August 12th USDA pre-report discussion

Chris: And it all comes down to this. 2 on, 2 out, bottom of the 9th. The Farmers lead by 1. Full count, here comes the play at the plate, and it's the Ag View Pitch! Welcome everybody to another episode of the Ag View Pitch, and finally we are getting close to that ever, uh, long time coming August 12th report, USDA report. We're finally getting there. Dwayne, as we head towards the report, we want to talk a little bit about some perspective here and have a little discussion on some of the things that we might see in some of the trade guesses as we head towards that and just have a little perspective conversation here. So how's it going, Dwayne?

Duane: Good, Chris. I'm anxious to get the report behind us. I don't like reports at all. And I'm kind of old school. I wish they came out in the afternoon after the markets were closed, not in the middle of the trading session. I would prefer that everybody had a chance to look at them and evaluate before we got them. But like I say, that's a day— that's times gone past. And now everybody wants it all in the instantaneous reaction. So it's— I guess I'm just old school, but I'm anxious to get this out of our way.

Chris: Yeah, it seems like it's been a long time coming. Everybody's been anticipating this thing for the last couple of weeks and makes it really hard to trade, hard to know as a producer what to do, and even for the market, pretty tough. As we start thinking about it, let's kind of start with corn first and have a little conversation. If I just throw a couple of segments at you on corn that the report's going to, going to lay out for us, let's start with the ending stocks. Any comments on, on that, kind of some ranges or kind of what that might hold? I know you and I talked off, offline a little bit here. I'm not trying to script, but just trying to figure out, you know, what's really the most important thing here to look at. And, you know, asking you that question, you're like, well, all of it, you know, there's a lot here.

And so let's start though, like I said, with the ending stocks. What, what are some of the ranges and some of the things that we maybe should be looking at or thinking about there?

Duane: Well, first, let's start with what's probably the easy one, and that's the old crop ending stocks. And the trade believes that's going to be somewhere around 2.4 billion bushels of corn, and that would be about 50 or 60 million higher than what USDA projected last month. The reason that is being raised a little bit is further shaving of export expectations, maybe a little shaving on ethanol. Usage expectations. And that's why that figure is being elevated a little bit. Then as far as new crop ending stocks, there's a, there's a pretty wide range. I mean, you're talking about an estimate for new crop ending corn stocks of 1.3 billion to 1.9 billion. And last month, USDA gave us right at 2 billion bushel carryout projection. Of course, we're— the wild card in, in that figure is going to be the acreage number. And then you also have people that want to work with demand figures.

And that's also leading to a wide range of estimates. A lot of people want to cut demand estimates further on corn, both in exports. They also want to cut them in ethanol. In most cases, it's difficult to find people that are, are changing these ethanol numbers by more than 100, 150 million bushels tops. And that, but, but I think that people are looking for the, the ethanol number to maybe be down 100 million. They're probably looking for feed usage to be down some as well, maybe as much as 350 million. And then their export numbers from what we had in, you know, going back to May, we're probably down about 375 million. And I guess that's kind of what I was referring to on the feed usage. You're down that much. If you look at it from where they were in July, you're probably still talking about being, you know, another 75 million down in feed.

And you're probably talking about being down another $100 million plus in the exports. And so because of all these wide different estimates on demand and acreage, it's leading to an awful wide carryout range. But at the average trade guesstimate for the corn carryout for new crop is 1.6 billion. And that number is, I would say that number is probably supportive of current values. In other words, if that's the type of carryout we're dealing with, we might have some vulnerability to harvest weakness from current prices if all we evaluated was that carryout figure. But as a general rule, that would probably be a somewhat supportive, uh, feature over the next 12 months at current value. So, um, I think that the $1.6 billion is not burdensome. But some people might find that to be anticlimactic if they've had some bullish optimism all summer long.

And so from that standpoint, it could be disappointing. But to narrow the ending stocks any far— any closer than the wide range that we have, we're going to have to get a handle on, on the acreage and the yield. And we'll talk about that, I'm sure, here in a few minutes. But As far as the ending stocks, um, it's 1.6 billion, but very dependent on these other figures.

Chris: Quite a wide range too when you look at, you know, from the high to the low, isn't it?

Duane: It's unbelievable high range of an estimate for just the ending stocks. And again, that goes to the complete uncertainty we have towards acreage and to some extent a, uh,— a lot of uncertainty on yield as well.

Chris: Yeah, just a lot of unknowns. So let's, as you kind of started to allude to it, let's lead into the corn planted, and then ultimately, let's talk about the harvested acres too. And I'm going to lead that with a question. Does the planted acres really matter? I mean, the range is 83.5 to 90 million with that average of 87.7. So, you know, what, what do you think there? I mean, are we gonna trade the harvested acres, which, you know, I think that's probably going to mean a lot more, isn't it, if we're somewhere in that, you know, 80 million acres of harvested or something, or 79.5 or something? Or talk a little bit about, about what your thoughts are there.

Duane: At the end of the day, the harvested acreage is going to be the most important figure. The problem that we're going to have on Monday at 11 o'clock, there's going to be 30 seconds before 11 o'clock that the market's going to start to move, you know, somewhat violently, probably because that's been the pattern. And then you're going to have about a minute and a half after 11 o'clock where things are going to be moving violently. And we'll have algorithms programs responding to different words and headlines, different numbers and headlines, and it's just going to be an absolute mess. And you can't trust the quotes you're seeing on the screen. In other words, if you see the market suddenly drop at 11 o'clock, you can't trust that's the final word.

And if it suddenly rallies, you can't trust that that's the final word, because what's very possible, or at least, at least a possibility, is that according to my understanding of USDA, since they are allowing corn to be planted as cover crops, it is possible that they could give a headline number of planted corn acreage that appears high. But if, say, there was a million acres of those that are not intended to be harvested and they're actually cover crop acres, then you could have, uh, whatever negativeness was associated with that large planted acreage number could be offset by an unusually low number of harvested acres given that planted acres.

So if they come out with the planted acreage first and that appears high and the algorithms run with that, and then they come out with a harvested acreage, you know, milliseconds or seconds later, and then they trade that, you can imagine why we could have all kinds of volatility here that is largely meaningless and completely untrustworthy in terms of if you're trying to look at the quotes you see on your screen as to what the gist of that report was. Was it a bullish report? Was it a bearish report when you threw it all together? And you won't be able to trust the first, whether that's several seconds or 60 seconds, whatever it is, it'll take some time for the marketplace to digest that. And the computer algorithms will be trading that. And you really won't be able to trust what you're seeing.

And that's a sad state of affairs, but that's an honest assessment of what you're dealing with. And so the, the planted acreage— back up a minute. My understanding from USDA, listening to them talk on a podcast, listening to them talk on a radio broadcast, my understanding is that even the June acreage numbers that we got from USDA, which seemed high, they said had 0% prevent plant acres factored into that. So if the producer intended to prevent plant those acres and he already made that decision, or he was up in the air, either way, my understanding is those acres were seen as whatever the intended crop was. So it was corn acres because there had been no official paperwork done to make them prevent plant acres at that time.

So at that, at that time, that figure that we got at the end of, of June had the corn acres planted, the corn acres intended to be planted, and had nothing removed from that for not getting planted or intended to be prevent plant acres. Today, or I mean not today, on Monday, we're going to, we're going to get a planted acreage figure, which theoretically could include acres that were, that were, that used corn as a cover crop. And then, so that number could seem artificially high, but that will be subtracted out and impacted in the harvested acres. And then we're going to receive a prevent plant acres. So We're expecting that we're going to get a lower planted acreage number from USDA Monday than what we had, uh, at the end of June because we will have those prevent plant acres out of there.

And so that's why the average acreage estimate is, um, now at 87.7 versus 91.7 that we got from USDA in, uh, at the end of June. So the trade's looking for that to be down 4 million. If you look at, talk to people about what they think prevent plant acres were from corn, 7 or 8 million is a common expectation with some even thinking it's higher than that. If we just take the low end at 7 million, and yet the trade is saying the planted acres is going to be 87.7, they, the trade, right or wrong, feels that we are starting from a higher point than what, uh, USDA had at the end of June. So the trade believes that the farmer in season, in the heat of the moment, at the end of the planting window, made a decision that they were going to plant more corn acres, um, than what they were thought they were going to buy— plant at the beginning of the planting season.

Even though they might have had planted, uh, prevent plant acres that they didn't expect, they still made decisions late to go ahead and plant more corn and, and maybe plant less beans. And so it's very, very strange that the trade expects 4 million acres less than what June, uh, USDA gave us at the end of June, but in the same conversation they also expect that the for corn prevent plant acres was 7 million, maybe more. So when you look at that and try to marry that together, that means that the trade in general feels that the farmer made a decision to plant 3 million more acres of corn. And that was a decision he made in real time as the season unfolded. I don't think that's what happened. But that's what the trade thinks happened. So there is opportunity for the trade to be surprised by a low number there.

And I suppose it's possible they could be surprised by a high number and everything what those people think turned out to be correct. But given the way USDA seemed to talk in the last couple of weeks, trying to explain what to expect on the— how these planted acres numbers were going to be computed, and how they were handled in June, I would say there's an opportunity here that Monday's acreage report on corn is actually less than what we think. Now the problem with that is everything I just said is looking at it as an end result, what the final result is. As much as we would like to have a complete clarity on what this acreage thing is, and as much as we think we should have a complete clarity on this acreage thing is USDA is warning us that they— we will not have the final word.

All the insurance companies haven't even been required yet to report their planted acres or their prevent plant acreage numbers. And so NASS is going to release what the prevent plant acres they have, but it's almost like it's going to be a running total. It's not going to be everything. And how much of that, how close they are to completion on that, how do you know? I have no idea. So we're going to come out of here at, after Monday's report, a little bit confused like we were at the end of June. We will have some prevent plant acreage information, but we, we're not going to be confident that we have it all. And so there's just a lot of opportunity here for volatility in, in the seconds following that report release when, when the market tries to, to sift through it all.

And even, you know, a couple hours after that report is released, people will be debating what, to what extent we have more prevent plant acres that haven't made it through the NAS system yet because they haven't had, um, all the reports from all the insurance companies on what those prevent plant acres were. My understanding is some of these insurance companies don't even have to report that data of what their actual prevent plant acres were that they wrote a check on until like the 29th of August. So we're, uh, we're not going to have all the information. So it makes it very very difficult to summarize it. And everything I'm going to talk about, I'm going to try to summarize it from an endgame, what it looks like in the end. But we're not necessarily going to get a snapshot of the end. We're going to get a snapshot of something in the middle. And we're not going to be—

Chris: we're going to—

Duane: we're not even going to know what that figure entails. We're not going to know if we're missing, you know, 15% of the reporting hasn't been done. We're not going to know if it's going to be 50% done. And maybe they'll tell us that figure, but that, that doesn't seem very clear to me. So if you think that if I'm talking in a very confusing manner, I apologize, but that's kind of how it is. It's going to be quite confusing as I understand.

Chris: One, one final question on corn in that arena on the harvested acres versus planted. Offline we talked about kind of a normal year, 91.5-ish percent of the planted acres are, you know, are factored as harvested acres. Roughly, what's everybody thinking that harvested acre percentage is going to be trimmed off the planted then, do you think?

Duane: Yes, I think rather than looking for like 91.5, 91.8, 92, whatever, I think people are expecting that harvested acreage will be more like a 90%. Figure. If it's possible, it could actually be lower than that. And to the extent that you had more and more acres planted, prevent plant acres planted to corn, you could— that would cause the harvested acres percentage number to keep eroding down. And I know that there's a lot of people talking about all this prevent plant acres that were planted to corn, but I really have a doubt how, how much that was. I mean, you have to find a home for that. And, uh, I'm not sure that fits a lot of people's scenario to find that home. So I have a question about that in general, but it is something that we're going to have to deal with it. But it basically get back to your original question.

The percent harvested that people are willing to work with this year is, is around 90%. And that means that given the average trade estimates that we have, The trade is expecting harvested acreage to be about 80 million, maybe a little bit less than that. And that's—

Chris: so if it, if it comes in a little less than that, yeah, that would be pretty bullish then.

Duane: I would say, I don't know how bullish it would be, but if it, if the harvested acreage is less than 80 million, it's going to have the word bullish somewhere in it, whether that's neutral bullish, slightly bullish, or something. But anything under 80 on harvested acres is probably going to be somewhat bullish.

Chris: And obviously the other way if it's on the other side of that, but just seems like they would in those algorithms, you could write that into, into your computer where you would be able to instantly have the computer recognize the relationship between planted and harvested acres and trade that as a factor. But maybe they already, maybe they do or don't have those algorithms written in there. Hard to say.

Duane: I don't know what they have, and if I answered that truthfully, it would be too sinister of an answer to give. So I don't, I don't know.

Chris: Right, right. Okay, well, one final question specifically on corn for the report, you know, and this is around the idea of yield. I think the yield average on the corn side of things is the trade guess anyway, and that, that 164.8, does that sound right?

Duane: Yeah, that's about, that's about what the trade has for an average, and the range is from 160 to 168. And even though that's the range in print, you know, in conversations, the ranges are even wider than that.

Chris: Well, and that's the thing. I mean, any guess, and I realize this is only perspective and putting you on the spot a little bit, but do you think they'll mess with that yield at all? Or, or who knows?

Duane: I absolutely think they will mess with that yield. They won't have field data that they're looking at, but they will use weather data generated from the month of July. That's part of their modeling, and that'll incorporate temperature and precip. And so yes, I think they will, because back in June they lowered their estimate at the— from the beginning of the season at 176-something to 166. And that 166 was a sharp drop of 10 bushels an acre, surprised everybody, but that was driven by their modeling and based on planting date. So right or wrong, the 166 should be seen as the starting point based on planting date, and then that would that would be the expectation for normal weather from planning forward, and then that's how USDA is calculating that 166.

So now here in August, they have computer modeling, statistical modeling based on weather statistics including temperature and precip that they will— that they can either add or subtract from that 166. So you have to ask yourself, based on the, the weather statistics that they have, have we had normal conditions since the crops were planted, or, or have we had stressful conditions, or have we had something, uh, better than normal and something leaning more towards optimal? I would imagine if you go someplace in the country, you can find something that fits all of that. And then I ask you to try to figure out what it would look like on a weighted average. And from a weighted average, if you look at— let's just take the, the wetter extremes. So let's say you're in South Dakota, and you've been— you were wet, and you were delayed planting.

And since that time, you've continued to be wet, and you've continued to fight that. So I don't think that wet part in that Northwest, like South Dakota, I don't think that since the crop's been planted, you could say we've had a normal growing season since, or that you've had anything leaning towards a move towards optimum or something better than normal. I think that you've had weather statistics that continue to weigh on that yield. And then if you take a move over to the I states like Iowa, Illinois, Indiana, at different times at different locations within those states, they have experienced dryness. They had— we had a couple of weeks of heat stress that actually went and impacted South Dakota and Nebraska and Kansas, along with the, the heart of the Midwest. They had a couple of weeks of heat stress, so that was not favorable.

And you certainly have a portion of Eastern Iowa, Southeastern Iowa, Western Illinois, Central Illinois, that's been much drier than desired and experienced crop stress, and that's also true in a good chunk of Indiana. So I find myself—

Chris: and the southern half of Ohio.

Duane: Yes, and I, so I find myself thinking that to the extent weather modeling will weigh on how USDA factors in this August yield, It seems at least plausible, if not quite reasonable, to think that we have weather statistics that in their modeling will cause them to lower that yield. And if that's true, then, um, next thing is to try to figure out the degree. If the 166 is the benchmark of normal from planning forward, and then average trade guess is 164.7, That's only 1.3 bushels less.

I'll guarantee you, if you're a farmer in eastern Iowa, in Illinois, or Indiana, or Ohio, and you're looking at your crops that have been under stress for a large chunk of the last 30 days, um, and you see your neighbors and you've driven, you know, a couple hundred miles and you see a lot of people experiencing the same thing you're experiencing, 1.3 bushels seems like an insult to the predicament and the stress that you're going through watching and looking at your own crop. So to me, I don't— I think the trade is quite optimistic on these yields at one point only being 1.3 bushels an acre less than what USDA gave us in June. So I think there's an opportunity that we're going to see a yield estimate from USDA that might surprise us, not to the tune of 10 bushels an acre, but certainly might surprise us almost as much as they did in June when they lowered it by 10.

So I'm not implying it'll be 10, I'm just saying it could be something fairly notable that they lower it. I'll be very surprised if, if they lower it only by 1.3, or if they— or if that for some reason that would be too low and they left it unchanged. That would really, really surprise me because it, it seems like by a lot of statistical measurements we've had something far worse than normal, or favorable or acceptable conditions during the month of July. And so I think that that's an opportunity for maybe a bullish figure in Monday's reports is that average national yield.

Chris: Well, and for clarity, that, that guess of 1.3 or whatever is their guess of what they think the USDA is going to say. It doesn't mean they think it's only, you know, a bushel and a half reduction. They may think it's a lot more than that. But that's what they— where they think the USDA is going to come in. So if the USDA comes in with a bigger number, that's probably just going to solidify what they probably already think, right?

Duane: Well, maybe or not. But I think the conviction level on what anybody's expecting here is so shallow that I think they're, they're going to react to whatever USDA— they won't say that it's built in. The other part of that is, let's say USDA comes in less than the trade guess, which is 164.7, and they show a yield reduction something greater than that 1.3 bushel drop from their June estimate. If, if the trade sees USDA moving in that direction, the trade is going to say, okay, USDA has just validated the concern and the stress that was experienced during July. Then they're going to extrapolate that and say, what do we got going on in the first 10 days of August? And they'll say, oh, you know, man, we got— we still— we have the same level of stress. And we maybe are increasing the footprint size of the acres under stress. And in some cases, it's been accelerating the stress.

So if the marketplace sees USDA lower this yield more than what the average— lower than what the average trade guess is, they're going to be somewhat anxious to more confidently embrace a further reduction because of the stress we're seeing here in August. So I don't think the trade looks at that yield and says, well, we, we expected it'd probably be down to 1.63 anyway, we just didn't think USDA would, would actually give it to us. I don't think that's the reaction because the trade knows that we are still experiencing stressful conditions from August 1st forward. And the— that accounts to a minimum of 25% of the U.S. acreage that falls under that category. And depending on who you talk to and how they look at it, it might be up to 50%. And if they look at it forward on a forecast, they might be confident that it's 50% of that acreage.

So anything from USDA that seems to validate the idea that— or excuse me, the month of July was stressful, whether it's heat or moisture, that's going to give traders confidence to even more confidently embrace the concerning weather that we've already had in August, and to the extent that it's still in the forecast to continue that stress in, in Monday's forecast.

Chris: Yeah, and you can kind of see that if you look at any of the drought maps. They're really showing kind of what what August has done. So let's, let's roll on here now and shift over to soybeans for a minute. Can you talk a little bit about the ending stocks on soybeans and some of the expectations we might see there?

Duane: Well, the ending stocks on beans, old crop is right at that billion bushel figure, and there's not a big change from July. They might raise it slightly. But, uh, statistically unimportant. Uh, as far as new crop, the average guess is 818 million for ending stocks. That's still a very plentiful supply. It's a burdensome supply. It's not quite as big as what we thought we were going to be dealing with for the entire year. Um, but it's also about 20 million higher than what USDA put out in July. Now, in order to come up with that figure. People will say that USDA's got to shave demand and they're going to cut, cut US exports, they'll probably cut crush. And so that's how they see them coming up with that. The other important part of that, and the wildcard is just like in corn, who knows what that yield is going to be, and who knows what that acreage is going to be.

And those are the two biggest components that's going to affect this US soybean ending stocks figure, and the trade fully expects a reduction in demand in the, in the balance sheet. And so that's going to drive sentiment to expect that number to stay somewhat lofty. But all of that can be more than trumped by what they do with yield and acreage.

Chris: Let's talk about that for a minute then. So when you look at, you know, planted acres, first of all, let's talk about that in soybeans because that's kind of the big question mark. So if, if the, a lot of the growers kept rolling with the corn planter and didn't switch back over to beans and also struggled with beans, it looks like, you know, they're talking an average guess of somewhere that 78 to 83.5 million, and so now if you average that out, you're at $80.8 million. Talk a little bit about that for a minute.

Duane: Well, I find it, uh, one, it is a wide range, and I think people are very uncertain about that range. They don't have any conviction to it, and when you end that with an average estimate of $80.8 million, that's 8— that's almost a million higher than what USDA gave us in June. And if you remember in June, the combined total between, uh, USDA corn planted acres and June— or, and soybean planted acres was less than what we were dealing with for combined acres between the two before. And so people think that what really happened is that the farmer opted for less prevent plant and they opted to plant more beans, but at the same token they want to say they planted more corn. To me, that doesn't make a lot of sense. I don't think that there was a strong desire by the farmer to plant a lot of beans. And so I struggle with this.

But I'll just take it at face value and accept the average trade guess, which is looking for almost 1 million more bean acres. I think it is a possibility that the trade could be surprised with some lower bean acreage numbers there. On the other hand, if they suddenly find all the acres that they seem to have lost in their June report between corn and beans combined, if you believe that storyline, then you are probably looking for an increase in, in bean acres. But I think this is a point that has a lot of potential for volatility and remains extremely uncertain. And as far as I'm concerned, while I might not agree with it, it wouldn't shock me if they came out with an 82 million acres of beans. But at the same token, I wouldn't be shocked if that figure was 77 million. So I think it could be quite a bit of a surprise for a bullish surprise as well.

So at the end of the day, we really don't know. And until we get the report Monday, we're just all guessing here and we just don't know. And so, but if you're— if you just to give you a perspective, if the trade's looking for almost 81 million, and with that figure, that's how they come up with an 800 million, million carryout. If they're off by a couple million bushels, all of a sudden that part of your carryout, now you're down to 700 million. If they're off a couple of bushels an acre on production, now your carryout could be all the way down to 550. So the acres and the yield is going to have a lot of influence on this carryout figure. And the, the potential for volatility in this bean number seems to me to be quite high.

Chris: Let me ask this, and this kind of leads to the yield question that you're starting to allude to is, okay, if they, if we add a million acres of soybeans to that, logic would tell me then that we're probably going to have to lower the yield from current guess at 47 or 47.5 is kind of the average. I'm not quite sure, I guess, and I'm speaking as a producer here now and just using a little logic and common sense, but if you had a million acres, those acres were planted really late, not in very good conditions, assuming they did get planted, then wouldn't that yield come back down too?

Duane: Uh, yes, it would. That would be the correct way to look at it. I don't know exactly what waiting to give that, but that is exactly the way to look at it. If they planted more acres, it's going to— that means there's a larger percentage of acres planted later, which would weigh on the national yield. And I'm not sure if the, the last estimate that we have from USDA for their working yield at, which is 48.5, I'm not sure that's really factored in the planning date to this same extent that they did in corn when they went from 176 to 166. I got a feeling we're going to see a reflection of the planning date, uh, in this report, maybe more so than what we saw in the July report. So I think there's still an adjustment coming for the planning date, and I think you have an adjustment coming for conditions since planning date.

And, um, Again, I would lean on the heat and dryness that we experienced. It probably may not have been quite as significant on yield to beans as maybe it has been to corn, but crop development in beans has still been seen as lagging. And if you, if you have people that subscribe to that theory. They're concerned that these beans are going to disappoint in the yield category, and so they think that these yields ought to be lowered. If you want to go just off of weekly crop condition ratings, then they haven't hardly changed, and then that argument would be that the bean yield estimate from USDA really shouldn't change. I don't think you can trust those weekly condition ratings to be connected to the USDA calculations— for a monthly yield. So I think, I just don't think there's history that suggests there's a strong tie-in there.

And I am suspicious that USDA is going to lower the yield for the same type of reasons that we— that they did in corn. I just don't think they made that move in the July like they did with the corn in the June. So I think there's still some of that left to be done on the beans. But I think USDA has been very vague in how they calculate these bean yields, much more vague than how they do on the corn yields. And I think we're really, we really just, again, don't know what we're dealing with. And I think the uncertainty in, in beans might even be more so than what it is in corn.

Chris: Isn't it plausible too that, you know, this report in beans, while it could be pretty bullish and could be bearish too, but regardless of where it goes, is— wouldn't it be plausible, or from a perspective standpoint, to think that weather is going to have probably in the next couple of weeks after the report more of a bearing on, on the market than maybe what the report does?

Duane: Well, like I alluded to a little bit ago on, on that weather tie-in, I'll answer that question this way. If the report leans towards bullish on the national corn yield and, and USDA lowered its yield, regardless of what the acreage figure is, regardless of what they do demand, if they lower the acreage or the yield number. The trade is going to look at the forecast. They're going to look at the weather we've had so far in August. They're going to look at the weather forecast. And if this weather forecast Monday is similar to what we have on, on Saturday and Sunday, then the marketplace will look at whether they'll look at, they'll look at any weakness as being a buying opportunity.

So if you get negativeness in, in corn from either demand numbers or negative in corn because of acreage numbers, but the yield number was actually friendly, and, uh, but those other factors maybe caused corn to have a knee-jerk reaction negative from that report, whether that was, you know, 5 or 10 cents lower in corn, that type of thing, uh, the trade will look at the yield and they will rely on that probably as a pretty good crutch. And I think you'll find people wanting to buy that because they'll feel that that yield is going to come down even more because of the August weather we've had. And because of the forecast, and I think that yield is going to— if it's, if it's friendly, moving in a lower direction, and comes in lower than what the trade expects, that yield narrative is going to trump any demand narrative, and it will trump any negative acreage narrative.

Chris: Back to some other conversations we've had in the past about, you know, beans maybe having the potential, particularly if they did get a kind of a bullish kickstart out of this report. Do you think that's going to bring some more money into the market for a little bit more volume to maybe move it even a little further? Or what does it take to bring more, more volume into the market? In your opinion?

Duane: If we are able to get past this report and begin to develop some positive price action that extends beyond the levels we finished at on Friday, which is basically a $0.40 rally in beans off the, off the low, maybe a little more than that. If we get past the report, digest the report, and deal with what is probably going to be a reduction in demand in the balance sheets. I don't know what we're going to get for acreage or yield. But if we get— maybe if let's say we just get— let's say we get something a little negative on acreage and beans. And let's say we get something a little negative for headline narratives and beans from demand. But we have something that's friendly on yield.

If the weather forecast Monday, Tuesday, Wednesday, whatever, is similar to the narrative that we had Friday, Saturday, and what— whatever it's going to be for, you know, the Sunday, Monday timeframe, if that weather is still somewhat concerning and you got 25% of the Midwest still under dryness concerns, and maybe that footprint of dryness stress could be anywhere from 25% to 50%. Any negativeness that comes from demand or acreage, uh, in beans, same as it was in corn, is going to be trumped by concern that national yield is in the process of declining. And we have the weather conditions and forecast that said it will— says it will decline further. That will be enough to trump it. As far as bringing in investment money and, and people to get excited about being long, The beans are very much primed for that to happen. The trade is short, been short for a long time.

And they've never fully covered. So there's lots of energy that can come at it from the market getting out of shorts. And so the question is, are we going to do anything to drive that emotion to get them excited about some upside potential? Not only do we have the groundwork laid for that to happen in beans, We also have a narrative happening in the global veg oil markets that's been unfolding for several weeks or more, and that is from a couple of different angles. So the, uh, global palm oil production is probably going to be down this year based on some, um, seasonal factors and some weather factors for this year.

And, um, you also have to deal with the idea that If China is not importing beans, and if they're crushing less beans, and yet they have, um, if, um, the inelastic demand for veg oil in that country, which has been proven many times in history that the price of that veg oil can double and it does not hurt their consumption, it's very inelastic demand. Well, if they're not importing beans, they're not crushing beans as much as they were, What happens to that oil that they would have been producing that now they don't have? That means they have to come in to the world vegetable market and buy oil somewhere. It may not be soy oil, could be canola, could be palm oil. Who knows what kind of oil that's going to be, but it's going to be some type of cooking oil. And so you have that demand. Well, global palm oil prices traded at like a 3.5-month high this week.

And the, the charts are supportive. The fundamental storyline is supportive. And the demand factor is inelastic. And that seems like a strong narrative. So you already have a narrative that might bring some money into it. And so the groundwork is laid, I think all we got to do is get past the USDA data, data, and make sure we're not overrun by some freight train of extremely bearish news and much larger acres than we expected and, and no reduction in yield. And, you know, a weather forecast that turns wet, if we get— we can avoid all that, then the narrative is the foundation is laid for that narrative to happen. So the market has been cleansed with at the beginning of this week with the word that China said they weren't going to buy from the US. And that was after we'd already had a large break and margin call and liquidation selling and panic selling.

So the market is completely cleansed. That's how I see it. And we've managed to rally beans 40-some cents since the first part of this past week after the market was fully cleansed on an emotional panic. And now we have— if we get past these reports on Monday and we don't have some devastatingly bearish inputs, but we have something that is somewhat constructive and we show a direction from USDA that they are shaving yields and then we have the forecast that's similar to what we had on Friday, that the forecast continues to post a threat for somewhere between 25% and 50% of the Midwest acres. That's the ingredients for a, uh, further price strengthening and very quickly we could forget about anything the report had to say that was bearish.

Chris: Okay, well, I think we're getting pretty well wrapped up here as far as, I think, laying out as much perspective as we can as far as what, you know, what to be watching on the report. There's a lot of stuff here, tons of things. Anything, any final thoughts, Duane? Parting thoughts as we get here into the last, you know, short period of time here in front of this report that, you know, that the farmers or the growers should have, or any last perspective thoughts?

Duane: Yes, when we have a report set up like we have right now, I think many of us find it easy to ponder what happens if we get something that's really bearish or really bullish and We're concerned about some big price dump because harvest is just ahead. And we're concerned about that. We're concerned about some big push up because the acres were much less than we expected, the yield could be down, etc. And so we're looking for these big moves, and we're looking for them to happen, or potentially happen right away. Okay, the marketplace has the same thoughts that have been going through their mind for the last week or two as well. And that leads to option prices being elevated.

And some of these short-dated options that will only last a few days and then they're going to expire, they tend to get a lot of activity where people are putting these bets down in case there's some big sharp move either up or down either way. Well, after the market has rallied 40-some cents off the lows in beans, about 30 cents off the lows in corn, this week. Sometimes we get all this information, and we'll have things that are headline bearish, we'll have things that are headline bullish, we'll have weather that has some indication we might get some better rains in the first part of the— this week in northern areas. And they might have, you know, more concerning parts later on. But But sometimes we get all this expectations for some big move. And we get by the time we sort through all the information we're going to get from USDA, we find that it's somehow managed to be anticlimactic.

And one thing offsets another. And then you had this 40-some-cent rally off the low in beans and 30-cent rally off the low in corn. And the market just takes a sigh, breathes a deep sigh and says, okay, we're just going to consolidate here for this week, and we're not going to go anywhere. Okay. And that's probably the last thing on most people's knee-jerk mind for their bracing for something big to happen out of this report. And maybe we don't get that. So I would just throw out there that to, for producers to think that if we got that type of price action, the marketplace will look at the lows we made last week, or the week before, depending on which market you're looking at.

And if we were to get the anticlimactic type of reaction to all this USDA data, all the weather that we'll have to contend with, and we kind of consolidate, that in essence also would be a constructive performance. So the biggest thing that the bull has to avoid here is just being blindsided by some piece of bearish things that he wasn't expecting, and the marketplace couldn't digest very well. If he's able to get past that, even if we don't go anywhere this week, we just consolidate the gains that we had this last week, that would still be constructive looking forward.

Chris: Okay, well, thanks a lot for all the perspective as we lead, you know, going to this report. We're probably going to expect a little fireworks, like you said,, in the 30 seconds in front of and probably for a little while during, and takes a while for the dust to settle as well. So, Dwayne, thanks a lot for the perspective. And then I think What's the Plan will probably hook back up again here on Monday after the close, is that right?

Duane: Yeah, well, it'll probably Monday after the close, maybe we'll see the weekly crop ratings and, uh, then we'll talk about, uh, the fiasco that we experienced on Monday with the reports and then try to sort through that in a post-report assessment. But the last thing I would leave would be we are likely to get some bullish aspects and some bearish aspects. And unless they are really, really negative demand, negative demand aspects negative acreage estimates can be easily and fully trumped by a lower than expected yield estimate.

And the reason that is, is because we are dealing with the weather situation that since the 1st of August and looking out ahead of us, we have experienced crop stress, and it appears that we're going to continue to more than the trade will embrace a decline in USDA lower than people think on these average yields as a, a green light to be concerned that, that this yield estimate will continue to ratchet lower. And it doesn't take much of a yield estimate change to offset some of these acreage and demand numbers.

Chris: All right, well, thanks, Duane. Appreciate all your perspective, like I said again, and thanks everybody for listening. If you need to get a hold of us, feel free to give us a shout, give us a call, send us questions. Make sure you're subscribed if you're not already, tell your friends, and we'll continue to try to bring you good perspective from the Ag View Pitch, and we will catch you next time. Thanks a lot.

Duane: Thanks for joining us on today's episode of the EggView Pitch. As always, you can reach out to us at cbarron@agviewsolutions.com or duanel@netins.net. We'll catch you next time on the EggView Pitch.