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Wacky WASDE · 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.
• 0:24
  SPEAKER_00: Today is January 10th.
• 0:25
  SPEAKER_00: I've got Jeff here with us today.
• 0:27
  SPEAKER_00: How's it going?
• 0:28
  SPEAKER_00: Good afternoon, Mike.
• 0:29
  SPEAKER_01: It's going pretty good.
• 0:30
  SPEAKER_01: Pretty active little day we had today, didn't it?
• 0:32
  SPEAKER_01: Wasn't it?
• 0:32
  SPEAKER_00: Oh, it was an active day.
• 0:34
  SPEAKER_00: We'll start off with uh we're going to talk about the Wazd Air Report today.
• 0:37
  SPEAKER_00: We're going to talk about the jobs report just a smidge and then talk about the risk management boot camp at SDSU that went on this week.
• 0:43
  SPEAKER_00: So let's talk about first and foremost.
• 0:46
  SPEAKER_00: We had a jobs report that kicked off our morning here, Jeff, and that uh really showed a few main things.
• 0:52
  SPEAKER_00: Unemployment unexpectedly dropped.
• 0:54
  SPEAKER_00: We saw uh jobs payroll grow a little bit as well there, uh versus expectations.
• 0:59
  SPEAKER_00: So what had happened was it looks like we're probably not going to have any rate cuts anytime soon in 2025.
• 1:07
  SPEAKER_00: Uh probably back into uh the back half of the year, at least before we get any.
• 1:12
  SPEAKER_00: I even saw one analyst today, Jeff, talk about uh a potential raise in rates at some point this year.
• 1:17
  SPEAKER_00: Really?
• 1:18
  SPEAKER_00: Yep.
• 1:18
  SPEAKER_01: So we've got back half of the year or something.
• 1:20
  SPEAKER_00: Yeah, so I mean uh just from that standpoint, the U the US dollar's been up a lot and we we're almost at 110 again here.
• 1:27
  SPEAKER_00: Uh the stock market took it very, very hard.
• 1:29
  SPEAKER_00: Uh we were down about 100 points most of the day on the SP, down about 800 or so on the the Dow most of the day.
• 1:36
  SPEAKER_00: So a pretty rough day on the equities.
• 1:38
  SPEAKER_00: Um gold has had some interesting trade as well, up uh pretty hard on that the last couple days.
• 1:44
  SPEAKER_00: So just a few things there that really shook around some money flow to start off our day, Jeff.
• 1:49
  SPEAKER_01: Good news is bad news as far as the equities pieces are concerned at this time.
• 1:54
  SPEAKER_00: Yep.
• 1:54
  SPEAKER_00: Yeah, yep.
• 1:54
  SPEAKER_00: Good news is bad news.
• 1:56
  SPEAKER_00: And even like uh Delta, I saw a deal that they came out and said that their demand has been superb for uh airplane so far traffic.
• 2:03
  SPEAKER_00: So uh just good news is bad news kind of again for the stock market here, and at some point that that most likely uh ends up being good news at some point here, but it you know, uh any day like today.
• 2:16
  SPEAKER_01: First initial scare is hey, we're not we're not gonna lower rates, we might ri might raise them.
• 2:20
  SPEAKER_01: Exactly.
• 2:20
  SPEAKER_01: But uh yeah, like you mentioned, um oil, soybean oil, crude oil, yeah, maybe some of the other commodities we care about, maybe a little bit bullish, you think?
• 2:30
  SPEAKER_00: Yeah, I saw some 45Z stuff come out that's been helping soybean oil uh a little bit.
• 2:34
  SPEAKER_00: It looked like crude oil's been up uh quietly, pretty decent here, uh up two bucks today plus.
• 2:41
  SPEAKER_00: So uh getting a pretty good run together there.
• 2:43
  SPEAKER_00: And I know we talked about it on a hog podcast as well, but I mean uh the commodities here with concerns of inflation have actually had pretty good money flow come back into them.
• 2:53
  SPEAKER_00: Corn a few months ago went from a record net short position to over 200 and some contracts, thousand contracts long now.
• 2:59
  SPEAKER_00: Um, you know, you've got a net short record on the soybean meal that they might be getting rid of soon here.
• 3:05
  SPEAKER_00: Uh hogs, you've had a record uh long position on for some time in that one.
• 3:11
  SPEAKER_00: Uh you're putting money into gold, oil, uh cattle are at near record highs in the cash market, and some of these futures months are getting crazy.
• 3:20
  SPEAKER_00: So just money flow going into commodities in a pretty big way, Jeff.
• 3:24
  SPEAKER_00: And uh, you know, even with the US dollar running up, anyways, we've seen it kind of in little commodities here or there, whether it's a softs or the the livestock markets kind of took off first.
• 3:36
  SPEAKER_00: Now the grains may be getting a little bit of support here.
• 3:38
  SPEAKER_00: Wheat still hasn't got it yet, but people are really kind of waiting for that one, it sounds like.
• 3:43
  SPEAKER_01: Sure.
• 3:44
  SPEAKER_01: So uh when the WASD report came out today, it was like, wow, this thing is it was a huge report.
• 3:50
  SPEAKER_01: It was an aggressive report.
• 3:51
  SPEAKER_01: Yeah, and I was like, well, that's gonna completely um shadow or or step over the economic and jobs reports of this morning, but maybe it shouldn't might not be longer term.
• 4:04
  SPEAKER_01: I mean, you look at uh soybe, let's just think about soybeans for a minute.
• 4:09
  SPEAKER_01: Um you know, obviously we had some adjustments in North America.
• 4:12
  SPEAKER_01: I'll let you chat about that here in a second, Mike.
• 4:15
  SPEAKER_01: But you know, worldwide, uh specifically Brazil and Argentina, they did not reduce the uh um yield or production down there at all.
• 4:24
  SPEAKER_01: And then you just told us um we got a dollar index that's pushing on 110.
• 4:30
  SPEAKER_01: Uh maybe we need to bring this uh jobs type data a little bit to the forefront here as we get into next week.
• 4:37
  SPEAKER_01: What do you think?
• 4:37
  SPEAKER_00: Yeah, it looks like next week's problem, or at least that's when I think uh it'll get a harder look.
• 4:42
  SPEAKER_00: Cause today it was definitely the initial big pull lower of yield.
• 4:48
  SPEAKER_00: Balance sheets took a massive hit for the US.
• 4:50
  SPEAKER_00: So that tightening really uh got reflected immediately in our in our trade at 11 o'clock this year.
• 4:56
  SPEAKER_00: So let's talk about that.
• 4:57
  SPEAKER_01: Justifiably so.
• 4:58
  SPEAKER_01: I mean, it's yeah, I don't wanna I don't want to say all that to um to put a cloud or or decrease the importance of this WAS report because man, it's one of the biggest adjustments I've seen.
• 5:09
  SPEAKER_00: Well, up until this point, it's been all demand.
• 5:12
  SPEAKER_00: We had a big corn crop, and then up until this point it was price started dropping, and then demand turned on, and we had good exports, we had good ethanol, and it was a demand story that had been building us up probably the last 30 or 40 cents, Jeff.
• 5:27
  SPEAKER_00: Now, today was arguably the first time where all of a sudden we saw the supply side really tighten things up altogether.
• 5:35
  SPEAKER_00: You saw a nearly four bushel cut on yield for the United States corn down to 179.3.
• 5:42
  SPEAKER_00: That was a big adjustment.
• 5:44
  SPEAKER_00: To put this number into perspective still, that 179.3 is still a record.
• 5:49
  SPEAKER_00: So it's still a big corn crop that we had.
• 5:52
  SPEAKER_00: But now with demand all of a sudden getting turned up recently, we're only at a 1.5 billion bushel ending stocks number, 10% stocks to use.
• 6:01
  SPEAKER_00: So that's very different than not very long ago when we first saw this balance sheet in last spring.
• 6:07
  SPEAKER_00: I mean, we were talking 15 and 16% stocks to use ratio, which is you know three and a half dollar corn history.
• 6:14
  SPEAKER_01: Well, we started the yield expectations at what 181 or 182 last spring as a trend line average, and we never lowered them to speak of.
• 6:23
  SPEAKER_01: Spent all summer thinking we had this record yield by you know five bushels better than we've ever seen before, type of thing.
• 6:29
  SPEAKER_01: And like I say, it's still a big crop, don't get me wrong, but it's just kind of amazing how much that changed here to where now it's a record, but it's record by what three quarters of a bushel or something.
• 6:41
  SPEAKER_00: Yeah.
• 6:41
  SPEAKER_00: Well, think about it this way too.
• 6:44
  SPEAKER_00: This was a sixth year in a in a row, six consecutive years that we've had a below trend line yield in corn.
• 6:51
  SPEAKER_00: So you know, we still haven't taken out that magical 180 number that we keep throwing out there every May.
• 6:59
  SPEAKER_01: Yeah.
• 6:59
  SPEAKER_01: Yep.
• 7:00
  SPEAKER_01: Interesting.
• 7:03
  SPEAKER_00: So um something to re we started calling for that 180 like back in 2018, too.
• 7:08
  SPEAKER_00: So it we've been waiting for that trend to kind of come around, but we haven't seen it.
• 7:13
  SPEAKER_00: This and that adjustment in that corn yield, Jeff, if you really look and break it down, it was your usual suspects.
• 7:19
  SPEAKER_00: You know, here in Minnesota, out in Ohio, those are the two states that finally got their adjustment.
• 7:25
  SPEAKER_00: Indy India or Indiana as well, but Minnesota was down almost five percent on their yield down to 174.
• 7:31
  SPEAKER_00: So that was a big hit in the report.
• 7:33
  SPEAKER_00: And then Ohio as well at 4%.
• 7:35
  SPEAKER_00: So both of those farmers are probably saying, I told you so at this point.
• 7:39
  SPEAKER_00: You know, like I told you this was coming, you know.
• 7:42
  SPEAKER_00: Minnesota, we had the big problem around Jackson, you know, Emmitsburg, kind of the northern and central Iowa.
• 7:48
  SPEAKER_00: So that was somewhat expensive.
• 7:49
  SPEAKER_01: And the drowned out pieces, you know, we know from experience.
• 7:52
  SPEAKER_01: You go combine a field that's got even 5% of it drowned out, that zero is a big deal on your average.
• 7:59
  SPEAKER_00: And then Indiana was down five percent as well.
• 8:01
  SPEAKER_00: That yield was still 189 or 198, but uh not not quite the 209 they had hoped for there.
• 8:07
  SPEAKER_00: But I I I think when I looked at it, Ohio and and Minnesota were kind of the two that, like, oh yeah, that you know, that makes a lot of sense, I think.
• 8:16
  SPEAKER_00: So the uh demand side really didn't change a whole lot on either corn or soybeans, I'd argue, just a very, very slight drop in the corn demand, um, which was important to see that big of a yield drop and see demand hold in there after that huge increase last month.
• 8:31
  SPEAKER_00: The soybean side, you saw a uh a bushel reduction on that from the yield perspective.
• 8:38
  SPEAKER_00: Uh the harvested acres went down like 0.2 as well, but nonetheless, uh production dropped there.
• 8:43
  SPEAKER_00: Uh demand pretty much stayed the same, uh almost the same, and uh ending stocks there dropped to 380 million bushels, so 8.7%.
• 8:52
  SPEAKER_00: You know, back when I first started doing this about eight years ago, Jeff, you know, a 300 million bushel carryout was pretty comfortable for a soybean crop.
• 9:00
  SPEAKER_00: Like that's not super tight, but that's not necessarily super burdensome either.
• 9:05
  SPEAKER_01: It's kind of the spot where it starts to get a little bit interesting, is the way I like to think about it.
• 9:09
  SPEAKER_00: I think so too.
• 9:10
  SPEAKER_00: When we were talking about half a billion, that was probably too much.
• 9:13
  SPEAKER_00: And uh, you know, you were right on the brink of this could be a problem.
• 9:17
  SPEAKER_00: Now at 380 again, it's kind of in the spot where ten and a half, eleven dollar soybeans kind of make sense again, I think.
• 9:23
  SPEAKER_01: Should allow for some rallies to play take place if we can throw a little weather or whatever else at it, right?
• 9:30
  SPEAKER_01: To the extra eth and all demand.
• 9:32
  SPEAKER_01: And we all know how that storyline ebbs and flows a little bit, especially through the winter months here.
• 9:36
  SPEAKER_01: Um should allow for some rallies, hopefully.
• 9:38
  SPEAKER_00: But that South America yield, I can't stress the importance of, I mean, if they're gonna produce a crop that is 16 bushels or 16 million metric tons above their prior record in Brazil, that still uh is a problem, isn't it?
• 9:52
  SPEAKER_01: That's sure that combined with uh a little bit less competitive from a financial standpoint.
• 9:58
  SPEAKER_01: I gotta believe that continues to push back.
• 10:00
  SPEAKER_01: And that's none of that's mentioning the what we all know is a huge risk with the geopolitical situation and trade um leverage situation.
• 10:08
  SPEAKER_01: That's only 10 days away.
• 10:09
  SPEAKER_01: Right.
• 10:10
  SPEAKER_01: So that's coming up.
• 10:11
  SPEAKER_01: That's right.
• 10:11
  SPEAKER_01: So we'll definitely have a lot to talk about on these grain markets as we move forward.
• 10:16
  SPEAKER_00: Um it's just made things more interesting.
• 10:18
  SPEAKER_01: Yeah, no question about it.
• 10:20
  SPEAKER_01: Um the you know, when you think about that, you know, think about how high high is, and I'm thinking more about the corn than the soybeans here, because you get that down into a 1-5 something.
• 10:31
  SPEAKER_01: You know, you talk about the 300 million level on the beans.
• 10:33
  SPEAKER_01: Well, one five is a very similar spot on corn.
• 10:36
  SPEAKER_01: It starts to get interesting here.
• 10:38
  SPEAKER_01: You start lowering that um ending stocks some more, um, now it's getting pretty tight.
• 10:44
  SPEAKER_01: But there's also limited uh areas or or reasons why we would continue to shrink the ending stocks, especially at higher prices.
• 10:53
  SPEAKER_01: You know, this is the last production report that we're gonna put out there, right?
• 10:57
  SPEAKER_01: So it's obviously got to come from demand standpoint.
• 11:00
  SPEAKER_00: It's worth noting too that front month was up 15 cents on corn and new crop was up three.
• 11:05
  SPEAKER_01: Yeah, that's gonna be the problem.
• 11:07
  SPEAKER_00: They're like, yeah, yeah, this is a problem right now, but hey, next year we got ninety-five million corn acres probably coming at us.
• 11:13
  SPEAKER_01: This is today's problem, right?
• 11:14
  SPEAKER_00: That illustrated it really well today.
• 11:16
  SPEAKER_00: You that you do not see that a whole lot where you're up fifteen cents and then one of your you know new crop months is only up three.
• 11:23
  SPEAKER_00: So that was a very clear sign that the market knows exactly what's coming given the corn to soybean ratio.
• 11:30
  SPEAKER_01: But we so we ran that uh the new um stocks to use ratio through our little scatter graph there, Mike, and it would suggest at ten and a half percent stocks to use, you should you March futures should be closer to five and a quarter.
• 11:46
  SPEAKER_01: Yep.
• 11:46
  SPEAKER_01: So that's a little that's interesting.
• 11:48
  SPEAKER_00: A lot tight a lot tighter of a balance sheet than the three and a half dollars, sixteen percent that we started at on this whole deal.
• 11:57
  SPEAKER_00: I mean, it was a much different balance sheet last May when we saw this.
• 12:02
  SPEAKER_00: And not to not to forget to February, we get the our outlook report for next year coming in that new balance sheet, which given the trend of the unit of the USDA, this is not gonna be a very bullish, probably, outlook report.
• 12:17
  SPEAKER_00: I mean, if they keep posting a 183 yield and 95 million corn acres, and that they're probably gonna have plenty of corn around given those type of numbers.
• 12:25
  SPEAKER_01: Yep, I'm sure that'll look big again, no question about it.
• 12:28
  SPEAKER_00: Now, we were in Brookings all week, Jeff, putting on a pro ag risk management boot camp.
• 12:35
  SPEAKER_00: Uh can you tell us a little bit about what you had going on up at SDSU this week as well?
• 12:40
  SPEAKER_01: Yeah, so the I think the boot camp, you know, turned out really well, had lots of uh, you know, producers, some students involved in it.
• 12:48
  SPEAKER_01: Everybody seemed to enjoy it quite a bit.
• 12:51
  SPEAKER_01: We did uh um kind of a small you know, maybe a third, forty percent of the whole course, and and the reason why we didn't um record it was uh kind of group activities where given a farm and and you know, row crop, uh fair to finish hogs, cattle feed lot, and and walk through um the decisions, walk through a year's worth of decisions on that farm to uh you know do the risk management, um do some production decisions.
• 13:19
  SPEAKER_01: So that was a lot of fun.
• 13:20
  SPEAKER_01: Um the other thing that they have going on this week as well up at Brookings is the beef 2020 meeting, and that's something that we haven't taken in before either.
• 13:28
  SPEAKER_01: Um, and and we were given an opportunity to give a risk management uh talk on that also this week.
• 13:34
  SPEAKER_01: And good agenda there as well, lots of younger producers.
• 13:38
  SPEAKER_01: Um, you know, a lot of meat science, um cattle marketing, uh C C A B type of stuff um on that agenda.
• 13:48
  SPEAKER_01: So a couple pretty neat things going on up at the college here this week that we were able to take in.
• 13:53
  SPEAKER_00: You know, a lot of what we do normally, like these podcasts and other events that we speak at are normally fundamentals, updates, market outlooks, things like that.
• 14:01
  SPEAKER_00: Where this week up at SDSU, both of our events there ended up being focused very heavily uh along the lines of educational purposes with risk management.
• 14:11
  SPEAKER_00: So we'll be doing that again next year with a collaborative effort of uh people like First Bank and Trust with Ed Fegan, the bank president, and SDSU uh for providing the space for us and and some other keynote speakers as well.
• 14:24
  SPEAKER_01: But it uh we better give a shout out to Tyler Moser.
• 14:27
  SPEAKER_01: He helped us out producer perspective.
• 14:30
  SPEAKER_00: We had a very nice producer perspective.
• 14:32
  SPEAKER_00: Rumor has it, Mike.
• 14:33
  SPEAKER_00: Rumor has it.
• 14:34
  SPEAKER_01: They asked him what his worst trade was of his career, he couldn't think of one.
• 14:39
  SPEAKER_00: I I did not hear that, but I won't mention the name of who gave him that advice either, Jeff.
• 14:45
  SPEAKER_00: Uh I wonder who asked him that.
• 14:47
  SPEAKER_00: What an awful question.
• 14:49
  SPEAKER_00: But nonetheless, with great producer presence there and uh some great real-world examples, but yeah, very educational piece.
• 14:57
  SPEAKER_00: And if you guys ever have anyone in your operation that needs to learn more about just risk management, the way things work, whether it's uh the way futures markets out look or what seasonals and things like that look like as well, and making decisions in your own operation.
• 15:12
  SPEAKER_00: We try to make it very applied.
• 15:14
  SPEAKER_00: So uh it was a fun time.
• 15:15
  SPEAKER_00: We'll be doing it again next year if anyone wants to attend, or if you have any ideas for anyone to attend.
• 15:21
  SPEAKER_00: Uh, thank you so much, and we'll catch you next week.
• 15:23
  SPEAKER_00: And thank you to all our listeners.
• 15:25
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 15:29
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 15:34
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 15:40
  SPEAKER_00: See you next time.