Global Trade Tensions, Weather Events Key to 2025 Grain Markets - Josh Hayes

There's a new way to stay connected and know what's happening with Market to Market. When you subscribe to Market Insider, one email and a lot of information awaits you. Go to market to market.org and subscribe to Market Insider. Welcome in to the MTM podcast. I'm Paul Yeager, your host here. And we are going to break down the commodity markets a little bit as we look to 2025. This is coming out on the last day of 2024. So why not look forward. We don't need to review the year that was. Let's look at the year that's to come. What factors are in play when it comes to our global partners and our global competition? We're going to go to Wisconsin today and we are going to talk with Josh Hayes, who's the CEO of a firm called Hedge Plus. The name should tell you that commodities is in the game. We're going to learn a little bit about Josh, how he left the business, went on a mission, came back, find out how that all transpired and then get his views on China, Brazil, Ukraine, Russia, Mexico, Canada and of course, the United States and the American farmer. We'll find out. Get a few price ranges from him, and we'll learn just a little bit more about what's, from his vantage point of what's ahead here in 2025. This is the MTM podcast, a production of Iowa PBS in the market to market TV show. New episodes in the new year will also come out on Tuesdays and in the new year, a new segment. We'll tell you about that at the end of this discussion with Josh. So how does a guy from the suburbs who lives in the big city ends up in commodities, Josh?

[Hayes] Well, it's, turned out to be a family business. Now, Patrick is my uncle, our owner. He got into trading commodities on his own in the 90s and had some, you know, pretty good success with it. And, it's found that, you know, there's more he traded, the more he learned about, the business and, farming. And, there's actually quite a few farm marketing firms in the southeastern Wisconsin area. And, he joined up with one of those and got really good at it and, branched off our zone. And we actually opened up our on our own in 2007. That's when I joined him. At first.

[Yeager] All right. So 2007, that's pre-Great Recession. economy's still kind of cooking along. so early on in your career, you're dealing with this ridiculous thing called the Great Recession that didn't scare you away.

[Hayes] No, no, no, we thrive to that period. the only thing that actually took me away for a while was, my own, I guess, desire to be an entrepreneur. And, it was, it was the bug I caught from from Patrick, I guess. And, so I went off on my own and, mid 20 tens and, got into real estate and, had some success there, running my own business, starting a business there, and, learned a lot of things. just about running a business in general, which is what brought me back to Hedge Plus this year.

[Yeager] The entrepreneur side of things is always fascinating to me. So were you one of those guys that had the, lemonade stand as a kid and you've just never looked back?

[Hayes] Yeah, absolutely. Definitely had a lemonade stand. And, definitely tried my hand at quite a few businesses and, you know, watching Patrick start up Hedge Plus and being a part of that, you know, I definitely inspired me. And, yeah, I just real estate was, something that you can kind of start on, on your own, like I did, and, and work for brokers. And, just I learned a lot of different. I'm a person that tends to find new ways to do things, I guess. And that's what I did in real estate. Created a niche, out in Las Vegas that helped me, to grow a business there. And, just, you know, learned a lot about, you know, looking after a business, growing it, marketing it, marketing yourself, hiring employees, managing, you know, managing employees. And that's something that, you know, we have we had a need for here, you know, that's that's where Pat called upon me. I actually, you know, kind of admire the way he's approached hedge funds this whole time. When we didn't have somebody in place to do what I'm doing now, growth was on the back burner. He's always kept his focus. So this day, he's our primary decision maker on, cash sales and hedging related to cash sales. And when there hasn't been someone in to fill the role, I'm filling those things about growth and marketing and even dealing with websites and that kind of things. Those all went by the wayside. So he never tried to wear two hats at the same time because it's really detrimental when you do.

[Yeager] Yeah, we'll get to we'll get into you and your day to day in a moment. But I also need to finish my parallel thought here. You as an entrepreneur, farmers are entrepreneurs. I mean, there is a lot of individuality out and everybody's different, but everybody's also trying to find your niche. Is that an accurate comparison?

[Hayes] Yeah, absolutely. We think it's best to, really focus in on what you do best, not get, too broad base to two diverse and to really become an expert at 1 or 2 things, as opposed to trying to be an expert in everything.

[Yeager] Well, there's, there's some expertise. Sometimes, though, you have to do a lot of hats or wear a lot of hats. I mean, and do a lot of things. And so, yeah, there. But at the same time, if, if one thing is not your focus, if you maybe not understanding the grain marketing is your thing, it's best to call somebody who might be able to help you out.

[Hayes] Yeah, exactly. I definitely give farmers tons of credit. You know, they are, you know, great at, growing the crop. And I also believe they're definitely great at following the markets. It's just how could they possibly give it as much time as we do? It's, so we're looking at every day, all day, year round. And, I think what that really helps us with in the time since I've been back, it's really helped me, to spot things, you know, ahead of time. I'm not calling, you know, major events ahead of time, but I can kind of see where trends are going. And we have a real collaboration here where everybody's, you know, weighing in. And, you know, Patrick is our decision maker. He's taking in information from all of us and helps shape, you know, shape, direction, the things that we think they're going. But yeah, I can't imagine trying to stay on top of everything, though. Everything that's going on in the world, everything that's going on here, changing markets, developing markets, you know, where acres are headed. I can't imagine keeping on top of all of that and doing what farmers do every day, just growing and being producers.

[Yeager] Have you adopted the phrase the trend is your friend, then?

[Hayes] Yeah, absolutely. I think actually, if you look at a broad based, picture, I know it's I know we'll get into more later. I kind of see where we're kind of headed back to, to, you know, more, more or more of a trend or coming off of, you know, wars and pandemics and, you know, take keep an eye on a big picture is very important. And we can have periods that last, you know, years, decades where we're in small ranges. And, when you're in small ranges and you're dealing with smaller margins, you really kind of have to spot the smaller ups and downs that are there are coming during those time periods that, you know, to really make a profit and, and to capitalize on the, quick bursts up and down and, more normal, more, more normal market like that, which we're kind of falling into already now. And so, yeah, we have to be able to spot those, those peaks and valleys and see them coming.

[Yeager] What's a typical day like for you, Josh?

[Hayes] I'm the first one in, by, I, I'm the person who's, I guess the I mean, you talk about many hats. I'm the person that's, you know, now, I don't know what the sales size of our sales side of our business, but the marketing we have, we didn't have an ex account prior to me coming back, and so I started that up. And so if you passed on X, which is at, Hedge plus Y, that, that accounts mostly going to be, what I'm putting out. So I'm putting out the first thing I work on is our, what I call or is there, what we're weighing today. So it's just weighing the market factors, the latest, things driving the market. And what I really do find value of. And then it's not about the news items so much. It's, Man, you really get a sense for what's, you know, you write that every day, and you get a sense for what seems to be really important and, and just the general direction that things are going, you start to notice that, wow, there's nothing there's no bullish news that's doing anything to the market. And the smallest bit of bearish news is causing prices to, you know, drop, you know thought nothing crazy. But it's just you get that sense of kind of the overall feel of where the market's headed. And by doing that every day. And that's when I start the day. And then, you know, keeping track. I post prices, both at the pause in the morning. At the end of the day, some stay on the top of prices, staying on top of other people's viewpoints. you know, I'm a, like, a collector of information. so. And then. Yeah. And then throughout the day, I'm working on, you know, making our business better, improving our website and things like that for our, for our clients.

[Yeager] It sounds like you're more in the fundamental side of things than the technical side of things when it comes to looking at the markets.

[Hayes] Yeah, that's my starting point. I am going to be starting to pay a little bit more attention to technicals. It's something I definitely come across from the people I'm listening to and following. And it's definitely something I look at. And I know our guys here are, you know, big on technicals. and so I'm going to be taking a closer look at that myself and trying to find the right, you know, meshing of the two together for sure.

[Yeager] Overall, big picture right now, the wheat market has been when you talk about negative news, it doesn't look like any time that there's, rockets or bombs thrown at one country between Russia and Ukraine that the market responds like it once did. So what's at play in that market right now for wheat?

[Hayes] Yeah, yeah, it's just sure that you kept expecting when there would be any, you know, escalation recently you thought the markets would react to it, and it just was nothing at all. I think we're, we're, we're, we're I think what everyone's starting to sense in not just, you know, in our business, but around the world is that, I think with, the, the change, president with Trump coming in, I think even Putin, I think Russia, I think they see a finish line. I think they see an end to this. you could tell by what Putin's responses were to the actions we've seen the past couple weeks where, it was long range missiles were authorized for use by Ukraine and using American and, British weapons and and those kinds of things. It seems like Putin was really trying to hold off, you know, I guess I wouldn't say taking the bait, but he didn't really want to, fall into that escalation so close to when I think he senses, maybe a favorable deal coming when when Trump takes office. And so, just in general, we're just kind of seeing what, what took place, you know, you know, in the late 2020, to 2023, 24 range where the markets climbed based on pandemics and this war, we started to see all those factors kind of be sifted through and work themselves out. And, I think we're falling into a, you know, more traditional ranges. And so, you know, barring a black swan event, another something unforeseen, which it's called Black Swan big for a reason, because it is unforeseen. We think we're going to be falling more into your, you know, like, your typical $1 range with wheat. So, instead of maybe $5 to $6, like, we are in a range from 2014 to 2020 account for a little bit of inflation that's kind of built in. And so we're looking at, prices probably within the range, this coming year in the 550 to 650 range is where we think wheat will, will rest for the most part, barring anything crazy or whether.

[Yeager] Corn has become more of a market that is dependent a lot on what happens inside the United States. Throw in though, you mentioned, Trump returning to the white House. He's already thrown, big shaded, Canada and Mexico trading partners, one and two when it comes to corn, the market did respond a little bit, negatively initially. But, you know, we believe the president is, the president elect is one that is just setting a position, and he's negotiating for something else. So not saying that Mexico is going to go away as a client, but if it's hampered or dampened or challenged, does that put a challenge on corn in 2025?

[Hayes] Yeah, definitely. It's something we're definitely watching for but not expecting. Okay. we we look at the trade imbalance between the United States and Mexico. I something I wrote about last week for our clients, it's just leverage. It's leverage for Trump. It's leverage to get, you know, you know, a desired result may look what he's using it for. And he's looking at using it to threat with both Canada and Mexico with tariffs to have them close the borders and stop the flow of, you know, immigrants and drugs into the country. He's not even, you know, trying to use that leverage to do anything else with trade. So, and with it, look, it appears as though it was, like you said, a media reaction and steps appear to have been taken immediately. I know Mexico has made some immediate, arrests. you know, some, some cartel arrests and some major drug busts. And so, yeah, I mean, we look back to what the way Trump, utilized the threat tariff the first time around. Yeah, there were some tariffs implemented, but, bigger picture would be, you know, just to, you know, get a desired result. So it's something we have to watch out for. It's definitely something we think we'll see coming if it comes to that. But right now I wouldn't, I wouldn't expect any kind of, any kind of threats to, to Mexico as a buyer of our corn.

[Yeager] Does corn in 2025 move more independently, or is it going to be at the whims of whatever happens, Mexico, Canada, China? Japan, wherever else? What controls corn the most? Next year?

[Hayes] I think there is definitely, a shift to more independence, but it's still going to be, I think, weighed down a little bit by wheat. I mean, I don't think you can get those two, separated too far from one another because it's both, feed grains. But, yeah, the corn is probably, I'd say of, of the, of the three between corn, soybeans and wheat, it's probably we feel like it's on the most stable ground. The fundamentals are strong there. demand is strong. is nice to see in the December report from the USDA. Those adjustments made to carry out and demand and, you know, that we just think that fundamentals for corn, most solid ground, maybe wheat has, more room to run, corn. Like I said, if we put a range on corn, if we go back to, that same 2014 to 2020 range, you remember you are looking at 350 to 450 range. So now again, counting for a little bit of inflation, we feel like the corn range, for 2025, or at least the first half of 2025. we feel like the range on that is between, 4 to $5. And in within that range of $45, we're looking at, you know, that's a still a dollar. So we're being on. But that's what we'll keep our eye on for sales is to make sure that when we see, prices hit the upper end of that range or we're taken advantage of that, you know, on our cash sales.

[Yeager] Really, since the end of harvest, the movements in corn have been much more pennies than dimes and quarters. And so it is back to kind of the way it has been. Do you see? I'm not going to set the table on soybeans this time, because I want to see what you think is the, the biggest story as we get into ‘25. And then I'll chime in and see if I can lead you down a path.

[Hayes] All right. Sounds good. Yeah. All right. So two big factors there. That's that's where you know, so soybeans have had at least, year they've had the biggest challenges right. That's what we we we've yeah I guess pinned is the key word for soybeans is it's the most challenged. So you've got South America growing you know more crop, bigger crop, more acres. And as of yet, no weather issues. That's the big thing we'll be watching for, in South America is any presentation of weather issues. We're still talking ranges. We're talking on soybeans instead of, a 9 to $11 range, more of an a 950 to 1150 range. And that was a moment when we, pushed 1150. We would expect it to come with some sort of weather issue. And if we see weather issues in South America here soon, then maybe we'll see that, come in in the beginning of our year, or if we end up with weather issues of our own, we maybe see that later on in 2025. And then also you've got what's happening with China and that is with soybeans. That's where, we know what Trump's tariffs had that had a bigger impact. When those tariffs came about in 2018, we really when we really, you know, dropped quite the lower in those price ranges. So those tariffs had a direct impact on soybeans. And so it all depends on what comes about with China. I do think China is in a not quite as strong a position this time around. And so maybe, there won't be such strong retaliation, maybe that, you know, there's just more willingness to work together and come to, a deal that works where maybe, you know, Trump doesn't have to offset the retaliation with, with credits this time around. I'd hope we could avoid that. And, Yeah, I'm. I just see, China's economy is in a weaker state this time around. They seem as though they're they're probably going to be more willing to work out something that works for both sides. Maybe we can get them to, stop sending so much, use, you know, cooking oil over or whatever it takes. But I just think this round will probably go a little better. People forget, you know, everyone always looks at it from the perspective of China. I mean, I even saw people, you know, panic about what Mexico might do in retaliation or Canada, even with China, we, you know, we are, our, our buying of their goods represents about 13.5% of, of their economy, and their buying of ours is about 7%. So there's still an imbalance there and some leverage to work with even with China. So, yeah, I in general, I just don't think the negative impacts will be as great this time around.

[Yeager] But to me, there's two factors that are maybe different this time is that the United States has learned how to work without the China business, handle, and respond without as much China business or dependance, I guess, is really the word. Do you think that is true? We're not as responsive to a cancellation by China of something out of the or a change politically or something there that maybe we were eight years ago or 12 years ago.

[Hayes] Yeah, I sure hope so. and I would hope that, you know, you know, Trump's got to be always looking at or anyone who's, who's making these decisions has to be looking at. If I hold my ground on this, what where can we make up for it? So if China buys fewer beans, which they are anyway, I mean, they've invested so much in South America in the last five years to, you know, help South America grow more soybeans so they can buy them from South America. And then they've done that to improve their leverage. Right. So I would think that anything we do shouldn't ever just be done haphazardly. And I don't think that was the case. You know, the first go around with Trump, by the way. So I would think, okay, well, I'm sure, Chuck Grassley has his ear. And, you know, maybe we put more emphasis on you know, biodiesel and opening up avenues there and, and promoting our own production that way and, and doing, you know, shifting alternatives. And then on the producer side, I think, yeah, I think we're going to see more corn acres. I think everybody's predicting that. So, you know, I don't. I wouldn't go so far as to say that, we're going to just start being a corn producing nation and let South America grow all the soybeans. I think the American response would be, you know, to explore, you know, different uses for soybeans. And I think that all the steps you can take, our policy decisions that that open up that market and it removes some restrictions. And I think that's what we'll probably see.

[Yeager] And to me, there's yeah, you've opened up a worm there, that I would want to because there's been a theory floated around maybe the U.S. does just get out of the soybean business. But yes, we still have domestic demands and industries that are dependent on that. But what about this whole notion? This is the second part of my China thoughts. What if it's just Brazil and China just do business and cut us both out? I mean, we don't really import that much from Brazil anyway or South America. But if you're China, why don't you just go with the path of least resistance? I don't want to have to change my actions. I don't want to have to abide by certain rules. Brazil's not going to complain. What happens in that scenario?

[Hayes] Yeah. two things. One, I would hope that it would not come to that. I would, I think that's where Trump uses his leverage and, you know, make sure that China doesn't go to that extent. Right. But you can't fully control I mean, I think we have enough leverage to prevent that. But yeah, we've got to open up, you know, new markets. And, I think the I read, you know, the USDA, don't want some of it. You know, it seems like four pieces. And they talk about the trade missions they're on. But there is important information in that, we are looking to expand markets and, we're constantly I think we're in, want to say it's, I think it's Africa right now trying to encourage Africa to buy, you know, their soybeans from us. And. Yeah. So, there's there's policy decisions, that can be made. I think that, that can help shift some of that. But, my boy, you can't just replace, you know, China's demand by that alone. So, Yeah, that's why I really can't imagine, you know, with, with, farmers are a big part of Trump face, and I think I saw someone maybe suggest that. Well, this is his second term, and maybe he won't, you know, be as mindful of the consequences of some of these, threats and actions. I just don't see that. I think, you know, there's always ego and legacy there. And, I also I just don't think he wants the America to lose that anything. So I think he's going to be careful. And I think, I, I really just don't think anytime soon at least we'll, we'll have to face, a situation where China is getting all of its, you know, beans from South America. Long term, maybe short term. I'd be more worried about, China's economy weakening than anything. That's my biggest concern with China. And I'm not so much worried about as seemingly everyone else about, you know, any kind of retaliation from terrorists as I am just in general, China's economy is weak, and I think we're seeing signs of that right now. They're buying a little bit more from us right now than last year, but they're buying way, way less from South America. And I think that's a pretty good indicator that, that, their situation's maybe not is as good at these, these, stimulus packages just haven't seem to work, work at all and market always seems to love the announcement of stimulus, but, give it a, few days or a week, and, it just doesn't seem to do anything. And when at what point do we which we take a look at things and say, maybe the problem there is, bigger than people realize?

[Yeager] Well, I think everybody likes to hear stimulus in other countries. It doesn't seem to go over well when they talk about stimulus in the United States, because that's I don't want to put more. We don't want to print more money and put it to the, it's an interesting dichotomy to me and how the, we're kind of talking out of both sides are a little bit about it's okay for them. It's not okay for us anyway. you talk about developing new markets, in livestock. That's long been a play for the beef and the pork producer, trying to find new places to sell, pork loins and steak and hamburger and beef. what do you see? Cattle and feeders. I mean, we've been on a heck of a run here.

[Yeager] Does this thing still have upside to go in 25?

[Hayes] Yeah, I think we're, I don't want to sound too pessimistic, but, we're already starting to see the same pattern with hogs, you know? But we're coming off of those, you know, the inflationary aspects and, you know, the, it's, again, the pandemic and wars trending towards a more normal, normal ranges, normal markets. so I see that same drift, slow drift down into, you know, typical ranges that we saw from, you know, 2014 to 2020. But wow, cattle still. So up there, you know, at the highs and you know, there's, you know, there's supply issues there that we just don't see in the other markets. So, but I do that when you look at the livestock markets as, you know, a leading indicator. So, you know, we had all this money pumped into these economies and, you know, still we're still seeing it in China and right now. Right? So when, when does that, that effects finally subside. And so we think, we think we do by basically what we're telling our guys, everyone. And Jason Gaylor here is our, our, our livestock guy is great. And, definitely, you know, follows those markets. He's basically looking at, with hogs, you've got, hogs sitting around $100 on the, the summer contracts entering the year. And that's not typical for this time of year. That's typically we usually typically see that when we get to summertime. So we're encouraging forward pricing. now to into those summer, summer month contracts. And on the, on the cattle side were charging more of, taking advantage of prices where they're at now and not not to get too greedy because as these economies slow down, if they do, which is what we, we think is happening and we're seeing signs of, that's going to be well, then we're one of the first places it shows up and those markets really start to fall down. And how can you how can you argue against record highs? Right.

[Yeager] Well, and you said something there that may that I had a flashback to old Wild Hackney saying it's hard to lose money taking a profit. And if and if that price is profitable, you have to take it before you, before you flip it. Right.

[Hayes] Yeah. Yeah. Exactly.

[Yeager] All right. Cattle market. You talk a lot about the hogs. There's a little bit of interspersed, are there? What are you hearing about expansion in feedlots? Are we holding them longer? Are we making them heavier? Is that what the anticipation is going to be here in 25?

[Hayes] yeah, I, I just, the talk about, pasture conditions improving, but, you know, it's always a battle for land. So, that's the fear is that, I mean, you've got, the cow market with fewer producers. It's, you know, it's a tough business, right? So, that's the greatest fear is the, the small amount of producers, you know, controlling, you know, price, direction. So and that's probably a big part of responsibility for why prices have held so long. But I just don't I don't see that lasting, long term.

[Yeager] In 2025 we're going to be in transition. That's just we've already discussed a lot of what's going to happen. Give me three things producers need to be watching here in the first quarter of 25, to just make sure I'm protected and to make sure that, you know, I can weather whatever happens as best as I can for my operation.

[Hayes] Yeah, yeah, it's we again are a real general perspective. And we look at, you know, markets getting back to, you know, war free, you know, black swan, free weather, free markets. And we just get in a typical trading ranges. You gotta we gotta be wary of the downside. Right. So, we we've begun for repricing, utilizing forward contracts and basis contracts and, I guess really the outside of predicting black swan events, we're just looking for any weather disruption, obviously, going into the year. The biggest thing to keep an eye on is South America. They've had, no issues, going into the end of the year. do we see any signs of dryness that would, impact the South American crop? with us, with wheat. I, you know, we've, at the time where we're having this discussion, there's talk about, the Russian wheat crop is in really bad shape. Well, then I had today, I read that maybe that's overstated. So that's something to watch for. it sure hasn't seemed to impact the markets as of yet, so maybe there is some truth to the fact that that concern is overstated. So that's something we're watching for with the wheat market. the corn, like I said, we feel like that's on the most stable ground, the most solid ground. And, so we'll watch them for there is a see that the demand continue to be there, and we think it will be and we think, Trump will be, favorable for the ethanol market. And we'll continue to see demand there. And, yeah, we will see what happens.

[Yeager] What doesn't make you you don't get concerned about, the chat about more help for oil than for ethanol.

[Hayes] You that's the natural and clarity clash, right. Because Trump talks about drill drill drill journal drilled baby drill. Right. So that is it.

[Yeager] That crude oil market drops out. Yeah. We're in trouble.

[Hayes] Yeah. Yeah, exactly. So is that, because, you know, Trump just has a fondness for the oil industry or is it just something he knows we have a lot of. And he's exploiting a strength of ours. Right. So that kind of gets into the same thing as we have with soybeans. So since you're trying to, you know, please two different industries and, and promote oil, but also you don't want to, damage your agriculture in the corn market because of, you know, flooding the market with oil. So we have to, you know, have to find really trade partners. And that's why you really can't risk, you know, losing sales to Mexico, which is, again, why I don't think there's anything to any, real threat there with, with, with, Mexico. But, yeah, we got to find buyers for, for corn as, as food and feed as opposed to, just using, expanding our use of corn for, for ethanol and for fuel.

[Yeager] All right, Josh, if they want to get a hold of you at Hedge Plus, how do they do it?

[Hayes] All right, so I talked to you earlier about, And one of my jobs was, coming in our website is is it was two websites. It's one it's, hedge-plus.com. but, perhaps by the time this airs, that our website is really, really, really close to the finish line of being updated. So, there's, there's that we're also on ex at, like I said, at Hedge Plus we and then we also, we, we started doing videos, YouTube and same thing hedge plus is our YouTube channel, so you can find us there. But honestly, the best place to start is just follow us on X, because I'm putting out a lot of stuff every day on our next.

[Yeager] All right, Josh, I appreciate your time. Thank you so very much.

[Hayes] Thank you Paul.

[Yeager] Next time when you log in to this podcast, we have what is going to hopefully be a regular segment where we tell you about some of the ways and things that we do to get the Market to Market TV show from a studio to wherever it is you consume it, whether it's on your phone, in your ears, on your television. Julie Knudsen will join us. She will help break down how we do things from a technical standpoint, and I'll try to navigate us through and not make too big of a fool of myself. Spoiler alert there's no saving me for that. We'll see you next Tuesday. Feedback for me or ideas on segments you want to see. Hit me up at Market to Market at IowaPBS.org. I'm Paul Yeager. We'll see you next Tuesday for the MToM podcast.