Beyond WEAT and CORN (COW and maybe others)

With wheat and corn futures continuing to climb and wheat prices quite possibly reaching all time highs and staying there for a while I think there may be ramifications in other sectors and businesses that rely on these raw materials for their own production. I thought I’d start a thread to collect ideas on this, if folks think the idea has merit and worth invested time into.
The first that comes to mind is the cattle/feed industry. The last time wheat prices were this high was 2008.
An excerpt from a USDA article highlighting the affect of grain and energy prices on livestock prices in 2009:

Manufacturers make decisions on the amount and timing of production based on input costs and the expected product price. Manufacturers may react to a significant increase in the price of a variable input, such as energy, by reducing production. As energy prices decline, manufacturers may respond in the short run by boosting output.

Biology, however, prevents livestock producers from instantly responding to price changes. The timeline for meat production—from farm to retail—ranges from 2 months for poultry meat to 2 years for beef. From the time a female is bred, it takes about 9 to 10 months to expand milk production, 30 months to produce a steak, 10 months for a pork roast, and 10 weeks for a chicken breast from when incentives to do so appear.

Livestock production’s varying timeframes make it difficult to change the direction of output quickly. Producers make decisions to expand or contract production before feed and product prices are known. Biological lags mean that animal products consumed today are based on production decisions made up to 2 years ago.

Record-high grain, oilseed, and energy prices between 2006 and 2008 increased the costs of producing and marketing meat and dairy products. Expecting feed and energy costs to remain high, livestock producers began to cut back on animal and dairy production. But just as producers were making their livestock-production decisions for 2009, feed prices began to decline. The dollar strengthened, which lowered exports, and worldwide economic growth began to slow.

As a result of decisions made before the end of 2008, livestock production will likely grow more slowly in 2009 and could begin to decline. Because of this, consumers can expect to pay higher prices for meat and dairy products through 2009, even as the costs of feeding and raising livestock decline.

Higher Feed, Energy Prices Shape Production Decisions

Prices paid for feed doubled from 2006 to 2008, mainly due to higher corn and soymeal prices. Corn accounts for 91 percent of feed grains used for feed, and soymeal is the principal oilseed crop product used as feed. By mid-2008, corn prices were about 140 percent above those of a year earlier. Similarly, soymeal prices reached a record $367 per ton in 2008.

Increased energy prices also affected the livestock sector in a number of ways, raising the costs of slaughtering, processing, and retailing. Beyond the slaughter plant, meat and dairy products require what is known as a “cold chain” of energy-intensive refrigeration. Margins, the difference between live animal prices and retail meat prices, are a reflection of the cost of processing the meat. To cover higher energy costs, margins must also rise.

Feed and energy costs are large components of livestock production expenses. The length of time necessary to produce meat animals governed the short-term reaction of the livestock industry to these higher input costs. Initially, livestock producers continued to feed the animals in the production queue, while eliminating their least productive animals and cutting back in less profitable areas of their operations.

I’m not sure this is an immediate play, but maybe something to monitor down the line. COW is one ETF that comes to mind immediately, but I’m sure there are others.

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As far as beef goes, I’d be surprised if cow is effected this early in, if at all. Cattle industry as a whole is not unfamiliar with issues like this or drought. Most have huge food stores and reserves and people often forget grass and hay as well, as there’s been a shift as of late for higher quality/locally farmed beef due to diet trends and shit.
With Beef prices already at ATH, the reason beef prices went up in the last year is because covid limitations forced them to scale back the size of their herds and operations to make ends meet. Which also loops back around to there not being a feed issue, there’s actually just less cattle being worked due to labor shortage and shit being shut down. So now that things are opening up that should change for the better for consumers.
Great DD, gonna follow it and keep track of the etf prices!

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https://www.reddit.com/r/wallstreetbets/comments/t56axc/missed_weat_and_corn_have_a_cow/

WSB

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Interesting. This could be a cycle repeating itself with the dollar strengthening soon and economic growth slowing down, I wouldn’t be surprised if prices started rising next year given that there’s a lag according to the excerpt. Will keep an eye out, thanks for pointing out this possibility!

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https://www.cmegroup.com/trading/price-limits.html#agricultural

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roll dates

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The one company that keeps coming up as I browse this Archer Daniel’s Midland (ADM). They seem to have their foot in just about every facet of agriculture. Anyone else have any insights?

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ADM has big representation in ETFs. See below

https://www.etf.com/stock/ADM

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Im going to shift into higher shipping costs and metals… My thought process is there will be a set of goods that will go up during ukraine russian war. Within these goods there are ones that are currently in focus and some that are out of focus. However, i would profer a commodity that will go up during escalation and descalation and out of focus. I feel like beef price can be scaled into to offset cost. But shipping ( would believe it takes long to make more ships) and even with descalation metals will still be in demand from recovery and miliirazation of the different countries.

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I like this train of thought. Just a quick google search, but average build times for these ships is 2.5 - 3 years, and many shipyards are already booked to capacity until late 2023.

Related, lead times for shipping containers are up from 6 weeks to 4 months due to supply chain issues.

Companies already able address shipping needs will be the ones to benefit, doesn’t seem like anyone is going to sneak in under the radar and steal business from the big players.

You can shuffle several different things around to more gently ramp up the price of beef (which is already high thanks to lower cattle numbers due to covid – yes feed costs more now but things are reopening and cattle numbers can be increased, which might just offset each other somewhat).

Like you said as well, steel will be in demand regardless of how Ukraine plays out. Whether its needed to build offensive equipment or for reconstruction, people will need steel.

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True dis. Keep in mind that area of Ukraine will be vulnerable for shipping for a bit.

https://apple.news/AHzNLMtiNQ4CEoamtpvsZuA

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The best advice I can offer for these companies is to look back to the 2011-2012-2013 time-frame as this was the last time grain prices were this “crazy” which was a result of the 2012 drought in the US.

Also, look at the charts on these AG ETFs at 2:30 EST for the last couple days. The grain markets on CME close at this time, so we my be seeing end-of-day adjustments at this time.

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I love metals right now. I have quite a bit of interest in Tin. This forum needs a tin dd post. I’ll start one if I get a chance. It is an absolutely critical component in chips, solar panels and everything else tech related- the glue of technology as they say.
I’m interested in shipping too, but am completely ignorant when it comes to evaluating that sector.

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Never knew about tin’s role in tech manufacturing. Looking into this now, thanks for the insight.

eta: still looking around, but I’ve only found one ETF which specializes in tin. JJT tracks tin futures like WEAT does for wheat. Unfortunately it has a 10-day average volume of <13K and the options chain has 0 OI. Might need to look at specific companies.

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I found this video on TikTok and thought it was very relevant given a lot of us are currently playing WEAT and fertilizer options.

https://vm.tiktok.com/TTPdAVE55y/

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Be very careful about ADM. They have Russia exposure. But not sure to what extent.

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VALE and FCX just broke through the psychological resistance at $20 and $50 respectively and on the same day?!? Coincidence? Perhaps not. There are driving factors stacked on top if each other for metals right now. My price of stainless from China is insane, lead time for steel buildings is 6-8 months according to Client of mine in construction. Some steel building manufacturers are trying to go back on invoices and even add steel surcharges retroactively. Russia’s steel industry will be sanctioned. Tons of metal required to build ships and containers etc. etc. I see no reason for this all not to continue.

Large positions in FCX and VALE. Open to suggestions regarding other Metals plays.

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The meat market seems to be reacting negative to the Russia invasion news not sure why.



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Thank you, I was definitely considering long calls. I’ll take a second look

I have a small position in JJT right now - I’ve been in and out a couple of times. It is quite illiquid, but it has been a steady climber with tin.
I’ve had good success with some penny stock tin miners. Alphamin (AFMJF) and MetalX (MLXEF).
They both have their risks.