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War and Weather · 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.
• 0:23
  SPEAKER_01: Today is July 21st, and I've got Luke Wells with us here today.
• 0:27
  SPEAKER_01: How's it going, Luke?
• 0:28
  SPEAKER_00: Uh, very well, Mike.
• 0:29
  SPEAKER_00: Good afternoon, sir.
• 0:30
  SPEAKER_01: Good.
• 0:31
  SPEAKER_01: Well, it's been a while since I've had you on the Friday podcast, so it's good to have you back.
• 0:36
  SPEAKER_00: Yeah, excited to be back.
• 0:37
  SPEAKER_00: Thanks for that.
• 0:38
  SPEAKER_01: Good.
• 0:38
  SPEAKER_01: Well, today's topics are gonna be a little bit of war, weather, and then uh mainly just uh a broad overview uh on commodities here, and I'll catch your take on hogs.
• 0:48
  SPEAKER_01: But let's let's kind of take a an overview of the markets and kind of what happened here this week, Luke.
• 0:55
  SPEAKER_01: We had December corn down ten cents today at 536.
• 0:59
  SPEAKER_01: We did rally up on December corn to a high yesterday and the day before at 563.
• 1:06
  SPEAKER_01: There's been a couple items really giving that market support here over the beginning of this week, and uh a big couple of the items as we talked about before the show today was uh what's happened in in Russia and Ukraine in that situation.
• 1:20
  SPEAKER_01: So last uh the end of last week there we caught news that they weren't gonna extend the uh uh export corridor deal, and then that uh they picked up some real uh heavy pressure with bombing the port of Odessa and some other things that uh has really uh thrown a monkey wrench in some of these uh export facilities for them longer term.
• 1:41
  SPEAKER_01: So with that being the case, uh grain prices have had quite a bit of support to start off our week uh from that aspect on war and tensions rising there, and it looks like uh the outlook for that tension is probably gonna start to really get played a little bit more, isn't it, Luke?
• 1:59
  SPEAKER_01: What do you think about the uh situation in Ukraine and how long that could last and kind of the impact?
• 2:06
  SPEAKER_00: Yeah, i I mean it feels it feels this one could have a longer tail to it, and Russia seems to I mean they're kind of running out of options and I think they're gonna keep the pressure on, and and uh I I would agree with that.
• 2:18
  SPEAKER_01: Um And real lately, the last couple times this has happened, it was like a one-day blip.
• 2:23
  SPEAKER_01: And that we'd get a higher price one day after a bombing, and then it'd pull back.
• 2:27
  SPEAKER_01: And it it seems like this is a little bit longer term, could have a bigger impact.
• 2:32
  SPEAKER_01: And then you see countries coming out like India today, uh, and uh earlier this week saying that they're gonna uh stop the exports of rice and wheat uh coming soon here because of food inflation being such a problem there.
• 2:45
  SPEAKER_01: And some of these other countries, China started to poke around and other uh other buying aspects too, because they've been buying a lot of Ukraine grain, so it's opening up a lot uh a lot of greater opportunities for exports from someone like the United States who we've had a significant setback in most of our commodity prices since I bought last.
• 3:04
  SPEAKER_01: Uh the US dollar was a little bit lower as well, so uh you know, when it comes to the war tensions there, that's built up a little bit of bullish energy on these grain markets, and then weather.
• 3:15
  SPEAKER_01: Uh we've uh had some really dry, hot weather coming at us here this next week.
• 3:21
  SPEAKER_01: Locally, a lot of 90s to 100 degree temps, uh, pretty much right after pollination, I would uh credit this time frame for.
• 3:29
  SPEAKER_01: Uh most areas were kind of in the heat of pollination this last weekend.
• 3:33
  SPEAKER_01: Uh it seems like a lot of that is probably wrapped up or been very close to it by the time this heat will get to us next week.
• 3:40
  SPEAKER_01: We could use some more rainfall, especially immediately after or right inside of that heat.
• 3:46
  SPEAKER_01: Um we'll see what happens here, but it is supposed to be a little bit hot and dry this next week, and then further out, uh part of today's weakness was 30 days.
• 3:56
  SPEAKER_01: That uh 30-day forecast was a little bit wetter and cooler uh than what they had originally anticipated, Luke.
• 4:03
  SPEAKER_01: So weather's getting uh definitely some attention here as well on these grain prices.
• 4:07
  SPEAKER_01: And the November soybeans today, 1401, we're down just three cents there.
• 4:13
  SPEAKER_01: Not really breaking any trends, I would argue, on that right now, but we did reach a high um here this week.
• 4:20
  SPEAKER_01: Uh 1428 there a couple days ago, it looks like.
• 4:24
  SPEAKER_01: Uh pretty significant, don't you think so, with that?
• 4:27
  SPEAKER_01: I mean, you're only twenty cents away from the uh contract highs there wet that we put in in April of 22, Luke.
• 4:35
  SPEAKER_00: I think it's been a pretty good rally.
• 4:37
  SPEAKER_00: You really kind of got through that$14 mark.
• 4:39
  SPEAKER_00: That's uh you know, and we're approaching contract highs, like you said.
• 4:42
  SPEAKER_00: It's also a number that I mean, there's some profit in that, right?
• 4:45
  SPEAKER_00: For a producer.
• 4:46
  SPEAKER_00: It's uh I think it's worthy of some attention.
• 4:49
  SPEAKER_01: And I think uh one of the main focus points I'm gonna talk about today in the in the grain recommendation letter, when I uh write and send that out, if you guys want to get thrown on that, please uh send us an email, let us know, give us a call.
• 5:01
  SPEAKER_01: Uh, I'm gonna talk a little bit about the correlation between locking in fertilizer prices at today's levels and then maybe trying to take advantage of the 2024 uh corn crop today and the prices and levels that are offered out there, because we are looking at a situation that's pretty close again to$5 cash corn in 24.
• 5:22
  SPEAKER_01: And and if I'm gonna be buying fertilizer today, I maybe want to take a little bit more risk off the table for the uh for the 2024 crop year.
• 5:30
  SPEAKER_01: So that'll be something I'm talking about and a few different strategies in that.
• 5:34
  SPEAKER_01: But let's keep uh keep our legs moving here over the livestock, you know, live cattle.
• 5:39
  SPEAKER_01: I'll make a real quick observation on that.
• 5:42
  SPEAKER_01: We continue to have a really nice uptrend on it.
• 5:44
  SPEAKER_01: Uh supply remains tight.
• 5:46
  SPEAKER_01: We are gonna have a cattle on feed report come out this afternoon that we'll have a uh update for next week that we'll want to talk about.
• 5:54
  SPEAKER_01: So uh keep that in mind with uh today's close and where we sit.
• 5:58
  SPEAKER_01: Uh we are looking for some lower placements coming into today's report.
• 6:02
  SPEAKER_01: So keep an eye on that report.
• 6:04
  SPEAKER_01: But uh I think on cattle we'll break this into the lean hog market here very soon.
• 6:09
  SPEAKER_01: But uh longer term, I think demand is still a little bit of a concern there.
• 6:14
  SPEAKER_01: So it uh that's maybe held uh these markets back just a little bit from what they could have been, probably based upon what we've been seeing in the cash market for both feeder cattle and live cattle, and then uh obviously what those further out months uh want to do uh in the future there.
• 6:31
  SPEAKER_01: But when we talk about the uh consumer sentiment, you know, this week, as you mentioned, it was a pretty good week for the Dow Jones, wasn't it, Luke?
• 6:38
  SPEAKER_00: Yeah, the thing kind of really took off, and it's some very recent uh, I mean, new highs for the last couple, probably new highs in the last how long, Mike?
• 6:49
  SPEAKER_01: You know, back uh 4800 on the SP was our our all-time high that we had occur there back in you know late 21 or so.
• 6:58
  SPEAKER_01: So we're getting very close to that level again, only uh 100 to 150 points away from that level.
• 7:04
  SPEAKER_01: US dollar as well, that's uh that's been bouncing around a little bit here lately.
• 7:09
  SPEAKER_01: Uh we did bounce back up above a hundred points here, but that was below ninety-nine for the first time in quite some time.
• 7:16
  SPEAKER_01: That's gonna help us out on the exports, but we see next week we've got the uh Federal Reserve coming out.
• 7:23
  SPEAKER_01: They're gonna try to raise interest rates uh one more time, it sounds like, in uh in the next week's report, and then it'll probably be done after that uh for the time being.
• 7:32
  SPEAKER_01: But a soft landing looks uh really uh uh it could happen at this point, a soft landing, which is a little surprising, I think, in a lot of books.
• 7:40
  SPEAKER_01: So uh we'll want to keep an eye on that, but nonetheless, if that does occur, uh that'll be a good thing for our demand uh for these proteins going forward.
• 7:48
  SPEAKER_01: So I'm gonna use that opportunity to break into uh the lean hog market here, Luke.
• 7:52
  SPEAKER_01: What do you think about that uh at the current time?
• 7:55
  SPEAKER_00: Yeah, that's a that's a nice segue, Mike.
• 7:57
  SPEAKER_00: And you you know you all talked about this this higher beef price, and yes, choice choice is off.
• 8:02
  SPEAKER_00: It's high, right?
• 8:03
  SPEAKER_00: By what about thirty, thirty, thirty-five dollars.
• 8:06
  SPEAKER_00: But still, uh what was boxed beef?
• 8:08
  SPEAKER_00: It's still printing above three hundred dollars, isn't it, Mike?
• 8:11
  SPEAKER_01: It's still plenty high.
• 8:12
  SPEAKER_01: It has set back some, though.
• 8:13
  SPEAKER_01: I mean, packer margins are probably gonna start seeing a little bit of a setback.
• 8:17
  SPEAKER_01: They're still sitting okay, I think.
• 8:18
  SPEAKER_00: So 302 on choice yesterday afternoon.
• 8:21
  SPEAKER_00: And and my point with that is is I mean, there's gonna be your staples, especially in the restaurant trade.
• 8:26
  SPEAKER_00: I mean, beef is always gonna hit those type of menus, right?
• 8:29
  SPEAKER_00: But um, from a substituting protein standpoint, um, that higher beef price, it's it's finally started to matter, especially I'd say at the retail level for pork, because when we look in the grocery stores, right, at the at the end of the day, in a lot of regards, the grocer kind of picks what people buy by what they put on inventory, one, but also what they feature on price.
• 8:48
  SPEAKER_00: And and with you know, tighter supply on beef, higher prices on beef, and pork.
• 8:53
  SPEAKER_00: Uh pork was was relatively very cheap to to um to the to the beef.
• 9:00
  SPEAKER_00: Uh recently, though, there's been some substitution.
• 9:02
  SPEAKER_00: And and when I talk about hogs, I mean the the front end of this hog curve, uh, it it's excellent.
• 9:08
  SPEAKER_00: Um, we've had a tremendous rally in our in our cash markets and our pork cutout markets.
• 9:14
  SPEAKER_00: Uh pork cutout, actually, we'll see if it sticks this morning, but it was on the morning report, uh, it was$118.39.
• 9:23
  SPEAKER_00: Uh, and that's a that's a sharp increase.
• 9:26
  SPEAKER_00: You know, we've we've drug all year on the on the product, and then we had the Supreme Court ruling in May that really kind of drove our markets down that late May-June time frame.
• 9:35
  SPEAKER_00: So, you know, we've been looking at the you know this front end of this this this deal, and we we think the beef price is a big deal.
• 9:42
  SPEAKER_00: Um, you know, also when you know, not to go back too far in time, but you know, when the Prop 12 decision came out on the Supreme Court at the end of May, it put a lot of question and and put a lot of pork buyers on the sidelines for California, just quite honestly.
• 9:54
  SPEAKER_00: And and there's been some changes there.
• 9:56
  SPEAKER_00: That's that's known now, but we've you know we've got some ketchup buying going on there.
• 10:00
  SPEAKER_00: We've got the grocery stores uh giving us a better look and more feature and and more shelf space.
• 10:06
  SPEAKER_00: And and we've had a really good rally in these hogs.
• 10:09
  SPEAKER_00: Uh pork cut out at 118, that's like back to Eurogo type levels, which you know, 21 and 22, you know, COVID stimulus-driven years were phenomenal price years for pork.
• 10:19
  SPEAKER_00: So so that's working well.
• 10:21
  SPEAKER_00: Packer demand, packers have some some margin improvements, which is counter-seasonal now.
• 10:25
  SPEAKER_00: So they've been chasing hogs.
• 10:27
  SPEAKER_00: Uh, we had a new high, weekly high,$108 paid for cash hogs this week.
• 10:32
  SPEAKER_00: Weighted average yesterday, right at$105, just a little bit under.
• 10:36
  SPEAKER_00: So you got all that stuff going really well for us.
• 10:38
  SPEAKER_00: And index heading, uh, heading it's at 104, index heading kind of to 105.
• 10:44
  SPEAKER_00: And so all that sounds great, right, Mike?
• 10:46
  SPEAKER_00: Um, and it is, I mean, for the very near spot term, but the the hog board, the the futures trade, it's just taken a an extreme prove-it-to-me mentality.
• 10:56
  SPEAKER_00: Um, it there's there's there's there's a deep discount in in all the months, even August.
• 11:02
  SPEAKER_00: Uh August, you've got the index at 104 heading to 105.
• 11:06
  SPEAKER_00: And the in the August Futures, which only has uh uh a few weeks, three weeks left on it, uh 17 days, I believe, to be exact.
• 11:13
  SPEAKER_00: It's it's it's just right around$100.
• 11:15
  SPEAKER_00: The October is down at 84, the D's is at 76.
• 11:19
  SPEAKER_00: Now we did have a bit of a pickup this week.
• 11:21
  SPEAKER_00: We had a nice kind of$3,250 up day yesterday, but my you know, I put this this pork market still in flux.
• 11:28
  SPEAKER_00: Um this this California Prop 12 put a lot of uncertainty into our markets, and and uh we've got great fundamentals now, and I kind of call like July 2nd kind of D-Day, Prop 12 day, if you will, because you know that's the day the new laws went into effect to California.
• 11:43
  SPEAKER_00: So the markets had some concern that um maybe some of this recent Supreme has been more just California catching up from when they're on the sidelines.
• 11:52
  SPEAKER_00: And for sure, California has been strong, exports have been strong, um, but it's just it's just believing this is a very temporary situation because it's keeping these discounts um you know in these hog boards, and it's it's kind of tough too from a uh producer's perspective because this is kind of seasonally the time where we get our summer rally, and we usually get October and December and February and April of next year to rally, and it's a great time to seasonally put on some hedges.
• 12:17
  SPEAKER_00: But the the the futures curve has kept very wide uh discounts out, uh, and and it's still an approve it to me mentality.
• 12:25
  SPEAKER_00: Uh corn, while it's not at its recent highs, it's rallied a bit and made cost of production just a little bit tough.
• 12:30
  SPEAKER_00: So I guess you know, from our perspective, we're really excited to see how this next week and this next week goes.
• 12:36
  SPEAKER_00: We we're maybe not quite, you know, as as bearish as the board.
• 12:40
  SPEAKER_00: We're a little friendly prices from here, to be honest with you, Mike.
• 12:43
  SPEAKER_00: Um, because we do think some of these things at the retail level and and pork's price to beef, it's it's a little bit more of a sh uh uh a change than just a one or two week phenomenon.
• 12:54
  SPEAKER_00: We think demand is is is going to be pretty good there for pork.
• 12:57
  SPEAKER_00: So with that said, not to give the wrong message out to the group, we're we're not mega bulls here.
• 13:02
  SPEAKER_00: You know, we're not saying wait for DSOGs to trade 90 or anything like that.
• 13:06
  SPEAKER_00: But what we're saying is we think it's probably not uh quite as bad as the boards pressing in here.
• 13:11
  SPEAKER_00: So um, you know, uh we're looking for a little bit of a little bit of a two to four dollar rally, and we kind of get to that spot and it kind of puts us in an area where we would like to get some coverage on.
• 13:21
  SPEAKER_00: So, you know, let's watch this pork and fundamental price, and you know, each day these fundamentals stay a little bit stronger.
• 13:26
  SPEAKER_00: Maybe we'll get the longs, the bulls out of the crowd and and do some more buying here and push these deferreds up because that's uh that's definitely where we want to do some hedging there, Mike.
• 13:35
  SPEAKER_01: I'm very interested uh in following the uh demand situation in California once Prop 12, once that got enacted through the month of July, maybe the first week or two.
• 13:47
  SPEAKER_01: I am curious to see what happens to demand uh in California here as this goes on with these changes and price changes and what impact that has on not just the pork industry itself, but uh the consumers of California as well.
• 14:03
  SPEAKER_00: Yeah, absolutely.
• 14:04
  SPEAKER_00: It's uh it's a wild and changing world world we live in with without a doubt, Mike.
• 14:10
  SPEAKER_01: All right, well, thank you for your time, Luke.
• 14:12
  SPEAKER_00: Yeah, thank you, Mike.
• 14:13
  SPEAKER_00: Thanks for having me on.
• 14:14
  SPEAKER_01: And thank you to all our listeners.
• 14:15
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 14:19
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 14:24
  SPEAKER_01: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 14:30
  SPEAKER_01: See you next time.