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Grains: WASDE Reaction · 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 January 16th.
• 0:25
  SPEAKER_01: I've got Jaden with us.
• 0:26
  SPEAKER_01: How's it going, Jaden?
• 0:27
  SPEAKER_00: It's going good, Mike.
• 0:27
  SPEAKER_00: How about yourself?
• 0:28
  SPEAKER_01: Not too bad.
• 0:29
  SPEAKER_01: We're going to talk about the grain market, specifically the Wazday report this week that threw us a lot of curveballs.
• 0:35
  SPEAKER_01: Something really uh hard to digest here for the corn market over the week.
• 0:39
  SPEAKER_01: I just want to talk about what happened, the reaction to the report, and how it sets us going forward here, Jaden.
• 0:46
  SPEAKER_01: So tell me about what you saw from the report and a few things that really stuck out.
• 0:51
  SPEAKER_00: Yeah, Mike, starting on the corn side of things here, I mean, it was a really bearish report for the corn.
• 0:57
  SPEAKER_00: So to start here, um a lot of people are looking for a yield decrease, and actually they bumped it up a bushel to 186.5.
• 1:05
  SPEAKER_00: And another thing they threw in there also is they upped the harvested acres by 1.3 million uh acres there.
• 1:12
  SPEAKER_00: So so yeah, the market saw this and they they saw the ending stocks 2.22 billion bushels that we got to carry over into the next marketing year, and it we sold off quickly.
• 1:23
  SPEAKER_00: Um, you know, March corn was down 24 cents on the day.
• 1:27
  SPEAKER_00: Um, you know, today we are up a few, but it seems like maybe that 420 level, there's not a lot of sellers below that.
• 1:34
  SPEAKER_00: But that 410 level um from August, that low there, I I I don't know why we don't go test that with, you know, probably not a lot of news for the corn market in the next couple months.
• 1:45
  SPEAKER_00: So we'll see there what happens.
• 1:47
  SPEAKER_01: Well, one of the things I find very interesting is just following the, you know, what does this mean for the corn market going from here?
• 1:54
  SPEAKER_01: What should price be?
• 1:56
  SPEAKER_01: This report really gives us a great idea of take this stocks to use ratio on the final crop report.
• 2:02
  SPEAKER_01: We know the most about the crop we have, take it back in history and take it towards and uh basically compare it to price.
• 2:10
  SPEAKER_01: One of the things we are seeing right now is that the five dollar mark specifically, if you have any stocks to use ratio above twelve and a half percent, typically you're topping out well below five dollar futures, below that point.
• 2:24
  SPEAKER_01: Now, if you look at stocks to use ratio below ten percent, typically you try to top out that corn market above five dollars historically.
• 2:33
  SPEAKER_01: Now this report really helped establish the fact that we are above twelve and a half percent stocks to use ratio in the United States, thirteen point six one to be precise.
• 2:43
  SPEAKER_01: So even if we do say that Iowa corn yield wasn't 210 in that, they did have a smaller yield than one off record, which would make sense still, you know, it even if we try to account for that later in the year, or let's say exports continue to be this strong and and we need to raise that up a little bit on the demand side, nonetheless, if you're shrinking ending stocks to use ratio even a full percent, you're still probably well below that five dollar high historically.
• 3:09
  SPEAKER_01: So just taking the report, gauging and using the most objective way that we can to look at corn price today, we are struggling, I think, to get a significant rally in this corn market longer term that we're gonna have to watch going forward.
• 3:24
  SPEAKER_01: The the report was obviously bearish.
• 3:26
  SPEAKER_01: We went down 24 cents the the immediately moments after it, but it's held an okay after.
• 3:31
  SPEAKER_01: Um we're finding very hard sellers towards this old low that we had back in August, Jaden.
• 3:38
  SPEAKER_01: And I think that's one thing to take away for the meantime is that we are finding a little bit of support just because it's harder to sell it after a 24 cent drop, especially after we look that we're not far off contract lows, only about 10 cents towards most of this week's trade.
• 3:53
  SPEAKER_01: So those are a few things just reaction-wise, I thought that were uh worth looking at.
• 3:59
  SPEAKER_01: On the demand side, was there anything that caught your eye in the report other than just the supply side?
• 4:04
  SPEAKER_00: Yeah, Mike.
• 4:05
  SPEAKER_00: So I I thought it was kind of surprising they didn't raise exports.
• 4:08
  SPEAKER_00: We we were out, you know, pacing our export pace.
• 4:10
  SPEAKER_00: The USDA has baked in at 3.2 billion bushels.
• 4:15
  SPEAKER_00: But um, so what we were kind of thinking, you know, we were expecting yield to maybe uh be brought down in this report, and we figured they'd you know bring down that feed and residual demand along with it.
• 4:25
  SPEAKER_00: But actually they they really did the opposite.
• 4:27
  SPEAKER_00: They raised feed and residual and raised demand.
• 4:30
  SPEAKER_00: And as we know, we're in the tight little tightest cattle supplies we've ever been in.
• 4:34
  SPEAKER_00: And uh for some reason the USDA thinks they need to you know raise feed and residual to six point two billion bushels, and just for reference, last year we were at 5.4.
• 4:44
  SPEAKER_00: So yeah, with their tightest supplies ever, the USDA um um has a really big feed in category baked into this uh balance sheet.
• 4:53
  SPEAKER_01: Yeah, that one really doesn't make sense still, but uh that the nice part is about the demand side of the category, we can change those items going through the rest of the year.
• 5:01
  SPEAKER_01: More on the supply side, that's basically not gonna change a whole lot going forward.
• 5:05
  SPEAKER_01: Um one that did make sense was the harvested acres getting bumped up.
• 5:09
  SPEAKER_01: Like we all had fantastic harvest conditions.
• 5:11
  SPEAKER_01: Harvest went really fast, you know.
• 5:13
  SPEAKER_01: Uh there was no big uh uh big troublesome uh uh problems during harvest, I think, that that would have called for a better or even just normal uh, you know, um uh acreage type of disappearance.
• 5:27
  SPEAKER_01: So that I think that number was fine getting bumped up there a little bit on harvested acres.
• 5:31
  SPEAKER_01: I I understand that part.
• 5:33
  SPEAKER_01: So uh the WASDA report just very, you know, that January report's huge.
• 5:38
  SPEAKER_01: That's your final crop report.
• 5:39
  SPEAKER_01: You pretty much set your supply.
• 5:40
  SPEAKER_01: Now we just change demand from the rest of the way out.
• 5:43
  SPEAKER_01: It's just gonna be very burdensome on this situation going forward.
• 5:46
  SPEAKER_01: You're gonna need some pretty big catalysts to just get normal or even subnormal rallies out of this thing going into the spring, Jaden.
• 5:53
  SPEAKER_00: Yeah, and along with the fact that, you know, we're kind of thinking 95 million plus acres next year.
• 6:00
  SPEAKER_00: I mean, there's gonna be a plenty, plenty of corn around for the for the next year at least, if not next two years.
• 6:05
  SPEAKER_01: Yeah, that's gonna put a lid on things for uh for quite a while.
• 6:08
  SPEAKER_01: No, I'm not saying we can't get a rally in the meantime or something, obviously, but we can do that.
• 6:12
  SPEAKER_01: I just uh I'm not gonna be shooting for uh too fantastically high of prices uh after this point, I guess.
• 6:18
  SPEAKER_01: So going into the spring, I'm just using that accordingly to a lot of our grain marketing plans, entering what looks like a couple tight years of equity preservation.
• 6:26
  SPEAKER_01: So uh very key as well, because next month we're gonna start averaging crop insurance prices uh in February.
• 6:33
  SPEAKER_01: So something to keep an eye on there after this pretty big sell-off as well.
• 6:37
  SPEAKER_01: Uh any other final thoughts about the WASD report that you saw?
• 6:40
  SPEAKER_01: I know world ending stocks went up for basically corn, soybeans, and wheat, Jaden.
• 6:44
  SPEAKER_01: Uh China, did they play a part in that at all?
• 6:47
  SPEAKER_00: Yeah, um, so yeah, like you said, um corn ending stocks for the world carry out did um raise um 10 million metric tons, and China accounted for around you know 60% of that.
• 7:01
  SPEAKER_00: So as we know, China's a big corn producer and so is the U.S.
• 7:04
  SPEAKER_00: But looking at the soybean side of things, they kind of changed things over here.
• 7:08
  SPEAKER_00: Um not really a surprise there.
• 7:10
  SPEAKER_00: They did drop export 60 million bushels, which I which I don't think was a surprise for many.
• 7:15
  SPEAKER_00: Um, we're really lagging behind um export pace there um to meet the USDA's export projection there.
• 7:23
  SPEAKER_00: And I I think you know China has been buying from us.
• 7:26
  SPEAKER_00: I think they will reach that 12 million metric ton goal there.
• 7:29
  SPEAKER_00: Um they're about 76% of it confirmed, but a lot of people think we're above that 11 million metric ton um.
• 7:36
  SPEAKER_01: Yeah, that's gonna be pretty close here soon, I think.
• 7:38
  SPEAKER_01: So that'll they'll reach out pretty quick.
• 7:40
  SPEAKER_01: Uh but thank you for your time today.
• 7:42
  SPEAKER_01: Any other thoughts?
• 7:43
  SPEAKER_01: Please call us about any questions on the Waz Airport or this grain activity here this week.
• 7:47
  SPEAKER_01: I know cattle kind of end of the week uh on a huge sell-off, so that's been a lot of our main talking points here today, anyways.
• 7:53
  SPEAKER_01: Uh corn was at the beginning of the week.
• 7:55
  SPEAKER_01: But if you want to talk about this corn situation, where we're sitting now going into this next year and some old crop, maybe what to do with it, for example, any basis implications.
• 8:03
  SPEAKER_01: You know, uh, we saw basis bump up a little bit here recently, but what's it look like going forward?
• 8:08
  SPEAKER_01: Could we get a little bit better basis now that futures are struggling to move much?
• 8:13
  SPEAKER_01: But uh a few things to really chat about here.
• 8:15
  SPEAKER_01: So thank you for your time, Jaden.
• 8:16
  SPEAKER_01: Guys, give us a call if you need anything here on risk management on the grain side.
• 8:20
  SPEAKER_01: Thanks.