Market Plus with Shawn Hackett

Paul Yeager: We are so happy to have you here on the Friday, August 9th, 2024 installment of Market Plus. Joining us now and continue our discussion. Shawn Hackett I've got my elbow up here because I really want to dig in on this question. Well, you didn't really talk about the WASDE report due Monday? The August report has a tendency historically, in the last few years to be a surprise. First question, Shawn is from Jon. Do you agree with USDA acre numbers that are being used for 2024? Given we will see some new data on Monday. What do you think?

Shawn Hackett: I do believe the harvest today acres are too high. I think they will start to methodically move them down to take care of what I believe was the flooding situation and the lack of harvest in acres coming from that region. So that's going to be one of the things that's going to buffer an increase in the yields that's likely coming. So, you know, pick a number 500,000 acres, a million acres somewhere in there, as I believe is what they need to do. and that will help. Like I said, keep those ending stocks from, from going up too much. When you use that denominator at a lower level.

Paul Yeager: In corn, do you anticipate we are going to have a higher acreage or higher bushel per acre above or below 182?

Shawn Hackett: I would be very surprised if the USDA didn't put the number above 182. I don't think they're going to get to 185 where I think we're going. I think they'll do it in step formation. but I think 180. I'd be very surprised if we didn't go into the 180 threes and then on our way to 185 in the next report, that's where I think they're going to wind up going, give or take a bushel to the acre.

Paul Yeager: Soybeans, 52 or 53?

Shawn Hackett: I think in this report I think they'll stick with 52. I don't think they quite as are comfortable enough yet with the weather and where exactly we're at, like corn. So I think more 52 ish on our way to 53 ish come the September report.

Paul Yeager: Let's talk stocks. We talk supply and demand a lot on the TV show. Is there still a lot of grain still left on the farm? As much as the government thinks there is.

Shawn Hackett: You know, I have no reason to believe that they're right or wrong or indifferent. I think there's a lot of grain that hasn't moved. I think a lot of farmers and bankers don't want it to move because the price is very unattractive right now. It eventually has to move. And this is the whole concept of the harvest low and how you, you know, clear the decks, create the floor price and then lock up the rest in the bin until, until such time that prices become better. But, you know, we have to go through that indigestion process. Clearly. I don't think we're quite done with it. Yep. Doesn't necessarily mean futures have to go lower. It may be more of a basis widening out issue than necessarily.

Paul Yeager: Futures basis has really been one of the only saving graces for some people here this year. Not everyone, but for a it's been spreading farther and farther in than it normally does.

Shawn Hackett: It has a part of that is, you know, farmers have been holding off, selling and, and but eventually, you know, there is some that we'll have to I think we might be surprised that not as many farmers are forced to sell as we may think. Last time I checked, they had a couple of good years. I don't think they spent all the money yet. I think they might have some holding power that might be a little stronger than many are suggesting.

Paul Yeager: Well, that is possible. That is one thing that doesn't get talked about a lot, John. I will admit that that is part of that discussion. Not many are saying that very loudly. People have been listening to what you say, by the way. I'll get to that in a minute. Gary's question that came in via X is a where is a weather scare in South America our only hope for a price rally?

Shawn Hackett: Well, the only thing that can happen in the first half of the growing season for a weather scare really is for soybeans. We talked a little bit on the main show that we have the lowest 2%. We have black colored subsoil moisture. It's a dust bowl kind of situation down there. And if we go into the September, October, November planting season and don't get rains, which I don't think we're going to, you're looking at a situation where you could have acres down, which almost never happens in soybeans with real problematic yields. La Nina is not developing. We're going to be stuck in more of a neutral phase. According to our work going into the end of the year, La Nina is what normally brings rains to the northern half of Brazil soybean areas. That means dry weather is going to persist, and it could be a really, really big story. The for the long weekend, it's the only thing. No, I think money printing in China we talked about could bring some demand into the U.S.. I also think that's potential holding back of importing palm oil from China, leading to greater demand for buying oil. I think those are two other catalysts. But definitely, you know, we want them we're going to need some weather help here in Brazil to really get fundamentals in soybeans. Better off.

Paul Yeager: Speaking of weather, Shawn, Matthew in Iowa has heard you on this show before and he said Sean talked dry scorching heat this summer. What changed?

Shawn Hackett: What I did say is that the Western Corn Belt would be hot and dry, and on the margin it has been. What I did say is I thought we have ample moisture in the East, but we would have a warm nights problem hurting yields. I did not get the warm nights problem correct. I did get the western drought correct. Why did that forecast not take place? The line Nino was developing in my view, was that we were going to develop this line, Nino, through the summer, making the atmosphere act more La Nina like. And it stalled in late June and actually backed up to where we were in neutral to El Nino. And the atmosphere responded like an El Nino. El Nino means cool weather in the central eastern Grain Belt. I thought that was an outlier, given all my work of 50 years of weather anomalies, and sometimes the less probable situation takes place. And that's how that part of the forecast got wrong. But I did get the drought in Brazil correct and the Russia Ukraine dought, correct. I just messed up on the Eastern Grain Belt, which is a big miss, by the way. But I did miss it.

Paul Yeager: All right. Well, I'll give you a chance here. Living the Dream in northeast Iowa wants to know “what do we see for the rest of the growing season?”

Shawn Hackett: I kind of really feel it doesn't really matter too much on the margin. I mean, I think we're at the point where the yields are down. We've made them. Yeah, we can all trim a little bit from here, but I don't really see U.S. weather being a market mover here the rest of the way.

Paul Yeager: All right. We have an economics question again. This is one I hear a lot. And this is Ryan in Iowa with $3 corn, $9 beans. How? $600 plus and three $700 plus dry fertilizer. $300 seed corn, $70 beans, seed. That's not all. Going to pencil out. What is going to have to give and when?

Shawn Hackett: Well, I mean, historically, if the prices don't rebound, the inputs always give, right? I mean, maybe not the cash rents give, but the, the inputs give because there's only two. But toothpaste is only so much you can squeeze out and the farmers is not going to do it. They're just going to cut back on everything they can and the banks not going to fund it. We just, you know, talked about how the banks are, you know, kind of putting the squeeze on. So either the price has to rally later on the year making it pencil out or the farmers is going to delay or pull back what he needs.

Paul Yeager: What about equipment? Because I hear the big green machine has been they, there's all sorts of stories about they’re, what they're doing with new machinery, used machinery. We've seen cutbacks in that company. Plenty of other companies that rely on the farmer to buy something iron. Is that train over for a while?

Shawn Hackett: It is over for a while. I mean, the equipment side is most impacted by this. I mean, farmers bought a lot of equipment over the last year’s. When times are good, they can go quite a while without having to do anything. And certainly I don't see them having any appetite to go buy new equipment unless they absolutely, positively have to, we're seeing the ag economy, you know, in a major contraction, Paul, you know, I don't you know, we don't want that to happen. We don't like when that happens. It's happened before. It'll happen again. We will get through this. But this is the bad part of the cycle where everyone is getting squeezed and the equipment manufacturer are no different.

Paul Yeager: Well, okay, we talked about Bank of Japan. We talked about monetary policy. Traditionally commodities have been opposite the cycle of the equities. And we are both, some have been high. But are we, live cattle, feeders, you know that has been high like the stock market. Are we, does that give, do you not think that the U.S. economy is struggling right now, or are we poised to go higher because we keep going lower on the ag side?

Shawn Hackett: The consumer is in a recession, and we may not be in a recession from the GDP that they put out. The consumer's in a recession. There's no question in my mind that the consumer is in a recession. Historically, what happens when the consumer's in a recession, stocks crash, we get monetary policy to go all in, and then the ag cycle fires up. September 11th, 2001, 2008 financial crisis, Covid. We've seen numerous examples of this. And the good news is that global liquidity of, looking all the central banks printing of money, is growing 5% year over year for the first time since coming out of Covid. That tells me that we're already getting that money putting into the system, and more so, it's a delay, a couple of months delay before we see that finding its way into commodities.But the process has already begun. So I'm optimistic that the liquidity, which always helps commodities, is going to be coming in later in the year to help commodities out.

Paul Yeager: We've put a bunch of monetary increase in this country since Covid that everybody who sits in that chair says almost the same thing. There's too much money in the system. Is there too much money in the US system right now? Still.

Shawn Hackett: When you have $35 trillion in debt and a $25 trillion economy, when the world has $320 trillion in debt and $105 trillion economy, we never have enough money in the system. They've not printed money since the beginning of the year, and we're starting to get convulsions. And only in late July have we seen this money supply start to grow. You cannot deprive a leverage system, a lack of money supply for very long or assets will deflate. So the answer the question is “no.” We never have enough in a situation that we're in. We can argue we shouldn't be doing this. We should have gotten ourselves in this mess. But we're here.

Paul Yeager: America's leading the way, and it might be into a much bigger problem. All right, let's end on something positive. I don't, this isn't positive. Kevin, in Iowa is going to set us up. Should we sell all new crop now? You hear a lot of talk mid to lower three and eight? Let's go. On the downside of how bad this could get. What should give me some advice for if I'm holding corn beans.

Shawn Hackett: We I would say the worst case scenario is we get 190 plus yield corn. I'm not forecasting that. We get, you know, 55 year old soybeans and we go back and retest the lows that were at during Covid. I mean to me like that's your washout. You know, that we get yields far, far above what I believe we're going to see if we don't get those large yields, I think we're at it. We're pretty close to a floor clearing price. I'm going to say today what I said back in August of 2020, all my indicators that are forward looking that I utilize say that we're near floor clear price. I would only sell what you absolutely, positively have to or you can't store.I would store the rest, lock it up in the bin and wait for better times to come. I'm convinced that Australia was good during Covid. I believe it's the right strategy today.

Paul Yeager: The right strategy we like is having you sit and join us. Good to see you again, Shawn.

Shawn Hackett: Thank you Paul. Always glad to be here.

Paul Yeager: I thank you so much, Shawn Hackett. Everyone. Next week we are going to take a look at new regulations that shorten the path for genetically edited seeds. And we'll have the commodity market analysis with Naomi Blohm. Thank you for joining us. Have a great week.

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