Takeaway

The presenter is bullish on wheat and soybeans, citing distinct supply-side catalysts. Slowed Black Sea exports could force end-user buying in wheat, while significant US yield concerns, particularly in key states, are expected to support soybean prices. The presenter also believes hogs have bottomed and favors a long position, citing the large discount of futures to cash and potential demand substitution away from high-priced beef.

What the presenter said

• Ag markets were mostly higher on Tuesday, with the exception of corn, which is facing harvest pressure and fund apprehension ahead of the WASDE report. [00:19, 06:10]
• Resumed missile activity in the Black Sea has slowed wheat movement from the region after peace talks failed to produce a resolution. [00:46]
• Black Sea wheat exports are reportedly down about 50% from a year ago, and the presenter argues that end-users who lack coverage will eventually need to purchase, potentially driving prices higher. [01:03, 01:24]
• Soybeans rallied on both supply and demand factors; China has covered 50-60% of its needs, and the US remains cheaper than Brazil. [02:51, 02:56]
• The presenter is concerned about US soybean yields, suggesting the national average could drop to 51 bushels per acre, or even below 50, due to trouble in key states. [03:21]
• The corn-to-soybean ratio is said to favor soybeans and is one of the best in over a decade for those double-cropping wheat with soybeans. [05:17]
• In livestock, the cattle market saw an uptick with cash trading at a premium to October futures. The market needs to see weights come down. [09:17, 09:54]
• The speaker believes the low for the hog market is in, citing a large cash premium (cash at $88 vs December futures at $72) and the expectation that demand will shift from high-priced beef to pork. [11:35, 12:06]

Trade ideas

• Instrument: Wheat

  • Direction: Long
  • Rationale: The presenter expects that end-users will need to increase purchases due to slowed Black Sea exports and potential weather issues for the upcoming winter wheat seeding.
  • Conviction: Medium
  • Horizon: Short-term

• Instrument: Soybeans

  • Direction: Long
  • Rationale: Strong demand from China combined with a high potential for US national yields to drop significantly is expected to push prices higher.
  • Conviction: High
  • Horizon: Short-term

• Instrument: Hogs

  • Direction: Long
  • Rationale: The speaker believes the market has likely bottomed. The large discount of futures to the cash market and potential for demand to shift from expensive beef to pork support this view.
  • Conviction: High
  • Horizon: Short-term

Levels and data cited

• Corn: Resistance noted at 4.95, 5.25, and a "tough area" at 5.50. A break of 5.50 could target 5.80-6.00.
• October Cattle: Futures traded at 2.13, a discount to cash. A close above 2.17 would make the chart look healthier.
• Cash Cattle: Current trades cited at 2.18-2.22.
• December Hogs: Futures price noted at 72.
• Cash Hogs: Current cash price cited at 88.
• Black Sea Exports: Wheat exports are down 50% year-over-year.
• USDA: Current national soybean yield is 51 bushels per acre.
• China: Has covered 50-60% of its soybean needs.

Risks and what would invalidate this

• A lack of resolution in the Russia-Ukraine conflict could continue to hinder wheat exports.
• Insufficient moisture in winter wheat seeding areas could negatively impact future yields.
• The upcoming WASDE report may not fully reflect the potential soybean yield reductions.
• Continued high feed costs could lead to further cattle herd reduction.
• Potential for executive orders related to beef plans could spook funds and negatively impact the cattle market.