30,000 foot view - weekly market outlook: March 25-29th

Chris: Thank you for listening to the Weekly Market Outlook. It is our pleasure to bring an industry-leading market analyst to provide you with the most value possible in your farm business. Please reach out anytime by emailing cbarron@agviewsolutions.com. Welcome everybody to another episode of the Ag View Pitch. We are heading into a new marketing week. Last week of March 25th through the 29th. We have with us today Jared Creed. Jared, how's it going?

Jarod

Creed: It's going good. And as always, appreciate the invitation to be on with you, Chris.

Chris: Well, it's good to have you here. And we've been able to get through the crop insurance mayhem or whatever you want to call it and get that hopefully behind us for the most part. Now what we're looking at is Cost of production challenges. I was telling you offline that we've been out to most of our farm operations and we've seen a lot of cost of production numbers. Quite a few of them are in the red. We're seeing a cost of production in the— on average in the soybean, somewhere in that $12.35 to $12.40 range cost of production with people's APH yields. And then somewhere in that $4 or excuse me, $5 bushel on corn. What are you seeing with your clients? And are we kind of matching up with you somewhat?

Jarod

Creed: I think we're matching pretty close there, Chris. You know, to start on the soybean side, just like for several years going now, the only way to make any money in soybeans is to have a really, really good yield. And most of the time that's going to be above APH. And I got to guess that the changes that you've seen from 2023 into 2024 I bet that soybean costs really didn't even drop much more than $25 an acre and maybe not even more than $10 or $15 an acre.

Chris: Maybe not. Do you agree? I would say the cost of production is the same. I just did a talk for Joe Vaklovic and I was looking at or telling them that, you know, it looks to me like, you know, last year we put the most expensive crop in we've ever put in. And it looks like on soybeans, nothing really changed. And the only reason the corn's a little bit cheaper is because of fertilizer. But all the other line items are not really that much different than last year.

Jarod

Creed: Right. So I would agree on corn that I do think that there was a lot of optimism that corn cost of production was going to drop quite significantly. But, you know, it's, it's, it's not a secret. Costs are much slower to react than the actual grain prices for that crop.. And if I had to take a stab at— let's just group together Nebraska, Minnesota, Iowa, Illinois, Indiana, Ohio, kind of the heart of the Corn Belt. I don't think that that cost on corn even really is going to be much more than $30 an acre cheaper. And that's just a comparison year on year. Now, now granted, that cost change it's going to get and garner a lot of attention.

But I promise you, I would much rather go back to August of— let's see, August of 2022, when we're talking about $6 plus corn and $1,200 to $1,500 a ton in Hydrous and all the other corresponding fertilizer prices at that point in time, the amount of bushels it took to cover that expense, was much, much less than today's world of fertilizer costs, maybe at a, you know, 40 to 50% of that value. So I think you get plenty of individuals that say, oh, my costs got to be cheaper this year. You know, I'm an Anhydrous user. Last year was $1,200, and this year I bought it at $700. Well, that's great, but it doesn't hardly move the needle. And we still have to fight the battle of, you know, higher interest rates and the balance of the expenses on the farm that really have not changed.

And to put a little bit of gas on the fire, I suppose, you know, here this last week, we, we basically, the Fed is more or less laying out the idea that we're not going to lower interest rates. And I think that one is really sneaking up on individuals here now, finally, that the cost of putting on a crop is one thing. But the amount of money that it takes to finance that and the finance charge, I should say, is not going lower. And that's been a big difference in cost of production the last 2 years versus years prior. And it can sneak up on a guy very, very quickly. And we've talked about that so many times over the last 6 months, that everybody needs to continue to monitor the cost of carry for their crop. Anything related to old crop right now, it's, it's no less, Chris, than 5 cents a bushel a month in corn and 10 cents a bushel a month in soybeans.

And that adds up very, very quickly.

Chris: Yeah, and I would concur with that. I almost argue I kind of use 7 cents a month on corn and about 12 on soybeans. That might be a little excessive. But, you know, there's, there's additional costs the longer you go to because you're going to lose Typically, and that was going to be my next question, is how much basis threat do you think we have as time goes on in terms of a percent of threat increase? Right? Because, you know, eventually all this stuff does have to move. We probably moved a bunch of stuff, you know, in that March timeframe or, you know, when people had to either roll or deliver or whatever. But, you know, what's your thought there on basis? Because I, you know, I think the basis opportunity is going to be like it always is.

In many areas you can do pretty good on basis at planting time, but after that it kind of gets tough, and this might be a year where it gets a lot more difficult.

Jarod

Creed: The soybean side is probably not as much of a situation. Soybean basis can certainly make some serious moves through the balance of the, you know, the balance of the spring and through the summer, but it's not going to really significantly financially reward or hurt somebody on the corn side, it really can get difficult. You talk about the cost to carry the crop each month. And I would say, going from the middle of March to— I'll toss out a date of June 1st— that post-June 1st is when basis probably has its biggest risk. And in the last 30 days, with a little bit of an uptick in the market, It's been obviously evident that the farmer has been liquidating as the big speculative short has been exiting their position.

And quite frankly, the very first week that that started to happen, corn was still lower 7 cents on the week, and the speculative community covered about 15% of their overall position. Obviously not a very good sign. And again, this is something that we've talked about for months and months and months. So it's not anything new to any of your long-term listeners. The farmer length in the market specific to corn is going to continue to act as a wet blanket. And eventually in the cash market, it does run the risk of creating a bearish narrative specific to corn basis. And I do think too, that you run the risk of, you know, we don't, we can never try to outguess what can happen overnight and tomorrow and so on and so on. Somebody bombs so-and-so, markets can move very, very quickly.

But I do know that you will overrun an end user with the amount of corn specifically that the average US farmer has to sell. It does not take much of a move in the marketplace to just hammer basis. I've been telling some individuals here lately that it seemed like $5 cash was the mark for a long time. And then it became $4.75 cash, and then recently became $4.50 cash. And it just depends regionally where an individual is at. But to your big processors, that's been the number. And we have been unable, unable, I should say, to sustain any of those prices. And now it's the producer stepping in to liquidate at those prices. So the board can do whatever the heck it wants. But at least for the next 30 days, I would say the idea of seeing cash be able to outpace or sustain the same move as what the Board of Trade does, I think is a long shot.

So to your— to long, long, windy answer there to your question, yeah, basis has a significant amount of risk once the crop is planted. The old adage of knee-high by Fourth of July, well, let's just call that knee-high by sometime in June. As soon as the farmer is comfortable with the crop that's coming their way. In the last 3, 4 years, it's been incredibly evident that the first couple of weeks of June, the farmer starts to liquidate the balance of the crop that's in the bin.. And if an individual is going to be rewarded by holding old crop for an extended period of time, I promise you, it's not going to be because of basis. It's going to be because of something else that impacted the Board of Trade in a very significant way.

Chris: So if a guy's gonna sit on corn because they think it's going up, do they need to do a basis contract? Or there's risk there, right on the other side?

Jarod

Creed: How about we just say this? Don't even sit on corn, right? We just rallied $0.30. I get it. It's still not a price that you want, but you got to liquidate this stuff. And there's plenty of tools in the marketplace to use it.

Chris: And whatever it takes to make the '24 crop go up, make— let's make that happen.

Jarod

Creed: Well, let's not lose sight of just '24, though, too, that we just placed a significant amount of new orders this last week for 2025 as well. That if we just said, we just made mention that $5 corn is what is needed, not wanted, but needed for the 2024 crop. And I suppose you can go ahead and make a pretty solid case that that's what's going to be needed for 2025. So it's, I would argue, Chris, that now that we're behind the insurance period, and producers are, in my opinion, going to have a pretty decent chance at being able to market some 2024 crop relative to the Board of Trade somewhere around that $5 area. That 2025 quickly becomes the biggest risk.

Chris: The— back to the basis for a second too. There's always the right day. There's the data sell and there's the data lock basis. And sometimes those days aren't that far apart and you can kind of navigate that. I've been kind of doing that this year a little bit, trying to, you know, I haven't done any basis contracts literally, but that's why I was asking is, you know, because I mean, you kind of need to watch that in, you know, in old, old crop as well as new crop. Any comments on that?

Jarod

Creed: Yeah, I think that ship has sailed. I think that right now the farmer just needs to be focused on cash and cash only, you know, back to the simple, just get it simple blocking and tackling, just get it sold. And if you really want to be a participant in the market, we'll go leverage the tools that are in the industry to do so. I think your point is more relevant for 6 months ago, 3 months ago, to a certain extent, and obviously looking out to 2024 and 2025.

Chris: Let's talk about '24 for a minute. I'm going to give you an example of a question or a thought process that I've heard a couple of people asking about, and then you can either embrace it or, or throw darts at it. But if you look at the Dec '24 price and then you look at May '25, which is the '24 crop, there's about a $0.21 carry there. And then if you think about it, you know, that's, that's, uh, on those bushels that a person knows they're for sure going to have in the bin anyway. And maybe that, you know, again, that basis, that delivery time is at that planting time. So it's like thinking a full year ahead. Does that make sense, or is that something that you throw darts at?

Jarod

Creed: Uh, the board carry is definitely returned. But what did you just mention about the cost of carry right now for your producers that you're looking at? It's about a monthly basis. Yeah, it's about a wash. Well, even if you charge yourself 5 cents a month, if you put that stuff in the bin in the month of October and November, so you got December, January, February, March, we'll just be conservative there. Okay, 4 months at 5 cents, it is a wash, just like you said. Quite honestly, it's probably a loss. Now, also considering what your basis exposure looks like in the fall at weaker basis levels, when the most supply is available to the market comparable to, you know, say April-May timeframe. But there's probably the, the best opportunity is somewhere in between that timeframe.

To eliminate more storage costs, eliminate more carry costs, and be able to do something that Thanksgiving to New Year's timeframe. And I do think that that is a relevant piece to be considering. Looking at marketing a 2024 crop, I don't, I don't really have a problem with somebody having some optimism around basis movements. I do have a problem with somebody having optimism of just what the average corn price is going to do. But if you're hedging something through a hedge-to-arrive or futures only, or you're doing something in a hedge account, yeah, I do think that there is obvious reasons and obvious situations to unfold that creates a better basis value than what you're going to be able to accomplish right off the combine.

And quite frankly, a lot of, a lot of your listeners as well are just not going to be able to capture or not capture, but execute too many physical sales during the heart of harvest. So it's a little irrelevant. But I just don't think today that with today's interest rates and today's supply and demand, that it's not, it's not just telling us that, hey, go ahead and lock in a carry on new crop from December to May, and hope that basis appreciates. No, I think you got to stick with keeping your hedges in the December contract. Don't go anything further than December at this point. March, okay, I get it. And it'll become an easier decision if all of a sudden we have some type of decent rally in the next 60, 90, 120 days that you're talking about being able to sell just straight cash corn for a delivery time slot after harvest, then that conversation is more relevant.

But I just don't think that that's something that a guy needs to get into the weeds on today.

Chris: Yeah. And the March does make sense for a few bushels, doesn't it? For those guys that are going to be sitting on some corn, you know, you don't sell everything, you sell— well, you're going to be carrying over, especially if we get some sort of a rally and those numbers work. It probably makes sense just to sell on the March versus the Dec and not having to roll it, isn't it?

Jarod

Creed: Well, I play a little devil's advocate here, Chris. How much better off would your average client be today if they were out of corn?

Chris: They would be a hell of a lot better off. The problem is, is they aren't going to sell all of it.

Jarod

Creed: And so if you can get them— well, now that it takes, it takes a hell of an effort to move the needle that far.

Chris: But it does.

Jarod

Creed: We, I would say within our organization, I don't know if there's more than 1% of last year's crop that is still in our hands. And that would have been the same number back in like March 1st. Turn the stuff into cash. You know, you're paying interest at the bank. Why? Why give that interest to somebody else outside of your control? That's the core reason of that right there. Why give that money to somebody else?

Chris: And I think what skews some, some people is, well, they're sitting on cash, so they, you know, they don't quote unquote need the cash. Problem is there's an opportunity cost I just had Mike Finley on last week on the podcast, and, you know, he's like, well, you can take that money, put it in Vanguard and get 5.27% currently right now. So the money is not working for you when it's in the bank either. So you're also giving up all that opportunity cost on top of the, you know, the cost.

Jarod

Creed: I actually just listened yesterday morning to Mike Finley's conversation that you had with him, and what stuck out to me that I think you and I have had this discussion many times, that the rate of burn in cash is picking up so dramatically. Yeah. And he pretty much laid it out there at the bank level to confirm what we were worried about, that it's happening at a faster pace than he's ever experienced.

Chris: Mm-hmm.

Jarod

Creed: And if you take that concern and you think about a year in advance from now, and you think about maybe even 9 months in advance from now, when you're sitting down with the bank and doing an updated balance sheet, having a pencil, like written in pencil, what your value of your crop is in the bin has been worth the piece of paper that has been written on the last couple years. It changes too fast. The markets are too volatile. And there is a known value or a known, I guess, call it a known value of having that stuff as cash in the bank. Versus a commodity sitting in a bin that you are marking down at— this is what it's worth today. But all of a sudden, I'm making the assumption that what it's worth today is going to be worth more tomorrow. And that's what's causing these cash burns. It's that simple. And, you know, Chris, you know me well enough.

And, you know, I'm sure some of your listeners don't like to hear this. But, but shame on you if you found yourself in that situation. Shame on you. Yeah, you've had the opportunities. And it's not about the market doing more or less than what you expected to do. But why are you willing to write a check out of your family's farm to the bank every single month? Why? Imagine the farm— imagine the bank coming to your farm right now. Chris, and to say, hey, I need you to write me a check for $40, $50, $60 an acre of interest for the next 12 months. Who's going to do that?

Chris: Yeah, and, and that's a good point. I think what a lot of times what we do is we think in terms of cost per bushel, but if you had to take that interest cost and think of it in terms of cost per acre, it's pretty easy to spend, you know, $30 or $40 or $50 an acre in interest but we think of it in terms of cost per bushel, and it doesn't impact us psychologically as much as, you know, because we, we think of certain things in certain increments. And if you think of it in a slightly different increment, it puts a whole new light on the perspective of, are you okay with spending $35 an acre on interest? Most people will be like, hell no, but they're okay with spending 5 or 7 cents a month, right?

Jarod

Creed: Imagine that, Chris, that— and you know, I know this isn't gonna happen, but I'm making light of the situation a little bit. A farmer should call their banker and say, how much interest did I pay in 2023? Find that dollar amount, and then divide that by your acres and literally take a physical check and write that amount out and put that on your computer screen, tape it somewhere. Have that physical view of knowing that I spent this much money last year. Do I really want to submit that check to the bank?

Chris: Yeah. And there's probably a fair amount of people that are still sitting on cash though, too. But it's the same thing, right? It's kind of what Mike Finley talked about is, is, you know, you, you're still kind of right. You still kind of need to write that check, maybe not at 8% interest, but at least at, you know, 5.25% that you're leaving on the table on top of, you know, on top of sitting on that. So I think, you know, oh, absolutely.

Jarod

Creed: You can, you can probably go right down the street there in Raleigh, Iowa, and go to a local bank, and I'm guessing that they will pay you 5.5% to 6% for a 9 to 12 month CD, give or take. Yeah, that right there in itself is a true opportunity cost. Well, instead of paying the bank 7-8%, I could still be turning this stuff into cash and earning 5-6%. If I'm sitting on a bunch of cash and I'm not borrowing a bunch of money, that's great.

Chris: Yeah, you can hear that. You go earn now though. I'm gonna need that money though in 3 months. Well, then put it in that Vanguard account that Mike's talking about so it is liquid, you know, because you can, you can even be in liquid accounts at 5.25%. So They're just— yeah, I mean, I think, I think we're— you and I are preaching to the choir back and forth here.

Jarod

Creed: I think. Oh, I agree. It's, it's, it's a hard conversation to have with anybody that is in that situation that is hopeful for a higher price and paying interest all along the way. But I think that probably the critical piece, Chris, to, to really fall back on is You gotta create a true mark-to-market value of your entire crop back against your cost of production. Your cost has obviously gone higher since harvest if you've been paying interest on any supply in the bin. And you have to add that as the cost, you have to understand what that new cost is, and then bring in the entire picture of what have I sold? What have I not sold? What's the overall price? What's the overall revenue? And what does that mean on a cash-to-cash basis of what I spent to grow the crop versus what I can generate? And it has to start and stop there, not considering what you want for the next year.

What you need and want for the next year is nothing— has nothing to do with 2023. You have to close that book and move forward. Yeah, in 2024, you learn from what you did or didn't do on '23. And adjust accordingly for 2024. And Chris, I'll make it— I'll make a very solid case here. I'm not, I'm not a guy that just advocates every farm is the same situation. If we find December '24 corn somewhere between $5 to $5.25 on the board of trade in the next 90 days, 120 days, you're not going to be able to Tell me a valid reason of why a producer shouldn't be at least 50% sold. You see numbers, I see numbers. What we need, what we want right now, we are in a mode, we're in a mode of keeping the cash in front of you, not giving it to somebody else. And what we need is $5 plus.

And if that opportunity comes around, by God, 12 months from now, if we're having the same conversation about why I didn't sell $5, now we're at $4. Now what do I do? No, don't get yourself in that situation. A move from 5 to 6 is fine. Even if you average 550, so be it. A move from 5 to 4 without having ample sales is legitimately farm sales. It is foreclosing. The foreclosure word is starting to sneak up. It is happening more than what your listeners probably think. And they are probably closer to those situations of making tough decisions at the bank, that this cash that we have right now, it can be gone so fast in 12 months and 18 months and 24 months, that we'll forget we ever had the cash. So what I'm getting at again, there's— we both agree $5 plus across the all the producers that we deal with. I mean, it is a stern— call it a recommendation, Chris.

I'll put myself on the record here, call it a recommendation. If you sell 50% of a crop above $5 and you have good insurance, you're going to be fine. It's just math. You're going to be fine. Don't care what price does from that point forward. But if you don't, and corn does go to $4, or beans go to $10, you dug your own grave.

Chris: Yeah. And, and what I just recorded in 19 minutes and I titled it Cash Only Marketing, but it was really— it's, it's, you know, it's going to be out on the 29th. And so that's my plug for signing up for that. But what I talked about there is, although most of the listeners that are on this podcast, I would say, are pretty executive-minded, so I think they're they're not the typical producer. I think a lot of these guys that listen to our podcast, I would argue, probably are going to be the ones that are going to have the opportunity to rent that ground where those other guys are done.

Jarod

Creed: 100% agree. 100% agree. And that's happening day by day, right?

Chris: So I think there's going to be some huge opportunities, assuming that these commodity prices stay low because of where the cost of production went to in this cycle. And so I think it's going to create a ton of opportunities. But on the same token, You know, just like you said, well, call it a recommendation, call it whatever. I've always been really careful to be like, it's a perspective here. But just because I, you know, Shay will tell you all day long, I don't like conflict. But I will also tell you, though, that, that you can be pissed at somebody because you listen to their perspective or their opinion or their recommendation, whatever it is. But we have to start being accountable for our own frickin decisions because I think a lot of times it's really easy for people to, you know, to, to, you know, throw the blame back on somebody else.

And we got to start freaking looking in the mirror and looking at our costs and saying, okay, what is our margin target as opposed to, you know, what do we want to— what do we want for a price? I mean, price chasers get nowhere pretty fast, at least from what I've seen over the years I've done this, as opposed to those who sit down and, and do a margin target No, sure, you don't, you don't win the big prize in a year like '21 and '22, but you stay in business the other 12 years on either side of those two.

Jarod

Creed: Exactly.

Chris: That's, that's the message that I think is kind of what you're trying to say. I'm just kind of trying to summarize what you're saying here, but I think it's just important that, that I listen to it too as a producer. I think we all need to not only listen to it, but then we got to be disciplined, right? I mean, it's, it's It's one thing to say it, but I always have— and maybe you've seen this too, but I've always seen what I have always called price increase resistance. And so the price goes up, you know, let's say it's, it's $4.70 and you make a sale because you're finally like, I should— I got to start making some sales. So you, you sell 10%, it goes up $0.30, it's at $5. You look back and you're like, what the hell did I do that for? So then you sell 5% because it looks like it's going up and then it goes up another $0.10. You sell one load.

And then it goes up a little bit more and you're frozen, you don't sell anything. So exactly what you're saying is look at the percentage, look at the average, and look at what that margin target is and pull the trigger that has a meaningful amount. Because I think a lot of us were guilty of, especially even last year, yours truly as well to an extent, that we, we looked at sales in terms of 20,000 bushels at a time or 10,000 bushels at a time instead of percentages, because percentages scare us. It's like, you know, if you said 50% and the guy's at 10%, he's going to make a 40% sale. All of a sudden he's got to sell 120,000 bushels in some cases or more, right? Or 50,000, whatever the number is. It's like, well, shit, I can't sell that much. Well, yes you can, you know.

So, you know, but it's a decision and it's, again, it's back to this perspective and this, you know, how we look at the decisions we're making and just making sure that we own them ourselves, right? We're our own example as our own business.

Jarod

Creed: You just kind of sparked an idea here in my head that I'm going to, like, use your farm as an example here, Chris. Let's just make a wild assumption that corn goes to $6. And if corn is at $6, relative to the 2024 crop, and you find yourself that you actually lost some money in 2024. That has to be something that you're willing to live with. But you know that that loss is much less than what it could be at the other side. If corn is poor, and you lose a whole bunch of money, that's a bigger problem. That is the result of not making good business decisions. And we're not trying to advocate some type of $4 or $5 or $6 corn that the market's going to go XYZ. That's just the fact of the matter of what we're spending. That's the price that we need.

And quite frankly, if corn's at $6 and you end up losing some money, it's probably because you don't have a good insurance product behind you either.

Chris: Yeah, that's why I was just gonna say that you're gonna have a a lot higher level of coverage all of a sudden too.

Jarod

Creed: But you're not going to have that luxury if corn is $4. And still with a good insurance product, you're just not going to have a whole bunch of revenue that's going to offset that drop in grain prices. So I don't know if that necessarily makes sense. But I'm just saying, if corn goes to $6 and you don't make a lot of money in the 2024 crop, so be it, because you protected what was put in place the last 3, 4 years in this cycle of how much money's been made. And if corn is $6, how excited are you going to be for 2025?

Chris: Well, I just did. I was going to say, I mean, you're going to be long '25 and '26. So, you know, sell, sell some there then. I mean, that's the thing. We're always long. So it's like, you know, the opportunities are always there. It's just a matter of being disciplined and again setting that margin target, but kind of running the numbers out a year or two. You know, you can't get them perfect, but you can get pretty darn close.

Jarod

Creed: So it's a deal too, Chris, that in how many more years is it before you want to retire?

Chris: Probably 10.

Jarod

Creed: 10. Okay. 10 years and you want to step away. In 10 years, you're going to be looking at primarily your balance sheet and what your cash flow allows you to do for retirement. In 10 years, are you really going to go back and look at 2024 individual year and say, well, I wish I didn't or did do XYZ in that individual year? I don't know a single farmer.

Chris: Look at the average.

Jarod

Creed: Yeah, I don't know a single farmer that looks back and says this one year in my 30-year farming career, 40-year farming career, whatever it is, I don't know anybody And this is kind of like a psychological mindset. And it's, it's no different for your business off the farm and my business not associated with the farm, that I'm not going to go back and look and say, well, I wish I did something different that individual year. You're looking at the entire pot. And what have you seen balance sheets do in the last 2-3 years? They have gone ballistic to a very, very favorable level for the farmer. And now it's our time to defend that for a while. The market in itself is not in an offensive mode for the farmer. Cost of production higher than what the markets present themselves.

And I guess, back to your joking comment about what's a suggestion, what's not a suggestion, that we need to be willing to step in and defend what we have built. The last couple of years.

Chris: Well, and I always, I always consider low commodity prices a pretty big opportunity because a few things are happening. You're building, you're building demand. And I realize it takes a long time, but you got to do it sometime. So you're building some demand. And then the other thing, just as an observation, this is 27 years now for me or going into year 27 of looking at people's financials and, and helping with people with cost production and Over all of those years, I've seen 4 pretty major cycles, and in every single one of them, I saw people improve their ability to be business people when the times were difficult because you have to make good decisions. And so I always take that as a learning opportunity. I mean, look at— I mean, it sucks.

Some of the lessons we learned in '23, that some of those lessons we learned in '23 will change how we make business decisions moving forward, especially for some of the younger guys. I mean, I'm 57, so I, I, you know, hopefully have learned some of those lessons. But it is easy to forget too. Sometimes we have a short memory and we think of just last year and we don't think of the average, like you said. And I think we got to step back and, and say, you know, what's going to make us a better business person, you know, and making sure that we always are thinking about, you know, we're business people, we just happen to farm. We're not farmers trying to be business people. We're, we're business people who just happen to farm.

And I think if you have that mindset, and try and improve your business acumen and try to, try to, you know, you know, listen to the noise but filter the noise, if that makes sense. Take the perspectives, but make your own executive decision for your own farm. And I think just— and I'm sure you're seeing the same thing with your clients. I mean, the people who do that stand out, you know, there's, there's no question.

Jarod

Creed: Oh, wildly. And I got to tell you real quick that somebody asked me this last week, how old is Chris? And I said, I think he might just be almost 50. And you said you're 57. Come on now. Yep.

Chris: Yep. That's why I said you asked me how much longer. I said 10 years. It might be 13. I might go till I'm 70. We'll see. I'm probably never going to stop doing this kind of stuff because you know how it is. It's kind of fun to help people and, and I, and I love working with people and I'll probably always drive a planter or a combine or run the grain dryer or whatever they let me do around here. But I might go on a few more vacations. As I continue to do that and more and more of those as I get older. But yeah, it's—

Jarod

Creed: yeah, you hit the nail on the head. I think it's just as simple that in the environment we are in as of going into the last week of March, I still think that the most sound advice for every single farm is to quantify what their net worth and their possible life-changing money that has been created in the last couple of years Quantify that and identify what you need to do to keep it. It's not— you don't have to— in the farming world, we've seen it time and time again. You don't— it sounds bad to say, but you don't have to make money every single year. Don't let the idea of, oh, I'm not making a profit on next year's stuff right now, so I can't do something. Look in the rearview mirror and say, what have you been able to accomplish? And what do you want to keep in front of you for the future? Keep your powder dry is the message that we've been sharing.

Keep your powder dry, because if it really does get ugly— and again, not advocating that that's going to happen, but we've been through these cycles before— if it gets ugly, having dry powder is either going to do two— it's going to do two things. If you're at the age of retirement, you're you are able to ride out into the sunset much easier. If you're not at that age, and you're still in growth mode on a farm, the opportunities are going to be mind-blowing. And those are continuing to happen day by day at a faster pace right now. There are so many horror stories out there. And if you want to know, here's one factual piece of information that nobody can argue with. The amount of corn on loan at the FSA right now for farmers going to acquire cash, because they need cash for this next year's crop, arguably, yes, it's cheaper than at the bank level.

But the amount of corn on loan through the FSA is the highest it's been since what year would you guess? I don't know, tell me. 2013. 2013. And what was prices right before 2013? It's too convenient that it lines up with that timeframe. The highest amount of corn on loan at this time of year since 2013. That tells you costs are higher. We went through a cycle, or we're making our way through a cycle. And now it's about keeping your powder dry.

Chris: And there's still a massive amount of corn unsold.

Jarod

Creed: Oh, that's— that'll be a challenge for a while.

Chris: Yeah, for sure. Going to lay a blanket on top of stuff here. Hey, I think I'm going to, I'm going to title this. I like I told you at the beginning of the conversation, I'm like, well, I lost my frickin notes that I had that I was going to ask you questions on. And we just started recording. I'm like, let's just start talking. We'll see where it goes. Well, I think we went a long ways and I think I'm going to title this Grain Marketing from 30,000 Foot because we've been talking about a lot of things that I think we all need to step back and look at our operations from 30,000 feet and say, okay, are we making good decisions? How are we doing? What do we need to change? What do we need to learn from and when we need to do? I'm going to give you the last word and then we're going to roll.

Jarod

Creed: Well, I don't want to repeat everything I just said. I got one other idea here though, Chris, of just if— let's just say the average producer, $5 cost production, and let's just throw out a $200 bushel an acre number on corn. Beans again, my opinion, you just got to yield to make money. But $5 a bushel, 200 bushel yield, $1,000 an acre. That's what we would estimate. That's probably producers at $1,000 an acre cost. That's not 200 bushel corn country, right? 200 bushel plus corn country is greater than that $1,000 number. But to use that $1,000 an acre consideration, if you can go get 6 to 10% of your money in a relatively safe way out in the marketplace today, you kind of got to benchmark yourself for that. So let's just say 10% is our revenue goal. I need to gross $1,100 an acre.

And if I'm going to gross $1,100 an acre on a 200-bushel corn crop, I need to have a price equivalent of $5.50. I need to average my entire crop at $5.50. What we know today in looking at new crop cash bids across the countryside, we're probably close to a dollar lower than that. So now if you are working in the assumption that I need to make a 10% return on the money that I'm putting out into the field, that's not a highly likely situation with what we know right now. But what is known is that if we start inching towards that, that creates what? A call to action. And I'm still cautiously optimistic here. I'm cautiously— or I'm I'm pragmatic about the approach here that I do think we will get a chance to sell additional product to 2024, somewhere 5 to 10% higher than where prices are right now.

After that, you're going to need to have a different situation, you're going to need to have something unfold that is not in your control. So again, it just comes back to the idea that if I need to make 10% return on my money, or I want to to make 10% return on my money, can I logistically— can I legitimately argue that case? Can I legitimately create a situation that says, yep, I'm going to wait until I can actually sell my product for that price? That is a big, big risk of identifying I need $550 to make 10%, but I also run the risk of losing how much? 20% if corn goes to $4. That's a, that's a, that's a bad situation.

Chris: Yeah.

Jarod

Creed: So I just, you know, it just, it comes back to what we talked about plenty of times. Math, push the pencil. Know what you need to do, not what you want to do. Know what you need to do.

Chris: Right. Right. Yeah. And I think, you know, if you go back to '13 through, and we'll wrap up here, but you go back to '13 to '19. Some of those years there, a lot of producers just yielded their way out of a potential catastrophe. And it, and it still comes back to that too. I mean, a lot of people I think are gonna be, you know, trying to hit a home run on the production side, which, like you said, on the beans, I mean, that's, that's about the only way. And a lot of, a lot of producers that listen to this, that's the only way they're going to make any money on that, that side of the equation is outyield the, outyield the cost of production.

Jarod

Creed: So, or you lower your bean cost and you add that cost to corn, making all this situation even tougher. Rotate. Yep. Even tougher.

Chris: Yeah. All right. Hey, Jared, this has been a good conversation. Good 30,000-foot view discussion and a lot of, a lot of things for guys to think about. If somebody wants to get a hold of you, what's a good way? If they want to call you up and yell at you, what's the best way?

Jarod

Creed: Call me, call me up and yell at me. Yes. At that point, if you're going to call, yes. 402-680-1744. Or just stop by in the office in Hudson and you can yell at me in person and I'll explain to you why. Why? I mean what I mean.

Chris: Sounds good. So, hey, Jared, I really appreciate it. As always, you have a lot of really great thoughts, ideas, and perspective, and it's and a lot of people really appreciate that. So with that said, thank you, and thanks everybody for being here. We'll catch you again next time on the Ag View Pitch.