Latest / Professional Ag Marketing Podcast / USDA Sparks the Rally, Can Mother Nature Stop It?

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USDA Sparks the Rally, Can Mother Nature Stop It? · Professional Ag Marketing Podcast

• 0:03
  SPEAKER_00: You're locked in to the Grain Market Talk Podcast.
• 0:06
  SPEAKER_00: Fast updates, market movers, and the green news you need right now.
• 0:12
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_02: Today is July 2nd.
• 0:22
  SPEAKER_02: I've got Jordan here with us.
• 0:24
  SPEAKER_02: How's it going, Jordan?
• 0:25
  SPEAKER_02: Good.
• 0:25
  SPEAKER_02: How are you, Mike?
• 0:26
  SPEAKER_02: We're doing good.
• 0:27
  SPEAKER_02: It's uh three-day weekend here.
• 0:29
  SPEAKER_02: No markets tomorrow on Friday, and then we'll be back at it again on Sunday night.
• 0:35
  SPEAKER_02: We had a pretty interesting week in the grain markets.
• 0:37
  SPEAKER_02: I feel like July 4th is always a pivotal time of the year uh going in.
• 0:42
  SPEAKER_02: It feels somewhat familiar.
• 0:43
  SPEAKER_02: Trump speaking at the uh Mount Rushmore this weekend, so that'll be exciting.
• 0:48
  SPEAKER_02: See if he says anything new.
• 0:51
  SPEAKER_02: But uh three-day long weekend ahead of July 4th here, and we had a fun week uh in the grain market, didn't we?
• 0:56
  SPEAKER_01: Yes, we did.
• 0:57
  SPEAKER_01: You know, kind of uh surprising, you know, we actually had a 20 cent rally off our lows here this week.
• 1:03
  SPEAKER_01: So, you know, kind of a decent opportunity to maybe price some some grain here heading into the weekend.
• 1:10
  SPEAKER_02: Very much so.
• 1:10
  SPEAKER_02: Let's start about start talking about some of the reasoning here.
• 1:14
  SPEAKER_02: Uh if you kind of look at the report here that we had this week, the quarterly stocks and the acreage reports, I'll have Cade pull that up there as you can see.
• 1:22
  SPEAKER_02: Uh this was a classic case of just sell the rumor by the fact, in my opinion.
• 1:27
  SPEAKER_02: The markets had sold off prior to this report, the few trading sessions before it, really hard.
• 1:33
  SPEAKER_02: And then after we saw the numbers come out, which I would have argued at least acreage-wise, I thought was pretty bearish.
• 1:39
  SPEAKER_02: And then looking at quarterly stocks, which we can get into that as well, and maybe a little bit friendly on the corn side, but it just felt like the trade was relieved that the report was done and over with, and then traded things a little bit back higher.
• 1:51
  SPEAKER_02: So, how did you take the report and some of what we saw?
• 1:55
  SPEAKER_01: Yeah, so like you said, you know, we saw a little bit of a bounce because the market sold off heading into it, and I think the market was afraid that we were gonna see more of last year kind of repeat on these acres reports, where you know, last year we we saw acres uh raised uh two or three times during the growing season.
• 2:13
  SPEAKER_01: So um, you know, I felt like the market was kind of getting ready for that kind of surprise, right?
• 2:18
  SPEAKER_01: Now that didn't happen.
• 2:20
  SPEAKER_01: Um, on this uh acreage report, we ended up seeing 95.3 on corn, which was no change from the March report and a little bit higher than what the average trade estimate was.
• 2:31
  SPEAKER_01: The trade estimate was just under 95.
• 2:34
  SPEAKER_01: So we do confirm big corn acres for this year, right?
• 2:37
  SPEAKER_01: Soybeans 85.3 that was up from 84.7 in the March uh report, but um the average trade estimate was right there with it, so really no change there.
• 2:51
  SPEAKER_01: So no real surprises in the acres reports report, just kind of confirmed bigger acres on corn.
• 2:57
  SPEAKER_01: Now, when you flip to the stocks report, that's where you kind of get that little bit of a bullish uh report, like you were saying earlier, Mike, right?
• 3:03
  SPEAKER_01: Soybean stocks, uh just over a billion market thought, you know, very similar numbers, no surprise, but corn stocks, uh 5.3 billion compared to the average of 5.4.
• 3:14
  SPEAKER_01: Now that's a hundred million uh less bushels there, right?
• 3:19
  SPEAKER_01: And right now you can pull up the WASD report and and specifically point at the export number.
• 3:25
  SPEAKER_01: And with the sales that we've had recently, it's it's light.
• 3:28
  SPEAKER_01: You know, we've we know that the USDA needs to raise that number.
• 3:33
  SPEAKER_01: Um, but what this does is you know, more or less confirms that it also confirms the hefty feed and residual number.
• 3:40
  SPEAKER_01: You know, back uh, you know, probably in January, February, we were talking a lot about how that number was very large, and you know, a big increase year over year probably needs to kind of be pulled down.
• 3:52
  SPEAKER_01: Well, you know, all this stocks report is doing is confirming that big feed number, and exports are very strong.
• 3:59
  SPEAKER_01: So um demand is is running rampant today.
• 4:02
  SPEAKER_02: One of the few takeaways on the quarterly stocks report was there's a lot of corn in the Western corn belt still sitting on farmers uh bin in farmers bin storage here in Minnesota and South Dakota specifically, Jordan.
• 4:16
  SPEAKER_02: Uh any any takes on that with where that crop is sitting?
• 4:20
  SPEAKER_01: Yeah, great point.
• 4:21
  SPEAKER_01: You know, when you pull up that stocks report, it kind of shows, you know, what's on farm today, what's not.
• 4:26
  SPEAKER_01: And today in Minnesota, we're 22% more stocks out there in Minnesota.
• 4:31
  SPEAKER_01: So, you know, big corn crop in Minnesota last year and in South Dakota, and it's showing, you know, the farmer has a lot of corn left in his bins today.
• 4:38
  SPEAKER_01: So we've seen bases tighten up on corn here as of recently because of that board uh falling off and cash prices dipping under$4 and the grain farmer not willing to sell that.
• 4:50
  SPEAKER_01: Um, but as you kind of look forward, you do kind of you look to that and say, you know, we got a pretty good crop coming at us now that we've seen some recent rainfall.
• 4:59
  SPEAKER_01: And with what's still in the bin, basis more than likely when you kind of get into August is going to be pretty sloppy again.
• 5:05
  SPEAKER_01: So um if you do have some old crop corn, that's something to maybe kind of think about taking advantage of.
• 5:10
  SPEAKER_01: Now, when you look at soybeans, the exact opposite.
• 5:13
  SPEAKER_01: You know, the grain farmer got rid of quite a bit of soybeans off the combine and you know, moved corn or sorry, moved soybeans, kept corn, and now you look at the on-farm storage there on soybeans, and then there really isn't any stocks there.
• 5:27
  SPEAKER_01: Um, we've seen it on basis also, but to an even ex more extreme point uh this week is what we saw.
• 5:35
  SPEAKER_01: Um, you know, some positive pushes being uh offered as recently as today on uh on some uh processors looking for some soybeans.
• 5:44
  SPEAKER_02: Yeah, hot bids for the soybean uh old crop here uh in this current month.
• 5:49
  SPEAKER_02: On the acreage side, a lot of acres between corn and soybeans combined, over 180 million.
• 5:55
  SPEAKER_02: Uh so pretty much pushing a record there between most soybean and corn acres planted in a year combined.
• 6:00
  SPEAKER_02: Uh, you throw wheat in there, that's basically where some of those acres came from.
• 6:04
  SPEAKER_02: Only 42 million in the wheat this year, lowest in basically a long, long time, Jordan, before you and I were here.
• 6:12
  SPEAKER_02: So uh from that perspective, anyways, it sure seems like the corn belt continues to grow a little bit with corn and and soybeans.
• 6:20
  SPEAKER_02: Uh, the urban sprawl hasn't really brought those acres down quite yet, just moving other crops out of the way at this point.
• 6:27
  SPEAKER_02: Uh, as we look at the futures market reaction, yeah, we mentioned a little bit earlier a nice pop this week through some of the week, providing a little bit of opportunities.
• 6:37
  SPEAKER_02: I would have liked a little bit better close today on D's corn if we could have held uh green pretty much across the board.
• 6:43
  SPEAKER_02: It would have been nice.
• 6:44
  SPEAKER_02: Uh a lot of these months we were floating three straight days of higher closes.
• 6:48
  SPEAKER_02: And that would have been the first time since May 11th that we've seen that.
• 6:51
  SPEAKER_02: So it's been quite some time that we've been able to gather a few trading sessions in a row together to have some green prices.
• 6:59
  SPEAKER_02: But long term, this report basically did us no good, I think, long run for fundamentals, giving us an opportunity to provide a boost, especially with if we get into weather here.
• 7:11
  SPEAKER_02: Weather looks pretty good going forward into a key time frame of pollination, doesn't it?
• 7:16
  SPEAKER_01: Yes, it does.
• 7:17
  SPEAKER_01: You know, we sat here last week and we were kind of looking at this hot, dry forecast here for the West.
• 7:22
  SPEAKER_01: And, you know, with uh quite a bit of the um South Dakota and Nebraska uh crops in drought, felt like uh, you know, we could really probably see good to excellent scores decrease over the next few weeks um with a deteriorating crop with with this high heat.
• 7:37
  SPEAKER_01: Now we got into this week and and that forecast, you know, really kind of did a 180 on us, right?
• 7:42
  SPEAKER_01: Um moved to a more wetter forecast and didn't really see the high temps that uh were kind of forecasted.
• 7:49
  SPEAKER_01: Now it was hot, um, but humidity came with it, right?
• 7:52
  SPEAKER_01: So now you're looking at a really, really nice crop out there here in the western cornbelt.
• 7:57
  SPEAKER_01: And then the opposite is kind of um true for the eastern cornbelt.
• 8:01
  SPEAKER_01: There's kind of this dividing line through Iowa, right?
• 8:04
  SPEAKER_01: That you know shows the eastern cornbelt is uh pretty moist out there.
• 8:08
  SPEAKER_01: They've had quite a bit of rain here over the past few weeks, and they very much welcomed this hot uh uh dry forecast and are are benefiting from that.
• 8:18
  SPEAKER_01: So um really kind of beneficial forecast for for both sides of the of the of the Iowa line.
• 8:25
  SPEAKER_01: Um as you kind of look forward, um, you talked a little bit about that uh close on corn, didn't trade uh up through 450 there on December corn.
• 8:36
  SPEAKER_01: We you know had some highs, I believe around 444, 445.
• 8:40
  SPEAKER_01: That area, that 450 area is kind of a pivotal point on the chart.
• 8:44
  SPEAKER_01: If we do kind of trade above that, close above that, that would uh signal a little bit of a bullish run there.
• 8:50
  SPEAKER_01: But as you look at this crop maybe getting a little bit better and um looking at past years when we kind of start talking about above trend line crops that we could be talking about now, they tend to be pretty big.
• 9:02
  SPEAKER_01: Um, you know, if you're if you're gonna get an above trend line yield, over the past 30 years, it's been anywhere from five to eight bushels higher.
• 9:09
  SPEAKER_01: So then you're kind of starting to talk about this 187 to 190 type crop.
• 9:14
  SPEAKER_01: And like you said, that uh shapes up for some lower lower prices.
• 9:18
  SPEAKER_01: Now, uh when you look at last year 2024, 2014, um, I mentioned 2014 just because you know this year's chart is shaping up to look very, very similar.
• 9:31
  SPEAKER_01: We did trade below four bucks.
• 9:32
  SPEAKER_01: You know, we kind of saw this market uh pull lower after July 4th, and as you kind of moved into August, uh dipped down into that 390 to 370 level.
• 9:42
  SPEAKER_01: So um, you know, I keep thinking about some extra bushels that you may have now that uh the forecast is kind of changed.
• 9:49
  SPEAKER_01: Though those bushels, you should be kind of kind of thinking about them um if you can't storm and maybe making some more sales, you know, kind of you know, looking at uh earlier we were probably talking about uh APH type crop.
• 10:02
  SPEAKER_01: If you're looking at above APH type crop by 10%, you know, maybe making another 10% sale makes a lot of sense.
• 10:08
  SPEAKER_02: Definitely.
• 10:09
  SPEAKER_02: And and just one other thing, chart-wise, that's pretty that's pretty good technical resistance.
• 10:14
  SPEAKER_02: Those old lows being support before becoming maybe a key resistance point now is something that I'm really gonna be focusing on myself just with this chart action.
• 10:24
  SPEAKER_02: Because on the soybean side, we're still sitting okay, like 11 and a half bucks.
• 10:28
  SPEAKER_02: It still really hasn't deteriorated much, and it makes sense.
• 10:32
  SPEAKER_02: Corn usually goes down first.
• 10:33
  SPEAKER_02: Uh first weather premium kind of comes out.
• 10:36
  SPEAKER_02: Uh, you know, August soybean weather is important and we're not quite there yet, so we've got to wait a little bit more for that to come out.
• 10:43
  SPEAKER_02: That's kind of what I'm looking at on the soybean side is just a little bit more time.
• 10:47
  SPEAKER_02: On the weather story, it's interesting because it it's shaping up okay.
• 10:53
  SPEAKER_02: There's maybe a few problems here or there all over the Corn Belt, whether you're too east in the or too wet in the east or a little bit too dry previously in the west, but it is interesting.
• 11:02
  SPEAKER_02: Like just if uh there is something to note about the volatility of weather with hail, uh tornadoes, windstorms, things like that.
• 11:12
  SPEAKER_02: You know, I had on, I always have on in the background of the office, Bloomberg, and it's a New York, very hedge fund type trading, big commodity pictures and whatnot.
• 11:23
  SPEAKER_02: And right before we came and did this podcast on their top news bar on there, they had the uh the wind farm by uh um in in South Dakota was their main headline that they were talking about how excess winds of over 130 miles an hour this week by high moor, South Dakota, up to a level category four hurricane.
• 11:44
  SPEAKER_02: Um just, you know, volatility, uh a weird thing, one for them to be talking about.
• 11:49
  SPEAKER_02: They were talking about it from a wind energy perspective with the windmills getting damaged, but just volatile weather out there, uh kind of scattered out throughout the western corn belt here has been an observation of mine with hail and wind and things like that to start off our growing season.
• 12:07
  SPEAKER_01: Yeah, it's uh definitely been been volatile, but it's uh brewed up some moisture, some much needed moisture.
• 12:12
  SPEAKER_02: I'll take it because man, we were so dry sitting four inches or so in South Dakota, year to date in rain and locations to now up over six at a key time frame right before hundred degree-ish days.
• 12:27
  SPEAKER_02: This will be uh an incredible boost for yields going forward.
• 12:30
  SPEAKER_02: So any other final thoughts as we wrap up here uh before the weekend, really?
• 12:36
  SPEAKER_01: Yeah, so um just really kind of you know paying attention to this uh um chart and and the way this trade kind of reacts, you know, making sure that you know we're getting some working orders out there.
• 12:48
  SPEAKER_01: And um, you know, if you feel a little bit undersold, you know, now's the time to kind of take action and and you know, look at this market and look at the carry that it's showing out there, you know, Mike, um, you know, 460 March corn um can make a lot of sense for for some guys throwing some corn in some bins.
• 13:04
  SPEAKER_02: For sure.
• 13:04
  SPEAKER_02: And if yeah, please call, consult us about some of those option strategies, revolving those too.
• 13:09
  SPEAKER_02: If you don't love that price but kind of still want to work something up, uh we can help formulate a plan for you all.
• 13:15
  SPEAKER_02: Uh some interesting headlines just watch for the weekend here.
• 13:19
  SPEAKER_02: Continue to watch weather, continue to watch whatever Trump says at Mount Rushmore this weekend at my home state.
• 13:24
  SPEAKER_02: Uh, it'll be a really interesting weekend uh from a few news headline perspectives.
• 13:28
  SPEAKER_02: So thank you for your time.
• 13:30
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• 13:32
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• 13:35
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