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Hard Selloff · 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 August 2nd.
• 0:25
  SPEAKER_00: I've got Jeff with us.
• 0:26
  SPEAKER_00: How's it going, Jeff?
• 0:27
  SPEAKER_01: Good afternoon, Mike.
• 0:28
  SPEAKER_01: Going pretty good, but wow, what a you know, what a wild Friday, huh?
• 0:32
  SPEAKER_00: Yeah, you wanted to listen every day for these markets this week.
• 0:35
  SPEAKER_00: It was a wild week all the way across the board.
• 0:38
  SPEAKER_00: Uh where we're gonna start first off is let's go over to the equity markets.
• 0:43
  SPEAKER_00: We had a lot of moving and shaking there.
• 0:45
  SPEAKER_00: Actually, the the NASDAQ, we were about 10% off of our highs now from that move.
• 0:51
  SPEAKER_00: Uh really big move out of those tech stocks, so that led it lower.
• 0:54
  SPEAKER_00: Dow Jones was down another 700 today, uh, down um over 500 yesterday on these futures.
• 1:02
  SPEAKER_00: Uh the SP futures were down over 100 again today.
• 1:05
  SPEAKER_00: So really big sell-off out of these um out of these equities.
• 1:09
  SPEAKER_00: The SP that's down about 5% now from the most recent high.
• 1:13
  SPEAKER_00: But a few of the things we had go on in that market, Jeff, this week were uh middle of the week we had a uh a Fed announcement come out where they had said we're not gonna change rates on this Fed fund rate.
• 1:25
  SPEAKER_00: Uh we're gonna leave things be.
• 1:26
  SPEAKER_00: But you know what?
• 1:27
  SPEAKER_00: You could see a rate cut coming in September and November, and it looks like every economic data piece we get each week tells us that's okay to do going forward.
• 1:36
  SPEAKER_01: It gets to be a greater and greater chance, doesn't it?
• 1:39
  SPEAKER_00: It l a little bit it does, yeah.
• 1:40
  SPEAKER_00: So it uh when Powell was asked, for example, I thought it was really interesting when uh they asked, you know, you guys are really late to the party on raising interest rates when inflation was going up.
• 1:50
  SPEAKER_00: Uh are you gonna be that way on the way down, too?
• 1:53
  SPEAKER_00: Are you gonna lag?
• 1:54
  SPEAKER_00: And he said he responded with, well, the last six months we've been lagging, we've been seeing things progress that would tell us we should cut rates at some point.
• 2:03
  SPEAKER_00: So that was a little bit more proactive maybe than what they had been in the past or what I expected out of them.
• 2:09
  SPEAKER_01: Yep, for sure.
• 2:10
  SPEAKER_01: So, you know, we w have been in the mode, Mike, um, when you know lower economic uh results or numbers, if you will, driving the potential for rates to drive lower.
• 2:21
  SPEAKER_01: Um that has been good news in the past, I don't know, what'd you say, 12 months, 18 months?
• 2:27
  SPEAKER_01: Is that is that changing now?
• 2:29
  SPEAKER_01: Is you know, is bad news bad news for the the markets, if that makes sense.
• 2:34
  SPEAKER_00: Yeah, what's a stock market reaction to news like this, right?
• 2:36
  SPEAKER_00: So it uh in the past bad news was good news actually, and now it seems like with the with both the manufacturing purchase managers index report this week and unemployment.
• 2:49
  SPEAKER_00: Unemployment came out at 4.3 percent.
• 2:52
  SPEAKER_00: That was this morning, correct?
• 2:53
  SPEAKER_00: That was this morning, yeah.
• 2:54
  SPEAKER_00: So 4.3% up on that.
• 2:56
  SPEAKER_00: It was 4.1 percent, so that's going up pretty steadily here over the last couple of reports, and that's bad news.
• 3:03
  SPEAKER_00: And the m the equity markets are treating it like bad news all of a sudden.
• 3:07
  SPEAKER_00: Interesting.
• 3:08
  SPEAKER_00: Yeah, they're actually trading it like they probably should.
• 3:11
  SPEAKER_01: And the flow, yeah, all the money flow, right?
• 3:13
  SPEAKER_01: Everything from bonds, US dollar, Dow Jones, all those markets are treating this uh surprise um from this morning and and kind of stacked on some, you know, some negative news throughout the week as as bad news, I guess.
• 3:28
  SPEAKER_00: So now we bring this up because when you look at the direct correlation between what the stock market did today off that news and what the commodity markets did, I think there's a really strong correlation, Jeff.
• 3:39
  SPEAKER_00: I really believe that they were getting hit hard, these funds on the equity side with the big sell-off and getting a little bit concerned with the direction that we're going at and maybe getting margin calls already, things like that.
• 3:52
  SPEAKER_00: And now all of a sudden they are gonna want to free up some risk.
• 3:57
  SPEAKER_00: They're gonna take some risk off.
• 3:58
  SPEAKER_00: And while they're really short, a record short on corn, for example.
• 4:02
  SPEAKER_00: Sure.
• 4:02
  SPEAKER_00: So they want to take those short positions off and take risk off.
• 4:06
  SPEAKER_00: And I feel like today going into the weekend was a good time for them to do that after their support, and they did that, and corn and soybeans traded higher.
• 4:14
  SPEAKER_00: And cattle would also be another one that they took risk off on, uh, some long positions, net long fun positions on spec money, uh, with uh cash prices near record high and still futures have had a really nice uptrend.
• 4:28
  SPEAKER_00: They maybe got out of those long positions here today as well, Jeff.
• 4:31
  SPEAKER_00: Wouldn't you say?
• 4:32
  SPEAKER_01: For sure.
• 4:33
  SPEAKER_01: Um so basically what you're saying, Mike, is it does take an act of Congress for us to get a rally in corn.
• 4:38
  SPEAKER_00: Is that the net result here?
• 4:43
  SPEAKER_01: So the world has to has to move in order to get a five cent move on corn to the more like an act of God at this point, I think.
• 4:50
  SPEAKER_00: Go above and beyond Congress.
• 4:52
  SPEAKER_01: So yeah, in the cattle market, obviously, you know, the cattle, it's like the last man standing in the world of commodities, is some of our issue with the cattle, right?
• 5:02
  SPEAKER_01: As far as everything else has really um really come off its high levels here that we've seen in the last two years, and clearly a different fundamental situation.
• 5:11
  SPEAKER_01: But that's why that is going to be the the tip of the spear in days like today um and getting the most attention.
• 5:19
  SPEAKER_01: It's extremely high levels yet, and when uh and when we've turned into a risk-off situation, um you know the funds are gonna want to liquid liquidate those positions.
• 5:29
  SPEAKER_01: Oh, what you already said, Mike.
• 5:31
  SPEAKER_01: Sorry to repeat that, but um, that's what gets interesting about this market.
• 5:34
  SPEAKER_01: So for a while there today, you had you know December and February down over five dollars, Mike.
• 5:41
  SPEAKER_01: And this type of market, as crazy as it seems, is it's all about money flow.
• 5:46
  SPEAKER_01: It's all about the situation where um money is trying to get out of that market and the door just isn't very big.
• 5:54
  SPEAKER_01: It's really amazing to watch on a day like today.
• 5:58
  SPEAKER_01: Um, so no question in my mind, the last two days of trade in the cattle was all about money flow.
• 6:04
  SPEAKER_01: There's nothing from a fundamental standpoint that we have seen to really cause a great concern.
• 6:10
  SPEAKER_01: Um, but unfortunately, this market is a bit of a circular reference or you know, reacts to itself, if you will.
• 6:18
  SPEAKER_01: So certainly lower front-end futures is gonna let uh cattle buyers buy cattle a little cheaper.
• 6:26
  SPEAKER_01: Yeah, so you do.
• 6:28
  SPEAKER_00: I'm a little concerned that you you try to get the Packers to gain some leverage here, don't you think?
• 6:34
  SPEAKER_01: Oh, I think without without question, I'm uh and uh some surprise today.
• 6:38
  SPEAKER_01: They actually were still buying some cattle today while the thing was imploding um at yesterday's cash value.
• 6:46
  SPEAKER_01: So that to me, even though we're gonna come in here with cash probably oh a good two bucks lower than last week, that's just like a huge win yet, which is unfortunate that you know it's an unfortunate piece of our industry, right?
• 6:59
  SPEAKER_01: But it is gonna be a big win.
• 7:01
  SPEAKER_01: Um so fundamentally that market was incredibly strong and and Packers willing to gather some inventory at very similar money to what they did yesterday and what they did last week.
• 7:13
  SPEAKER_01: Uh one thing I did, you know, as we was focused on cattle for just a minute here, um, one thing I was a little encouraged by is there was at least parts of the day where the two the equity markets and the cattle weren't completely joined at the hip.
• 7:27
  SPEAKER_01: So I think that's a it's a little bit of a silver lining there.
• 7:31
  SPEAKER_01: Maybe if we have to can if we have to continue to road, you know, things like the Dow Jones, which you know it could that could go down for a long time, right, Mike, if we if we start changing the trend there.
• 7:41
  SPEAKER_01: I'm not sure that cattle have to follow it the whole way.
• 7:44
  SPEAKER_01: Um there's a little bit of glimmer of hope there with the in the kind of innerday trade.
• 7:48
  SPEAKER_01: Um, but otherwise, you know, that market's set up.
• 7:52
  SPEAKER_01: Uh it's working really hard to pull um some cattle into this summer and uh and to take some of the weight off this inventory.
• 8:01
  SPEAKER_01: Uh, and I think we're getting to the point where maybe you're getting some of that done.
• 8:05
  SPEAKER_01: I mean, we I know the northern part of the the inventory at least is is working hard at getting some cattle sold much sooner than what we thought we would.
• 8:14
  SPEAKER_01: And plus, it's just a really good way to get rid of some inventory, right, Mike?
• 8:18
  SPEAKER_01: If we're struggling to figure out, okay, where should we hedge some cattle, what should we do?
• 8:22
  SPEAKER_01: Well, let's look at the the next 30 to 60 days worth of cattle here and see if we can't get some of them moved over to the packer at some you know almost record levels here.
• 8:32
  SPEAKER_01: So that part of the industry, that part's working, and that probably keeps the market stronger for longer, um, even though we are very concerned about you know the heavy weights, the uncurrentness of this market.
• 8:46
  SPEAKER_01: Um you know, we think we'll probably end up suffering from all that here at some point this fall, but this is gonna help.
• 8:53
  SPEAKER_01: A big break in futures, get some cattle moved earlier, especially in the area of the country where we negotiate more than what other parts of the world do.
• 9:02
  SPEAKER_01: Um should kind of help us a little bit longer term.
• 9:06
  SPEAKER_01: Not to don't get that confused to say that we don't think that uh there's risk in this market, because we absolutely do.
• 9:13
  SPEAKER_01: We absolutely think that uh you know the weights will still be a problem at some point, and um we'll we'll have to pay for that as we get further into the fall here at some point.
• 9:22
  SPEAKER_00: Chart data was really interesting, really broke apart that uh feeder cattle chart this week, really broke through support.
• 9:28
  SPEAKER_00: That was uh awful chart there actually.
• 9:30
  SPEAKER_00: The live cattle, it almost seemed like we kind of fought back to the bottom end of that trend line yesterday, and then today we pretty much blew it apart.
• 9:38
  SPEAKER_00: So it'll be interesting to see if that continues or not here, Jeff.
• 9:40
  SPEAKER_01: There's some big holes in the chart from here down, isn't there?
• 9:43
  SPEAKER_00: There is some big holes there.
• 9:44
  SPEAKER_00: Yep.
• 9:44
  SPEAKER_00: How about the the grain side, Jeff?
• 9:47
  SPEAKER_00: We saw a really active week there as well.
• 9:50
  SPEAKER_00: December corn, a couple closes below four dollars for the first time that we've had uh since that December 24 contract came on the board back in December of 2020, Jeff.
• 10:01
  SPEAKER_01: Yeah, that's pretty wild.
• 10:02
  SPEAKER_00: That's a pretty bad statement.
• 10:03
  SPEAKER_00: Yeah, that three handles gonna hurt a lot here on uh any open bushels for this next uh marketing year if that sticks around.
• 10:10
  SPEAKER_00: Uh really at the base of this story, we start off with just a lot of rain and a lot of key spots.
• 10:15
  SPEAKER_00: Crop condition scores went up, they're supposed to go down this week.
• 10:19
  SPEAKER_00: And when you take those crop condition scores and equate it back to a corn yield US average, that it's like above trend line, it's maybe 183, somewhere in that area.
• 10:30
  SPEAKER_00: This was, in my opinion, the first real week I heard actual real estimates above trend line yields, I would say, from key sources.
• 10:39
  SPEAKER_01: I yeah, totally agree with that.
• 10:40
  SPEAKER_00: And the market responded.
• 10:42
  SPEAKER_01: Yeah, and I and like you said, I I guess personally I think for good reason.
• 10:46
  SPEAKER_01: I I know for I, for one, Mike, I'm I'm really gonna be interested in your observations as you hit the road next week, is it?
• 10:53
  SPEAKER_00: Yep, yep, Sunday here.
• 10:55
  SPEAKER_01: Um, you know, and and get out there and start putting some eyes on uh some of the this corn crop for sure.
• 11:02
  SPEAKER_01: Um I think well from what we've heard the beans look excellent.
• 11:04
  SPEAKER_01: That's we're obviously really early there to make too many observations.
• 11:08
  SPEAKER_01: But and you know, we're early on the corn tours as well, um, which we understand, but you know, I I think very anxious to be one of the first ones out there and seeing, you know, okay, what do some of these kernel crounts and and ear sizes look like?
• 11:24
  SPEAKER_01: And I think that that's gonna be really interesting.
• 11:27
  SPEAKER_01: If you would um maybe just give us a minute or so, Mike, get what should we be looking for next week?
• 11:33
  SPEAKER_01: What are some of the things that you guys are gonna be um putting out there for us to to take a look at and help follow along on your tour?
• 11:42
  SPEAKER_00: Yeah, so the first thing will be kind of our main hub where all of our information is gonna be, which is gonna be on uh professional eggmarketing.com slash crop tour.
• 11:51
  SPEAKER_00: It'll be right on our website, it'll be on the grain tab under crop tour.
• 11:55
  SPEAKER_00: You can find our our two routes, our southern route and our northern route, and see kind of where we're going and zoom in and out and uh poke around at that.
• 12:03
  SPEAKER_00: Uh there's a corn yield calculator that we created this year that you can put in your own samples and calculate your own yield from your samples.
• 12:10
  SPEAKER_00: And then we have uh a Twitter page attached to it where we'll have updates along the road and then uh whole day summaries as well uh attached to it with pictures uh just saying and explaining what we've seen, and then uh we'll have some other yield calculators broke down by state to try to uh uh fool around with to get the estimate for the entire US as well, but that's our main hub.
• 12:32
  SPEAKER_00: We're gonna spend about uh five days on the road from Sunday to Thursday here this next week, and it's gonna be just shy of about 2,500 miles or so, and it's gonna be a handful plus of states that we get to really go through.
• 12:45
  SPEAKER_00: Very similar tour is last year uh geographically.
• 12:48
  SPEAKER_00: We've got some exciting things we'll get to talk about about this tour here later on that uh we're experimenting with on the road, but yeah, otherwise, Jeff, it's you know, you go into the year and you you kind of know what to expect before you hit the road, right?
• 13:03
  SPEAKER_00: Most years, you know, the last couple of years uh we saw below trend line yields in the Western Corn Belt, and uh we got to see some of that with very dry fields, which uh if an area is completely dry, it's easy to see that, right?
• 13:15
  SPEAKER_00: Yep.
• 13:15
  SPEAKER_00: But some of the black eyes this year are gonna be kind of hard to determine how big that area is, and I'm hoping this will help us get a better handle on where to draw some of those circles on our map now with uh areas that had a black eye or or look really, really good in that eastern corn belt.
• 13:30
  SPEAKER_01: Well, that's what you know usually when we're putting your route together and spending some time on that mic, it's really you can really pinpoint a what a 25% of the belt or 30% here and there that uh boy, you know, let's get down there and see what that really looks like because we've been hearing about some fairly major issues.
• 13:49
  SPEAKER_01: And there just isn't any of those areas unless you consider, you know, really in our own backyard here throughout southern Minnesota, right?
• 13:57
  SPEAKER_01: And in northern Iowa.
• 13:59
  SPEAKER_01: And there'll be some th there's definitely some fields there that are problematic.
• 14:03
  SPEAKER_01: Um, and like you say, trying to figure out how big an area that is, but that's that should be some of the worst corn you see all week.
• 14:10
  SPEAKER_00: Very much so.
• 14:11
  SPEAKER_00: Well, it'll be interesting to see.
• 14:13
  SPEAKER_00: Join along on uh Twitter or our website there.
• 14:16
  SPEAKER_00: We'll have some uh fun, interesting information.
• 14:19
  SPEAKER_00: We love this crop tour.
• 14:21
  SPEAKER_00: There's four of us going this year on the southern route, and then we'll have a northern route as well.
• 14:25
  SPEAKER_00: So uh please get in touch with us, send in some samples and whatnot.
• 14:29
  SPEAKER_00: But otherwise, Jeff, wrap it up the podcast here after the interesting week of uh crazy market action we've had and extreme volatility here at the end of summer.
• 14:38
  SPEAKER_00: Any final thoughts?
• 14:40
  SPEAKER_01: Just you know, the volatility you bring that up, and that's a great point.
• 14:43
  SPEAKER_01: I mean, that's what really makes um you know opportunities show up from time to time, right?
• 14:49
  SPEAKER_01: So like it's very scary in the cattle market right now, no question.
• 14:53
  SPEAKER_01: But maybe this type of a money flow type of an issue, maybe it's what we need to you know start a bit of a technical rally on some of the corn or some of the soybean contracts, and maybe we can get an opportunity here to lay off some some price risk on those markets, even though you know fundamentally maybe we shouldn't, right?
• 15:11
  SPEAKER_01: So let's just be paying attention, keep our head on the swivel.
• 15:14
  SPEAKER_01: Um this it it sure looks like money's gonna be the the thing to talk about here in the coming week.
• 15:20
  SPEAKER_00: That's really my question is if we do give these funds a good reason to cover these shorts and if they're doing it in a fast way, how much of that is the American farmer gonna offset with sales of this crop?
• 15:31
  SPEAKER_00: And remember, we got that 24 crop coming right at us fast too.
• 15:34
  SPEAKER_01: Fair point.
• 15:35
  SPEAKER_01: Yeah, any rallies are gonna be uh met with some pretty aggressive selling, no question about it.
• 15:39
  SPEAKER_00: We'll see which one wins.
• 15:40
  SPEAKER_00: Thanks, Jeff, for the time.
• 15:41
  SPEAKER_00: And thank you to all our listeners.
• 15:43
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 15:47
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 15:52
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 15:58
  SPEAKER_00: See you next time.