Historic walk in commodities with Sean O'Leary

Paul Yeager: Hey, everybody, it's Paul Yeager and this is the MtoM Show podcast, a production of Market to Market and Iowa PBS. One of the long standing traditions of Market to Market is the market analysis segment. And we pride ourselves on a variety of analysts to give you perspective on what's happening to the grain markets, you've come to know many over the years, maybe some are new. And today we are going to bring in a new voice to just give you something else to think about, you know, you watch the show, but now here is somebody different. Sean O'Leary has started a company in Iowa. In ag country called Hawkeye Commodity brokers. He's not a cyclone, but he is a Hawkeye. We'll talk about the difference there. And how he made his start, how his dad used to talk to him about the business and his eyes would roll back in the back of his head. Funny how life sometimes goes. That's our discussion today. If you have any feedback for me, it's Paul.Yeager@IowaPBS.org. I always look forward to hearing from you if you feel like a comment. Those are kind of fun to enjoy. 

Sean, how does the guy in agriculture feel he's strong enough to make Hawkeye the first part of his company name? Doesn't that get you in trouble and cyclone country?

Sean O'Leary: It does, especially this year. I have been kind of quiet this year, rightfully so, with all due respect to another fine school is kind of how I put it. I think we're very fortunate to have two very fine schools. You know, I went to Iowa, but I had all kinds of friends who went to Iowa State. So I knew I knew I was potentially getting into it. When I went I named the company the way I did, but it's a cycle on state this year. It's been a Hawkeye State. It's a two great schools in one grade state though.

Paul Yeager: The you grew up in the shadow of Cyclone country. Carroll is not that far from Ames, you share highway 30, right there. You mentioned a lot of friends that went there. What went into your decisions between schools? I have no idea if you were looking at maybe a small school and decided on Iowa instead.

Sean O'Leary: Yeah, I jokingly say that Iowa, the Iowa City was further away from home. And at the time, they had a better football team. That's kind of how I thought as a high school senior, unfortunately, but it is what it is also had. Truthfully, I had two older sisters that attended the University of Iowa, graduated from there. So we had a little bit of a pedigree going at that school at that time.

Paul Yeager: And you weren't studying agriculture at the time, either. You went for a different major.

O'Leary: I did. I did. I was an open major to start went into broadcasting and film, which you'll appreciate I'm sure. So, you know, I got school didn't really know what I wanted to do. Went into that field. Move back home to Carroll while I was looking for a job. And I said to my dad, he asked me well, what do you want to do? And I said, Well, I'm open to a lot of things. But I want to work for a good size company that's at the head of their field. And he said, well, the company I work for is at the head of their field. Dad, I didn't know that. You know, he had spent years while I was in grade school in high school trying to explain to me what it was he did. And it always made my eyes roll to the back of my head. I had no idea what he was talking about. But started with him and the company was Lind-Waldock. Then they were eventually sold in 2000. But they were the first and eventually the largest discount brokerage in the country. And I fell in love with it from day one in very intriguing industry to be always challenging.

Paul Yeager: Well, you have to fill me in what exactly is a discount brokerage? What's that mean?

O'Leary: Well, at the at the time, that was, you know, '89 and '91. I started that's when everything was traded open outcry in the pit. So nothing done electronically. In a course discount today. It means something entirely different. But we had customers that all they wanted was execution. They they knew what they wanted to do. They just needed someone to do it for him. Where Lind-Waldock really had an in was they were the first to transmit orders electronically. From a trade desk like ours in Carroll, Iowa, to two, just outside the pit, the order was brought in by a runner executed by a broker reported electronically back. So they were night and day different in in the way of execution. So they they got things done quickly and they did them well. And it was a great company to work for great company

Paul Yeager: Ted Seifried talks about his time working on the floor as a runner as an intern, and he would be one of those runners of the trades, did you ever aspire to go into Chicago and work on the floor?

O'Leary: I did, I did. And I actually was kind of invited to do so. But at the time, I had two small kids living in Carroll. And I saw it as kind of a daunting thing, someone in my position. And I kind of jokingly said the whole time I was in Carroll that, you know, I like Carroll a lot. And it's especially nice when you can make Chicago money and not live in Chicago. So I, I kind of fell back on that for a long, long time now.

Paul Yeager: There's something about the Chicago way and the rural way of it, you know, Carroll is a town, but it still is not a suburb of Chicago, it is still involved with the the commodities, the communication side. Did you ever do you feel like that was a major? That? How did that help you? I won't say wasted because I'm a Communications major. So I can't say Mom, that my major was wasted. But how is it that that has helped you do what you do now?

Sean O'Leary: Yeah, well, it's all about communication. You don't in a lot, and a lot of ways, I kind of feel like I came into the industry and in into finance with kind of a blank slate, which can be an advantage. I didn't have anything ingrained in me that was going to potentially be problematic. And when it comes to opening accounts at that time, we were opening accounts for you know, we had all kinds of customers, anybody that was successful in their field and could afford to open an account to trade, futures and options. They they came to us. So we had, we had farmers, we had grain and livestock producers, obviously that we have doctors, dentists, attorneys, real estate, people, hotel, restaurant owners, you name it. And the communication side of it really came in into play there. I think if you have good oral and written communication skills, you can go a long ways whether you're in the finance side or or any other industry. So I think it paid off in that regard.

Paul Yeager: Because in a way, you have to explain what is a complex philosophy of buying something in the future that you don't physically own for a delivery that you won't take, but I might take to not scare the bejesus out of somebody.

Sean O'Leary: Yeah. Yeah. And my dad was very patient person when he tried to explain all that to me. When I first started,

Paul Yeager: Except you said it won't you rolled your eyes in the back of your head. So he he needed to put it because that whole explain it to me like a fourth or a fifth grader. Father and son is different than a customer.

O'Leary: Took months, maybe years. Yeah, yeah. And maybe it's easier when it's not a father and son, right. But yeah, it's, uh, and, you know, the, the, what I like about the futures and options side of it, the futures are, you can eventually kind of explain that to anyone, you're, you're selling something you don't own. But it's a promise to buy it back. And if you don't do so, this happens and you want to avoid that. But it's the options side of it that really interests me. And I think producers could could really do themselves a lot of good bye bye educating themselves or becoming educated about what's possible on the option side of it, because if you if you start with futures and then throw in long puts, and or long calls you scratch 5% of the surface, honestly, there's a world of opportunities in between those two to category He's so and I tell people when I make trade recommendations to both spec and hedge customers, I said, you know, the only way to really learn how to do it is to actually do it. And you can do it, it's kind of like a measurement of an inch is exactly an inch or is that just over just under and you can keep slicing and adding zeros. After that decimal, you can do the same with the option market as well.

Paul Yeager: When your father in his company, I'll ask in a moment about how the customer has changed, but let's let's button up how you got involved with what your dad was doing and then transfer it into your own operation,

O'Leary: Right. Well, the discount side of it eventually towards the towards the end of the '90s, early 2000. Some people remember others won't, but it was kind of a race between the CME and in the CBOT as far as which electronic platform would win out the Board of Trade's was initially called Project X or Project A. The CME had their own matching system and they called the GlobeX. Well we all know which of those two one out and the CME basically you know, they they kind of incorporated the Board of Trade over time. So, at the end of or starting in the early 2000s is when everything became more and more electronic Lind-Waldock was sold to Refco. You know, some will remember Refco out of Sioux City, Iowa. They filed for bankruptcy in 2005. There was they cook the books on an IPO so Lind-Waldock a great company to work for got sold to as someone put it, the dirtiest firm on the street. And we found out a few handful years later, that was indeed the case. So we we went from from being the branch of Lind-Waldock to a branch of Refco. Refco was bought by a firm the eventually known as MF Global. MF Global filed for bankruptcy in 2011. than that at the time was one of the top 10 bankruptcies and in the US. And there were the those were unpleasant times let me put it that way. But after MF Global filed for bankruptcy, we went over to RJ O'Brien as our clearing member, we became an introducing broker at that time no longer just a branch office of a large corporation. So we've been incorporated as Hawkeye Commodity Brokers since 2011. 

Paul Yeager: Was in was your dad done at that time working?

Sean O'Leary: Dad passed away at age 72 in I think 2006. So he had stepped out of the business. And it was my brother Mark and I and another order entry clerk. And that was the case until we moved into home offices in 2016. My wife and I moved to to Des Moines in 2019. We've got two adult sons here in the metro. I've got a daughter that's a pharmacist in Iowa City and our youngest as a daughter works in TV production in Dallas, Texas. So we enjoy enjoy where we are now.

Paul Yeager : She's going to critique this interview, isn't she if I didn't get the lighting right on you.

Sean O'Leary: You know even at this interview didn't take place. She'd be critiquing me.

Paul Yeager: But I didn't hear a next generation involved in what you're doing.

Sean O'Leary: They are not they are not. They the the older son is as a contractor the other works for a friend here in town and manufacturing. And the daughters are Iowa City and in Dallas. I've I think they're smart enough to not go into this business.

Paul Yeager: Well, okay. You mentioned you're in the home. Does that make it easier to get up at three in the morning to start reading through the overnights.

Sean O'Leary: Interesting you should say that because I you know you had someone on the other day that I, you asked him about, I don't recall who it was, doesn't really matter, but 3am came up in the conversation. And, and I thought, you know, I remember when all that started, and we'd have customers complain, you know, our, our, especially grain customers, they say, you know, I don't like this overnight trade, you know, it just doesn't sit well with me. And, you know, I would explain that the market is going to be open and moving somewhere, when it's not here, it's not going to just wait around. And you'll remember, during open outcry, and prior to that night trade, coming about, you'd have gap open moves at 930 Central Time, and people just got to get their bell, Ron, you know, and you can get your bell rung a different way now. But going back to the the action side of it, and and how you can take control of the markets, I tell people, when you learn how to use the options, and again, not just buying puts and buying calls, that's just the start of it. When you can learn how to use the option market to protect a different position, including a futures position, he can go to bed at night, and know that you're not gonna get your bell rung, you know, you might, you might be limiting yourself and potential profit. But I think there's a trade off, you know, if you don't sleep, well, you're not going to work well, the next day.

Paul Yeager: Well, and that's, you know, I was going to ask, we'll come back to the how the customer has changed. Now the customer can get updates from whomever whenever about any movement during the course of the day, or at night. So what you're saying is if you take a little bit of work, spend a little bit of money to find a position and create a safe spot for you a strike or a sell point. Sleep is a little easier to have than but but producers, I'm guessing some of your customers have had some very sleepless nights. How do you talk them back from? Hey, help me out? Let me help you here.

Sean O'Leary: Yeah, yeah, well, there's, and there's only so much you can do. And obviously, there's a distinction between a hedger and a speculator. You know, the hedger has skin in the game. The hedger unless he's completely hedged, is is gonna have a blow softened by the fact that he's he's got inventory that is not yet priced. So that's, that's one way to look at it. But But honestly, there's only so much you can do when you're talking about long or short futures going into a night session. You're you're you're just kind of at the mercy of what's going to happen globally, and how money chases money. And that, that, that game never sleeps.

Paul Yeager: Perfect transition to the wheat market. What do you see in 2023 of the global money in the global story? Because wheat has become an absolute global commodity, because it's grown in so many places, but we may have major global stories impacting the one side of the ledger, how does how do you see wheat in '23?

Sean O'Leary: Well, going into it. And looking at the past just a few weeks of trade. It's, you know, if you're an end user, I'd say you're not in a hurry to cover cover needs right now. The way its looked, and Russia had a big crop Canada year over year, big increase in production, France. I read the other day was 98%. Good-to-Excellent rating. I know ours going into dormancy is not in good shape. But if you throw all those things together. I'd say you can afford to be patient. But putting in new lows here recently. And I think, depending on the contract where we're close to $2.50 or 260 off of the highs from the spring and early summer. That's a big move. That's a that's a big chunk taken off value wise of that market. So I think that would be that would be something somebody could could do. Be interested in all the long side of that going into next year.

Paul Yeager: Yeah, Sue Martin said on the show recently, she said, if you've waited to sell now, why now? Why not keep waiting, because you might get it to bounce back. You've missed your opportunity, the $2 referencing there, right, right. In corn. That is a fundamental story that circles around a global demand for the crop. And there's always the C word the China hanging out over our head. Were you surprised China has been buying so much US corn?

Sean O'Leary: I would say no. And they're there, they're pretty good about buying it at the right time. You know, I think you can say that within soybean market as well. And I think you could probably look for that to continue, we've got I'm sure they're know that they know the balance tables pretty tight too. And that won't take much of a hiccup in production for that to be exacerbated. So I think you could look for that to continue, and they haven't been you know, with with COVID. And, and the way they treated lock downs they haven't been exactly moving forward as they typically would economically. So I think there might be you might see some some pent up demand, whether it's corn or being are being the oil and meal. So that could spill over into the hog market as well.

Paul Yeager: Do you see an acreage fight that makes it pretty much 5050? In the United States, corn soybeans, do you see the ratio changing? And '23?

Sean O'Leary: I would say, I would say it would favor the bean market right now. But that's going to depend on what happens in South America obviously, always the caveat, right. And that I think, for the most part, you know, people have been looking for for big numbers out of both Brazil and Argentina. Argentina has been on the dry side. I think Brazil generally has been pretty benign. But I would think price wise going in the next year. We're gonna see a lot of producers looking at maybe planting more beans compared to a corn. 

Paul Yeager: You in the camp like Matt Bennett does American farmer sure likes to plant corn and will plant it if there's even a slight chance that it's a better option for him?

Sean O'Leary: Yeah, I think there's probably some truth to that. Probably some truth.

Paul Yeager: Do you see price highs coming for the year, in the first six months of '23 in corn?

Sean O'Leary: I would say the way it looks to me. I would expect to see highs made in beans sooner than corn. And that's basically just the way it looks on a chart for the time being beans have really held their value, they're kind of pushing the upper end of the range. Meanwhile, corns just kind of fall falling out of the bottom side of the range. And obviously corn is not getting any help from the wheat market. So

Paul Yeager: You've been you keep bringing beans into the conversation. I suppose we should talk about that a little bit. What is it you'd like about soybeans? You mentioned chart movement? Is that what gets you excited? Or is there a fundamental side to beans that gets your attention?

Sean O'Leary: Yeah, I'd say it's a little bit of both. And I'll admit to being more of a technical technician as opposed to a fundamental analyst. I do. I do a fair amount of reading, but I tried to kind of cap it because eventually it'll just cloud your judgment. So you know, I think if you if you look at kind of some some macro things, I would throw the crude oil market out there. As one thing. We just put in a new low yesterday. I've got some customers that are you they're their grain and livestock producers, some of them will step in on the long side of the crude and call it a hedge, sometimes it is sometimes it really isn't. But I had I had one, one customer yesterday, say Why, Why does the market keep putting in new lows? And I said well, I think that's an indication that you know, the politically and worldwide. People are a little bit fearful of how the early part of next year first second quarter are going to be laid out. If, if you see more confidence in economies, both local and global, you're not going to see crude oil, putting in new contract clothes. So I think that should be that that to me kind of throws up a red flag about how things are now, but but also how they might be going forward. So...

Paul Yeager: Maybe the global story or the stories in the last six months, three to six months of recessions coming downturns coming. And the crude oil market not responding as such. Now that you're telling me it sounds like that the market is telling us something, the crude oil market specifically is, is telling us that maybe there's not as much confidence about the economy real soon real fast,

Sean O'Leary: I would say that's a good way to put it. That's a good way to put it in a few. You know, if I had to choose corn or beans for someone to be long, I think that's why beans look that much better. Corn is kind of mirroring the crude oil and the fact that at least in the recent weeks, it's it's moving lower, whereas bean market is kind of inching higher. If the bean market is inching higher in the face of crude oil putting in in new lows. That's a that's a bullish sign for the bean market.

Paul Yeager: All right, in the last couple of minutes here, let's get into some livestock talk. How much do you look at? What do you like about we'll start with beef. You'd like live cattle or feeders as an investment? If I'm not somebody in the feedlot that's necessarily

Sean O'Leary: Yeah, I you know, in cattle, the the last cattle on feed was, you know, we're we we have a small heard the talk is that production first quarter, second quarter of next year is going to be lower, not drastically, but lower. And the way that market is traded, it just seems to always get bought on a dip, it seems to hold value. I've got cattle producers that are kind of fearful of what happens in the equity market and the talk of recession and the like. And you just never really see it play out in the price of cattle. Traditionally, you'd think there'd be a correlation. And there has been between a weak equity market and people stepping away from from high price beef. But I think the what the consumer has told us over the past six to 12 months, is even after the equity markets poor, we're still going to eat well. And then they have not stepped away from from high price beef. So I think that's a that's encouraging if you're a pure cattle producer, and hopefully that'll can continue to be the case.

Paul Yeager: Yes, you see the the hold back. Finally, maybe some hold back in those feeder markets were in those yards where you're like, Okay, I think we can finally afford as corn has dropped a little bit, some of the input sides. hog market, you kind of mentioned a little bit about that earlier in our conversation. Do you like hogs in the first part of 23?

Sean O'Leary: I do. I think right now, seasonally, we're we're getting to a point where we have typically a pretty good supply. If you look at the summer months, I think those about perform, they outperform the October they've outperformed the December contract, and right now they're outperforming the February. So I think that's encouraging in that market, I can't really I wouldn't be able to explain why. But that under a handful of times, but over the past six to nine months has had some sharp sell offs, you know, 1214 $15 in a short amount of time. And you think well that said, you know, we're we've you know the worm has turned and we're headed lower. Two weeks later we're back to the same value or even greater and that that's happened again recently with both the nearby and the deferred contracts. So I think that's that's a friendly indicator and I mentioned China and how they haven't done they haven't been your typical China with the way they've treated lock downs so I get that figured out. I think that could be friendly for a lot of things.

Paul Yeager: Alright, I guess I didn't prep you for this one. But if you had to pick one contract one commodity that you like in the first six months of 2023 Mr. O'Leary, what would it be?

Sean O'Leary: Long wheat then I'm I I'm not you know, I'll I'll put a customer in the corn and beans four times faster than I will the wheat market. Not a lot of wheat grown in Iowa. I don't I don't have a lot of wheat producing customers. But I think that if you compare it with the way that looked in the spring to the way it looks right now, that's a that's a pretty depressed market. that not a lot of reason to get excited about a depressed market. That's one way to look at it. But you know, taken two to 250 or 260 off of that contract. I don't see we going down another dollar, dollar 52. So I think that's even from a short covering standpoint. That's that's got some some potential pop to it, you might say.

Paul Yeager:  Smells like potential. I love it. I also love the way wheat smells in the morning to John O'Leary from Des Moines, Iowa. I appreciate your time. Thank you so much. And yeah, appreciate

Sean O'Leary: Alright. 

Thanks, Paul. 

Paul Yeager: My thanks to Sean O'Leary for his time and commentary and how he sees markets moving in 2023 at least for the first few months. If you have any thoughts or feedback for the program, you could also send an email to MarkettoMarket@ IowaPBS.org. I'm Paul Yeager. Thanks for watching, listening or reading. We'll see you next time.