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COF and Short Covering · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Egg Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the egg 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 October 20th, and I've got Jordan and Macy here today.
• 0:27
  SPEAKER_00: How's it going?
• 0:28
  SPEAKER_01: Pretty good.
• 0:28
  SPEAKER_01: How about yourself, Mike?
• 0:30
  SPEAKER_00: Very good.
• 0:30
  SPEAKER_00: So, Macy, tell us a little bit about your new office in Fairmont.
• 0:35
  SPEAKER_00: Uh we got you moved out there and you've set up shop there.
• 0:39
  SPEAKER_00: What can you tell us about your new base of operations for ProAG?
• 0:42
  SPEAKER_01: Yeah, so most recently, the past couple months, I've been working um in my new Fairmont office here.
• 0:49
  SPEAKER_01: Um just downtown there.
• 0:51
  SPEAKER_01: Uh have a a nice little office to myself and continue to have the same interactions as I do with the team just in a different space.
• 1:00
  SPEAKER_00: Awesome.
• 1:00
  SPEAKER_00: So if you find yourself in that part of the woods, uh please stop in and say hi to Macy uh during trading hours when it's really busy.
• 1:07
  SPEAKER_00: So, other than that, let's get started.
• 1:09
  SPEAKER_00: Jordan, we're gonna talk a little bit about Catalon Feed.
• 1:12
  SPEAKER_00: We're gonna talk about short covering as well.
• 1:14
  SPEAKER_00: What can you tell us about the Catalon Feed report that we saw today?
• 1:18
  SPEAKER_01: Yeah, an interesting Catalon Feed report here today.
• 1:21
  SPEAKER_01: Estimates there for On Feed were right on top of last year's numbers there at 100%.
• 1:28
  SPEAKER_01: Um estimates there also um 96 to 104, a big spread on uh the placement data there, actually coming in 6%, so way out of estimate range there for cattle placed in September, while the marketing numbers were um 88% of of last year to 91% on the estimates coming in actually um 11% uh below 2022 there on uh September marketing.
• 2:01
  SPEAKER_01: So a pretty surprising report compared to the last several reports we've we've seen.
• 2:06
  SPEAKER_01: Um, like I said, six percent more on cattle place there while marketings were down compared to last year's numbers.
• 2:14
  SPEAKER_00: What can we say about that placed number at 106?
• 2:17
  SPEAKER_00: Jordan, do you got any input on that?
• 2:20
  SPEAKER_02: Yeah, it was quite a large number, like Macy said, uh, you know, kind of broke out of the top end of the estimates there.
• 2:26
  SPEAKER_02: Um, you know, this week the cattle on mark cattle market uh took another big hit, um, including today down another buck fifty in the deferred market, while October was up a little bit.
• 2:37
  SPEAKER_02: So, you know, what we're seeing there on that cattle is cash markets, you know, doing well, right?
• 2:44
  SPEAKER_02: Up another two bucks.
• 2:45
  SPEAKER_02: Um, but the deferred market continues to fall off.
• 2:50
  SPEAKER_02: And you kind of look at the chart, and we're seeing a little bit of a head and shoulders formation um, you know, kind of happening right now, and you know, a lot of uh questions on on why are we seeing this, right?
• 3:02
  SPEAKER_02: You're seeing, you know, good cash values cut out, you know, dropping from 320 to 300 on on choice.
• 3:10
  SPEAKER_02: Um, but why are we losing so much ground on the board?
• 3:13
  SPEAKER_02: And you know, it it feels like you know, so far on this this rally we've you know had really good premium in the market, but the market is starting to to take that premium away, right?
• 3:25
  SPEAKER_02: You know, are we kind of getting to a top?
• 3:27
  SPEAKER_02: Have we had a top in now, right?
• 3:30
  SPEAKER_02: And the market wants to take that that premium away and kind of go from you know having this premium in the market to maybe pulling it out and maybe making making the cash market lead the way, right?
• 3:42
  SPEAKER_02: Um which you know, we've had some discussions, you know, around here um over the past month or so about you know what what was gonna happen here once we kind of moved into new crop corn, right?
• 3:53
  SPEAKER_02: You get cheaper corn, you know, these feeders are gonna push weights higher, feed cattle bigger, but if you don't have that premium out there any anymore, you know, maybe that kind of goes away.
• 4:05
  SPEAKER_02: So just something uh something to kind of think about, I'd say, going forward.
• 4:09
  SPEAKER_02: And you know, with these larger placements at 106, uh, there's definitely gonna be a little bit more cattle around us, right?
• 4:16
  SPEAKER_00: Looking back now, it's been over a month actually since the cattle market had peaked in the future.
• 4:21
  SPEAKER_00: So 915 that was the high in the cattle market, which it's been a little while now since we kind of broke out of that top end uh putting in record prices there uh for some of those deferred markets.
• 4:32
  SPEAKER_00: It's uh kind of interesting uh how that's pulled back off, anyways.
• 4:36
  SPEAKER_00: And like you said, this week uh a lot more uncertainty yet again.
• 4:40
  SPEAKER_00: Uh it'll be interesting to see what kind of pressure we have on this market to come into this next week, anyways.
• 4:47
  SPEAKER_00: But one thing's certain, you know, when we look at the direction of this cattle market, it's it's um it's clear when you look at the economic picture.
• 4:54
  SPEAKER_00: You know, the consumer uh they're continuing to spend, government handouts have been primed, uh have primed the pump for continued spending, inflation really isn't in check, interest rates are still rising, savings are being depleted, um, except for the fact that the employment numbers are still high, so a more traditional economic decline would feature more joblessness, but uh we really haven't seen that in this one.
• 5:20
  SPEAKER_00: So, you know, it'll be interesting to see, you know, uh looking forward on what the uh what the consumers uh feel like going forward with some of these uh high box beef values and uh you know what this can economy can do going forward.
• 5:35
  SPEAKER_00: And I think that takes us into this next talking uh talking topic uh pretty well.
• 5:41
  SPEAKER_00: When we look at the short covering that had occurred in in many of these markets this week, yesterday, uh yesterday morning, even uh up until about 12 guys, we hadn't seen a lot of action in the corn, wheat, soybean markets.
• 5:55
  SPEAKER_00: And then uh right at about the the right right about the last 30 minutes uh before closing, the the corn and wheat markets had skyrocketed.
• 6:04
  SPEAKER_00: And it was a very interesting uh way how the day uh played out because there wasn't a ton of news uh that we had found to make that happen, but we did see that uh you know there are reports of attacks related to the Israel-Hamas war, uh including a drone strike on an Iraqi base housing U.S.
• 6:24
  SPEAKER_00: force.
• 6:25
  SPEAKER_00: Um that contributed to some of that choppiness yesterday that I think when you look at managed money funds uh becoming more uncertain about their sizable short positions in corn and wheat in light of their rising tensions in Israel.
• 6:39
  SPEAKER_00: Uh, you know, yesterday's news was maybe just enough to start some of that short covering that we saw in positions uh for corn and wheat.
• 6:47
  SPEAKER_00: And then also, you know, yeah, it wasn't just short covering.
• 6:50
  SPEAKER_00: Uh open interest shot up yesterday, 47,000 contracts.
• 6:53
  SPEAKER_00: So that did suggest that we s had some new money come into these grain markets uh over the past 24 hours and continued in into this morning's session, but part of yesterday's um support was that uh rumors about Chinese uh uh purchases or interest in in corn and wheat had spilled over for the United States, and we haven't really seen much confirmation of that yet.
• 7:18
  SPEAKER_00: So maybe the end of today going into the weekend, prices backed off in these grain prices a little bit uh because of what we had saw with um the lack of uh purchases so far.
• 7:30
  SPEAKER_00: What do you guys think about that situation and and where the grain markets are at here at a time where it's interesting to be talking about other things like this versus uh traditional uh yield, crop size, uh harvest progress, things like that?
• 7:45
  SPEAKER_02: Yeah, so you mentioned uh, you know, possibly China coming in and purchasing some corn off the PNW.
• 7:51
  SPEAKER_02: Um a little interesting to me, you know, seemed like the market was, you know, just trying to find things to explain what happened there yesterday, right?
• 7:59
  SPEAKER_02: Um, you know, the USDA balance sheet has you know a large increase of exports, you know, figured into it today, right?
• 8:07
  SPEAKER_02: So, you know, we're gonna need to see that you know pick up as we kind of move forward.
• 8:11
  SPEAKER_02: So, you know, to get a bullish reaction off of that yesterday, uh, a little little confusing, right?
• 8:17
  SPEAKER_02: But you know, one thing that I wanted to mention here today was you know, before the market started rallying, we already seen spread starting to narrow yesterday on corn.
• 8:26
  SPEAKER_02: So December was up um you know two cents compared to March, two cent narrowing of the spread.
• 8:33
  SPEAKER_02: So, you know, as harvest is kind of pushed along here, we're seeing slow farmer selling.
• 8:38
  SPEAKER_02: You know, the farmer is very reluctant to make any more additional sales at these levels.
• 8:43
  SPEAKER_02: Um, and we've we've had you know really good carrying this market out to 15 cents, which we need with larger interest rates, right?
• 8:51
  SPEAKER_02: But with slow farmer selling, we started to see that spread actually narrow a little bit there yesterday.
• 8:57
  SPEAKER_02: Yes, exactly.
• 8:59
  SPEAKER_02: Um, so that that's indicating that you know we're probably gonna see basis levels you know strengthen here as we kind of come out of harvest, which I don't I don't believe that really surprises anyone, right?
• 9:10
  SPEAKER_02: But um, you know, that that is one thing that we're kind of looking at here as we go forward.
• 9:15
  SPEAKER_02: Um as we kind of broke through that five dollar mark, you know, I believe we hadn't traded over five dollar December futures since August 21st, I believe, was the number.
• 9:25
  SPEAKER_02: Um, you know, little talk that you saw some farmer movement, but I don't believe it was, you know, too significant.
• 9:32
  SPEAKER_00: The next resistance point was about 509 on December Futures.
• 9:36
  SPEAKER_00: And this morning we did stress that didn't break through it until uh we backed off here into the later session.
• 9:44
  SPEAKER_00: Uh do we have any final thoughts for our listeners this week before going home this weekend?
• 9:50
  SPEAKER_01: I don't think so, Mike.
• 9:51
  SPEAKER_01: Um, I was just gonna point out there, jumping back to the cattle and feed report real quick.
• 9:56
  SPEAKER_01: This is the second highest um the on-feed numbers um here in inventory since the you know reporting kind of started there at the beginning of 1996, there.
• 10:07
  SPEAKER_01: So in half of near half of those are heifers.
• 10:11
  SPEAKER_01: So I guess continuing to see that that we're not holding heifers back yet.
• 10:15
  SPEAKER_00: Yeah, that'll be a number to continue to watch going forward, but we'll see what this uh cattle market can show us at the beginning next week.
• 10:23
  SPEAKER_00: Thanks, guys.
• 10:24
  SPEAKER_00: And thank you to all our listeners.
• 10:26
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 10:29
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:34
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 10:40
  SPEAKER_00: See you next time.