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Grains: Damage · 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 Miner.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is October 24th.
• 0:25
  SPEAKER_01: I've got Jace back with us here today.
• 0:27
  SPEAKER_01: How's it going, Jace?
• 0:28
  SPEAKER_01: It's going pretty good.
• 0:29
  SPEAKER_01: Good.
• 0:30
  SPEAKER_01: Well, we have some fun things to talk about today.
• 0:32
  SPEAKER_01: I just thought I would bring you on.
• 0:34
  SPEAKER_01: I know we talked about cattle yesterday with Jeff as well, but with today's crazy price action, crazy news, I just needed the two main bullet points basically on what happened in the cattle market the last couple days and why.
• 0:46
  SPEAKER_01: And then after that, we're going to talk about China, grains, some of those updates.
• 0:50
  SPEAKER_01: But I just want to spend a couple moments talking about cattle.
• 0:55
  SPEAKER_00: Yeah, so we today was kind of a pivotal day in the cattle complex there.
• 1:00
  SPEAKER_00: We broke the 50-day moving average for the first time since back in the tariff days, you know, like the operation to April 2nd time frame.
• 1:10
  SPEAKER_00: So that's that's been a that's been a moving average that's been watched pretty closely there and broke through it with a with a vengeance here.
• 1:18
  SPEAKER_00: And I guess the second thing and the reason for it was just the policy change that has come out of this administration recently.
• 1:25
  SPEAKER_00: So what it describe the policy change that has occurred.
• 1:30
  SPEAKER_00: It hasn't been so much in action yet, but it's it's more so in talk.
• 1:35
  SPEAKER_00: First it was Argentinian beef uh imports raising that quota, quadrupling that quota.
• 1:41
  SPEAKER_00: And now it it seems to be a little bit broader than that with and this is somewhat speculation, but the Brazilian meeting this weekend and then Mexican feeder cattle imports, there's supposed to be a a talk about that in the near future here, so we'll see.
• 1:59
  SPEAKER_00: We'll see kind of where that goes.
• 2:02
  SPEAKER_01: Alright, any other final thoughts on cattle before we dive into the grains?
• 2:05
  SPEAKER_01: Just because I I know if many of you in the grain space, especially, weren't watching this market.
• 2:10
  SPEAKER_01: We've climbed to historical levels after a five-year trend, bull trend for so long, and we haven't violated that trend much at all.
• 2:19
  SPEAKER_01: A lot of major news lately catching articles, headlines just about expensive beef prices.
• 2:24
  SPEAKER_01: Trump, it's really caught his eye that he wants to fix high beef prices, and he's gone about it in a very aggressive manner.
• 2:31
  SPEAKER_01: And then some of the ways he's going about that we talked about yesterday as well a little bit, but today was the true escalation of the technical side I thought of.
• 2:41
  SPEAKER_01: Just we've really pulled back now.
• 2:44
  SPEAKER_01: I mean, on the feeder cattle side,$30 off of the recent highs, or uh basically we've erased all the gains for the month of October, which were significant up until this point, Jace.
• 2:54
  SPEAKER_01: Tell tell me a little bit more though, before we wrap up cattle, just on the fund activity that you see happening, because one, we don't know, right?
• 3:01
  SPEAKER_01: But what are some of the things that you've seen when you dive into open interest or volume that you're right now that you're noticing?
• 3:08
  SPEAKER_00: Yeah, so over the past few days, well, over the past few weeks, we haven't got our commitment of trader reports, so we're flying a little blind there on the managed money.
• 3:18
  SPEAKER_00: And then you look at the volume and open interest over the past few days has been kind of interesting.
• 3:24
  SPEAKER_00: We saw even yesterday, we saw open interest going a little higher.
• 3:30
  SPEAKER_00: And the first limit down move this week.
• 3:32
  SPEAKER_00: We saw open interest climb a little bit, so that was that was very interesting, and then and then to have today after that was was very interesting.
• 3:40
  SPEAKER_00: But volume volume was up significantly over the past couple days.
• 3:46
  SPEAKER_00: So that starting to see that increase and show signs of a little liquidation there.
• 3:51
  SPEAKER_01: Alright, let's get into the grain markets, Jace.
• 3:54
  SPEAKER_01: Where do you really want me to start this week on the grains?
• 3:57
  SPEAKER_00: Well, I guess being a cattle guy, it makes you wonder if that market ever moves.
• 4:04
  SPEAKER_01: So the answer is not right now, in an immense way.
• 4:07
  SPEAKER_01: Um the only reason it is moving, specifically soybeans, would have been the fact that we are talking about China and a couple meetings coming up.
• 4:16
  SPEAKER_01: But in general, this market has entered a time of the year which August until about March is historically very flat time frame.
• 4:24
  SPEAKER_01: Most of your known items, like yield, production, what your demand looked like, most of those are turning into a known item this time of the year.
• 4:32
  SPEAKER_01: So there's not a lot of time, not a lot of volatility in this market through that stretch.
• 4:37
  SPEAKER_01: Normally, the way it is.
• 4:38
  SPEAKER_01: We mentioned earlier there's obviously no government reporting in a lot of these categories, like the WASDAir port we missed in October.
• 4:46
  SPEAKER_01: It looks like we have the jeopardy of uh missing the November WASDAir port as well.
• 4:51
  SPEAKER_01: So no new market moving news.
• 4:53
  SPEAKER_01: Uh many folks believe the the corn market yield is sliding lower in the United States, and we aren't getting true verification of that.
• 5:03
  SPEAKER_01: So that creates less volatility.
• 5:05
  SPEAKER_01: So it's a good question because yes, that's what it's abnormally quite boring right now, even more than it normally is.
• 5:11
  SPEAKER_01: Um let's dive into China a little bit here.
• 5:14
  SPEAKER_01: So the big thing I uh I'm focusing on right now, and the market is focusing on here in the near term on the soybean market is mainly just Chinese trade news.
• 5:23
  SPEAKER_01: Um, other aspects are coming into play on soybeans that we could talk about as well, whether it be um weather in in South America allowing for them to pick up planting pace coming forward, but no Drew, no true direct weather threats at this point for the soybean crop.
• 5:39
  SPEAKER_01: They're gonna combine in January and February this next spring to compete with our soybean exports.
• 5:45
  SPEAKER_01: But in general, there are a couple things going on.
• 5:47
  SPEAKER_01: So this weekend, uh in particular, you have Scott Besson.
• 5:52
  SPEAKER_01: He's gonna be in uh a meeting with Chinese representatives uh in Malaysia.
• 5:58
  SPEAKER_01: So they're gonna pretty much prime the meeting for Trump on Thursday this next week, Jace.
• 6:04
  SPEAKER_01: How that meeting will go, who knows at this point, or even if they will have the meeting, given uh, you know, the history of the the relationship between Trump and G and their country.
• 6:16
  SPEAKER_01: Um it's still very much up in the air when we look at it that from from that way.
• 6:21
  SPEAKER_01: Um the US further escalated things with the Chinese situation here today.
• 6:26
  SPEAKER_01: Market took it okay, right in stride.
• 6:28
  SPEAKER_01: It was only barely red on the soybean market today.
• 6:31
  SPEAKER_01: Um, but the U.S.
• 6:32
  SPEAKER_01: launched an investigation into China's compliance with the phase one trade deal in 2020 today.
• 6:38
  SPEAKER_01: Um they basically added a little friction there with the trade talks ahead of the meetings this weekend and next week, just based upon they kind of want to see how they did with meetings, some of the criteria that they were supposed to agree upon last time and if they actually lived up to it or not.
• 6:53
  SPEAKER_01: Uh that should have created more friction, but the market really didn't react much.
• 6:57
  SPEAKER_01: So we'll see how the weekend talks go with Besson, how the meetings primed up for Trump next Thursday, but there's going to be a lot of volatility, mainly regarding all of the news items with those.
• 7:08
  SPEAKER_01: Um we are seeing some rumors about Chinese firms trying to procure soybeans and wheat potentially out of the United States.
• 7:17
  SPEAKER_01: Couple of reasons why.
• 7:19
  SPEAKER_01: One, if trade talks go well, they will be beneficial to be buying that before those trade talks occur.
• 7:25
  SPEAKER_01: That'd be the first thing.
• 7:26
  SPEAKER_01: Two, we're very competitive.
• 7:28
  SPEAKER_01: We're 60, 70 cents cheaper than the competition like Brazil for exporting soybeans globally.
• 7:34
  SPEAKER_01: So we are very cheap exports compared to the rest of the world on all our grain products.
• 7:38
  SPEAKER_01: If they get a deal figured out, uh, that would be very beneficial for them to have something done prior to any type of grain rally.
• 7:46
  SPEAKER_01: So for them to look into it or even be potentially making some purchases right now, which it it's reported that's not happening, but with the government shutdown, it would be pretty dark.
• 7:57
  SPEAKER_01: So they could be buying small chunks or making some purchases of U.S.
• 8:01
  SPEAKER_01: soybeans without us really truly knowing at this point.
• 8:04
  SPEAKER_01: Hard to believe, but uh it could be happening, and it would be probably in their best interest too as well, just to create some cushions so they don't have to dip into their own large reserves in China uh over the next Brazil soybean crop.
• 8:19
  SPEAKER_01: The other part uh that's really worth talking about with these grain markets is uh one, we've built up this rally based on Chinese optimism around a trade deal, shrinking Iowa corn yields essentially, just to sum it up in general, and then from a seasonal perspective, October can have some good price rallies throughout history.
• 8:38
  SPEAKER_01: Um now, technically speaking, we've held some very supportive res uh support points.
• 8:43
  SPEAKER_01: If you look back at uh this last week's trade when we kind of tested that 418 December corn area, uh that held quite well and had a little bounce the last couple days.
• 8:54
  SPEAKER_01: Um but in general, we even the last go round here, the middle of the month, 10 days ago, we held some really key 410 type areas on December corn as well.
• 9:03
  SPEAKER_01: So some chart work.
• 9:05
  SPEAKER_01: We've been able to trade some really nice uh chart uh work here on the corn market and on soybeans as well.
• 9:10
  SPEAKER_01: We we held some key support areas around$10 on November.
• 9:14
  SPEAKER_01: And uh at this point at 1041, it feels like if we're gonna make an advance higher towards that 1070 area, it's gotta be on the back of a Chinese trade deal, some China buying, something along those lines, especially without a South America weather problem.
• 9:28
  SPEAKER_01: And at this point, we don't know that yet.
• 9:30
  SPEAKER_01: In a week, we still may not know that yet, but at least we'll have some answers to how this week, uh this weekend and next week's talks go.
• 9:39
  SPEAKER_01: So it should be a very volatile market in the soybeans.
• 9:41
  SPEAKER_01: It should try to determine if it's 40 cents higher or more support around that$10 range again and test that on this soybean market.
• 9:49
  SPEAKER_01: So a very pivotal point, especially right on the back half of harvest.
• 9:53
  SPEAKER_01: If you have soybeans sitting in storage facilities that have to be priced in 10 days or something, it's going to be very important and imperative that we talk about a marketing situation for those type of bushels that need to be force sold here over the next couple weeks, essentially.
• 10:09
  SPEAKER_01: So that's worth noting.
• 10:10
  SPEAKER_01: Um a few other things just outside money flow-wise, Jace.
• 10:15
  SPEAKER_01: Do you got anything on the oil market?
• 10:17
  SPEAKER_01: Really big news this week that kind of sent that thing higher.
• 10:20
  SPEAKER_01: What do you got for me?
• 10:22
  SPEAKER_00: Yeah, so we climbed about five, six dollars on that oil market this week, but it did seem to top out today and close below a couple of the moving averages there.
• 10:32
  SPEAKER_00: So it bumped against the bumped against the hundred to the penny and bounced off of it and closed below both that and the fifty.
• 10:40
  SPEAKER_00: So I have seen a pretty decent rally on all the Russian news as well.
• 10:43
  SPEAKER_01: Yeah, so what happened there?
• 10:44
  SPEAKER_01: US put sanctions on Russian oil, basically, and we rallied higher.
• 10:48
  SPEAKER_01: That's what it seems.
• 10:49
  SPEAKER_01: Pretty much that's pretty much it, isn't it, at this point.
• 10:52
  SPEAKER_01: I mean, we were probably oversold technically the way it was too getting into the 50s there.
• 10:57
  SPEAKER_01: Uh it had gone down for quite some time.
• 10:59
  SPEAKER_01: So uh fuel prices are reacting quite quickly.
• 11:03
  SPEAKER_01: Uh if you wanted to buy ag fuel today or road fuel, I mean uh uh some people are talking twenty cent jumps just in today's news.
• 11:10
  SPEAKER_01: So um a lot of uh, you know, it we went down for quite some time and it seems like price didn't move much, but the last couple days here the the prices at the at the uh uh end side at least sure skyrocketed for diesel fuel.
• 11:25
  SPEAKER_00: And when you're in the 50s, US production is not getting increased there.
• 11:30
  SPEAKER_00: So there's a little there's a little talk down south of you know cutting a little production if it stays this lean.
• 11:36
  SPEAKER_01: Is Trump gonna allow that, you think, or is he gonna keep incentivizing them to keep pumping?
• 11:41
  SPEAKER_00: I think he's gonna want them to keep pumping.
• 11:42
  SPEAKER_01: Yeah, so we'll see how that goes with that rift too, because sixty to eighty kind of the sweet spot for most oil producers, isn't it?
• 11:48
  SPEAKER_01: Especially in the US.
• 11:50
  SPEAKER_00: Yep, that's accurate.
• 11:51
  SPEAKER_01: Alright, well, uh there's gonna be a lot to talk about next week, too.
• 11:54
  SPEAKER_01: Please reach out to us if you want to talk to uh to us about anything at all regarding uh these markets.
• 12:00
  SPEAKER_01: It's very volatile times, especially in the livestock.
• 12:03
  SPEAKER_01: So it's been exciting news this week to chat with all of you on uh on managing some risk around uh this cattle market, and please, if you have any questions, just reach out.