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In this episode of the Farm Equipment Used Equipment Remarketing Roadmaps podcast, brought to you by Agrisolutions, host Casey Seymour sits down with guest Shawn Hackett of Hackett Financial.  

Shawn regularly joins the discussion to provide an update on the commodity markets.

In this episode, Sawn shares some insights on the global commodity market, and how things in Ukraine, South America and China are impacting the markets here at home.  

 
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Farm Equipment‘s podcast, Used Equipment Remarketing Roadmaps, is brought to you by Agrisolutions.

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Agrisolutions is the market leader in wearable parts, components, accessories and solutions for tillage, seeding, planting, fertilizing, hardware and inventory management solutions. Improve performance and durability with a wide range of in-field and extended life solutions.

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Full Transcript

Kim Schmidt:

Hi, I'm Kim Schmidt, Executive Editor of Farm Equipment. Welcome to Farm Equipment's Used Equipment Remarketing Roadmaps podcast. In this episode, host Casey Seymour sits down with Shawn Hackett, with Hackett Financial. Shawn regularly joins the program to provide an update and insights into what's happening in the commodity markets.

Kim Schmidt:

Before we head over to Casey and Shawn, I wanted to thank our sponsor, AgriSolutions. AgriSolutions is the market leader in wearable parts, components, accessories, and solutions for tillage, seeding, planting, fertilizing, hardware and inventory management solutions. Improve performance and durability with a wide range of in field and extended life solutions. To learn more about AgriSolutions and their globally recognized brands, such as Bellota and Ingersoll Tillage and Trinity Logistics, visit agrisolutionscorp.com.

Kim Schmidt:

If this is your first time listening, you can subscribe to the podcast on any of your favorite podcast platforms. Okay, let's get things going. Here's Casey and Shawn discussing what's happening in the commodity markets around the world.

Casey Seymour:

Shawn, how you doing this morning, man?

Shawn Hackett:

I'm doing great, Casey. Doing really good.

Casey Seymour:

I'm breathless with you being on here today, dude. I can't catch my breath.

Shawn Hackett:

Well, I heard there's a new strain of the virus and it comes through on Zoom.

Casey Seymour:

Is that right?

Shawn Hackett:

Yeah.

Casey Seymour:

Okay, well I probably have that then.

Shawn Hackett:

It's the Zoomicon.

Casey Seymour:

Yeah, I'll look forward to getting my COVID test to see if that works or not. All right. Well, a lot of crazy stuff overnight. Yesterday, especially. We've talked about volatility here since this Ukraine/Russia thing happened. Man, I tell you what yesterday was no lack of volatility. Especially when you start looking at hard red winter wheat. I think by my just brief looking at what happened and seeing my alerts, there's about a .75 swing, I think? From the low to the high yesterday. Just all over the place. Like we talked about when we got started here, that every little news item's popping up is driving those prices around.

Shawn Hackett:

Yeah, the history is that when you get these shocks, stories or these events like this, they tend to place atop for a while. Meaning you pump up the bullish sentiment so extreme, "We're not going to have any supply to the Ukraine." "They're never going to grow any more wheat ever again."

Casey Seymour:

Right.

Shawn Hackett:

You trade that sentiment. I don't know what the long term implications are, by the way. I'm just saying that when you trade that fear, Casey, put a top in for a while. You can look on a map over the years of tops and bottoms and they tend to be event driven. The virus in 2020, printing below in commodities and a lot of ag markets.

Shawn Hackett:

So it just seems to me that this kind of gyration, wheat prices are very, very high right now. No one knows how this is going to turn out. But most likely it's going to turn out better than the Armageddon-ish fear that was originally traded in the wheat market. At least it's going to appear to get better for a little while. That means that I just, I think in general, grains are going to be under correction here into April. We have a Planting Intention report coming out. Cannot imagine they're not going to say, we're going to plant more acres in just about everything.

Shawn Hackett:

South American weather's been fair-ish all along. Meaning the market is ignored. The good rains in Argentina, they ignored. The good growing conditions in Mato Grosso for second crop corn. But now all of a sudden, I'm starting to hear people talking about, "Boy, the weather's been pretty good down there!"

Shawn Hackett:

So once again, it's just really hard to see how we're not going to have a correction here in grain markets heading into April. By the way, a traditional time to be bearish.

Casey Seymour:

Right.

Shawn Hackett:

Oh, we have a record crop. It's going to be the biggest crop we've ever had of all time. We always start the season optimistically, that we're just going have the best crop ever. Maybe we will this year. I'm just saying that you look at crude oil, $130 down to $95.

Casey Seymour:

Right.

Shawn Hackett:

It's just, the market is having a post-Russian invasion hangover. Quite frankly, we're kind of in a mini crash in commodities right now.

Casey Seymour:

Right.

Shawn Hackett:

Across the board today, it's red everywhere.

Casey Seymour:

Right.

Shawn Hackett:

So just be careful, if you're a farmer and you haven't sold yet, why not? Why haven't you made some sales yet? What are you waiting for? We talked about this, I think at least the last couple of programs on your show, what are you waiting for? Don't take risk with cash on the farm, take risk on paper. That has been a big policy shift for us in that, sure! Can we have $10 corn if we have a weather problem? Can we have $12 corn? We could, but I'd rather speculate on that on paper, not my cash grain at this point.

Casey Seymour:

Right. That's a good point. There's a lot of opportunities for folks to sell some almost $8 wheat and a lot of... Depending on what basis contract looks like and those kind of things, there's some real opportunities there for guys to get really close to that $8 mark on corn. You're looking at $11.50 to $11 for sure on wheat and those kind of thing. So its just, there was some really, really, really good opportunities to be very profitable. So it goes back to that marketing plan and what you're doing there.

Casey Seymour:

As you take a look at what's going on, so you hit on Brazil right now. So Brazil, it really had a good bounce back from where it was. When you start looking at moisture and those kind of things. They're off to a good start for the second crop corn and what that looks like. So your thoughts there leading into our planting season?

Shawn Hackett:

We put a podcast out yesterday for our subscribers Casey. We went over why we think we're going to have a better finish for South America than last year. Most of the consensus are saying, "Droughts going to continue there." Because La Nina's still there. They're just repeating what happened last year. But no two years are the same. This is a second year La Nina, that is rapidly dissipating. What we highlighted yesterday, is that the eastern central Pacific sea surface temperatures have warmed dramatically! In fact, we're almost in El Nino territory in the eastern central Pacific.

Shawn Hackett:

La Nina's don't die from the center. They die from the east warming going west. So this dramatic, dramatic! Change in the eastern central Pacific sea surface temperatures is telling you that La Nina's on thin ice. That it's rapidly depleting. That it's going to rapidly go away. The solar cycle already tells us it can't last past spring. That actually, while it's still in place, while we still have cooler than normal sea surface temperatures in the central Pacific, it's a La Nina Modoki now.

Shawn Hackett:

La Nina Modoki now changes the La Nina impact in South America. Where now you're having what they call a, "Double-barreled Walker cycle", where the cold air sinks in the center, then the cold air goes to the west and to the east pumping moisture. Now providing more rain chances into South America. And it's actually going to provide more moisture potential for the US as well. So that is something that is a big change. We're not going to see this repeat drought cycle like we had been predicting last year, this year. We don't think this is the year that's going to emulate that. In fact, we actually think we're going to have a strong finish and that's going to continue to put some pressure on grain markets.

Shawn Hackett:

As you know, we price such a bullish trade on the historic drought in Southern Brazil and the soybeans. We were trading what we thought was going to be an historic drought in Argentina. It looks to us like Argentina is going to be much better than that. We're going to have a very good second crop corn crop, especially from last year. So all of these factors have been ignored. But the more we move away from the Russian invasion, the more that ultimately, weather trumps all else.

Casey Seymour:

Yep. One of the things I've been paying attention to quite a bit here, is what China's been doing this whole timeframe. They're really playing both sides if you really look at... Russia's reaching out to them for help economically and militarily for the Ukraine thing. We're sitting, talking with them as well. As you look at that, what's your reaction to that?

Shawn Hackett:

I don't think China trusts us. I don't think China trusts Russia. I don't think we trust China. I don't think Russia trusts us. I don't think Russia trusts China. But what I do think is, we don't want to be an aggressor in Ukraine. Because we believe, I think we believe that Putin's going to fire nuclear weapons. I think that the US is convinced he will do that if we do something aggressive. We don't want that.

Casey Seymour:

Okay.

Kim Schmidt:

We'll get back to Casey and Shawn in a moment. But first I wanted to pause to thank our sponsor, AgriSolutions. To learn more, visit agrisolutionscorp.com. Now back to Casey and Shawn, as they continue their discussion and shift their focus a little to China.

Shawn Hackett:

I believe that the Chinese believe that they can't get from Russia all the food that they need. I don't think they can get all of the oil that they need, energy that they need. They need us and other players to be involved. So I think it's in their best interest to be as friendly as possible with Russia and as friendly as possible with us to keep the flow of supplies going to them. But not be so friendly that you alienate the other against the other.

Kim Schmidt:

Right.

Shawn Hackett:

It's really a heck of a chess match. I view it as... What's that movie? Reservoir Dogs [crosstalk 00:10:10]

Kim Schmidt:

Oh, yeah [crosstalk 00:10:11]

Shawn Hackett:

The scene in the movie where you have everyone has a gun pointed each other.

Kim Schmidt:

Right.

Shawn Hackett:

All it takes a one person to... I think that's where we're at. As long as everyone is loaded, but hasn't pulled the trigger, we're all going to try to work together. We just hope someone doesn't pull that trigger and begin a cascade of events.

Kim Schmidt:

Yeah.

Shawn Hackett:

This is what we're dealing with. I think China plays... Right now, China... I think we're viewing China as... Look, right now, we're trying to also avoid China going into Taiwan [inaudible 00:10:45]

Kim Schmidt:

Right.

Shawn Hackett:

I don't think the United States is prepared for a major military conflict at this moment in time. We just pulled out of Afghanistan. The country's will for a war is not in place. We've had a lot of problems with our military with these vaccine mandates and losing a lot of people. I'm not saying it's right or wrong or indifferent. I'm just saying there's been a lot of issues. Our military, in my view is been weakened considerably due to the virus and everything else. And as such, I just don't think right now that we are up for...

Shawn Hackett:

And by the way, we just spent $10 trillion.

Kim Schmidt:

Right.

Shawn Hackett:

The country just spent $10 trillion to try to get ourselves out of this COVID mess that we got ourselves into, in terms of the lockdowns and everything else. So a war is very expensive. Very expensive! If you're going to go into a full blown on the ground war, tanks and guns and bombs. I don't think the appetite is there in an election year, spend $1 trillion more dollars on a war.

Casey Seymour:

Yeah.

Shawn Hackett:

So, when I look at those... By the way, this is just me thinking as anyone would think. You have your own thoughts. But I don't think we will have any interest in trying to escalate this to a war. Which, I think we're trying to do everything we can to not do it.

Casey Seymour:

Right.

Shawn Hackett:

So that's why China's playing a role. Because I think we feel they are friendlier to Russia than we are. Maybe they can work out some truce where we take our fingers off the gun barrel for a little while. A cease fire, whatever you want to call it. But some impasse that kicks the can down the road until maybe we can figure out how to move forward from this. But, right now we're trying to deescalate emotions, which have been running high.

Casey Seymour:

Yeah.

Shawn Hackett:

As You know.

Casey Seymour:

They absolutely have been. It's interesting to watch the articles. You read these articles and all these different things and you don't know, you can't really make hide or hair of what's being said there. Because you don't know the influence behind it. But if China wanted to be an influencer in the world, they're getting their opportunity right now.

Casey Seymour:

All right, let's jump down and talk about what's going on over in the protein complex. If you take a look at what's happening with pork, looks like the USDA has just approved faster line speeds at three different plants. So that's going to help get more stuff pushed through. Your thoughts there and how that's going to affect the overall hog market?

Shawn Hackett:

Remember, do you hear anything more about the virus?

Casey Seymour:

No, I haven't.

Shawn Hackett:

Have you heard Fauci speak lately?

Casey Seymour:

No, I have not. No.

Shawn Hackett:

So somehow, the narrative is now changed from, the virus is the number one issue that we need to take care of. To now the Ukraine war is. So now things that should have been done maybe earlier than this, in terms of opening up our logistical system. Doing some things like you just said, "Speeding up production lines", and such, are now starting to happen. It's a positive thing it's too bad it took a Russian altercation to allow for that to happen.But I do think we're going to start making some changes in how we go about things. Because we do need to get our act together as you I'm sure are aware of Casey, in terms of our logistical food delivery system. Allow for a more efficient system to start to reinvigorate again.

Shawn Hackett:

So right now the livestock sector is involved in a, what came first, the chicken or the egg? What's worse demand destruction potential that everyone's worried about? Or the lack of supply that everyone's worried about? So it's a true battle between supply and demand. Right now the market has been more worried about demand problems and that's why they've been hitting the hog market and hitting the cattle market.Although cattle had a very strong rally yesterday for the first time in a while.

Shawn Hackett:

We believe, I believe ultimately the supply constrain issues, Casey, will outweigh the demand destructive worries in the end. That means, I believe we're going to have higher cattle and hog prices as we move into the summer and to the fall. Ultimately I believe that will win out. But it's going to be a little bit of a battle here over the spring until we alleviate some of these demand side fears. We have a Fed meeting coming out tomorrow. Everyone is speculating. What are they going to say? What are they going to do? A lot of fear out there. But I do believe ultimately the animal prices are going to move higher.

Casey Seymour:

Right. Okay. Right on. Yeah, you're seeing that right now, too, especially with the price of oil coming down. You saw some reaction the other day, well, the last couple days in the beef marketplace. Talk about that a little bit, what do you see happening there?

Shawn Hackett:

Well look, energy impacts everybody!

Casey Seymour:

Right.

Shawn Hackett:

Everybody! Everybody is impacted by energy prices in some shape, way or form. So when you jack up energy prices to the extent that we did in a very short period of time, that's a shock. It's called demand shock, to the system, a price shock. When you do the same thing to a wheat price, which is one of the top two ag food items in the world that are consumed by people to feed their families and survive. It is a pull back factor. It takes everyone to reassess their budgets and say, we're going to take that budget and we're going to bring it down. We're going to buy less clothes. We're going to not go on vacation this year. We're not going to go on that drive across the country we were expecting to do. But we are going to feed our families. Right?

Casey Seymour:

Mm-hmm (affirmative).

Shawn Hackett:

We are going to find a way to keep that budget available for the food that we can afford. Beef is a high priced item. It doesn't mean they won't eat it. But they'll eat less of the higher end stuff and they'll eat more of the hamburger stuff that's cheaper. But it definitely... They may go out to the steakhouse maybe a little bit less. So, all that is what the fear part of it, Casey, is all about. Why, when you looked at the energy price, takeoff, the cattle price just crashed. Then all of a sudden we get this crash in the energy price, now we had this almost limit up day yesterday in the cattle market. So yeah, it's very, very important.

Shawn Hackett:

The hog market, not as important, meaning the pork price is not as high priced item. It still matters, just not as much. But even that has been impacted and gone through somewhat of a rope-a-dope based upon the worry that people are going to withdraw from eating as much meat protein. So yeah, the energy prices are very important. I hope they stay down under $100. I think under $100 we can make things work. You get up to $130, $150, $200, that many were talking about, that's not going to work.

Casey Seymour:

Right.

Shawn Hackett:

That's not going to Work.

Casey Seymour:

Yep. All right, Shawn. Hey, good stuff as usual. Folks want to reach out to you and get more information about what you're doing at Hackett Financial, what's the best way to do that?

Shawn Hackett:

Our website is Hackett, H-A-C-K-E-T-T advisors.com. We have a lot of information on there about our weather algorithm. Our smart money algorithm. How we go about forecasting markets to see if what we do might be of value to your listeners.

Casey Seymour:

Right on. Well Shawn, appreciate you being on the podcast, man.

Shawn Hackett:

Thanks, Casey. It's a crazy time to be talking ag, but I think we're going to be busy all year long, trying to figure out exactly how this is all going to play out.

Casey Seymour:

Yep, I agree. I am Casey Seymour with Moving Iron podcast. Make sure you check me out on Facebook, Twitter and Instagram. Also, I have a LinkedIn page as well, so check that out. Go to movingironllc.com for everything Moving Iron related. You can find the entire library of the Moving Iron podcasts, all the blogs I've written. As well as all the information for the upcoming Moving Iron summit in Nashville, Tennessee, that is September 6th, 7th and 8th. If you want more information about that, send me email at movingiron.summit@movingironllc.com. Send that to me and I'll get you more information or you just peruse all the speakers and whatnot that are on the website there. Shawn's going to be there. He is going to be talking about some cool stuff when it comes to switching from La Nina to El Nino and what that looks like. So that'll be a good talk. Shawn, looking forward to that.

Shawn Hackett:

Yeah, I am looking forward to it. It's a big change in the weather. We're also going to be talking about a dramatic cooling in the North Atlantic, which hasn't happened since 1962. Which also is going to be a very different weather scenario pattern when meshed with the El Nino that's coming. So a lot of changes going to be happening and kind of a weather pattern, the way really haven't seen in a very long time. Those that come to your gathering, it's going to be a pretty interesting look at this new weather pattern and what it might mean for agriculture production going forward. Not only here, but also out in Europe and Asia.

Casey Seymour:

Right on. It's going to be an interesting talk. So with that, I'm Casey Seymour with Shawn Hackett. Let's [inaudible 00:19:50] folks.

Kim Schmidt:

Thanks Casey and Shawn. And thanks to AgriSolutions for sponsoring this podcast. You can keep up on the latest industry news by registering online to receive our free newsletters. Visit www.farm-equipment.com. For Casey and Chip, as well as our entire staff here at Farm Equipment, I'm Kim Schmidt. Thanks for listening.

Sound Effects: Jahzzar - Magic Mountain