Welcome in.

You are listening to the Friday, October 20, 2023 installment of Market Plus.

Joining us now, star of stage and film, Shawn Hackett.

Hi, Shawn, I.

How are you?

Good.

I have we have great questions.

First off, we want to talk about some whether I'm going to button up some of these other things that kind of ran through.

But these questions this week were fantastic, everybody, because they cover a lot of things.

We're going to start with Ernie in Nebraska.

Ernie emailed me a question.

He wants to know, Shawn, are the Chinese trade challenges producing any issues for farmers in this part of the economy?

That is the issues of trade barriers and restrictions, as well as the showdown recession in the Chinese economy?

Well, I would say, given that the Chinese have made a decision to diversify their demand away to other countries like Brazil and are wanting to do that more and more is having an impact on our demand from them, our basis levels from them, no question about it.

Now, you know, we don't we're not actually seeing physical barriers, but we're certainly seeing intentional barriers of not wanting to buy unless they absolutely have to.

And they will if the price is right.

But, you know, that means you've got to have a little price for them to want to come in and do it.

It's an ongoing factor.

It's not going away and it's just something we don't have to deal with.

This week China announced GDP numbers that were above expectations.

We heard you know, the question there was about a recession.

Kind of looks like that economy maybe has turned.

They've been pushing a lot of money in printing a lot of money.

They've been trying to support the banks, lowering interest rates.

If you do enough of that, Paul, you will get at least a short term reaction.

I do think they're looking at a bounce in their economy into the end of the year.

Is that enough to excite the commodity markets so far?

It hasn't really done so, but it eventually will.

You open the door?

I don't know if I should say it, but it's what the United States does.

It is money into the economy lowers interest rates, and then we had inflation take off.

What happens if China has high inflation because of these policies that they've just done?

Well, if their policies create commodity inflation, which always leads headline inflation 6 to 9 months in advance, it complicates what the Federal Reserve and the government wants to do in an election year in 2024, which was which is to boost the economy and get things rolling.

So.

Very complicated situation, Paul, because if we're not in just a, you know, only one, a single polar economy anymore, it's multipolar.

And every factor, every lever gets pulled at a different time.

We'll call that balanced.

It is it can be balanced at times, but it's.

Also hard to understand and make sense of what move and what lever responds.

And I get what you're saying.

Yes.

All right.

Frank in Illinois has one for you here, Sean.

Is the 100 year drought still forecast for next year?

If so, how do you recommend positioning in certain contracts for corn and beans?

Well, let's be clear.

The light of the glass, very cycles and 89 year cycle plus or minus one year.

We went back and looked at all the tree ring analysis data have gone back 11 centuries and confirm this cycle.

And there's a three year window that it is typically happened.

That was 2023, 2024 or 2025.

That's your three year window.

If it's going to repeat.

We just dodged a bullet this past growing season, meaning a few things went a little bit differently.

It could have been that kind of a drought.

The issue with the Glyford Cycle is you need a neutral to La Nina base state.

We didn't quite have that this year, but we're moving back into La Nina next year.

And the question will be how quickly does lining a gaping hold in the atmosphere?

If it's early enough, then 2024 could certainly, you know, offer that opportunity.

25 is clear and our work to be a La Nina year.

So right now, when I'm looking at 2425, I'd have to say 25 gets our our nod right now.

But 24 could be depending on when La Nina kicks in.

So we're going to be hotter and drier.

Most likely moving forward, we're going to be worse than what we were this year.

This year we were lucky.

Up until the end, we had really cool weather for many.

There's plenty of people out there who will gladly show you pictures of their yield monitors.

True.

But if we had hot weather in the key growing areas, the yields could have been considerably worse.

La Nina, however, we're not going to be afforded any cool weather.

It's going to be hot and dry.

So next year could be considerably worse than what we saw this year.

So I'm guessing from what you said, are you positioning yourself in anything in corn and beans then, given what you just said and your thoughts on whether.

We've been adamant in our writings and in our recommendations to our livestock producers to go out and use the December 24 price levels to lock in and protect upside price rates on corn, for example.

Just a few weeks ago we made a similar recommendation in meal.

We think end users of physical feed need to be protecting against this ongoing drought cycle, which we think has at least another couple of years to go in the US before we might actually shift the climatic gears here.

Boy, there's a lot of people who don't like to hear you say that, Sean, when they look at whether I mean, I look at low Mississippi River levels for shipping and the impacts on that up.

Memphis this week set a record on low levels.

When does that start showing up into any pricing?

Well, it shows up with a weak basis.

If it can't move the product, obviously it'll show up next growing season.

If if we don't refill up the river and we deplete the soil even further.

You know, last year we got a recharge.

That helped a lot to get, you know, get off to a good start.

But if we go into the spring and we have the river levels at that level, then we have no ability to recharge.

It could be quite, quite a situation.

And you also think Brazil is not off the hook either when it comes to weather was we.

Feel we have one of the most serious situations we have seen in decades for Central West.

That's the Mato Grosso area, the Amazon Basin, which is the rainforest that feeds Mato Grosso tend the driest start to monsoon season since 1902.

The Amazon River is at record low levels.

Talk about the Mississippi.

That's what feeds it.

That's the monsoon.

If you have a failed monsoon season going into the growing season like this, we already are hearing that it's so dry in Mato Grosso that they're going to have to see significant ripples in things of crops, of soybeans that were already planted, which means guess what?

Those are going to mature later on in February and even have a delayed planting for corn and, you know, you run that situation through.

We will have never I've never seen the Amazon basin dry like this before.

I mean, it's really unusual.

And maybe all those plantings in the Amazon that they keep doing is starting to have an impact on that atmospheric river that is blessed, you know, Brazil for a long time and allowed them to grow crops for a while.

The last three or four years we've seen unusual dryness in the Amazon.

So I really, really feel that if we're looking at the growing season, keep an eye on Mato Grosso.

It could be a big mover for the winter months and provide marketing opportunities much earlier than we would normally expect to see it under normal circumstances.

We will do one more question on that in a moment, but I want to get to fill in Ontario now, because he's asking about the significance of December corn breaking $5.

He says December is gaining on the March 24 contract with the carry narrowing.

There is lots of corn around.

Is it a function of farmers locking the keys to the bend, or is it Brazil setting up for dry parents, or is it just an anonymous anomaly?

It's too early for Brazil, You know, we're too early for that to be an issue.

You know, certainly one of the reasons why you have post harvest rallies in corn this time of the year, because farmers do lock up in the bin and say, come get it next year.

We're definitely seeing that there Is this also indication and maybe the yields are lower than the current USDA estimates.

Maybe the test weights are coming in light, which we're hearing from many.

The problem with that is the USDA, the way that process works will probably not going to get that answer at the earliest January, and we may not even get it until the March quarterly grain stocks.

So unfortunately, I think we're going to be guessing for a long time here and what that actually looks like.

Well, we're looking at the December corn contract on the video side of things, but this is tied a little bit to the crop size.

In August, Mike in Nebraska asked you about what was your biggest assumption and question going into the Pro Farmer tour?

Was your assumption correct?

Are the good bad areas better worse than expected?

What about your fuel?

Fuel needs?

He says right now I'm hand-to-mouth.

Well, when it comes to crude oil and diesel and things of that nature, because we've had this premium put in due to the escalating Israeli war be a little reticent to lock in those kinds of energy prices right now.

But natural gas prices, propane prices, fertilizer prices, that side of the energy ledger, we think the long term opportunity to lock in very economical, physical supply is something that's available and we should continue to do that.

When you have $18 LNG overseas and we're sitting at three, at some point, that's going to narrow.

Yeah, and natural gas went down nearly 10% this week.

Tough week there, rough week.

Let's move to feeder cattle question here with Ryan in Illinois.

He was wanting to know from you, Sean.

Feeder cattle prices have remained strong yet.

We've seen some price correction in the live cattle complex.

What are your thoughts on where that market for cattle may be going as we approach 2024?

And I'm going to add a little more to your question, Ryan, in 24 as well.

Well, we've been very negative and continue to be negative this complex into the spring.

Too many cattle on feed have to come to the market demand side shock.

We've been anticipating we're starting to see the beef cut out price decline for two months straight.

We're starting to see the speculators liquidating the market.

The feeder cattle really getting hit hard and of course no one expects it to come down.

You know that.

That's the way the psychology works, right?

We think you need to continue to lock in as a cattle producer.

These levels, which are still positive and profitable into the spring.

Now, that's the first half story, the back half story of supply isn't going to be rebuilt anytime soon.

And if you know, and because of that, if we get the beef cut out, price down low enough, demand will come back, especially as you get into the spring, the summer grilling season.

So I think it's a back half better first half tough time.

So you can also use today's cattle on feed, then placed at 106 market at 89 which doesn't that say people are holding back.

Yeah.

I mean that says that the we have a lot of animals on feed a lot of animals they have to come to the market and everyone is starting to pull back from the marketplace.

That's probably Paul, one of the most bearish cattle and feed reports I have seen in a year or two.

It's been a long time.

We've seen something way out of the box like that.

One last out of the box.

Question To wrap it up, this is what you can talk about in the airport on the way home or on your trips.

Let's go.

Dan in Nebraska, Are we in the beginnings of a commodity supercycle?

Use all the things you talked about.

We believe we are, whether volatility is on the rise, all our work with lower solar cycles and such suggests that's going to continue to worsen over time.

Secondly, the geopolitical situation, we there's something called the 53.5 year geopolitical escalation cycle comes due in 2026, which means we are in an escalating cycle that always has in the past led to higher commodity inflation.

When we look at times that we've seen sovereign debt crises like we're starting to see where governments are overbloated with debt and have to print money to keep themselves going is always been a situation where money flees the fiat currency system and moves to hard assets.

All three of these cycles are in our in sync at the same time, which says to me, that's a commodity supercycle.

It has ebbs and flows and we've been slowing down for a while.

But these typically last 10 to 15 years and we're only year three into a 10 to 15 year cycle.

That's what we think we are, and we don't see anything to sway us away from that conclusion.

We have come to the conclusion of our time together.

Shawn, good to see you.

Good to see you, Paul.

Thank you so.

Much.

Shawn Hackett, everybody.

Thank you.

Next week, agriculture's heavy hitters will gather to discuss world food policy.

And we'll have the commodity market analysis from Shawn O'Leary and Ross Baldwin.

They will join us.

Have a great week, everyone.