Podcast Summary
Agricultural Markets Uncertainty: Weather conditions and trade tensions with China are causing uncertainty in agricultural markets, particularly beans. Farmers in Midwest and mid-Atlantic regions face crop challenges, while southern states and Maryland struggle with oversupply and negative grain basis.
The agricultural markets, particularly beans, are experiencing uncertainty due to weather conditions and trade tensions with China. The Federal Reserve is expected to cut inflation rates, but job numbers remain down. In the Midwest and mid-Atlantic regions, crops are facing dry conditions, especially during a crucial time for corn growth. Pennsylvania and New York have diverse agricultural industries, with dairy and mushroom production being significant in Pennsylvania, and apples and dairy in New York. Wheat and hay production in the southern part of these states and Maryland are also facing challenges due to negative local grain basis and oversupply from last year. Farmers may consider skipping soybean planting or switching to alternative crops due to economic factors and weather conditions. The upcoming World Agricultural Supply and Demand Estimate report will provide more insights into these issues.
Mid-Atlantic wheat harvest: Unexpectedly large crops and economic stress have led to low basis prices for farmers in the Mid-Atlantic region, while disease pressure and drought stress pose challenges to crops, particularly corn during its tasseling stage.
The wheat harvest in the Mid-Atlantic region has been impacted by unexpectedly large crops and economic stress, leading to low basis prices for farmers. Disease pressure was more significant this year compared to last, but the crops overall are hanging on, especially corn, which is in a critical stage of tasseling. The region, including Pennsylvania and Maryland, has significant acres of hay and corn, with over a million acres of each. Irrigation is used more in sandy soils in the Del Marva area due to lower water holding capacity. The crops are in desperate need of rain as drought stress is prevalent, especially for corn during its reproduction stage.
Mid-Atlantic agriculture diversity: The Mid-Atlantic region has a diverse agriculture landscape with various crops and farm sizes, prioritizing conservation practices due to regulations and economic reasons.
The Mid-Atlantic region is known for its diversity in agriculture, with significant acres dedicated to crops like corn, soybeans, wheat, hay, apples, peaches, and specialty crops such as blueberries and cranberries. Some states, like New York and Pennsylvania, have large horse markets leading to a high demand for hay. Virginia, on the other hand, has more peanut acres than cotton. The Mid-Atlantic and Northeast regions prioritize conservation practices more than the Midwest due to regulations and population density. Farm sizes are smaller, and there is a growing focus on regenerative agriculture. The unique challenges and regulations in the region have encouraged farmers to adopt conservation practices not only due to regulations but also for economic reasons.
Cover crops impact on grain market: Despite economic benefits, heavy use of cover crops in certain regions has led to a high supply of corn, causing a weak market. USDA can manage supply by adjusting demand.
Farmers in certain regions are heavily using cover crops, which has economic benefits and contributes to regenerative agriculture practices. Meanwhile, the USDA's World Agricultural Supply and Demand Estimate report on Friday will provide insight into how the grain stock and acre numbers from late June fit into the overall balance sheet. The report's most disappointing aspect was the high supply of corn, leading to a heavy carryover and a weak market. The USDA can manage these numbers by making adjustments to yield, acres, or demand. However, yield adjustments typically aren't made until September, and changes to acres won't occur until the September planting report. Therefore, the primary area for adjustments is the demand side, with the USDA making systematic moves to keep carryover down.
USDA reports, corn demand: Despite stable crop and yield numbers, USDA reports reveal concerns over slowing corn demand due to competition from South American countries, which may lead to uncomfortable market numbers. Export sales are low, and China's recent small purchase did not help. Keep an eye on demand to determine market direction.
The USDA's latest reports on corn and soybean crops have revealed some interesting developments. While the crop and yield numbers are not expected to change significantly until later in the summer, the demand side of the equation is causing concern. The slowing corn demand, due in part to competition from South American countries, may result in numbers that the market finds uncomfortable. Soybean stocks are higher than expected, but demand has been good lately. However, the USDA may have helped producers by keeping demand high in a market where it is currently lacking. Export sales are low, and China's recent small purchase did not move the needle. Corn acres have increased, and soybean acres have only ticked up slightly, leaving a lot to be planted. Keep an eye on the demand side of the equation, as it will likely determine the market's direction in the coming weeks. The FSA data for pre-event plans, which will give a better idea of where the crops stand, is not expected until September.
Grain market surplus, competition: Grain markets face a surplus due to potential increased production in flood-affected areas & strong Brazilian competition. Demand concerns & potential additional acres could negatively impact prices.
The grain markets are currently facing a surplus situation due to potential increased production in areas affected by flooding, as well as the strong competition from Brazil. The demand side of the market remains a concern, and any positive news regarding additional acres could negatively impact prices. Monogrosso in Brazil has had a productive year, but the long tail of their crops may limit market gains. The Federal Reserve is expected to cut interest rates in September, but economic factors such as housing and consumer debt, along with political instability from the upcoming election, could add uncertainty to the markets.
Wheat markets interest rates: Anticipated interest rate cuts causing trend of decreasing rates and increasing bond values. Russian crop situation uncertain, US harvest ongoing, hedge pressure weaker cash markets, potential for exports due to demand increase in fall and early winter.
The markets are anticipating potential interest rate cuts in September, which is causing a trend of decreasing interest rates and increasing bond values. In the wheat markets, there are several factors at play. The Russian crop situation and its impact on global wheat prices remains uncertain. The US wheat harvest is ongoing, leading to hedge pressure and weaker cash markets. Despite these challenges, there may be opportunities for exports as demand increases in the fall and early winter months. The market has become desensitized to shipping issues in Ukraine, which have largely faded from the news cycle. Overall, it's important to keep an eye on global wheat production and demand as well as US harvest progress for market trends.
Ukraine crop production, cattle market: Uncertainty around Ukraine's crop production due to dry weather and potential technical breakdown in cattle market could impact supplies, causing concern for negative supply and demand fundamentals, with demand for cattle strong but export demand weakening, and economic downturns exacerbating the situation.
While the Ukraine conflict has taken a back seat in the markets, the uncertainty around their crop production, particularly with dry weather, could impact the market in the future. In the cattle market, retail values have been a key support, but recent weakness in this area has caused concern, with the market showing signs of a potential technical breakdown. Producers should take advantage of current cash prices and consider protective measures. Demand for cattle has been strong, but export demand has been weakening, which could add to supply concerns. Overall, both markets are showing negative supply and demand fundamentals, and any economic downturn could exacerbate the situation.
Commodity market protection: Farmers should consider buying puts to protect against potential losses in corn, soybeans, and livestock markets due to current uncertainty and elevated levels.
Farmers should consider securing some protection against potential losses in the commodity market, particularly in corn, soybeans, and livestock, due to current uncertainty and elevated levels. John Heinberg from Total Farm Marketing advises farmers to consider owning cheap puts to keep a floor under prices, acknowledging that this may mean protecting a loss in the market but minimizing potential damage. With uncertainty ahead, staying diligent and ensuring adequate protection is crucial. Corn, soybean, and wheat futures all saw losses, while cattle and leanhogs finished down as well. Texas crude oil finished up, but the Dow Jones also saw only minor gains. Overall, farmers should remain vigilant and cautious in the current commodity market environment.