Market Plus with Sean O'Leary and Ross Baldwin

Paul Yeager: Welcome into the Friday, October 27, 2023 installment of Market Plus. Panel Time. Shawn O'Leary. Ross Baldwin. Ross Baldwin. You're new to you're both. Both have been here. New in this calendar year. But Ross, you're the newest of the new from western Iowa cattle guy. Yup You work at the same company as Matt Bennett. I just need to get that out of the way.

Paul Yeager:  Matt recommended you. Did he recommend coming on the show or.

Ross Baldwin:  He did.

Paul Yeager:  He even said It's okay.

Ross Baldwin:  He said you're a good guy.

Paul Yeager:  Oh, well, we've got him fooled. What did you think of this first television experience?

Ross Baldwin:  I thought it went really good. It was fun working with Shawn. I think it was. It was really good.

Paul Yeager:  How do you do? You're going to grade him or should we grade him later?

Sean O'Leary:  Thumbs up. Thumbs up.

Paul Yeager:  Okay.

Sean O'Leary:  He said it goes by really quick. And it does.

Paul Yeager:  It does. And we were discussing that between the breaks. I think I ask the same question, Shawn. His first time and it does fly by. But we do try to get some indepth. So bear with me, Ross. We'll get into a couple of things, but I'm going to start with your questions. Robert in South Dakota wants to know the following question.

Paul Yeager:  Sean, why isn't the recent snowstorm affecting the markets as millions of acres remain unharvested and more snow to come this weekend?

Sean O'Leary:  Right. Right. That seems to be almost a nonevent with the market that's talked about. You don't see the market rally. I think that's the market's way of saying that we've got supply in hand, essentially, and some of those acres are just going to have to wait.

Paul Yeager:  If some is left in the field. It's left in the field, is what you're saying.

Sean O'Leary:  Right.

Paul Yeager:  But the bigger story, do you remember this a few years ago was a South Dakota snowstorm in October that was a little more different. Does a snowstorm impact cattle and livestock a little more when it comes at this time of year?

Ross Baldwin:  Depends on the location. Primarily a snowstorm up in the northern feeding regions often times isn't a huge market mover. If you start talking in snowstorms down in Kansas, Texas, that's a whole different animal. And that is usually supportive for the cattle markets.

Paul Yeager:  Okay. Yeah, the that one there a few years ago. And in South Dakota that that one had a long tail to it. Phil in Ontario took a break and submitted this question to us via X. Grain prices stagger along in their lower end of the range. Is there any bullish narrative for this to change or Sean has big supply completely won the day and one more are improving South American conditions adding to this?

Sean O'Leary:  Well, I though going back to earlier comments about comfort level pricewise, corn and beans, I think the shorts are going to have a hard time pressing the market very much right now just because it's way too early. You know, South America's weather, for the most part between Argentina and Brazil has been fairly benign. It hasn't really been an impetus price wise for any Brazilian in corner beans.

Sean O'Leary:  So they've got some dryness issues, primarily in Argentina that have to be dealt with. So I think it's it's just too early for us to get that comfortable.

Paul Yeager:  Is there a time on the calendar where we need to be paying attention to is that like a December one or January one?

Sean O'Leary:  I'm sorry? Yeah, I'd say December into January. Yeah. You know, we've got a long ways to go.

Paul Yeager:  Okay. All right. You kind of alluded to this a little bit, Sean, but we're going to give this one to Ross Smith in Missouri. When will fundamentals matter and not what game the paper players are running?

Ross Baldwin:  You could definitely apply that to the cattle markets here. Recently, our fundamental picture hasn't shifted in near the bearish way that the futures markets have recently. I do think we saw the fundamentals prevail here this week in cattle with cash and in the week on a higher note, trading 185 in the South, some 186 up here in the north, which we did put a low end, it looks like today for the time being.

Ross Baldwin:  So they definitely lent support. But the biggest risk the futures markets had is this global uncertainty. The Israel-Hamas war, is Iran going to get more involved, which brings the US into it, the cattle markets? No, it's no secret. They don't like uncertainty. Somewhere, the equity markets, which we've seen, the equity markets and the cattle markets all trading in risk off and selling off.

Ross Baldwin:  I think the big unknown right now is as the manage money crowd has held good sized longs and live cattle and feeder cattle is when are they satisfied on exiting those? I did see here today that they liquidated 20,000 contracts of their live cattle along. They're down to about 62,000 length and they're down to like 3300 feeder cattle longs.

Ross Baldwin:  They typically don't press the short side in a meaningful way across the cattle markets. So I think given the fundamentals that we've seen this week with stronger cash feeders have backed up some in sale barns, I mean, we've seen some back up 10 to $15, depending on where you're at. But I think we're going to find strong demand for feeders here as we work out over the next few months.

Ross Baldwin:  And I just don't see the funds really pressing this thing a whole lot harder. So the fundamentals should step in here.

Paul Yeager:  I always discuss this from a consumer standpoint. When you mentioned the equities are tied, at what point, though, Sean, does the consumer walk away or has the consumer walked away from some of the beef that had reached the price that it had?

Sean O'Leary:  Yeah, I think, you know, you saw a fair amount of value come off in those markets prior to that cattle on feed. All right. So I think there was a little bit of slack demand going into that report. You know, I don't know how many months that bull market is right now, but it's

Ross Baldwin:  We're a ways.

Sean O'Leary:  In the tooth. Yeah, yeah, yeah.

Paul Yeager:  It is a long one.

Sean O'Leary:  Yeah.

Paul Yeager:  Let's go. We're going to look future. Very future. Tony in Nevada asked us online this week when will December corn for 27 be released and available to trade? Will it be trading at a discount to DEC corn 2026. Now, you both can you both were talking about this one. So, Ross, do you have the first answer? Do you know when it's going to become available?

Ross Baldwin:  I think it'll come on when this DEC of 23 goes off the board. I think DEC of 27 should come on the board.

Paul Yeager:  So, Sean, then I'll ask you the second part of the question. Where do you see value in an opportunity?

Sean O'Leary:  I agree with Ross because he did his homework on that one. So let me just throw that out there.

Paul Yeager:  But what was well, what will it be trading? Will December of 27 be trading at a discount to corn of 26?

Sean O'Leary:  I would guess so. I would guess so by how much? I couldn't answer that question.

Paul Yeager:  Predicting. What did you tell me? Predicting an hour two.

Sean O'Leary:  Yeah, I said that it's one thing to ask what's the market going to do between noon and 1:00, much less between now and DEC 27. I might be retired by then.

Paul Yeager:  You could be, but we know that there are underlying stories. You go back to South America, you go back to the United States. Long term weather patterns could be a factor. So if I'm someone who's taking I want a bunch of risk or I just, you know, what am I going to do is a safe place to enter.

Paul Yeager:  I have one in seven and 26.

Sean O'Leary:  I've got customers that have been aggressive with that strategy, and it has paid handsomely more often than not. In other words, that December 27 comes on board and you want to make some sales might be a good place to do it.

Paul Yeager:  Interesting. Okay, let's go to Box Ranch in Kansas. We have great names, by the way, this week that have submitted. Box Ranch in Kansas. When is it enough on this feeder cattle feeder cattle sell off Ross. $7.35 on the week. Only 3%. Only 3%. I think you mentioned something about a V bottom.

Ross Baldwin:  Live cattle look like they have more of a V bottom set up than feeders. Feeders. We did make a new low and they rallied off of that new low today. They're still consolidating down here. So was a little disappointing. It still shows the manage money crowd is selling every rally they're seeing right now. I, I just don't see a whole lot more downside here given the sell offs been I think the high on January feeders was around to 6850 somewhere around there we've had $35 correction.

When is enough enough? I think we've got to be getting awfully close to a bottom, just given this fundamental story that we still have going. It hasn't changed. Yes, the placements number last Friday, the 106 placements rattled the market. But you get you get further down the road. And the interesting part is, is if we start talking that we're set up for a wet spring here this next year, there's a lot of there's going to be a lot of appetite for people placing feeders or buying feeders, and it's going to be into a much tighter period out into 24.

Keep in mind, a lot of those placements that we saw last Friday in that report, Texas and Kansas were both at 113%. What was going on is down in the south, there's no question how dry it was. Texas, the southwest feeding region and we're pulling them cattle forward is all we did. They pulled them into the feedlots sooner and it is going to create a gap on the back end.

And if we do start talking a wetter outlook next early this next year, there's going to be a strong appetite for feeders and those numbers are going to be tight.

Paul Yeager:  I almost get you. You almost said amen there. I think you were shaking your head so far down there, Sean. All right. Last question to Sean here. Let's go. Roger in Minnesota. And this one has become a topic we've hit a couple of weeks in a row here. Will carry improve enough to offset the cost of higher interest rates of storing grain until summer?

Sean O'Leary:  I guess my comment there would be it seems like the majority of my customers are not interested at all in in paying for storage. Some of them are aggressive about re owning bushels, others are a little bit a little bit more conservative and, you know, going back to the way the corn in particular is traded, it's not the market's not walking away from you.

You know, it's giving you plenty of opportunity to re own it. So I, I know there's a lot of talk about on farm storage. I think that's valid. But there's the flipside of that too, is you know that it varies quite a bit from producer to producer, but I know in particular some of my own customers, they're selling, they're selling bushels.

Paul Yeager: Were they selling at a higher percentage off the combine than normal?

Sean O'Leary:  Some somewhere a little bit better than others recently put it that way.

Paul Yeager:  You mean more profitable or just more profitable?

Sean O'Leary:  Yeah, than.

Paul Yeager:  They had been in the past.

Ross Baldwin:  I would agree with what Sean said, though. If you if you're honest with yourself and you look at 9% interest, it, the carry does not offset the fees.

Sean O'Leary:  Yeah yeah yeah different different different animal than it was a year ago in a year and a half ago.

Paul Yeager:  Or in 2026 or 2027.

Sean O'Leary:  Yeah.

Paul Yeager:  Either way. Sean O'Leary, thank you so very much.

Sean O'Leary:  Thank you.

Paul Yeager:  Thank you. Shed it. Ross Bolen.

Ross Baldwin:  Thank you. Thank you, Paul. All right.

Paul Yeager:  That'll do it for Market Plus. Next week, we are going to talk about new regulations that are shortening the path for genetically edited seeds. And we'll also have the commodity market analysis of Mr. Matthew Bennett. Thank you for joining us. Have a great week.

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