Episode Transcript
[00:00:00] Let's get into today and what's really moving markets this week. This week's cup of coffee sponsored by Egg i3.
[00:00:09] Great opportunities to lock in profits on new crop canola are out there. You can be aggressive on your Forward contracting with AG i3's Forward Protect Insurance that protects you in case of a buyout. Intrigued? Check out www.agi3ai. All right, folks, we've got canola down a dollar a ton here to start the morning. We've got soybeans down two and a half cents. Now, that is coming off some of the lower, some lower values. All right, so we are gaining some momentum and we'll check that again towards the later part of the show, see if we can chat enough to get this into positive territory before we, before we sign off. Spring wheat is currently up about two and three quarters of a cent at 629. Of course, off the May contract, still below that 650 level. That's kind of showing up as a resistance spot there. Kansas City wheat's down about half a cent at 602. Bean oil's trading slightly higher at 65.63. Corn up 3.5 at 463. And I've got the Canadian dollar trading lower at 72.96.
[00:01:20] And oil West Texas oil up 5% at 92 and a half dollars a barrel. A barrel. Pardon me. Gotta get that coffee flowing. It's a solo cup of coffee for this week. So you got me. We got lots to get through. We had seven questions come in before hitting the start button here and a couple extra headlines for you as well this morning.
[00:01:46] So we've got a lot to go through. So let's get into some of the headlines here and then we'll start tackling questions now for headlines. Of course, this is old news, but oil prices tumbled on Monday amid growing concern, or, pardon me, growing optimism that the war may be nearing an end.
[00:02:07] So of course, we all woke up. We saw Trump put out free five days of no bombing or not a ceasefire, but a temporary pause in the escalation and the war there. Oil prices tumbled, stock market cruised higher and we will not get into the big trade that happened just minutes prior to Trump announcing that. But always some interesting things going on in our markets. Now, as we start today, some of that optimism has come out and it's been like the last couple of Mondays, right? Mondays come around, you see oils down, grains and oil seeds lower as well for your Monday. And then what's happened the last couple of weeks is we gain a little bit of momentum throughout the week. We kind of get back to status quo for the five trading days and then the weekend happens.
[00:03:04] And what, you know, what happens over the weekend, we usually see a bit of an escalation in war and then a whole bunch of tweets and headlines and things coming out saying, you know, we're creating a coalition to help, you know, traffic pass through the strait or oh, there's going to be a ceasefire. Oh, we're in talks for peace, calms everything down Sunday night and for Monday gets everything calmed down and settled down. All right. We've also got, later this week, the Trump administration, they're inviting farmers to the White House. They're having a little bit of a party on Friday. I don't know if, if it's an agriculture party or what you call it, but they're having a party on Friday. The trade is guessing that that is the day that there'll be that. The new announcement or the final, finally an announcement around biofuel policy, maybe some blending quotas, things like that. All right, for Friday, there's a big party. Hopefully you got your invite and, and you can go and participate on that one.
[00:04:01] Rains in the extended forecast, like if you've been in a drought before, you guys understand this, the extended forecast, it really doesn't mean anything unless there's that big major switch or change in the weather pattern. But it's got to start with that. It starts with that one rain and then you see that momentum build. And we saw some of that across the prairies in June of 2025.
[00:04:27] But right now we saw wheat markets face a little bit of pressure because rains came into the forecast in the 11 to 14 day period for the US Midwest.
[00:04:37] Now, where that rain is going to fall, I don't know. It looks to me when I was checking out the latest from BAM weather, it looked to me like the rains might go a little bit further east anyways, until then, until Easter.
[00:04:51] Kansas, Nebraska, southern Nebraska, parts of Colorado, Oklahoma, Texas remain dry.
[00:04:59] They had record heat. I had a meeting with a gentleman in the Midwest on, on Friday.
[00:05:05] They were anticipating some record heat and it certainly, it certainly happened. So it's hot, it's dry, it's going to remain that way.
[00:05:13] But that long range forecast looks like it's got a chance to bring in some rain and that could put pressure on your wheat futures. But as I was chatting with some of my farms yesterday, it's got to happen yet, right? It's got to happen. It's got to come in if you've been part of a drought before. Those long range forecasts, they don't mean much until, until you see it happen.
[00:05:37] Ag rule as of last Thursday well followed consulting firm in In South America, 68% of the crop we're talking about Brazil here had been harvested. That's behind last year's pace of 80%. So there was concerns about quality for Brazilian soybeans. The pace has been slow. We've been talking about this every single week. Is it providing support to the markets? Maybe a little bit. But obviously energy is the bigger story right now. And then biofuel mandate in the US as well. Just going back to this winter wheat crop. Kansas City Winter wheat fell 6 points week over week to 46% good to excellent.
[00:06:19] Oklahoma declined 4 points to 14%. Colorado fell 5 to 24%.
[00:06:25] Again folks, we're gonna start getting the weekly ratings here starting in April. Crop ratings that is. And so we'll keep an eye on how that develops. We'll keep an eye on the rain and that's going to dictate some of the direction in your wheat futures. I was telling some farms last week that even if the war premium came out, if it stayed dry in Kansas, I would expect wheat futures maybe decline in the short term but, but to find a recovery fairly quickly. Also Texas was down or sorry increased 1 point to 16%. Good to excellent there for grain prices and input prices.
[00:07:02] There's not a lot that jumps off the page. I did see, you know some higher old crop wheat trade in the peace region. Some of the highest values of the, of the crop year. You know, if we go from August to now, we are seeing some demand out there with certain elevators, certain locations.
[00:07:22] You know, I joked, I think it was Bungie Grimshaw or Bungay Manning, whatever up there. Anyway, Grimshaw, Manning doesn't. I definitely have been to Manning. There's no elevator there, Grimshaw. But they had five or six specials on six different crops.
[00:07:36] You know you could bring a mix, a mix of in your trailer and be like here you go guys, you need it all anyway, right? But there is some demand with a few elevators to fill those cars before you know planting is going to be around the corner here at some point. Even though winter has decided to stick around for, for this year of note, $8 hard red spring wheat. That would be for a 113.5. We did see $8 targets trigger in the Saskatoon region.
[00:08:04] So Saskatoon farmers, this is a pretty important level for that region. We should have seen 850 in central Alberta. Maybe it was there. I didn't catch it though. But there's usually about a 50 cent spread, maybe even 40, something like that. But that's a pretty important level in Saskatoon. So you're not there today. But if futures pop about 20 cents, then that would come back into play. G3PNH locations in that Saskatoon region. And then I just wrote new crop, green peas. That price stinks. I don't know what's going on with those green peas, but it is brutal out there. I've got urea trading, if we want to talk inputs for a minute. Urea trading between 1200 and 1275 a ton for spring here. And then I've got diesel coming in around a buck 40. But that was prior to the drop yesterday and I did not get a fresh quote.
[00:08:56] There's usually a delay in price. So there we go. Let's get into some of these questions. First one, I get asked this all the time, but what. What book do you recommend? What crop marketing book do you recommend to young farmers or to someone who just wants to, you know, to read something? Right. We don't do a lot of reading anymore. I do, but I know reading is kind of fallen for most. But this is the Farmer's Guide to Grain Marketing. Maximizing profit while minimizing risk.
[00:09:24] Sean Treasure is the author of this book. And the reason that I promote it is that it's about 130 pages.
[00:09:34] It's a quick read and it's one that for me is an easy read, if that makes sense. I'm not the smartest guy out there, so I need something easier to read. And it doesn't put me to sleep. I have a crop marketing book, a really thick one by my bed. If I can't sleep, I pull that guy out.
[00:09:54] It's a good book, but this one doesn't put me to sleep. So again, the Farmer's Guide to Grain Marketing. If you Google that, you'll find it. All right, so that was a good question. That came in. Another one. Do we buy the dip on Mondays? Well, in the last couple Mondays, yeah, we've had some brave folks out there buying those dips. I have not been that brave. I have too much crop to sell, so I haven't been chasing it too much.
[00:10:18] But yeah, you know, like I said earlier, we get through that news on Sunday night. Monday, the markets are down and some folks have done really, really well buying the canola dip on Mondays. All right, okay. Now, I got a question that came in Here from Ken. And there's a little bit of length to this one, but it's important, important topic for right now. So Ken says, can you go through the rationale of buying options for new crop? Right now, if I want to protect my downside risk with an at the money put, it's going to cost me about $1.10 a bushel. That's extremely expensive insurance to protect downside risk.
[00:11:00] If you go out of the money, you can cheapen it up, but you're still giving up somewhere around a buck 40 a bushel. So he's talking about a 700 put. It's 34 and a half dollars a ton or 78 cents a bushel. I realized with the extreme volatility, the cost has gone up. I'd rather just sell the options. That's Ken's perspective on that one. Would it be better to use soybean oil or soybean options to hedge?
[00:11:26] Should I just be selling the options? Just a bunch of great questions in here. How can a guy make these affordable? That's where we'll end that one. They are expensive.
[00:11:36] They are expensive.
[00:11:37] And this is where your bias comes in. Like Ken says, I'd rather just sell the grain. Like I'd rather just sell it and not spend the money on the options.
[00:11:47] Now you've got, you've got to rally that in Canola. That's being influenced by crude oil and the energy market, its impact to bean oil and then over to Canola.
[00:12:01] And so I don't like, it's not a, it's not a fake rally, but it's a rally with a lot of, you know, criticism.
[00:12:09] And people look and say, well yeah, China's come in and bought a bunch of Canola now, but we're still going to carry over a fair amount. 5 year high on ending stocks. And then we're going to plant more acres. But we haven't grown that crop yet. So we might plant it, but we got to see where that goes. It is expensive out there. And, and Ken, like what I would say is again, you have to check your bias here and check what you feel and what your research and your gut is telling you from market direction.
[00:12:39] If I've been buying a put option, I've also been selling something. Cause I'm taking advantage of the high volatility and I might be paying up for this put. But I've also looked at selling puts, so looking for like a three to one type of ratio. You know, if I can do something around 30, 33 bucks a ton and have about 100 bucks a ton of protection.
[00:13:04] That's what I've been striving for here the last week or so.
[00:13:08] And I'm not even that bearish. Like, when this war thing falls apart, yes, the canola is going to pull back, but I'm not even in the short term at that bearish. But I am still cautious that we are gonna plant more acres. And what happens if we get a big crop and when we lose this war premium and if more US farmers plant soybeans? You see what I mean? Right? But that's one way to do it, is to take advantage of, by selling something. Now, if you sell a call above, you are taking on some risk that if the market goes above that level, you could be in a margin situation and you're capping your upside.
[00:13:44] But you know, Ken, it sounds to me like you're very comfortable right now with, with selling this stuff. And that is step number one, you know, selling some of this. And then one of the easier things to do is to maybe buy a call option at some point. Maybe you sit there and say, I like 15 or $16 canola, I want to sell that. And then you say, oh man, spring's not rolling around here. You know, maybe I should buy a call option and protect myself against a buyout. Or oh man, this war got worse. You know, crude is now over $120 a barrel. It looks like it wants to go higher. You could buy a call option and participate in that. You could also do an out of the money call where you're basically saying, I want to sell this. Now, I'm willing to take on a little bit of risk, but I'm going to buy, you know, an $800 call, for example, and make sure that if it goes above 8, I'm participating in that market. It is expensive.
[00:14:39] Everyone has their own kind of, their own reasons and their own strategy. I have been, if I buy it, I've also been selling something to try to get that cost more reasonable. But great, great question. On top of that, Sheldon also asked if I could explain what open interest is.
[00:14:55] And so open interest from a, I guess from a trading perspective, here is the total number of outstanding derivative contracts, futures or options that have not been settled, closed or exercised. I'm just pulling this definition off the web because how I would want to say it is that it's, it's all participants. It's all participants in the market. Open interest is everybody in, but they're not double counted. So if you buy A contract and someone on the other side has sold the contract. That is one. All right, it's not double counted.
[00:15:28] Now, lots of talk about open interest rate. Now if you have an increase in price and rising open interest, that tends to confirm a stronger, healthier bull market trend. All right, if you have higher open interest happening in a declining market, then that's a bit more of a bearish type of signal. But yeah, great, great comment there, Sheldon. And I hope that, certainly hope that helps. It's all participants, but they're not double counted. Is is the important one I also got last night. Is now a good time to buy a canola put option? My answer to that one was yes, it is a good time. Now as of last night, we were about 10 bucks a ton off off that November high, right?
[00:16:13] And so if I could get it for, you know, the markets rally 10 bucks today, I, that'd be ideal. But we continue to bump up against this kind of the ceiling. And if you're looking to protect downside now you're at the top end of this short term range range. So I think it is a good time to buy a put. I like keeping my upside open, which is what this farmer was looking to accomplish as well.
[00:16:39] But I was blow off top from a couple weeks ago. That's the thing that still keeps me up at night. I can't find research that shows me that a blowoff top we go and make a new high right after or shortly after, maybe it happens later this spring, but I can't find it. In digging back in many different markets, I can't find where a blow off top leads to a higher price in the short term. This thing, to me, it needs a boost right away. Otherwise we're running into a little bit of trouble here. And I don't like the setup on the chart as of this morning, I'm not a technical guy, but I don't like how it's looking and I do believe that puts are a nice safe play. We need a boost in energy, a boost in the war premium to get this canola market to pop up even more.
[00:17:27] All right, I'm going to grab one from the chat here from Trenton, I believe. Can I sign a futures only contract with ADM for knob delivery in hopes that the basis gets better? What I would say to that one is that some of the smaller crushers are full or close to full or have a 80, 85, 90% coverage level for October for November.
[00:17:53] I can't speak specifically for ADM though, but that I would Ask them how covered are you? Because my thought would be lock in futures and leave basis open.
[00:18:05] But some of these companies are very well covered.
[00:18:09] All right, so you gotta, you gotta keep that in mind. Farmers have done more forward contracting. This is the most that they've done since the terrible event of 2021 where everyone walked away from grain marketing.
[00:18:23] This is the most that they've done pre sold. So just keep that in in mind. ADM is usually one of the bigger ones out there that tends to always be buying for the most part.
[00:18:36] But that's, I'd have that discussion. Hey, Mark.
[00:18:40] If this is adm, Lloyd. Anyway, Mark, what's the deal? What do you got going on for coverage? And see what he says and that'll determine that. Now, basis levels at the line companies are wide.
[00:18:53] And I do have one more question on wheat about futures first as well.
[00:18:58] So again, they're wide at the line companies. In that situation I'd lock in futures only, but at your crushers, find out what the coverage is like. All right, just two quick ones guys, and then we'll get into some key insights and we'll move on with our day.
[00:19:12] This just follows up. Jordan, what's your thoughts on targets for futures only? Contracts for 2026 new crop hard red spring wheat.
[00:19:21] Jordan, if you're looking for a level, obviously a seven would be fantastic, but something in that 690, 685, 690 range and a seven for futures first target. That's what I would look for for Minneapolis spring wheat off the December contract.
[00:19:37] I still just two things.
[00:19:41] I'm a little bit concerned and this is maybe tinfoil hat stuff guys, but I'm a little bit concerned like if, if crude goes higher, history tells us the Canadian dollar goes higher as well.
[00:19:55] And then if crude goes higher, our costs, our freight costs are going to go up. So I'm, I'm not as bullish on basis as I've been the last couple of years.
[00:20:06] And I noticed in Saskatoon to hit the eight dollar targets, they were triggering about a 30 cent better basis level than what was posted.
[00:20:19] So I want to proceed with caution here. Jordan, I like the futures first angle. It's been very successful for me the last couple of years.
[00:20:28] My basis expectations are lower though. I want to be clear with that. They're lower than they normally are based on some of the factors I just talked about.
[00:20:36] And I just wonder if, if doing a little bit of both, you know, maybe depending on where your farm is. Jordan, you're, you're looking at something eight plus if you're eastern Saskatchewan, you're maybe a 775 type level to get started, but something throwing something eight plus out there, 820, 25, something like that. And then having a futures first target in and seeing how that balances out. I don't think you should put all your eggs in one basket. One last one here, Ian. And I know we're a bit over time. What are your thoughts on malt barley? I was at a PNH meeting last Thursday, which apparently my dad was there as well. We thought he was doing a parts run, but apparently he was having coffee and snacks with the PNH folks.
[00:21:22] But anyways, they said I'm better off with feed at 5:25 to 5:50 than growing malt.
[00:21:30] Well, Ian, dude, if they are offering you 525 to 550 for PNH in Aberdeen, Saskatchewan, and all I'm getting is a 560 malt bid with further freight into what? The bigger region, that is definitely a no brainer. But I don't think you're there on the feed.
[00:21:47] So if PNH wants to step up and pay you those values, then yeah, you go with the feed barley. But if they're just saying, you know, if we ever got there, I'd look at the numbers and where they sit today. Are you a 5 maybe? I think you're a 5ish in that region.
[00:22:05] I would look at that spread. There's a slight yield advantage going with feed barley, but the malt guys aren't complaining about yield either.
[00:22:13] So it's trickier. Malt is a trickier market to hit. I like the feed market right now. I think the malt guys have to wake up a little bit and increase their bids in order to secure some of these malt acres. But everyone's talking about more barley and the malt guys are just saying, I'm gonna guess there'll be a little extra malt going in as well. So anyways, ian. Yeah, at 550 in Aberdeen, Saskatchewan, all day, I'd be a feed barley grower, give it all the groceries, have fun with it.
[00:22:42] But if they're giving you like a 475 or something like that, like they gotta come and show you that number, right? So anyways, I think there's still a little advantage to malt barley overall across the prairies. But the malt guys are slow and they have to increase those bids. All right, all right guys, here we go. Last couple things here again. Solo episode going a little bit long.
[00:23:04] These are Kind of my three watch outs. The epa biofuel announcements. Later this week we would consider that bullish bean oil and then through that bullish canola. But I want to be cautionary around that storyline. Okay. It wouldn't surprise me for some strange reason if we wake up Friday or go to bed Friday and say that wasn't as good as we thought for canola. I'll get into that. Maybe in Friday's episode on why but there's something there that we need to talk about. This blow off top already talked about it in the show. But I would position myself to protect the downside. At least a tranche here of downside. I would do something to protect some downside. I understand energy war. It's exciting. Lots of stuff going on. But you can protect downside and keep yourself exposed to the upside. You can do it. You can do it every single day. And I think right now is a great time to do that. Where energy goes. So do grain prices. I want to say there's a bit of a long game developing here. Lots of storylines around fertilizer and the access to fertilizer.
[00:24:12] Now. I think we're fine for the start or for the 2026 growing season. I think everyone will piece it together. But charts are carving, especially wheat charts or cereal charts are carving bottoms here in these markets. There's a bit of a long game where we're cautiously optimistic for higher prices overall. Even after this war thing finishes up. We're still optimistic. I'm the least bearish I've been in three years and I'm not alone in that category. It doesn't mean we won't make some lower lows this fall though. We certainly can. But I'm just hearing, oh, fertilizer issues for next year, next crop. Something like that. And I'm looking at these charts. There could be a bit of a long game here. Maybe a bit more optimism in the future. All right. Couple other comments have just kind of come in. 575June delivery by Terra Humboldt. Phenomenal old crop feed barley values, guys. Phenomenal. Yes.
[00:25:04] 610 vermillion. 100% feed barley malt barley prices not pretty much the same right now. Export programs have been dynamite here for us this year. Does that continue? Hopefully. But it's also giving you that new crop opportunity. Like it's just feeding into the fall and giving you that first chance to get some new crop done. Yeah. And we king these and yeah, biofuel announcement stuff that can be a bit of a downer sometimes. I don't know. We'll see. But it wouldn't surprise me.
[00:25:35] All right, guys, that's it for this week. I went way over time.
[00:25:38] This week's cup of coffee brought to you by AG i3. You use precision tech in the field. Why not in your risk management? AG i3 uses advanced data to build custom insurance layers that protect your yields. And now lock in your revenue. Upgrade your strategy today at a Guy 3 AI.
[00:25:57] I'm out of coffee, folks. That's it for this week. I will see you guys Friday on what the futures.
