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In this episode hosts Casey Seymour of Moving Iron LLC sit down with Shawn Hackett of Hackett Financial, based in Boca Raton, Fla.

Shawn regularly joins the podcast to provide an update on the grain marketplace.

They discuss the recession pressure on the grain markets and how what is happening with cotton’s pricing is one of the leading indicators and an economic measuring stick for the other ag commodities.

They also discuss the impacts the Russian-Ukrainian conflict is having on the wheat market.

Click to watch the VIDEO REPLAY of this podcast.

Full Transcript

Kim Schmidt:
Hi, I'm Kim Schmidt, executive editor of Farm Equipment. Welcome to Farm Equipment's Used Equipment and Marketing Roadmaps podcast. In this episode, host Casey Seymour of Moving Iron LLC sits down with Shawn Hackett, of Hackett Financial, in Boca Raton, Florida. Shawn regularly joins the podcast to provide an update on the green marketplace. If this is your first time listening, you can subscribe to the podcast on any of your favorite podcast platforms.

Kim Schmidt:
Okay. Let's jump in. Here's Casey and Shawn discussing the recession pressure on the grain markets and how what's happened with the cotton pricing is one of the leading indicators and an economic measuring stick for the other ag commodities.

Casey Seymour:
Shawn is with Hackett Financial out of Boca Raton, Florida. He's nice enough to come on, talk about what's happening in the marketplace. So Shawn, how you doing this morning?

Shawn Hackett:
I'm doing really good, Casey. Enjoying the day so far.

Casey Seymour:
That's good, considering that it's, what's 8:30 there. So you, well, I guess you've been up for like eight hours, so...

Shawn Hackett:
Yeah. Half my day's already gone already, so...

Casey Seymour:
Yeah, Shawn gets up early, so you can catch the Chinese news, the Chinese news reports.

Shawn Hackett:
The first thing I go to is the Bangladesh news. It's really the first thing I go to, so I got to be up for that.

Casey Seymour:
Got to be ready. It's hot off the press, hot off the press.

Shawn Hackett:
And off the rice pad.

Casey Seymour:
It's no joke. There you go.

Casey Seymour:
All right. Recession talk is something that just can't seem to go away. Looks like they're contributing a lot of stuff to some overnight liquidation because of fears of recession and what that might look like showing up some, I guess, short positions, I guess. Probably what you're seeing out there. And looking at some longs and those kind of things that are getting shored up as well. So a lot of that stuff's going on.

Casey Seymour:
We're also heading towards the end of the month too, so that's something play there as well. But I guess Shawn, as you're looking at the grain market and this recession talk out there, how much of these movements that we're seeing? Because I mean, everyday movements are huge, man. One day they're way down and next day they're way up, and you might see end of the day, they're only up by five, but it could have been a 50 cents swing in between each start to close. So I guess. What's your thoughts there?

Shawn Hackett:
Look, when prices are high, like they are, the market is just looking for an excuse to sell. So if it's recession talk, they're going to sell because prices are high. We're not dealing with $3 corn anymore.

Casey Seymour:
Right.

Shawn Hackett:
And we're dealing with $7, $8 corn. So it doesn't take much to spook people out of these markets. When you have $120 barrel oil, doesn't take much to get people to want to sell, because they kind of feel uncomfortable owning something that's already got up so much.

Casey Seymour:
Right.

Shawn Hackett:
Obviously, with the grains we have, this is the time of the year we typically are under pressure. You know, I mean, we've been bears grains now for quite some time. We talked about how a mid, late May top, especially for corn was likely. The actual top I think was right there in mid-May for the corn market.

Shawn Hackett:
So none of this is really new. The weather so far has been okay. We had a little bit of a heat scare, but now the models are getting a little cooler into the end of the month. We have this big report out at the end of next week on the acreage and quarter grain stocks. And so, so everyone is just sort of getting themselves to a spot where they get a little more comfortable. So corrections in the late June is actually commonplace for grains and having recession talk just takes, just accelerates that sell just a little bit more, you know?

Casey Seymour:
Yep. All right. So talk recession here. And one of the leading indicators that we see out there, that is a economic driver, or an economic measuring stick, I guess, is what's happened with cotton. Cotton right now is still hovering around that $1.40 a pound area. It's down a little bit today. You've seen some pressure here and there, but I mean really, the response that we're seeing from that, obviously, is it's down 18 cents from its high back at the end of May.

Casey Seymour:
But as you look and kind of go through the cycle of cotton right now, obviously we're going to wait to see what happens with harvest, because we do have a shortage of cotton out there. But I guess as you take a look at cotton, what are your thoughts there?

Shawn Hackett:
Well, we'll be talking about this for months now. The demand for cotton's going to be down. We had a demand that was coming from China for stockpiling non-child labor cotton, but they've stockpiled it. They've bought it. And now if the end user demand isn't there, they're going to have to work through it.

Shawn Hackett:
And our price for the first time in long while has started trading at a premium to the Chinese price, which is a perfect setup for saying that they bought what they needed and are going to back off. We're getting rains in West Texas, which was one of the big concerns out there. So the crop size is starting to look bigger right now, based upon that moisture coming in. So with all of that, and a $1:20, a $1:30 December cotton price is extremely attractive and high.

Shawn Hackett:
So this is what's going on there. And it makes sense that it should go on. Now obviously, crop's not been made, still a lot for the growing season to still go. We still have to get through a hurricane season. So, I don't think grains or cotton, this is the terminal decline, but it's the first shot across the bow, Casey, that supply and demand may be shifting towards more supply and less demand, versus what we've been dealing with for almost two years now, which was too much demand and not enough supply.

Shawn Hackett:
So we're getting the first show across the bat that we're beginning to shift gears, and if our weather forecast is correct beyond a weather skate here in early July, that we're going to have good crops this year, these won't be the lows. We'll see lower prices later on in the summer when the crop is made and the market has determined that crops are going to be good. So...

Casey Seymour:
Right. So with all the turbulence that we're seeing over, on the outside markets, we get a lot of pressure, you know, Jerome Powell yesterday, Fed Chairman, was on Capitol Hill getting grilled by the Senate and about asking dumb questions that they should know the answers to. But you would think all the pressure that you saw there, do you see a lot of spillover? Are the outside markets coming in and putting money into the markets right now? Or is it just kind of so much uncertainty right now that just no one knows to do with what?

Shawn Hackett:
Well, when the Fed comes out and says, "We are going to raise rates until inflation comes down, and we don't care if the economy goes in a recession," which is essentially what he said.

Casey Seymour:
He did say that. Yeah.

Shawn Hackett:
He might have said it more nicely than that, but that's what he said.

Casey Seymour:
Right.

Shawn Hackett:
You know, that's a scary...we don't see the Feds say that very often. Right? So to the extent that you have short term hot money that gets spooked by that, they come in immediately want to sell.

Shawn Hackett:
Having said that, if the goal is to raise rates and until inflation comes down, well, price is starting to come down. Lumber is down from $1600 to $500 something.

Casey Seymour:
Yeah.

Shawn Hackett:
Copper is down from almost $5 to under $4. Crude oil is down from $120 to $100. So we're starting to see a lot of prices starting to fall. Well, you know, that may mean that we're getting near the end of what they need to do, if that's the reason they're doing it. If they start to see inflation coming down and we start to see better inflation numbers and then months ahead, then, then that could be a bullish sign that they've done what they needed to do. They've been aggressive enough, and they may take a step back.

Shawn Hackett:
Obviously, we're not quite there yet to see those big inflation numbers coming down. But I think within the next couple of months, we're going to get the first big number that's going to say inflation was way down from what it was the month before. And I think once that happens, that people are getting comfortable, that we're coming down the inflation mountain, a lot of this stagflation talk, this never ending inflation, that we're going to go in this deep recession, the Fed's going to have raise rates forever, it might start to calm down. And we might start to get a little more balance in the market.

Shawn Hackett:
And remember, when everyone is worried about something it's usually already in the market or almost always mostly in the market. So the fact that everyone now is scared to death about recession, which they should have been worried about six months ago, says we're probably near the end of the reaction to that in markets.

Shawn Hackett:
And what you need to do now is what is, what is the talk six months from now, I think it's going to be saying, "Much lower inflation than we thought. Fed on hold." That's probably much more bullish scenario than we're currently trading now. I think that's where you have to start thinking about where might be the opportunities if you are a cash buyer of lumber, if you're a cash buyer of copper, some of these very economically sensitive commodities. You should be looking for opportunities to buy physical product when there's blood in the streets, and everyone is so fearful. That's when you get your opportunity to buy on a discount, buy something cheap, something that's come off a lot.

Shawn Hackett:
So that's what I'd be thinking about right now, especially in those economically sensitive commodities, like lumber, like copper, even like cotton, if it were to come down considerably further, there's going to be an opportunity in some of these things because the market rarely lets everybody get it right. It only lets a few people get it right.

Kim Schmidt:
We'll get back to Casey and Shawn in a moment. But I wanted to take a quick moment to invite you to this year's National Strip Tillage Conference, July 28th and 29th, in Iowa city. Come learn about the growing strip tillage market and how to serve your customers who are actively investing in the practice or considering it. To learn more and to register, visit www.striptillconference.com.

Kim Schmidt:
Now back to Casey and Shawn, as they continue their conversation, moving on to a discussion about Russia and Ukrainian grain and what, if any, impact it will have on wheat supplies.

Casey Seymour:
So I've read several articles here. You know, you got the US out here, urging countries that need help with, with food and fertilizer imports out of Russia and what that looks like. The US is pleading with them, if you need help with this, please do it, because we didn't sanction these things, those kind of things. You got Turkey investigating claims that Russia stole Ukrainian grain. I don't know what there's to investigate there. There's plenty of news reports and video, and just hauling truckload after truckload after truckload of grain, out of Mariupol and those places in there. And I guess as you looked at, you talked about this earlier, Russia doesn't want to look like the bad guy, but they're sure not trying very hard to let grain come out of Ukraine. So I guess your thoughts on that.

Shawn Hackett:
Whatever the grand plan is, Russia's current image is not a concern. So they obviously have an idea of what they want to do. And who knows, I think they have a strategy beyond Ukraine, and I'm not sure what that strategy is yet, but there's something going on beyond Ukraine. Ukraine is the first move in the chess match to something bigger, whatever that bigger thing is. And China's involved.

Shawn Hackett:
It's a complicated situation, but as I try to say to everyone, I try to predict what I can, and I try to manage the risk of what I can't. So I can't predict what Russia's going to from day to day. I can't predict what the news story's going to be day to day. For example, yesterday, right? There was a news story that Russia bombed some another storage area facility or something. And then the wheat market goes up $30 or $40 on that news, and then, by the end of the day. Down I can't predict that. And so I just don't try.

Shawn Hackett:
The overriding theme, and I hate to be a broken record, but sometimes that's a good thing. I think at the end of the day, what I believe is going to drive the grain markets beyond sound bytes and these short term fluctuations, which can be severe, is the idea that we're going to have good crops in the US, and that Russia is about to harvest a record wheat crop. And they will sell their wheat. And how much wheat they sell that's not theirs, I'm sure they'll do that too. But I don't see a shortage of wheat. I don't see a shortage of wheat, at least in the next three months when we're harvesting and they're harvesting a record crop, and they're going to be selling like crazy to China and others. I don't see any shortage in wheat for the next three months.

Shawn Hackett:
Now, it doesn't mean there won't be a shortage six months from now, but we're dealing with markets pricing, and the pricing of markets and what farmers should be doing and who should be selling and who should be buying. Right now, I don't see any supply problem, unless the US were to get into trouble. And I don't see that outside of a weather scare, not a actual crop problem. So I think that the onus is that we're heading down, on a down trending market here in grains and in cotton, into the harvest lows.

Shawn Hackett:
Is there going to be some volatility upside? Yes. And I do believe we could have a weather scare in the first half of July that would give us one of those upward volatility opportunities for farmers to get some sales made on a typical...going over the growing season. But the big picture is, I think we're going to find our way down into some kind of an early harvest low. And then when we get there, then we have to take another look about what the long term supply/demand equation looks like. But for no I think the trend is down and I think that's going to be the trend, at least until we get far enough into the end of the growing cycle to where the market prices is all in.

Casey Seymour:
Right on. Okay. Yeah. It's a very weird scenario. Because there for a while Russia was thinking like they had the idea that, we'll get this grain out of Ukraine, let everybody do the thing. And that that lasted for about three days. And then they went a different direction totally.

Casey Seymour:
So interesting story to watch and see how that develops moving forward, because getting ships in and out of there, I don't know. I mean, it's just, that's a whole thing right now, so...

Shawn Hackett:
Well, ensuring the ships, who's going to captain it. Who's going to ensure safe travel.

Casey Seymour:
Right?

Shawn Hackett:
Who's going to going to load the ships?

Casey Seymour:
Yeah.

Shawn Hackett:
I'm not even know if they're sitting there. I don't know

Casey Seymour:
A lot of moving parts there.

Shawn Hackett:
A lot of moving parts. And you need to have everyone cooperate. What could go wrong? What could go wrong? I don't know. I'm not sure we're at the point where everyone's really ready to get along just quite yet. I don't think we're quite there yet.

Casey Seymour:
Yeah.

Shawn Hackett:
I hope we are, but I don't think so.

Casey Seymour:
All right. Let's talk a little bit on the proteins here for just a little bit. Obviously. This is a big time of the year for barbecuing and those kind of things. So beef demand is going to be high. Pork demand is going to be high as you take a look what's going on there. And then you got the stuff that's happening in Kansas with these cattle kills that they've seen come through. A lot of heat stress on cows out there. So the rate of gain is slowing down, I guess. As you look at that whole picture, Shawn, what are your thoughts there?

Shawn Hackett:
We're in the battle between recession, like you said, at the beginning of your show, which never, never makes people feel comfortable owning the meats, because when you look at your budget, meats tend to be a higher priced item than buying popcorn, for example. So that always brings some sellers into the pits at times. But at the same time, we do have that visceral American tradition of going out in a nice warm sun and grilling a lot of meat. And even in the year where energy prices are high, and maybe people aren't going to be maybe driving as much as they did, that means maybe they're going to even do more of that, staying local and doing things locally with that sort of thing.

Shawn Hackett:
So overall, I think at least in the cattle business, I think the supplies are going to be so low going forward that even with potentially weaker demand later in the year from a lower economy, I think there's going to be plenty of demand to provide a shortage.

Shawn Hackett:
In the pork, I'm not so sure. We have to get exports, because we produce too much domestically. We don't have enough domestic demand like we do in beef to sop it all up. We were selling a bunch to Mexico. That slowed down and the Chinese are not ready to buy yet. And so we kind of in this zone where demand domestically is good, but, but you have to have those big exports. And I just worry a little bit about the hog market, struggling here, finding some of that export demand it needs to get rid of this excess supply.

Shawn Hackett:
Where as, the cattle business doesn't really need those exports. It's more additive. In fact, the exports for beef have been surprisingly strong, surprisingly strong. So I guess I'm kind of constructive, but I'm more, much more constructive on the cattle market.

Shawn Hackett:
I'm going to be much more constructive on the hog market in the fall going forward. Because I think that's where China needs to come in and restock, because their hog prices is now rising. I believe they had liquidation from the second round of ASF is over. And I think that as they slowly reopen, as I believe they will by the fall, they're going to need to buy some pork from the US. And I think that would be more dynamic or interesting time to look for big purchase from trying to re-excite the hog market. In the meantime, it could be kind of a big volatile trading range until we get there, for hogs

Casey Seymour:
Right on. Well, good stuff as usual, Shawn. Folks want to reach out to you and get more information about what you're going 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. Lots of information in our weather cycles, our capital flow cycles, to let people know what we do and see if we could be of service to your listeners.

Casey Seymour:
Right on. And speaking of weather cycle, Shawn, and I are going to do a special podcast, kind of an update on the weather cycles and natural climate changes that Shawn's talked about quite in extensively here on the podcast. That's been probably six months or so since we've really done one of those. And as we head through this, this el niño to el niño change and how that flows into this fall and what that looks like, this is one of those impactful moments that you've talked about quite a bit, moving into that September, October timeframe.

Shawn Hackett:
We're also going to talk a little longer term, because pretty important event. We talked about this in our podcast yesterday that we sent out to our subscribers, about something called the gleissberg cycle. Don't want to spend a whole time going over exactly what that is, other than there tends that it's an 85 to 90 year cycle that has historically been associated with one in 100 year Midwest droughts.

Shawn Hackett:
The last time that cycle came into play was 1934, 1935. And now the next cycle's coming into 2024, 2025. So, there's a pretty interesting cycle that says we could be entering one of these rare drought cycles that you see one shot out of 100, you get one of these really nasty ones. And we'll go over what the cycle is, what's the basis behind it, what the history is behind it and why this period coming up for el niño, that's going to be bearish for grains into next year. Could be a tremendous opportunity for livestock producers to load up on cheap feed ahead of what could be a wild kind of a situation with weather.

Shawn Hackett:
And so, that and more. But I think those that have an interest in long term weather patterns and what it may mean might find this discussion about the gleissberg cycle pretty interesting. So...

Casey Seymour:
All right, I'm looking forward to that. So listen for that. We're going to record it tomorrow. Now today is Thursday, the 23rd. Hopefully, we got it recorded on the 24th, and I'll have it out this weekend for everyone to listen to. So Shawn, one more time, for the folks can reach you over at Hackett Financial.

Shawn Hackett:
That's Hackett, H-A-C-K-E-T-T, advisors, with an s, .com.

Casey Seymour:
Right on. I am Casey Seymour, with Moving Iron podcast. Make sure you check me on Facebook, Twitter, and Instagram. That's where you find the latest editions of the Moving Iron podcast. You can also find those same podcasts on LinkedIn, at Moving Iron podcast and the video version of it on YouTube.

Casey Seymour:
So if you're interested in checking that out, go see that. If you want to see everything Moving Iron related, you go to movingironllc.com, and you'll get all the latest editions of the Moving Iron podcast, blog posts, as well as all the information for the upcoming Moving Iron summit in Nashville, Tennessee, September 6th, 7th, and 8th. That's open to any dealer, new, used or otherwise, doesn't matter.Iif you want to come check that out, network with people and learn, talk about used equipment and sales processes and those kind of things, all that exciting stuff out there. If you're interested in doing that, hit me up at Moving Iron podcast and movingironpodcast.com, and I'll get you more information. Or you can just fill out the form there online, and you'll get registered, and you'll be ready to go. So looking forward to seeing everybody coming up here in September.

Casey Seymour:
So with that I'm Casey Seymour, Shawn Hackett. Let's move some iron, folks.

Kim Schmidt:
Thanks to Casey and Shawn for sharing their conversation with us. You can keep up on the latest industry news by registering online to receive our free newsletters visit www.farmdishequipment.com. For Casey and Shawn, as well as our entire staff here at Farm Equipment. I'm Kim Schmidt. Thanks for listening.

Sound Effects: Jahzzar - Magic Mountain