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Broad Commodity Overview · 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.
• 0:23
  SPEAKER_00: I've got Pat back with us here again this week.
• 0:26
  SPEAKER_00: How's it going, Pat?
• 0:27
  SPEAKER_01: Good, Mike.
• 0:27
  SPEAKER_01: How are you this afternoon?
• 0:29
  SPEAKER_00: Not too bad.
• 0:30
  SPEAKER_00: Well, it's July 26th, and I'll tell you what, there's a lot of weeks here, it seemed like through the summer that have been where we talked about a lot of the same stuff over and over, and the market seemed like they didn't show much volatility, which was a little bit different compared to most summers, I would argue.
• 0:46
  SPEAKER_00: And this week I would say, I don't know if it was just me paying attention to the market a little bit harder, Pat, or what, but seemed like volatility and market-moving action news uh came at us from all directions on whether it was the grains or the cattle market or the hog market here or even the outside market.
• 1:05
  SPEAKER_00: So I feel like we've got a a little bit of taste of everything here this afternoon, don't we, Pat?
• 1:10
  SPEAKER_01: Yeah, I think that's great.
• 1:11
  SPEAKER_01: Uh great point, great way to start this out.
• 1:14
  SPEAKER_01: We've got uh uh a little more volatility around us and and as you say coming at us from a bunch of different directions.
• 1:21
  SPEAKER_01: So I'm looking forward to uh hearing what you got to say about all that, Mike.
• 1:26
  SPEAKER_01: Perfect.
• 1:26
  SPEAKER_00: Well, let's start with the grain markets here.
• 1:28
  SPEAKER_00: Uh December corn had to make things interesting at the end of the week here after we put on a really nice rally through the grains at the beginning of the week.
• 1:36
  SPEAKER_00: We're down nine cents uh currently here, just after uh about noon on uh Friday.
• 1:42
  SPEAKER_00: So we've got December corn back to 411 after uh making some highs earlier this week at about 423 there.
• 1:49
  SPEAKER_00: And then the November soybeans leading the way.
• 1:52
  SPEAKER_00: We're at 1052, we're down twenty-seven cents this uh uh this afternoon here, Pat, putting new lows on for the move here after hitting a high earlier this week at about ten eighty-six.
• 2:04
  SPEAKER_00: So soybeans continue to really lead the way on these grain markets, which I would believe at the end of July makes a lot of sense as you look out at uh really what impacts the market at this time of the year, Pat, which would be our six to ten day forecast as we start podfill uh at this time frame, kind of as we wrapped up uh pollination for a good chunk of the United States on the corn side.
• 2:27
  SPEAKER_00: And uh the soybean market definitely seems to be pushing these grain markets a lot this week.
• 2:32
  SPEAKER_00: And I feel like we really saw it with uh a little bit of uh uh hot weather coming into next week's forecast that was really realized at the beginning of this week, Pat.
• 2:43
  SPEAKER_00: And I feel like we uh, you know, traded soybeans from the 1030 low on the November at the end of last week up to we put 55 cents on this market here over kind of uh Friday and Monday and Tuesday's trade on this November soybean contract off some uh future hot weather coming at us and some dryness.
• 3:03
  SPEAKER_00: And now that that forecast is kind of getting realized for next week that it's gonna be hot through a lot of the Midwest.
• 3:09
  SPEAKER_00: Uh we're pulling some premium back out of this market today.
• 3:12
  SPEAKER_00: So we traded the weather scare at the beginning of the week that we had for the beginning of August, and and now it's kind of uh um yeah, kind of selling the fact here coming up, I think, Pat.
• 3:21
  SPEAKER_01: Yeah, really makes sense.
• 3:22
  SPEAKER_01: I think that beans are leading the way, as you say, as as uh you know we often remind ourselves that this August uh uh or that this bean crop can in largely be determined as we go through the month of August.
• 3:35
  SPEAKER_01: So it it certainly has the most uh weather risk and opportunity as it relates to to dictating crop size is as we uh uh uh get into the month of August here, not too shortly.
• 3:48
  SPEAKER_01: And so I do think um this is the first real um and probably the last um uh d given we're at uh in the growing season here, but the first real um heat stress system for the corn belt this year and and really for the whole corn belt.
• 4:06
  SPEAKER_01: And so you so you're right, the the market was wanting to trade that pretty aggressively towards the end of last week, certainly at the beginning of this week.
• 4:15
  SPEAKER_01: And you know, going home today, the six to ten day forecast, as you say, is still for above normal temps, but I think they have lightened the pressure just a little bit as it relates to you know lows during the evenings and nights and those sorts of things too.
• 4:29
  SPEAKER_01: So maybe just a little bit of relief in the forecast as we look out in terms of of uh both these corn and soybean crops and humans and animals alike, maybe getting a little bit of a break uh uh uh based upon the the forecasted lows now.
• 4:44
  SPEAKER_00: And if you look really hard out to like the first of August, second, kind of next weekend, starting on Thursday, uh it looks like we have really good rain opportunities through the eastern corn belt coming at us as well.
• 4:56
  SPEAKER_00: So the closer we get to those, I think we're kind of plugging that back into this market too.
• 5:01
  SPEAKER_01: Yep, and so worth noting, right, we we um you know what we're talking about from um a weather scare perspective is from uh new lows that were just recently traded in in both the corn and soybean complex, and really kind of back to in some cases the top end of the range, but really kind of back to kind of pre-COVID, pre-inflation type price levels, too, right?
• 5:26
  SPEAKER_01: So, so uh the the reminder of perspective, like where we're rallying from is pretty important because what we don't want to do here is like talk ourselves into a big weather problem.
• 5:37
  SPEAKER_01: That isn't the issue at all, right?
• 5:38
  SPEAKER_01: It's really just the the the the first real weather scare, as I've said, as as you go through the growing season here, and that's from from some from some four-year lows kind of kind of levels from which we were trading.
• 5:50
  SPEAKER_00: How about the livestock market, Pat?
• 5:52
  SPEAKER_00: I think this live cattle market's been very interesting.
• 5:55
  SPEAKER_00: We fought uh either side of this trend that we've been in on an uptrend on the live cattle market.
• 6:01
  SPEAKER_00: We fought all the way back up to the top end of the trend now.
• 6:04
  SPEAKER_00: Uh one of the things I've been really watching closely has been the August futures and its connection to the cash market.
• 6:11
  SPEAKER_00: Uh we've got August futures back to 189, pretty much flat with what we're trading in the South now on cash.
• 6:18
  SPEAKER_00: So uh those two have narrowed up uh in incredibly aggressively here as uh we talked about a huge spread between the cash and the futures for a long time.
• 6:27
  SPEAKER_00: Now those two have finally pretty much come together.
• 6:29
  SPEAKER_00: And uh, you know, there's some m things worth talking about in the in the cattle market, I think, from more macro perspectives, whether it be uh, you know, uh ground beef prices being near record highs, like you mentioned this morning, or uh whether it be choice starting to fall off now.
• 6:44
  SPEAKER_00: Are we going into a into that valley where we kind of start to rebound again seasonally?
• 6:49
  SPEAKER_00: Or is this back to more normal levels on a trajectory?
• 6:53
  SPEAKER_00: And uh at this point uh it's gonna be interesting to see how uh how some of these sales react uh as we go forward here for how much uh uh risk people want to take as some of these uh come available in in the western part of South Dakota and Wyoming and Montana for some of these yearlings coming off grass.
• 7:11
  SPEAKER_00: And uh some of the really I mean, we've got some really high prices still getting traded for those things out there that have to still get looked at.
• 7:18
  SPEAKER_00: So um that market just going on in it's incredible how we've kept this uptrend back to bottom of the trade trading range, the top end, and we just haven't really broke out or found anything interesting there yet.
• 7:30
  SPEAKER_01: Well, is it worth noting that the cattle complex is like is the opposite of the corn complex, right?
• 7:35
  SPEAKER_01: Like we just we just said, well, we're willing to trade some hot weather that probably isn't isn't threatening, it's just a a warm forecast, and we're willing to to to put a little bit of of weather premium back into a market that's that's trading uh more or less at the bottom end of a four or five year range, whereas on cattle is is the exact opposite, right?
• 7:56
  SPEAKER_01: I mean, we're challenging and trading top end of of historical range or on the the right side of the cattle cycle to to get these pricing opportunities for for beef producers.
• 8:08
  SPEAKER_01: But from these levels, the demand side of the equation has got to be right.
• 8:13
  SPEAKER_01: And so, as you mentioned, we've seen a little correction in box beef values over the last 30 days or so, and it might just be a technical correction, just the ebb and flow of things, and a little bit of of uh softer meat demand uh uh coming uh coming out of the Fourth of July holiday there.
• 8:31
  SPEAKER_01: Or it might be a bigger picture issue at stake here.
• 8:35
  SPEAKER_01: And and so um, you know, from a cattle complex perspective, I would just say for cattle producers out there, um, you mentioned that you know, for the feedlots, there's some decent opportunities out there to to to manage some margin and and uh and because of the the uh the previous observation, I would strongly encourage you to consider such things and and for the cow calf guy uh really the the same things at play here.
• 9:02
  SPEAKER_01: But from a larger um picture perspective, you know, what's going on as it relates to economic activity here in the U.S.
• 9:11
  SPEAKER_01: and disposable income for consumers and and and what happens with interest rates and all of those things is critically important to really all of the commodities that we care most about, Mike.
• 9:21
  SPEAKER_01: So can you comment as we kind of wrap up here today a little bit about uh inflation data that came out today and and where the the latest is as it relates to to likely Fed actions and and Fed opinions?
• 9:34
  SPEAKER_00: Yeah, so an important gauge for the Federal Reserve uh in showing inflation, that eased slightly from a year ago uh in June here.
• 9:44
  SPEAKER_00: So that's something that the Fed uh watches very closely when looking at interest rate cuts and and the possibility of those going forward here is uh we're all anticipating we should start to see in September.
• 9:55
  SPEAKER_00: And today's news was right at expectations.
• 9:58
  SPEAKER_00: Uh the PCE was uh basically two and a half percent up from a year ago, so right in line of expectations, and it should really leave that door open for an interest rate cut here in September, Pat.
• 10:10
  SPEAKER_00: So things are slowing down a little bit, but it's at a point too where it's not too much to be concerned.
• 10:16
  SPEAKER_00: So it's uh, you know, the soft landing that we've talked about, or whatever hard, no landing, you know, it looks like soft may be pretty well in play at this point.
• 10:24
  SPEAKER_01: And we've been talking about this for a couple of years now, and the and the Fed is doing a nice job, I think, of of of telegraphing, uh talking about what their strategy plan might be as as we go forward here.
• 10:38
  SPEAKER_01: And so that is providing a nice calming effect, I think, to to the equities market and and uh and money markets and those sorts of things.
• 10:47
  SPEAKER_01: And so and so anyway, I I am I too am cautiously optimistic that they're gonna be able to kind of meander their way through this this uh challenging time of of uh you know managing inflation but not causing a significant slowdown in economic activity.
• 11:02
  SPEAKER_01: So we'll see how that plays out.
• 11:04
  SPEAKER_01: Just real quick to wrap up.
• 11:05
  SPEAKER_01: I know we're going a little long here today, Mike, but last week's um podcast, we we talked about internal and external factors as it relates to impacting these markets, one of which was was um the uh uh US uh election here.
• 11:20
  SPEAKER_01: And I would just just say that week over week here that trend has continued, right?
• 11:26
  SPEAKER_01: Like we you can make an argument that that you could put a little bit of a premium in these grains because of the the current forecast, like we started that like we talked about at the beginning of this podcast.
• 11:36
  SPEAKER_01: But you can also make an argument that uh um well the polling data would suggest that the uh the presidential election is closer this Friday than it was last Friday.
• 11:46
  SPEAKER_01: Just leave it at that, right?
• 11:47
  SPEAKER_01: But it but that too um would would probably spur just a little bit of of manage money flow back into commodities.
• 11:55
  SPEAKER_01: And so it'll be interesting to see, you know, as we look at open interest and and uh and and manage money activity week over week here, um, if there's much of a change in that.
• 12:05
  SPEAKER_01: But I it I think it's important that we just sort of kind of remind ourselves that uh both these internal and external factors are adding to the volatility in these markets today.
• 12:14
  SPEAKER_01: And and uh and again, as you kind of led this thing out, Mike, that's exactly right.
• 12:18
  SPEAKER_01: I think we're we're kicking it up a little bit in terms of of all the different items to trade here.
• 12:23
  SPEAKER_00: And it's important to note how all of those internal and external factors have lined up so well with one and another.
• 12:30
  SPEAKER_00: Like weather and the election progress have correlated really well with each other so far.
• 12:35
  SPEAKER_00: So we've had a mass effect on the market with where when the election news is pushing the market, weather's pushing it in the same direction.
• 12:42
  SPEAKER_00: We haven't seen them try to go against each other at all yet, really.
• 12:45
  SPEAKER_00: Which likely will happen at some point.
• 12:46
  SPEAKER_00: Yeah.
• 12:47
  SPEAKER_00: All right, thank you for your time, Pat.
• 12:48
  SPEAKER_00: Thank you.
• 12:49
  SPEAKER_00: And thank you to all our listeners.
• 12:51
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 12:54
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:59
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:06
  SPEAKER_00: See you next time.