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Grains: Outside Noise · 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 Miner.
• 0:22
  SPEAKER_00: Let's get started.
• 0:23
  SPEAKER_00: September 5th, I've got Pat here, and it's feeling like fall outside, isn't it?
• 0:28
  SPEAKER_01: Got my flannel shirt on, Mike.
• 0:30
  SPEAKER_00: Yeah, we we have warmer clothes on today, so that is a nice thing finally to have.
• 0:35
  SPEAKER_00: It feels like it's been uh very hot for quite some time now, so it it'll be winter in no time, I'm sure that's how that goes.
• 0:41
  SPEAKER_00: We get about a week of fall, I feel like a little bit of uh silage coming out?
• 0:46
  SPEAKER_00: Little bit, a little bit all over the board.
• 0:48
  SPEAKER_00: Some in northwest Iowa, some into South Dakota, some locally, but uh just kind of the start of it.
• 0:53
  SPEAKER_00: And then, I mean, even some of this drier spots, you know, Fairmont area, some corn will be coming out in the 20s.
• 1:00
  SPEAKER_00: Southern Iowa's actually combining a little bit of corn too, but nothing really yet to have conclusive yield data.
• 1:07
  SPEAKER_00: It's kind of all over the board.
• 1:08
  SPEAKER_00: You know, we're combining some light stuff, some hills, you know.
• 1:12
  SPEAKER_00: You know how it goes at the beginning of harvest, but stuff's coming out.
• 1:15
  SPEAKER_01: I the um I last Friday when we talked, uh I think uh Deese corn closed at 420 and it's trading at 421 as as uh as we visit this Friday, Mike.
• 1:25
  SPEAKER_01: Um much market activity as we've gone through the the this short uh holiday week?
• 1:30
  SPEAKER_00: Yeah, I mean, if we look at it now, this would be if we close higher again today, this would be the fourth straight weekly gain on corn actually, since putting in our lows.
• 1:39
  SPEAKER_00: So it's been some really nice development.
• 1:41
  SPEAKER_00: Um some of the recent activity, the range has been somewhat tight this week, but playing around this like December corn around 415 to 425 this week has really seemed to be the range that we fit into uh on this corn market, I guess.
• 1:56
  SPEAKER_01: So it's a little bit of consolidation and a little bit of wait and see, and it kind of makes sense, right?
• 2:02
  SPEAKER_01: I yeah um you did get uh a little bit of an adjustment in um in yield projections out of Stone X this week as well.
• 2:09
  SPEAKER_00: Yeah, so last month they're at 188.1, and yesterday there they came out at 186.9.
• 2:16
  SPEAKER_00: So they did drop the yield on the crop.
• 2:20
  SPEAKER_00: The crop technically went higher in production because of the acreage increase.
• 2:24
  SPEAKER_00: But nonetheless, I think it helped illustrate that the trend of this crop is starting to we're showing smaller yields.
• 2:31
  SPEAKER_00: And I think that's fine with what we've seen with the disease pressure that we've heard, which is a little bit more overwhelming than we thought.
• 2:38
  SPEAKER_00: Um, dryness, drought is actually up to like 9% of corn production now in the US from it was like three.
• 2:44
  SPEAKER_00: So you're starting to see that maybe we could have finished this crop a little better.
• 2:48
  SPEAKER_00: And you know, that was those just perfect case, perfect time scenario when we posted those August yields, it looked like on the last report.
• 2:56
  SPEAKER_01: Yeah, and it it is somewhat rare for the August numbers to be the highest printed, like the the biggest crop of the year to to to get printed on WASDI in in August.
• 3:08
  SPEAKER_01: That's not a common thing for sure.
• 3:10
  SPEAKER_01: Um but uh also likely logical for this year, to your point, and we talked about this a little bit in on last week's podcast as well.
• 3:18
  SPEAKER_01: Like both could be right, like the crop did have the potential to be 188 or 189 as we wrapped up an extraordinarily perfect July, and really May, June, July in a lot of cases, right?
• 3:30
  SPEAKER_01: So um so the middle of the growing season, really good, and like to your point, August hasn't been ideal.
• 3:36
  SPEAKER_01: Um, we certainly have dried out in some cases.
• 3:39
  SPEAKER_01: We've dried out significantly, particular, particularly in the eastern corn belt.
• 3:42
  SPEAKER_01: So um certainly popular consensus is is this crop is getting a little bit smaller as we go here.
• 3:48
  SPEAKER_01: Um, but one of the things that that we were and others were concerned about was that WASDI report uh not only printing a big production number, but also printing too big of a usage number, right?
• 4:02
  SPEAKER_01: We were never going to be able to use 16 bushels of uh or 16 billion bushels of corn, at least not at four bucks, right?
• 4:11
  SPEAKER_01: Yeah, I mean, if we were gonna try to figure out a way to use that much corn, like that balance sheet should suggested, it was likely gonna take much lower value prices, right?
• 4:21
  SPEAKER_01: But so so the consequence to that inaccurate balance sheet projection on the usage side um in the month of August is that now that we're shrinking yield a little bit here, it's really not all that bullish, right?
• 4:35
  SPEAKER_01: Because it's pretty easy for us to say, all right, let's take 250 million or so out of the usage side of the equation.
• 4:41
  SPEAKER_01: We didn't beat believe the uh the feed residual category anyway, um at the at the increase year over year, given the the lack of expansion in animal numbers here domestically.
• 4:52
  SPEAKER_01: And so um and so here we sit.
• 4:54
  SPEAKER_01: It uh uh you know we're gonna settle around 420 this week, just about like we did last week, and and and mostly because, yeah, the crop's getting smaller, but but uh um we're we're also pretty we got we got this extra little cushion built into the usage number that's gonna get pulled out of there anyway.
• 5:10
  SPEAKER_01: And I and so um and so as we think about you know what's gonna happen next, we'll start to get a better feel as we get closer to and into you know the harvest season and harvest pace and start talking about the new inputs of of of yields and and potentially some adjustment from from a projected national average yield uh in that 185 area.
• 5:31
  SPEAKER_01: Um is there much to talk about, uh, Mike, as it relates to uh uh to the oil seed bean side of the equation?
• 5:38
  SPEAKER_01: What's been happening there week over week?
• 5:40
  SPEAKER_00: Well, it was actually a really big week for the bean oil because it's so tightly um tied to the crude oil market, and we had a massive sell-off again today.
• 5:49
  SPEAKER_00: Saudi Arabia came out and said they wanted to increase the rate of their hike in production, so that was a negative on the crude oil market, and that's drug soybean oil down with it as well.
• 5:59
  SPEAKER_00: And then U.S.
• 6:00
  SPEAKER_00: inventories were higher on crude oil as well, so you had some pressure from there too.
• 6:04
  SPEAKER_00: So crude oil being back around$60,$61, has put some pressure on that bean oil market, and that's helped pull soybeans down to some support levels, too, I would believe.
• 6:14
  SPEAKER_00: Um, so that's been that side of it.
• 6:15
  SPEAKER_00: Soybeans do have an interesting story, though.
• 6:17
  SPEAKER_00: Like corn we talked about, even if you shrink yield a little bit, maybe it's not that big of a deal.
• 6:21
  SPEAKER_00: Soybeans, I mean, you shrunk acres quite a bit in that last report.
• 6:25
  SPEAKER_00: Yeah.
• 6:26
  SPEAKER_00: August weather, if it was a little drier, probably could have been a little bit better.
• 6:29
  SPEAKER_00: Not as extreme as last year, with the decrease in in acre or in yield probably, but not the best.
• 6:36
  SPEAKER_00: Um, if you do, I mean, losing 170, 200 million bushels on soybeans at this level, that probably matters a little bit.
• 6:44
  SPEAKER_00: I mean, that's a little tighter balance sheet.
• 6:46
  SPEAKER_00: So I'm gonna be curious to see what we do with that soybean market, fundamentally from this point out.
• 6:52
  SPEAKER_00: You know, if prices are so rapidly all over the place and volatile because if is China in the market, are they not?
• 6:59
  SPEAKER_00: And there's been a ton of speculation on that lately with Chinese uh trade delegators or whatever being in the US making meetings, are they are and are they not?
• 7:08
  SPEAKER_00: It's been all over the board lately.
• 7:10
  SPEAKER_00: So it that the futures impact of it is always tough with soybeans, but fundamentally I can see maybe there's something more to that picture than than what people have accounted for up until this point.
• 7:22
  SPEAKER_01: Yeah, absolutely.
• 7:23
  SPEAKER_01: And and and and just to we also just don't know, right, how much um the negative weather in the month of August impacting the bean crop relative to the corn crop, and so that story has yet to be told and and and it'll be start getting told quick enough, right?
• 7:42
  SPEAKER_00: And I mean last year was more extreme.
• 7:44
  SPEAKER_00: It was drier earlier, and they still increased corn yield last year 183.1 to 1860, 183.6 in this September report.
• 7:53
  SPEAKER_00: So it's like there's no certainty that they have to completely start to destroy corn yield at this point in the September report.
• 8:00
  SPEAKER_00: So I don't, you know, watch out for that.
• 8:03
  SPEAKER_00: Don't let that take you off off guard either.
• 8:05
  SPEAKER_00: So um, those are just a few things I've been focusing on on between the two.
• 8:10
  SPEAKER_00: The one thing you could link back to the crude oil market is probably ethanol.
• 8:15
  SPEAKER_00: Ethanol margins are dropping, the price of gas is falling, so that hurts it on the output side, and then corn price has been firmer too.
• 8:23
  SPEAKER_00: So margins on ethanol have been shrinking a little bit.
• 8:27
  SPEAKER_00: Um keep an eye on that, I guess.
• 8:29
  SPEAKER_01: And we've had a little bit of economic data come out this week as well, right?
• 8:32
  SPEAKER_00: Yeah, and the economic data that came out this morning's jobs report was worse than expected, which good new bad news is still good news, which means we're probably gonna cut rates in two weeks up to, you know, up to some people have a hundred percent chance now where it was like 90, 80 percent before.
• 8:50
  SPEAKER_00: So bad news was good news this morning in the economy, and uh yeah, the other thing with that too is um that some of these Meg 7 stocks I noticed like at the start of this week on Tuesday coming back off the Labor Day.
• 9:04
  SPEAKER_00: So you the seven companies that make up almost the majority of the stock market sold off big time.
• 9:10
  SPEAKER_00: People took a lot of profits on them, and in those same days, like soybeans were down, corn was down, cattle had been down through those stretches.
• 9:18
  SPEAKER_00: It it seemed like you saw a switch in just risk management practices with gold is ripping everybody's heads off right now on a massive rally.
• 9:27
  SPEAKER_00: Stock market took a little breather, cattle took a little breather.
• 9:31
  SPEAKER_00: You know, it was more of a risk-off attitude this week, I would argue, and the markets coming out of Labor Day, which I think is important for the egg markets because there's some there's some funky stuff going on.
• 9:42
  SPEAKER_00: I mean, cattle is not a normal market right now by any means.
• 9:45
  SPEAKER_00: Hogs are up at uh, you know, very high levels historically, uh$88.5 on these hogs almost today at the high.
• 9:53
  SPEAKER_00: That I mean, that's higher than we closed in 2014.
• 9:56
  SPEAKER_00: Right.
• 9:56
  SPEAKER_00: So just from money flow perspective, I think you're seeing an interesting switch this week a little bit.
• 10:02
  SPEAKER_01: Yeah, absolutely.
• 10:03
  SPEAKER_01: And so um um a jobs report that gives the the feds uh an excuse to do what Trump's asking them to do, uh uh lower interest rates.
• 10:12
  SPEAKER_01: Um it also, you know, US dollar is is cheaper as a result of all of those things that you described, which obviously can be supportive or beneficial from an export perspective for commodities.
• 10:23
  SPEAKER_01: And you're right, Mike.
• 10:24
  SPEAKER_01: I'd am not sure that beef is a commodity anymore, the way that it's uh the way the way that it's uh inelastically pricing higher as we go forward here.
• 10:32
  SPEAKER_01: So um so we'll see what uh what happens next on that front.
• 10:35
  SPEAKER_01: But uh again, I uh you know, to kind of recap here, just uh a little bit more of a quieter week, week over week, on in terms of of the the well, the corn complex for sure.
• 10:46
  SPEAKER_01: Um, and and we'll see what happens next.
• 10:48
  SPEAKER_01: This economic data that we we kind of wrapped up today's uh um conversation with, I think is is is critically important.
• 10:56
  SPEAKER_01: I mean, we've at least in the meat complex, I think, enjoyed um a U.S.
• 11:01
  SPEAKER_01: consumer that's been in a unique spot of having a little extra disposable income and not really willing to make some some some some major investments, house cars, you know, whatever.
• 11:11
  SPEAKER_01: And so it's created a little more disposal income, maybe been good for meat demand, but also likely had been pretty good for fuel demand.
• 11:18
  SPEAKER_01: So it's interesting that we're starting to see a little bit of a correction or uh in that, and and that can be seasonal, everybody going back to school and all those things.
• 11:26
  SPEAKER_01: But but um but if we're also um starting to see just a little bit of a slowdown um you know from a U.S.
• 11:34
  SPEAKER_01: consumer behavior, um, that's something to watch out for in the in the meat complex for sure.
• 11:39
  SPEAKER_00: For sure.
• 11:39
  SPEAKER_00: All right.
• 11:40
  SPEAKER_00: Well, thank you, Pat.
• 11:41
  SPEAKER_00: I know one thing I'll be watching going forward.
• 11:43
  SPEAKER_00: This corn trend has just been moving higher.
• 11:45
  SPEAKER_00: We've held a nice uptrend.
• 11:47
  SPEAKER_00: I'm very curious to see if we can keep that rolling here as we start getting into this field and have some harvest pressure.
• 11:52
  SPEAKER_00: So something we'll be watching.
• 11:54
  SPEAKER_00: Please give us a call for anything on risk management.
• 11:56
  SPEAKER_00: We'd love to chat with you.
• 11:57
  SPEAKER_00: Uh, we'll see you next week, Pat.
• 11:59
  SPEAKER_01: Thanks, everyone.
• 12:00
  SPEAKER_00: This podcast is also brought to you by ProAg Power Grains, the all in one grain marketing tool tied directly to your brokerage account.
• 12:08
  SPEAKER_00: Track cash, futures, and options all in one place, compare your cost of production with others, use what if tools to build your marketing plan, and get to work with uh wonderful people at professional egg marketing on developing the right risk management strategy for your operation.