Paul Yeager: Welcome into the Friday, April 26, 2024 in style in a market. Plus Arlan Suderman still with us. I did tease one thing. We’ll get to it in a moment. Arlan, anything economically on your mind? The PCE came out today. Inflation continues to be. I said stubborn, sticky. We’re still buying. There was a term this week about called hate spending. The American consumer just keeps going and buying stuff. How does the inflation has that changed and how it impacts commodities and the American farmer?
Arlan Suderman: It really really does. Because if we look back, we’ve got a stone ex commodity index, which tracks a basket of commodities, and we also have subtract here for each sector of commodities, because if we look at the broad picture of commodities, the correlation, anything statistically above 0.7 is considered strong correlation between the five year breakeven inflation rate and what the market thinks inflation is going to be doing in the years ahead is .87. That’s a very strong correlation over the last ten years. And so when we see the market environment think inflation’s going up, they generally want to be long. The commodities are not short, and they’re short right now. And so they’re starting to flip that position over. Now, if an individual commodity just has a really bearish, they’ll stay short or when the opposite is true as well. But we’re starting to see that transition now. So it elevates the level at which the market manages supply and demand. Doesn’t mean you get a bull market. You can still have a bear market condition but is still manage it at a higher price level than it otherwise would.
Paul Yeager: If I look at my closed sheet for each week, Peter, our producer, put this together because talking about copper, copper has continued to track higher. Then you look at the dollar we talked about at the end of the show. Then you look at crude oil. Every time, always headed to 100. It comes back. We’ve not been able to. Are all of those commodities in this same discussion influence that same discussion that you’re saying they really are?
Arlan Suderman: The grain and oilseeds has been the weak link going lower against the tide until this last week. And then they started turning reluctantly coming with the rest of it was really kind of the leader of that. Now, history does not mean that that’s the way things have to happen in the future. But the correlation has been just amazingly strong. And when you look at the correlation between the commodities and the CPI, even though there’s a lot of other things that go into the consumer price index, that correlation is like point 89 or so, it’s even stronger.
Paul Yeager: Let’s get into another fun topic, whether we have some great questions that came via X and Facebook each week we ask you. Here is the first one, Mitch in Iowa. He has two questions this week. The first one. Do you expect this to be a La Nina year and what effect would it have on new crop marketing opportunities if it is?
Arlan Suderman: Well, the reason he’s probably asking that is because La Nina tend to increase the risk of drought in the Midwest, and they also tend to increase the risks of drought in Argentina in the following growing season in southern Brazil and sometimes even into other parts of Brazil. So that’s why farmers always kind of want to know about that. The models seem to be in agreement that we’re moving to La Nina. The question is how fast will that happen? When are the timings and be relative to our growing season? And then how intense will it be? And several of the models were very aggressive a couple of months ago, even a month ago, moving as very rapidly to a moderate to strong La Nina by July, which would really increase our odds of being in a hot, dry period in the Midwest by the reproductive time for corn and soybeans. Those models have backed off. They’re still calling for a weak La Nina by the end, and they may change again. They may slip. But the current trend is that they’re backing off. They’re still calling for the move, but they’re slowing it, pushing it into the fall, which makes it more of a South American event.
Paul Yeager: And you look at the weather. We did talk a little bit about the way the spring planting could be impacted this week. But you look at the Eastern Corn Belt, which was wet to average moisture last year, some delayed planting and that looks like it’s backing up more towards Illinois. I know in eastern Iowa they would love to see some more rains. The drought monitor improve there. So, yeah, always something to look at. How about this? This is more of a technical or pattern question. Mitch, a second question. What analog year or years are you following for new crop corn soybean marketing this year? Are you into…
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