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Report Day · 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 June 28th and it's report day.
• 0:26
  SPEAKER_00: How's it going, Pat?
• 0:27
  SPEAKER_01: Good.
• 0:27
  SPEAKER_01: How are you this afternoon, Mike?
• 0:29
  SPEAKER_00: Oh, we're doing.
• 0:30
  SPEAKER_00: We're doing.
• 0:31
  SPEAKER_00: We had a crazy day in the markets today.
• 0:33
  SPEAKER_00: Uh one of the most volatile days for most years, anyways.
• 0:37
  SPEAKER_00: Today definitely lived up to the hype here, Pat.
• 0:40
  SPEAKER_00: Uh let's start with the uh so we had the acreage report and quarterly stocks.
• 0:44
  SPEAKER_00: Where do you want to start?
• 0:46
  SPEAKER_01: Well, let's uh start with uh old crop and stocks here uh a little bit.
• 0:51
  SPEAKER_01: I I think Mike is probably a good place to start.
• 0:54
  SPEAKER_01: Then spend most of our time talking about acres and new crop balance sheet.
• 0:58
  SPEAKER_01: How about that?
• 0:59
  SPEAKER_00: Perfect.
• 1:00
  SPEAKER_00: Sounds good to me.
• 1:00
  SPEAKER_00: Uh quarterly stocks here as of June 1.
• 1:03
  SPEAKER_00: We had come in above expectations on corn, soybeans, and wheat, just slightly.
• 1:08
  SPEAKER_00: Uh 4.99 on uh on the corn ending quarterly stocks here at this time.
• 1:16
  SPEAKER_00: That is more than 4.1 last year at this time.
• 1:20
  SPEAKER_00: Uh what do you got to say about stocks here and on farm versus off-farm Pat?
• 1:25
  SPEAKER_01: Yeah, so uh a little bit higher stocks all around there.
• 1:29
  SPEAKER_01: Um and uh and the uh improved, increased, elevated ending stocks number, particularly in the Western Corn Belt, uh still showing up uh on farm.
• 1:42
  SPEAKER_01: And so um pretty big uh discrepancy, especially when you look at the state by state um breakdown, not only year over year, but also just a little bit as we as we kind of work through um this this marketing year.
• 1:56
  SPEAKER_01: So so Mike, I you know, from a real crop producer's perspective, I mean we you know, we were um you know, the the balance sheet's building here just a little bit on on old crop, of course, and we'll talk about new crop in a second, but you know, we've had this issue of of uh a little bit softer demand year over year and and uh and obviously harvested you know a nicely sized crop.
• 2:18
  SPEAKER_01: And so, you know, it's uh it's a little bit uh um I guess more challenging than normal to kind of work through all of this because we've had some uncharacteristically tight basis levels, particularly in the Northwest Corn Belt, Western Corn Belt in general, probably.
• 2:36
  SPEAKER_01: And um, but the numbers, um, the on-farm stocks, the uh um the projected ending stocks um would suggest that uh you know there's still that wall of corn out there potentially.
• 2:50
  SPEAKER_01: And then that added layer now of crop production challenges, to say the least in some cases, uh in in the Northwest uh corn belt, just sort of enhances the the challenge, if you will, in trying to uh uh guess or anticipate uh what's gonna happen here as it relates to corn movement as we um wrap up the balance of this crop year and look forward to uh to next year.
• 3:14
  SPEAKER_00: I got a stat for you.
• 3:16
  SPEAKER_00: Corn stocks on farm in South Dakota are up 50% from a year ago.
• 3:21
  SPEAKER_00: 50%, 5-0.
• 3:23
  SPEAKER_00: That's not a small number.
• 3:24
  SPEAKER_00: Big number.
• 3:25
  SPEAKER_00: Yeah, that's a big one.
• 3:26
  SPEAKER_00: All right, how about we get over to the acreage side?
• 3:29
  SPEAKER_00: Uh plantings on soybeans a little bit lower than what was expected going in.
• 3:34
  SPEAKER_00: We had 86.1 million acres of soybeans versus 86.75 expected.
• 3:40
  SPEAKER_00: And then on the corn side, that was the big number.
• 3:43
  SPEAKER_00: 91.5 million corn acres versus 90.35 expected.
• 3:48
  SPEAKER_00: So a bigger increase there than expected.
• 3:50
  SPEAKER_00: It yeah, I got another stat for you here.
• 3:52
  SPEAKER_00: It was really interesting going through the numbers.
• 3:55
  SPEAKER_00: This was the 10th time in a row now that this report has shown soybean acres lower.
• 4:00
  SPEAKER_01: Interesting.
• 4:01
  SPEAKER_00: Yeah, so they overshoot it every year pretty much on soybeans.
• 4:05
  SPEAKER_00: Last time was 14 and they're way, way, way off.
• 4:08
  SPEAKER_00: But yeah.
• 4:09
  SPEAKER_01: Interesting.
• 4:11
  SPEAKER_01: Yeah, I don't know what to say about that, other than uh um we like to plant corn in the corn belt, and uh um usually uh um we get a little surprised by that, and this report uh um certainly dis didn't disappoint from that perspective.
• 4:26
  SPEAKER_00: Very true.
• 4:27
  SPEAKER_00: How about on the corn side here?
• 4:29
  SPEAKER_00: Uh 91.5 million acres pat, a little bit more than expected, honestly pretty close to what we were probably expecting uh in the March report before they gave us a gift at the time of uh only ninety and a half there or so uh or I guess right at ninety at that point.
• 4:46
  SPEAKER_00: Uh what do you think about that bigger corn acres number?
• 4:50
  SPEAKER_01: Well, uh the the average trade guests and a lot of the uh s uh market export experts were talking about um more corn acres.
• 4:58
  SPEAKER_01: They weren't talking about this many more, but they were talking about more corn acres.
• 5:02
  SPEAKER_01: And I I frankly question all that just a little bit.
• 5:06
  SPEAKER_01: I I didn't think given the the uh later planting dates and then and then in some cases really later planting dates, I didn't I didn't think that that would be captured to this level of aggressiveness on this report.
• 5:20
  SPEAKER_01: Um and it is worth you know noting your note, right?
• 5:23
  SPEAKER_01: Uh what how did the USDA um what what did they talk about as it relates to um later planted acres here?
• 5:32
  SPEAKER_00: Yeah, so they did show that uh right around the uh 3.36 million acres for corn were left to be planted in in this report's gatherings, and then about 12.8 million acres were uh left to be planted, and that would be on the higher end of the range uh for what we have normally.
• 5:53
  SPEAKER_00: I mean, two million is kind of normal on corn uh to have left to be planted in this report.
• 5:59
  SPEAKER_00: And honestly, on soybeans it's a little all over the board, but like uh somewhere around 910 is uh you know, the average is about eleven and a half.
• 6:06
  SPEAKER_00: Okay.
• 6:07
  SPEAKER_00: Yeah.
• 6:07
  SPEAKER_00: All right.
• 6:08
  SPEAKER_00: So a little high.
• 6:09
  SPEAKER_01: Yeah, so there's a little potential there yet.
• 6:11
  SPEAKER_01: A little higher potential potential than normal for this number to to be less accurate.
• 6:17
  SPEAKER_01: Yeah.
• 6:17
  SPEAKER_01: That's probably the way to say that.
• 6:18
  SPEAKER_00: The other way to look at it was like five hundred thousand of those acres on corn that were increased were between Iowa and Minnesota.
• 6:25
  SPEAKER_00: Sure.
• 6:25
  SPEAKER_00: So it'll be interesting to see what we do with the the recent rains there over the past couple weeks there.
• 6:30
  SPEAKER_01: Certainly.
• 6:30
  SPEAKER_01: So as always, there's always there's more story to be told.
• 6:33
  SPEAKER_01: We'll we'll learn more in the in the in the future than what we know today, kind of a thing.
• 6:38
  SPEAKER_01: But but um for the time being, the market's gonna trade these numbers and and uh uh certainly traded them today.
• 6:44
  SPEAKER_01: Uh 91.5 million acres planted, as you said.
• 6:47
  SPEAKER_01: A normal abandonment uh would take us to 83.5 million harvested acres.
• 6:53
  SPEAKER_01: Umsing your 181 yield uh mic, the same number the UST has been using from the beginning here, usage unchanged as well.
• 7:03
  SPEAKER_01: Um we're talking uh 2.3 billion bushel plus um ending stocks number or stocks to use ratio of 15.8 percent, uh burdensome number for sure, and uh obviously the the the uh the reason for the sell-off today.
• 7:21
  SPEAKER_01: But um we I I did find myself just kind of doing some what-ifs there as well, and so I just kind of backed into well, how much can yield go down now given this acreage amount and still hold that ending stocks number above two billion?
• 7:36
  SPEAKER_01: Not there's anything particularly magical about that, but um two billion instead of uh something less than that.
• 7:42
  SPEAKER_01: And you could take this yield down to 177 now.
• 7:45
  SPEAKER_01: So so this these extra acres gave us a four-bushel um uh I guess cushion or something as it relates to to the balance sheet here, and so I uh which is um you know last year's yield, just for whatever it's worth.
• 8:01
  SPEAKER_01: And we can talk about weather and and all that here in a second, but nonetheless, it does create um uh this uh additional probability or chance of uh of uh holding that ending stocks number above above two billion, uh, even if we do end up with some uh below trend yield type events.
• 8:20
  SPEAKER_00: I think that two billion that is a very nice spot to determine are we above four dollar corn or are we below four dollar corn?
• 8:27
  SPEAKER_00: It seems like.
• 8:28
  SPEAKER_00: So if we hold too long above that two billion bushels, it's gonna be tough for corn to not get below there for quite some time frame at least, Pat.
• 8:35
  SPEAKER_01: So let's just talk about market action for a second here.
• 8:37
  SPEAKER_01: We did close Deast Corn 13 cents lower here today on Friday at 420 and three-quarters.
• 8:43
  SPEAKER_01: That nearby July contract today being uh uh first notice day, um, dipped under that four dollar mark, settled at 397, down 16 and a half, the low of the day 390 and a half.
• 8:55
  SPEAKER_01: Um that's banging around those same levels that the nearby contract traded down to in the end of February prior to that October of 2020.
• 9:04
  SPEAKER_01: And so we haven't been this low in this corn market, again, other than that little little uh break there in Feb.
• 9:11
  SPEAKER_01: Um, well, which would have been ironically the last time we're talking about a 181 yield and 91 and a half eight uh million acres, right?
• 9:19
  SPEAKER_01: Um, but uh that that's uh that prior to that October of 2020 and kind of pre-COVID type levels is is uh you know what uh the the trading range are we're starting to to consider here.
• 9:33
  SPEAKER_01: And so um I agree with your observation.
• 9:35
  SPEAKER_01: Uh now dies corn back at the 420 area.
• 9:38
  SPEAKER_01: I think even giving these new um you know this this new acreage number, it's probably still trading, you know, in that 177, 178, maybe 179 sort of a yield.
• 9:50
  SPEAKER_01: And so it'll be interesting to see what type of follow-through that we get uh next week in this market.
• 9:57
  SPEAKER_01: But you know, for the time being, uh I think we're gonna be just we're gonna be pretty interested in in uh trying to find or forge a little bit of a bottom here, again at these levels that that we briefly traded down to in February, and then focus on on the next event, which clearly will be July weather in the northern hemisphere.
• 10:16
  SPEAKER_00: It is interesting how like March corn futures there dipped below four bucks for the first time right at like first notice day.
• 10:24
  SPEAKER_01: Yeah.
• 10:25
  SPEAKER_00: Yeah, very ironic.
• 10:27
  SPEAKER_01: Same thing happened in Feb, right?
• 10:28
  SPEAKER_00: Yeah, very interesting.
• 10:29
  SPEAKER_00: All right.
• 10:30
  SPEAKER_00: Well, thank you for your time today, Pat.
• 10:31
  SPEAKER_00: Any final thoughts for our listeners?
• 10:33
  SPEAKER_01: Well, no, I just uh I mean, other than this the the dynamic of of trying to um manage our old crop positions uh as well as uh new crop risk management strategies here, and and so we just would encourage everyone to uh um give us a call, look for the opportunity to talk through uh all of that with you.
• 10:53
  SPEAKER_01: There's some unique merchandising opportunities available to us, particularly again here in the Northwestern Corn Belt.
• 10:58
  SPEAKER_01: Um, would appreciate the opportunity to interact and uh see when get figured out.
• 11:03
  SPEAKER_00: All right.
• 11:03
  SPEAKER_00: Thank you, Pep.
• 11:04
  SPEAKER_00: And thank you to all our listeners.
• 11:06
  SPEAKER_00: Please reach out to us at professional eggmarketing.com.
• 11:09
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 11:14
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 11:21
  SPEAKER_00: See you next time.