Episode Transcript
[00:00:00] Speaker A: Futures moves to start off the morning here, we have a green screen in the right areas and we've got some red in the correct areas as well. What I mean by that is you have crude oil now trading under $78 a barrel this morning, down just about three bucks. That's helping a little bit or should in the pocketbook. We've got the Canadian dollar basically trading sideways at 71 70, but that's been a little bit weaker as well over the last couple of days here. Canola is up 270 a ton at 763. Spring WH Basically, I don't know, up a penny or so right around 641 on the September contract.
Kansas wheat's up a penny or two as well at 6.46. Soybeans leading the charge this morning up 13 cents at 11.35.
Being oil sideways 71.34 and corn up just about two and a half cents here at four and a quarter. Noteworthy here for pricing. I actually didn't write anything down for grain prices for this week because it.
I think maybe a noteworthy one would be just some of the demands, old crop demand to fill those last wheat cars here for summer. You know, I don't have those numbers, but I know eight and a quarter in the piece. 775 Central Saskatchewan. Maybe we could throw that in there. And then on inputs, you know, lots of talk about the area values here the last week or so. We've got, yeah, urea coming in, you know, right around 800 bucks a ton of maybe a little bit less than that if you're in the southern part of the prairies and a little bit more if you're towards the north. All right, so we'll talk about that a bit more here later on. This week's cup of coffee sponsored by Land for Rent, built for farmers who want to grow land4rent.com now questions that came in this week. We did have one command from Keaton in regards to UAN.
And so 2800 UAN just asking about, you know, if we should expect to see a price drop similar to urea. Would expect to see something here, but UAN is trading at quite a bit of a premium over urea here. So basically some notes from Josh Linville. You know, they still UAN remains a massive premium over NOLA urea.
We're going to have to wait and see. These are Josh's words to see what happens here over the next couple of weeks. The hope is that lower urea values will pull these programs lower than previously expected. Now Keaton, don't you worry because Josh Linville is going to be on the what the Futures podcast Friday. So we will dive into that a little deeper. Headlines this morning. US crop conditions came in Monday afternoon and here's why. I guess this is noteworthy. Just the direction now it's not big numbers, but spring wheat is up 3% in the good to excellent category week over week. Right. So improvement somehow. Winter wheat gained 2% as well to 27% good to excellent. But also note that crop is now 25% harvested.
Just cruising along, which you would expect with a light crop. Corn up 1% to 68% good to excellent. Soybeans also up 1% to 66.
Now these are better than the five year average and so they're trending up. Now it's June16. This is not, you know, the crop is nowhere near made, but it is the trend, the trend of improving crops and that is noteworthy. That is something that we need to pay attention to. When does that change? How does it change? Does it change? Or are they just gonna keep getting better and better? Time will tell. It's usually not the case though. US and Iran, that war seems to be coming to an end here. June 19 there will be an MoU sign between the two countries.
Obviously crude down urea has been trending lower as well for the last number of weeks here. So markets have almost reached pre war levels. It could be crude, it could be urea, it could be wheat as well. Everything's kind of towards that bottom end before the the war broke out.
New world screw worm. That's obviously a problem now in the US a new case detected 250 miles north of where they first found it. Here in Texas. I get to go hang out with cows and control on Thursday.
They're doing a cattle outlook, a full day seminar and I'm going to go and chat with people a lot smarter than I am in regards to cattle. So I'll have more of that in next week's what the Futures episode. Should have some fun with that. Markets are closed Friday for Juneteenth, the holiday in the US and then the funds wiped out a bunch of length last week, except Canola.
So let's bring in our guest here.
Good morning, Evan, how are you doing?
[00:04:42] Speaker B: Good morning. I'm doing just fantastic on this Tuesday. How are you?
[00:04:48] Speaker A: I'm good, buddy. My, my coffee's got hints of grapefruit in it today, so it's like just a life of luxury over here, to be honest.
[00:04:55] Speaker B: Wow. The fancy Coffee?
[00:04:57] Speaker A: Hey, you bet. Fancy coffee. Paper cup, but here we go.
All right, man.
So you're, you're one of the bosses over there at Simple Hedge. You know what, what is the latest. You're, you're a alumni of the Crop Marketing Made Cool conference. You've been there a couple of times. Yeah, we've had you on the show a couple times as well with kind of the latest and greatest. But you just get us up to speed here when it comes to Simple Hitch.
[00:05:24] Speaker B: Yeah, absolutely. Thanks for having me on the show again, Ryan. And yeah, lots of exciting things happening at Simple Hedge these days. We are continuing to expand our offerings on the app, continuing to provide farmers with some more and more direct knowledge and education directly on the app as well as along with some of our brokerage partners that we're working with, we've also got some self directed trading offering on the app which we've seen more and more farmers looking to use. Just if you're a little bit more knowledgeable and want to execute some, some things yourself, you can do that now directly on Simple Hedge as well.
So the latest and greatest and yeah, it's been, it's been a fun ride and we're continuing to help guys manage their risk where we can.
[00:06:13] Speaker A: And what I want to add to this as well is if you are kind of new to, to hedging or, or new to these strategies, don't discount the education part in this in your, in the app here because if you want to walk through examples and, and gain some quick understanding, they've got some great educational tools in there. So wanted to definitely highlight that. All right, Evan, your weekly recap that you guys send out is a, a must read and I will say one of the better emails that go out in the crop marketing space in Western Canada. All right, now I put free question mark because I'm getting these now and I don't think I've paid for them. But can you just enlighten me a little bit on how this came together and why you guys spend so much time and energy putting together a great read?
[00:07:08] Speaker B: Yeah, absolutely free. You can remove that question mark if you. It is free. We are just sending it out to everybody to help, help inform everybody on what's going on. So we believe that, you know, if you can help bring a little bit more information and some weekly recaps, then more and more guys will be interested in potentially jumping on the app and getting going as well. So just trying to provide another resource out there and appreciate your, your kind words about the.
[00:07:40] Speaker A: About the email, it is well laid out. It's got the important stuff. And then what I really like is that so there's some perspective in there, like what to watch for. And even you guys even had a little note here about, you know, keep an eye on this July weather. You know, obviously weather's quite wonky right now, but keep an eye on this. And then also just like a nod to watch, you know, US Corn and you know, maybe it coming into Canada. Canada importing a bit more if we run into weather issues, like just some, you know, I don't know. It wasn't on my radar until I read it and I was like, oh, I should. Yeah, I gotta pay attention to that too. So that's what. What I like about it for sure. All right, man. So the USDA came out late last week. It's old news now, but is there anything that. That came out in last week's, you know, wasde that you'd look at and say, you know, maybe this has further, you know, further.
A further storyline to follow later this summer or into. Into the winter. Like, did anything come out of that or was it just a snoozer?
[00:08:46] Speaker B: 90, 80, 90% snooze. And I think the market saw that as well. When it came out and they basically did nothing.
It was pretty quiet. The one sort of caveat on there is we did see a little bit of a move on wheat where we saw the all wheat yield down about half bushel an acre. A production cut, Production cut and carryouts decreased as well as well as we saw some lower stocks to use. So we did see, I think soft red wheat finished green and hard red sort of lagged on it a bit. But that was the only notable thing on the June that I saw. And the market seemed to agree because nothing else really seemed to do anything. It was just in line with expectations or pretty boring altogether. So sometimes boring is good. We'd all like maybe some surprises to the upside, but better than a surprise to the downside. So we'll take it sometimes.
[00:09:47] Speaker A: Yeah, yeah, exactly. So we get that report.
I'm looking at Kansas wheat right now.
It seems to have built a little bit of a bottom here. We're trading 647. We tested 630 a couple of times. I know you've definitely spent time as a. As a, you know, merchandiser and I've worked with growers for many years. But like, how optimistic can we be? Because we have the question about, you know, where would you sell more spring wheat? And hard red spring wheat. And I'm like, oh man, like targets right now.
Unless you've got a line company that's really hungry, they're tricky in a declining market. So, you know, do you think this kicks off some further strength or do you think it's. We still just need to be kind of cautious and don't expect any big, you know, big gains, big swings to the upside, putting you on the spot on that one.
[00:10:40] Speaker B: But no problem. It feels like we're a little like a little bit in, I like to call this no man's land on wheat where you've had a bit of a reduction. It looks like we're finding some support here and maybe a little bit of upside. But I could see, if I had to guess I would see us moving more in a choppy range here over the next month unless something changes materially in terms of weather outlook. But right now it seems to be more range bound after. We've taken a lot of steam out of, out of the wheat and I think if we see sharp rallies, we'll get something, it'll get sold. So I would say if you see some rallies, I would start either hedging or selling pieces of wheat into it in terms of where I would sit today. But unless something material changes on the weather front in the US and we get this July heat coming in super strong, then maybe we get a sustained rally. But I think we see some choppiness over the next couple of weeks here.
[00:11:49] Speaker A: Yeah, I'm, I'm with you and I, you know, I'm just, I'm looking at a one year chart right now for spring weed and you know, and you can go back many different years, many different charts and see like a high established in May or June, like that's pretty normal. And then last year we go and we don't find our bottom until, you know, basically right before Christmas and then we go and visit it again in January.
Like there was a tough six months there. I'm not saying that we have those six months ahead of us, but what I'll say is I agree with you, Evan, that when you have a little pop, maybe you have a dry extended range forecast that rolls in for the northern plains and you have a little rally, like we're going to have to stay quite disciplined and price those.
And then I think the other interesting for wheat, interesting thing for wheat, at least on my radar would be, you know, El Nino and its impact to the wheat crop in, in, you know, Australia or India.
And maybe wheat is something that you know, you sit here and try to pick off some. Some rallies to get cash flow covered and keep, you know, the trucks rolling. But then, you know, maybe it's. It is in the winter. Maybe we do have an exciting winter for marketing wheat, which is not normal, like, wheat marketing for me. I kind of close the books in October, and I'm like, I'll see you again in the spring. And unfortunately. But, hey, maybe 20, 27 will be different. So fingers crossed.
[00:13:13] Speaker B: Could be.
[00:13:15] Speaker A: All right, this has been on my mind. I want to talk canola. This has been on my mind because I wrote in here, what is wrong with the canola industry? Which is a weird thing to say in Western Canada, but just hear me out. Crush margins are historically high.
Basis, though, is not prairie basis for crushers.
It doesn't stink a whole bunch, but it's not great. It's certainly not throwing a signal of tight supplier, strong maybe demand. It's pretty boring. But then I go over to my country elevator, and I'm staring down like, a minus 85, a minus $88 per ton canola basis. Like, it's basically telling me we're not exporting this product anymore, which is not true.
But what the heck's wrong? Like, what. Or am I thinking about this the wrong way? It just seems to be broken right now.
[00:14:12] Speaker B: You know what it might be? I don't know, because it's a. It's a good question. When you're seeing what does seem like from the outside record crush margins, especially on the board, when you're calculating everything, they're looking unbelievable, but yet you're not seeing the basis come with it yet. On the other side, what's interesting is we're seeing canola futures hold up very, very well versus the rest of the industry. I mean, over the past four weeks, we've seen every other major agricultural commodity drop, and canola has dropped as well. But in terms of. Relative to the other two, it's held up remarkably, remarkably well. And we're seeing this reflect in the fund positioning as well, where every single commodity over the past four weeks on eggs has been cut or even flipped from. In corn, it went from a net short of 235,000 contracts to a net long or a net long to net long.5,000 to a net short. Yeah, like, that's a massive, massive switch. And then you have canola here. That's. We've added longs. So I think we're starting to see a story play out on the futures where people are starting to see that There is some risk on Canola and there is a bit of a story on Canola versus the rest of the complex. We're starting to see this play out on futures. Now. The question is, is basis just lagging or is there something different happening on the cash side that we don't really know?
So if you had to put a gun to my head and ask me, I would say the commercials may have gotten a decent fill of physical selling when they saw a run up to 800 and they're just going to wait until they absolutely have to buy Canola. So I think they're probably hoping that they can keep basis low and the futures will do the work for them to bring them up to a target price where they may get some selling.
That could be a potential strategy that they're employing today where they're like, we have some time. We think there may be a run up in futures. We're going to let the futures do the work for us and keep the basis low today. But I think that, you know, if we don't get another big sustained rally on Canola and there isn't a large selloff into it, then basis has to come up.
Yeah, I don't know. I don't know.
[00:16:57] Speaker A: That's where I would put my. That's where I would put my.
My bias is like, you know, something is going on here and I like what your comment on the, the coverage. Because, you know, unfortunately, you know, we sold it at 675, Evan, not at 800, but we did sell it at 675 to them. But they probably have the best coverage they've had in years. They're. The crop is not. It is a concern in certain pockets, some small pockets with excessive moisture, but it's not an overall driving concern across the prairies yet. We'll see in July with the heat. And so they just patiently wait and hope they scoop up a few more tons at these, with these terrible basis. Like I, I think my basis in Melfort, Saskatchewan can improve in the extreme here. Can improve by like a buck a bushel. And then if I think about going a little bit further east where with the excessive moisture, like there could be something even greater there. So we'll see. We'll keep the listeners updated throughout the winter and see what, see what happens. Question that came in from Tim. Did I miss the window to buy puts for Canola?
And Evan, you're kind of the guy with all this in front of him every day. What do you think on buying Canola puts I'll throw my opinion in after.
[00:18:11] Speaker B: My strong opinion is, no, you did not. I always think that puts are a very good way to protect your downside. And the reality is we just don't know what's going to happen the rest of the year. In terms of canola prices, my bias is they do have some support right now, but we could see this change very quickly and could continue to drop. And I think it's always good to have some sort of additional protection, sort of depending on how much physical sold you have on.
On that side. So I would say if you're like, you know, if you're 100% sold on canola at this point, I. I wouldn't go out there and. And buy some puts. But, you know, if you're 10 or 20, 30%, might not be a bad idea to layer in a little bit of extra coverage on canola. It's my opinion.
[00:19:11] Speaker A: I think Tim's in a spot here where planting was a little bit delayed for them, just like our farm. He's a little bit, I think, west of us. And so I'm guessing that Tim's sitting here with little bit of coverage, but then also fingers crossed for some. Some heat to move this crop along. So I like focusing on puts for the next couple of weeks in what I would call these little, like, relief rallies. So I. I want to be optimistic. Like, I want to be super optimistic on Canola, and I want to just sit here, throw caution of the wind, hope for higher prices later on and not have to do anything. But when I see the decline in everything else, I just think that at some point something weird will happen where the chickens come home to roost. It might be a Kuzma trade thing. It might be some weird biofuel legal dispute or something like that. It might be something that just comes out of nowhere and takes the wind out of our sails. So I really like puts, especially when you have a couple of positive days. Let's say today closes up three bucks, which I'm gonna get margin called if it does, but anyways. And then let's say tomorrow it goes up another six or seven bucks. Like, I. I would be right there just trying to layer in some puts on these little relief rallies that we see. History tells us that when we hedge, you know, in this environment at this time of year, we go back more often than not and are very thankful for those. For those hedges. So. So I'm. I'm really good with it. Tim, did you miss the high at 800?
You know, maybe Time will tell, but you still have a chance here. And history again shows us these little relief rallies. And even though they weren't perfect, they ended up being some really, really good hedges at the end of the day. So there we go.
[00:20:58] Speaker B: I also think the one thing I just want to add to that is especially when you're nervous about condition of your crop and where it could go, hedging via financials with no physical obligation to deliver could be a, can definitely be a nicer way to lock in when you're worried about what might come this summer as well.
[00:21:16] Speaker A: Yep. Suffering over here, Evan. Anyways, no, good point, good point. And I think that's all good stuff. So. And that's what I have here for just some rapid insights to wrap up the show is, you know, it doesn't matter if it's wheat, it doesn't matter if it's canola. These little relief rallies that we see the exception being weather and, you know, extreme heat in July that can change this thing. Weather is very important here for the next couple months. We, what we say today can be altered with, with a forecast. So, so keep an eye on that. In the meantime, though, if weather turns out to look good in the long range, relief rallies, super important.
Not looking to, to gain, you know, huge amounts here, but, but just rewarding these little, little rallies. All right. Okay. Well, this week's cup of coffee is brought to you by Land for Rent. Find new acres, manage every lease in one place. Skip the paperwork headache. Landforrent.com Transforming how farmland is rented.
I am just about out of coffee. I got a little more here yet, but that's it for this week. Thank you, Evan, for being on the show Friday. On what the futures. We have Josh Linville to talk summer fill and strategy around that. We also have Brett Waltz covering. There you go. Long range weather forecast. It's like we knew what we were going to talk about today, Evan. Unbelievable. All right, folks, we'll see you there. Thank you so much.
