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Tariff Week · 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 involve 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.
• 0:24
  SPEAKER_01: Today is March 7th.
• 0:25
  SPEAKER_01: I've got Jeff here with us today.
• 0:27
  SPEAKER_01: How's it going, Jeff?
• 0:28
  SPEAKER_00: Good afternoon, Mike.
• 0:29
  SPEAKER_00: Things are going pretty good.
• 0:31
  SPEAKER_01: Good.
• 0:31
  SPEAKER_01: Well, let's start off.
• 0:33
  SPEAKER_01: I'm gonna call this one probably tariff week, since uh this is when the tariffs went on, went off, got delayed, all the fun stuff.
• 0:40
  SPEAKER_01: All the above, right?
• 0:41
  SPEAKER_01: We get to talk about that because that's all I feel like we've talked about all week.
• 0:45
  SPEAKER_01: But uh other than just mass amounts of crazy volatility, we just got done talking on the hog podcast about a settlement sell-off we saw that was massive there.
• 0:54
  SPEAKER_01: So that was a fun one.
• 0:56
  SPEAKER_01: If you have not gone and listened to that, that one's a great one to go listen to.
• 1:00
  SPEAKER_01: Um but just a lot of volatility.
• 1:02
  SPEAKER_01: That was that was unusual.
• 1:04
  SPEAKER_00: Yeah, and that's a telltale sign of money flow really taking over the marketplace.
• 1:10
  SPEAKER_00: Absolutely.
• 1:10
  SPEAKER_00: And that's what we've seen a lot of this week, right, Mike, is it's like uh fundamentals kind of went out the window and it was all about where the money wanted to go and when it when and where it wanted to be.
• 1:22
  SPEAKER_01: Exactly.
• 1:22
  SPEAKER_01: Now, the one thing we are gonna focus on here today, Jeff, is uh when we talk about money flow, is the CFTC report, the commitment of traders, when that came out today.
• 1:32
  SPEAKER_01: You look across basically every single egg commodity, Jeff, and they were all money flow leaving eggs.
• 1:39
  SPEAKER_00: Now, this this is as of Tuesday on the close.
• 1:43
  SPEAKER_01: That was the low in almost all of those markets.
• 1:45
  SPEAKER_01: That's right.
• 1:46
  SPEAKER_01: Yep.
• 1:46
  SPEAKER_01: And the idea was that on Tuesday the fourth, that was when Trump's tariffs are going on Mexico and Canada, and uh there's a pretty big hope, I think it sounded like that maybe they were gonna get a delay last minute again, kind of like what we saw last time, and that did not happen right away, I should say.
• 2:05
  SPEAKER_01: So it put a low in.
• 2:07
  SPEAKER_01: And then what happened, Jeff?
• 2:08
  SPEAKER_00: Well, obviously we've um ended up selling the market off some more, and then uh was it Wednesday morning?
• 2:17
  SPEAKER_00: Yeah.
• 2:17
  SPEAKER_00: Tuesday night was kind of when they came through and said we're gonna push them back into one month, so thirty m thirty day delay, which you know, as we've noticed that can get by can go by pretty fast.
• 2:29
  SPEAKER_00: Um and then money started flowing back into the markets that uh to me that's when it's car started to make some logical sense again.
• 2:38
  SPEAKER_00: When you started looking at the corn market, that started coming back pretty nicely.
• 2:43
  SPEAKER_00: Um hog market came back really nicely, uh mostly on Thursday and and now Friday here.
• 2:49
  SPEAKER_00: Um so yeah, I I think you know, from a lot of things were were hard to understand, hard to make some logical sense out of.
• 2:57
  SPEAKER_00: I think the past couple days here things started to to maybe trend a little bit more to where they maybe ought to should be as far as where you thought the money would want to go.
• 3:07
  SPEAKER_00: Um considering the fundamentals and considering the recent price act action, I guess.
• 3:13
  SPEAKER_00: Um let's just kind of go through the list here a little bit on the commitment of traders, Mike.
• 3:17
  SPEAKER_00: I we don't want to get too boring, but I think there's a lot of interesting numbers here.
• 3:21
  SPEAKER_01: Yeah, so the uh corn to start off with, really big mover and shaker, their managed money funds dumped about a hundred and seventeen thousand contracts up until Tuesday there, week over week.
• 3:32
  SPEAKER_01: So that change of a hundred and seventeen thousand contracts was the most out of the egg commodities.
• 3:37
  SPEAKER_01: Soybeans close stuff.
• 3:38
  SPEAKER_00: Let's talk about that corn one minute because I think that is really interesting.
• 3:42
  SPEAKER_00: You've said before, and probably on this podcast, from the low in corn in September to last week, two weeks ago, yeah, we had a six hundred thousand change in managed money position.
• 3:55
  SPEAKER_00: And it was about a buck.
• 3:57
  SPEAKER_00: And the market went up a buck.
• 3:58
  SPEAKER_00: Yeah.
• 3:58
  SPEAKER_00: So we were short three hundred and some odd thousand at the low, we were long three hundred and thirty some odd thousand at the high here a week and a half ago, and now, and that that had an increase in price of a dollar a bushel.
• 4:15
  SPEAKER_00: Um now you saw a sell-off of a hundred and just about twenty thousand.
• 4:19
  SPEAKER_00: Yep.
• 4:20
  SPEAKER_00: And we lost seventy cents.
• 4:22
  SPEAKER_01: Yep.
• 4:23
  SPEAKER_01: Math doesn't seem to math very well, does it?
• 4:25
  SPEAKER_01: It doesn't matter.
• 4:26
  SPEAKER_01: And a big part of that is we had farmers selling crazy during that rally that we had through fall and harvest.
• 4:34
  SPEAKER_01: So that part of that makes sense.
• 4:36
  SPEAKER_01: But yeah, to put that into perspective, 70 cents came awfully left pretty darn quick.
• 4:42
  SPEAKER_00: Well, to me, that that is what's really gets interesting as you study the money movement and you know the the commitment of traders, the open interest, this sort of stuff.
• 4:53
  SPEAKER_00: If you start to focus more on that than the underlying fundamentals, it gets really interesting.
• 4:59
  SPEAKER_00: I think it makes some sense.
• 5:00
  SPEAKER_00: Like you said, you had a lot of farmer selling on that whole rally.
• 5:03
  SPEAKER_00: So the funds were able to buy six hundred thousand contracts, farmers sold a bunch of it.
• 5:07
  SPEAKER_00: What happened this past week?
• 5:09
  SPEAKER_00: Funds were selling, there was no buyers.
• 5:13
  SPEAKER_00: There's nobody left to buy it, was one of our biggest problems on the corn and the hogs, and that's why you see a 70 cent drop off a hundred and some thousand contract change in position.
• 5:24
  SPEAKER_00: What gets a little interesting about that?
• 5:27
  SPEAKER_00: They're still holding two hundred and twenty thousand.
• 5:29
  SPEAKER_00: Yeah, we're not.
• 5:30
  SPEAKER_00: So what the heck do you do with that?
• 5:31
  SPEAKER_01: That I guess one could say they're not done if they want to continue.
• 5:36
  SPEAKER_01: Uh the other aspect is are they really at 219?
• 5:40
  SPEAKER_01: I mean, that was as of Tuesday, and that was our low in the market, so it really shouldn't be, you know, less than two nineteen unless for some reason we did have a bunch of buyers step into this market, which doesn't really look like that at this point.
• 5:54
  SPEAKER_01: Yep.
• 5:55
  SPEAKER_01: Absolutely.
• 5:56
  SPEAKER_01: Very interesting.
• 5:56
  SPEAKER_01: Soybeans, they wiped off about 43,000 contracts there.
• 6:00
  SPEAKER_01: But I mean the grains weren't the only thing.
• 6:02
  SPEAKER_01: You could look at corn, soybeans, wheat, but cattle, you had a a negative change in at least live cattle.
• 6:09
  SPEAKER_01: Feeder cattle have tried to be like, oh, by the way, guys, corn's a lot cheaper.
• 6:13
  SPEAKER_01: So that that's fantastic for them.
• 6:15
  SPEAKER_01: So they've tried to play that card a little bit and some nice upward moves.
• 6:19
  SPEAKER_01: And also live cattle, it seems like we import a lot of beef into the U.S., so it's not like they should care a whole lot about tariffs.
• 6:26
  SPEAKER_00: Yeah, that's what's interesting about the cattle is tariffs I think are largely bullish for the cattle market.
• 6:34
  SPEAKER_00: It's just fear.
• 6:35
  SPEAKER_00: Yeah, it's the it's the fear, it's the money just saying, get me the heck out of here.
• 6:41
  SPEAKER_00: Um get me to the sidelines.
• 6:44
  SPEAKER_00: Um there's a little, if you tried to pick it apart a little bit, you could say, okay, we send a decent amount of beef over to China, and we're and so we're gonna have some tariff and and a trade war with Time China.
• 6:58
  SPEAKER_00: We we haven't um went around and picked on countries like New Zealand, Brazil, um, the other South American countries that send us beef, Mike.
• 7:09
  SPEAKER_00: So from a from an endpoint standpoint, maybe we aren't going to tariff any more than what we already are, which is a little bit ironic.
• 7:16
  SPEAKER_00: We we actually have a quota system in for beef coming out of Brazil, for an example.
• 7:21
  SPEAKER_00: Um so no, I I at the end of the day, I don't think the trade war is is uh bearish on cattle.
• 7:28
  SPEAKER_00: I think it's probably bullish if anything else.
• 7:31
  SPEAKER_00: Um but what started happening here on Thursday is cattle sold off pretty hard where hogs and corn were recovering because of the the reprieve in the trade war discussion, but cattle were selling off that day because we had a bunch of jobs data come in and a bunch of negative uh economic news or mentality, if you will, if nothing else, and so that's where the cattle would start to to come into this discussion is well, if the economy's gonna get in trouble because of trade, or in the jobs discussion, Mike, where was the biggest uh uh biggest spot we laid off jobs was in the federal um part of the world, right?
• 8:16
  SPEAKER_00: Yeah.
• 8:17
  SPEAKER_00: So if we're gonna start seeing some negative news from either trade or you know other political in uh parts of the environment, um that's where cattle maybe start to to participate in some of these outside markets just a little bit more.
• 8:31
  SPEAKER_00: The other one we want to talk about quick is the hogs.
• 8:33
  SPEAKER_00: Of course, we lost three to thirty-three thousand of the long there.
• 8:37
  SPEAKER_00: That's on top of the twenty-some thousand we had gotten uh sold off on the week before.
• 8:42
  SPEAKER_00: So we're down to fifty-seven thousand there compared to two weeks ago.
• 8:47
  SPEAKER_00: Of course, would have been over a hundred thousand in some uh kind of record long situation.
• 8:53
  SPEAKER_00: So that market's adjusted quite a bit.
• 8:55
  SPEAKER_00: You know, I don't I don't think the the managed money will want to go short to either hogs or corn anytime too soon, Mike.
• 9:03
  SPEAKER_00: So we've maybe done enough there.
• 9:05
  SPEAKER_01: Kind of tough to remember fundamentals haven't changed because of trade wars yet.
• 9:09
  SPEAKER_00: So it That's right, nothing's really happened.
• 9:12
  SPEAKER_01: No, market's just changed, just market moved a lot, like 20% or so.
• 9:16
  SPEAKER_01: Yeah, on the cattle side there, the uh fear part of it, uh the stock market definitely had that come in this week.
• 9:23
  SPEAKER_01: The VIX, the fear index, that rose quite a bit.
• 9:26
  SPEAKER_01: And then you saw the stock market actually pull off about 8% on the SP 500.
• 9:31
  SPEAKER_01: So that was a pretty significant move to say the least there, mainly led by the Mega 7.
• 9:38
  SPEAKER_01: You know, if you look at the Meg the biggest seven companies that make up the SP 500, those were the ones that really contributed to this down move that we've seen.
• 9:47
  SPEAKER_01: So just risk off uh money leaving the markets and uh heading for the sidelines, which maybe at some point here you get a little bit of uh uh you know confidence back in in this market, maybe think somebody telling us things will be okay and and things will uh money will flow right back into this stock market, especially after, you know, if you would have pulled out anywhere near the high, you're looking at a a nice little setback to get back in and uh have a better uh buying point there, Jeff.
• 10:15
  SPEAKER_01: So we'll see what that all looks like.
• 10:17
  SPEAKER_01: We'll see if the stock market uh shoots some fear into the uh cattle uh cattle futures or not, but choice beef hovering just above where we were last year now at this time frame.
• 10:28
  SPEAKER_01: Yep, actually.
• 10:29
  SPEAKER_01: So getting pretty close there anyways.
• 10:31
  SPEAKER_00: Cash, I believe.
• 10:33
  SPEAKER_01: We saw some good cash today, didn't we?
• 10:35
  SPEAKER_00: Yeah, it was definitely higher on the week over week um trading in that 200?
• 10:41
  SPEAKER_00: Yeah, 200, 317 in the in the meat, and that's gonna be officially back over on top of uh what the choice meat's been reported at on the boxes.
• 10:52
  SPEAKER_00: So packer margin's obviously gonna be pretty tight there.
• 10:55
  SPEAKER_01: Yeah, shoot.
• 10:55
  SPEAKER_01: That'd be what three bucks higher?
• 10:58
  SPEAKER_00: Yeah.
• 10:58
  SPEAKER_00: Yeah.
• 10:59
  SPEAKER_00: So the other the other thing that was going on here, Mike, uh on the outside markets is the dollar index.
• 11:05
  SPEAKER_00: That thing got rocked pretty good this week.
• 11:09
  SPEAKER_00: Um so obviously negative kind of economics uh uh mentality pushing that thing lower, right?
• 11:16
  SPEAKER_01: Yeah, and I mean when you look at the dollar, sometimes that can be traded as a a safe haven.
• 11:21
  SPEAKER_01: But uh yeah, that bull case is seemingly uh weakening pretty pretty fast there.
• 11:26
  SPEAKER_01: We've seen a bag big sell-off, and this is where sometimes money flow makes things not make sense because that lower US dollar is really gonna make our exports look more competitive, especially in things like wheat or beef or pork or you know, things like that.
• 11:42
  SPEAKER_01: So that in the days we were down really hard on the dollar too, it wasn't like that was helping out our uh commodity markets either.
• 11:50
  SPEAKER_01: So uh those two things a little disconnected from the normal inverse they've had.
• 11:55
  SPEAKER_01: But uh we are down about five percent from uh since the start of uh Trump's inauguration there on the US dollar and basically just US pressure or US tariffs, those are pressure in the dollar here.
• 12:06
  SPEAKER_01: Euros rising quite a bit and some of these other uh uh currencies as well.
• 12:11
  SPEAKER_00: Well, you you mentioned the dollar, the currency situation being a good guy for export movement, if you will, but then also you know, like in corn's uh scenario, you're still gonna be fifty cents lower than uh what you were a week and a half ago on price.
• 12:27
  SPEAKER_00: So you're gonna have a little bit better advantage from a uh currency situation, and then obviously the price is just a whole heck of a lot lower.
• 12:35
  SPEAKER_00: None of that seems to suggest we're gonna let up on shipping any corn to Mexico anytime soon.
• 12:40
  SPEAKER_01: Yep.
• 12:41
  SPEAKER_01: All right, well, thank you for your time today, Jeff.
• 12:43
  SPEAKER_01: And thank you to all our listeners.
• 12:44
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 12:48
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:53
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:59
  SPEAKER_01: See you next time.