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Price Action · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_01: This is your host, Mike Miner.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is July 19th.
• 0:25
  SPEAKER_01: I've got Pat with us here today.
• 0:26
  SPEAKER_01: How's it going, Pat?
• 0:27
  SPEAKER_00: Good, Mike.
• 0:28
  SPEAKER_00: How are you?
• 0:29
  SPEAKER_01: Very good.
• 0:29
  SPEAKER_01: I want to talk about price action here a little bit this week, Pat.
• 0:33
  SPEAKER_01: We've seen uh some interesting things over the past three weeks, and I want to get your perspective.
• 0:38
  SPEAKER_01: Uh let's just start with the corn market, and we'll kind of start at the front here, uh, and then we can do a broad commodity uh look at the past three weeks as well.
• 0:47
  SPEAKER_01: But what uh when you just look at the charts and the prices, what do you see and some uh specific events tailored around those that time frame?
• 0:56
  SPEAKER_00: Yeah, thanks, Mike.
• 0:57
  SPEAKER_00: Uh Deece Corn trading at at 406 uh to be exact as we're recording this podcast here on on Friday, July 19th.
• 1:07
  SPEAKER_00: And and uh you know relatively stable consolidation here on the December corn chart, really going all the way back to July 8th.
• 1:18
  SPEAKER_00: And so, you know, it it's uh it's felt like we've had some pretty good volatility here, but but really we're we've kind of strung a couple weeks in a row here of the market um feeling pretty good about the price range um that it that it's trading in.
• 1:35
  SPEAKER_00: And and so um you know one of the things that I think is important to sort of talk through here just a little bit is what's going on, what's the reason for the sell-off here, and um, and then the one of the takeaways is is that the the market clearly feels pretty comfortable that it's it's priced in a couple different bearish factors.
• 1:56
  SPEAKER_00: And so when we say a couple different bearish factors, we we all know what one of them is, right?
• 2:01
  SPEAKER_00: It's improving crop conditions nationally, it's the uh affirmation of uh of uh the potential for a 181 national yield with the with the uh the monthly supply and demand report that was released last week.
• 2:18
  SPEAKER_00: Um it's the uh realization in a lot of cases that that uh the probability of ending stocks exceeding two billion bushels being around a 15% stocks to use ratio, those sort of things, all um pretty bearish components, of course.
• 2:36
  SPEAKER_00: Um and so the internal fundamentals that like we always talk, um we always talk about internal and external factors that that uh that push these markets around, Mike, and and uh the internal factors, um supply and demand of corn uh um is has has certainly a bearish tint to it, tilt to it.
• 2:55
  SPEAKER_00: And then when one considers uh the uh excess stocks on hand um as it relates to well, I say excess, and it is, we're over two billion bushels approximately, actually after the last adjustment adjustment a little bit less than that, but we just say that you know we've got uh about 850 million more corn that's gonna get carried into this harvest compared to a harvest a year ago, most all of which is in the farmer's hands, right?
• 3:20
  SPEAKER_00: Well documented, been talked a lot about this summer, but still true, right?
• 3:24
  SPEAKER_00: And so um the the internal factors um for corn is maybe enough, and I say enough in quotes, and that being um certainly uh uh a subjective term, but it's uh to to to necessitate or or a reason or excuse for a 40 cent break um from from where we were on June 26th.
• 3:47
  SPEAKER_00: And so I just say that to and point out the June 26th date to kind of transition ourselves into the other factor, this one being external, if you will, um as it relates for the reason for the sell-off.
• 4:00
  SPEAKER_00: And June 26th happened to be um the uh the presidential debate, um, which by any account uh Trump clearly won.
• 4:09
  SPEAKER_00: And since then has gained momentum, right?
• 4:11
  SPEAKER_00: And so if the election was held tomorrow, um we would have uh a different president than we have today, uh, based upon most polling data here.
• 4:20
  SPEAKER_00: And that uh a Trump presidency, while the markets have been keeping an eye on this for a while, um, certainly wanted to uh um I believe um trade in a higher probability of of uh of of that occurrence uh um after that debate and really since then.
• 4:40
  SPEAKER_00: And and so um, especially for commodities that that we and our clients care about that are um specifically export dependent, um hogs, corn, soybean meal, or and and soybeans would all be part of that for sure.
• 4:56
  SPEAKER_00: Um they have taken also a particularly sort of big hit here uh uh since that debate.
• 5:02
  SPEAKER_00: And then certainly you know Trump's exp acceptance speech last night and and him hitting all of his marks as it relates to uh you know being tough on China and being tough on Mexico and being tough on on uh on products that get imported in in into this country, all of those things are certainly concerns as it relates to um what reaction those countries might have, our friends or foes, and uh and and in our ability to move commodities into those markets.
• 5:32
  SPEAKER_00: So I just say all of that, Mike, just to make sure that we're sort of thinking about everything that's going on.
• 5:38
  SPEAKER_00: You know, we we've we've got improved crop conditions, we've got the probability or possibility of improved uh balance sheet due to favorable crop conditions, and then we also have these external factors or concern about demand um as it relates to um uh exports in general.
• 5:57
  SPEAKER_01: Awesome.
• 5:58
  SPEAKER_01: That's a really nice recap.
• 6:00
  SPEAKER_01: So a little bit better uh supply situation, especially in the Eastern Corn Belt catching some rains recently, and then uh Trump's just been a little bit louder lately and getting a little bit more trade confirmation there.
• 6:11
  SPEAKER_01: Um Yeah, exactly right.
• 6:14
  SPEAKER_00: But but would just say that that um to just to wrap up this portion of the conversation, Mike, we haven't done much.
• 6:20
  SPEAKER_00: Like us this is end with where we started.
• 6:23
  SPEAKER_00: Like the market hasn't done much for a couple weeks.
• 6:25
  SPEAKER_00: And so again, just a reminder, it's a futures market, right?
• 6:29
  SPEAKER_00: And it it uh it does a decent job most of the time of anticipating such things and prices it in.
• 6:34
  SPEAKER_00: And so and so all of this talk about improved crop conditions and and uh challenging trade and all those stuff, I I could argue you know there's there's a pretty good good portion of that, you know, dialed into today's markets.
• 6:45
  SPEAKER_01: And if it helps at all, you know, if you look back at history with similar stocks to use ratios, yeah, December corn at around four dollars, that that's maybe just slightly higher than some of the past years with these fundamentals, but you're getting awfully close.
• 7:00
  SPEAKER_01: Like the last couple of years it's been a much greater premium.
• 7:03
  SPEAKER_00: Yeah, it's a good exercise.
• 7:04
  SPEAKER_00: I'd encourage anybody that has uh vested interest in this thing to pull up the uh um pull up the weekly chart and just look at at a continuous chart on corn or soybeans or meal or any of those things and and look back at you know where we've been for the last ten years or so relative to to today's market.
• 7:22
  SPEAKER_00: It's an interesting perspective and and uh sure would appreciate the opportunity to interact with anybody that wants to dive a little deeper into the into the historical relevance of today's prices.
• 7:32
  SPEAKER_01: So we're at eight minutes.
• 7:33
  SPEAKER_01: Anything you want to wrap up with?
• 7:34
  SPEAKER_00: Well, you know, I again appreciate everyone taking the time to to listen to our our commentary here and and uh um sure appreciate again the opportunity to to interact, you know, Mike.
• 7:46
  SPEAKER_00: I especially here in the Northwest Corn Belt, um there's still some pretty aggressive uh strong basis levels.
• 7:54
  SPEAKER_00: I referenced earlier in this discussion that that uh you know by all accounts there's still a fair amount of uh uh physical inventory in producers' hands and and uh you know make sure that you're putting on your merchandising cap and making good cash decisions.
• 8:10
  SPEAKER_00: There's still some opportunities out there.
• 8:12
  SPEAKER_00: Um again appreciate the opportunity for engagement, but uh it's important that we're thinking about those things and and and uh in a now more challenging margin environment, uh we need to hit our marks as it relates to managing um basis spreads and uh flat price opportunities.
• 8:30
  SPEAKER_01: All right, thank you for your time, Pat.
• 8:31
  SPEAKER_00: Thank you.
• 8:32
  SPEAKER_01: And thank you to all our listeners.
• 8:34
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 8:37
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 8:42
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 8:48
  SPEAKER_01: See you next time.