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Grains: Soybean Talk · 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 involve 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 August 15th.
• 0:25
  SPEAKER_00: I've got Pat with us here today.
• 0:27
  SPEAKER_00: How's it going, Pat?
• 0:28
  SPEAKER_01: I'm doing well.
• 0:29
  SPEAKER_01: How are you this morning, Mike?
• 0:30
  SPEAKER_00: We're doing really well.
• 0:31
  SPEAKER_00: We've got uh some interesting topics to talk about today.
• 0:34
  SPEAKER_00: We had uh Trump Toothpo Truth Post that started the soybean market out on a hot, hot start this week.
• 0:40
  SPEAKER_00: Then we had a WASDAir port, and seems like volatility just hasn't gone away.
• 0:45
  SPEAKER_00: In fact, on the soybean market, I was looking, Pat.
• 0:48
  SPEAKER_00: We've had for pretty much a week now, we've had double-digit changes every day in the soybean market.
• 0:54
  SPEAKER_01: Increased volatility, no doubt, right?
• 0:57
  SPEAKER_00: That and the cattle market too, you could throw in there.
• 0:59
  SPEAKER_00: It seems like that's going crazy almost every day as well.
• 1:02
  SPEAKER_00: So what do you got to say about uh just broad commodity overview here this week?
• 1:07
  SPEAKER_01: Well, I think uh let's just dive into the soybean market first and then kind of maybe just rotate around a little bit, Mike, if we could.
• 1:16
  SPEAKER_01: So um, so you know, the at the beginning of the week, you know, as you mentioned, there was a little bit of discussion as it relates to Trump and trade and tariffs in China and and and all of that.
• 1:28
  SPEAKER_01: So what if anything materialized as we went through the week on that front?
• 1:32
  SPEAKER_00: Yep.
• 1:32
  SPEAKER_00: I mean uh really at this point, been pretty quiet from the trade front.
• 1:36
  SPEAKER_00: Monday, the truth post happened, and the or Sunday night, truth post happened, and then Monday you had the 90-day truce, and that's been about it.
• 1:44
  SPEAKER_00: So basically what that told me was China doesn't really plan to have to do anything anytime soon when it comes to trade, in my opinion.
• 1:51
  SPEAKER_01: And uh as as we went through the end of the week, there's uh a little bit of of uh talk about some some cash transactions having taken place uh from Brazil into that Chinese market into the month of October now, and so still zero sales on the books.
• 2:09
  SPEAKER_01: Um sooner or later, um the the Chinese will be quote unquote forced to uh purchase some soybeans from the U.S.
• 2:18
  SPEAKER_01: But um it's really been in their best interest to um hold off on on getting any cash on the books as there's still some negotiations to take place with you know the U.S.
• 2:30
  SPEAKER_01: administration and whatever happens next with China and trade.
• 2:34
  SPEAKER_01: And so it's in their best interest not to have anything on the books today, the Chinese.
• 2:38
  SPEAKER_01: And and really, I think what's what's what's also interesting about that, Mike, is that there hasn't been anything all summer long that's been threatening from a fundamental perspective that they felt the need to to put any positions on the books.
• 2:54
  SPEAKER_01: And so from that perspective, if you're uh you know from the from the Chinese perspective of of negotiating, that uh they they kind of got a a free pass here, if you will, because we really haven't had much of anything happening at all as it relates to to weather concerns.
• 3:09
  SPEAKER_01: In fact, just a little bit of data to to back that up, and I'm kind of flipping to corn for a second here, but but um this is the first year since 1981 that we haven't taken out the February high during the growing season, right?
• 3:24
  SPEAKER_01: So that's uh 1981 was a little while ago, right?
• 3:27
  SPEAKER_01: And and so and so for us to and so that's the whole point, right?
• 3:31
  SPEAKER_01: Like this is this is the first year in a long, long time where we haven't had a weather scare.
• 3:36
  SPEAKER_01: And that is also important about our next topic when you start talking about balance sheets and those sorts of things.
• 3:41
  SPEAKER_01: But the Chinese have been able to use that, I would argue, in their favor, if you will, as it relates to negotiations on on uh on trade and and tariffs and those sorts of things.
• 3:51
  SPEAKER_01: And so someday we'll get an announcement that uh um you know we'll get some Nvidia chips from uh the Chinese in exchange for them buying soybeans and and both sides will claim victory.
• 4:01
  SPEAKER_01: But in the meantime, there's no soybeans on the books for new crop.
• 4:05
  SPEAKER_01: And as a result of that, we're seeing some wider basis levels, particularly in the Western Corn Belt.
• 4:09
  SPEAKER_01: And so uh as we jump around, talk about oil seeds in particular here, I would just encourage our row crop producers to be thinking about these things.
• 4:18
  SPEAKER_01: And um, you know, Mike, you and I had a chance to visit about about the details of that to some extent for a while this morning.
• 4:25
  SPEAKER_01: I would just encourage uh producers to to give us a call and talk through what opportunities are available to us as it relates to taking advantage of the current merchandising situations or case of soybeans.
• 4:37
  SPEAKER_01: And so um look forward to the conversations with our clients and and uh and anybody else that's willing to and wanting to to have uh uh some good discussions about that, looking forward to that interaction.
• 4:49
  SPEAKER_00: So that's something very different from the past probably few years, especially.
• 4:54
  SPEAKER_01: No question about it, and and and and so if there's a theme that that we will attempt to articulate in this morning's podcast is um we're in an environment of of you know good fundamental block and tackle work is what's successful, right?
• 5:10
  SPEAKER_01: This isn't we're not in in the current stage of the cycle where you can just you know take it take uh a seven-step drop back and throw the ball deep and and uh it's gonna work out just fine.
• 5:21
  SPEAKER_01: We're in an environment where it's uh two and a half or three and a half yards in a cloud of dust, and we've got to do everything right.
• 5:27
  SPEAKER_01: We've got to do it right every time, and we'll be successful, but it it takes work and it takes discipline and and uh and and and uh uh that block and tackle work is how you're successful um in these higher stock, bigger crop sort of years, and we're looking forward to the opportunity interacting with our producers and making that work for them.
• 5:47
  SPEAKER_00: What else are you looking at this week?
• 5:48
  SPEAKER_01: Let's talk about the bean balance sheet.
• 5:49
  SPEAKER_01: Why don't you just just talk about Tuesday's numbers and and just get into the specifics of of of what uh the government told us on Tuesday?
• 5:59
  SPEAKER_00: Yeah, so they came out at a 53.6 yield on soybeans, so right at the top range of estimates, they were prior to that in 52.5.
• 6:08
  SPEAKER_00: So nothing crazy.
• 6:09
  SPEAKER_00: The core number was probably a crazier yield number for them to come out way above expectations.
• 6:15
  SPEAKER_00: The acreage number went down to 80.9 million, down from that 83.4.
• 6:21
  SPEAKER_00: That was one of the bigger um surprises, I was arguing, because uh uh the massive change in acreage was big historically, and it was it's pretty unexpected.
• 6:31
  SPEAKER_00: That's a really hard one to forecast.
• 6:33
  SPEAKER_00: Yield, you at least have some crop conditions and things to kind of go through.
• 6:37
  SPEAKER_00: Acres are just kind of that that's that black swan that it's hard to forecast into that report.
• 6:42
  SPEAKER_00: So you cut cut the acres down, you increased yield just a little bit, you um on the export side, you drug that lower about 300 million bushels for new crop exports from last month.
• 6:56
  SPEAKER_00: Uh so they did make a few changes there.
• 6:59
  SPEAKER_00: They left crushings the same, but nonetheless, the balance sheet just got a a little bit sm a little bit smaller.
• 7:05
  SPEAKER_00: Um the I guess the export number didn't change there.
• 7:07
  SPEAKER_00: That was uh down 40 uh million, sorry, not that much, but nonetheless, um we went to 290 million bushels on ending stock, so that's down 20 million.
• 7:18
  SPEAKER_00: Nonetheless, basically no change in the balance sheet month over month after all of the changes that they made, it's in the same spot as it was, Pat.
• 7:26
  SPEAKER_00: So decently tight, but not necessarily comfortable either.
• 7:32
  SPEAKER_00: What do you think?
• 7:33
  SPEAKER_01: Yeah, so I don't know compared to corn, the bean balance sheet is more supportive from a real crop producer's perspective.
• 7:40
  SPEAKER_01: Probably, yeah.
• 7:41
  SPEAKER_01: Yeah, and and so so all of that is fine.
• 7:43
  SPEAKER_01: We also have probably a little more uncertainty as it relates to soybean production, just because it's the middle of August and not the middle of September.
• 7:52
  SPEAKER_01: Yeah, we've got some heat in here, yeah, it's kind of dried up a little bit in the eastern corn belt, but probably not incredibly threatening from a production perspective.
• 8:00
  SPEAKER_01: And so um, if there's a chance, one commodity versus the other, soybeans versus corn, soybeans probably have a little bit better chance because just a little bit tighter structure as it relates to projected uh ending stocks in the oil seed complex.
• 8:16
  SPEAKER_01: On the corn side of things, um this being Friday and the report being out uh on Tuesday, there's been plenty of times for us and others to have opinions about the numbers, so we don't need to, I suppose, dive too deep into that.
• 8:28
  SPEAKER_01: But it is just worth noting, you know, from the the yield is one thing and and it is what it is, and we'll learn as we go, and that can be adjusted and all of those things.
• 8:39
  SPEAKER_01: But you know, more acres should be accurate, FSA data.
• 8:43
  SPEAKER_01: Again, well documented, but worth mentioning.
• 8:46
  SPEAKER_01: Um but but interesting is is the 500 million uh addition uh that was made um that that was made to the uh usage number, um, especially on the on the export front.
• 9:01
  SPEAKER_01: And so a lot of people are questioning how or why that we can um add 500 million uh uh bushels to that.
• 9:09
  SPEAKER_01: Uh and so there's no question that uh projected even stronger U.S.
• 9:14
  SPEAKER_01: exports on top of this year provides for the opportunity to help absorb the bearish news that's being presented here from the supply side.
• 9:24
  SPEAKER_01: Now, what uh I mean I think USDA used a 390 corn price or something like that, is what they're also dropped at 30 cents.
• 9:31
  SPEAKER_01: Dropped at 30 cents.
• 9:32
  SPEAKER_01: It was a pretty big move, really.
• 9:33
  SPEAKER_01: It's a big move for them, but so is eight bushels and so is 500 million more usage and all that.
• 9:38
  SPEAKER_01: So so that's what the USDA is is is rec or suggesting is that we're going to uh that lower prices is gonna allow for us to flex into um additional demand there.
• 9:50
  SPEAKER_01: Uh that's a that's a tall order.
• 9:52
  SPEAKER_01: I question that.
• 9:52
  SPEAKER_01: I've I've been saying for a month or so in here now that I I think the market in that$4 area-ish, and this is you know, I guess a awful lot of moving parts here, so the the appropriate disclosures are are necessary at this point.
• 10:07
  SPEAKER_01: But but um around a 185 yield, um I think in around$4 futures, I think that the the market does have a pretty good chance of finding a place to tuck away this extra corn and figuring out how to flex into some additional demand.
• 10:23
  SPEAKER_01: In my opinion, you start talking about a 188-189 yield, especially on more acres, Mike, that gets a lot harder to do.
• 10:32
  SPEAKER_01: There's only so many livestock miles on the planet to feed, there's only so many places to sort of tuck this corn away.
• 10:37
  SPEAKER_01: And so, um, and so anyway, we'll see.
• 10:41
  SPEAKER_01: I just question a little bit that a 30 cent drop in average farm price that the USDA projected correlates to an additional 500 million bushels of demand.
• 10:51
  SPEAKER_00: And it's hard for that to kick on right away.
• 10:53
  SPEAKER_00: Like you're harvesting all of that in two months essentially across the United States.
• 10:58
  SPEAKER_00: So you're just gonna end up with a pile of corn at harvest, and that's always a big feat to get through, even if you find out later how to use some of it.
• 11:05
  SPEAKER_01: That's right.
• 11:05
  SPEAKER_01: So now you're wanting to move this conversation from flat price into basis and spreads, and that's fine.
• 11:10
  SPEAKER_01: Good discussion to have.
• 11:12
  SPEAKER_01: And you're right.
• 11:13
  SPEAKER_01: I mean, there there the the the the market has three different ways in order to adapt and work through this this uh this particular situation.
• 11:22
  SPEAKER_01: One is the flat price of of you know where the futures market is trading at.
• 11:26
  SPEAKER_01: Two is you know, what is basis levels doing in any particular area, and then also what's happening with spreads and and all of those those all three of those components will work together to to to sort of make this thing work.
• 11:39
  SPEAKER_01: Um I'm just suggesting from a flat price perspective that that uh um boy basis and spreads are have a lot of work to do for four four dollar futures in order to find a home for 189 bushel to the acre on two and a half million more acres, too, on top of it all.
• 11:56
  SPEAKER_01: So um so we'll see how that plays out.
• 11:58
  SPEAKER_01: Again, very important things for all of us to be thinking about, talking about on this podcast in this venue.
• 12:05
  SPEAKER_01: We have a tendency, Mike, to talk in very broad strokes and just make observations as to as to you know what we see and what we think is going on in the marketplace.
• 12:16
  SPEAKER_01: None of these things are particularly helpful, frankly, in terms of making specific decisions for your operation.
• 12:23
  SPEAKER_01: It's critical that you sit down with someone that you have um uh have some trust in, has an incredible amount of experience in this space, like we do at Professional Ag Marketing, and we talk through how to work through the current fundamentals to make sense and make the right decisions for your operation.
• 12:41
  SPEAKER_01: And so I just wrap up with that today that that again we really encourage folks to to reach out and let's talk through those for their operation.
• 12:48
  SPEAKER_00: All right, thank you for your time today, Pat.
• 12:49
  SPEAKER_00: Thank you.
• 12:51
  SPEAKER_00: This podcast is also brought to you by Pro Ag Power Grains, the all-in-one grain marketing tool tied directly to your brokerage account.
• 12:58
  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 ag marketing on developing the right risk management strategy for your operation.