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Grains: Spooky Trade · 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 October 31st.
• 0:25
  SPEAKER_01: It's Halloween.
• 0:26
  SPEAKER_01: I've got Pat with us here today.
• 0:27
  SPEAKER_01: Happy Halloween, Miner.
• 0:29
  SPEAKER_01: Seems fitting for the action of events this week to be a little spooky, doesn't it?
• 0:33
  SPEAKER_00: Yeah, it's beyond frightening, I think.
• 0:35
  SPEAKER_01: Yeah, the volatility was beyond frightening.
• 0:38
  SPEAKER_01: That's what this podcast should be called, I think.
• 0:41
  SPEAKER_01: Where do you even want to start this week?
• 0:43
  SPEAKER_01: Last week, going Sunday afternoon, Bessent came on TV, talked about framework for a China trade deal, kind of floated through the week.
• 0:52
  SPEAKER_01: Cadell had some crazy volatility.
• 0:55
  SPEAKER_01: And then all of a sudden, kind of Wednesday night, we had the meeting between Trump and President G, our time.
• 1:01
  SPEAKER_01: And coming out of the meeting, soybeans dropped really hard.
• 1:04
  SPEAKER_01: It seemed like there was no true uh major impact points that they had come out with.
• 1:10
  SPEAKER_01: And the meeting was done in 90 minutes instead of four hours, like it was supposed to be.
• 1:15
  SPEAKER_01: So we sold off pretty hard.
• 1:16
  SPEAKER_01: And then the next morning at 6.20, Besson said we're gonna sell a bunch of soybeans China that they agreed to.
• 1:23
  SPEAKER_01: Um that was kind of the order of events, I guess, and then you can mix in things like Fed interest rate cut this week.
• 1:31
  SPEAKER_01: What I mean, where do you even want to start with all this, Pat?
• 1:34
  SPEAKER_00: Well, I think he kind of skipped the 34-second handshake, too, between uh G and Trump, like then, which was a little bit weird.
• 1:41
  SPEAKER_00: Those guys would look like for a little bit they're there holding hands.
• 1:43
  SPEAKER_00: So I wonder if Trump's not up for the formalities required to meet with those folks.
• 1:49
  SPEAKER_00: Um so yeah, very interesting.
• 1:51
  SPEAKER_00: Let's start, let's start with beans first and then maybe work through cattle and then talk about a few macro things, Mike.
• 1:57
  SPEAKER_00: But I I mean to start with soybeans, and I and I wouldn't uh I'm gonna go negative first, frankly, and and uh and as you know, just the conversations that we have around here, um an increasing level of frustration over the last five or six months, frankly, you know, as it relates to um the lack of support that agriculture is getting from this administration, um, when one can easily argue that it's agriculture, or at least rural America, that put this administration in office today.
• 2:33
  SPEAKER_00: And so I I'll, you know, and there's about three-quarters of the of the rural population that's afraid to say it out loud, and I guess I'll say it out loud on this podcast, but my gosh, right?
• 2:45
  SPEAKER_00: Like, like uh um you know, we've been uh um we've been building an infrastructure in agriculture for decades to um export food and and fuel all over the planet, and uh and uh you know this the the the current administration has been pretty aggressive in in making that more challenging.
• 3:06
  SPEAKER_00: How about that, uh, you know, recently.
• 3:08
  SPEAKER_00: And so so there's this underlying frustration, frankly, and negative.
• 3:13
  SPEAKER_00: I understand what it what uh you know the the the uh uh what we're talking about here.
• 3:18
  SPEAKER_00: And and so um and so anyway, when I think about the impact with that being the backdrop of everything that's happened this week on soybeans, um, you know, all we've really done is um, you know, we've we've we've broken a relationship with with our biggest customer, China and soybeans.
• 3:37
  SPEAKER_00: Um, and now we're celebrating that we repaired it to about 90% of what it used to be, right?
• 3:43
  SPEAKER_00: And so and so we haven't accomplished much other than um you know created an awful lot of volatility um and and created an awful lot of of um of of I guess stress and and and and all of that.
• 3:58
  SPEAKER_00: And so and so at the end of the week, that that part is a little bit frustrating, Mike.
• 4:03
  SPEAKER_00: But I do think it's also worth noting that, you know, first of all, like this whole time that we were kind of on again, off again, and most of the time off again as it relates to bean exports, the bean market really handled itself.
• 4:18
  SPEAKER_00: We've held up well.
• 4:19
  SPEAKER_00: It's pretty well, exactly right.
• 4:21
  SPEAKER_00: And part of that is because we're just setting one record crush month after another, right?
• 4:26
  SPEAKER_00: We've added um processing crush facilities here in the U.S.
• 4:31
  SPEAKER_00: Um, and we've also built up a nice base of other um export customers um, you know, outside ex-China, sort of a thing.
• 4:41
  SPEAKER_00: And so maybe those things would have happened anyway, but maybe the challenges that we've had from the first Trump administration to this one and just the ongoing tension as it relates to having all of our eggs in that Chinese basket.
• 4:57
  SPEAKER_00: Yeah, so maybe um the the forced diversification that was created on the demand side of the bean complex, maybe that's a good thing.
• 5:08
  SPEAKER_00: Actually, we all know that it is, right?
• 5:10
  SPEAKER_00: We all didn't want to be relying on that market completely anyway, the Chinese one.
• 5:14
  SPEAKER_00: And so now as we sit here on Friday afternoon, yeah, you know, I'm bellyaching about the process a little bit, and maybe a lot, but maybe the process wasn't so bad.
• 5:24
  SPEAKER_00: Maybe um, you know, we can start to look at this bean complex to the prism now of uh, well, gosh, you know, we kind of got back 90% of what we had before, and we build a nice 20% base here or something.
• 5:37
  SPEAKER_00: I'm just making up the percentages, but you get the point, Mike, right?
• 5:40
  SPEAKER_00: Like maybe, maybe we are a little bit better off at the end of this week than we were six months ago or even at the end of last week.
• 5:45
  SPEAKER_00: And so, um, and so and and and also would just say that the market's kind of trading that, right?
• 5:50
  SPEAKER_00: It's showing some real nice um some some real nice uh uh strength here uh recently, of course.
• 5:57
  SPEAKER_00: And so then the you know the other thing I get this question many, many times just today is is this a buy the rumor or sell the fact thing?
• 6:04
  SPEAKER_00: So now that we got this China deal done, is the is the bean market and the meal market and all that, is it is it just gonna crash again?
• 6:09
  SPEAKER_00: And I um great question, don't know, never really do, but got an opinion, always do, kind of thing.
• 6:15
  SPEAKER_00: But but we just say that that uh um I think there's a possibility that there's maybe a little bit of legs in this thing yet, and that would be more wrapped around the physical act, meaning that like I know Dreyfus stopped uh you know, stopped some deliveries this morning.
• 6:30
  SPEAKER_00: I know that bean basis levels in North Dakota are narrowing significantly.
• 6:34
  SPEAKER_00: And maybe both of those things are gonna happen anyway, but maybe not, right?
• 6:37
  SPEAKER_00: Maybe there's a little bit more going on, you know, as it relates to the now the cash and spreads and merchandising, all of those things, starting to figure out a way um, you know, to move 400 million bushels of soybeans in the next two and a half months or something, right?
• 6:52
  SPEAKER_00: And so just the physical act of trying to squeeze six months of business into six weeks might create some additional enthusiasm in this market that that but could potentially have a little life to it.
• 7:03
  SPEAKER_00: So see how that plays out.
• 7:05
  SPEAKER_01: The most exciting thing up front has to be the basis opportunity, because like North Dakota, for example, and locally here, we were really worried about like, all right, are we gonna get that big December, January push like we normally do?
• 7:18
  SPEAKER_01: Like, is even storing soybeans worth it?
• 7:20
  SPEAKER_01: Now all of a sudden it seems like that answer is kind of or that question is kind of answered, it seems like for the soybean market.
• 7:26
  SPEAKER_01: And we're already like we sold a uh Madison, South Dakota sold a uh train already to the PNW yesterday, right away.
• 7:34
  SPEAKER_01: So I mean it was pretty immediate that we started seeing this already.
• 7:37
  SPEAKER_00: You bet.
• 7:38
  SPEAKER_00: Good.
• 7:38
  SPEAKER_00: And so that's the bean thing.
• 7:39
  SPEAKER_00: So now let's talk about cattle for a second and and you know, the cattle complex, this is a you know, if if soybeans is the last three-day story, the the cattle complex is the last three-week story, right?
• 7:50
  SPEAKER_00: And and that and and and beyond or or before that sort of a thing.
• 7:54
  SPEAKER_00: Um and so the common question that we get asked on you know, is this the end of the of the bull cycle on cattle?
• 8:02
  SPEAKER_00: And uh well, and if you want to say no, the ans the reason why you'd say no is because nothing has changed, right?
• 8:09
  SPEAKER_00: I mean, the the the the global S and D on protein supplies is the same this week as it was last week, more or less, right?
• 8:16
  SPEAKER_01: And so trade to an extent is the same as what it was.
• 8:19
  SPEAKER_01: That's exactly right.
• 8:20
  SPEAKER_01: Yeah, nothing's like we haven't even done anything.
• 8:22
  SPEAKER_00: Yeah, nothing's changed, right?
• 8:23
  SPEAKER_00: And and even if in the things that we're talking about changing, like like if if if we started to allow um or dropped a tariff on Argentine ground beef, we're talking about a day's worth of harvest or a day and a half of harvest or something.
• 8:36
  SPEAKER_00: Accurate, as crazy as that sounds.
• 8:38
  SPEAKER_00: It's insignificant, right?
• 8:39
  SPEAKER_00: And so, and so you can if you want to be a a beef bull, if you want to be you know a bull in this cattle market, that's the argument, right?
• 8:48
  SPEAKER_00: A tight tight prototype, there's always a way to find a big there's always a way to be a bull in that market, Pat.
• 8:53
  SPEAKER_00: Yeah, so anyway, just the point of of underlying supplies still are very tight, and and what's the you know, how do you start to build supplies without tightening things up?
• 9:03
  SPEAKER_00: All of those things are still very, very true, right?
• 9:05
  SPEAKER_00: And so, um, so that's the good news.
• 9:07
  SPEAKER_00: The bad news is is that you could you know fast forward two or three years and then look back to this time and say, all right, it didn't make a ton of fundamental sense then, but here's what ended up happening, right?
• 9:19
  SPEAKER_00: And and and uh yeah, that would that was the that was the peak.
• 9:23
  SPEAKER_00: And right, so you could you could I would argue you can make a pretty pretty uh definitive um um judgment either direction on on that portion of the conversation.
• 9:32
  SPEAKER_01: Yeah.
• 9:33
  SPEAKER_00: And go ahead.
• 9:34
  SPEAKER_01: One thing that seems real certain is that no matter how they're gonna do it, your administration seems like they want cheaper beef prices.
• 9:42
  SPEAKER_01: And uh it seems like you know, they'll make some import deals, they'll open the border to Mexico eventually, I'm sure.
• 9:49
  SPEAKER_01: They seem stuck on just they're trying to fix the price.
• 9:52
  SPEAKER_01: And however they go about doing it, whether it be that or uh opening up some CRP for grazing, like longer term wise, they just seem fixated on let's just get beef prices down.
• 10:03
  SPEAKER_00: Fixated on that this week.
• 10:04
  SPEAKER_00: And then so good.
• 10:05
  SPEAKER_00: I mean, uh maybe or or not.
• 10:07
  SPEAKER_00: Like how how long they're gonna stay fixated on that subject is but but good point.
• 10:11
  SPEAKER_00: There is some other levers that they potentially could pull if they're if they're committed to to changing that process at all.
• 10:17
  SPEAKER_01: The volatility is pretty great, and it I mean it uh this week we took a little break here after a a few hard days, but i I'm really missing the uh government reporting on funds.
• 10:28
  SPEAKER_00: I would really love to see how many funds are left, long on managed money and both a hotest to a resolution on that uh discussion then then it is appropriate to start talking about yeah, w w what information do we expect to see when when the government goes live again and and and that'll be some interesting talking points for sure, Mike.
• 10:50
  SPEAKER_00: Why don't we wrap up today with just some some macro observations though?
• 10:54
  SPEAKER_00: The Fed, as you mentioned earlier, did cut interest rates again this week.
• 10:58
  SPEAKER_00: And and and I do think it's important um to just talk through all of that just a little bit.
• 11:03
  SPEAKER_00: And and uh um not to make i I I don't intend to make this political as well.
• 11:09
  SPEAKER_00: In fact, the opposite is true.
• 11:11
  SPEAKER_00: I they they didn't cut interest rates this week because Trump wanted them to.
• 11:16
  SPEAKER_00: They're cutting interest rates because they're concerned about um about unemployment levels continuing to work higher, about some significant layoffs at major companies.
• 11:27
  SPEAKER_00: They're worried about about economic activity and are trying to be relatively proactive in addressing those concerns, in spite of um, you know, CPI still being above target at 3%, and in spite of you know the stock market um it performing amazingly well.
• 11:45
  SPEAKER_00: And so, and so here we sit with wanting to make a lot of excuses or talk about fundamentals as it relates to trade and and Trump and tariffs and all of that, and saying that's why the beef market sold off, or or uh you know that's why we're seeing a correction in the lean hog complex or something.
• 12:05
  SPEAKER_00: But it might have just as much to do with um that that those markets share the same concern that the Fed does, is that we're having some some challenges as it relates to economic activity domestically.
• 12:19
  SPEAKER_00: And and I don't I don't know how true any of that is, but I do know that it's appropriate for us to be um aware of that being a potential possibility.
• 12:31
  SPEAKER_01: And in these markets, we saw it last April.
• 12:34
  SPEAKER_01: The uncertainty just takes risk off the table.
• 12:38
  SPEAKER_01: Indeed.
• 12:38
  SPEAKER_01: People aren't willing to eat that risk, and we're seeing a little bit more of that in the last few days.
• 12:45
  SPEAKER_00: No doubt about it.
• 12:46
  SPEAKER_01: All right.
• 12:47
  SPEAKER_01: Well, thank you for your time, Pat.
• 12:48
  SPEAKER_01: Uh definitely a a great time to speak with uh your risk manager right now.
• 12:52
  SPEAKER_01: A lot of uh marketing decisions taking place for farms operations, so please reach out.
• 12:58
  SPEAKER_01: Uh have a great weekend, folks, and uh we'll be back with you next week.