The views and opinions of this program are those of the host, guests, and callers. There is substantial risk of loss in trading futures and options, which you should carefully consider prior to trading.
Well, plenty of dynamics at play impacting our market trade. Let's take a look at some of the different things we need to keep an eye on here as we get through the middle of the month of April, spring planting season getting into the heart of that as well. Weather coming into focus more, still watching geopolitics, the markets and more. Joining us for a conversation, Shawn Hackett, Hackett Financial Advisors. Shawn, good to have you back on Market Talk, my friend. Hope all is well.
Things are doing great in my world, and I'm looking forward to the growing season, which is always full of fun and excitement and opportunities.
Absolutely. Well, and let's start with the weather piece of this because we could talk the geopolitics side here in a second, but this is that time of year where weather becomes a bigger, bigger story in the markets. And I'm feeling like the grain markets in particular are kind of in that wait-and-see mode right now in terms of the weather. You know, this current pattern we're in, you kind of got this middle section of the country getting rain and storms, while the western plains, the southeast dry. So, I mean, what are you seeing with the weather right now? Do you think the markets are kind of in a wait-and-see mode in terms of the weather, Shawn?
Yeah, I mean, it's really, really hard nowadays in modern day times to get the market excited about weather until you get into May. How many times have we said the KC winter wheat crop is never going to come back, and then we get rains in May, and all of a sudden, amazing how much the crop recovered, it's better than we thought, and those May rains saved the day. I just think we've been taught not to get too excited about weather. We could be concerned about it, we could be monitoring it, but I think May is really where the market starts to pay closer attention.
We have arguably the warmest subsurface sea surface temperatures ever in the central Pacific Ocean for the month of April. 1997 and 2015 were the prior record warm bodies of water. This now exceeds that. What that means is that your feedstock to create an El Niño here is just enormous. And if we can get what's called the Southern Oscillation Index, which is the pressure differential between the west and the east of the Pacific to reverse, meaning go from positive to negative, then that helps bring that water up to the surface, and you get a very, very rapid El Niño. And we are seeing that. We are now in our third straight week of negative Southern Oscillation Index, and we expect that we're going to actually have El Niño type sea surface temperatures come to the surface in the month of May.
Very, very, very hard to not expect better weather in the month of May for the dry areas out west and for the dry areas in the southeast. Doesn't mean perfect, doesn't mean it's a drought buster, but it's hard not to see the situation improve and actually get some cooler temperatures too. When we look at every single moderate to strong El Niño we've ever had since 1950, we've never had crops below trend in corn, soybeans, or spring wheat in any of those years. In fact, half of them have been above trend. Now, of course, this year could be different. There can always be something unusual, but you got to go with the averages, and the average says we're going to have a really good crop year for the US, and we're going to have to digest the burden of that crop in August like we typically do before we can get more excited.
So, what we think's going to happen here is we've had some of these nice run-ups here on some weather worries, on this geopolitics. Hopefully, we meet, you know, Trump and Xi meet here in May, and we get an expansion of the trade deal, and get maybe one final push in this latter part of the spring season. And we think that could be the highs for a while, and that may be where farmers need to finish up their cash sales, finish up their marketing plans, so they don't have to sell in August at the harvest lows, which seems to be the last four or five years our harvest lows have occurred in August like clockwork, and you don't have to sell in that unfortunate period of time. So, unless we get $200 barrel oil, I'm not saying that can't happen, and it creates an upswing in all commodities, it's going to be hard for the market to see higher prices in August than we're going to see here in the spring, in our opinion.
And that piece you bring up with China, I have to think and agree with you, if this meeting happens, you know, what could come from that? Probably, you think immediately soybeans, maybe even cotton too, as a beneficiary if all good things come from that meeting potentially between Trump and Xi in May, if it does in fact still stay on schedule with everything going on in the Middle East, Shawn.
Yeah, I certainly think corn and cotton, they've bought from us before. In the last trade deal, they were big buyers of cotton and corn on top of soybeans in an expanded trade deal. So, those would be logical markets to expect a potential for buying that comes in and tightens up the balance sheets like we saw that soybean rally from $10 to the mid-11s on Chinese purchases. I kind of feel the only country in the world that can really, I'm not going to say control, but can really dictate what Iran's going to do or not do is China. Meaning, China and Iran are close-knit. They have a working relationship in terms of energy purchase, trade, and such.
And I kind of feel neither side, and I don't ever want to mention that people's lives being at risk, that it's a game that is being played, but the way I see it strategically, I think Xi feels there's leverage if they could show that they have control over Iran. I think Trump says we have leverage because we have control over what happens with the closure of the Strait of Hormuz or not. So, I think both of them want containment. They don't want it to really get out of hand because it's not good for anyone for that to happen. At the same time, I don't think either one wants it to be resolved until the meeting because I think they want to keep that leverage to get what they want on the other side of this trade deal. I think once that trade deal happens, if it does, I think the situation in Iran can really, really calm down and ease back.
I really feel all this is connected right now, and some of this containment we're seeing or this calming down is all about China behind the scenes telling Iran just, you know, just chill out for a little while. We need you to do that. And that's why I'm actually fairly optimistic this meeting's going to happen, and why I think it's actually going to lead to an expanded trade deal. I'm actually pretty optimistic we're going to get some better. That's why I still hold the carrot out that we might see one more surge here in late April into May on this trade deal being positive, and maybe some final weather worries. You know, there's some frost risks that we see coming in at the end of the month for winter wheat. There's a few things that could still cause this thing to have one more surge, and we want to make sure that we keep some of the cash sales open to that possibility for our customers.
A great perspective on that, Shawn, and it's one that you got to take a step back and look at the whole global picture here. And obviously, a lot of front-of-mind concern about crude oil prices and high diesel prices and shipping through the Strait of Hormuz, and obviously, just the war impacts in general. But when you start to look at the deck chairs, so to speak, there's interesting layers that you got to peel back here to try and understand how it could potentially impact this broader market picture, Shawn.
Yeah, and then you think, you know, and I'm no geopolitical guru by any stretch of the imagination. I'm just trying to look at things I think fairly logically. But if you think of our strategy against Venezuela prior to this, getting access to their oil, getting access to the reserves, regime changing that country, having one of the largest reserves in the world maybe getting more accessible to us in the world over the next few years. This happened just before the Iran situation. It almost feels like that was a precursor to what those in the know knew was going to happen in Iran, that it's all part of a bigger piece of the puzzle of how maybe we're trying to gain leverage on China because China was a large purchaser of Venezuela oil. That we know, I think we know that China has got us pretty good on rare earth metals, how vulnerable we are to that, and so I think there's just a lot of strategy behind the scenes as to why it's happening, the reasons it's happening.
Of course, no one likes war. I don't think anyone likes war, and I don't think anyone wants to see any soldiers or innocent people perish at all. And nonetheless, history is littered with leaders doing things for other purposes, and it just seems to me that's what's happening here and why it's happening, and it has to run its course. And I think running its course could at least be positive for grain markets at least in the short run.
We're talking with Shawn Hackett from Hackett Financial Advisors. Broader inflation concerns. I mean, we've had the CPI, the PPI data come out with the PPI out Tuesday morning, for instance. I mean, no surprise, you know, the inflation gauge is a little bit hotter right now, but how concerned are you about broader inflation with the economy and the markets in general with this war going on and this blockade happening right now and things like that? I mean, how concerned are you that we could see rising inflation here into the summer?
