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Outside Markets and WASDE · 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 egg 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 April 12th.
• 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 this afternoon?
• 0:29
  SPEAKER_01: Pretty good.
• 0:30
  SPEAKER_01: Pretty good.
• 0:30
  SPEAKER_01: We're going to talk a little bit about some of the market activity that we saw today.
• 0:35
  SPEAKER_01: Some outside market activity, the protein markets, and then we're going to work our way into yesterday's WASDA report.
• 0:41
  SPEAKER_01: Where do you want to start, Pat?
• 0:43
  SPEAKER_00: Sounds great.
• 0:44
  SPEAKER_00: Let's talk about outside markets.
• 0:46
  SPEAKER_01: Awesome.
• 0:46
  SPEAKER_01: Well, the uh crude oil market here, we had a nice pop this morning.
• 0:50
  SPEAKER_01: Things have uh been turning green there recently.
• 0:53
  SPEAKER_01: Uh crude oil futures did pull back a little bit from the morning highs there.
• 0:57
  SPEAKER_01: Uh we've been dominating that news with uh talks about the potential Iranian attack of Israel, which could come anytime.
• 1:05
  SPEAKER_01: So when we're looking at that potential, uh we saw quite a few option buyers going into the weekend here.
• 1:12
  SPEAKER_01: And uh I think it's important to note that Iran's production is about three million barrels a day, Pat.
• 1:18
  SPEAKER_01: And if uh you look at that, a larger percent of that uh moving away, uh we could be uh really talking about a tighter uh world market supply in the crude oil sector, and especially when you're talking about the situations with uh rising political problems between Russia and China as well.
• 1:37
  SPEAKER_01: Uh I think that market has been uh getting uh squeezed tight a little bit here recently.
• 1:42
  SPEAKER_01: So that that flow uh kind of spilled into uh some of the grain markets today, it sounded like as well.
• 1:49
  SPEAKER_01: And uh I think that was worth noting, at least for the soybean market having a nice day today.
• 1:54
  SPEAKER_01: And I I also think there's something worth talking about with uh the gold oil and the gold and the dollar and uh some of that spilling over into the grains as well, and and part of that has been ch China's been a really big buyer of uh gold and silver lately and a lot of different commodities, and uh uh China historically, when they start buying commodities, Pat, they find soybeans to be a little bit more attractive of a buyer, and we really saw that flow in today.
• 2:22
  SPEAKER_01: And uh last night the Chinese import-export numbers were awful uh out of their country, so their economic situation looks really poor today.
• 2:31
  SPEAKER_01: So they've been really buying up excess supplies of gold and uh silver, things like that to kind of hedge against that, as well as you know the dollar doing what it did here uh recently, Pat.
• 2:44
  SPEAKER_01: We saw the dollar go way up here recently with the the inflation numbers out of the US.
• 2:50
  SPEAKER_01: It made it look like maybe we're not gonna cut rates as much as what we thought it was gonna happen, so the dollars went up as well.
• 2:57
  SPEAKER_01: Uh so a lot of things went on in the outside markets, and it it really led toward uh some more specific commodity buying in gold and the dollar and it and oil, and now it sounded like today we finally, after talks about the spreads being kind of odd in commodities, like some were getting bought and some weren't, uh, some of those other commodities ended up getting bought today, I thought, Pat.
• 3:22
  SPEAKER_00: So on the uh on the crude oil rally there, I mean, we had um well back in March, we had spent a lot of time consolidating in that$76 to$78 area and surged higher um towards the end of March and then hung out uh you know above eighty dollars up into that eighty-one dollar area.
• 3:45
  SPEAKER_00: And now over the last week or so, um, again surged higher and then and then some consolidation up above eighty-four.
• 3:53
  SPEAKER_00: Um, as I look at the July chart specifically, uh traded over 86 briefly today, and then sold off.
• 4:01
  SPEAKER_00: We looks like we're still going to finish higher on the day, but moderately so, and and sort of back into this range we've been in the last week or so.
• 4:08
  SPEAKER_00: And so um, you know, you mentioned a lot of different stuff there in in your opening, and and there is a lot going on as it relates to to outside markets and influence.
• 4:19
  SPEAKER_00: Um, why don't we talk just a little bit about the inflation inflation data report that came out on Wednesday?
• 4:27
  SPEAKER_00: Um, do you have some numbers as it relates to that off the top of your head, Mike, and just talk about that a bit.
• 4:33
  SPEAKER_00: I I wanting to focus on um you know that that inflation or those those CPI numbers that came out, talked about higher energy prices and then also talked about things like um um higher insurance premiums up 22% was one of the things that I had read.
• 4:50
  SPEAKER_00: And and so um I think a lot of us that are that are engaged, involved in the in the in the business of buying and and raising and and and selling commodities are a little curious as to what all the connections might be there.
• 5:06
  SPEAKER_00: And so, you know, the idea that that um you know the average consumer is gonna be forced to spend more money on energy and and has higher fixed costs, particularly as it relates to um insurance premiums, to to to make an appointment or or to to cite an example, um perhaps um tightening up the uh amount of of cash available to buy things like meat and take trips and and use gas and those sorts of things.
• 5:31
  SPEAKER_01: So I think that's what today was in the meat market.
• 5:33
  SPEAKER_00: Well, I I think it's been going on for a little while.
• 5:36
  SPEAKER_00: And and and I I think I mean if if it's the same reason why the stock market is selling off, I I I I think would be a logical reason why we're seeing a sell-off in in in in livestock as well.
• 5:48
  SPEAKER_01: Yeah.
• 5:49
  SPEAKER_01: So that consumer price index that came out, uh key inflation gauge, that rose 3.5% in March.
• 5:55
  SPEAKER_01: Uh that was higher than expectations.
• 5:58
  SPEAKER_01: Uh we're uh marketing acceleration for inflation here, and most of that was shelter and energy costs that drove the increase pat.
• 6:06
  SPEAKER_01: So it and that's nothing I wouldn't say that's abnormal from what we've seen, like in the February report as well, that was the same situation.
• 6:13
  SPEAKER_01: And like if you took shelter out of the inflation numbers, I mean be we'd be at like 1.8% inflation.
• 6:19
  SPEAKER_01: So I know that's had a a big chunk to do with it.
• 6:22
  SPEAKER_01: But like you said, I mean we start uh we don't drop rates, the stock market doesn't like that.
• 6:28
  SPEAKER_01: And if we're spending more money on fuel and and shelter and some of these other things that we have to, maybe we're not gonna buy the stakes as long this this summer as what we normally would.
• 6:37
  SPEAKER_00: Well, and again, in in bigger picture, it's a reminder of of the the fine uh thread that we're trying to needle, the night the fine needle that we're trying to thread, right?
• 6:49
  SPEAKER_00: Of of getting this right, of of um stopping or slowing the rate of inflation to a point where the economy is able to to um cool down just a little bit, but not so much that it forces this uh into a recession.
• 7:03
  SPEAKER_00: And I, you know, the market was trading interest rate cuts, interest rate cuts, interest rate cuts, CPI data comes out and says we can't cut interest rates.
• 7:11
  SPEAKER_00: And so um so this extra volatility at these elevated levels would just cite as it relates to especially the hog and cattle markets here, um, is the reason why you would have or are seeing some sell-off there this week.
• 7:25
  SPEAKER_00: And and as it relates to to hogs in particular here, I would just just mention that I mean spot fundamentals are still extraordinarily good.
• 7:34
  SPEAKER_00: We enjoyed a very good week of of appreciating cash and cutout values and and uh um and in spite of all that experience to sell off in the futures market and and relatively significant.
• 7:46
  SPEAKER_00: I mean we that June contract traded uh just short of 110 bucks there uh uh early Wednesday morning, and and tonight's settlement was uh down close to 102, so a pretty significant sell-off to to wrap up wrap up the end of the week here.
• 8:01
  SPEAKER_01: Definitely.
• 8:02
  SPEAKER_01: And I mean there was some other internal fundamentals going on, at least for the grains here, like soybeans.
• 8:08
  SPEAKER_01: We had four straight days now of uh sales for soybeans going forward, which is kind of a new development as well, Pat.
• 8:16
  SPEAKER_01: I'll uh I'll say we are not very competitive with what Brazil prices have been.
• 8:21
  SPEAKER_01: However, really recently over the past few days, it really sounds like uh word on the street is that the Brazil price for their soybean exports is shooting up pretty rapidly.
• 8:31
  SPEAKER_01: So uh something to look at going forward there, especially as I tie that into yesterday's WASDAY report, Pat.
• 8:38
  SPEAKER_01: Uh, when we look at that report, it's historically a little boring.
• 8:42
  SPEAKER_01: We we normally have the stocks report at the end of March, so we know a lot of those numbers coming in, and then we don't have anything for the new crop report yet until May.
• 8:52
  SPEAKER_01: So we're kind of in limbo in the April report.
• 8:54
  SPEAKER_01: And yesterday I would say they actually changed quite a few different columns in the US corn and soybean balance sheet, I think, compared to what I was expecting or what the market was expecting there.
• 9:05
  SPEAKER_01: And the big one being soybeans, they came out uh a fair ways away from the expected level for the soybean balance sheet on ending stocks.
• 9:14
  SPEAKER_01: They uh raised those to 340 million bushels, and that was a big chunk to do with a 20 million bushel uh decrease in exports and and a few other usage categories as well, a little bit more of a slush fun there, but nonetheless, uh, you know, uh before about the start of this month, we hadn't been finding very attractive soybean export numbers at all.
• 9:36
  SPEAKER_01: So for them to make that adjustment made a probably made a lot of sense here.
• 9:40
  SPEAKER_01: So it's encouraging to see uh or interesting to see what soybean exports have done this week here with some of these sales PAT.
• 9:47
  SPEAKER_01: So that that kind of sums it up for the U.S.
• 9:50
  SPEAKER_01: balance sheet, I guess, on soybeans.
• 9:52
  SPEAKER_00: Yeah, and I tell you, there's uh I was just looking at some data here um um over you know over the last hour or so that I mean the there's a pretty big discrepancy still between you know what the U.S.
• 10:03
  SPEAKER_00: is calling um crop size down in South America and what Conab is, and and uh uh it's basically the difference between um uh significant exports available out of that region, out of that country, uh Brazil specifically, and uh or or no exports at all, depending on on which estimate is right.
• 10:23
  SPEAKER_00: And so there might be a little bit of hedge and a bets there, why we're seeing a little bit of export uh sales activity uh this week out of out of U.S.
• 10:32
  SPEAKER_00: Um might be some uh um newfound concerns about about crop size down there.
• 10:38
  SPEAKER_00: Um and so there's always is and and will continue to be um plenty of unanswered questions as it relates to all of this.
• 10:45
  SPEAKER_00: But you know, from a U.S.
• 10:46
  SPEAKER_00: producer's perspective, as we look uh out over the next couple weeks, generally a pretty favorable forecast for planning progress if you choose to partake.
• 10:57
  SPEAKER_00: And and uh as we go through the next week, we'll we'll get closer and closer to to some of those optimum dates.
• 11:03
  SPEAKER_00: And so anyway, I I think we'll see some pretty good planning progress for the next couple weeks.
• 11:07
  SPEAKER_00: Forecast looks decent.
• 11:09
  SPEAKER_00: You still have enough hanging out there as it relates to um you know drought, uh dry weather concerns, I think, to to uh um force some some weather risk premium to be put into this market, which again isn't really all that uncommon for this time of year.
• 11:24
  SPEAKER_00: And so we'll see what happens here.
• 11:26
  SPEAKER_00: I I am looking at the December corn chart as as we talk here, Mike, and and uh um, you know, it's still a nice little 20-25 cent rally uh off of off the lows there at the end of February.
• 11:40
  SPEAKER_00: Um, you know, from a real crop producer's perspective, you know, you've guys uh we've got some really nice strategies here to to to put some floors into this thing and and still maintain some some upside possibilities here.
• 11:52
  SPEAKER_00: I sure um would appreciate the opportunity to engage with anyone that wants to to learn more about that.
• 11:58
  SPEAKER_00: But um, you know, this this this newfound volatility or or uh or the next chapter of volatility that we're experiencing here as as we visit today, I um does certainly create opportunities, and I would just encourage everyone to take a take a good look at what makes the most sense for their operation.
• 12:15
  SPEAKER_01: Now is the time to chat.
• 12:17
  SPEAKER_01: Thank you for your time, Pat.
• 12:18
  SPEAKER_00: Thank you.
• 12:19
  SPEAKER_01: And thank you to all our listeners.
• 12:21
  SPEAKER_01: Please reach out to us at professionaleggmarketing.com.
• 12:24
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 12:29
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 12:36
  SPEAKER_01: See you next time.