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Transcript

WASDE · 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: Today is July 12th.
• 0:25
  SPEAKER_00: I've got Lucas Peters with me here today.
• 0:27
  SPEAKER_00: How's it going?
• 0:28
  SPEAKER_01: Well, it's going pretty well, Mike.
• 0:30
  SPEAKER_01: Always good to join you in the ProAG podcast studio.
• 0:33
  SPEAKER_00: It has been a while, so I want to talk a little bit about the WASDA report and a little bit about crop conditions at this current standpoint, Lucas.
• 0:41
  SPEAKER_01: Gotcha.
• 0:42
  SPEAKER_01: Well, let's start with crop conditions.
• 0:44
  SPEAKER_01: How about that, Mike?
• 0:46
  SPEAKER_00: Are you okay with that?
• 0:46
  SPEAKER_00: I'm good with that.
• 0:47
  SPEAKER_00: What do you see out there?
• 0:48
  SPEAKER_01: Yeah, so over the last week or 10 days, uh, you know, with the 4th of July holiday in there and um and then we at uh Pro Egg we had an opportunity to go over to the NPIC uh pork uh kind of convention there in the Wisconsin Dells this week.
• 1:07
  SPEAKER_01: Got to see and talk to a lot of uh farmers uh across the United States.
• 1:12
  SPEAKER_01: Always good to to engage in those conversations, but the nice thing that does it gives me an opportunity to drive out of the backyard and get a little bigger picture on what this crop looks like, uh, but also talk to people around the country to see what their crop looks like.
• 1:29
  SPEAKER_01: And I'll tell you what, Mike, I I would say um I I maybe I have a little bit of too much backyard itis, but boy, if through the month of June, especially that you know 20th of June on when there was a lot of excessive rainfall in our area specifically, we kind of got down on the way the crop looked, right?
• 1:51
  SPEAKER_01: Uh boy, there was a lot of standing water, um, flooded areas, corn looked yellow, soybeans were stunned, and you can still see that today uh locally and and especially as you go across I-90 in southern Minnesota.
• 2:10
  SPEAKER_01: But, and maybe this is not a surprise to anybody that looks at the market or lives outside of that area, uh you get out of that area, and boy, there's some really good-looking fields in uh I'm gonna say southern South Dakota, out of the flood zone, uh northern South Dakota, where it's not where it was planted, um even greater Minnesota, where you've avoided the heavy rain, stuff looks good.
• 2:37
  SPEAKER_01: And then you start talking to some customers from eastern Iowa, Illinois, Indiana, Ohio, Nebraska, and the general theme is man, our crop looks really good.
• 2:50
  SPEAKER_00: Illinois, I mean, record uh yield potential is what I keep hearing for those guys in particular, but that's uh and everybody I talk to would agree with that.
• 3:01
  SPEAKER_01: The the way the way it's set up, getting dry they were getting dry, uh, and you're looking at a little bit of heat building in, and then the remnants of the hurricane come and it rains two to five inches across uh the key area of Illinois.
• 3:14
  SPEAKER_00: So you're telling me the worst crop is a crop that you drove through from Laverne, Minnesota to Wisconsin, basically.
• 3:22
  SPEAKER_01: I would say from Laverne, Minnesota to Albert Lee, Minnesota is going to be kind of the the epicenter that I saw uh for the worst-looking crop this year.
• 3:32
  SPEAKER_01: Um you know, the uh maybe that's uh not a surprise when you look even at the crop condition scores, right?
• 3:39
  SPEAKER_01: Like Minnesota is a little bit lower than maybe what we expect.
• 3:43
  SPEAKER_01: But um, yeah, I I don't know.
• 3:46
  SPEAKER_01: We talked to some people, a lot of different people from a lot of different areas.
• 3:49
  SPEAKER_01: Corn and beans both really looking good.
• 3:52
  SPEAKER_01: Uh wheat yields uh that stuff that's getting combined.
• 3:56
  SPEAKER_01: Um I talked to a few guys uh on a custom combine crew.
• 4:00
  SPEAKER_01: Boy, the yields are really well.
• 4:02
  SPEAKER_01: The wheat that hasn't been harvested, yield potential looks really good.
• 4:07
  SPEAKER_01: Uh some uh double crop beans going on uh happening and going in there uh in the east.
• 4:13
  SPEAKER_01: Um they're uh yeah, you kind of get out of our backyard, and I would say most of the U.S.
• 4:20
  SPEAKER_01: is having a pretty good year.
• 4:22
  SPEAKER_01: Probably not a surprise since uh lowest acres I've had in a drought in quite some time as well, Mike.
• 4:28
  SPEAKER_01: So um, so I guess the uh other side of it, the year isn't over.
• 4:32
  SPEAKER_01: Um, we are gonna have a little bit of a heat spell here.
• 4:36
  SPEAKER_01: There's gonna be pockets that are gonna hope for a shower uh inch of rain to carry them through pollination.
• 4:42
  SPEAKER_01: You know, along uh just out uh actually seeing some customers today, quite a few cornfields throwing out some tassels, seeing a few silks coming out uh locally.
• 4:50
  SPEAKER_01: So we'll start seeing that in earnest over the next two weeks.
• 4:54
  SPEAKER_01: And of course, that's a very critical time.
• 4:56
  SPEAKER_01: I would say we have the subsoil moisture built up locally, and a little heat isn't gonna hurt us too bad, but we'll see how excessive it gets.
• 5:04
  SPEAKER_01: So generally, I'd say the crop looks good.
• 5:07
  SPEAKER_01: Um, unfortunately, the market, I think, uh sees that as well, Mike, right?
• 5:11
  SPEAKER_01: And uh it's been been kind of a rough spell on the grains.
• 5:15
  SPEAKER_01: Uh and then we had a WASDA report come out today, too.
• 5:19
  SPEAKER_01: So July Wazday is we were just talking, maybe a little bit of a snoozer report generally.
• 5:26
  SPEAKER_01: Uh was there anything that surprised you in uh the report that was released today?
• 5:32
  SPEAKER_00: Yeah, so a report came out at 11 here.
• 5:34
  SPEAKER_00: Soybeans uh really a little bit red at the end of the day, down about two cents at 1065.
• 5:41
  SPEAKER_00: The corn market closed up four cents on the December, so almost 415, which was a win.
• 5:48
  SPEAKER_00: Um at this point, the the corn market had the big mover and shaker for a report out of uh all the commodities, I'd say.
• 5:56
  SPEAKER_00: Um corn came out with increased usage, so they moved uh old crop demand on corn up 75 million bushels on corn for feed and residual, and then new crop as well, they moved up 75 million bushels, so 150 million bushel change there.
• 6:14
  SPEAKER_00: Uh, some of those numbers uh came through the grain stocks report, and then obviously you add in the acreage, uh new added acreage, and somehow we were able to keep corn ending stocks for this next year at uh 2.09 billion bushels, and now that is a lot still, too over two billion bushels.
• 6:35
  SPEAKER_00: However, that's a win considering the fact that we added a million and a half acres, planted Lucas, and we kept ending stocks actually just slightly lower, about five million bushels lower than what we had for ending stocks in uh the June report.
• 6:50
  SPEAKER_00: So for corn, big win on the uh on the demand side as they move those numbers up a little bit.
• 6:58
  SPEAKER_00: And uh also exports they moved up just a smidge on old crop there and new crop as well, which makes sense given the pace that we've had.
• 7:07
  SPEAKER_00: We're just slightly above the needed pace for estimates that uh restarts uh the marketing year and uh in September.
• 7:14
  SPEAKER_00: So coming uh late enough here where they can start to dial that in, maybe just a little bit anyway.
• 7:19
  SPEAKER_00: So corn had a friendly report, uh, a little bit friendly, anyways, with demand getting increased there.
• 7:25
  SPEAKER_00: The soybean side for the United States, we were able to uh change acres a little bit lower, so that lowered production, and then beginning stocks uh as well just dropped a smidge.
• 7:37
  SPEAKER_00: So we were able to keep ending stocks at 435 million bushels versus 455 last uh in the June report there, so a little bit lower than expectations on corn and soybean ending stocks for the United States, and uh we were able to get through today's report without too much of a bloodbath uh when it came to these futures, which uh it was a concern, right?
• 8:00
  SPEAKER_00: We were bucking uh, you know, some of the lowest prices we've had in quite some time.
• 8:05
  SPEAKER_00: Uh December corn, right at about that four dollar range.
• 8:08
  SPEAKER_00: Are we gonna buck under and be in the threes or not the rest of the year?
• 8:12
  SPEAKER_00: So uh big report to keep us out of that.
• 8:14
  SPEAKER_00: And then on the soybean side, we're below 11 bucks.
• 8:17
  SPEAKER_00: I mean it pretty simple there.
• 8:19
  SPEAKER_00: So um, you know, we got some help today for these futures to get a little bit of a rally.
• 8:24
  SPEAKER_00: Um the wheat side probably held the corn rally back a little bit today, I would say.
• 8:29
  SPEAKER_00: Wheat did not have a fantastic report, pretty much all the categories were higher than expectations.
• 8:35
  SPEAKER_00: So if one of my talking points there after the report would be the fact that, you know, maybe corn could have done a little bit more if wheat didn't have uh such a bad report as well.
• 8:44
  SPEAKER_00: So those were a few of my main talking points after the WAS day today, and uh some of these next retracement levels, you know, there was some resistance right under 417 on December corn today that we hit up against and couldn't quite get through.
• 8:58
  SPEAKER_00: And then that next spot at 425, it'll be interesting to see if we could bounce back up to that or not.
• 9:04
  SPEAKER_00: But at this point, a lot of uh a lot of corn still out there, a lot of soybeans still out there, uh, but it didn't get worse today, and it left uh, you know, yeah left the door open for some maybe challenges and weather uh at the end of July here, maybe into August as well.
• 9:21
  SPEAKER_00: I I really think that the weather was a big factor this week at the start of the week, getting the hurricane and pushing rains into Illinois, Indiana, and Ohio and Michigan, that stretch there was a really big timely rain for them, and it hit perfectly geographically for needed areas that needed rain at the right time.
• 9:40
  SPEAKER_00: So that was a big bearish influence on prices this week.
• 9:43
  SPEAKER_00: And for us to escape through this report, not changing yield at all yet, and keeping ending stocks slightly lower than we had in June on corn and soybeans.
• 9:52
  SPEAKER_00: I mean, I think that was a bullish win for these uh commodities.
• 9:56
  SPEAKER_00: Now, uh what are the funds gonna do about it?
• 9:59
  SPEAKER_00: We're at a record position short on managed money for corn, soybeans not far off.
• 10:03
  SPEAKER_00: We're uh adding to those aggressively, it looks like.
• 10:06
  SPEAKER_00: So when I look forward at uh the funds, maybe they are gonna struggle to add too many more shorts at this point.
• 10:13
  SPEAKER_00: Problem is in the June uh quarterly stocks report, it showed that we had three billion bushels left of farmer corn still in the grain bins, Lucas.
• 10:21
  SPEAKER_00: Yeah, and that's almost since 1988.
• 10:24
  SPEAKER_00: So even if we do get a little bit of a pop here with some short covering of funds, I'm concerned that farmer selling is gonna hold that rally back a little bit.
• 10:33
  SPEAKER_00: Uh we'll see what happens, but uh any any future short covering rally that's got uh that's got my uh attention anyways when it comes to that offsetting factor.
• 10:43
  SPEAKER_01: Well, and it it's gonna be hard.
• 10:45
  SPEAKER_01: Like I said, it was it was nice to not have another piece of bad news to hit the market on a Friday.
• 10:50
  SPEAKER_01: It was at least held it a little bit together.
• 10:53
  SPEAKER_01: And all the corn uh that is in and soybeans for that matter that are in the bins uh more than usual this time of year, with the way that looks like we got a crop coming, that corn's more than likely gonna have to get to market at some point.
• 11:07
  SPEAKER_01: We can't carry that much over in a farmer's bin uh into the next year.
• 11:12
  SPEAKER_01: Uh, and so any sort of rally is going to be met with pretty heavy selling, you would think.
• 11:17
  SPEAKER_01: Um and something to probably watch over the next month and a half as we rapidly approach harvest of 24.
• 11:24
  SPEAKER_00: All right.
• 11:25
  SPEAKER_00: Well, any final thoughts that you can think of today, Lucas?
• 11:28
  SPEAKER_01: Nope, I think we're good.
• 11:29
  SPEAKER_01: We finally got a little heat uh here in the north, which should help uh help this crop move along a little bit, maybe get us a little closer to average of where we should be on heat units.
• 11:38
  SPEAKER_01: And uh yeah, so stay safe in the heat and enjoy your weekend, Mike.
• 11:42
  SPEAKER_00: All right, awesome.
• 11:43
  SPEAKER_00: On the risk management side, I would just say right now's a really good time to uh reevaluate your plan, look at some option opportunities out in November soybeans and December corn.
• 11:53
  SPEAKER_00: Uh some really good uh option strategies I like today that I'd love to talk to you guys all about.
• 11:58
  SPEAKER_00: So give me a holler and uh let's walk through a few of those.
• 12:01
  SPEAKER_00: Have a good weekend.
• 12:02
  SPEAKER_00: And thank you to all our listeners.
• 12:04
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 12:08
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:13
  SPEAKER_00: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:19
  SPEAKER_00: See you next time.