Welcome into the Friday, May 31, 2024.

This is Marketplace, and that is Shawn Hackett.

You stuck around, huh?

I have to.

You know.

And keep you out of trouble.

I've yet to have anybody walk.

I just take your mic off and depart.

We talked a little bit about the livestock half.

We're going to get into the livestock.

There's another thing I'm going to tease - this called a tease.

We're going to talk about softs.

We always talk about cotton.

We got some other soft stories that Shawn is going to get into a moment first.

But Shawn, we're going to get into weather.

But first, I want to lead off with Trent in Iowa.

And he submitted this question via Facebook.

Has your spring planting weather outlook matched up overall with what you were predicting from this past fall and winter?

Trent says in his part of Iowa, we keep hearing hot and dry later on this summer, but potentially $3 corn by fall.

Not sure which direction we should be looking.

Answer is we were predicting a very good spring.

We were predicting good moisture.

So that has played out the way our weather forecast had been suggesting.

In terms of the weather that we are expecting to see the heat is the most important component, not how dry it is, but how hot it is.

We haven't had a hot July.

What I mean by hot is high daytime temperatures above 95 degrees and nighttime temperatures above 70 degrees.

Warm nights, hot days, 2011 and 12, where the last two times we had that.

And those have been our two worst deals below transfer corn and soybeans since that time.

We believe we are set up, by the way, a very active tornado season like we're having.

Top five percentile.

2011 was the last time we had anything like this, which was the warm night scenario.

Not a good crop year in 2011.

Right?

Terrible crop year because very warm, hot nights.

What we're thinking, Paul, is that the middle of the grain belt to the east where they've had a lot of excessive moisture.

We could be looking at the warm night scenario from the center west where it's drier.

And we think, you know, daytime temperatures over 95 can be more like a 2012 story.

So we think those are the two dynamics that are going to be working in July to create a much more significant potential crop problem than we've seen.

All right.

You said one historic year, 2011, what about 1983?

1983 is another great example of a year that was wet and then turned very hot in July with a lot of dryness.

The heat continues to be the message I'm trying to convey.

If you don't have the high heat either at night or during the day, it's very, very hard to hurt these genetics.

But 83, another great by the way, 2011 and 1983 were sort of neutral, El Nino, La Nina... And we're going to be pretty kind of neutral going into July.

So it's a very similar sea surface temperature set up in the Central Pacific.

A little credit there for Mark Gold, who told me to look at that 1983.

I wrote about it, so I'll give it that.

And Shawn, thank you for commenting on that one.

Shamus in Iowa has our next question.

Mr. Hackett, if we had such a great crop, why did it take seven weeks to plant it?

And probably we've got 2 to 3 more weeks to go?

Well, my view is rain makes grain until it doesn't, right?

So you just you're not going to rally the market on.

We have some solid moisture fall and we're and we're planting is at a normal pace.

Are there problems?

Yes, but overall, you're not going to excite the market on moisture.

Okay.

We were talking before we started rolling, before the main show about good to excellent.

We're going to start seeing crop ratings here next week.

It's going to look really good in June because of what you've just said.

Right.

The good moisture, so many years, if we don't start well, we can't finish well.

We're going to start well.

But you're trying to tell me that we're not going to finish well.

Well, let me put this way.

We started off terrible last year.

May and June, when the driest in 50 years.

And we turned out fine because we had a cool, wet July.

It's far more important what happens in the middle of the growing season than at the beginning or at the end.

We keep having bad finishes and bad starts, but we haven't been able to have a bad mid middle part of the growing season.

And my view is that we're finally going to get those unfavorable mid growing season conditions that are going to take a good start and make it end poorly.

We're going to treat this like a market here.

We're going to let that one rest for a minute.

I need to get back in the livestock because you had some good comments there.

Scott in Wisconsin wants you to look at cash and futures here.

Prime steers brought $2 live weight, futures, only $182.55 at the close on Thursday.

What's with the futures disconnect?

Well, I mean, I think you look at an average cash price.

I mean, some go off at two, but not all are going off there.

You know, the cash price I think yesterday was 187.

We're not too far off of that on the nearby futures prices.

So I think what he's talking about is more of a differential trade cash wise in parts of the country, but not necessarily with the average cash prices.

But we've also seen that for months in in the cash has been king versus the futures in livestock.

Right.

It has been, yes.

Okay.

All right.

Paul in Minnesota.

We kind of got into this a little bit in the main show, but his question is, what happens if China doesn't buy beans?

How low will this market go?

Well, I can only tell you how low it will go if we know how good a crop we are going to have to have and how big our carry outs are going to be.

Obviously, you know, just because they haven't been buying doesn't mean they won't start buying.

But if they maintain purchases at these levels, that's going to be predicated on what August weather is.

My concern for soybeans is that an active hurricane season in the Gulf, Paul, can bring moisture in August and save the soybean crop where it won't save the corn crop.

To me, that's I really as I said in the main show, I'm struggling to find myself getting excited about soybeans.

Okay.

Keep that thought for just a moment.

Kevin in Missouri, you asked about the long term weather forecast.

Hit rewind on the podcast.

The long range weather forecast in the U.S., you're saying July is the key month.

I now want to flip to I want to go to Gary in Wisconsin.

I'm going to skip one Julie, sorry, because this is about the carry out story that we haven't I haven't asked you specifically about that.

But Gary in Wisconsin wants to know is 180 yield and 91 million acres even on the table anymore?

What has to happen for traders to consider sub 2 billion bushel carryout?

Well, I think, you know, one of the things that I believe is going to happen is we're going to see quarterly grain stocks in the next report in June show a lot less corn available than we think is out there.

I do not believe for a second we had a 177 yield last year.

I think the USDA has overestimated that.

Secondly, I believe we're going to lose some acres in corn because it has been wet and low margin is expensive crop to put down.

And I do think we're going to lose some acres which will help move the bar further lower.

And thirdly, you bring high nighttime temperatures and high daytime temperatures.

The way we described in the month of July in the markets can very quickly think about how much lower can those carry outs go.

It wouldn't take much to start moving those carry outs to the mid 1.5 billion range, especially with exports.

What I think are going to be very, very strong because Brazil's crop way down, their exports are going to be way down.

And it looks like another major drought in Mexico means they're going to continue to be big buyers of corn.

Right.

They have been good buyers of corn and that has probably been one of the saving graces.

It has been.

But I do believe China is going to be in the corn market for U.S. corn.

Do you have any positive thoughts that China has the the unknown has been crossed out and the word China has been placed in some of these recent purchases that maybe there's some buying around the corner?

I think the corn there is some buying way around the corner.

I think they need to buy U.S. corn.

They're not going to get it from Brazil this year.

And so I think that's going to be a I always believe that in terms of geopolitics, they will buy what they need and they'll put politics aside.

They're going to need corn from us and they'll buy it.

At the end of the day, it's still about the dollar.

Still about the dollar.

Okay.

All right.

Let's, our planned questions.

Phil in Ontario is going to be our last one here.

And he likes to follow seasonality.

And he says, I was ready to sell new crop December corn on June 18th.

Thinking about history and seasonality.

However, it's not working out based on this past week with lower prices and breaking support.

Shawn, has the new crop corn marketing opportunity passed?

The first opportunity has passed.

I don't believe it's the last opportunity.

I don't necessarily believe it's the best opportunity, but the first opportunity has clearly passed.

The seasonality this year was an earlier seasonality.

We always talk about seasonality as a guide, not a you know, not a perfect, you know, perfect pattern.

And so, you know, this is definitely I do not see the selling opportunity coming in June, as we just talked about in the main show.

Let's close with softs.

You've mentioned the hurricane pattern, but there has been these stories of record coffee prices, cocoa prices, What else and why.

The tree crops, orange juice or oranges, coffee and cocoa?

All three tree crops have gotten themselves into big trouble.

Tree crops don't get planted annually every year.

When you get into a supply problem, you just can't turn on the spigot.

You have to ration demand.

The problem is chocolate demand and coffee demand in terms of rationing, those demand basis is extremely difficult and not something that's easily done.

And so when those kind of tree crop markets get going, it can persist for a long time before we start seeing that demand and even investments that they make you put plant new trees, make investments today you're talking about two or three years before you're getting production out of those trees.

It's a longer term cycle.

And so I think that's why we've just seen those three tree crop markets really take off because we had very, very hot temperatures in Brazil at the wrong time for flowering, for both oranges and for for coffee and in cocoa, it was the exact opposite.

They had 50 year rainfall excesses that created disease.

And the disease means you have to rip the tree out and planting no one behind it.

There's no way to generate new production for a while.

So both those markets are in how high do we have to go to ration demand?

The reality is, to answer your question, we don't really know for coffee and cocoa, how high we have to go.

We've never really done it before.

I guess the only parallel to what you're saying sounds like the livestock market.

And when you have the avian flu that keeps getting talked about, you were before avian flu, I think you were really still pretty bullish on cattle and feeders and hogs.

Are the parallels correct?

I think the parallels most apropos for cattle because of the long cycle of reproduction of sort of increasing supply of getting that signal, it just takes a long time to do that.

So I think that the cattle market is and is exactly like a tree crop, hogs and poultry.

We can kind of turn the spigot on much quicker.

The dairy situation, however, because of avian flu and because we have this very, very significant dairy replacement shortage and so many dairy cows have been bred to beef cows, I actually don't believe we can turn the spigot on in dairy in the US like we've done in the past.

Even if we get the, you know, the big signal to go do so, we may actually have a elongated cycle there the likes of not really seen before because there's unusual situation where we're losing tons of production from those infected animals and there's going to be no way to turn that sucker on, in my view, any time soon.

So I think right now dairy and cattle are very apropos, are very similar, analogous to the tree crop scenario of how how much how high do we have to go to ration demand to let the supply catch up.

It's a lot.

They're going to have to listen to this podcast.

I like three quarter speed because of everything you just said Shawn.

Oh, I try my best to be clear.

I appreciate it.

Thank you.

Shawn Hackett, good to see you.

Thanks, Paul.

That'll do it for Market Plus.

Next week we are going to look at a move by an animal rights group to close the last packing plant in Denver.

And we'll have the commodity market analysis with Elaine Kub.

Thank you for joining us and have a great week.