Latest / Professional Ag Marketing Podcast / Grain Update

Transcript

Grain Update · 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 October 25th, Pat.
• 0:25
  SPEAKER_00: How's it going?
• 0:26
  SPEAKER_00: Good, Mike.
• 0:27
  SPEAKER_01: How are you today?
• 0:28
  SPEAKER_00: Very good.
• 0:28
  SPEAKER_00: Well, most of the time at this time of the year, we start to find a lot of knowns in our operations, Pat.
• 0:34
  SPEAKER_00: It's the known of yield that we're getting, the known of price as we sell it out of the field, and the known of, you know, we just know what kind of crop is out there for the United States, so to say, on grains specifically in this example.
• 0:47
  SPEAKER_00: But yet a heck of a lot of volatility for the end of harvest, probably compared to normal, whether it's spreads or futures, uh the direction of these markets have been incredibly volatile.
• 0:59
  SPEAKER_00: Not a lot of just straight up or straight down.
• 1:02
  SPEAKER_00: It's been jumpy both ways, Pat.
• 1:04
  SPEAKER_01: Absolutely.
• 1:04
  SPEAKER_01: And then we just add to the the sliding from the unknown to the known category is our our fall price on crop insurance.
• 1:12
  SPEAKER_01: And so, you know, we're able to close the book on that as well.
• 1:15
  SPEAKER_01: And so from a uh um risk management perspective, let's just start with that today, Mike, and and remind all of our listeners, our row crop producers, that uh um that you do have a lot more information at your fingertips today than what you had a month ago.
• 1:33
  SPEAKER_01: Production, as you mentioned, fall price, um, maybe some harvest sales, those sorts of things.
• 1:39
  SPEAKER_01: And so as we get um uh a little bit more time as harvest wraps up here, it's important to uh make sure that we're making time to um evaluate all the different alternatives and options in front of us as it relates to making some some pretty good marketing decisions, and we'll do what we can here in terms of sharing information and and attempting to provide value as it relates to those decisions.
• 2:02
  SPEAKER_01: But um, so let's get into it.
• 2:04
  SPEAKER_01: Let's talk a little bit about fundamentals.
• 2:05
  SPEAKER_01: And and we've got um you know December corn settling tonight at at 415, which more or less is the middle of this most of the October trading range.
• 2:16
  SPEAKER_00: 417 is the October average as of last night for your fall crop insurance price.
• 2:21
  SPEAKER_01: And that's the close today, more or less.
• 2:23
  SPEAKER_01: And so that's uh good information for for for crop insurance perspective, but also uh an observation of of it being uh um in the middle of the the trading range that we've been in the last 30 days here.
• 2:36
  SPEAKER_01: And so um so we've had we've had some good news, we've had some bad news.
• 2:40
  SPEAKER_01: You want to start with uh uh some of the good news, Mike, as it relates to uh exports specifically?
• 2:46
  SPEAKER_00: Yeah, I mean uh the one uh that really picks uh or sp uh is really uh pointing out at us today would be the corn site, largest uh export sales week that we've had in three and a half years on corn.
• 2:59
  SPEAKER_00: So uh Mexico being a very aggressive buyer in this week's sales exports.
• 3:04
  SPEAKER_00: And uh with that being the case, too, uh exports uh Mexico seems to be front loading a little bit here, so really aggressive on sales early on in this marketing year.
• 3:14
  SPEAKER_00: And also they typically do have one really big week that they've got pat uh normally at this time of the year for exports.
• 3:20
  SPEAKER_00: So uh corn exports look really good, ahead of their pace, needed.
• 3:24
  SPEAKER_00: Um, but uh from an export picture, it doesn't sound like Mexico really needs more corn than what they've prior uh prior guessed or seen.
• 3:32
  SPEAKER_00: No changes in animal numbers or things like that from last month's reports or the last few weeks.
• 3:38
  SPEAKER_01: So yeah, so your the observation is is suggesting that we maybe have an increased demand too much here, but we have uh influenced the timing of those purchases, and and that may be true.
• 3:51
  SPEAKER_01: Um, but I would also just say that um you know, just generally a little bit bigger picture, the last balance sheet the USDA threw out, they're projecting just short of a 2 billion bushel landing stocks number.
• 4:04
  SPEAKER_01: And a lot of us believe, including me, that we're gonna be able to add a little bit to the projected export number.
• 4:11
  SPEAKER_01: We're gonna be able to add a little bit uh to that feed number.
• 4:15
  SPEAKER_01: We'll probably add some weights here on the livestock side of things.
• 4:18
  SPEAKER_01: Margin overfeed is pretty positive, and so you're right, there's just as many hogs in Mexico today as there was yesterday, figuratively.
• 4:25
  SPEAKER_01: Um, but uh you know, they they you know margin overfeed being positive, they might add a little weight to that.
• 4:30
  SPEAKER_01: And the same thing on cattle, a little bit on the broiler side of things.
• 4:33
  SPEAKER_01: And so, and so there are some opportunities to flex into some additional demand globally, domestically, etc.
• 4:41
  SPEAKER_01: And so um, and so I think there's also some real good, maybe solid reasons for that four-dollar area and nearby futures to to hold some support.
• 4:53
  SPEAKER_01: We haven't traded underneath there since we took a swing at that back at the end of August, and it's been a little while, and we've had some good supply information since then and haven't set new lows because of it, sort of a thing.
• 5:05
  SPEAKER_01: And and then you also just have, Mike, this the function of being done with harvest and the natural occurrence of basis levels starting to narrow up um from gut slot harvest.
• 5:20
  SPEAKER_01: That's been pretty dramatic so far this year.
• 5:22
  SPEAKER_01: This export business that you reference has had a positive impact on delivered um Gulf values, to some extent, PW values as well.
• 5:32
  SPEAKER_01: And so um we talked a little bit about that stuff last week, but I would just say that that um the the combination of the timing of things, basis levels starting to narrow, spreads now narrowing as a result, and then the last part a farmer that really isn't interested in selling any more corn than he has to down at these futures price levels, right?
• 5:54
  SPEAKER_01: And so so so when when the futures market is down the four dollar area, seems to be a little more export business around the timing of um Mexico and others wanting to to to to to make some purchases and and that coupled with a producer that isn't really willing to move the needle here a little bit, narrows basis, narrows spreads, and then puts a little bit of strength in the futures market.
• 6:16
  SPEAKER_00: The soybeans, it's probably a little bit different.
• 6:18
  SPEAKER_00: Um, you know, we've seen an incredible range.
• 6:20
  SPEAKER_00: I mean, the first day of October when we started averaging prices on soybeans, we got up to 1065 that day on November soybeans.
• 6:29
  SPEAKER_00: Uh today we closed at 988.
• 6:31
  SPEAKER_00: I mean, just a week ago here we were at 969.
• 6:35
  SPEAKER_00: I mean, your average is like 1010.
• 6:37
  SPEAKER_00: Massive range both ways on soybeans here through the averaging time frame.
• 6:41
  SPEAKER_00: Uh at not very normal, I don't think.
• 6:43
  SPEAKER_00: I mean, normally it's usually picked a direction by now, but uh, you know, demand on the soybean side a little bit weaker than what corn has been in these last few reports.
• 6:52
  SPEAKER_00: You've got a half a billion bushels of ending stocks coming up this next year on soybeans.
• 6:57
  SPEAKER_00: Global stocks are quite burdensome record amounts as well, a stocks-to-use ratio.
• 7:03
  SPEAKER_00: So uh the soybeans almost a little bit different story than the corn, probably, Pat, huh?
• 7:08
  SPEAKER_01: It is a different story, and it might be um part of the function of bean demand is always just a little more inelastic than what corn demand is, right?
• 7:19
  SPEAKER_01: It gets a little bit harder to flex into additional meal and oil demand uh on on this futures price break.
• 7:27
  SPEAKER_01: So I think that's a that's a big chunk of it.
• 7:29
  SPEAKER_01: And it's also um likely a scenario there where there just isn't quite as much catch-up demand that needs to happen in the export space.
• 7:39
  SPEAKER_01: Now, having said all of that, we are the only game in town today, historically are from October through mid-Jan, first for February or so.
• 7:49
  SPEAKER_01: We we typically are the primary supplier to to the world.
• 7:53
  SPEAKER_01: And so, and so that's not a new or novel concept, but it is something that we need to remind ourselves of.
• 7:58
  SPEAKER_01: And and so as we're thinking about you know, being you know, long cash inventory at home or on on uh um some sort of delayed pricing or something at the elevator, we need to be thinking about managing basis and managing these spreads here as we think about what can happen between now and the end of the calendar year specifically.
• 8:16
  SPEAKER_01: And so so there's some opportunities there to think through, and you probably will see some normal basis improvement just just because of the time of year that it is, but it does get harder to get a futures price rally and a sustainer rally without something else happening.
• 8:29
  SPEAKER_01: And generally, the other thing that has happened uh as we've gone through the month of October here, Mike, is um more favorable weather forecast and weather activity in the southern hemisphere, right?
• 8:42
  SPEAKER_00: Very interesting.
• 8:43
  SPEAKER_00: It's been a really fast harvest pace so far, Pat.
• 8:46
  SPEAKER_00: So a lot of folks locally here starting to wrap up uh corn harvest this week.
• 8:51
  SPEAKER_00: Uh progress is uh getting really uh really far here on U.S.
• 8:56
  SPEAKER_00: harvest pace.
• 8:57
  SPEAKER_00: But uh ground's really hard, a lot of tillage work left to do, anyways.
• 9:00
  SPEAKER_00: I uh the drought maps really indicate that, I think, with a large percent of the corn belt in a drought now going into this spring.
• 9:08
  SPEAKER_00: But uh that's kind of how we're sitting here, I think, for part of the case.
• 9:11
  SPEAKER_01: It does appear though, just a slightly changing weather pattern as we look out into the six to ten day uh forecast, and and um we might finally be disrupting this uh um longer term uh uh pattern we've been in.
• 9:24
  SPEAKER_01: I mean, really no precept to speak of at all, all the way from the Canada border down to the Gulf of Mexico.
• 9:30
  SPEAKER_01: And so the whole central part of the belts has has been the United States has has been on a on a long hot streak here, but it does it does look in some of the midterm forecasts that that has a has the opportunity to get busted up here a little bit.
• 9:43
  SPEAKER_00: Any final thoughts before we wrap up?
• 9:45
  SPEAKER_01: No, I just uh again uh would just wrap up with what we started with, which is uh um again, as we've got more information at our fingertips here as it relates to um uh the the things that matter the most about your operation, a good time to uh uh making sure that we're making the right decisions as it relates to uh uh managing risk and opportunities.
• 10:06
  SPEAKER_01: So look forward to uh to visiting with with anyone about that.
• 10:09
  SPEAKER_00: All right.
• 10:09
  SPEAKER_00: Thank you, Pat.
• 10:10
  SPEAKER_00: And thank you to all our listeners.
• 10:12
  SPEAKER_00: Please reach out to us at professionaleggmarketing.com.
• 10:16
  SPEAKER_00: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 10:21
  SPEAKER_00: Trading commodity futures and options involve substantial risk of loss and is not suitable for all investors.
• 10:27
  SPEAKER_00: See you next time.