Market Plus with Shawn Hackett

Paul Yeager: Welcome to the table for the Friday, November 15th, 2024 installment of Market Plus. Back with us, Shawn Hackett. Of course, Shawn, I cut you off in the main program. You know, the thing about doing the show with you is I have to be quick to come back and engage with you in a hurry. We've talked about this and I think in the podcast before, when we first introduced you to the audience, you are very succinct on some things, but it also allows certain threads that we need to pull on. Is there a thread out there right now that maybe I didn't pull on in the first show that we need to keep pulling on here, in Plus?

Shawn Hackett: Well, I kind of wanted to go back to the meal market. There are not a lot of commodities that have come down to the Covid bottom, and the meal prices are a within a whisker of doing that. We've talked about how it's this relationship with being oil and potentially that sort of thing and renewable diesel. But when you have a livestock producer and I'm looking at a price level that I last saw during a Covid crisis low. I really, really think that that is and of course can always go lower. Never say market can't go lower. But I mean, if I'm looking at that in a long term with where hog prices and cattle prices and dairy prices are at, I sure would not want that price level to just all of a sudden slip away and go 30 or $40 a ton higher. I really, really think that's a price level you want to get covered in any way fashion. I just think it's a great opportunity and don't lose sight of that fact as a livestock producer to do that.

Paul Yeager: Any reason why that's so low?

Shawn Hackett: Well, I think because of this excitement over, imported vegetable oils being reduced, they've been unwinding that spread, thinking we're going to overproduce meal to produce more oil, which is bullish for soybeans but not for meal. But at some point, the demand is going to be there regardless. And I think we're at that level.

Paul Yeager: Well, maybe that's a tiny answer to this first question. It is from Ryan in Iowa, and he asked us on Facebook, when can we expect change in favor of the farmer?

Shawn Hackett: Well, you know, I think the way a Trump administration is going to go, at least for the first year, is going to be a chaotic market. We're going to have false rallies and false declines, false rallies and false declines. We call it headline risk. You as a producer, understanding that need to keep an open mind and be ready to cash market on any situation where a headline is viewed, bullish or bearish. I don't view that as in favor or against the farmer. Just be opportunistic. I think you're going to get plenty of opportunities to sell a price that will pencil out on the farm.

Paul Yeager: And that could be in anything.

Shawn Hackett: In anything.

Paul Yeager: Yeah.

Shawn Hackett: I mean, I remember waking up when Trump was first president at 4 a.m., he would do a tweet and soybeans would go up $0.30. And the next morning he put a tweet out and be down $0.30. You have to view that this is the world we're going to be living in for at least the next six months. Both sides have to take advantage of volatility from headline risk.

Paul Yeager: Okay. This one also has political implications. Williams question. And a couple of people were asking about this. Are we about to see oil company waivers again.

Shawn Hackett: I don't know. You know what ultimately the administration is going to do I know Trump is not, you know, a huge alternative energy fan. I would think that his tendency would be to provide those waivers again. I, you know, I'm not a political insider. I can't know for sure if he's going to repeat, but that's what he wanted to do last time, and that's probably the risk he's going to do again.

Paul Yeager: Let's stick with politics, shall we? Tim In Minnesota: With tariffs in play. Should I sell old crop beans now?

Shawn Hackett: My belief is we don't know what he's going to do. Everyone's speculating and painting the worst case scenario. What is going to do. My view is sitting here today at the August harvest lows in soybeans. I would not want to be locking in cash sales and preventing some of that headline risk upside. That's probably going to be there. What I would prefer to do is price protect the market here in case we get something we don't like. The market has another schism, but I would wait and keep the top side open for cash sales. I think there's going to be plenty of those volatile opportunities that'll be better than the prices we see today.

Paul Yeager: We'll go back to what you said about meal. You're not afraid that the thing could go lower?

Shawn Hackett: Well, how can I say this way at these kinds of price levels, at these kinds of relative value undervaluation, based on historical precedent, you have to weigh the risks of further downside risk of upside. No, I'm always worried about the prices going lower. But at these price levels, I'm more worried about upside price risks than downside price risks. Hence why I'd rather price protect than lock in a cash sale. That could prove to be less than ideal.

Paul Yeager: And again, back to something you said about wheat and corn. When we were discussing in the main program, certain things are baked in ahead of time that could be something that's baked in already in anticipation of a Trump win. Then the market did what it did, and we're already starting to unwind a week later. Is that...

Shawn Hackett: Sell the rumor, buy the news, has been an adage that has been used for as far as markets have ever existed. In my experience, in 30 years of watching commodity markets, any time that a market is telling you about what to worry about, of this catastrophic situation that's coming in a price that only now inevitably, it turns out, not quite as bad. And so if you go from pitch black to just dark, you can have a significant unwind from shorts that are disappointed they didn't get something more dire than they ultimately did. And I think that's what we're set up for as we get closer to January 20th, I think the risks of an unwinding of the Trump trade increase over time.

Paul Yeager: Well, news has come out rapidly this week. So again, it could happen in any moment. Let's go Paul in Minnesota then: The price of rented and owned land is going the wrong way. And it's on a collision course against what you can make. Do we have a recession coming in the ag sector soon?

Shawn Hackett: Well I mean it's up I don't know if you look at equipment sales, if you look at a lot of things, I would say we're in a recession right now. It's not showing up in land values. It's not showing up. You know, in those kind of metrics and cash rents, those are a little more sticky. But in terms of actual farmer income and farmer purchases, I mean, I think we are in a recession already. I don't think we're going to stay there. I think we're going to have a better farm economy in 25 than many are projecting. But I think we're already there. I think we're already there.

Paul Yeager: Let's do something we can really predict... The weather. Here's one that came in from @NEIowaFarmer: What's the South American weather forecast Shawn?

Shawn Hackett: We start off with a historic hot, dry pattern. Delayed soybean planting. Most of the planting was done in the back half of the planting season, which means most of the pod setting is in late December into January. This is the critical period for weather for soybean yields in Brazil. Our work says we're going to get a drier, hotter pattern to come back. It probably means we can put some weather premium back on. How much premium we put back on is exactly how hot and how dry it is when it really counts during that 2 to 3 week period when the pods are setting the most. But I do believe they'll be enough worry to bring some weather premium back that we lost when the rains came here in October.

Paul Yeager: We talk about the weather window in this country and the volatility. So throw in pods setting in late December as we're a couple of weeks away from a new administration, the volatility is going to be amped up even more in that soybean market.

Shawn Hackett: Yeah, it's hard to guarantee a lot of things. And I might not have enough guaranteeing a lot of things. But what I can guarantee, in my opinion, based upon a Trump administration and the normal factors that we're going to have a lot of whipsaw and a lot of opportunity to get sales when people are excited and get purchases bought, when people are getting very, very negative. And I think that is actually a very exciting outlook for ‘25 because some years we don't get that some years of prices low and they just don't have any opportunity. I think there's been a lot of opportunity. Just got to keep yourself, you know, emotions at bay. Pencil in those numbers, look at those charts and understand what your cost is so you don't let those opportunities slip.

Paul Yeager: Sounds like you have to have some discipline.

Shawn Hackett: Discipline? Absolutely.

Paul Yeager: I'll give you a word. That one's free. All right. Let's talk some prices then. Phil in Ontario wanted to know with November beans at approximately $9.87 and November 25 beans at $10.14, How should we be marketing our soybean with such big supplies here and building in the South American fields? What kind of timeline should we follow? Or should we just grow more corn?

Shawn Hackett: Well, I mean, like I said, I think price protecting here. I, you know, probably make some sense because there's a lot of variables that we can't necessarily control. But I really, really don't believe that this is a place where you want to be aggressively marketing either your old crop or your new crop just yet. There's going to be plenty of opportunities to take advantage of upside opportunities when they come. And I just think that that's the strategy. Soybeans aren’t going away and there's renewable diesel being oil situation of not importing oil. I think that's a bigger story than the market has yet totally understood. And I think that's going to just be a better situation than we think domestically for soybean demand, cash basis, by the way, for us, soybeans has been very, very strong, just like corn the last three weeks. The cash market doesn't lie. Speculators lie a lot. I think the speculators have overplayed their hand here.

Paul Yeager: You've just made two assertions. Pretty strong beans not going away in the cash... That's good, I like that. All right. Let's close with one more question here from Hari in Massachusetts. Wheat, corn, beans and cotton all are depressed. What contract months should we target for upside bets and why?

Shawn Hackett: I really feel the September contract month is where most of the expression of whatever upside there's going to be is going to be, is going to be in their place. And the reason I say that is because I think that with the second Russian wheat crop being poor, we'll know more about that in the spring. Trigger number one, we'll know much more about second crop corn that's going to be planted in February in Brazil. You know, that's another thing that we've really be an important upside potential. Obviously, our growing season is going to be very important. A much drier pattern's likely to be in place with a neutral negative. And so the sea surface temperature regime, when I look at all those things and better calibrating a Trump administration, what it really means, that says to me, September's the place to be looking.

Paul Yeager: You also talk weather quite a bit. And I think the last time you were here, we talked a lot about what weather patterns, what sunspots and various things were telling us. What is it telling you for the growing season in the United States next year?

Shawn Hackett: What everything is saying to me, the last two years we had thrashing El Nino to La Nina, La Nina to El Nino, and it created enough instability that we got rains when we needed it in the US growing season. This year, we're not going to see that. We're gonna have a neutral, neutral, negative, very stable situation going into our growing season. And that is going to allow the upper airflow pattern to kind of set itself and be more stagnant oriented. And I believe that's going to be able to bring in a much more warmer, drier, consistent pattern than the ones we've seen in the last couple of years at the times that matter most. And I really feel that those are the risks that we're going to be looking at as the spring approaches. But to me, what we're not going to have the kind of growing season this past year, which was really good, something far more. Think of it this way. Even if we have low mid 1.70 corn fields based upon where demand is and based upon where our ending stocks are, that's going to put us in a low 1 billion bushel carryout just with a crop just a little bit off from trend. We don't need a major crop problem to create a significant change in the balance sheet on corn. We just need to be less perfect than last year and that's a big difference from other years where you needed a major crop problem. We don't need that. If we had a major crop problem, obviously all bets are off.

Paul Yeager: But we do appreciate a perfect Shawn Hackett. You're always good.

Shawn Hackett: Thanks, Paul.

Paul Yeager: Good to see you. Shawn Hackett, everyone. Thank you so very much. And a reminder to get signed up for our new free newsletter at markettomarket.org. Next week, having that uncomfortable financial talk with those living on and off the farm and Commodity market analysis with Sue Martin. Thanks for joining us. And have a great week.

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