WEBVTT - This Year's American Wheat Harvest Has Been Awful 0:00:09.760 --> 0:00:13.880 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:13.920 --> 0:00:18.079 I'm Joe wi Isn't and I'm Tracy Halloway. Tracy, you know, obviously, 0:00:18.200 --> 0:00:21.520 when we talk about inflation, which we talk about all 0:00:21.560 --> 0:00:24.360 the time, a lot of the converse, a lot yeah, 0:00:24.960 --> 0:00:29.920 has to do of course, with the macro monetary policy, 0:00:30.320 --> 0:00:35.080 fiscal policy, the compensation for years of under investment in 0:00:35.200 --> 0:00:38.840 key commodities or key industries. But it really does seem 0:00:38.880 --> 0:00:41.680 like in some areas, I don't know if luck is 0:00:41.760 --> 0:00:44.360 the right word, but there are some areas where things 0:00:44.360 --> 0:00:48.800 are contributing to shortages that do seem like sort of 0:00:48.840 --> 0:00:53.279 like bad luck and not necessarily related to the economic 0:00:53.360 --> 0:00:57.160 cycle directly. But here's the thing, So, yes, I agree 0:00:57.200 --> 0:00:59.840 with you, but it feels like that bad luck just 0:01:00.160 --> 0:01:03.920 keeps continuing, right. It feels like we've had a number 0:01:04.040 --> 0:01:06.720 of specifically commodities at this point in time where we 0:01:06.760 --> 0:01:10.319 talk about, oh, a perfect storm of factors have come 0:01:10.360 --> 0:01:14.760 together to drive coffee prices higher, or wheat prices higher, 0:01:14.880 --> 0:01:18.520 or soybean prices higher or whatever. And it's always sort 0:01:18.520 --> 0:01:22.600 of different factors. Some of them have an underlying thing 0:01:22.600 --> 0:01:25.320 in common, which would be the weather. But it just 0:01:25.360 --> 0:01:29.600 seems to keep happening, and I guess, yeah, it's weird, 0:01:29.680 --> 0:01:32.280 and I guess it makes me wonder whether or not 0:01:32.400 --> 0:01:36.360 there's something structural at play, like maybe when it comes 0:01:36.400 --> 0:01:39.600 to certain commodities, something about the market is just less 0:01:39.600 --> 0:01:42.160 resilient than it. You know, you're toetally right. I think 0:01:42.360 --> 0:01:46.319 back to we probably had a number of episodes where 0:01:46.360 --> 0:01:48.400 like the perfect storm in this so the perfect storm 0:01:48.440 --> 0:01:51.840 and lumber, the perfect storm at the ports, and it's like, 0:01:51.920 --> 0:01:54.880 if you keep having perfect storms over and over, right, 0:01:55.600 --> 0:01:59.760 maybe they're just normal storms, and be they might reveal 0:01:59.800 --> 0:02:04.600 so thing underlying that maybe about the market or about 0:02:04.600 --> 0:02:08.000 the underlying good that it doesn't take much to wind 0:02:08.080 --> 0:02:10.680 up in a perfect storm, because perfect storms aren't supposed 0:02:10.680 --> 0:02:14.359 to happen all the time exactly. It pains me to 0:02:14.480 --> 0:02:16.720 quote to lab but maybe there's a sort of anti 0:02:16.919 --> 0:02:20.000 fragile thing happening here. But I think I think we 0:02:20.000 --> 0:02:21.880 should dig into this, right and I think we should 0:02:21.880 --> 0:02:26.720 look at a specific crop or commodity that has experienced 0:02:27.120 --> 0:02:29.800 a perfect storm last year, And we talked about it 0:02:29.840 --> 0:02:31.880 back then, and I think the title of the episode 0:02:31.960 --> 0:02:35.160 was actually a perfect storm for this particular crop with 0:02:35.280 --> 0:02:40.200 the heat. And now fast forward to two and it's 0:02:40.200 --> 0:02:42.600 even more of a perfect storm. You still have bad weather, 0:02:43.000 --> 0:02:47.720 you still have subpar yields on crops, and now you 0:02:47.760 --> 0:02:51.079 also have what's happening in Ukraine and Russia which is 0:02:51.120 --> 0:02:54.679 also eaten into the global market. So it's even more 0:02:54.720 --> 0:03:00.400 of a perfect storm perfect or storm. Clear is that 0:03:00.520 --> 0:03:03.680 plantings of wheat in the US and so just basically 0:03:04.600 --> 0:03:08.120 the pace of new crop plantings has been really dismal 0:03:08.280 --> 0:03:12.320 in which does not pretend good things for the wheat supply, 0:03:12.800 --> 0:03:16.320 does not pretend good things for food inflation and food 0:03:16.360 --> 0:03:20.519 shortages to ease dramatically. So we're going to dig into 0:03:20.560 --> 0:03:23.639 what's going on. So we're gonna return with uh, a 0:03:23.720 --> 0:03:27.160 guest we've spoken to last year with the original perfect 0:03:27.160 --> 0:03:29.560 storm in the space, we're gonna be speaking with Angie 0:03:29.560 --> 0:03:32.440 sets Her. She is the co founder of Conscious r I, 0:03:32.960 --> 0:03:37.160 which helps farmers manage their risk, hedge and so forth. 0:03:37.360 --> 0:03:40.320 And so Angie, thank you so much for coming back 0:03:40.360 --> 0:03:44.680 on Odd Lots, Thanks for having me. We're just talking 0:03:44.680 --> 0:03:47.000 about how long it's been. It was just late last fall, 0:03:47.040 --> 0:03:49.839 but I'm pretty sure it's been a decade, uh, if 0:03:49.880 --> 0:03:52.680 not more. UM in the egg space. Currently, it's what 0:03:52.800 --> 0:03:56.120 it feels like. Last fall feels like a really long 0:03:56.160 --> 0:04:01.000 time ago objectively, so we just uh time we had 0:04:01.000 --> 0:04:05.240 you back, so uh planting for wheat, they're really dismal, right, yeah, 0:04:05.280 --> 0:04:07.600 so spring wheat. So it's important to kind of one 0:04:07.600 --> 0:04:10.560 of the fun things that I love about my job 0:04:10.680 --> 0:04:13.440 is to be able to kind of educate or or 0:04:13.600 --> 0:04:17.720 kind of give you insight into all of the wonderful 0:04:17.760 --> 0:04:21.360 classes of wheat um. And So in Kansas City, in 0:04:21.400 --> 0:04:23.920 the southern Plains, the Kansas City wheats what we call 0:04:24.000 --> 0:04:27.640 it um it it the southern plains grows hard red 0:04:27.680 --> 0:04:31.160 winter wheat. And then in the eastern corn belt, so 0:04:31.200 --> 0:04:33.600 east of the Mississippi down to the Gulf of Mexico 0:04:33.800 --> 0:04:37.000 up into Michigan where I am, we grow soft red 0:04:37.160 --> 0:04:40.120 winter wheat and soft white winter wheats. So we actually 0:04:40.120 --> 0:04:43.480 have farmers plant in the fall um on the soft 0:04:43.520 --> 0:04:45.920 red winter wheat side in the eastern corn belt here, 0:04:46.279 --> 0:04:48.559 specifically here in Michigan and in some of the states 0:04:48.560 --> 0:04:51.080 in the Great Lakes areas, they had a poor planting 0:04:51.160 --> 0:04:54.800 progress or poor planting weather. Um last fall, we just 0:04:54.880 --> 0:04:56.760 weren't able to get the swaybeans off in time to 0:04:56.800 --> 0:04:59.120 get the wheat in in time. Winter kind of came 0:04:59.120 --> 0:05:01.320 on a little early, so we saw a pretty significant 0:05:01.360 --> 0:05:05.000 reduction in our acreage here um in Michigan and in 0:05:05.120 --> 0:05:08.520 some surrounding states. In the southern plains, they're dealing with 0:05:08.520 --> 0:05:11.000 the drought. So we can get to that later. But yes, 0:05:11.120 --> 0:05:13.480 in the spring and wheat belt, which is actually the 0:05:13.520 --> 0:05:18.240 most important because that's kind of where we really had 0:05:18.320 --> 0:05:20.920 leaned heavily on a year ago, was okay, we we 0:05:20.960 --> 0:05:23.479 can manage through. You know this of course before the 0:05:23.600 --> 0:05:26.320 Russia Ukraine situation and some of these other things. You know, 0:05:26.400 --> 0:05:29.159 we can really manage through with a tighter wheat crop 0:05:29.240 --> 0:05:31.000 if we can make sure that the spring wheat crop 0:05:31.040 --> 0:05:34.400 looks good. But we obviously had a major drought in 0:05:34.440 --> 0:05:37.560 the Canadian prairies and into the spring wheat areas of 0:05:37.560 --> 0:05:40.960 the United States. So spring wheats grown in Montana, North Dakota, 0:05:41.080 --> 0:05:45.800 parts of South Dakota, and uh western um Minnesota. And 0:05:45.880 --> 0:05:48.719 so if if you look at a summary of rainfall 0:05:49.080 --> 0:05:51.240 um leading up to about the first of April one 0:05:51.279 --> 0:05:55.120 planting season would kick off, they had stayed um incredibly dry. 0:05:55.480 --> 0:05:59.320 So in a you know, cruel twist of irony. We 0:05:59.360 --> 0:06:01.240 started the year concern that we were going to see 0:06:01.240 --> 0:06:04.560 continued drought development, and we had been so exceptionally dry 0:06:04.640 --> 0:06:07.800 for so long we were nervous about what would take place. 0:06:07.880 --> 0:06:10.800 So you know, in true mother nature form over what's 0:06:10.800 --> 0:06:13.839 taken place the last couple of years, she brought all 0:06:13.920 --> 0:06:16.200 of the rain that you would want to have seen 0:06:16.279 --> 0:06:19.159 in the six months prior in about six weeks time. 0:06:19.360 --> 0:06:24.359 And so yeah, we've seen UM record UH delays and planting, 0:06:24.440 --> 0:06:28.080 specifically in in North Dakota and in Minnesota. Most of 0:06:28.120 --> 0:06:30.920 them we feel UM should be close to have being 0:06:30.960 --> 0:06:35.080 able to catch up prior to final planting final insurance 0:06:35.080 --> 0:06:37.760 planting dates the middle of this week. UM. There was 0:06:37.800 --> 0:06:41.000 a lot of progress that has taken place, although it 0:06:41.080 --> 0:06:44.240 took place in in less than ideal conditions and and 0:06:44.279 --> 0:06:47.159 so some farmers are are crossing their fingers and holding 0:06:47.160 --> 0:06:50.000 their breath that uh, we're we're able to see that 0:06:50.040 --> 0:06:52.839 crop come up and and get a normal year of production. 0:06:54.120 --> 0:06:56.000 So this is a really good reminder that there are 0:06:56.040 --> 0:06:59.880 different types of wheat that are planted at different times 0:07:00.040 --> 0:07:04.360 of the year and in different parts of the country. 0:07:04.480 --> 0:07:07.120 Can you give us an idea of what yields actually 0:07:07.360 --> 0:07:10.160 look like on some of those crops at the moment. 0:07:10.280 --> 0:07:12.560 And my understanding is that the U. S Department of 0:07:12.600 --> 0:07:16.240 Agriculture also grades the crops, you know, give some like 0:07:16.320 --> 0:07:20.200 excellent designations or poor designations. What does it actually look 0:07:20.240 --> 0:07:22.880 like right now? How bad is it out? Yeah, So 0:07:23.000 --> 0:07:26.320 the softwad wheat belt, like I said, the eastern region 0:07:26.320 --> 0:07:30.240 of the country, we're doing pretty good. Um. Things look good. 0:07:30.280 --> 0:07:32.840 We continue to get reasonable rain, the wheat crops starting 0:07:32.880 --> 0:07:35.640 to head out, um, and you want to see some 0:07:36.040 --> 0:07:39.280 continued rain, um, you know, for the next couple of 0:07:39.280 --> 0:07:42.080 few weeks here until we get closer to harvest. Here 0:07:42.080 --> 0:07:44.320 in Michigan, we're the last ones in the Software wheat 0:07:44.320 --> 0:07:47.119 belt to to roll with harvest and that usually takes 0:07:47.120 --> 0:07:50.080 place the week after the fourth of July. So the 0:07:50.120 --> 0:07:53.960 Software wheat crop is used for cakes, doughnuts. You know, 0:07:54.000 --> 0:07:55.880 we like to say that we're the fun crop. Um. 0:07:55.960 --> 0:07:59.600 It's used for the fun stuff. Um. And the hard 0:07:59.600 --> 0:08:01.720 read w crop is is really where a lot of 0:08:01.720 --> 0:08:04.040 the condition ratings because the spring wheat crop is is 0:08:04.080 --> 0:08:06.640 just getting planted, so we haven't had a chance yet 0:08:06.640 --> 0:08:08.680 to to see what those look like. But the hard 0:08:08.680 --> 0:08:12.160 red winter wheat crop UM in in the southern plains 0:08:12.440 --> 0:08:16.160 is one of the worst rated crops um on record. Um. 0:08:16.200 --> 0:08:18.240 As a result, the U. S d A has has 0:08:18.280 --> 0:08:22.440 lowered yield expectations, you know, with with acreage and yield 0:08:22.440 --> 0:08:26.560 expectations as is and the expected abandonment. So basically what 0:08:26.640 --> 0:08:28.920 you could see farmers do is is they could come 0:08:28.920 --> 0:08:31.559 into spring and recognize that the stand of their crop 0:08:31.680 --> 0:08:34.400 is is poor um and that the potential for the 0:08:34.440 --> 0:08:37.240 crop is is below average, and they can then transition 0:08:37.280 --> 0:08:41.199 into a different crop. They may choose to um, switch 0:08:41.280 --> 0:08:44.600 to corn, maybe milo, maybe soybeans, depending on how planting 0:08:44.679 --> 0:08:49.559 is going, something of that nature. Uh, sorghum. So yeah, 0:08:49.640 --> 0:08:51.840 so we'll call it milow or sorghum, depending on where 0:08:51.840 --> 0:08:54.680 you're at in the country. Um. So that's the that's 0:08:54.720 --> 0:08:57.280 one of those fun Uh here in the industry we 0:08:57.320 --> 0:09:00.280 call it milo, but yeah, it's sorghum. Um. They may 0:09:00.280 --> 0:09:02.480 switch over that. Especially store gum is a very drought 0:09:02.480 --> 0:09:05.280 tolerant crop. So if they're in the western portions of 0:09:05.400 --> 0:09:07.880 Kansas and parts of Texas that haven't seen the amount 0:09:07.880 --> 0:09:11.000 of rain that they had hoped for the Oklahoma Panhandle, um, 0:09:11.040 --> 0:09:14.559 you know, you could see that transition take place. Um. 0:09:14.600 --> 0:09:16.240 But yeah, so the crop is is one of the 0:09:16.240 --> 0:09:18.560 worst rated on records the us D as a result, 0:09:18.679 --> 0:09:21.280 you know, has come in um with yields that are 0:09:21.360 --> 0:09:24.440 are well below average ten ten bushels are so preake 0:09:24.520 --> 0:09:27.439 or below average expected in that hard red um winter 0:09:27.440 --> 0:09:30.160 wheat crop area. Then as a result, we're looking at 0:09:30.160 --> 0:09:34.439 one of the smallest um us winter wheat crops hard 0:09:34.440 --> 0:09:38.280 red winter wheat crops specifically since the sixties. Um. So 0:09:38.320 --> 0:09:41.439 we just keep you know, the hits keep coming, so 0:09:41.520 --> 0:09:44.320 to speak. Now we're just getting started in harvest. And 0:09:44.400 --> 0:09:46.760 so wheat is one of those things where a wheat 0:09:46.800 --> 0:09:48.839 trader will tell you that it takes a lot to 0:09:48.920 --> 0:09:53.000 kill wheat, like after a nuclear bomb where to drop 0:09:53.040 --> 0:09:55.080 you would have cockroaches and wheat, you know what I mean, 0:09:55.120 --> 0:09:58.280 Like you just it's it's very difficult to kill wheat. Now, 0:09:58.320 --> 0:10:00.960 it may not average yield by is what you're hoping for, 0:10:01.000 --> 0:10:03.160 but you may get surprised when you get out into harvest. 0:10:03.240 --> 0:10:06.400 And so we'll get a much better feel, um for 0:10:06.400 --> 0:10:08.840 for what all we're seeing from a production standpoint here 0:10:08.880 --> 0:10:11.679 over the next three to four weeks as harvest starts 0:10:11.720 --> 0:10:14.319 to progress to the north in the hard wheat belt 0:10:14.600 --> 0:10:17.600 and and then the soft wheat belt. UM. But for 0:10:17.679 --> 0:10:20.320 now it does look to be one of the smaller 0:10:20.320 --> 0:10:22.520 crops that we've seen here in the US UM and 0:10:22.640 --> 0:10:26.080 quite some time. Can you just put a few like 0:10:26.320 --> 0:10:29.320 numbers on this, like what is you know, like I 0:10:29.400 --> 0:10:31.720 sort of I don't know the best way to aggregate it, 0:10:31.760 --> 0:10:35.680 but total volume, total acreage or total number of bushels 0:10:35.840 --> 0:10:38.240 what we would normally be looking for. How big a 0:10:38.320 --> 0:10:40.400 part of the market it is, and then what the 0:10:40.440 --> 0:10:42.520 shortfall is going to be if we're really having like 0:10:42.520 --> 0:10:47.280 one of the worst uh planting seasons, one of the lowest. Yeah, yeah, 0:10:47.320 --> 0:10:50.079 I mean we're gonna want to pull up and and see. 0:10:50.240 --> 0:10:52.160 You know. One of the benefits about the the hard 0:10:52.200 --> 0:10:53.880 read winter wheat crop it it gets a lot of 0:10:53.920 --> 0:10:58.720 conversation here um in the you know, and it gets 0:10:58.720 --> 0:11:01.160 a lot of attention from the world market. Everyone tries 0:11:01.200 --> 0:11:04.240 to pay attention, especially considering it it does set the stage. 0:11:04.600 --> 0:11:06.200 One of the things that we have seen is the 0:11:06.280 --> 0:11:09.920 U s d A has anticipated thanks to the increase 0:11:09.920 --> 0:11:12.920 in price and and the tight available supply. So you've 0:11:12.960 --> 0:11:15.560 seen the cash market or at least our export offers 0:11:15.600 --> 0:11:17.960 really kind of outpaced the rest of the world, so 0:11:18.000 --> 0:11:20.439 they have reduced export demand as a result, just because 0:11:20.440 --> 0:11:23.040 we're more expensive. But to take it into you know, 0:11:23.160 --> 0:11:26.600 kind of consideration there as to what you're looking at 0:11:26.600 --> 0:11:29.600 in the world wheat crop or the world wheat supply, 0:11:30.040 --> 0:11:31.840 you know, compared to maybe where we were in two 0:11:31.920 --> 0:11:34.920 thousand twenty even you know, production was about one point 0:11:35.000 --> 0:11:39.240 eight three billion bushels. We're expecting it to come in 0:11:39.280 --> 0:11:43.000 around one point seven three this year versus so I mean, 0:11:43.040 --> 0:11:45.440 you're you're talking a hundred million bushel reduction and overall 0:11:45.440 --> 0:11:49.800 wheat production, but you're seeing ending stocks, you know, deplete substantially. 0:11:50.320 --> 0:11:52.400 For a short period of time there between about two 0:11:52.480 --> 0:11:56.240 thousand fifteen into two thousand eighteen, you know, we saw 0:11:56.520 --> 0:11:59.880 hard read winter weak trade below four dollars, you know, 0:12:00.440 --> 0:12:03.080 more than once, and so that really kind of created 0:12:03.080 --> 0:12:07.240 this environment in which the farmers that traditionally would grow 0:12:07.240 --> 0:12:10.520 wheat looked other crops, especially you know, speaking of milo 0:12:10.880 --> 0:12:13.760 or sorghum. You saw this continue, this big increase in 0:12:13.880 --> 0:12:16.559 Chinese sorghum demand, and so you saw a lot of 0:12:16.600 --> 0:12:19.640 folks really just kind of transition away so you saw 0:12:19.679 --> 0:12:22.520 people transition away, you saw plantings getting smaller. You know, 0:12:22.600 --> 0:12:25.680 as we worked our way into two thousand one, you know, 0:12:25.720 --> 0:12:29.600 you saw a reduction in in area harvested. You see 0:12:29.640 --> 0:12:32.880 another reduction in area harvested this year, especially because of 0:12:32.920 --> 0:12:35.920 the increase in band an abandonment. You know. But one 0:12:35.960 --> 0:12:37.760 of the things that we're seeing is when you break 0:12:37.760 --> 0:12:41.760 it down per class, that's when you know the noticeable 0:12:41.800 --> 0:12:45.320 reduction and supply becomes clear. You know, at one point, 0:12:45.720 --> 0:12:48.880 hard red winter wheat was flirting with you know, above 0:12:48.960 --> 0:12:52.800 five million, close to a billion bushell carry out. That's huge, 0:12:52.880 --> 0:12:56.480 that's that's considered burdensome. Now this year they're expecting carry 0:12:56.480 --> 0:12:58.839 out to be around three hundred and sixty million bushels. 0:12:58.880 --> 0:13:02.480 So it definitely is very evident. And as a result, 0:13:02.559 --> 0:13:05.520 you're seeing the farmer and the commercial elevators in those 0:13:05.559 --> 0:13:08.720 regions become very protective of the supply that they have 0:13:08.800 --> 0:13:12.640 on hand. And really, we we kind of joke in 0:13:12.679 --> 0:13:16.320 the US wheat industry, like the our job is to 0:13:16.400 --> 0:13:20.520 keep our wheat expensive enough to where maybe it doesn't 0:13:20.520 --> 0:13:23.480 fly off the shelves into the global market, um simply 0:13:23.520 --> 0:13:25.679 so we can make sure that we have enough at 0:13:25.720 --> 0:13:27.959 home to to manage our feed use if we were 0:13:27.960 --> 0:13:30.520 to run into a production issue down the road, another 0:13:30.600 --> 0:13:48.600 production issue down the road at this rate. So this 0:13:48.720 --> 0:13:50.640 was kind of going to be my next question. So 0:13:50.760 --> 0:13:55.760 what typically happens in a tight market for a specific crop? 0:13:55.840 --> 0:13:59.000 Do you see farmers start to attempt to grow other 0:13:59.080 --> 0:14:02.599 things like storkam which you already mentioned, And does the 0:14:02.679 --> 0:14:05.760 US tend to try to keep those goods at home 0:14:05.880 --> 0:14:08.360 or those commodities at home rather than export them, And 0:14:08.400 --> 0:14:12.800 what other options are available to farmers and the industry 0:14:12.840 --> 0:14:17.439 to try to offset a bad harvest. Yeah, um, so 0:14:17.760 --> 0:14:19.560 we'll see that. We we tend to see it in 0:14:19.560 --> 0:14:22.320 the cash market. So I always I'm a cash trader. 0:14:22.400 --> 0:14:25.280 I'm a physical trader. You know. My job is to 0:14:25.280 --> 0:14:28.120 to get bushels from the farmers that I work with 0:14:28.160 --> 0:14:31.000 that produced them to the end users that need them, 0:14:31.080 --> 0:14:33.000 you know. And so I I live in the cash 0:14:33.040 --> 0:14:35.720 market every day. And I will tell you the cash 0:14:35.760 --> 0:14:38.080 market is is king no matter how you slice it. 0:14:38.120 --> 0:14:40.840 Whatever the cash market is doing is it will eventually 0:14:41.280 --> 0:14:44.000 transition into futures and in some way, shape or form 0:14:44.080 --> 0:14:46.920 or at the very least, the cash prices is gravity, 0:14:47.000 --> 0:14:49.480 especially in wheat. So, but if we do run into 0:14:49.520 --> 0:14:52.040 a situation where we have a question regarding what production 0:14:52.080 --> 0:14:53.720 looks like, you know, one of the first steps that 0:14:53.760 --> 0:14:56.760 you see is, as I indicated before, everyone kind of 0:14:56.760 --> 0:14:59.360 pulls their arms and legs inside the vehicle. Okay, we 0:14:59.360 --> 0:15:02.520 we we wait, you don't you try to assess the market. 0:15:02.520 --> 0:15:05.880 You let someone um other than you potentially put on 0:15:05.920 --> 0:15:08.080 a couple of trades or make a couple of trades 0:15:08.120 --> 0:15:10.560 to get a good feel as to what the actual 0:15:11.120 --> 0:15:15.080 cash value is. So futures can trade um one price 0:15:15.440 --> 0:15:18.680 uh and depending on what the local supply and demand 0:15:18.800 --> 0:15:21.200 is or what the regional supply and demand is in 0:15:21.240 --> 0:15:24.200 a in a specific location surrounding a specific end user, 0:15:24.560 --> 0:15:27.120 you know you'll see a basis, which is that difference 0:15:27.120 --> 0:15:29.800 between cash price and future Sometimes it trades as at 0:15:29.800 --> 0:15:33.440 a premium, some times it trades at a negative. But 0:15:33.560 --> 0:15:35.240 so what you'll tend to see is is one of 0:15:35.240 --> 0:15:37.600 the first things that happens is the folks that tend 0:15:37.720 --> 0:15:40.560 to traditionally do the selling, whether that's an elevator or 0:15:40.600 --> 0:15:44.080 a farmer. If a crop scare comes about, we stop selling. 0:15:44.280 --> 0:15:46.360 Like that's just human nature, right. If you don't know 0:15:46.400 --> 0:15:49.280 what you're going to have going forward, you stop selling. 0:15:49.560 --> 0:15:53.600 So then the market's job becomes getting it to a 0:15:53.680 --> 0:15:57.080 high enough value to where it entices a pickup and selling. So, 0:15:57.160 --> 0:16:00.920 whether that's a enticing a farmer to liquidate his or 0:16:00.920 --> 0:16:03.520 her bushels at a certain price, maybe it's a you know, 0:16:03.600 --> 0:16:05.920 the farmer has an eight dollar target order in mind, 0:16:06.000 --> 0:16:08.560 or something of that nature. You know, whatever it will 0:16:08.600 --> 0:16:10.440 take to get to those values to really kind of 0:16:10.560 --> 0:16:14.160 entice the farmer or entice the elevator. So there's a 0:16:14.160 --> 0:16:15.880 whole host of things you'll have to be able to 0:16:15.920 --> 0:16:19.480 offset or or you know, provide in in the market 0:16:19.520 --> 0:16:21.800 price itself, you know. And so that's what you'll see 0:16:21.840 --> 0:16:23.840 is is folks will start to discuss the basis is 0:16:23.920 --> 0:16:27.080 increasing and that spreads are you know, spreads are tightening. 0:16:27.160 --> 0:16:29.360 So the other thing is is that spreads will no 0:16:29.440 --> 0:16:33.480 longer incentivize you holding the product out of the pipeline. 0:16:33.800 --> 0:16:35.840 You know, they're going to punish you for doing so. 0:16:35.840 --> 0:16:39.120 So traditionally, in the commercial elevator business, you know, you 0:16:39.160 --> 0:16:43.680 see what we call carry um or contain go and 0:16:43.840 --> 0:16:45.960 you know, if you're your fancy, we just call it 0:16:46.040 --> 0:16:48.960 carry because we're not you know, so you'll see you 0:16:49.040 --> 0:16:52.400 typically we see carry i e. The market isn't paying you, 0:16:52.400 --> 0:16:54.640 we're providing you incentive to keep it out of the pipeline. 0:16:55.000 --> 0:16:56.960 The opposite comes true if if it looks like you're 0:16:56.960 --> 0:16:58.640 going to have a short crop. So one of the 0:16:58.680 --> 0:17:01.040 things that we pay attention to, you know, not only 0:17:01.160 --> 0:17:03.360 is basis whether or not the end user is paying 0:17:03.360 --> 0:17:05.640 more or less yesterday, but what are the spreads doing, 0:17:05.920 --> 0:17:08.520 because that will give us an insight into whether or 0:17:08.560 --> 0:17:11.120 not you could see supply come into the pipeline. And 0:17:11.200 --> 0:17:14.040 so yeah, I mean the first big step that has 0:17:14.119 --> 0:17:16.600 taken as you just stop selling, which is what we 0:17:16.640 --> 0:17:21.000 saw take place in India right like, the concerns started 0:17:21.040 --> 0:17:23.240 to develop that we were selling too much. We were 0:17:23.320 --> 0:17:24.800 uncertain as to what we were going to have come 0:17:24.840 --> 0:17:27.320 into play for new crop, and so the government said 0:17:27.320 --> 0:17:29.520 weld on, you know, we're going to take some time now. 0:17:29.760 --> 0:17:33.160 They did it through measures that you know or are 0:17:33.240 --> 0:17:38.000 seeing in a more government centric UM agricultural production system, 0:17:38.160 --> 0:17:42.520 whereas in the US, UM traders tend to to uh 0:17:42.840 --> 0:17:46.639 manage their own reduction and market exposure, you know, i e. 0:17:46.960 --> 0:17:50.840 They make their bids really or their offers really expensive. Um, 0:17:51.000 --> 0:17:53.000 the end users may firm up bids, you know, things 0:17:53.000 --> 0:17:55.960 of that nature. But um, we just kind of become 0:17:56.119 --> 0:17:58.920 we start to play chicken, you could say, Um, when 0:17:58.960 --> 0:18:02.840 it comes to purchase and sales. What is the shape 0:18:02.880 --> 0:18:05.560 of the futures curve right now? I mean we know 0:18:05.640 --> 0:18:08.960 that a lot of uh, at least you know, up 0:18:09.040 --> 0:18:11.400 until very recently. I can't remember the last time I look, 0:18:11.480 --> 0:18:14.000 but all around the world, whether we're talking about egg 0:18:14.520 --> 0:18:18.520 or metals or energy commodities, we have seen this sort 0:18:18.560 --> 0:18:21.840 of like front month, uh, you know, high premium in 0:18:21.880 --> 0:18:24.560 the front month. What is the shape now of the 0:18:25.200 --> 0:18:29.679 wheat futurest curve? And what is it indicating? That's the 0:18:29.720 --> 0:18:33.119 ironic part um. You know, you pull up the shape 0:18:33.119 --> 0:18:36.479 of the wheat futures curve um, and we saw it go. 0:18:36.800 --> 0:18:38.720 I mean, I don't know how much attention folks paid 0:18:38.760 --> 0:18:42.080 to to what the market had done here. Um. Upon 0:18:42.119 --> 0:18:45.040 the news of the invasion, we saw some pretty substantial 0:18:45.080 --> 0:18:49.480 inversions um or backwardation developed to where you saw the 0:18:49.560 --> 0:18:52.880 July dece you know, go to a two dollar inverse. 0:18:52.920 --> 0:18:55.359 I mean just something that was just absolutely obscene, something 0:18:55.400 --> 0:18:58.320 that we had never seen. Um, happened before. And as 0:18:58.400 --> 0:19:01.720 a result, it kind of lou um a lot of 0:19:01.760 --> 0:19:05.159 elevators out of the market because they they right, like 0:19:05.200 --> 0:19:06.720 so that I was gonna I was gonna ask like 0:19:06.840 --> 0:19:10.080 their business must be premised on the idea that like 0:19:11.320 --> 0:19:15.080 you know, you hold, they hold right, or they hold 0:19:15.240 --> 0:19:17.560 they hold grain, and if you hold it, you know 0:19:17.600 --> 0:19:20.240 it's grain is priced more valuable in a few months 0:19:20.320 --> 0:19:22.160 or a year or whatever it is, and you get 0:19:22.200 --> 0:19:24.679 some sort of I guess, as you said, carry, But 0:19:24.760 --> 0:19:27.879 it's got to be a terrible business in the opposite 0:19:27.880 --> 0:19:30.959 when there's such a premium currently. Yeah, yeah, And and 0:19:31.000 --> 0:19:33.800 that's what you saw. You saw wheat elevators of flour mills, 0:19:33.960 --> 0:19:37.719 you know, they just basically withdrew bids. So the farmer 0:19:37.800 --> 0:19:39.639 was very frustrated in the sense that the board was 0:19:39.760 --> 0:19:44.080 rallying twelve fifty dollars for Chicago wheat and the end 0:19:44.160 --> 0:19:47.159 users and processors with drew bids. As a result, you know, 0:19:47.240 --> 0:19:49.480 of of the cash market again going back to the 0:19:49.480 --> 0:19:53.840 cash market just basically being destroyed um by that move 0:19:54.119 --> 0:19:56.760 in futures, you saw a lot of activity, You saw 0:19:56.800 --> 0:19:59.240 a lot of folks sleeve. You've seen the spread zone wine. 0:19:59.359 --> 0:20:01.840 So ironically, you know, a lot of folks are talking 0:20:01.840 --> 0:20:04.440 about how wheat is the most bullish commodity out there, 0:20:04.480 --> 0:20:06.199 you know, it's the one thing that we tend to 0:20:06.240 --> 0:20:08.320 hear the most about. But when you look at the spreads, 0:20:08.320 --> 0:20:11.359 they're they're painting substantial carry or what has traditionally been 0:20:11.440 --> 0:20:14.560 solid carry um for the last several years, at least 0:20:14.600 --> 0:20:17.240 out into the march board um, you know, when you're 0:20:17.280 --> 0:20:19.960 looking at the Chicago crop um, and even out into 0:20:20.040 --> 0:20:22.879 the march board when you're you're looking at the Kansas 0:20:22.920 --> 0:20:26.760 City crop um, and so you know, there there's carry, 0:20:26.800 --> 0:20:28.760 there is incentive to hold the crop. But I think 0:20:28.800 --> 0:20:31.640 that's more to do with the fact that the global pipeline, 0:20:31.720 --> 0:20:34.720 or our export business, or our delivery system, you know, 0:20:34.800 --> 0:20:37.600 simply couldn't handle all of the wheat coming off at 0:20:37.600 --> 0:20:40.280 harvest time, you know. And you could say the opposite 0:20:40.320 --> 0:20:42.959 is true and corn and soybeans, where they're pretty heavily 0:20:43.000 --> 0:20:47.040 inverted old crop um to new crop um. Just you know, 0:20:47.200 --> 0:20:50.000 especially I think considering the fact that for wheat, the 0:20:50.000 --> 0:20:54.879 new crop year starts on Wednesday, So for wheat um, 0:20:54.960 --> 0:20:57.480 we have a June to June, and so we're basically 0:20:57.560 --> 0:20:59.600 ending up. We know what we we did for for 0:20:59.640 --> 0:21:01.600 old prop we have an idea of of what will 0:21:01.640 --> 0:21:03.520 be left over at the end of the year. And 0:21:03.600 --> 0:21:07.080 now we're we're facing you know, a new crop coming 0:21:07.080 --> 0:21:10.600 in full bins. Hopefully even with a smaller crop, you know, 0:21:10.640 --> 0:21:12.240 you're still going to have a lot to take off, 0:21:12.720 --> 0:21:14.919 um you know, early on in the season. And so 0:21:14.960 --> 0:21:19.119