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Honing in on the Grain Market · 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 grain news you need right now.
• 0:11
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 0:23
  SPEAKER_02: All right.
• 0:23
  SPEAKER_02: Today is July 17th.
• 0:25
  SPEAKER_02: I've got Pat and Jaden here with us today.
• 0:27
  SPEAKER_02: We're going to talk about the grain market.
• 0:29
  SPEAKER_02: We've got a ton of great things to cover today, some really big picture stuff.
• 0:33
  SPEAKER_02: Uh, how's it going today, guys?
• 0:35
  SPEAKER_03: It's going good.
• 0:35
  SPEAKER_03: Thanks for letting me be part of your deal there, Minor.
• 0:39
  SPEAKER_03: I appreciate it.
• 0:39
  SPEAKER_01: It's always fun to have three on instead of two.
• 0:42
  SPEAKER_02: That is for sure.
• 0:43
  SPEAKER_02: So let's just start with a little bit of what we've seen here.
• 0:47
  SPEAKER_02: Uh more macro level, very uh 30,000 foot view looking on this crop because Pat, over the last few months, we've had a very different change of pace and belief in this corn market, haven't we, from an overall trading perspective?
• 1:02
  SPEAKER_03: Yeah, I'll just I'll tell you, I think like leading into this growing season, right, in in March or April, and if we went back and listened to a podcast or two, we we probably could uh um we we probably could uh uh get this indication that I'm about to to articulate here, which is you know what, we we as we've gone through this year, we've managed to flex into about 250 million more bushels worth of export business than what wasn't anticipated a year ago for this crop year.
• 1:32
  SPEAKER_03: And and so um and and we and we kept saying things like, look, we're on year number three of growing above trend line trend to above trend line yields here in the crops here in the US.
• 1:46
  SPEAKER_03: And uh, you know, while the projected ending stocks is quote unquote comfortable, it's not burdensome, especially again given the backdrop of growing some pretty nicely sized crops.
• 1:58
  SPEAKER_03: And then we were saying things like, you know what, demand is sneaky good.
• 2:03
  SPEAKER_03: And uh the last stocks report that came out, Jaden, it it solidified that, right?
• 2:08
  SPEAKER_03: Like it, like we provided further evidence, you know, that that uh you know, either last year's production was a little bit off or feed disappearance is a little bit better.
• 2:18
  SPEAKER_03: I tend to think that maybe last year's crop maybe wasn't quite as big as as as as advertised.
• 2:23
  SPEAKER_03: But nonetheless, um the uh the uh the the case for for building in the bull camp, I I argued prior to the beginning of this growing season was was uh was a a reasonable possibility, especially if you know we did end up wanting to trade some weather issues and those sorts of things.
• 2:44
  SPEAKER_03: And so um so we got a little something going on there, right?
• 2:47
  SPEAKER_03: We did get D scorn to trade uh you know over five bucks for uh a brief period of time early, right?
• 2:53
  SPEAKER_03: And and and so we started to to have the you know the the market started to lean into that that um that thought process, you know, we we almost need to grow a trend line or better crop, right?
• 3:05
  SPEAKER_03: Just to maintain not just US um ending stocks, but but global stocks as well.
• 3:12
  SPEAKER_03: And so for a while here in the last four months, we would lean towards if we're finally going to break out of this three-year trading range meaningfully, it's to the top side.
• 3:22
  SPEAKER_03: Well, then we get into you know the month of June, if get the crop planted in the Eastern Corn Belt, things start to look a little bit better.
• 3:29
  SPEAKER_03: And at the same time, you know, we're starting to see a little bit of a of an increase in US dollar currency, starting to make us a little less competitive on the export front.
• 3:39
  SPEAKER_03: And, you know, I uh when we took off and and uh flew around uh um the corn belt there the last week of June, you know, I kept sort of challenging myself, well, geez, what would I rather have?
• 3:53
  SPEAKER_03: Would I rather have the crop in the Western Corn Belt that looks amazing uh, you know, for June 25th, but trending drier, right?
• 4:03
  SPEAKER_03: Living on the edge, going into the month of July without the opportunity potentially, right, for for some rain and now heat, those sorts of things.
• 4:12
  SPEAKER_03: Or would I rather have the eastern corn belt crop that um wasn't off to the best start, had some planning delays?
• 4:19
  SPEAKER_03: You can see some holes in the field out there with you know drowned out spots and uh and a stunted you know crop around those drowned out spots.
• 4:26
  SPEAKER_03: And so wondering about uh, well, geez, which crop would I rather have on June 30th, right?
• 4:31
  SPEAKER_03: Ready for July, uh, but doesn't look so good or looks great and living on the edge.
• 4:36
  SPEAKER_03: Well, here we are two weeks later, and they're both doing pretty good.
• 4:39
  SPEAKER_02: They've both improved really for the city.
• 4:41
  SPEAKER_02: Exactly right.
• 4:42
  SPEAKER_03: So the answer is I'll take either one of them, right?
• 4:44
  SPEAKER_03: Yeah, is is is kind of how it seems like that that uh that's turning out.
• 4:48
  SPEAKER_03: But would just say that the threat at the time was uh-oh, right?
• 4:52
  SPEAKER_03: Like if we can't repeat last year's exports, and we do end up, you know, growing a crop that could potentially be four or five, six bushels above trend.
• 5:02
  SPEAKER_03: Not forecasting that today, but just trying to make the point that that if if that um was a possibility, maybe we'd take this three-year stretch of 425 on the bottom side, 475 on the top side, and we break out to the bottom side potentially.
• 5:19
  SPEAKER_03: How are we gonna flex into some additional demand?
• 5:21
  SPEAKER_03: And so, and so a couple weeks ago or three weeks ago, the threat of that possibility was there.
• 5:27
  SPEAKER_03: And in fact, Deast Corn traded under 430, leading up to that stocks and acres report that I referenced earlier.
• 5:33
  SPEAKER_03: So here we sit today, three weeks later, and um and it seems as though, fellas, that perhaps the most logical outcome is that um, you know, while we we we we maybe have taken some top-off um yield possibility or potential in this crop given um July weather here, and I sure'd like for you guys to talk about that a little bit just as it relates, especially to where we are at, where we thought we were a year ago.
• 6:03
  SPEAKER_03: Um so so maybe we have taken the top side off of this thing a little bit in terms of potential yield.
• 6:09
  SPEAKER_03: Um we probably have solidified ourselves to the point where um we're not incredibly concerned about a major problem or a below trend line yield event.
• 6:20
  SPEAKER_03: So have we scrunched down the yield potential of this crop and therefore also sort of scrunched down the potential for us to to trade out of this this three-year trading range we've been in for the last three years?
• 6:33
  SPEAKER_01: Yeah, but I would I would for sure echo that.
• 6:36
  SPEAKER_01: I think we have, you know, maybe stretched uh to the top side of this yield potential.
• 6:40
  SPEAKER_01: And I really like looking at crop ratings.
• 6:43
  SPEAKER_01: So if you guys remember last year in the August was the USDA did predict that the national corn yield would be a 188 yield.
• 6:51
  SPEAKER_01: So when you do look at these crop ratings, you know, the U.S.
• 6:53
  SPEAKER_01: as a whole, 6% below last year, that's 6% basically below a 188 yield.
• 6:59
  SPEAKER_01: And the states that stand out, you got Nebraska below last year, Illinois, and Iowa.
• 7:04
  SPEAKER_01: So um we'll we'll definitely be watching that here going forward.
• 7:09
  SPEAKER_02: As you start off a marketing year, there's typically your most amount of unknowns at the beginning of the year when you're getting the crop planted.
• 7:18
  SPEAKER_02: What geopolitical issues are there going to be?
• 7:20
  SPEAKER_02: This year it seemed like it was max everything.
• 7:23
  SPEAKER_02: You had max potential geopolitical issues, whether it be China trade, whether it be Iran and the situation there.
• 7:31
  SPEAKER_02: As you develop the crop and become more of a known on yield, which will really narrow that in over the next two, three weeks here through the pollination window, uh, that'll become more of a known.
• 7:43
  SPEAKER_02: I would argue our window has now shrunk from you know a 188 or 190, even got talked to, or sub-180, is probably like a 182 to a 186 today that we've shrunk it to.
• 7:55
  SPEAKER_02: So that's becoming a little bit more of a known.
• 7:57
  SPEAKER_03: Right.
• 7:57
  SPEAKER_03: I really appreciate the way that you're saying that, Mike.
• 7:59
  SPEAKER_03: I I uh and great points, Jaden, as it relates to to crop conditions, uh scores, and those sorts of things.
• 8:06
  SPEAKER_03: But that your point is it um like what resonates with me is like we've all learned through the years that that crop, the corn crop, soybeans two, but the corn crop has its maximum genetic potential when it's in the bag, right?
• 8:19
  SPEAKER_03: Before you plant it.
• 8:21
  SPEAKER_03: And and uh and then weather and everything else, environment uh chips away at it.
• 8:26
  SPEAKER_03: Sometimes management practices, right?
• 8:28
  SPEAKER_03: All of those things sort of chip away as we go through the growing season.
• 8:32
  SPEAKER_03: And the markets are similar in that sense, right?
• 8:34
  SPEAKER_03: You have the maximum amount of uncertainty before you know the growing season starts, and then we start to chip away and start to hone ourselves into a little bit more definition, right, in terms of what that supply is, and and and not uncommon actually for the markets to react to that.
• 8:50
  SPEAKER_02: Absolutely.
• 8:51
  SPEAKER_02: And if it, Kate, if you pull up a December corn chart and go back to like the first of the year, it's kind of interesting because the way I would sum this up would be on January 10th to 13th through that stretch there where you had that spike low.
• 9:04
  SPEAKER_02: That was after the WASD airport in January there, right about where his cursor's at.
• 9:08
  SPEAKER_02: You put a spike low in, and then we never traded below that mark here until the end of May, beginning of June again.
• 9:15
  SPEAKER_02: Now we just add a quarterly stocks report that we put another major low in.
• 9:19
  SPEAKER_02: Now we've traded substantially off of that again.
• 9:21
  SPEAKER_02: And it illustrates it well because we had max amount of unknown potential in that after that January WAS day there.
• 9:28
  SPEAKER_02: We started to come into a lot of issues potentially uh at RAN, oil, um, crop size, things like that, planning, obviously, which ended up going fine.
• 9:37
  SPEAKER_02: And now we've started to get a few more rains kind of through uh that stretch that we saw in the beginning of June helped push things down.
• 9:45
  SPEAKER_02: Oil really pulled back through that time frame.
• 9:48
  SPEAKER_02: Now we've started to pop back up a little bit.
• 9:50
  SPEAKER_02: And a few of those reasons I would argue is when I look at what a 182 to a 186 yield does, Pat, I see somewhere between a 10% stocks to use ratio up to a 13% stocks to use ratio.
• 10:03
  SPEAKER_02: You can pull up the the um supply and demand chart there, um, yeah, the two over.
• 10:09
  SPEAKER_02: Um that one right, the one below.
• 10:11
  SPEAKER_02: Yep, that one right there.
• 10:13
  SPEAKER_02: You can see so like a 180 to a 186 yield high and low there, you can see anywhere between about a 10% stocks to use ratio to a 13%.
• 10:21
  SPEAKER_02: And those are two very substantial key markers as well, because once I get below 10% stocks to use ratio and the chart to the left of that there, Cade, historically that would suggest price somewhere around, you know, uh positive five bucks.
• 10:38
  SPEAKER_02: It becomes a lot more erratic in that area.
• 10:40
  SPEAKER_02: Once I get down to a 13%, it's very difficult for corn to really try to be above four bucks, Pat.
• 10:46
  SPEAKER_02: And we're really honing this in now that we're probably very comfortable in this range around the middle four type area on this corn crop, as long as what we know today kind of ends up staying true from here on out.
• 10:59
  SPEAKER_02: We're honing that in a little bit.
• 11:01
  SPEAKER_03: Yeah, exactly right.
• 11:02
  SPEAKER_03: And I and and so I and and and I think the point of this podcast is is that 180 to 186, that likely is the outside range in terms of what the potential is, right?
• 11:14
  SPEAKER_03: And and so um the the highest probability is probably a little bit narrower than that.
• 11:20
  SPEAKER_03: I would tend to lean towards the top end of that of that yield potential, um, just uh um and just giving credit to the genetic potential of today's technology to uh um to deal with with uh you know the extreme amount of heat um that that uh you know we're dealing here with the month month of July, but that's certainly the debate, right?
• 11:42
  SPEAKER_03: That's what it's all about, right?
• 11:43
  SPEAKER_03: Is is is to is to figure is to figure that out.
• 11:46
  SPEAKER_03: I do think it's also worth um mentioning in terms of relatively recent developments.
• 11:51
  SPEAKER_03: Um we do have um a crop problem developing in in Europe, um, uh particularly in France and wheat production areas.
• 12:01
  SPEAKER_03: And we do um also have uh um a new round of concerns and issues as it relates to the whole uh Russia-Ukraine engagement uh war and uh um and and Russia's uh uh challenge as it relates to uh um exporting wheat, and and and Russia is the the largest wheat exporter in the in the world, right?
• 12:22
  SPEAKER_02: Out of all the things I was expecting us to trade the last two weeks, that wasn't really in my item.
• 12:27
  SPEAKER_02: We haven't traded the Russia-Ukraine war in a very long time.
• 12:30
  SPEAKER_02: So I was very surprised that we actually got to trade that a little bit the last two weeks.
• 12:35
  SPEAKER_02: And because otherwise it's it's been very consistent that we continue to trade weather China and Iran headlines in this grain market for sure.
• 12:43
  SPEAKER_03: All right, so we're losing a little bit of volatility here, um where we would argue, right?
• 12:46
  SPEAKER_03: Maybe again, sort of honing in on crop size, maybe we can feel a little bit better about potential disappearance uh uh globally for U.S.
• 12:56
  SPEAKER_03: corn production in particular, um, soybeans as well, as when we start to consider the the recent uh positive developments as it relates to China.
• 13:05
  SPEAKER_03: But nonetheless, as as uh you know for for for our row crop producers, uh fellas, what's the best way to to uh uh you know, what should we be thinking about here as as we're starting to um feel a little bit better potentially about our crop prospects, but but what type of marketing strategies should we be focused on for our group?
• 13:26
  SPEAKER_01: Yeah, but I really like honing in, you know, see see what you know maybe uh you know bump up your APH a little bit.
• 13:33
  SPEAKER_01: Maybe we we are expecting, especially here in Minnesota, to have an above APH yield.
• 13:37
  SPEAKER_01: So start to kind of plan for that.
• 13:39
  SPEAKER_01: And for bushels that need to come out of the combine, I mean that's the first priority that need to go straight to the elevator using either options or futures.
• 13:47
  SPEAKER_01: I really like today.
• 13:48
  SPEAKER_01: And the soybean side of things as well.
• 13:50
  SPEAKER_01: You know, continue to see demand there from China, can continues to keep this uh market propped up.
• 13:55
  SPEAKER_01: So really like making sales there around that$12 area.
• 13:59
  SPEAKER_02: And with the soybean side, too, with some recent China activity lately, we've seen some very aggressive opportunities on the rail side of things for harvest.
• 14:09
  SPEAKER_02: Uh, it looks like October in particular, it's mainly just designated so far to soybean trains.
• 14:15
  SPEAKER_02: So there are some good pushes that are happening in the Western corn belt here today for soybeans coming out at harvest.
• 14:22
  SPEAKER_02: So that's been a big talking point of mine lately with Brocrop producers on managing those harvest-delivered bushels at a decent futures price today.
• 14:30
  SPEAKER_02: And actually, we're getting bases to come along with us pretty well.
• 14:34
  SPEAKER_02: So on that front, that's been very important.
• 14:36
  SPEAKER_02: Um, the December corn, we're still bumping in an area of significant resistance.
• 14:40
  SPEAKER_02: You've had plenty of moving averages right around 465 here.
• 14:44
  SPEAKER_02: So uh we're really trying to break through this Hunter Day kind of area at 473.
• 14:49
  SPEAKER_02: I'm gonna be watching that pretty closely on December corn here, Pat.
• 14:52
  SPEAKER_03: Excellent.
• 14:53
  SPEAKER_03: That sounds great.
• 14:54
  SPEAKER_03: Good advice.
• 14:54
  SPEAKER_03: Uh, and just a reminder to everyone out there uh um that uh um would invite you to uh the opportunity for real crop producers, uh livestock, cattle, hog producers across the country.
• 15:06
  SPEAKER_03: We've uh um recently introduced a uh a wonderful platform called Proeg Power that allows for us to um easily track uh um positions and and help you make good decisions uh um for your operation and and uh would encourage the opportunity for anyone to uh engage with us and and learn about the new technology that's available to help us make good decisions for your operation.
• 15:31
  SPEAKER_02: And to get in contact with us, please click the link on the description below to get things like our daily market commentary and other market research info as well, or go to a professionalketing.com.
• 15:42
  SPEAKER_02: Thanks, everyone.
• 15:43
  SPEAKER_02: Thank you guys.
• 15:44
  SPEAKER_03: Thank you.