar, you know, from January first to December 30th.
• 5:03
  SPEAKER_00: But in between times we went to what eight, a little over eight?
• 5:07
  SPEAKER_01: Yeah, you closed front month futures last year at five ninety-three on corn there for March of twenty-two, so five ninety-three.
• 5:14
  SPEAKER_01: And then by April twenty-ninth we reached a contract high of eight twenty-seven.
• 5:21
  SPEAKER_01: Yeah.
• 5:22
  SPEAKER_01: And then all of a sudden we put a low in July twenty-second, five sixty-one.
• 5:28
  SPEAKER_00: Yeah, and I mean you like that jump up uh to that April high is you know springboarded by the Russian Ukraine.
• 5:37
  SPEAKER_00: Definitely.
• 5:38
  SPEAKER_00: Yeah, and and c corn's just an example.
• 5:40
  SPEAKER_00: I mean, you could look at a wheat and and oil.
• 5:42
  SPEAKER_00: Uh I mean you talk you talk about what oil did uh in that same time period.
• 5:47
  SPEAKER_00: It's you know, it's kind of surprising how much it mimics corn, but um a very similar trading pattern.
• 5:53
  SPEAKER_01: So you uh closed last year their trading at 75 on crude oil.
• 6:00
  SPEAKER_01: You ran up very quickly to about 130 by March 4th.
• 6:06
  SPEAKER_01: And then um pulled back a little bit and then rallied by the time we got into midsummer and pulled back.
• 6:12
  SPEAKER_00: So, like the general theme of 2022 um and maybe markets, maybe specifically commodity markets, is first half of the year dominated the by the Russia-Ukraine news.
• 6:27
  SPEAKER_00: Um and we saw big money flow into commodities, right, Mike?
• 6:31
  SPEAKER_01: Definitely.
• 6:32
  SPEAKER_00: Like uh you're coming off the pandemic, you're coming off all these shutdowns, um, everybody's finally going back to work, they want their stuff, uh so they want raw materials and commodities benefit from that by getting a lot of money flow uh right away as we started the year.
• 6:50
  SPEAKER_00: Um and and that was kind of the trend through what June you th you figure?
• 6:57
  SPEAKER_00: Pretty much till June.
• 6:58
  SPEAKER_00: Yep, and and then uh then it kind of went the other way, right?
• 7:03
  SPEAKER_00: Like you were throwing out some numbers before of the amount of money coming out of commodities, and it's it's pretty staggering.
• 7:10
  SPEAKER_01: Definitely.
• 7:11
  SPEAKER_01: It was one of the biggest shifts in sentiment in history for raw materials here.
• 7:15
  SPEAKER_01: So like this time this time around, wild price swings spurred a rush of about an exit of$129 billion out of the global markets for a record of any annual period up to like mid-December.
• 7:30
  SPEAKER_01: And that really showed, you know, that came after two months of hard pouring money into commodities, uh, right in those first two months of the year that we saw major inflation.
• 7:42
  SPEAKER_01: Demand from everything from oil to industrial metals, they boomed earlier this year as the world emerged from their pandemic lockdowns, and investors sought a hedge against inflation and bought the US dollar and bought crude oil and corn and wheat, and then Russia's invasion of Ukraine and worries about a global recession really turned commodities.
• 8:05
  SPEAKER_01: And uh from that point on, you know, weather disasters and other man-made disasters it turned commodities into a really wild gamble for a lot of these um investors.
• 8:18
  SPEAKER_01: And, you know, we ended 21-20 as well.
• 8:21
  SPEAKER_01: I mean, it was major outflows for the commodities, and the bigger price moves showed that now past June about uh, you know, these guys just had to pull money out of commodities, and it became riskier to be long in commodities, and uh clearing houses were boosting collateral requirements to protect against defaults, and while higher interest rates are raising their borrowing cost, it made it a lot more expensive for them to trade, Lucas.
• 8:49
  SPEAKER_01: And so when I looked at money flow, that was a major influence from you know volatility, fixed volatility almost.
• 8:56
  SPEAKER_01: It it created uh an environment where it was too expensive for them to hold long positions and commodities.
• 9:03
  SPEAKER_01: And I think you still see it today because um crude oil futures, they have the lowest open interest since 2014.
• 9:11
  SPEAKER_01: Um same as wheat as well.
• 9:13
  SPEAKER_01: Open interest in wheat, that's fell to the lowest since 2008's financial global crisis.
• 9:18
  SPEAKER_01: Um liquidities just went down here, and uh the the thought of owning commodities as a hedge against inflation now is a a lot harder to do.
• 9:27
  SPEAKER_00: Yep, no, that's uh those excellent points.
• 9:31
  SPEAKER_00: It was kind of uh we saw that uh, like I say, in our commodity markets, in the financial markets.
• 9:36
  SPEAKER_00: You know, I I I sit here as a uh probably a pretty typical one of our listeners of I I got a farm and I also have a job.
• 9:46
  SPEAKER_00: Um, and I look at the the farming side of the uh you know my business like was pretty good this year.
• 9:53
  SPEAKER_00: You know, yields yields weren't great uh because of the volatile weather and the weather patterns we saw.
• 9:58
  SPEAKER_00: We can talk about that a little bit, but um you know, prices were really good.
• 10:03
  SPEAKER_00: And so you look at the farm side, you see that commodity jump, even though, like you were saying, towards the end of the year we saw a lot of money flow out, our prices are still good and still profitable.
• 10:14
  SPEAKER_01: Yeah.
• 10:15
  SPEAKER_00: So the farming side of me says, Boy, that was a really good year.
• 10:18
  SPEAKER_00: On the flip side, the uh employee that's got a 401k in me says, Man, though that market sure took a hit uh this year.
• 10:27
  SPEAKER_00: It's I mean, the uh the retirement accounts, the 401ks, all of that are kind of a lot worse off right now than they were a year ago at this time.
• 10:37
  SPEAKER_01: So when I'm looking at performance of asset performance for 2022, the best asset performance this year was the commodities index.
• 10:48
  SPEAKER_01: We had an overall growth of 21% year to date.
• 10:52
  SPEAKER_01: Last year was actually even better, that was 40% last year.
• 10:55
  SPEAKER_01: The dollar had a really good year, that was at 8.2%, that was second highest.
• 11:00
  SPEAKER_01: Crude oil was uh 5.8%, and that barely went up this year, and that was the third best.
• 11:06
  SPEAKER_01: Everything else is pretty much negative.
• 11:08
  SPEAKER_01: The SP 500 closed the year down about 18% year to date.
• 11:13
  SPEAKER_01: And to your point, investors are still really comfortable uh investors are still really uncomfortable getting into the market.
• 11:21
  SPEAKER_01: Even some of the deepest pocketed players are facing skyrocketing risks in a lot of these investments and they're not willing to step into it, specifically commodities.
• 11:30
  SPEAKER_01: So yeah, good points there on that.
• 11:32
  SPEAKER_01: But I'll attach this attachment, just showing asset performance, eat each commodity performance for the year.
• 11:38
  SPEAKER_01: It's very interesting.
• 11:40
  SPEAKER_01: Because I mean, even agricultural commodity performance this year was up five point one percent as an overall host.
• 11:46
  SPEAKER_01: Just an interesting statistic there.
• 11:48
  SPEAKER_01: And uh energy was up uh pretty decent 11.9.
• 11:52
  SPEAKER_01: You know what one was better than I thought would be?
• 11:54
  SPEAKER_01: Livestock, 11.7% for uh livestock in general.
• 11:59
  SPEAKER_01: So uh kind of interesting there.
• 12:01
  SPEAKER_00: Yeah, you would think like uh a general economy recession hurts livestock markets generally, right?
• 12:08
  SPEAKER_01: Demand goes down, people looking for cheaper, cheaper things to eat, and it was just a slow grind higher kind of live cattle and whatnot, where you know the grain markets were so incredibly volatile.
• 12:20
  SPEAKER_01: But when we look at, you know, Russia-Ukraine, they were the big one to start off with, and then that poured on the inflation party, and and then we get into the next part of all of this, which uh Mark Twain wrote that history doesn't repeat itself, but it often rhymes.
• 12:38
  SPEAKER_01: And I think that uh, you know, when I start to think about what the Fed has done this year to try to combat inflation, they really started March 17th was their first hike after this.
• 12:49
  SPEAKER_01: It was only 25 basis points, and then by June they were going every 75 basis points, and now we finally started in December to finally back that off, only 50 basis points higher here.
• 13:00
  SPEAKER_01: So it's been a long grind higher.
• 13:03
  SPEAKER_01: The um Fed funds rate now up to 4.5% here, you know, uh back in 08, they had got things uh really rising up to about 5.25 was the highest we got there at the end of all that before they started pulling those back down to help some easing.
• 13:21
  SPEAKER_01: But you know, when when I think you look at the markets and you saw them start to make June 16th was their first 75 basis point height, you really saw the markets pull money out of the commodities, and I think that's a strong correlation with money flow and seeing the impact of the Fed combating inflation.
• 13:39
  SPEAKER_01: And I I think it goes really well together this year.
• 13:42
  SPEAKER_01: What do you think?
• 13:43
  SPEAKER_00: Yeah, no, I I think like when we were looking at that chart of commodities, and like you said, that's when they really started bumping up the rates, saw a lot of money flow come out of commodities.
• 13:52
  SPEAKER_00: Really, the only thing that kind of helped our our grains was the weather, right?
• 13:57
  SPEAKER_00: Like we we had the La Niña pattern send in again uh in the United States, dry areas stayed dry.
• 14:03
  SPEAKER_00: Um, you know, a few states got rain, yields are good, but as a whole, the U.S.
• 14:08
  SPEAKER_00: crop had another challenging year, and that kind of helped those grains grind higher uh coming into the end of the year against that money flow out uh as investors look for safer places to put their money.
• 14:21
  SPEAKER_00: All right, Mike.
• 14:22
  SPEAKER_00: So we've talked on uh uh kind of meander back and forth on a lot of items here.
• 14:26
  SPEAKER_00: Give me your uh top three wrap-up points for 2022.
• 14:31
  SPEAKER_01: So the top three would be one, Russia, Ukraine, that situation, the inflation, the environment that we saw this year with inflation, and then weather and weather patterns continuing dry.
• 14:44
  SPEAKER_01: And two of those three are changing today, I would say.
• 14:48
  SPEAKER_01: Weather, it would appear that the La Nina pattern is coming to an end this spring, so it should be getting more wet in the United States and South America according to that.
• 14:59
  SPEAKER_01: And I think we can see it as we look outside right now and see like 55 feet of snow out of our window.
• 15:05
  SPEAKER_01: And the inflation portion, it looks like the Fed finally has that somewhat under control, at least they would like us to argue.
• 15:13
  SPEAKER_01: Um, you know, gas prices are lower than they were a year ago today, so that that seems to be changing.
• 15:18
  SPEAKER_01: The third one, though, I don't think is yet.
• 15:21
  SPEAKER_01: Russia-Ukraine, that situation, uh initially we had the big boom, but however, that is not solved in any mm way, shape, or form.
• 15:30
  SPEAKER_01: And I don't think it will be.
• 15:31
  SPEAKER_01: That's gonna drag out for quite a while.
• 15:33
  SPEAKER_00: No, that's that that Russia-Ukraine deal is something that uh, you know, this is gonna stick around and hover over us for We're gonna have to talk about that next year.
• 15:42
  SPEAKER_00: For years to come, right?
• 15:43
  SPEAKER_00: I I don't even think it's next year, I think it's the next three to four years.
• 15:47
  SPEAKER_00: Uh but as we do uh, you know, kind of wrap up one year and take a look forward of, you know, I don't wanna any predictions or anything.
• 15:55
  SPEAKER_00: So like what's the most interest interesting thing we can look at of what what are the potential uh black swans out there for 2023?
• 16:05
  SPEAKER_00: Uh you know, you just mentioned one, Russia Ukraine is still one.
• 16:09
  SPEAKER_00: Yeah, it is a volatile situation.
• 16:11
  SPEAKER_00: Uh it's a volatile situation that's kind of just stays there in place.
• 16:16
  SPEAKER_00: So I don't know how volatile it is, but at any moment it could spark off.
• 16:20
  SPEAKER_00: So that's the easy one, so I'll take that one.
• 16:22
  SPEAKER_00: Uh give me uh give me another potential black swan that Mike Miner's looking at.
• 16:27
  SPEAKER_01: The cryptocurrency market and the impact of that on money flow going forward, that was a really big deal.
• 16:35
  SPEAKER_01: Like a lot of people lost money in that, and uh a lot of money was put into those couple exchanges.
• 16:42
  SPEAKER_01: I I just I want to see next year how big of an impact that has on our overall marketplace and health of our general economy.
• 16:48
  SPEAKER_01: And if a bank was tied into it in the wrong way, shape, or form, whatever the case may be, I still think there's something bigger to come from that collapse.
• 16:57
  SPEAKER_01: Yep.
• 16:58
  SPEAKER_01: That'd be the one that I think could be really big.
• 17:00
  SPEAKER_01: Um renewable fuels, renewable diesel, I think that expansion will be something big to watch in the next year.
• 17:07
  SPEAKER_01: That could be probably further out even yet, though, 24, 25, more or less.
• 17:11
  SPEAKER_00: Yeah, but you're gonna have to need to see the the continued growth and the build-out.
• 17:15
  SPEAKER_00: They're gonna have to build the thing.
• 17:16
  SPEAKER_01: So you're gonna see more from that aspect too, and demand and um policy changes state to state and how they're adapting that.
• 17:24
  SPEAKER_01: So um I'm watching that going forward.
• 17:26
  SPEAKER_01: Weather, obviously, like we talked about, um, that'll be another big swan, black swan, just because we're still in a tight place um supply and demand-wise on a lot of these balance sheets, and until we get major crops to get some cushion in there, we'll stay pretty volatile.
• 17:41
  SPEAKER_01: And uh those are kind of the main ones I'm watching, I guess, Lucas.
• 17:44
  SPEAKER_01: Uh and then just I mean, the cryptocurrency was kind of the start of me talking about more of the general global health of the economy.
• 17:53
  SPEAKER_00: Yep, yep.
• 17:54
  SPEAKER_00: No, that's that's gonna be important of you know, with the the inflation, the cost of everything going up.
• 18:00
  SPEAKER_00: And like you said, crypto is we we like to joke about it, but it did pull a lot of money out of a lot of people's bank accounts and and across the world.
• 18:08
  SPEAKER_00: Um, and that is going to accelerate or uh maybe not accelerate, but make worse this potential global recession uh that a lot of people talk about, but we probably haven't seen take a strong foothold yet.
• 18:22
  SPEAKER_01: Not until we see Michael Lewis's new movie.
• 18:24
  SPEAKER_01: Yeah, there you go.
• 18:25
  SPEAKER_01: On that come on Netflix.
• 18:27
  SPEAKER_00: The uh you know, and the weather is interesting.
• 18:29
  SPEAKER_00: Uh we always think of weather as a black swan negative.
• 18:32
  SPEAKER_00: Like the b biggest black swan, I think, in weather this year in the United States is good weather.
• 18:37
  SPEAKER_00: Yeah.
• 18:37
  SPEAKER_00: Like we haven't had good weather in a few years, and that's helped bolster grain prices.
• 18:43
  SPEAKER_00: And now, boy, we uh as you look at some of these acres and potential pattern shift.
• 18:48
  SPEAKER_00: I mean, we've now getting moisture again.
• 18:52
  SPEAKER_00: I mean, you want to fix a problem in a hurry, you get good weather on American farmers that know how to raise a good crop, and we can make that balance sheet turn around in a hurry.
• 19:03
  SPEAKER_00: So uh kind of interesting to think of as a black swan as good weather, but uh, I guess that's kind of something I'm looking looking at for 2023.
• 19:12
  SPEAKER_01: I will post some of the links in here as well uh for some of those asset management portfolios, tracking those, uh, some interesting stuff.
• 19:19
  SPEAKER_01: Please reach out to us.
• 19:20
  SPEAKER_01: This one more one of the more fun podcasts we do each year, and I really enjoy it.
• 19:25
  SPEAKER_01: Thanks, guys.
• 19:26
  SPEAKER_01: And thank you to all our listeners.
• 19:28
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 19:31
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 19:36
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 19:43
  SPEAKER_01: See you next time.