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Grain Plan · 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 July 3rd.
• 0:25
  SPEAKER_01: I've got Jeff with us here before the 4th of July.
• 0:28
  SPEAKER_01: How's it going?
• 0:29
  SPEAKER_00: Good.
• 0:30
  SPEAKER_00: Happy 4th tomorrow, Michael.
• 0:33
  SPEAKER_01: Happy 4th to you as well.
• 0:36
  SPEAKER_01: Well, what do we got to say about the grain markets to start off with this week, Jeff?
• 0:40
  SPEAKER_01: We're going to focus on that here.
• 0:41
  SPEAKER_01: It seems like that's kind of the hot play here last week.
• 0:46
  SPEAKER_00: Mostly kind of a weather discussion this week, would you say?
• 0:49
  SPEAKER_01: Probably more of a weather discussion, I would argue.
• 0:51
  SPEAKER_01: Yeah.
• 0:52
  SPEAKER_00: Obviously the report from Friday needed to be digested.
• 0:55
  SPEAKER_00: Yeah.
• 0:56
  SPEAKER_00: With the acres coming in.
• 0:57
  SPEAKER_01: I would say so.
• 0:59
  SPEAKER_00: Well, let's give it uh give us your overall view of what's been going on as far as Western Front, the Eastern Front on the weather side of things, Mike.
• 1:10
  SPEAKER_01: Definitely.
• 1:10
  SPEAKER_01: So over the last week here, we saw the drought monitor actually get released a little early this week before the fourth.
• 1:16
  SPEAKER_01: So saw that come out and uh saw some green being put back into the uh into the drought monitor here for some of the northern United States here, and then on the the southern side, mainly uh southeastern Illinois, Indiana, Ohio, uh, and then farther south there as well, those areas that seemed like really added some drought back into there.
• 1:42
  SPEAKER_01: So honestly, this week, more than more than what I've noticed the last few is that you know the central parts and and uh southern of Indiana, Illinois, and Ohio still adding drought into those uh into those areas.
• 1:56
  SPEAKER_01: So that I think weather-wise is gonna continue to be the main mover and shaker when it comes to actual trade activity.
• 2:03
  SPEAKER_01: And uh, you know, here locally it just won't stop raining really, which uh rain makes grain when it comes to funds in Chicago.
• 2:10
  SPEAKER_01: However, you know, after some travels here from this area, northeast a little bit through Minnesota yesterday, uh obviously some a lot of struggles through that part of the world, uh, a lot of uneven cornfields, yellow, things like that.
• 2:25
  SPEAKER_01: You know, maybe not as bad once you dip over into South Dakota, it seems like for a little bit there, but nonetheless, some weather concerns there no matter what.
• 2:33
  SPEAKER_01: So we are seeing a divergence between the two, aren't we?
• 2:37
  SPEAKER_00: Yeah, well, I guess you know, as we've looked around the corn belt here, and obviously we've got a lot of customers in the geography that you're talking about, Mike.
• 2:45
  SPEAKER_00: Um, and but I from our perspective, correct me if we're wrong, those are probably some of the worst crops, worst-looking crops.
• 2:54
  SPEAKER_00: We'll see how they actually turn out.
• 2:56
  SPEAKER_00: Um across the corn belt.
• 2:58
  SPEAKER_00: Yeah.
• 2:58
  SPEAKER_00: Would you agree with that?
• 2:59
  SPEAKER_01: Yep, I would say so Minnesota's gonna hold that this year.
• 3:02
  SPEAKER_00: Yeah, so you gotta keep that in mind, especially if you're traveling around southern Minnesota, if you're farming in south southern Minnesota, you are looking at some of the poorest conditions.
• 3:13
  SPEAKER_00: Now, I I want to stress, like on the surface, right?
• 3:16
  SPEAKER_00: You mentioned some of the drier, uh potential drier issues out east, and and I agree, I think that was gonna become a storyline here at some point yet this summer.
• 3:26
  SPEAKER_00: One of the biggest things out in that front um this week is just the lower temperatures.
• 3:31
  SPEAKER_00: You know, we we just we we really cooled things off from that 95 plus degree stuff we were seeing a couple weeks ago to more mid-80s.
• 3:42
  SPEAKER_00: And what's that look like six, ten, fourteen days out there?
• 3:47
  SPEAKER_01: Six days it's still pretty cool throughout the United States, cooler than average.
• 3:51
  SPEAKER_01: You go eighteen, eight through fourteen and it starts to warm back up a little bit, but sure feels like uh we've pulled a little heat out of this forecast, I think, in general.
• 4:01
  SPEAKER_01: And uh in general, I mean okay, it's six to ten percent of the corn is in a drought today, probably in the United States.
• 4:08
  SPEAKER_01: Last year at the end of June it was seventy percent.
• 4:11
  SPEAKER_01: It's gonna take a lot to get this corn market fired up to produce a big enough rally besides maybe a few days of short covering.
• 4:18
  SPEAKER_01: And so if I use this weather opportunity to talk about the funds here, you know, we're over three hundred thousand contracts in net shorts now.
• 4:27
  SPEAKER_01: Um they're thinking just over that three hundred mark, um, getting close to a record net short position on corn now.
• 4:33
  SPEAKER_01: Uh maybe we're pushing it at some point this week, it sounded like.
• 4:37
  SPEAKER_01: I I think that's worth talking about just with uh, you know, you cover up some of those shorts on some good days and produce a little 10-15 cent rally, maybe.
• 4:46
  SPEAKER_01: But yeah, I think those are dead cap bounces, and uh that's about all we crank out of this thing in the near term here.
• 4:52
  SPEAKER_00: Even a weather rally off some hot and dry to your points, kind of that's more the 30 to 40 cent type of rallies, not the long-term sustained ones, most likely, the way things look at this point.
• 5:04
  SPEAKER_01: If we if we get 30 cents here, it'll really be a gift.
• 5:08
  SPEAKER_01: When I look back at years like 2014 and 2009, which I would argue are the analog years that look very similar to what this year looks like from a chart perspective, maybe a little bit of weather too.
• 5:21
  SPEAKER_01: Um, you know, 2009 was a good example in this part of the world with where uh cooler temps and wet weather kind of pushed pollination back, pushed us back in fall, and had experiences through uh harvest that were pretty uh troublesome, I guess, for getting corn out of the field dry.
• 5:39
  SPEAKER_01: So when I look at the chart movement going forward and and seeing what I saw out of a couple of those years, it was very difficult to get anything above a 10 cent rally.
• 5:50
  SPEAKER_01: I mean, let alone 30 cents.
• 5:51
  SPEAKER_01: So that's what I I struggle with looking at some of those years and looking forward and already the the decline that we've had.
• 5:59
  SPEAKER_01: But at this time of the year, right, you start to have to look at kind of my four check marks, I think, when it comes to grain producers.
• 6:06
  SPEAKER_01: The first one is uh profitability, which we're not really there at this point on the corn market, uh really troublesome levels when we look at four and a half dollar break-evens.
• 6:15
  SPEAKER_01: Um so we're not there.
• 6:17
  SPEAKER_01: Seasonal, we are there.
• 6:19
  SPEAKER_01: We are at the beginning of July now, and fourth of July is usually my seasonal target.
• 6:23
  SPEAKER_01: I always talk about that.
• 6:24
  SPEAKER_01: You gotta force sales at this time of the year.
• 6:26
  SPEAKER_01: Uh so that'd be the next one saying that you gotta do something.
• 6:30
  SPEAKER_01: The the third one uh would be, you know, uh we we just took off a lot of m money off this corn chart.
• 6:37
  SPEAKER_01: So that that is the one thing that it's hard to sell after a huge decline, right?
• 6:42
  SPEAKER_01: So that's that's not pushing us to really sell.
• 6:44
  SPEAKER_01: If if we're on a really large uh rally and we're putting in new highs towards a peak, towards resistance areas, uh that would be the other scenario, for example.
• 6:53
  SPEAKER_01: Um so a few of those things I've really I really look at going back, and uh it's gonna push me more towards well, I feel like I need to do something on protecting the crop.
• 7:04
  SPEAKER_01: Um, how am I gonna go about it when uh pretty much all these other things aren't lining up for me at the time frame?
• 7:11
  SPEAKER_01: Because I feel like I need to do it from a seasonal perspective and when I compare like 2014 and 2009.
• 7:17
  SPEAKER_00: Tough decision time.
• 7:18
  SPEAKER_01: Yeah.
• 7:18
  SPEAKER_01: So I'm gonna lean more towards options.
• 7:20
  SPEAKER_01: I'm gonna lean towards more of the carry market, looking all the way out into July, really focus on that and a few of the strategies that I can do at minimal cost all the way out that aren't gonna tie my hands too bad, Jeff.
• 7:32
  SPEAKER_00: So uh uh definitely tough decisions and and need to be thought through.
• 7:38
  SPEAKER_00: Um but you know, sticking our head in the sand there probably isn't the right answer either.
• 7:43
  SPEAKER_00: Um same on soybeans.
• 7:46
  SPEAKER_01: I mean, if you look at it, it's like 2.65 ratio between corn to soybeans today.
• 7:50
  SPEAKER_01: So it's actually soybean prices are pretty high compared to corn at this current time frame, and those had very similar charts in those years.
• 7:59
  SPEAKER_00: Soybeans maybe have just a tick more time as to develop some sort of issue.
• 8:03
  SPEAKER_01: That's a thing.
• 8:04
  SPEAKER_01: July weather for the corn is what impacts it, August weather on the soybeans seems like it buys you a few more weeks of uh weather premium.
• 8:12
  SPEAKER_00: So if we switch gears, think about end users here for a minute, Mike.
• 8:16
  SPEAKER_00: Um, you know, one of the big questions that we've been asking ourselves, of course, is you know, how low is low, right?
• 8:23
  SPEAKER_00: Uh um and and should we be stepping out and and gaining some coverage here?
• 8:28
  SPEAKER_00: Um and I, you know, I think that kind of depends where you're sitting, as far as you know, you've got to consider what you're where you're sitting on the revenue side of the equation.
• 8:36
  SPEAKER_00: If we've got a lot of cattle covered, a lot of hogs covered, been dragging our feet on some of these inputs.
• 8:41
  SPEAKER_00: Um, no doubt in our minds it's gonna be a spot to make sense.
• 8:45
  SPEAKER_00: Yeah, it's gonna be a spot to get caught up for sure.
• 8:48
  SPEAKER_00: Um then there's also we've we've covered a lot of that stuff with some option um coverage over this past you know three, four months.
• 8:56
  SPEAKER_00: So it's a great time to take a look at those, especially on the new crop side.
• 9:00
  SPEAKER_00: We've been moving a lot of calls lower this week, so we've been investing a little bit of money there, which I'm not super proud of, but when you start looking at the ratios of what you can move some of those call options down and get much closer to the money, you got something that really um it's actually going to do something for you versus some of those higher up calls that we had in place while we were selling some of the pigs or cattle.
• 9:23
  SPEAKER_01: For a risk management practice, that's what you should do.
• 9:27
  SPEAKER_00: I think so.
• 9:28
  SPEAKER_00: Yeah.
• 9:28
  SPEAKER_00: I think so.
• 9:29
  SPEAKER_00: And you know, the next stage is okay, do you start just getting along some extra corn in here someplace?
• 9:35
  SPEAKER_00: And you know, it's absolutely the wrong time of year to be doing that.
• 9:39
  SPEAKER_00: That's one of the things that's been stopping us um uh a bunch here this week.
• 9:44
  SPEAKER_00: But you also you know, you so you just let's just start talk some numbers here.
• 9:47
  SPEAKER_00: You know, you got ending stocks um to use ratios close to that 16% area, two three, two, four, something like that, as far as billion bushels go.
• 9:58
  SPEAKER_00: Historically, that's that has chased prices down into the mid-three, hasn't it, Mike?
• 10:02
  SPEAKER_01: It has.
• 10:03
  SPEAKER_01: I mean, low to mid-threes here, historically, so it it would argue that uh with the fundamentals we currently have.
• 10:10
  SPEAKER_01: I mean, three and a half dollar corn is probably where we should end up at at some point this fall.
• 10:15
  SPEAKER_00: So it's you know, we're probably not quite to the point today.
• 10:19
  SPEAKER_00: I'm I'm not sure that we're gonna stand around and and wait to uh to take some action until we get down to those type of prices, but you know, sitting here with a little bit of carry into the December's got that at 420 yet.
• 10:32
  SPEAKER_00: Um that's not a price target that we're looking to uh kind of get long corn just for the fun of it type of a thing.
• 10:40
  SPEAKER_01: So well look what the spreads are telling you too.
• 10:42
  SPEAKER_01: I mean the price of December's at 420 today, but the July of 25 is over 450.
• 10:48
  SPEAKER_01: So I mean a 31 cent carry between December to July is it's not like the spreads are telling you they're worried about it at this point.
• 10:55
  SPEAKER_01: I mean, uh they're pretty bearish really.
• 10:57
  SPEAKER_00: Well, when you think about that just from a flat price standpoint, again, 450 seems like more of a sellable level than a buyable one here with what we're especially historically, maybe not in the last couple of years, but for sure, looking back 10.
• 11:10
  SPEAKER_01: Yeah.
• 11:11
  SPEAKER_00: Yep.
• 11:12
  SPEAKER_00: So maybe not quite there yet.
• 11:13
  SPEAKER_00: I know we've we've really been staring at it hard, and and stay tuned to that.
• 11:17
  SPEAKER_00: We've it's a discussion we're having um almost daily here in the shop, trying to trying to figure out to do what to do from an opportunity standpoint on the end user side of things.
• 11:28
  SPEAKER_00: But you know, as we round up uh the first half of the week here after the big report and that big jump lower, that's kind of our our thoughts for the moment.
• 11:38
  SPEAKER_01: How about on the cattle side?
• 11:39
  SPEAKER_01: I want to end off with that this week.
• 11:41
  SPEAKER_01: I I feel like we're seeing some interesting things in in the cattle market right now.
• 11:46
  SPEAKER_01: Jeff, what can you tell me about consumer demand and and what you're seeing on the product side and and supplies here?
• 11:52
  SPEAKER_00: You know, it's I've been telling people the most impressive fundamental about this cattle thing has been where choice beef has been in the last, I don't know, two or three weeks, Mike, something like that.
• 12:03
  SPEAKER_00: You know, we were we were kind of going higher into Father's Day and uh lagging last year, lagging 2021, thought, okay, this this is probably where we're supposed to be.
• 12:13
  SPEAKER_00: You know, we're not going to see as high as levels this year as what we did last year.
• 12:17
  SPEAKER_00: When you consider all of the negativity surrounding the potential um consumer demand issues, um as you think about you know credit card debt and some of the things like that.
• 12:29
  SPEAKER_00: Um, and then not to mention just prices of beef as well as everything else going up again year over year, right?
• 12:36
  SPEAKER_00: But we have seen that thing march higher all through the month of June here.
• 12:41
  SPEAKER_01: Impressive chart, just a little higher every day.
• 12:44
  SPEAKER_00: Just auger's up there, and seasonally we should be giving up any day now, and we might.
• 12:51
  SPEAKER_00: I mean, I'd be shocked if we didn't give up quite a bit of ground through the month of July on this choice meat complex.
• 12:59
  SPEAKER_00: But sitting here today, we're trading at a higher level than what we were last year, and then you flip flip over and think about the supply side of that situation.
• 13:08
  SPEAKER_00: You look at total kills, um, including cows, you know, we are we're definitely off there, and that storyline continues.
• 13:15
  SPEAKER_00: But the other thing that's changed the back half of June is you look at just the fed cattle um kill rates, they're actually right on par with where they were last year with weights 28 to 30 pounds heavier than what they were a year ago.
• 13:33
  SPEAKER_00: So you're actually putting more choice meat out the door than what you were last year, and you're selling it for, you know, let's call it the same price.
• 13:41
  SPEAKER_00: And that's if that's the coal in the or if that's the canary in the coal mine type of thing, these consumers aren't giving up at all, which which really blows my mind.
• 13:52
  SPEAKER_01: Maybe I'm the only one that when uh we were asked for July 4th what we were gonna bring for our family dinner.
• 13:59
  SPEAKER_01: Strawberry fluff salad.
• 14:00
  SPEAKER_01: We brought pork skewers, and then the other guy said, Well, we're bringing pork loin, and the other guy said that they were bringing something pork, and I'm like, alright guys, who's gonna cough up the ribey's here?
• 14:11
  SPEAKER_01: Where is the beef?
• 14:12
  SPEAKER_01: Where is the beef?
• 14:13
  SPEAKER_01: It's not at our house, Jeff.
• 14:15
  SPEAKER_01: I'll tell you that.
• 14:16
  SPEAKER_00: I hear you.
• 14:17
  SPEAKER_00: I hear you.
• 14:18
  SPEAKER_01: So maybe this will be the transition weekend.
• 14:20
  SPEAKER_01: It does seem to kind of peek right before this, doesn't it?
• 14:22
  SPEAKER_00: Yeah, you know, I'm sure it will, but I I still would say even if it does, you still go back and you you park this in the back of your mind as a benchmark um on consumer demand.
• 14:32
  SPEAKER_00: Yeah.
• 14:33
  SPEAKER_00: And I think that's I mean that that can change any day, of course, but right now there's no bad news on that up front.
• 14:38
  SPEAKER_01: So August futures are what, 15 bucks below cash that we knew of last, I guess, for what yeah, we're not trading quite this week.
• 14:45
  SPEAKER_00: And you know, it probably that might be a tick overstated, but certainly in the$12 to$13 area in the north.
• 14:51
  SPEAKER_00: South trade a little, there's a pretty big gap again between the south and the north.
• 14:54
  SPEAKER_00: So but no where however you slice it, hugely positive basis.
• 14:59
  SPEAKER_00: Futures are saying, listen, guys, the cat there are some cattle out there.
• 15:03
  SPEAKER_00: Weights are heavy.
• 15:04
  SPEAKER_00: We know we've seen this situation before.
• 15:07
  SPEAKER_00: Um, so the higher you go now, the harder it is to market cattle now.
• 15:11
  SPEAKER_00: Probably means there are just a few more of them to be marketed later in the year, and that's the way the market's been trading this.
• 15:17
  SPEAKER_00: And I I kind of agree with it.
• 15:19
  SPEAKER_00: I I don't know how long the cash market will stay up at these levels.
• 15:23
  SPEAKER_00: Um by la you know, last year by this time, we had it as a counter-seasonal year, also we had topped out um by now.
• 15:31
  SPEAKER_00: I personally think we're awful close here to finding a high spot on the cash.
• 15:36
  SPEAKER_00: Um, whether we can dip down into the mid to low 80s by the time you get to the end of August.
• 15:41
  SPEAKER_00: I don't know about that, but I would not be surprised at all to start taking some money off.
• 15:46
  SPEAKER_00: I just think you get close to two bucks.
• 15:48
  SPEAKER_00: You're motivating cattle to come to town.
• 15:51
  SPEAKER_00: I think that's gonna get the job down.
• 15:52
  SPEAKER_00: It's gonna put a cap on this cash price, and then uh I think we you know we can spiral lower for a bit here, kind of see where we end up, see where you know we got to get low enough eventually where the um producer will stop uh marketing cattle and start making them big again, um, you know, as kind of how this cycle's gonna play out in my mind.
• 16:13
  SPEAKER_00: But you know, first we haven't we haven't topped this market yet either.
• 16:17
  SPEAKER_00: So it'll be interesting to see you.
• 16:19
  SPEAKER_00: I don't know if we'll see much cash this week or not, but uh be interesting to the next couple weeks here where how hungry the Packer is.
• 16:27
  SPEAKER_01: All right.
• 16:27
  SPEAKER_01: Well, thank you for your time, Jeff.
• 16:29
  SPEAKER_01: Uh, can you tell me what you're gonna be doing Sunday through Wednesday this next week after the fourth?
• 16:34
  SPEAKER_00: Yep, so on the hug side of things, um everybody goes, a lot of folks go out to Wisconsin Dell's a pretty big event out there.
• 16:42
  SPEAKER_00: Um you know, and it happens once a year here in July.
• 16:46
  SPEAKER_00: And we're out there most years this year.
• 16:48
  SPEAKER_00: We're out there, we're doing part of the uh breakout sessions there, so look for us there.
• 16:52
  SPEAKER_00: We do have a um Tuesday afternoon.
• 16:55
  SPEAKER_00: We always have a bit of a shing ding over by the pool, so look us up there.
• 16:59
  SPEAKER_00: Um looking forward to a few days of networking out there, Mike.
• 17:03
  SPEAKER_01: All right, thank you for your time, and thank you to all our listeners.
• 17:07
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 17:10
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 17:15
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 17:21
  SPEAKER_01: See you next time.