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05 Jan 2023
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Stock market outlook and Tax savings strategies for 2023 with Tim Webb

With every new year, there are new opportunities, and there’s no better time to dive deeply into the stock market and tax-saving strategies for 2023 than now. In our latest episode of the Hedged Edge, we’re joined by Tim Webb, Chief Investment Officer and Managing Partner from our sister company, RCM Wealth Advisors. Tim is no stranger to advising institutions and agribusinesses where he has been implementing no-nonsense financial planning strategies and market investment disciplines to help Clients build and maintain wealth and reach financial goals since

Inside this jam-packed session, we’re taking a break from commodities, and talking about the world of equities, interest rates, tax savings, and business planning strategies. Plus, Jeff and Tim delve into a variety of topics like:

  • The current state of the markets within the wealth management industry
  • Is there a beacon of hope, or is it all doom and gloom for the markets?
  • Other strategies to think about outside of the stock market and so much more!

 

Contact Tim Webb [email protected]

Visit rcmwa.com for more information and be sure to follow them on Twitter and check them out on LinkedIn

 

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Check out the complete Transcript from this week’s podcast below:

Stock market outlook and Tax savings strategies for 2023 with Tim Webb

 

Jeff Eizenberg  00:14

Welcome to the hedge edge by RCM AG services where we’re getting out of the field and onto the mic to bring you weekly market updates, commentary from commodity experts in monthly interviews with the biggest names in agribusiness. Welcome to the hedge edge and the first episode of 2023. As always, I’m your host Jeff Eisenberg. Today we’ll be taking a break from commodities and diving into the world of equities, interest rates, as well as tax savings and business planning strategies for the new year. Our guest today is Tim Webb. Tim is a close friend of our sister company, RCM Wealth Advisors, where he’s the Chief Investment Officer and managing partner. Tim has been working as a portfolio manager and advisor to families institutions, and agri businesses, implementing no nonsense financial planning strategies, and market investment disciplines to help clients build and maintain wealth and reach financial goals since 2003. Tim, welcome to the show.

 

Tim Webb  01:25

Thanks, Jeff, for having me. Appreciate it.

 

Jeff Eizenberg  01:29

Absolutely. Hey, last time we saw each other I think it was on the golf course. And correct me if I’m wrong, but pretty sure I was standing on a green that you drove Absolutely. Over the green went over.

 

Tim Webb  01:40

Yeah, I want to be clear on that it. It carried the green.

 

Jeff Eizenberg  01:47

Oh, is that possible? So you you grew up playing baseball. I mean, some people say golf and baseball don’t mix. But from what I see, it’s a perfect match.

 

Tim Webb  01:57

Well, you know, I, I’ve always been somewhat of a big hitter, I back and forth pretty much my entire career. And initially, it did not mix, I was having the banana slices all the way into the woods and all that other stuff. And if we’re talking advice here, I’m going to give two quick driving tips, I guess the first one would be try to transfer a little bit of weight to your front foot that helped me out a ton. And then really just kind of driving down into the ball and through it. And if you’re looking for power, the one thing that I’ve realized is that I do swing hard, that’s that’s neither here nor there. But where I generate my most power is because you’re in a small confined area, is you actually have to push down into the ground and up you have to figure out how to generate a lot of power from a very short period short area, right. So you can kind of drive my feet into the ground and then come up at the at the point of impact there. So Wow.

 

Jeff Eizenberg  02:55

So you’re not not only you know, offering financial advice, you’re also operating Golf Tips. Which one did people take you up on more frequently? I guess is the question.

 

Tim Webb  03:05

Well, the only benefit in golf I can do is with my drive. My short game is horrendous. So but ya know, it’s I enjoy it. I joined the league and over the past three years, so I’ve improved markedly my golf a little bit. So I get out maybe, I think maybe, you know, I try to get in 18 holes a week if I can. Yeah, so it’s nothing nothing great. I’m I’m I’m a mid 80s shooter. So don’t other than the dry. That’s all I can impart on this conversation. Okay, well,

 

Jeff Eizenberg  03:39

I’ll put you on my scrambled team for sure. Next, next time we play, but I do well, I do. Well, it scrambles. Yeah, on percent. Great. Well, yeah. So excited to have you here today. You know, we’ve been obviously working together in parallel for a long time now. And, you know, the markets. We’re going to talk about a little bit about the markets. And you know, before we jump into that, I think it might be helpful, just for anyone listening in just to give a little bit of your background. I mean, you you started our CM malt advisors over 10 years ago with with Bobby shorts, and you know, the CEO of RCM alternatives and in ag services. What What can you tell us about this journey? I mean, 10 years ago, you know, all we had to do is stick your money in the markets and we’re looking pretty good. 10 years later, but it’s different world now.

 

Tim Webb  04:28

Yeah. Well, especially in the in the overall wealth management space as a whole. So I started my career back in 2003. Started with a great regional firm, ag Edwards, and after about four years, four or five years in there, I remember going down to a meeting at their St. Louis campus with the CEO. And I won’t mention names with that but the CEO was asked and it was it was like around 2007 I guess right around there. was closed for Friends with the Gallatin family who had started ag Edwards. And I remember the question was, Hey, would you ever sell this firm? And he’s, you know, quote unquote, Over my dead body? Would I ever sell this firm? 11 days later he sold the firm. Right? So. So from there, you know, it went to, I think it was y cobia. At the time. I can’t remember offhand. I didn’t necessarily want to stay with with that firm. So I ended up transferring over to Smith Barney at the time, then you hit kind of the the 2008 financial crisis. Citibank broke the buck. Smith, Barney was kind of their crown jewel of, you know, assets for the bank at that point. It was, it was at that point, it seemed as if we were gonna be buying some other groups. I remember calling some of my friends on the street, like, oh, they were calling me. I said, I hear we’re buying you there. I got we here we’re buying you like okay. Eventually they, Morgan Stanley and Smith, Barney decided on a joint venture, which eventually turned into Morgan Stanley, long term, they were offering up some deals, I didn’t necessarily want to take any kind of deal from them. So at that point, in 2009, I opened up in independent office, went to the RIA model, right, so there was, you know, broker johrei, but it was through a local outfit. And that local outfit was eventually swallowed up by Charles Schwab. So that

 

Jeff Eizenberg  06:34

was an interesting time, because the RA model is so different than the traditional stock brokerage model, right? You’re really taking an entire look at someone’s financial plan, as opposed to what stock Can I pick? That’s going to me the next Tech tech, tech stock or something along those?

 

Tim Webb  06:51

Yeah, it totally true. And the biggest thing with that is, is really kind of becoming a fiduciary, right? So once you go to the gray model, it’s so much different than it was back when I started in 2003. When you go into the RA model, you’re sitting on the you’re sitting as a fiduciary to your clients, and you’re sitting on the same side of the table, right? You’re not making any Commission’s off of their business, you’re charging a fee for service and advice, adding value and and not necessarily pushing any product to any one person and or client, right. So the idea is what is best for that individual, that corporation, that that non for profit, that is going to help them and all those people that might be within that organization, and you push forward from that standpoint now, from an overall business, I couldn’t make that any better. Right? So, you know, there’s from the situation of having to say, Okay, well, what is best? How do we get a go the best? How do we go about getting our clients to that end goal. And that’s where the IRA model, in my opinion, the registered investment advisor model is best suited for the lion’s share of clients, and you’re starting to see even the big banks and all that stuff, trying to push their business more towards that arena.

 

Jeff Eizenberg  08:01

Yeah, listen, everybody is an expert at their business right at this stage in the game. And we want to let them stay experts at what they do and bring you in to piece together the the financial elements of it makes sense. And then also your global network, additional service providers or partnerships, allow for you to then also kind of be at the helm of some of these organizations, whether it’s a, you know, a farm, in an elevator, you know, somebody that’s touching in traditional agricultural businesses, or, you know, obviously, not inside our markets, but other types of companies and businesses that you work with elsewhere.

 

Tim Webb  08:42

It’s great point, one of the one of the main things to and where you can continue to drive value for your clients is trying to figure out ways that you can help their business in every aspect, right? So be it bringing specialty Farm Insurance to two different groups, bringing estate planning wills, getting, you know, essentially negotiating on behalf of your clients with these groups, going to different different outfits that may do those services and bringing some volume to them, so that you can bring the volume discounts back to your clientele, and say, Okay, well, here’s, here’s how, here’s what we’ve negotiated. This is, you know, these are the experts in these fields, and they’re gonna bring this to you, and it’s most likely going to be less costly than you would going out on your own right. So that that’s kind of the big thing and kind of bringing that full full suite of services to whatever client base we’re chatting with organization or otherwise, right.

 

Jeff Eizenberg  09:42

All right, well, we’ve got the elevator pitch down now. So let’s flip over to the important stuff. What is not that that doesn’t count, but people want to know and I do too. Where are we going with stocks, the stock market, and interest rates coming up here in the new year? Here we’re, you know, obviously market end of the year down terribly, almost as bad as 2008. And then you reference the 2003 period when you started. That was another terrible period. But you know, I guess the first question is, is there a beacon of hope? Or is it all doom and gloom here? What are you and your team looking at right now?

 

Tim Webb  10:21

Yeah. So you know, obviously, you know, the big in maybe you’ll have questions about this later. But the big thing that are on a lot of our client’s mind is, okay, is there a recession coming? Or I believe we already are in it. Some, some, some don’t.

 

Jeff Eizenberg  10:36

And I’ll tell you, my Costco bill, telling you we were going to be in recession, I can’t believe the prices, I’m going to hit the brakes and sending my wife to the store.

 

Tim Webb  10:44

Yeah, yeah. Inflation. That’s obviously another big situation. And, we try to inform on that as well. But yeah, with respect to is there a recession kind of looming hovering over us? The answer, in our opinion, is yes. Right. So we’re kind of projecting it out probably for the second half of 23, which is where it looks most likely. Everybody who’s been in the markets understands that this past year, was it didn’t matter what you’re in, you could have been in stocks, bonds, Bitcoin, silver, gold, you know, it seemed like everything was, you know, really tracking backward. And in a lot of ways, in a typical recession, some of those things might have worked, you know, even in the corporate bond space, or those high grade corporates or, you know, mortgage-backed should have done a little bit better than they did. So everything kind of really took it on the chin, some of the numbers, you have

 

Jeff Eizenberg  11:33

to take a pause there and make a plug for the alternative side here, you know, following CTAs, fad had a great year, you know, double digits. So let’s not forget about where there can be potential is commodity since we’re on a commodity podcast. Remember, there was there were some positive numbers out there.

 

Tim Webb  11:55

No doubt. I’ve been seeing those numbers from you guys. And they are quite impressive. I would I would definitely agree with that. Yeah, so there, I mean, yes, there’s, as you know, there’s always someplace where you can kind of look, it was just more difficult and 22. Right. There was in, you know, to put it put it lightly, I guess, to really look back, you know, because they started raising interest rates so aggressively and above expectation, wait way beyond what they were predicting, right. Like at the beginning of 22? I believe they were kind of coming out saying, Yeah, we’re going to probably do employment looks good. We’re probably going to have 325 basis point rate hikes throughout the year of 22. Well,

 

Jeff Eizenberg  12:36

exactly. It just complete change, of course.

 

Tim Webb  12:39

Yeah, they did that in one month, right. So we’ve just seen this happen fast and furious. And the other big thing that we look at, and you know, what, everyone’s there’s a lot of froth still left in the markets, right. So, you know, from a standpoint of empty money supply, right. So they’ve, there has just been because of the pandemic and everything else like that there has been a flood of money that’s been put out there, be it through different government programs, things like that different bills that have passed, but there’s been a lot of money, and that has kind of pushed through the system and still has a way of working, it has some more time that it has to work its way through the system if you will. So now, you know, moving into 23, you can see the Federal Reserve kind of saying, Okay, well, we’re, we’re looking at some of these things we’re at we did just did a 50 basis point hike, some are projecting another 75 basis points. And one thing that we’re seeing a lot of is that, you know, if 22 is any indication, I don’t necessarily think the best place to look is what the Federal Reserve is kind of touting right now. Right? Of course, and

 

Jeff Eizenberg  13:49

dead wrong. I mean, why should we believe right?

 

Tim Webb  13:52

I agree. And the worst part of it all is, is the markets are trading based off of their, what they’re saying and all that other stuff. It’s not based off of fundamentals. It’s not based off of even, you know, tracking, it’s all based on what is the Federal Reserve going to do? What are they going to say? What are they going to project out? And that’s no, that’s, that’s not a good place to be overall. And I do think in 23, that’s that that narrative starts to change a little bit, right. So eventually, the markets do tend to always go back to okay, what’s the valuation that I’m at right now? Right, where, where is where can I find future growth and, and future prospects for different companies? And once we start getting back to the fundamentals, which we do believe will happen in 23, be it in the bond markets, be it in the stock markets? We do think we get back to some normalities where we’re going off of what you know, earnings because obviously, you’re going to have compression in earnings. You know, there’s going to that’s going to trickle through. That’s probably what’s going to trigger the recession that we think is forthcoming. On top of it, you’re gonna probably see that the Federal Reserve is going to kind of keep their Put on the gas a little bit. So you get closer to more of a 5% unemployment rate, versus staying at the three-and-a-half word that it’s technically quoted at right now. Right. So, you know, so there’s gonna be some of that coming off the system, which, you know, with respect to stocks, that we don’t necessarily think that’s the best growth environment. So for some of those cloud computing companies, some of those, you know, even even some of the big aggregate tech companies, they’re facing headwinds throughout that. So, you know, our goal is kind of looking at, okay, what dividend paying stocks value based stocks are we looking at, we know, there’s going to be some volatility that comes through here, you can utilize some option work with that utilizing covered calls. And we have something we call our triple income strategy where we’re doing different things to kind of generate synthetic Nan, we want to call it synthetically generate options, premiums to kind of get some of these, these dividend paying stocks at a better price, do a covered call or call spread on it on the back, and really kind of mitigate some of that volatility that, you know, we saw throughout 22. So we think that that strategy in 23 looks to be a little bit stronger than saying, okay, everything is dip back so bad in the tech space and the growth companies that it’s gotta be a good time to buy it.

 

Jeff Eizenberg  16:21

Is really, what if I could summarize what you’re saying there, at the end of the day, hope is not a strategy, right? And you you really have a view of where where things need to go? Or are potentially going and then being tactful in how to allocate? You know, really kind of falls on your shoulders a bit, I guess, you know, a question that comes to mind is, historically, people have been successful with passive investments, versus the active type of investment strategies. And I know, you and your company that you’ve mentioned, your, your strategy, you know, have had quite a bit of success on the on the being the tactful, or, you know, active side. Maybe just talk a little bit about that. Not too not too detailed. I mean, you’re talking to commodity traders. So, you know, we understand, you know, covered calls and options, strategies, but just high level what, what are some of the more active approach? You take?

 

Tim Webb  17:22

Yeah, yeah. And speak briefly on the past stuff. Yes, over the past 10 years, with easy money. It was kind of a point and shoot situation, right? You know, it was, if there’s 500 targets out there, and you hit a few of them yet, it’s gonna it’s gonna be fine, right like that. That’s that that’s what was good under easy monetary policy, obviously, it’s gotten a lot more difficult. Now that the volatility is ticked up. And also, that has come to kind of a screeching halt from an empty money supply aspect, right. So that, that in 22, right around October is pretty much gone, too. It’s still a little bit going on, but it’s pretty, pretty slow down substantially, right. So with respect to that, you know, the way the way that we look at it for 23 going going forward, you take a passive index, you know, let’s just say the s&p 500, a lot of times people say, You know what, I’m gonna put that in there. Okay, so just based off of what I said before, that’s a market cap weighted average, right? So that the biggest companies in the world are going to have the most amount of exposure in that s&p 500 font. Right? Right. So you’re gonna own all the apples, the Google’s the Facebook’s meta, if you will, all of those, that’s going to be comprised of about 35% of your portfolio between 30 and 35% of your portfolio based on market cap weight. And, you know, you’re technically moving more towards kind of a technology based portfolio with respect to that. And in our opinion, in this upcoming year, the value base is going to be more the healthcare sector, you know, a little bit maybe, you know, financials have been hurt a little bit, but, you know, those potentially could do okay, being that we’re in a, you know, somewhat of a an abundance type of atmosphere with the Federal Reserve type of thing. So the one the one strategy that we employ is obviously, we want reoccurring dividends that have consistently increased over time that we think that are going to continue to, you know, they’re not going to get hurt too bad throughout any kind of recession, because they’re kind of their built in businesses. They’re the steady growers, if you can get four to 6% in market return, and you got a two to 4% dividend, you’re looking at a six to 8% Return overall. And sometimes you just got to take what’s given to you in that particular time. Right, you know, question

 

Jeff Eizenberg  19:36

Question comes to mind right there. So with cash rates as high as they are now three to 5% it was cash-rich companies are the ones that you’re thinking about because ultimately they’re going to earn interest on money it’s an excess cash plus potentially thrown off profit from the from the best business actual revenues. Is that something that you’re thinking about?

 

Tim Webb  19:57

Absolutely. Cash is king right? You know, that’s, that’s Always the, you know, we do what’s called discounted cash flow analysis or discounted cash flow, you know, kind of reporting on companies. So we’re always looking okay, what’s the cash look like? What’s their ability to continue to pay those dividends? What’s their growth model? Because, you know, be it with inflation still at high levels, right? There are certain capital expenditures that different companies were paying for in the past, right. wage growth was kind of moving pretty, you know, up pretty quickly, because, you know, you had easy monetary policy, and that kind of trickled down through all the, through all the ranks or so yeah, definitely cash is going to be king our opinion 2023 typically always is. But you know, those high valuation stocks, while they may be cash rich, they’re still trading in multiples that are well beyond what we think that, you know, could continue in 23. There. So it’s just more of a conservative approach, right, just just for to start off the year. It’s not that we can’t pivot it, you know, because at some point, I don’t want to be all doom and gloom on this. I do think, at some point, there’s going to be a great buying opportunity, both in bonds, because those have retracted so much. And even in those growth stocks. I mean, I just I think the market is waiting, somewhat for an all clear sign. But I want to put that in perspective as well. Right. So we’ve just gone through 12 months of the market, you know, starting in January, the market just started tanking and 22 going down, going down. I’ve had a couple of pockets. We had about nine or 10 situations where the market tried to rally and failed throughout 2022. We do think that tends to continue into 23. A little bit. And but with that said, if we do go into recession, markets will be trying to get out don’t they’ll be the first things to recover, right? So typically, recessions lasts anywhere from two to 18 months as a whole. Right? That includes 2008 and blues back for the past 50 years. So, you know, we’re 12 months into kind of a retracement in, in equities. And we do think that, you know, I don’t think we’re gonna hit the long end of that 18 months, but I think for the first couple of quarters, I think it makes sense to play it safe. dividend payers, things like that. The other thing is I have not this is something that we’ve been doing, we’ve been kind of doing a laddered CD strategy. I haven’t bought CDs for DVDs.

 

Jeff Eizenberg  22:21

I mean, are you talking about the ones that we listened to on our old disk man? Or what does it say?

 

Tim Webb  22:29

Well, it just, you know, the appetite for risk right now is very, very low is what I would say with the base that we deal with, right? So that’s also if you look at it from the contrarian standpoint, too, that’s also an opportunity like you, you may want when things get it’s that old Warren Buffett, you know, saying is, you know, be greedy when others others are fearful, we’re starting to hit some peak fearful levels right now, which, from our standpoint, we look at that as an indicator of good times ahead a little bit, right. So when we come out of these, these types of recessions, you have the largest you have, you can look back, and you’re going to be looking at 45 to 50% returns, potentially out of these recessions and and not too short time after that. And stocks will typically run six to 12 months ahead of that recession actually being over, right. So I don’t want to get too fine with with the strategy saying, Okay, you got to do this. And you got to wait until you get an all clear sign. That might not be the case, right. So it’s a situation of we know where we’re at, we’re about 12 months into this retracement, we know potentially could last 18 months but went a little bit longer. Okay. Historically, now we’re passing some levels, we had a pandemic, that was pretty large and had a quite a bit of an effect. We’ve had easy monetary policy that they’re pulling back. Oh, and by the way, we got $32 trillion in debt at the government level.

 

Jeff Eizenberg  23:51

Let’s not forget about that. Oh, another 1.7 here at the end of the year, whatever the number is. Yeah,

 

Tim Webb  23:56

I saw it. I think that’ll probably pass but we’ll see. So yeah, and it’s just one of those things where it’s, it’s, you know, you want to play it safe a little bit. But as I was saying, with the laddering of the CDs, we’ve been doing that, but we’re doing short term, right? So you’re able to get, you know, on one month, you’re getting 4% type returns 4.2%. Now, it’s annualized, right? So but we’re kind of laddering that so that we’re doing it month by month on that. And then as the interest rates are being risen, sometimes the CDs rates are raised, rising and kind, but we also want that liquidity available to us so that if the markets do turn, we don’t think they’re going to turn on a dime. But we do want to have some availability with some of the capital to then be able to put that to work for our long term strategy, right? In these situations, what we’re going through right now, you have to you got to kind of battle in the short term, find your pockets get in there. And then you know, at some point, we want to get back to a long term strategy because we do believe more Kids are going to do fine over a long period of time. Historically, they always have, you know?

 

Jeff Eizenberg  25:10

Yeah, I can completely appreciate the long term view. And I think that kind of leads into the next section here, which is kind of transitioning away from what markets are doing, or doing or anticipated doing to, you know, really building a business, long term business, and the planning and structure around that, I think is super important. And, you know, making money in stock in the stock market, or in equities or bonds is one thing. But the other side is also extremely important. How about saving money in taxes or, you know, preparing your infrastructure and your business, to be able to pass it on to either, you know, other employees through employee benefit programs, Aesop’s other things like that, or succession planning, if you’re a small business, small farm, or even just a small business passing things along those ways. So if you could just maybe shift over a little bit, Tim, and I mean, there are many other strategies that people should be thinking about that outside of just where do I, you know, what stock? Do I buy? What, you know? How high is the stock market?

 

Tim Webb  26:18

Gonna go from here? Yeah, yeah, good point. So, you know, from a tax planning standpoint, you know, for our clients, businesses, organizations, farmers, we, that is something that we concentrate pretty heavily on. So we’re fair, you know, the corporate benefit space is something that we’re in and we look at it very heavily, and we bring that to our business owners as a great benefit

 

Jeff Eizenberg  26:38

large or small businesses are absolutely,

 

Tim Webb  26:41

yeah, it could be individual, individual owner only type 401 K’s right. And they didn’t realize that they could potentially get, you know, $67,000 off of their taxable wages, by setting something up for themselves themselves and their wife, whatever, your wife and husband opposite way. So just it’s one of those things that we really try to help from a financial planning standpoint. So we’re talking about market strategy, things like that. This is more under the financial planning wealth management portion of of our business. So in the corporate plan space, and or even just retirement space, right. As I mentioned, just previously, we’re $32 trillion in debt, what does that tell us? Right? It tells us at some point, tax rates are going to have to go up quite a bit to pay down our debt. So what do we do? Do we just sit here and wait for those rates to go up and continue doing what we’re doing? Or do we take advantage of some of those government, or, you know, the IRS places that allows us to put money away into a tax deferred vehicle, or an after tax deferred vehicle, ie what the Roth portion of things, and take advantage of what we can while we can build those balances up? So that in the future, because we all know, they’re kind of kicking this can down the road, at some point, you know, it’ll come home to roost, right, there’s gonna be a situation, what we try to plan for is we don’t want that situation to happen, right, as you’re going into retirement, and then oh, by the way, tax rates had just moved up, 10%, you’re gonna have to work another two years, even though you didn’t necessarily plan for it, you know, from that standpoint, right. So we’re trying to prepare our investors for the the likelihood or potential that tax rates could go up in the future. And one of those ways to do it for businesses and individuals is getting the proper retirement planning piece to your business or your individual aspect in place, and be prepared for the unknown. Right. So that that’s, that’s the big takeaway I would give.

 

Jeff Eizenberg  28:41

Yeah. And I think that, you know, a lot of people end up just putting a lot of trust in their accountants to tell them exactly what to do here. And I think that the accounting community does a great job giving advice, but at the end of the day, you know, you partner with accountants to help them be more successful in advising their clients. And I think that, you know, any accountants that are listening in here? It’s, yeah, let’s let’s all work together. Because at the end of the day, if, you know, all parties are swimming in the same direction, it’s going to be a lot faster boat, right?

 

Tim Webb  29:11

Yeah. No, no doubt, a lot of times. So that’s part of that financial planning process overall, is, you know, many times, you know, and I often say like, your money is your business. Right? It’s it’s unique, right? So

 

Jeff Eizenberg  29:26

you got like Jim Cramer does isn’t that his line? Your Money, Your business or something along those lines?

 

29:32

I don’t know. I don’t steal it from him. You know, you might. Yeah,

 

Tim Webb  29:37

well, yeah. If he said it, oh, I must have heard it passing. But I’ve been saying that for years. So but it but it remains true, right? So you have to run your money like your employee, right? So you’re putting your employee out into different markets, and if they’re not being productive, then they’re a non productive employee, and you need to get rid of that employee in in some sense, right. So um, And, and that’s also a taxes, right? So what a lot of times in the financial planning process, whether you have your own account that you love working with, or if you’re looking for one we have partnered with, with different firms in that regard that have a very sound track record of working in the financial planning process. But we oftentimes will do conference calls, you got to have your own management team and run your business, right? So we work with them and their accountants to say, Okay, well, here’s what we’re looking at. It could be Roth conversions throughout time, it could be okay, here’s where we’re at from a business standpoint, we need to figure out a way to get $150,000 off of the company books, how do we do that, from a proper retirement planning standpoint, things like that. So that when you start getting that out, you’re paying less taxes year over year, and that money is now growing for you versus going reverse back to the government. That’s, that’s that where that starts to bifurcate. And you get, okay, we’re going up this way, as opposed to paying that way, right. So and then all of a sudden, you continue to build on that. And then come retirement, diversifying your tax liabilities, be it through some Roth pieces, and like cash balance plans, then you can kind of have a situation where you’ve, you’ve also done proper tax planning, all the way through your accumulation phase. And when you get into your withdrawal phase, because we always kind of talk about there’s two phases to your retirement. Right now, if you’re not retired, you’re building your business, you’re building your individual net worth, and you’re accumulating the assets that you need to build so that you can retire a lot of times, you’ll work for 3035 years. And with the advent of new medicine, and a lot of new cool kind of technology coming in from stem cell and all that other stuff, people are going to be living longer, potentially, right. And you might be working for 35 years, and then in retirement for 30 years, right. So now, you’re not making that income, how do we? How do we account for that in the future, and that’s what we, that’s where that financial planning process comes in. We basically look at it year over year, figure out how to get you to that end goal so that you don’t have to go back to work when you’re 82. You’re like, wait a minute, I didn’t, I didn’t realize I should have done that.

 

Jeff Eizenberg  32:12

Are you question? Are you going to be able to hit the ball, as long as you are at 82?

 

Tim Webb  32:17

I’m going to try? I definitely, you know, every nowadays, because I swing so hard. It’s a couple Advil before the round. And if you go after, right, maybe

 

Jeff Eizenberg  32:28

something else help as well, you know,

 

Tim Webb  32:31

hey, you know, it’s one of those things, you know, gotta get, you know, maybe, maybe it’s something to ease the pain, if,

 

Jeff Eizenberg  32:38

you know, this is it. And I think in terms of easing the pain related to retirement planning, I think that what you guys are doing is phenomenal, you know, excited to be partnered with you guys in this project adventure to, you know, get this story out and message to more of our, you know, farming and agri businesses that are out there, you know, small, medium, large, I mean, at the end of the day, particularly in agriculture, the business has grown exponentially, you know, a small country elevators, now a mid sized country elevator, a, you know, a farm that was historically, you know, had revenues, a million, or $2 million is now, you know, for six or 8 million in revenue. And, you know, there’s a lot to manage. And, you know, there’s a lot of work that needs to go into making sure that these businesses, they used to be more family run, continue to be family run, and then grow pass on, and ultimately are successful for many generations to come. And that’s why I think that, you know, this discussion is super important today, and really wanted to have you on here, Tim, so

 

Tim Webb  33:52

I’m an Indiana guy, we have a great, we got a great farming community out here and everything like that. So yeah, we’re, you know, obviously land and everything is done very well. And, you know, what we’d like to do is we like to bring those services out to them, because a lot of times, you know, there’s not many alternatives in a specific area for them, where they can take advantage of, of a different perspective or something along those lines, there may be only two shops in their entire, you know, 30 square mile radius, and they don’t want to travel out, you know, so we go out to them, we sit down and chat with them and all that stuff. So it’s, you know, just want to let people know that they have options that they can choose from, and it’s more of a holistic approach, looking at the whole, the whole piece of the puzzle for you. So,

 

Jeff Eizenberg  34:39

yeah, this has been great, Tim, really appreciate this. I think what we’ll do is catch up with you here, maybe quarterly to see what’s going on with markets and you know, touch base on any new new updates related to these planning strategies, as well and you know, other you know, we have an office out in Kansas, you got the new office there in Crown Point, Indiana, like you said, I mean right there in foreign country and continue to grow. So congratulations on the business. You know, one last thing I’d like to ask here before the end of before we wrap up is, you know, first of all, you’ve kind of already given us your market prediction, you think that market is forward looking and likely to make a turn around here at some point. I’m not going to stick number on it for you but you know, it sounds to me like that’s that’s your your one point. And then second is you know, if you had to kind of go back you’re 21 year old body right after you graduated college. And you know, you’re gonna go out you’re gonna go play in the Major Leagues. It sounds like let’s say, let’s say that didn’t work out what what extreme sport would you find yourself interested in getting after?

 

Tim Webb  35:59

I would think I you know, and I’m currently looking into it as well even at my advanced by becoming more advanced age here. Rock climbing also in an odd way boxing so my father was the US the heavyweight Bengal bot Bengal Bowl champion at Notre Dame for two years running. So, you know, that would have been extreme I guess it’s kind of a fight sport that would have been something you know, kind of on those stressful days in the markets are down, you know, you know, a little boxing would have been okay, too. But yeah, I’m currently I’m looking into some rock climbing options for myself. Not a ton out here in Indiana overall.

 

Jeff Eizenberg  36:40

Yeah, I was gonna say probably not right in the heart of rock climbing area, but can certainly I guess I know what to get you next year for Christmas. I get your boxing boxing bag or heavy bag? Yeah, yeah. For the office, you could play ping pong. And then you know, the loser after you lose to the young bucks, you have to hit the bag.

 

Tim Webb  37:01

You know, they can’t beat me just so you know. I mean, it’s as hard as they try. It’s not gonna happen. So

 

Jeff Eizenberg  37:07

Well, Tim, really appreciate you coming on the show. How do people get in touch with you? What’s the best place to reach you? Yeah.

 

Tim Webb  37:14

So we’re at obviously, you see the RSC mag services. So we are our CM Wealth Advisors. So it’s RCM w a.com. So you can check us out there. And you know, our number and everything contact information, a lot of our groups listed on there as well, not all of our strategic partners. But a lot of our interior group is listed on that. So yeah, we’re happy to help in any way that we can. Big or small to your point, it doesn’t matter to us. You know, if you have questions, it’s a no obligation. We’re here to help. If you need some help, give us a call.

 

Jeff Eizenberg  37:47

That’s perfect. Yeah. And then tie in with the services piece. We can obviously all we could talk about both sides of the market at the same time. So

 

Tim Webb  37:56

we’re gonna come on in, right. There’s more to come on that for sure.

 

Jeff Eizenberg  37:59

So yeah, we’ll keep keep everybody posted. But all right, Tim. Well, thank you so much for your time. Super, super great to see you. Next time, we’ll get another round of golf in and catch up for a game of ping pong. But thanks again and enjoy the rest of your you know that your new year coming up?

 

Tim Webb  38:20

Absolutely. Thanks for having me. Appreciate it.

 

This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.

03 Jan 2023
Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

LEONARD LUMBER REPORT: 2023 Lumber Market Outlook & Affect on Housing

2023 Lumber Market Outlook & Affect on Housing

The following report summarizes today’s lumber industry and housing. I use past data to project future scenarios. What can’t be measured is the buyer attitude, cultural norms, and trends. The data is going to paint a troubling picture while in fact the housing market has tremendous underlying strength because of the cultural shift to homeownership. There is a whole generation out there of new home buyers. Today they are just waiting for it to be affordable again. Hopefully by the end of this report we have some type of idea whether that will happen in 2023 or not.

Interest Rates:

“The Fed wants housing dead.” If you want to curb inflation you attack the largest segment of the growth wheel. Powell is laser focused on our sector. The is no reason to enter into the debate of whether it will be a “50 or 25” move. Our focus should be on the ratio of wages, home prices and rates to get a better read of trajectory. The average mortgage rate over the last 50 years is 7.76% according to mortgagerates.com. The current rate of 6.30% seems manageable. Weekly wages jumped 6.20% last year. The is the highest rise in wages since the early 1980’s. The dominant factor is home prices. The explosion of prices post covid has taken many out of the game. Home prices and the CPI tend to track well together. A cooling CPI will not necessarily cause a fall in home prices but will lead to home value erosion. It will be purely a mathematical change. The prices will be forced to relate to the marketplace. Today the math adds up to a marketplace will accept rates close to 5.5%, median home values are under $400K and wages that are consistent with inflation. Those points are closer than most think. The issue, as always, in 2023 is if the Fed overshoots. This is the key factor for housing in 2023. A stagflation model will keep demand and construction underwhelmed.

Cost of Production:

The cost to produce, from logs to transportation and also wages has gone up substantially over the past few years. What we have experienced in other commodities after their spike was a return to a level about 35% over their 30-year average. There is a strong correlation here. Those markets found costs higher after the fact. Doing the math that puts the low end of lumber prices to be near $420. Over time that number will be a feature and should be factored into your business plan. Our all-in and all-out cycles make it hard to buy value.

Starts:

Home construction is slowing with expectations of it continuing. From the forward-looking statement coming out of the builders to the reports from those who feed the home builders, things are going to get slower. If you look at the chart below the analysis shows the starts number to close in on the 1.1 mark. The defined business plans in 2023 from the home builders is fluid. It is going to be developed quarter by quarter. The structural decade plan was for a 1.4 pace. Covid accelerated that number and now it is pulling back but construction can be turned on in a short time period given many plans are already in place. In this scenario the longer the pullback the quicker the rebound.

Import/Export:

Here is a component of pricing that has never had as much an impact as it does today. The sheer number of traders in the Euro space is a factor in overall pricing today. They can drive the market. That has never been the case before. We are currently seeing how much downside pressure it is putting on the market. The question now becomes as we move into 2023 and shipment are curtailed will that boost prices? The other positive is the fact that Asia exports are off substantially. There is a lot of capital available to build in China. The increase in exports overseas will at a minimum tighten up certain markets. There are some possible green shoots for the market in this sector.

Wages/Employment/ Money:

Wage growth is currently sitting at 6%. As we try to compare that growth to years back, we must recognize that most families are dual income today so 6% is a big number. The buyer isn’t too far off affordability. There is that natural drift away from buying after such a spike, but incomes will allow home buying. It will take time to accept the higher level. Employment is the key to all this analysis. If unemployment takes off the housing market will go into a freeze mode that takes months to thaw. My analysis calls for a continued rise in unemployment but leveling off at some point in the 3rd quarter. Most will be comfortable with their employment status. And finally, with have a very large amount of excess capital out there. From infrastructure to chip building the dollar amount is enormous. That capital spending will trickle into housing.

Summary:

A drag across the bottom could be unsettling in 2023 to all who haven’t lived it. Not just in the lumber industry but in most others. There will not be an all-good signal until the cycle plays out and that won’t be for many months. That said, any signs of a turn in the market will bring in a robust buying environment that will fail. What is needed is a guarded deliberate buy program to build a value area. Inventory will become an investment not a liability. There won’t be a perfectly timed buy. It must be ongoing. There also won’t be the volatility we are used to. This will be a grind year with spikes higher. Grind is good.

The recession is the key to the 2023 housing market. Gold and silver, yes those old men investments, are showing a inclination to a heavier recession than what is projected out there. The other side is talking about copper and its positive tone indicating no recession. None of this will help our current issue of liquidity but could project the distance of the problem.

 

Happy New Year!

 

Brian Leonard

[email protected]

312-761-2636

02 Jan 2023
Agriculture, Corn, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: DECEMBER 16 – 30

Corn made gains over the last two weeks with the continued escalation of bombing in Ukraine and more dry weather in Argentina. Exports remain uninspiring as the year comes to a close. China announced they will reduce some travel restrictions while covid infections continue to cause problems and continued lockdowns. Brazil’s expected record crops could offset some of Argentina’s losses but what extent will be determined in the next 2 months. The news has been slower as we get to the end of the year but the continuation and escalation of the war along with the other factors can continue.

Via Barchart

Soybeans participated in the market rally over the last couple weeks making solid gains back over $15. The Argentinian crop is rated as just 10% good to excellent, down from 12% the previous week. Brazil’s weather has been quite favorable to their bean crop which is much larger than Argentina’s. While exports remain lackluster, once Brazil begins to harvest they will become worse. The rally into the end of the year was very welcome and the start of 2023 will set the tone into the spring.

Via Barchart

Equity Markets

The Dow has been flat the last couple weeks while the NAQDAQ and S&P 500 stocks saw losses. The continued rate hikes into 2023 along with recession fears continue to weigh on the market as investors look for answers along with some tax loss harvesting to end the year. 2022 was not a great year for the markets as a whole and 2023 will sure to hold its own surprises.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

 

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

22 Dec 2022
Podcast rcmagserv 0 comment

Populations are rising and so are food costs – can improved soil conditions save the day? With Russell Taylor of Live Earth Products

With the world population just crossing 8 Billion in November 2022, the details of what it takes to feed the world today and the question of what it will take to feed the world 30 years from now when the population is expected to approach 10 Billion is mind-blowing to many. Today’s guest, Russel Taylor, is an expert on the science behind bringing additional agriculture yield to life through soil health.

Russell Taylor is President of Live Earth Products, Inc., a premium producer of humic shale-derived products. He has spent 20 years mining, extracting, and marketing of humic acid-based products. Areas of experience include; agriculture, turf management, organic fertilizers, animal feed, and soil reclamation. His knowledge has put his company at the forefront of the soil health revolution.

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Quick Links from the episode:
For more information visit livearth.com and humictrade.org, follow @livearth on Twitter, and check out their LinkedIn.
Direct questions for Russell: [email protected]
And last but not least, don’t forget to subscribe to The Hedged Edge on your preferred platform, and follow us on Twitter @ag_rcm, LinkedIn, and Facebook.
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Check out the complete Transcript from this week’s podcast below:

Populations are rising and so are food costs – can improved soil conditions save the day? With Russell Taylor

Jeff Eizenberg  00:14

Welcome to the hedge edge by RCM Ag Services where we’re getting out of the field and onto the mic to bring you weekly market updates, commentary from commodity experts in monthly interviews with the biggest names in agribusiness. Welcome to the next episode of The Hedged Edge. As always, I’m your host, Jeff Eizenberg. With the world population just crossing 8 billion in November 2022. The details of what it takes to feed the world today, and question of what it will take to feed the world 30 years from now, when the population is expected to reach 10 billion is absolutely mind blowing. Today’s guest is an expert on the science behind bringing additional agricultural yield to life through soil health. Russell Taylor is President of Live Earth Products Inc, which is a premium producer of humic shale derived products. He spent 20 years in mining, extraction and marketing of humic acid based products. Areas of expertise for Russell include agriculture, turf management, organic fertilizers, animal feed and soil reclamation. His knowledge has put his company on the forefront of the soil health revolution. Russell, welcome to show.

 

Russell Taylor  01:42

Thanks for having me.

 

Jeff Eizenberg  01:44

All right, good deal. Well, again, we’re jumping right in here. And before we get started, everyone wants to know what’s in the background there. Why is there a pile of dirt over your left and right shoulder, what’s going on back there?

 

Russell Taylor  01:59

That’s a virtual background. It’s a picture of the mine, which I’ll cover a bit more on today’s call. It’s actually from the ancient tropical forests where we mine and it’s a picture of the deposit.

 

Jeff Eizenberg  02:10

As I believe and you’re in Utah, I looked up where you are Emery, Utah, it’s basically not too far from Moab. So if we kind of put that in perspective, you know, we all know the arches and everything out there. That’s the type of soil and ground that you’re dealing with out there. Yeah.

 

Russell Taylor  02:26

Yeah, yeah. So we’re underneath the sandstone cap. The sandstone has basically kept this ancient forest trapped for millions of years. But we’re in the middle of the Utah desert of all places.

 

Jeff Eizenberg  02:38

Yeah. And so getting into your background, you would say you grew up in the dirt. Sounds like you got involved with mining and some of this opportunity here, you know, from a young age. Is that true?

 

 

 

Russell Taylor  02:53

Yes. So my father opened the mine in the early 80s. At the time, I was nine years old. And he would be out there drilling the holes, and I’d be getting the dynamite ready.

 

Jeff Eizenberg  03:03

it’s with them, I played with them at ease and throw them in the pond and try to kill frogs. So does that count?

 

Russell Taylor  03:09

Yeah, close. But my experience felt like work. I grew up around it, you know, to be in the industry for that long. It’s hard not to learn a lot of things. After college, I’ve been working here exclusively. I’ve been with Live Earth as Vice President since 95. I’ve also been the President of the Humic Product Trade Association for 10 years. I was involved with humic long before it was cool, but that’s implying that the humic industry is gaining traction now.

 

Jeff Eizenberg  03:43

No, and I think that that’s really what we’re dealing with here today. And part of the reason why I wanted to get in touch with you is that, you know, here we are, we’re in an environment where we have rising input costs to farmers, we’ve got growing world populations, and it’s just a very timely discussion, to figure out how it is that other people or companies like yours are helping the world get ready for the next phase of real agricultural growth. And, you know, we have a lot of farmers that we work with, we work with a lot of elevators and you know, and consumers of commodities. And for them, they need to buy the products, right, or they’re producing them. And, you know, the question starts to come to mind are, what is it that can be done outside of just, you know, the traditional, you know, soil kind of background with the with the soil and then plant the seeds fertilized and go, you know, are there more things that can be done and so, bringing you on here, it sounds like you’ve been doing this since the 80s. Clearly, you have a good idea of some alternative solutions and seeing an alternative As in our background, love to kind of dive in. So yeah, share with us a little bit.

 

Russell Taylor  05:05

Right. So we’ll start from the beginning and work backwards a little bit. The deposit we mined is an ancient plant deposit. So imagine a rich tropical forest, where all that material is stacked up underneath that forest. That’s what we have. Now, why is that necessary? And the reason is, you know, you’ve usually got a soil that doesn’t have sufficient organic matter, or you’ve damaged your organic matter through cultural practices, and telogen, and a lot of other things. And so farmers are finding benefit by adding these products back. There’s been a big disconnect between fertility and soil health. And those are completely separate topics where you can add something that adds fertility to the soil, which will yield crops that can be detrimental to soil health. And soil health includes variables like structure, water conservation, and nutrient retention. And so as your soil health decreases, a lot of those other problems come to the forefront. And so, as an industry, we’re looking forward and saying, okay, what can we do? What is going to be needed in the near future, and with limited resources? As far as fertilizer, and nutrients, limited water, and also reduction in land, all these 1000s of pristine acres are to be converted into roads and houses and other things. So it’s kind of a triple witching effects, where you see a lot of things competing for the same resources. And we’re ignoring soil health. So it’s extremely problematic.

 

Jeff Eizenberg  06:44

Now, you’re, you’re talking about mining and ancient forest, I think he told me on the phone, or beforehand, here 70 million year old forest, that is essentially it was a tropical, you know, equivalent of the rain forest today. You know, mining and organic matter, don’t usually go hand in hand, right. But everything that I’ve read, and you’re telling me is that there is a large deposit of organic matter in your area, that you’re able to mine extract. And then I assume further process for delivery out to farms, other agricultural systems, whether it’s, you know, I saw you’re involved with the Rose Bowl, and some other things like that. So maybe just walk us through, I mean, how much how much matters there? And is it unlimited or what’s what’s going on? Well,

 

Russell Taylor  07:46

We’ve received 1000s of acres of mineral leases over the years. We’ve been mining for the past 30 years. So, in the grand scheme of things, we’ll be here for a while. When you talk about organic matter, you need to break it into two categories, active organic matter, which is being broken down by your microbes, and then the leftovers passive organic matter, which the microbes aren’t breaking down any further. As a farmer, you know, when you’re trying to contribute organic matter back, it’s usually in stover and corn stocks. So, you know, in a normal system in nature, those things are being returned to the soil and building up your soil organic matter. So you see the cultivation over time that farmers are slowly decreasing the organic matter. And your organic matter is your storehouse, your pantry, where you store nutrients, store water, and create room for microbes and oxygen and all those things that plant X and used to live. So by adding the product that we’re selling, which is humate, you’re kind of backstopping that process. You might not be returning those organic compounds back to the soil through the crops, but you’re actually able to add this to help build the soil organic matter through other means.

 

Jeff Eizenberg  09:07

And that’s a big deal right now with areas especially there in the West. I mean, it’s so dry, you’ve got drought conditions, you know, if you could hold on to more water, then that’s a bonus. Right?

 

Russell Taylor  09:18

Right, right. And it’s kind of a catchy thing, right? You use less because you lose less. But it’s true. You know, a lot of times, we’re seeing water loss and nutrient loss just simply happen, because there’s not enough organic matter to hold those nutrients and water into the soil profile longer. And the hard part is, we’re breeding our plants to be these racehorses, for lack of a better word. We’re building these really high power hybrid plants that have to have extreme amounts of energy to perform properly. Suddenly, soils just can’t sustain those nutrient loads and have a lot of waste. It was really easy for us to be wasteful when things were inexpensive? You know, a year and a half ago, two years ago, urea was $250 a tonne, right? Last May I think it hit $1,200 a tonne. So, I mean, look at the cost difference to the farmer and say, Wow, this is a big difference, how do we get more efficient? Because those conversations were, they weren’t being held as much because it was so cheap. So now is the time where people are looking at companies like us and saying, oh, okay, let’s talk about conserving nutrients, making those things last longer, because all of a sudden, they got expensive, and that’s hitting my bottom line in a big way.

 

Jeff Eizenberg  10:35

So okay, you know, that’s, that’s right. And we’ve got input costs have gone through the roof that Russia Ukraine, raw war has caused for increased pricing on the urea, it seems like fertilizer prices are coming back down, which is a good thing for the farm and for the inputs. But you know, supplementing it with what you’re doing now, you said you using 20 to 30 acres of the 1000s, you have access to what does it look like for you to actually harvest or extract a lot of this, this this matter? And then sell it large scale? I mean, are you are you targeting, selling the product to large seed and chemical companies as a mix in with some of their current fertilizers? Are you trying to go direct to farmers? What is the kind of the business model here to you know, help direct people down your path?

 

Russell Taylor  11:29

Sure. So we are a family business. Owned by my father, operated by myself, my brother, and we are small, right? So we work through dealers, there’s no sense for us to, as a small company we try to recreate the wheel, you know, find a local agronomist and get them hired on. So we sail through distribution through a local farmer, co-op. So in Utah, for example, if you went to Intermountain Farmers Association, you would find our products readily available through their cooperative. We sell through random cooperatives within the United States, and also through some ag dealers. So that’s where you get our product, you know, make sure you’re talking to AG dealer and getting in the process.

 

Jeff Eizenberg  12:05

If this was Shark Tank, I’d be asking you, you know, who do you have your large distribution with? And, you know, try to get you in with bear or somebody like that, right. So let’s see what we can do.

 

Russell Taylor  12:20

Yeah, we have some of the largest distributors in California, for example. Penny Newman, great company distributes our products and Penny Newman’s huge and we’re happy to be a partner with that company. Some of the areas where we have less distribution, the further you get to the east, obviously, you know, freight becomes an issue. And prices get a little more sensitive to the farmers. But we distribute nationally, internationally, we sell these products as raw materials and extracts. So what you see there behind me, that’s just a picture of the raw deposit. And we’ll just take that the Sansa layer on top glass and remove it. And just take an excavator and share it. It’s soft, brown dark material, and screen it granulate it and sell it as a raw material. We also do some extracted ingredients; we sell liquid humic acid and liquid fulvic acid. What’s interesting about this deposit, you’d mentioned, you know where we’re selling it, is it going to just ag? The answer’s no. We sell into ingredients and dietary supplements, cosmetics, animal feeds, and fertilizers. And you’re thinking, well, that’s kind of an odd thing. But this is an old plant deposit. And it’s clear full of minerals. So sometimes on the label, it says “minerals”, that’s us, because they’re using it as a background, trace mineral, got it?

 

 

Jeff Eizenberg  13:31

And now it’s started, I started to think about okay, you know, we’re talking to the beginning, that, you know, we really need to focus on soil health, for around the globe to grow and increase the amount of yield of food that we can actually make available to the world population. Are there other types of deposits like this, or areas that you and your company could target around the globe to really just replicate your business and say, you know, sub Sahara Africa or, you know, China or something along those lines.

 

Russell Taylor  14:01

You know, for a company, we’re not wanting to take over the world, only all these deposits, we actually have some friends and peers in our industry through the humic product trade association that are doing similar things. So if you’re looking for a deposit in the United States where you know, we’re not reaching, go to humictrade.org and look at the member section, you’ll see a list of members that are also our peers in the industry selling and manufacturing humic acids. Now you make deposits vary in their parent material. So, you know, 75 million years ago, we were set by tropical forest, some places had grasslands or swamps, and so or peat bogs and so what made their humic deposit was a different pair of material. So they’re all a little bit different. Some might have higher humic values or lower fulvic values. And so they will vary in what they describe as age range and decomposition. So you know, some are very immature like in Canada you got those peat bogs that are fully kind of no longer peat, but slowly transitioning into these deposits. And in the listeners minds imagine, you know, when there’s an apple turned into compost, it’s a process right you know decomposition, the same thing is occurs with this old plant material, you got an ancient forest that fell down, and then it got deposited in overtime with heat and pressure. It hasn’t turned into coal yet, but it sure broken down from what it was. So that’s kind of where it’s at is somewhere between peat moss, and cool.

 

Jeff Eizenberg  15:30

Well, I’m definitely buying a bag this year from my, from my garden here in Ohio, I’m going to need it let’s let’s, let’s move on a bit here, this, this is a super interesting step, you know, the way that, you know you guys have even started this business and grown it over the years. And the fact that you’re also involved with, you know, others that really kind of as an association and attempt to, you know, kind of share the wealth. What do you think of so so you’re kind of sitting in a unique spot that you’re talking with people all over the country, and presumably the globe? I guess what do you think agriculture success looks like if we start looking out 510 2030 years from now, thanks to soil health and opportunity.

 

Russell Taylor  16:21

There’s a lot of hope on the horizon. When I say that is, you know, conservation has become a big issue, particularly because inputs got expensive. When it got expensive, all of a sudden, people started talking about conversation, until our agricultural practices decouple from petroleum based inputs will always be beholden to the industry. And the problem is us the nitrogen industry, for example, nitrogen is made through what they call the haber bosch process, they use some type of either natural gas or in Europe, or maybe some dirty coal in China to capture nitrogen out of the air and make that nitrogen. So that’s when you see a war on these fossil fuels. And you start looking at some of the dirty players where we can impact it, and nitrogen is one of them there, we’ve got to decouple our nitrogen from these processes. So in the future, you know, some businesses will succeed significantly by either figuring out a way to produce that nitrogen without fossil fuels, or conserving the nitrogen we make, maybe that’s the only way we could make this type of nitrogen. But using technology like ours, actually taking that nitrogen and making better utilization of it. So going forward, I think we’re going to focus in on not just precision ag, because Precision Ag you know, in the past, people thought, no machines and computers and strategically plants, placing fertilizer on the soil. The problem is, if that soil health is degraded, it’s not going to hold those nutrients. You know, in some ways, fertilizers are extremely soluble. So one example is – imagine, somebody told you and me that we’re going to have to drink all of our water for the month, in one sitting from a firehose, right now, both painful and inefficient, right? There’s going to be waste and water everywhere, and you and I are going to be unhappy. That’s what we’re doing with some of these crops, we’re given them a big dose of fertilizer at the beginning of the season. And at the end of the season, they’re saying what you ran out. So when we’re mimicking nature, when we’re taking that nitrogen and attaching it to a carbon, like a humic acid, that plant gets a longer look at it. So I can give you a couple examples. We recently did some work in 2018 through 2021, with the University of Tennessee, okay. We do granular fertilizers and then liquid fertilizers. We took a side dress application, that’s where you go on corn later on the season, and you give it another dose of nitrogen in that sideways application we went with and without humic acid. Now the corn that had received extra humic acid produced almost 20 more bushels of corn than the corn that did not. Now this is a lower getting better soil. And that’s the response you would want to see. Okay, how was that corn plant able to produce more corn? And the simple answer is that plant was able to get a longer look at that nutrient for it was last volatilized or converted. That’s how nitrogen is lost it is either it goes in the air as the gas gets rinsed away in your aquifers are it’s mineralized in a way that the plant can get it. So by adding these organic acids back to current fertility programs, we’re able to assist the farmer into making a better use of some of those expensive inputs like nitrogen. And I think looking forward in the future, like you said, where do we see this? This has to occur? Because I can’t see inputs going down. Right? I can’t see the war on fossil fuels and fossil fuel use decreasing. So I think that’s the first step, I think the NRCS and some of those other agencies as far as cultural practices, no till and some of those things, they’re trying to encourage farmers to do it that’s going to continue to occur. But I think getting smart with our nutrients is going to be, particularly nitrogen is going to be some of the pivotal things we’ll see in the next 2030 years.

 

Jeff Eizenberg  20:21

I think, you know, farming has evolved, and it will continue to, especially in other areas of the world, where, you know, the people, sometimes they’re just stuck with the soil that they have. The question becomes is, is there a economies of scale for you, your business and the farmers in far out regions away from where these deposits are, for them to be able to, again, economically, bring in the right amount of additional soil or nutrients that you’re talking about, to that region? And I guess that’s, that’s a question for you. I don’t know.

 

Russell Taylor  20:58

So there is a document out there by the NRCS, that talks about soil health, and how to build soil health and how to build soil organic matter.

 

Jeff Eizenberg  21:06

Yeah, we’ll make that one available in the notes in the show notes here.

 

Russell Taylor  21:10

Sure, sure. So I’ll just summarize, you know, a couple points out that real quickly. It talks about how to change soil organic matter over time. And the ones that you’ve got to remember is, it’s like eating an elephant, you know, you’ve got to do this one bite at a time and slowly, slowly commit to doing it. Because if you start backing up the numbers, let’s say for example, you took an acre of soil, six to eight inches deep, and that’s where most of your corn would root right, and you took that acre soil six, eight inches deep, and you made a big pile, that’s going to make 2 million pounds of soil in that pile. So if we said, let’s change our soil organic matter, 1%, 1% of 2 million is 20,000 pounds of pure organic matter. So you’re going to tell a farmer look, you need to put up 20,000 pounds of stable organic matter. Now stables got the big Asterix next to it because corn stover and manure and all those things have a 10 to one conversion, when it when the soil microbes breaking down takes 10 pounds of active organic matter to make one pound of passive. So that means to get your 20,000 pounds of stable organic matter, you have to put 200,000 pounds of active organic matter. Okay, no farmers putting down 100 tonnes of anything. Exactly. That’s that when we’re talking about taking bites us at a time, you’ve got to commit to it now, what’s the upside and the benefits and if you read that document, we’ll see you know what percent change organic matter will conserve 27 to 30,000 more gallons of water per acre. All of a sudden, that makes a difference, you could fill a few swimming pools with that amount of water. If let’s say you’re dryland wheat, or dryland corn, you’re conserving 30,000 more gallons of water per acre, that’s a big deal. You know, it’s not acres and acres feet of water, but it’s enough water to maybe make a difference on a yield. So that over time plus the nutrient retention is real big reasons why you should increase soil organic matter. And that down the road is going to turn into profits. If you’re retaining nitrogen, it’s because you’re retaining the water, it’s got that water there nitrogen in it and keep preventing it from leaching away.

 

Jeff Eizenberg  23:12

So you’re you’re really if I had to put an analogy around it, you’re saying that your efforts and these efforts in general, whether it’s through you, your company, or your association, it’s more of a dial than a switch, you really have to commit to this over time, and see is to see the results.

 

Russell Taylor  23:32

Right now there is one little nuance in there and it these raw materials, like I’ve talked about behind me in bulk, or use the soil amendments. In some of the extracts, we make these products act like a biostimulant, where we see some accelerated plant growth with these solubilized some of the components, so people will actually add those extracts to the fertilizer, I call it a dealer cocktail, but they’re adding them and what we see is kind of a one plus one equals three, where the added benefit of the humic acid caused that plant to take those nutrients in quicker and allow that plant to achieve a higher genetic potential or better yield.

 

 

 

Jeff Eizenberg  24:15

Well, this has been super interesting Russell, I, you know, don’t spend much of my days thinking too much about the organic matter and soil. But today’s has been one of those days and I actually really enjoyed this opportunity to speak with you. Are there anything else that you know, that we’ve missed here that you want to make make the audience aware of before we kind of wrap up?

 

Russell Taylor  24:40

Well, you know, I try to fly the banner for the industry as much as I can about promoting as the president of the trade association. I tried to be selfless and say hey, you know that I’m trying to help everybody out. But you know, we’re a small family business. We’d like to make sure we’re promoting our name out there. And it’s small companies like myself that are there selling these products. You’re not seeing large agricultural conglomerates really getting behind this yet. And that’s primarily through what’s going on with some changes in laws, how they treat these products. And it’s a long topic, but I’ll just cover it real briefly is the way our government acts, they have got a law for pesticides. And then then the states are in charge of regulating the fertilizers. So there’s this gap in the middle where soil amendments like ours, they’re not a pesticide, they’re not a fertilizer. And so there’s just a gray area. And so there’s not been a lot of laws, rules and testing methods that have been real favorable for our industry. And that’s all in the process of changing now. So you’re going to see updated seals of approval through trade association that show, you know, this, this testing method is approved for products like ours. And consumers should just ask more about how these products are tested and get informed. And the other thing is, there’s a lot of confusion between black products. And I’ll give you one quick example from our chart. Now, biochar, it has an application. And it is nowhere near humic substances. Biochar, somebody’s burnt trash that they didn’t they want to hold in a landfill, it’s a burden on the farm. They’re trying to sell to the soil and it’s beneficial in soils that have low pH, and they’re well drained. Okay, that’s the only the only place where biochar has been shown to be beneficial in soils that have higher pH and because biochar has the lambing potential, and it also has its germinated germination inhibition. Now, those two things, you know, might be too technical agronomy, but basically, you’re putting a product down, that keeps the seed from germinating. So if you just put a crop in the ground, he put something down, it inhibits germination, that’s going to be bad. So you look at it a little bit deeper, I would encourage anybody listening to this, you know, look at the industry, look at what they’re trying to do, and learn a little bit more the difference in these products because humic substances definitely differ between biochar just because it has carbon. They’re not all the same. So let’s talk about the how this carbon is bonded and how it’s useful.

 

Jeff Eizenberg  27:26

Well, we’ve got your video on video now. So you know, when we see you on the steps of the USDA, with with a with a picketing sign telling them to pay more attention to your products, we’ll, we’ll be sure to, you know, tie that back to you.

 

Russell Taylor  27:39

Thank you. Yeah. You may see us on the Rose Bowl, we been on the Rose Bowl Stadium since 2006.

 

Jeff Eizenberg  27:46

okay, well, now that we’re talking, I’d like to go to the next game. The one that coming up here that would if you got extra tickets, I’ll be there.

 

Russell Taylor  27:52

Yeah, we’ll talk offline. I’ll hook you up.

 

Jeff Eizenberg  27:53

All right, I like that. Last question for you ask all my guests. It’s kind of a fun thing. Off topic. Since we’re talking football and sports, in your background, or in your I guess your in your favorable, previous 21 year old body? What extreme sport would you be most inclined to do try or be involved in

 

Russell Taylor  28:18

Extreme sport that I would want to be involved in? Rock climbing, you know, in my area people do a lot of bouldering. And I see the kids out there like lizards on a rock. And I think, you know, if I was younger and didn’t feel like falling off a giant rock that might be interesting to me.

 

Jeff Eizenberg  28:37

Well, seems like you’ve probably got a lot of them there around you so that maybe maybe this will inspire you to get back out there. All right, Russell, this has been great. What is the best way to get in touch with you if people have questions or want to reach out,

 

Russell Taylor  28:50

You’re always welcome to reach out through the website, livearth.com.You can also call us, we’re a small family business. I’m a certified crop advisor. I like picking up the phone talking to people. And we’re always available by phone. And that’s 800-846-2817.

 

Jeff Eizenberg  29:10

Excellent. Well, this has been a real pleasure to appreciate your time and interest here. And, you know, I was kind of risk management approach. You know, we obviously try to help as many people just stay informed with, you know, all that’s happening in agriculture. And this is obviously not anything brand new, but it is on the forefront. So appreciate the time, and maybe we’ll get a chance to hook back up again. And, you know, maybe you’re you tell us you found, you know, the Tyrannosaurus Rex skeleton in that mine or something like that.

 

Russell Taylor  29:43

Yeah, we won’t tell anybody about that. We don’t want to turn that mine into an archeological dig.

 

Jeff Eizenberg  29:48

Yeah, right. Yeah. Good idea. All right, Russell. Well, thanks for your time. I really appreciate it and we’ll be talking to you soon. Have a great holiday.

 

 

Russell Taylor  29:56

Thank you for the interview.

 

 

This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.

 

 

 

19 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: The liquidity issue in the marketplace seems to be getting worse not better

Weekly Lumber Recap 

12/18/22

Happy Holidays!!

The liquidity issue in the marketplace seems to be getting worse not better. At this point in the cycle, we should start to see a few green shoots. None were to be found last week as futures hit a new low on Friday. The outside markets are having a bigger than normal effect on our trade. Mostly due to the lack of news here. I’m confident that overall production on January 1st. will be less than the amount produced December 1st. The market seems to agree but throws in the fact that there will also be less homes starting on January 1 than started on December 1. The question becomes of how long the drifting lower will remain in place.

Look at the chart below. It has a Fibonacci measurement from the contract low during covid to the highs in 2021. Look to the left and 2019. The sideways price channel for the year was developed with an average of 1.29 starts. If that is the number, we are looking for 2023 then a sideways trade for a year could be expected. I’m not sure if that will develop but it does look like the current futures market wants to test that theory.  I’m in the camp that next year will be somewhat subdued, but at a higher level. Next week will be more of the same unless the short funds start to cover. It hasn’t shown up yet so that is even a limited wish.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

https://www.cftc.gov/dea/futures/other_lf.htm

Lumber & Wood Pulp Options

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

16 Dec 2022
Agriculture, Corn, Dow Jones, Grain, Market Commentary, Market Updates, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: DECEMBER 7 – 16

Corn had a good week making gains on mixed news across the world. The war in Ukraine has picked back up with more bombing and aggression from Russia after a “quiet” few weeks. Exports were better this week as we head into the end of the year well behind the expected pace. Weather in Brazil remains good in most areas while Argentina forecast is becoming wetter. Markets will likely remain cooled through the holidays unless there is any unexpected news (flooding rains, further escalation in Ukraine, etc.) that is not already priced in.

Via Barchart

Soybeans were relatively flat this week with a mix of up and down days. We are back up trading at the top of the range we have seen since July. Whether it fails at this level again or can move higher may require some surprise news to the market as exports were good, but the market seemed to shrug off. With South America expected to produce a record crop and those beans hitting the world market in a little over a month, finding buyers for US beans could become challenging. Like corn, news may be quiet heading into the end of the year and holidays.

Via Barchart

Equity Markets

The markets were down this week following a good amount of volatility following the Fed’s announcement of a 50-point hike in rates with comments indicating there will be more raises in the future and could be held higher for longer. CPI came in better than expected but still hot at 7.1%. While we are 2% lower than the highs, we still have a long way to go to hit the target of 2-3% which the Fed will continue to work towards.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

 

12 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: What a difference a year makes

Weekly Lumber Recap 

12/11/22

 

What a difference a year makes. This week 12 months ago saw a $170 trading range with a high of $1069. Last week we saw a $50 trading range and a high of $436. Last year the market was in a full panic. Today it is not. The reason I bring this up is that it has been one hell of a run and now we are suffering from the hangover. No one can argue that we are in full stop mode that has pushed prices to the lowest level since the covid shutdown. Is it sustainable? Probably not. Will it go lower probably. All that said, this market is going to start working itself out of this spiral lower trading. What are those indicators?

This market has sold off sharply because of two issues. The first is the drastic slowdown in construction on the horizon. The other is an industry with no appetite for inventory. The first is a known value. The estimates of a 30% reduction in building are getting announced almost daily from builders large and small. The distribution side of the industry is in for some real pain and is drastically trying to curb supply. That brings us to the other issue and that is the fact that everyone is curbing inventories. Everyone is off at least 30% of volume by now. That is a formula for the downward spiral to end. That does not indicate a turn but shows a limited downside from here. If you add in the technical read, we get the same conclusion.

The weekly outlook shows a pattern of limited downside. The futures market has traded between the moving averages and the lower band since June of 2021. Today the spread between the lower band and the averages is $100. That spread was over $300 for almost 2 years. The lower band sits at 374. The averages sit around 473. The market could take the 373 band out, but history tells us that it will recover. That band will lower but it isn’t indicating that today. This pattern also shows us how much resistance there is at the 473 level.

To sum it up the call is for a bottoming action followed by a sideway trade. Most of our headwinds are not supply and demand related anymore. They are driven by outside economic issues. This week’s Fed announcement could upset our market, but regardless we have started the process to find equilibrium. The lack of the roll has been surprising.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

https://www.cftc.gov/dea/futures/other_lf.htm

Lumber & Wood Pulp Options

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

08 Dec 2022
Agriculture, Corn, Crude Oil, Grain, Market Commentary, Market Updates, Podcast, Research, Risk Management, Soybeans, Weather, Weekly Prices rcmagserv 0 comment

AG MARKET UPDATE: NOVEMBER 18 – DECEMBER 7

December has not been good to corn as we started the month with a slide lower into the $6.40s. There has not been any major news change with a good start for corn in Brazil, China lockdowns, and the war in Ukraine continuing to hold the headlines. While weekly exports have been good but uninspiring, the weakness in the USD should help US ag exports be competitive in the coming months before the South American harvest. The humanitarian corridor has continued to work as ships leave Ukraine, but as always this is something to keep an eye on for any bad developments. Russia is expected to resume ammonia exports soon, which would help keep input costs for 2023 from getting much higher.

Via Barchart

Soybeans have seen a nice improvement with their slow march higher from the beginning of October. The EPA came out with lower-than-expected biofuel mandates sending soybean and other world veg oil prices lower while meal has taken off higher. Soybeans hit their highest price since mid-September this week with buyers coming back in the market with a weakening USD. South Americas start has been good enough to where the market expects them to produce another record crop but there is still a long way to go. Right now, there does not appear to be much higher of an upside than the low $15 range in the near term, but if South America has weather problems, that could be the catalyst to move higher or if weather remains good the next move lower.

Via Barchart

Crude Oil

Crude has had an interesting second half of the year following its peak in June. While it has traded between $80-90/barrel most of that time, this recent dip below $75 shows there is a lot of uncertainty as we head into winter. The sanctions on Russian oil by capping it at $60 goes into effect this week while many investors do not expect to see it having a major impact immediately. With Russian oil already trading below the $60 and their breakeven closer to $40 it does not appear this will dampen exports for them with India and China continuing to buy. Europe is still struggling with energy as the war in Ukraine continues. Further guidance from the UN or another shock to the market (China loosening Covid restrictions) could send Crude back higher to its recent trading range.

Via Barchart

Equity Markets

The equity markets had a great November rallying over 10% but have gotten off to a sluggish start in December. While data comes in still pointing to a strong economy and job numbers the ball is in the Fed’s court on what to do with rates. It is expected that there will continue to be rate hikes into 2023 with the Fed potentially keeping rates higher for longer than originally anticipated but slowing the rate at which they raise them. Some of the largest companies in the world have either laid off workers or frozen hiring as many questions remain for next year.

Via Barchart

Drought Monitor

Podcast

The Hedged Edge is back online with a guest who could be this podcast’s most important guest of all time. At a time when inflation is running rampant through the world economy, drought conditions are drying up our rivers, and the global supply of grain is scarce. We are tasked with the question, “what the hell is going on in logistics, and is there any relief in sight?”

To help address these questions and more, I am joined today by a man that needs no introduction to most in the physical commodity sector – Woodson Dunavant with the Dunavant Logistics company based in Memphis, TN.

Via Barchart.com

 

Contact an Ag Specialist Today

Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or [email protected].

05 Dec 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: IF YOU HAVE BEEN AROUND LONG ENOUGH YOU HAVE SEEN TIMES WHEN THERE IS NO MARKET

Weekly Lumber Recap 

12/4/22

If you have been around long enough you have seen times when there is no market. It was always caused by some event. This time the focal point is on the free money causing an overbuilt/overpriced housing sector. The market now has to digest the run up. Commodities in general will have extended swings as traders are either 100% in or totally out. The issue today is that the buyside continues to add cheap product to the pile for the first quarter. This could be a Peter and Paul moment. We are going into a critical week for the market. There needs to be a shift in interest level going into the end of the year. We shall see.

I talked about the futures market starting with a 3 handle back in late July. It took over 4 months to get there. Except for a few corrections the futures market has traded sideways. Only when the cash market accelerated down did futures finally sell off. Futures were building the bottom end of the range. Today they are just following an unhinged cash market. My point being that futures is looking at the low $400 as a tradable level. That is not a buy recommendation, just a value area. I have been around too long to think the mills will find a bottom anytime soon. Firms today really believe that all this will end soon, and things will be back to normal. There is little planning going on to limit exposure. It will take time.

The technical picture could be friend or foe. On the friendly side the whole momentum complex has come together. Rarely has a market continued its trend without some type of correction. With the RSI at 29% there may be more downside but with the pattern and going into the holidays I expect a little pop. Now on the foe side the Bollinger bands are moving sideways but January futures closed under the lower band. Futures tend to bounce right back into the band area. If futures continue down, it will take time and distance for the bands to catch up. Doing the math today that level would be $307.80. There is the shock.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

https://www.cftc.gov/dea/futures/other_lf.htm

Lumber & Wood Pulp Options

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

28 Nov 2022
Agriculture, Lumber, Market Commentary, Market Updates, Research, Risk Management rcmagserv 0 comment

THE LEONARD LUMBER REPORT: AT THIS POINT IT’S TIME TO KEEP IT SIMPLE

Weekly Lumber Recap 

11/27/22

At this point it’s time to keep it simple. I remember the quote from Ronald Reagan about the cold war. He said, “let’s keep it simple. We win they lose.” Today we don’t have a road map. We don’t have historical data. All we have is the market in front of us. The data indicates a market headed for $300 while the real fear is it goes up $300. Both are a reality. Without a supply disruption the market is geared for a slow erosion with light rallies in between. Any signs of fear from the buyside and the mills will be off the market again.

Most would agree that housing is in a created recession. That is a recession caused by a steep increase in prices. Whether those price increases were cost related or not, it has the same effect at the end of the day. The only question is how deep of a recession the US go into. A layoff panic will drag housing into a deeper recession. A recession with minimal layoffs will allow the market to find a level and build off of it. The bad news it may take until the 2nd quarter to see how bad it could be.

Today the futures market is at a standstill. It is drifting lower with the cash market. The January futures contract has had a $38 trading range in November so far. There are three days left but nevertheless that is the smallest range in years. All the pressure in futures comes from the electronic trade made up of either the algo or the funds. The industry has pared its inventory to a level that hedging is not necessary. That is friendly. Any disruption in supply sets off the panic beginning with the funds covering shorts. That is where the big run-up would come from.

From a technical standpoint the market is close to a move. The Bollinger bands are as tight as we have seen in months. The sideways trade has pushed the market into an area calling for a breakout. A strike will set things off to the upside. A .75 raise in December will probably cause the bottom to drop out. In either case the futures market wants to trend. I’m still a fan of mitigating upside risk. The downside is easy.

NEW CONTRACT:

Lumber Futures Volume & Open Interest

https://www.cmegroup.com/markets/agriculture/lumber-and-softs/lumber.volume.html?itm_source=cmegroup&itm_medium=friendly&itm_campaign=lbr&redirect=/lbr

CFTC Commitments of Traders Long Report

https://www.cftc.gov/dea/futures/other_lf.htm

Lumber & Wood Pulp Options

https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf

About the Leonard Report:

The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.

 

Brian Leonard

[email protected]

312-761-2636

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