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FED and Harvest Progress · 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 Minor.
• 0:22
  SPEAKER_01: Let's get started.
• 0:23
  SPEAKER_01: Today is September 20th.
• 0:25
  SPEAKER_01: I've got Pat back with us here today.
• 0:26
  SPEAKER_01: How's it going, Pat?
• 0:28
  SPEAKER_00: I'm doing well.
• 0:28
  SPEAKER_00: How are you today, Mike?
• 0:30
  SPEAKER_01: Oh, very good, very good.
• 0:31
  SPEAKER_01: We've had some interesting reports and some interesting market action this week here, Pat.
• 0:36
  SPEAKER_01: Uh the corn market, 404 this morning.
• 0:40
  SPEAKER_01: We had a kind of a rough day yesterday, bounced us back to the bottom end of that trend that we've had kind of on this uptrend since the end of August.
• 0:47
  SPEAKER_01: Puts us just over four bucks on Deese corn and the November soybeans just above ten bucks there.
• 0:53
  SPEAKER_01: But not a whole lot of r real action lately, is there?
• 0:57
  SPEAKER_01: I mean, it's pretty pretty sideways for quite some time now in the grain markets.
• 1:01
  SPEAKER_00: Yeah, kind of stuck in this trading range.
• 1:03
  SPEAKER_00: I would, yeah, if you wanted to expand the range uh up into that 42025 area, I guess you go all the way back to the first of the first of July there.
• 1:13
  SPEAKER_00: And uh, you know, as you mentioned, we maybe some short-term um highs in that 416 to 413 area against uh the December contract, which was a nice rebound um off of those lows established at the end of August there, um a little bit under 385 even.
• 1:34
  SPEAKER_00: And so um, so here we sit to your point though, and and maybe makes some sense, kind of waiting to see if we can get a little bit better definition on crop size is as we get into the early, early part of harvest here, Mike.
• 1:48
  SPEAKER_00: What have you heard for yield reports?
• 1:50
  SPEAKER_01: You know, so far in the yield reports, it's pretty scattered.
• 1:53
  SPEAKER_01: There's not a lot of you draw a line here, everyone south of it is harvesting, draw a line north of it, nobody is.
• 1:59
  SPEAKER_01: It's pretty scattered yet, pretty early.
• 2:01
  SPEAKER_01: The one common thing I have heard so far this week is that uh after we get past some of these rain events that were supposed to happen over the weekend that they've kind of pulled out or moved around, uh, we'll see some more progress next week.
• 2:14
  SPEAKER_01: But the soybeans so far, I've heard fantastic yields from almost all areas, uh, especially for these early soybeans.
• 2:21
  SPEAKER_01: The uh corn, it's been a little bit more all over the place.
• 2:24
  SPEAKER_01: It's a little bit harder to gauge corn size, anyways, just with either earliage or silage reports.
• 2:29
  SPEAKER_01: You know how that goes with their estimates, but a little bit more variable on the corn side than the soybeans, but fantastic soybean yields so far from what I've heard.
• 2:38
  SPEAKER_00: Yeah, for sure.
• 2:39
  SPEAKER_00: I would say too, though, that um um you know uh a lot of discussion over the last week or so in terms of of um how much the the drop monitor map has started to to show dryness or to creep into the corn belt here, and and it certainly doesn't look nearly as bad as what it looked last year as an example, but still plenty of questions about um what impact that might have on portions of the corn belt as it relates to um bean yields uh with this, you know, the with moisture um dropping off considerably towards the end of the growing season here.
• 3:18
  SPEAKER_00: And so um I suspect that we're gonna see a kind of a first flush of soybean harvest here, and then it might slow down again just a little bit here.
• 3:30
  SPEAKER_00: That's what it looks like, at least around in the in the northwest corn belt here.
• 3:33
  SPEAKER_00: We've got a few bean fields that are ready, and then and then there's quite a few that got a ways to go yet.
• 3:38
  SPEAKER_00: So there might be a little bit of a difference in terms of of um of production.
• 3:42
  SPEAKER_00: Uh maybe some of these earlier varieties um manage the late season uh dryness better.
• 3:49
  SPEAKER_00: And so we'll we'll see how that plays out as we go through harvest.
• 3:52
  SPEAKER_00: But um certainly uh a bit of a holding pattern, if you will, as it relates to uh um getting any more definition on overall crop size for both corn and soybeans.
• 4:02
  SPEAKER_01: What about further out in the eastern corn belt?
• 4:04
  SPEAKER_01: Because a lot of the dryness that's picked up in the drought map has been like Ohio, Illinois, Indiana, and a little bit of Nebraska as well for the extreme western corn belt.
• 4:14
  SPEAKER_01: But um that harvest seems to be picking up pretty quick in in the fringe kind of outside eastern states, doesn't it?
• 4:21
  SPEAKER_00: Agreed.
• 4:21
  SPEAKER_00: And and so it sounds like sounds like things are progressing pretty well, and uh and so far, as expected, I I think you know, Eastern Corn Belt, Eastern, Eastern Corn Belt in particular, um, are are pretty pretty pleased with uh their production prospects as they as they get into harvest over there.
• 4:40
  SPEAKER_01: Good deal.
• 4:40
  SPEAKER_01: Good deal.
• 4:41
  SPEAKER_01: Also another major concern with that drought picking up is we are starting to talk about river levels a little bit over there, impact that has at this time of the year is somewhat significant.
• 4:50
  SPEAKER_01: Have you heard any recent updates from that?
• 4:53
  SPEAKER_00: Well, I uh uh uh uh the U.S.
• 4:56
  SPEAKER_00: corn and soybeans um are are competitive globally, and and we should be able to be seeing a nice little uptick here in exports.
• 5:06
  SPEAKER_00: Um low water levels on the Mississippi is is uh impeding that process uh to to some extent.
• 5:13
  SPEAKER_00: And so um that certainly is uh creating uh wider basis uh um wider basis levels in the Eastern Corn Belt, and and uh it it certainly is um impacting our ability to to move product uh uh globally here.
• 5:30
  SPEAKER_00: And so that's a real issue anyway.
• 5:32
  SPEAKER_00: And then we also have the the the uh political uh issues as it relates to tariff and China and and the Biden Harris administration uh talking about some more tariffs here um yeah, week over week on some specific goods coming in from China and and as always as as uh being involved in the in agriculture, we're worried about what type of retaliation might take place there and whether or not uh uh China might decide to impose some of the tariffs they have in place on soybeans as an example.
• 6:02
  SPEAKER_01: Next Friday being that big day, so we'll see what China comes out with on that after they've shown retaliation on countries like Taiwan or Canada that have taken similar actions against them here really recently.
• 6:15
  SPEAKER_00: One other topic, Mike, that we've been been talking a little bit about on the supply side of things is weather in uh in the southern hemisphere, in in Brazil, Mato Grasso specifically.
• 6:26
  SPEAKER_00: Do you have an update for us on that?
• 6:28
  SPEAKER_01: Yeah, a little bit.
• 6:29
  SPEAKER_01: Uh we are expecting some of the weakness we saw this week in the soybean market was maybe because of early rainfall that's expected early October, which uh from a time frame perspective, you know, most of that planning is pushed back into that time frame anyways.
• 6:43
  SPEAKER_01: So from a production standpoint for them, I don't see it as being that much of an issue as long as they kind of get those rains.
• 6:50
  SPEAKER_01: But we know that the larger or the further back we push that planting time frame, it it doesn't just impact the soybean crop they're planting, but also the safrina corn crop that they'll plant after it.
• 7:01
  SPEAKER_01: But here, um, you know, it's it's dry down there, but also I don't know even how much of that has led to the soybean rally that we've seen.
• 7:10
  SPEAKER_01: The more I look at it, there's probably some other things that contributed alongside of it too, uh, that gave us that little bit of a soybean rally.
• 7:17
  SPEAKER_01: But at this point, you know, it it they're expected to get some rains early October now.
• 7:22
  SPEAKER_01: Um yeah, that's not that late versus normal, anyways.
• 7:25
  SPEAKER_01: Uh, not really an issue.
• 7:27
  SPEAKER_01: It just could be an issue to watch going forward is kind of where we're sitting at for South America.
• 7:32
  SPEAKER_00: And and then just a reminder that we've got a projected um world-ending stocks to use ratio above 33 percent, um incredibly high number, right?
• 7:45
  SPEAKER_00: So largest ever.
• 7:46
  SPEAKER_00: Largest ever.
• 7:47
  SPEAKER_00: So the concern uh well, just slightly less concerned about potential weather developments as we go forward as it relates to oil seeds.
• 7:54
  SPEAKER_01: Yeah, and then the bigger ending stocks, even in the United States, I mean, you start to say, well, will we adjust some of these uh production levels lower a little bit?
• 8:03
  SPEAKER_01: I mean, ending stocks are still pretty massive, especially on the soybean front for the United States.
• 8:09
  SPEAKER_01: So that's gonna be uh really limiting on any rallies, potential rallies that we may get, especially with smaller farmer selling levels going into harvest here.
• 8:20
  SPEAKER_01: If we do see a little bit of a bump here to like that key level, like 425, like you talked about on corn or ten and a half dollar soybeans, uh, we're probably gonna see a lot of farmers selling really try to combat that and hold it down, I think.
• 8:33
  SPEAKER_01: So I'm interested to see if we'll have some range-bound action going forward still.
• 8:38
  SPEAKER_00: And so, Mike, everyone is interested in your opinion as it relates to um the influence of of what's going on with outside markets here on the commodities that that we uh care the most about.
• 8:53
  SPEAKER_00: Um, you know, we've been um spending the first portion of this podcast talking about about internal fundamentals, uh mostly supply side, uh, and and uh and but but curious your thoughts uh with that half point um interest rate hike here this week that uh that the Fed announced it what impact uh might that have on commodities as we go forward here?
• 9:15
  SPEAKER_01: So the impact four years ago when we started to raise rates was a start of the bear run that we had in the commodity market.
• 9:23
  SPEAKER_01: So when we started to raise interest rates, we entered a bear cycle in commodities.
• 9:28
  SPEAKER_01: And now is the first time that we've started to cut rates.
• 9:31
  SPEAKER_01: So historically speaking, that should favor commodities to start or find support or a bull run necessarily.
• 9:39
  SPEAKER_01: Um this cut should uh benefit exports out of the United States for commodities by decreasing the US dollar value.
• 9:47
  SPEAKER_01: It's a less attractive interest, uh less attractive investment.
• 9:51
  SPEAKER_01: Uh so that's gonna help us out a little bit.
• 9:53
  SPEAKER_01: We've seen, you know, other metals, gold, you know, uh like if you want to look at gold in particular as a commodity or investment, I mean it's kind of got everything aligned to it.
• 10:03
  SPEAKER_01: Someone in Chicago told me, like, if it's technicals, fundamentals, you know, gold's kind of got it all right now.
• 10:09
  SPEAKER_01: And you've seen that in in the recent trend in pricing.
• 10:12
  SPEAKER_01: So when it comes to cutting rates, I mean, all of us are gonna feel a little bit better in the United States as a consumer with uh with that occurring.
• 10:20
  SPEAKER_01: If I was just on the line of do I want to buy that next piece of ground, this helps give you a nudge in the in the direction to say, I could probably afford that now, or you know, even a next vacation, or um, the meat market, for example, the other day, you know, uh consumer demand has been pretty good uh in the United States for both pork and beef, and uh, we've held cutout values a little bit sideways versus what we normally do.
• 10:45
  SPEAKER_01: This should help continue to benefit that in the longer run.
• 10:48
  SPEAKER_01: Now, does it impact it necessarily like right up front right now today?
• 10:53
  SPEAKER_01: Maybe a little bit just in some market reaction, but it was mostly expected.
• 10:57
  SPEAKER_01: You know, we had a rate cut of 50 basis points.
• 11:00
  SPEAKER_01: Um, it was expected that we had 40 basis point cut.
• 11:03
  SPEAKER_01: Um, so it was mostly expected, but the the real change or the real thing that I think people were looking for in that report was what was Powell gonna say about the future.
• 11:15
  SPEAKER_01: And his outlook was basically, hey, we're cutting rates right now, not because we need to, not because the US is gonna go into a recession.
• 11:23
  SPEAKER_01: We're cutting rates because we can.
• 11:25
  SPEAKER_01: We have inflation headed towards 2%.
• 11:27
  SPEAKER_01: We're not there yet, but we can start cutting because it's probably gonna continue to go down to that level.
• 11:33
  SPEAKER_01: Um so that's one thing they talked about, and then you know, the outlook going forward, uh, only two more 25 basis point cuts expected this year, um, pretty anticlimatic from that standpoint.
• 11:45
  SPEAKER_01: So, and then next year another hundred is what they were expecting.
• 11:49
  SPEAKER_01: So it no real rush, no no real urgency to uh any of the discussions that Powell had this week or uh or what he expressed, but for agriculture and equities uh all alike, I mean it's it's kind of a win by default in a cutting rate environment.
• 12:07
  SPEAKER_00: Absolutely, and I think that's a good recap.
• 12:09
  SPEAKER_00: And I think the summary would be that uh you know, generally uh uh you know lower interest rates gives us the opportunity to stimulate economic activity, um, more long-term investment, whether that would be um building, developing um infrastructure or uh housing from a from a personal perspective, those sort of things.
• 12:32
  SPEAKER_00: And so, and then in the short run can also um just create some cash flow, the combination of cheaper energy prices and and uh um and and lower cost of money uh also helps the consumer, of course, and all of those things can be supported to commodities.
• 12:50
  SPEAKER_00: And so we'll keep a close eye on money flow here.
• 12:52
  SPEAKER_00: I'm I'm interested to see um how um the uh uh the money managers, New York money, if you will, to see how that flows into commodities here um um g given uh these developments.
• 13:08
  SPEAKER_00: And I and I know that that there was no real big surprises there.
• 13:12
  SPEAKER_00: The market expected all of these things, but it'll be it'll be interesting to see um what what the reaction is as we go forward here.
• 13:19
  SPEAKER_01: And really, we've expected it, I would say, since the end of August, we started to really see uh economic data support a cut of twenty-five basis points or more, and that was kind of when the fund started liquidating some of their major short positions and commodities.
• 13:34
  SPEAKER_01: Very good point.
• 13:35
  SPEAKER_01: Lines up well.
• 13:35
  SPEAKER_01: All right, thank you for your time today, Pat.
• 13:37
  SPEAKER_01: Thank you.
• 13:38
  SPEAKER_01: And thank you to all our listeners.
• 13:40
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 13:43
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 13:48
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 13:54
  SPEAKER_01: See you next time.