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Funds and Fun · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_00: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_00: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_00: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: This is your host, Mike Minor.
• 0:22
  SPEAKER_00: Let's get started.
• 0:24
  SPEAKER_02: Well, good afternoon, everybody.
• 0:26
  SPEAKER_02: This is Lucas Peters filling in for Mike Minor, who's got a uh kind of an illness going through their house uh this week.
• 0:33
  SPEAKER_02: And I am joined in the podcast studios today by my good friend Jeff Hogdorn.
• 0:39
  SPEAKER_02: Jeff, how are we doing?
• 0:40
  SPEAKER_01: I think we're doing pretty good, Lucas.
• 0:42
  SPEAKER_01: Thanks for having us, having us both on, I guess.
• 0:44
  SPEAKER_02: Yeah, of course.
• 0:45
  SPEAKER_02: So thanks for joining me, Jeff.
• 0:47
  SPEAKER_02: And gonna kind of start out uh just looking a little bit at macroeconomic and uh conditions here, Jeff.
• 0:54
  SPEAKER_02: And and one thing that we were talking about before the podcast started was the strength in the US dollar uh really kind of hitting some pretty high levels that we haven't seen in a few years.
• 1:04
  SPEAKER_01: Yeah, that so that um was up again here today, pushing 50 points higher, pushing over 107.
• 1:12
  SPEAKER_01: So there's a number that I guess personally, Lucas, I didn't think we would see uh at this juncture.
• 1:19
  SPEAKER_01: Um I know everything's you know running pretty good in the U.S.
• 1:22
  SPEAKER_01: and and that's why we're pushing that index as high as we are.
• 1:26
  SPEAKER_01: But go back on a little bit of a history lesson here.
• 1:29
  SPEAKER_01: That is going to be the highest mark for this year and last year.
• 1:33
  SPEAKER_01: We did get just a little bit higher than this in 2022.
• 1:37
  SPEAKER_01: It bounced all the way up to like 114 on that index, but that was very brief.
• 1:42
  SPEAKER_01: Um, and then quickly went back down into that kind of 10102, 103 type of an area.
• 1:50
  SPEAKER_01: Before that, you have to go all the way back to um the early 2000s.
• 1:56
  SPEAKER_01: So that is a long time ago.
• 2:00
  SPEAKER_01: Um, and what's so it's kind of interesting about that, and you know, another thing I want to jump into is you know where the funds are at and what they've been up to the past week or two.
• 2:09
  SPEAKER_01: But um, they're they're heavy into the hogs, so we've got quite a bit of money been pushed into the hog market.
• 2:15
  SPEAKER_01: And you know, 2022 was actually a really good year for pigs um and for meat demand in general.
• 2:22
  SPEAKER_02: Well, it was kind of good for commodities as a whole, right, Jeff?
• 2:25
  SPEAKER_02: Yeah.
• 2:26
  SPEAKER_02: I mean, that's coming off of COVID and inflation was you know peaking about 2022, which would kind of correlate with the dollar strength, right?
• 2:35
  SPEAKER_01: Yes, I think that's exactly right.
• 2:37
  SPEAKER_01: But you know, from a baseline standpoint, you think about a high dollar and you have to think about lower commodity prices.
• 2:44
  SPEAKER_02: Yeah, that would what my simple uh insurance brain would say high dollars is generally not good for exports, generally not good for, I mean, specifically grains of being a grain farmer, uh, that's that's kind of the piece that I've always been ingrained and and uh trained in.
• 3:02
  SPEAKER_02: Uh am I wrong about that?
• 3:05
  SPEAKER_01: No, I don't think so.
• 3:06
  SPEAKER_01: Especially, you know, you have to remember the dollar index is a comparison tool to other currencies, right?
• 3:11
  SPEAKER_01: And our the big one that it compares to is the EU, which uh, you know, a lot of our commodity markets, we don't care a ton about what's going on in the EU, but it's also a signal of strength in the U.S.
• 3:23
  SPEAKER_01: I mean, we might care a little bit on the corn side.
• 3:26
  SPEAKER_01: Um, we care from the hog perspective because uh, you know, the EU has been historically a big competitor of ours in the world market, right?
• 3:34
  SPEAKER_01: So the lower their currency is compared to ours, they're in a their more competitive meat to buy.
• 3:39
  SPEAKER_01: That's changing.
• 3:40
  SPEAKER_01: Um, you know, so we're flipping over looking a lot harder at places like Brazil and watching their currency as a from a competition standpoint, both on the soybean side of the world, um a little bit on the corn, and then certainly um a growing competitor in the hog space.
• 3:59
  SPEAKER_01: Um, so you look at some of these other currencies like the Brazil, like uh Mexican, um the Japanese currencies, those are all uh also lower compared to the dollar.
• 4:11
  SPEAKER_01: So the dollar is really sticking out on this rally.
• 4:15
  SPEAKER_01: It's not just compared to Europe, it's really compared to a lot of other currencies, which you know, you think about the Mexican peso and how much um corn and hams they've been taking from us, and you really got to start to wonder, you know, will that be an impact, right?
• 4:34
  SPEAKER_01: Will that will they slow down here a little bit um because of this strength?
• 4:39
  SPEAKER_01: But the other thing, which, you know, looking backwards at 2022, the other thing that obviously the dollar index is trying to gauge is how good our economy is doing at home, right?
• 4:52
  SPEAKER_01: And like you just went through the list of reasons why 22 was a very good from an economic standpoint, and I I truly think that boiled right over into the protein demand, also.
• 5:05
  SPEAKER_01: We were really surprised, we were shorter numbers, um, especially in the pig world in 2022.
• 5:11
  SPEAKER_01: We were shrinking cattle as well, not to the levels that we are today.
• 5:16
  SPEAKER_01: Um but you know, we've we've seen some really fired up markets, and I think that was largely built on some domestic demand with maybe just a smidget um less supply side things.
• 5:29
  SPEAKER_02: Okay, so yeah, if you think back 22, we were kind of in the dollar-wise, a similar situation.
• 5:36
  SPEAKER_02: Um, and are you thinking of dollar strength right now?
• 5:40
  SPEAKER_02: We've just gone through an election, lots of speculation of what's going to be Trump's economic policy, how is that you know, exports specifically, how are those things going to play in?
• 5:52
  SPEAKER_02: Um, it seems like a lot of his policies and ideas lean towards an inflationary environment again.
• 6:00
  SPEAKER_02: Is is some of this strength built into speculation of what might happen uh or things that are have have happened already or are moving in that direction?
• 6:10
  SPEAKER_01: Well, a lot of the economic indicators are coming in fairly positive, right?
• 6:16
  SPEAKER_01: Um, you know, inflation, consumer inflation would be um probably halfway steady, I would dare say.
• 6:24
  SPEAKER_01: And then, you know, things like jobs report and GDP, everything is looking pretty good.
• 6:28
  SPEAKER_01: So I think it's some of both.
• 6:29
  SPEAKER_01: And what we hear a lot about in the marketplace today is how Trump's um a lot of his proposals or thought processes, like you said, going to be inflationary, um, whether it you know pro-American type of approach or you know, a lot of folks looking at tax cuts being potentially inflationary.
• 6:49
  SPEAKER_01: Um, so yeah, I think the marketplace has an inflation, a bullish inflation type of mindset today.
• 6:58
  SPEAKER_01: And so what right or wrong, and this is where you get kind of the tug and pull that we're that we're talking about on this podcast, right or wrong, the fund money is gonna go, they're gonna want to own some commodities in that environment, right?
• 7:12
  SPEAKER_01: And that's kind of where this discussion is headed here, of course, is you know, they are they have been increasing their volume on the buy side um throughout the commodity index.
• 7:25
  SPEAKER_01: Really, it started before the election, but it certainly has continued after the election.
• 7:31
  SPEAKER_01: So what happens?
• 7:32
  SPEAKER_01: I I think the way they think about it is okay, we want to put some more money into commodities.
• 7:37
  SPEAKER_01: Um, we want to put extra dollars in there.
• 7:39
  SPEAKER_01: It's it's a small percentage of our per portfolio, right?
• 7:43
  SPEAKER_01: But um, and then they go start boiling down into which commodities do you want to be parking your money at this time and then ebb and flow from there, right?
• 7:53
  SPEAKER_01: So you flip over and look at where they've been putting their money.
• 7:57
  SPEAKER_01: Um, hogs obviously is a big one.
• 8:00
  SPEAKER_01: They were three weeks in a row here of record length on the managed money on the hog market.
• 8:06
  SPEAKER_01: Um, that information you know is good from last Tuesday, so it's getting a little bit old and the market kind of had a dip in between there.
• 8:14
  SPEAKER_01: So we've probably lost some of that.
• 8:15
  SPEAKER_01: One of the really impressive ones that we were looking at this week, Lucas, was the money that got thrown into the corn market, you know, 88,000 longer, um, which pushed them into an over a hundred thousand managed money position.
• 8:31
  SPEAKER_01: Uh, looking over at the index fund, it's it's more mediocre.
• 8:35
  SPEAKER_01: You know, it's they're just holding a kind of a um a medium-sized position in a lot of these commodities.
• 8:42
  SPEAKER_01: They're you know, 300,000 into the corn, 100,000 into the soybeans.
• 8:48
  SPEAKER_01: Um, when some of those records, you know, are 500 and 200 respectively.
• 8:53
  SPEAKER_01: The only one that they're super long in right now is also the pigs.
• 8:56
  SPEAKER_01: So, you know, the way I think that goes for corn and hogs is okay, you want to put some money into the commodities.
• 9:02
  SPEAKER_01: Hogs have a decent story going to them, um, relatively cheap.
• 9:07
  SPEAKER_01: This is probably a few months ago when they started, relatively cheap compared to historical, right?
• 9:13
  SPEAKER_01: Um, so it's a good place to throw some money.
• 9:15
  SPEAKER_01: And those fundamentals have continued to be surprisingly supportive, and I think that's what keeps the money attention over there.
• 9:22
  SPEAKER_01: Corn, I think that's much more of a default.
• 9:25
  SPEAKER_01: There's a few interesting things going on there as far as export demand being a little bit better than expected.
• 9:34
  SPEAKER_01: But boy, you look at the dollar index getting upwards into the top 5% of where it trades.
• 9:40
  SPEAKER_01: I don't know how bullish you can be longer term on these corn exports.
• 9:44
  SPEAKER_01: Um, but you know, their yields dropped a little bit.
• 9:48
  SPEAKER_01: Um, demand looks very solid.
• 9:50
  SPEAKER_01: I think by default that market got the money.
• 9:54
  SPEAKER_01: Um, maybe continues to get a little bit of money.
• 9:57
  SPEAKER_01: You know, you look at soybeans, they're very inactive, especially on the managed money.
• 10:02
  SPEAKER_01: They're still short the bean market.
• 10:04
  SPEAKER_01: Just a lot of issues there right now, isn't there, Lucas, as you think globally.
• 10:08
  SPEAKER_02: Yeah, and and so going back to your point on corn, you'd think of the amount of money that uh the funds have put into the corn market, you'd see a bigger reaction in the price of corn.
• 10:20
  SPEAKER_02: And it is it's kind of trucked along a little bit higher, but I haven't seen a big move uh considering how short the funds were earlier in the year to where they are now.
• 10:30
  SPEAKER_02: Um probably met with a lot of farmer selling, would be my guess.
• 10:34
  SPEAKER_02: Uh right.
• 10:35
  SPEAKER_02: So, you know, you're not going to get a big move when you got people buying and selling.
• 10:39
  SPEAKER_02: Uh, but I I I like how you put that of just kind of parking your money there for now and kind of see what happens on the soybean side, uh, kind of where you went, and they that has not been as attractive.
• 10:53
  SPEAKER_02: I think that's where you look at the soybean market.
• 10:57
  SPEAKER_02: South American weather is, I mean, dang near perfect the way it looks right now for this time of the growing season.
• 11:04
  SPEAKER_02: Uh, I saw a few pictures of the crop down there, and of course a picture is not real telling, but boy, they look pretty good in the pictures that they're putting out.
• 11:13
  SPEAKER_02: Um, so the South American weather's good, crop looks like it's gonna be big.
• 11:18
  SPEAKER_02: Uh you throw that on top of the US dollar going up, probably hurting exports on beans.
• 11:24
  SPEAKER_02: The U.S.
• 11:24
  SPEAKER_02: crop was a big crop.
• 11:26
  SPEAKER_02: Uh, there's just a lot of not bullish items facing the soybean market for the American farmer, anyway, uh, right now.
• 11:36
  SPEAKER_02: And and kind of the market saw that this week.
• 11:39
  SPEAKER_02: It was a pretty tough week on the soybean side.
• 11:41
  SPEAKER_02: Um what uh what else has your uh attention as we look forward here, Jeff?
• 11:47
  SPEAKER_02: Or what other topics you think we should talk about?
• 11:49
  SPEAKER_01: I don't want to pile on the soybean thing too hard, so I'm gonna apologize in advance, I guess.
• 11:54
  SPEAKER_01: But it was a tough couple days over there as we broke into some new lows.
• 11:58
  SPEAKER_01: And just from a technical standpoint, um, it's kind of a lookout below type of a market.
• 12:04
  SPEAKER_01: Hopefully we can gain some strength in front of Thanksgiving here.
• 12:07
  SPEAKER_01: Maybe we won't have a bunch of active selling coming in here next week.
• 12:11
  SPEAKER_01: I think that's about the best we can hope for for that market, but kind of technically I don't like what I'm seeing here.
• 12:19
  SPEAKER_01: Um today's clothes wasn't bad.
• 12:21
  SPEAKER_01: Yesterday's obviously quite ugly.
• 12:24
  SPEAKER_01: So it'd be something to stay tuned to and um keep your eyes peeled on just a little bit, I guess.
• 12:30
  SPEAKER_01: Or basically, you know, from a producer standpoint on the bean side, we're we're really just hoping and waiting for something to change, right?
• 12:38
  SPEAKER_01: And that can be a long, frustrating process, I guess.
• 12:42
  SPEAKER_01: Um, you know, other than that, I I I think that's what we wanted to cover today.
• 12:47
  SPEAKER_01: Um I I I don't know exactly how important the money flow is going to be going forward, but I I think it's something to be a student of.
• 12:55
  SPEAKER_01: Um, and uh, you know, fundamentals are gonna outweigh that, certainly, in most situations, but it's gonna be something to to continue to be uh um apprised of the situation and just kind of know where that money's coming and going and and watch for it to be changing direction because it it usually uh you know once it changes, it changes quickly, but then it kind of moves that trend for a while, would be my argument.
• 13:21
  SPEAKER_02: So that's a really good point.
• 13:23
  SPEAKER_02: Something uh that we will continue to watch going forward here.
• 13:28
  SPEAKER_02: And yeah, any uh closing comments, Jeff, or are we good for the week?
• 13:32
  SPEAKER_01: I think we're good for the week.
• 13:34
  SPEAKER_01: Everybody enjoy their weekend and we'll get ready for Thanksgiving next week.
• 13:37
  SPEAKER_01: Sounds good.
• 13:38
  SPEAKER_01: Thanks, Jeff.
• 13:39
  SPEAKER_00: And thank you to all our listeners.
• 13:41
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 13:44
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:49
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:56
  SPEAKER_00: See you next time.