Latest / Professional Ag Marketing Podcast / Corn fallout over bearish WASDE

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Corn fallout over bearish WASDE · Professional Ag Marketing Podcast

• 0:02
  SPEAKER_01: You're locked in to the Grain Market Talk Podcast.
• 0:06
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• 0:11
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• 0:20
  SPEAKER_02: Well, good afternoon, everybody.
• 0:22
  SPEAKER_02: Today is October 9th, and it is a beautiful Friday here in Laverne, Minnesota.
• 0:28
  SPEAKER_02: Uh, we're in the professional egg marketing podcast studios.
• 0:33
  SPEAKER_02: This is Lucas Peters, and I am going to ask Mr.
• 0:36
  SPEAKER_02: Mike Minor a few questions today.
• 0:38
  SPEAKER_02: Mike, how is it going?
• 0:40
  SPEAKER_02: Oh, it was a day.
• 0:41
  SPEAKER_02: It was a day.
• 0:42
  SPEAKER_02: So let's get right into it.
• 0:44
  SPEAKER_02: Uh, kind of a a uh kind of a crazy Friday, I guess.
• 0:48
  SPEAKER_02: Maybe we started out the day.
• 0:50
  SPEAKER_02: We I know in our little discussions that we were having in the office, we knew we had a WASD report coming out and didn't think uh I could do a little bit of this, a little bit of that.
• 0:59
  SPEAKER_02: And then of course, we had a surprise, which we haven't had, a big surprise in a WASDA, maybe for the last couple months.
• 1:05
  SPEAKER_02: Uh, and we got one today.
• 1:07
  SPEAKER_02: So, what what was the biggest surprise?
• 1:09
  SPEAKER_02: Your takeaway from the WASDA report today, Mr.
• 1:12
  SPEAKER_02: Mike Minor.
• 1:13
  SPEAKER_00: Well, that surprise would be in uh August and September.
• 1:17
  SPEAKER_00: Both those months, the USDA cut yield down to last month.
• 1:21
  SPEAKER_00: We were at 178.5 on corn.
• 1:24
  SPEAKER_00: Uh, in the last 30 years, they have done that about eight times in the last 30 years, where we've lowered yield in August and September.
• 1:32
  SPEAKER_00: Seven of those eight years, we end up with a yield higher than that 178.5 or the September number.
• 1:39
  SPEAKER_00: Uh so typically we would end up above that yield on corn by the January final report.
• 1:45
  SPEAKER_00: Uh, this October was day today came out at a 181.2, quite a ways above expectations.
• 1:53
  SPEAKER_02: Expectations and maybe are we pushing up against reality?
• 1:58
  SPEAKER_00: Now, reality would say that's very close to just barely below trend line.
• 2:04
  SPEAKER_00: Yep.
• 2:04
  SPEAKER_00: Um we've been arguing as well, even before we had a quarterly stocks report that gave us a couple hundred million more bushels than anticipated.
• 2:14
  SPEAKER_00: You know, you end up above 180.
• 2:16
  SPEAKER_00: We really don't have to ration much.
• 2:17
  SPEAKER_00: Uh, you know, we start to push uh where that'd be a 1.8 billion bushel carry out.
• 2:24
  SPEAKER_00: You probably don't need to ration much once you get around 2 billion bushels.
• 2:27
  SPEAKER_00: And that's what we had last year was at 2.09 billion bushels.
• 2:31
  SPEAKER_00: So a little bit different than last month.
• 2:33
  SPEAKER_00: We had 1.5.
• 2:35
  SPEAKER_00: And for us to be pushing up to 1.8 and some change there, uh, historically, that'd argue that March corn futures should be around 480.
• 2:45
  SPEAKER_00: That puts December corn around 465-ish historically.
• 2:49
  SPEAKER_00: Um, so the December futures made sure that they tried to move that direction a little bit today, Lucas.
• 2:54
  SPEAKER_02: Yep.
• 2:54
  SPEAKER_02: So that definitely when uh when that number came out and kind of surprised us all with the I would the the amount of increase, I guess.
• 3:01
  SPEAKER_02: We were all thinking they might bump it up a little bit.
• 3:03
  SPEAKER_02: Uh the fact that they went up to 181.2 uh today in this report was did catch a lot of people off guard.
• 3:10
  SPEAKER_02: And to your point, the markets uh reacted very quickly to uh try to get away from this rationing demand that you were referencing earlier.
• 3:19
  SPEAKER_00: And it was a rough day.
• 3:20
  SPEAKER_00: I mean, we were down limit on corn for a majority of the day here after that report, down 30 cents on December.
• 3:26
  SPEAKER_00: It came back.
• 3:27
  SPEAKER_00: We were only down about 20 at the close.
• 3:29
  SPEAKER_00: So uh it did come back about 10 cents there to close around 480.
• 3:33
  SPEAKER_00: Um, but the report I'll have uh have the guys pull it up here on the charts here soon.
• 3:38
  SPEAKER_00: But I want to focus on uh right here, you can see on the chart for the minute chart at 11 o'clock there, you see the steep drop-off that we had in price.
• 3:46
  SPEAKER_00: So obviously, heavily correlated to the WASDA report that came out at that exact moment.
• 3:51
  SPEAKER_00: You took off uh a pretty good chunk from about 504 D's futures down to uh uh just under uh 470 there, just on top of it.
• 4:01
  SPEAKER_00: So a pretty good uh 34 cents lower, really, from where we were trading at this morning on the D's corn.
• 4:07
  SPEAKER_02: Yep, yep.
• 4:08
  SPEAKER_02: Very surprising.
• 4:09
  SPEAKER_02: Uh I guess not surprising after we saw the number.
• 4:11
  SPEAKER_02: The number was a big surprising part.
• 4:13
  SPEAKER_02: And like you said, what combine that with the stocks increase, um, you know, really puts us in a pretty okay spot.
• 4:21
  SPEAKER_02: Uh come ending stocks, stocks to use ratio uh going forward.
• 4:25
  SPEAKER_02: And and I guess do you want to run through some of the specific uh WASDA numbers uh besides the yield?
• 4:30
  SPEAKER_02: Uh and here we go, Mike.
• 4:31
  SPEAKER_00: Yeah, definitely.
• 4:32
  SPEAKER_00: Let's look at the demand category, you know, the the supply side we kind of went through there because you increased beginning stocks and you increased yields, so you ended up at over 18 billion bushels of supply.
• 4:43
  SPEAKER_00: But on the demand side, when you look at every single single category from last month's number, they actually raised demand in every category there.
• 4:51
  SPEAKER_00: Uh exports were up, ethanol was up, uh your feed, food, and residual numbers were all up as well.
• 4:58
  SPEAKER_00: So they did increase uh use pretty decent, which I argued was already pretty hefty numbers to begin with.
• 5:04
  SPEAKER_00: So yeah, I get it.
• 5:05
  SPEAKER_00: Demand, uh demand goes up when price goes down, and today's numbers on the supply side definitely help push price down.
• 5:11
  SPEAKER_00: So that helps demand, but uh it's still some pretty greedy numbers, I feel like, from the from the use side that are inflated a little bit.
• 5:20
  SPEAKER_00: And uh from that perspective, anyways, uh I was fine with the increases in demand for the most part, but it it bucked the recent trend that we've been seeing with exports specifically.
• 5:32
  SPEAKER_00: Exports have been significantly behind last year's numbers.
• 5:36
  SPEAKER_00: So that's just the wild card I'm gonna want to watch uh on uh the next few reports here.
• 5:41
  SPEAKER_00: Because if exports don't step up their game, you know, uh here and take advantage of a lower price, uh, that number is probably a little bit too high on the demand side, which makes that balance sheet even a little bit more scary.
• 5:52
  SPEAKER_02: Yeah, correct.
• 5:52
  SPEAKER_02: You bring up a good point of if they keep this yield and harvested acres at the number they're at and and then start looking at this demand.
• 6:00
  SPEAKER_02: If we don't get the exports to keep pace like we did last year, that does raise uh a lot of red flags going forward on where the potential for this price to go.
• 6:09
  SPEAKER_02: Um what about the world corn?
• 6:11
  SPEAKER_02: I mean, that was one thing that I guess maybe I I wasn't following as closely, but you know, we've had a pretty good bullish run or support here uh on the corn market just from having an overall tight world supply with some production challenges uh in Europe and in what's going on in Ukraine.
• 6:28
  SPEAKER_02: Uh and all of a sudden it looked like that got a little bit better.
• 6:30
  SPEAKER_02: Was that primarily driven from the United States or what's going on there, Mike?
• 6:35
  SPEAKER_00: Most of that is gonna come because of the United States increase in production there.
• 6:39
  SPEAKER_00: So uh when you look at the Argentina and Brazil numbers for production, those didn't change at all either.
• 6:45
  SPEAKER_00: So uh it's pretty much heavily influenced by the US numbers there on world at 280 million metric tons.
• 6:51
  SPEAKER_00: Estimate was only 273.
• 6:53
  SPEAKER_00: So the prior one was 272 even.
• 6:56
  SPEAKER_00: So uh a little bit higher than expected there, bearish numbers on corn uh for the world numbers and wheat as well.
• 7:04
  SPEAKER_00: That one was a little bit higher.
• 7:06
  SPEAKER_00: So uh on the uh on the wheat side and corn, you saw pretty pretty strong resistance today across both the main major grain fronts, and they kind of fed off each other a little bit.
• 7:17
  SPEAKER_02: So the one slightly positive note on the grain front was soybeans.
• 7:22
  SPEAKER_02: Uh, you know, in soybeans they did raise uh raise the bushels.
• 7:26
  SPEAKER_02: Uh they come in with a projection of 53.1 for a final yield, which would be a record uh over the 53 flat uh yield last year.
• 7:35
  SPEAKER_02: Um so again, probably not surprising uh that we thought they might bump the yield a little bit uh on this report.
• 7:43
  SPEAKER_02: Um so what are the other important numbers you saw on the uh on the soybean side, Mike?
• 7:47
  SPEAKER_00: Yeah, I wasn't surprised to see the soybean yield higher.
• 7:50
  SPEAKER_00: I was expecting it, everything we've heard, even in yesterday's podcast, we mentioned it.
• 7:54
  SPEAKER_00: Most of the reports we've been seeing is better than expected soybean yields.
• 7:58
  SPEAKER_00: Um so I I was I wasn't shocked to see a uh 53 or above yield on the soybeans.
• 8:04
  SPEAKER_00: I thought it could have even been a little higher given what we've heard.
• 8:07
  SPEAKER_00: Um, that's what I was expecting.
• 8:09
  SPEAKER_00: Uh when I look at the other categories, the one that made sense was exports as well.
• 8:13
  SPEAKER_00: They raised that just measly 10 million bushels there.
• 8:16
  SPEAKER_00: Uh, I I was fine with that as well.
• 8:18
  SPEAKER_00: I thought what we've seen on soybean exports, uh, given what China's been doing, we're pretty decently competitive.
• 8:24
  SPEAKER_00: We're seeing some problems potentially out of South America.
• 8:27
  SPEAKER_00: Yeah, let's bump that one up a little bit.
• 8:29
  SPEAKER_00: So I was perfectly fine with the balance sheet.
• 8:31
  SPEAKER_00: I was surprised to see us close green on the day up four cents.
• 8:35
  SPEAKER_00: I thought that was a pretty good comeback from the numbers we had been seeing.
• 8:39
  SPEAKER_00: But uh at this point, anyways, corn was a major down day that we saw.
• 8:43
  SPEAKER_00: And for soybeans to hold green at the end of the day was a win in my book.
• 8:47
  SPEAKER_02: Yeah, that that is a uh right after the report, you know, of corn going down that far, soybeans were down 12 or so.
• 8:54
  SPEAKER_02: It drove it down 15 something uh there right away.
• 8:57
  SPEAKER_02: And to have them come all the way back to close positive, I it says was very surprising, I guess.
• 9:03
  SPEAKER_02: Uh, and maybe it's just overall a little bit of a bullish tone towards the soybean side, uh, supported by many things like we've talked about of policy, biofuel policy, and and uh the China exports and things like that.
• 9:16
  SPEAKER_00: Long ways, long ways on the Brazil crop, too.
• 9:19
  SPEAKER_00: Yeah.
• 9:19
  SPEAKER_00: Given the Super El Nino that we've got, strongest ever.
• 9:22
  SPEAKER_00: They're probably not gonna have the best crop down there, just given what we know about weather today.
• 9:25
  SPEAKER_00: It's super early, but um, I'm very focused on that 20-day moving average on the Nove bean chart.
• 9:31
  SPEAKER_00: Just if if we bump up against that again, maybe some resistance kind of toward today's highs.
• 9:37
  SPEAKER_00: Uh if we break through that though, I might want even new highs out of the soybean market.
• 9:41
  SPEAKER_00: So a little surprised there.
• 9:43
  SPEAKER_02: Yeah, so I guess that's if you're uh a grain farmer sitting in your combine today, uh, you're a little frustrated, you probably didn't have as much corn sold as you would have.
• 9:51
  SPEAKER_02: Uh very reactionary, of course.
• 9:53
  SPEAKER_02: Maybe there's a little upside on the beans, and um, and I guess the strengths in the beans, maybe that'll help support corn a little bit, depending on where these yields and and demand shake out.
• 10:04
  SPEAKER_02: Um so as we got through our WAS day now, we're into harvest.
• 10:09
  SPEAKER_02: What uh what should guys be looking forward to?
• 10:12
  SPEAKER_02: What's their next move on their marketing plan for the next couple of weeks here, Mike?
• 10:16
  SPEAKER_00: So the biggest, most important, fast-paced items that we need for action would be one, uh, what basis premiums are still available out there?
• 10:25
  SPEAKER_00: Most of the soybean ones are gone.
• 10:27
  SPEAKER_00: Still good basis levels on soybeans.
• 10:29
  SPEAKER_00: So I am taking them, selling them off the combine, just getting paid cash.
• 10:34
  SPEAKER_00: And then uh we can look at re-ownership opportunities later down the road.
• 10:38
  SPEAKER_00: Uh, but probably storing the corn still looks like the better option.
• 10:42
  SPEAKER_00: Uh, so that's the first and foremost thing.
• 10:44
  SPEAKER_00: Second, uh, this week with folks turning over to corn this weekend, there are some opportunities out and about to get some early harvest premiums for corn delivered this week.
• 10:54
  SPEAKER_00: Uh, seems like everybody can find a field at 15 or 16% still, just with some of the poorer stuff.
• 11:00
  SPEAKER_00: Go after it.
• 11:01
  SPEAKER_00: If you can get something at option, like I heard uh kind of north central Iowa even today, uh maybe even some central, uh south central Minnesota.
• 11:12
  SPEAKER_00: Take advantage of those, get some good, uh, get some good early basis premium pushes on corn and get it off the farm at a dry level that you don't have to pay for drying.
• 11:21
  SPEAKER_00: Uh so that's number one, first and foremost, easiest thing to do.
• 11:25
  SPEAKER_00: Second, uh the the carry built out pretty good out to July today.
• 11:30
  SPEAKER_00: The the carry didn't build really between dece to March corn.
• 11:33
  SPEAKER_00: Uh that kind of stayed at 15 cents.
• 11:35
  SPEAKER_00: But if you look the dece to July today, that got as wide as over 30 cents.
• 11:40
  SPEAKER_00: So they're putting premium uh into that uh July, holding it a little higher while dece really flew uh flew lower today.
• 11:47
  SPEAKER_00: So keep that in mind if you've got hedges in that dece, want to roll them out.
• 11:51
  SPEAKER_00: We're getting closer to a level, you know, you get past 32 cents, you might as well just start taking advantage of some carry further out uh on those bushels.
• 12:00
  SPEAKER_00: Last um but not least, I'm looking at 27 on both corn and soybeans.
• 12:05
  SPEAKER_00: The soybeans are at 1263 for November 27.
• 12:08
  SPEAKER_00: Pretty hard not to do something there in one fashion or the other.
• 12:12
  SPEAKER_00: And on D's 27, we're at 511 still.
• 12:15
  SPEAKER_00: Not an awful value to start continuing to take some uh take some risk off the board one way or another there using some options that we can walk through.
• 12:23
  SPEAKER_00: So still using some opportunities, you know.
• 12:26
  SPEAKER_00: D's corn uh in 27 was only down six cents today, so that's pretty good win compared to the front month being down 20.
• 12:33
  SPEAKER_00: Uh seeing pretty good premium further out there because of that.
• 12:37
  SPEAKER_02: Well, good stuff, Mike.
• 12:38
  SPEAKER_02: Uh, thanks for uh running through the numbers with us.
• 12:40
  SPEAKER_02: Thanks for running through that plan.
• 12:42
  SPEAKER_02: I think it is good to reflect too, as you mentioned it earlier.
• 12:46
  SPEAKER_02: A lot of customers have been commenting that their yields are slightly better than what they had thought.
• 12:50
  SPEAKER_02: There's some pockets and fields here there that of course aren't, and uh we feel for those guys.
• 12:55
  SPEAKER_02: But if your yields are a little better, make sure you talk to the guys here at Professional Egg Marketing to get a plan on what you're gonna do with those extra bushels and uh and lock up some opportunity while it exists.
• 13:05
  SPEAKER_02: So appreciate that.
• 13:07
  SPEAKER_02: Uh we got a good harvest weekend coming ahead of us, looks like Mike.
• 13:10
  SPEAKER_02: And uh, as I mentioned, most guys flip into corn.
• 13:13
  SPEAKER_02: Soybeans should be mostly wrapped up by the weekend, at least locally around here.
• 13:17
  SPEAKER_02: Uh so be safe out there.
• 13:19
  SPEAKER_02: Uh, hopefully we get some cooperative weather for the next couple of weeks here.
• 13:24
  SPEAKER_02: And if you get a break, make sure you grab some uh pork off the shelf and celebrate pork month uh by smoking a pork shoulder or something on your uh traeger this weekend and have some uh fun doing that.
• 13:35
  SPEAKER_02: Anything else that you want to mention, Mike?
• 13:37
  SPEAKER_02: Hit the subscribe button.
• 13:38
  SPEAKER_02: Sounds good.
• 13:39
  SPEAKER_02: Thanks, guys.
• 13:40
  SPEAKER_02: Thanks, guys.