Better than expected season - weekly market outlook: Oct. 9-13th

Narrator/Chris

Barron: 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 Ag View Pitch. We're heading into a new marketing week, but before we get going, I want to make a couple of announcements. Number one is a reminder of 19 Minutes. We're still kicking those out on the 9th, the 19th, and 29th. I sent out a bonus episode the other day on leadership that's gotten some pretty good reviews. And another one that will be coming out on the 9th is going to be on land rents and land values. So that one's going to be one that you're definitely going to be able to get some value out of on kind of what's happening with land rents and values.

Worked with an individual from People's Company me on, on a discussion there. So, and then the last bit of housekeeping is the Ag View Executive Business Conference, which Jared Creed, who, if you're watching this on YouTube, you see Jared there, he's going to be one of the presenters at the Executive Business Conference in Phoenix on the 24th, 25th, and 26th of January. And we are down to— Alyssa just informed me here this morning before we started recording, we have 12 spots left. And so I have been telling you all that, hey, this is going to get full. It is going to get full. The one thing I hate in life more than anything is having to say no to somebody. And so I'm saying now, if you are going, I'm— I hate saying no. So I guess I'm going to turn you over to Alyssa if you don't get signed up and it's full because there's 12 spots left. So with that said, We are.

Jarod

Creed: What happens if I don't sign up, Chris? Yeah, I get told no.

Narrator/Chris

Barron: No, you're already— you're already signed. You, you're a— you're a presenter.

Jarod

Creed: You're there.

Narrator/Chris

Barron: We're good. But yeah. So anyway, that's— that's important. With that said, though, like I said, we're heading into a new marketing week. It's the second week of October. We finally got through the first week and we're going to talk about insurance here in a minute. But before we do that, I want to talk a little bit, Jared. I want to have you kind of hit on what you're seeing on harvest progress. I'll give you my two cents, but I want you to go first and just kind of what are you hearing from clients? What are you seeing firsthand? I know you were harvesting soybeans yesterday, so talk a little bit about harvest to this point.

Jarod

Creed: You know, first off, from a 30,000-foot view, it seemed like harvest wanted to go, wanted to go the last couple of weeks and it just never really took off. However, this last week, I think a pretty big one, especially on soybeans, not so much on corn. Those operators who really don't plant a lot of soybeans annually are flying through their corn. But I would say the expectations here this next week is that harvest progress on soybeans— I mean, is it going to be 50%? That might be a little bit of a stretch, you know, jumping from 25% to 50%. But I think we're well in motion to have the overwhelming majority of the soybean crop harvested and put in the bin in another 5, 6 business days, with corn shortly to follow. As far as results so far, you know, kind of we were talking offline before we started recording here. If the yields are poor, they're not great.

If they're really good and they caught rain, they're phenomenal. I can show examples across our client base, like just in the state of Iowa. Averages that barely broke 50 for the entire operation soybean average to operations that were almost 90, all in the state of Iowa, only a couple counties away. Just a matter of did it rain or did it not. And the corn kind of follows suit in those parts of the world. You know, no secret that with some of the weather that we've had, corn on corn's dragging a little bit. Had the joke with a few folks that even in that situation, corn on corn profitability is still better than planting the darn beans. And I actually got a new line that I learned here this week that somebody was giving me a hard time about how I like to call soybeans a cover crop. It's not— you need to start changing it to your rotational weed.

So, well, yeah, we got a new, new name for soybeans: rotational weed. But, you know, here's the crazy piece, Chris, that just to put into context the variability, that's probably not all that much of a surprise. For a lot of your listeners that are in areas that had hit or miss rains. Like here, right outside Waterloo, we can go 4-mile stretches and have a field average 40 and have a field average 80. And then right between Hudson and Waterloo on some of the poor dirt in Black Hawk County, I cannot believe it. My brother-in-law called me Thursday night, says, you're never going to believe this down along the Black Hawk River. If anybody knows where P&K Implement is in between Waterloo and Hudson on Highway 63, That blow sand down there set a new record at 196 yield. And it looked terrible all year, all year. I can't believe it. That's across the scale.

That— so I don't know what to expect on corn, to be honest with you. I would tell you that the bottom end, albeit the expectations were pretty low versus last year, the bottom end yields that we have seen so far in corn are much better than expected. And the top-end yields are kind of just mind-numbing of how do we get there. So it's early, we got a lot of corn still to get through. But I think in another 2 weeks' time, we will have harvest progress on corn somewhat mirror the progress that we're seeing in beans here for the last 5, 6 days. But absent of any type of moisture events, it seems like this thing's gonna fly right, right on through. Even guys up in North Dakota, South Dakota are clipping right along. So nobody's really dragging their feet. How about that?

Narrator/Chris

Barron: That's awesome. Yeah, it's, Shay always calls it, it's never harvest season. It's always better than expected season. Cause it's like every single year he's, that's been his observation anyway, since he's come back from the military, it's like every year it's like, oh, it was better than we thought. I would say from my report, from what we're seeing or hearing and also what we saw yesterday, we took out our Pioneer plot. We're in the red zone. We're in that drought. If you look at the drought monitor, we're in the red. I think you are too, right? You're in that as well. Our plot average was better than our plot average last year and we're 20 inches behind on rain.

So you tell me I mean, the agronomist was here yesterday too, and he's like, well, the solar radiation, you know, it was this— it was— we had so much sun, we had so much good growing conditions, and there was enough water there. They've got the hybrids, you know, so that they're very water efficient. We just— it is unbelievable. Now, if you look at that whole farm, we had some inversion frost in June. So those who haven't heard of that before, that's pretty fun. In June, you get an inversion frost comes out of the ground, it freezes the corn and kills some of it and screws it up. Those areas were off the pace for sure. And then we also had areas where, you know, you have sand or whatever and the light ground. In our case, what we're seeing is definitely it's off the pace, but that plot was on corn and soybean ground.

What we're seeing, our observation in our farm operation is corn on corn is about 50 bushel behind. Corn on soybean ground. And so that's, that's one of the things that we're seeing, I guess, is kind of interesting. What I'm hearing from clients, though, is everything is— there's a couple exceptions, but almost everybody that I talk to says, you know, we're definitely way better than we should be for the conditions we had. I thought I saw this all year. I think I told you on other recordings and other podcasts, this man, this crop looks really good. There's spots where it doesn't look so good, but driving all over the US, it seemed like all summer the crop looked pretty damn good. With that said, before we get into the insurance thing, well, let's go that route first.

Jarod

Creed: Let's, let's go into that. Can I ask?

Narrator/Chris

Barron: Yeah.

Jarod

Creed: Can I ask you one question?

Narrator/Chris

Barron: Yeah.

Jarod

Creed: I've heard a few other guys mention this as well. Something that kind of sneaks up on us, sneaks up on us at the end. Kind of forget about how good our emergence was. How good our populations ended up being.

Narrator/Chris

Barron: And we had—

Jarod

Creed: it seems like it's been a few years since we've really had a great, great start on emergence. So perhaps ear counts are a little bit of a surprise collectively. You know, you don't have to move that by more than half a percent, 1%, maybe 1.5%. That makes a big difference, especially locally and nationally.

Narrator/Chris

Barron: People get excited about tip-back, but if the if, you know, the test weights have been running in the 58 to 62 pound range too, even where it's not yielding that great, the test weight's still 58 pounds. So I mean, the, the, the phenomenal, leaps and bounds that these companies have made in hybrids and varieties is just unbelievable. It's not even, we're getting what we're getting, what we're paying for., as far as the, as far as value goes. So crop insurance, let's hit that and then we'll go into a couple other things. So, talk a little bit about, we just looked at the numbers, tell us what, where we're at on the discovery price as of right now, and what that might mean and what we are going to be looking at here.

Jarod

Creed: Right, so we're 5 days into the harvest average.

Narrator/Chris

Barron: Which is 25% of the way in, right?

Jarod

Creed: Yeah, it was 17 days left, 22 days this month, 22 days this year. Um, corn average running at $4.90, soybean average running at $12.74. Those are both just a couple cents above a dollar drop-off from the spring price, or I should reword that, harvest prices are about a buck lower than the spring prices on corn. It's 83% of the spring price, meaning if you're carrying an 85% policy, you have to yield above and beyond your APH to not have a claim. If you are carrying an 80% policy, you don't have to yield your APH yet to not have a claim. On soybeans, uh, it's kind of hit and miss. There's not really going to be much indemnity money passed around in soybeans, in my opinion. Maybe some of the larger area-based coverages, you know, 90 to 95% coverage.

But even the producers that we've had that have came away with some poor soybean yields, you know, a good 5, 6, 7 bushels lower than their APH, you know, the combination of the yield and the price is still not bad enough to trigger a multi-peril claim. So real quick, before I forget here, Chris, something that has kind of snuck up on us Make sure if you are in an insurance claim situation, this is to the producer that you're speaking with your accountant on it because a revenue claim is not deferrable. There's only a certain amount of dollars that can be deferred. Now, I hate to get into that tax game and what do you do with money into the end of the year, but I think that can possibly sneak up on some individuals and, and arguably cause unnecessary trouble. On unnecessary spending at the end of the year.

So just be planning ahead, you know, in the next 60 days, prices have dropped specifically in corn low enough that if your yield is not stellar, there's a high probability that you can be having a multi-parole revenue claim. Yield claims, deferrable, because that's grain that you would typically possibly sell and deliver after the first of the year. Revenue claim, you raise the bushels, prices lower, you're going to have a claim that is not able to be deferred by your accountant. So just a quick heads up on that. But other than that, you know, like I said, 15, 17-some days left in the average. Nice little pop into the beginning of the month. I despise— there is no such thing as a crop insurance rally that the RMA is behind. So let's just put that behind us. There's no such thing as a conspiracy theory on all that.

Um, you know, I don't want to shift it over to the market, but I think it's, uh, interesting what the energy market and equity markets have done in the last few weeks. Um, you know, crude oil went all the way up to $95 and had one of its fastest sell-offs in history, uh, in the next $10 drop. And actually Friday traded down to low $82s. $95 to $82, that's, that's nothing to, uh, Nothing to turn away from, and it's a little worrisome that maybe corn can be following a similar trajectory. Uh, everything gets a little bit of a lift, um, with harvest progress just around the corner. Farmer hedging pressure has been tremendous in the soybean market for the last week, and I expect that to follow through on corn because all year long, uh, the individuals that are undersold, uh, really didn't do anything. I think their plan now is just get the harvest spotted across the scale.

So we're on that doorstep. Uh, so when you start thinking about what the averages can possibly be, I would toss out the idea that our average will probably end up being closer to $4.80 in December corn, which makes a difference. You know, 10 cents a bushel is huge, is a lot of money on a revenue per acre basis., and soybeans, just, I don't know, call it maybe, maybe down in that $12.50, $12.60 area, but I'd be a little surprised on that, but really irrelevant as well. Still not going to be deep enough of a drop to really trigger much on the insurance side.

Narrator/Chris

Barron: Um, what, what do you think, you know, as we get through that gut slot of harvest or whatever you want to call it, is when people are moving the grain putting price pressure on it. There's people also then they're sitting there thinking, okay, then when do we recover? When do I, you know, because I think, I think that's a dangerous spot. Yeah, because, you know, do you recover from that just because you, just because what you said, you know, you could see $480 being the average of October or whatever. Well, that doesn't mean it has to go up from there either, right? It could go down from there too. You know, any, any, any bright spots or anything there that could give us some, some hope for some kind of price strength after October?

Jarod

Creed: I don't want to say a bright spot or a bad spot, Chris, but we've discussed this numerous times that one of the most troublesome situations for the producer could be December corn just kind of flatlining somewhere in that $4.80 to $4.90 range for the first half of October.. And so far, that looks like it could certainly happen. And then we start to drop after that. Because you think about the, the makeup of the producer today, the producer is probably not all that excited that we are a measly 10, 12 cents above the most common traded price for the last 60 days. It's not a lot of perhaps added revenue to the farm. A dime's a dime, don't get me wrong. But I'll tell you, A dime lower for insurance is worth more than a dime higher on unsold grain, because you're probably double dipping on the way down.

You're making more money as we go up or down, and you're making less money as the market goes up. But I think we have to be acknowledging the situation that don't just stop your analysis on, well, what happens if the insurance price is this? Take it to step 2 of what happens if price does XYZ after insurance, because a very bloody situation in corn could unfold if we would flatline around this area and then eventually grind lower to $4.50. And you have plenty of data still coming at us from primarily a lack of demand and production numbers. My personal opinion, next week's WASDE, You know, the yields are going up in corn. I think that beans can kind of stay steady, but there's a situation to unfold that we have to— we have to acknowledge the reality of a corn carryout that's going to be above 2 billion bushels, probably closer to 2.2, 2.3 for the long haul.

And absent of any type of wildcards that we do not know of today, that's not worth close to $5 corn. And funds pressure has already showed that. Spreads pressure already shows that. And you got the conversation out there that look at basis, look at basis. There's places where it's huge. I'll touch base on that here in a second. But it's, it's just important, I think, that don't— you have a listener that called me beginning of this week to talk through that as thinking about ideas of, well, how do I protect this insurance price? How do I lock in some money? And kind of came to an agreement that there's really no need. Worry about the long, long picture, the long game, and make sure that you are prepared for whatever type of price drop could possibly happen after this floor expires.

And in, in all reality, everyday marketing, if you buy a put option, you hope that put option expires worthless. If you buy insurance on your left arm, you hope that that insurance expires worthless because you didn't lose it. Same kind of thing on insurance. If, if the market moves higher and it kicks you out of insurance, that's— it is what it is. But you can't— it's so hard for the producer to go from a mindset, okay, I forward contracted, now I'm going to try to go long to protect my insurance prices and oh, I got to time that right to go from being a long position back to a short or hedge position to cover the balance of my crop in the event the market moves lower. So it's tricky. It's not worth the time in my opinion.

Just, just be, be mindful of measuring out those scenarios if we would happen to continue lower after the averaging period, because that's definitely where the market can inflict the most pain to the most individuals. We have a report.

Narrator/Chris

Barron: I'm gonna—

Jarod

Creed: if it's all right.

Narrator/Chris

Barron: Yeah, good.

Jarod

Creed: If it's all right, Chris, with you, I want to roll from that comment into— it just kind of clicked in my brain here. How do you inflict the most pain? A market move lower. And I mentioned basis being extremely high in some places. Given the recent dip that corn had, ethanol margins got to a very, very profitable level. And ethanol outfits are no different than the farmer. When they have an opportunity to lock in profit margins, they're going to do everything that they can possibly do. And one of the simple pieces is selling their ethanol, perhaps hedging their DDGs, but more importantly, locking in a price on corn, specifically paper, the board. So just imagine you're an ethanol producer that bought December corn $4.70 to $4.75. And you hedge your ethanol and you got some other stuff done on your byproducts, your corn oil, your DDGs, and the market rallies.

But even on that 15, 20, 25-cent rally, the farmer still has not sold. The farmer's not engaging the market. The only way for the ethanol outfit to offset their long position that they locked in their margins on is to buy it from the farmer, which would execute a short position. Making them neutral. They locked in their margin. The only other way that they have to get ownership from the farmer is to jack their basis up. I'm a little worried that they're not going to want to go out there and blow their brains out on basis because there's few and far between places that are. And when you talk about the market inflicting the most pain as, as much as possible, we could legitimately see an undersold farmer come to the market faced with an end user that can't buy it from the farmer that decides to liquidate their own position as well. So what do you have?

You have two huge segments selling at the same time. That's probably not the easiest thing for somebody to comprehend. Rewind a minute and a half, listen to that again. The ethanol plant can be long the corn market right now, and the only way they get even is by buying it from the farmer. And the only mechanism they have to do that is jacking their basis up. Some are more disciplined than others, and again, it's few and far between who's willing to go out there and blow the cash market up just to get ownership rather just liquidate the position and move on and see what the next day brings.

Narrator/Chris

Barron: Yeah, that's interesting. That's really interesting. So let's, um, let's talk about the report too. That's going to be out Thursday, October 12th. The USDA, you know, I think a lot of people, when the last report came out in September, everybody thought, you know, well, how much more will they go down? Now I think people are thinking, how much will they go back up on stuff? Or will they, or will, you know, will they not make much of a change? What's your crystal ball tell you? What do you anticipating the, you know, the government doing with respect to the October 12th report?

Jarod

Creed: Well, first off, we're lucky we're having a report. Yeah, a week ago, didn't know if that was going to happen. Didn't know if shutdown would be avoided quick enough to actually have NAS enumerators apparently were able to still collect the data. But the analysis team would have not been— what's the word I'm looking for— immune to a government shutdown. They would not have had the time needed to put the data together. In my crystal ball opinion, it's awfully hard to sit there and look at what yields have came in and make some judgment calls on that. But I think that there are large enough areas that we're going to move the corn yield higher. Quite frankly, if I look at the entire Western Corn Belt, Again, 30,000-foot view, this is going to tick off some listeners. The only problem areas is Kansas and parts of Nebraska. South Dakota, no. North Dakota, no. Minnesota, no. Iowa, no.

Again, 30,000-foot. I'm not so sure that Iowa might not go set a record yield this year. It's weird that it's going to possibly go that route. But it only takes another bushel or two from where the USDA is currently at. So Eastern Corn Belt, I think that's well advertised, right?

Narrator/Chris

Barron: It's a big—

Jarod

Creed: it's a big, big crop. Again, there's a few pockets. But I think those pockets are probably mostly defined just the small areas in Illinois, and a couple small areas in Indiana, I suppose. But collectively, again, on the corn front, my, my bias is that we're not going to take the yield lower., and we got a lot of possibilities of taking that yield higher yet. And remember that the yield data that would have been presented, a month ago had a lot of assumptions in it. It had a lot of implied ear weights. Well, what was the thought all summer long? Well, test weight's going to be bad. Test weight's going to be bad. Test weight's going to be bad. What test weight are you seeing in some of the worst drought areas? It's good, right? So what's our ear weights? Does that correlate directly?

I don't know, but the ear weights is the next big piece for this report, uh, that will heavily dictate what the actual, uh, yield estimates are. Ear weights, ear counts, it's really all a guy should care about looking deep into the October report if you so choose to look that far, uh, but that's going to be the main driver on what our yields are. And when I go down a list of states, if wanted to have, you know, a friendly beer bet with somebody, I think Iowa and South Dakota both have the chance of setting a record on corn. South Dakota, maybe to a lesser extent. And I'm not so sure that the collectiveness of Illinois, Indiana, Ohio doesn't have a possibility of setting a new record as well. Not state by state, but collectively, I think that they got a chance. All of a sudden you just took up a whole bunch of the corn area in the US to really lift the boat.

And remember, you know, being a 174, 175 yield is, is obviously it's below trend, but it's still a few bushels off of a record. And you start to talk about in percentages, 1 to 2% variances, that's a lot, right? A 2% variance on a yield is a lot. And that's how easy, easily, I shouldn't say easily, it sounds kind of bad to say it that way. But the perception of all yields got dropped 10 bushels an acre. No, that's mathematically just almost impossible.

Narrator/Chris

Barron: Yeah, that's too many good areas.

Jarod

Creed: If I had to put a final range on things right now, Chris, I'm gonna, I'm gonna throw out the idea of no less than 174 with the possibility of reaching 177, that final. Mm-hmm. And 177 is pushing a new record nationally.

Narrator/Chris

Barron: Yeah. Yep. Yeah. It's gonna be interesting. We'll see. It's always interesting to talk about it a little ahead of time and kind of see what, where things shake out. Last week I had a conversation with Clark Nabors a little bit on the idea of the, the, the algebra equation. Bless you. The algebra equation that we need to do with respect to storage, carry management, hedges that are currently on, unsold bushels relative to sold bushels, all that stuff. There's like a pretty complex— I was telling him last week, you know, it's like in algebra, I was like, when the hell will I ever use this? You know, and this is truly a really interesting algebra equation with looking at the carry and saying, okay, I can store some of these December, let's say you got December HTAs or you've got some hedges. I can store some of these. I need a certain amount of money.

So cash flow is one of the variables. Tax situation is one of the variables. And most of the people listening, I would say, I know there's a few exceptions listening that took the beans and just sold off the combine or are currently doing that. And some will do reownership and, and, you know, some will use options and that kind of stuff. Let's talk about corn more specifically, though, relative to the equation. What, what order are you putting that equation together in terms of capturing carry and interest? I didn't throw interest rates in there. Interest rates are a big deal, too. I think a lot of people are going to, going to move enough to cover cash flow, not pay too much tax, and then they're going to roll. Do you roll out to that March, to that May? Does it just matter when you're going to need the cash? What, what's your thoughts on building out that equation?

Jarod

Creed: Keep it simple and find out what your total cost is on a monthly basis and do not move past the idea of, oh, I'm not paying interest right now. Okay, you're going to pay interest next spring though, because you're going to start incurring expenses for next year's crop. So in corn, we're using a number of 7 cents a bushel a month. And that 7 cents a bushel includes about a penny and a half to 2 cents to keep it on farm. And a collective— another nickel of the interest expense in conjunction with the interest I can actually earn. I'm gonna walk right down the street a block away from my office and go get a 9-month CD at the local bank at 6.5%. You have to factor what else you can do with the money. That's an opportunity expense. And you start to think about what your true upside is in the market per se.

I think a lot of it is avoiding interest and earning interest rather than trying to turn this, this shelf-life commodity slash assets— a loose word for a bushel of corn— um, but trying to generate the same type of return with all the risk associated. So 7 cents a month, I mean, I think that's pretty simple between now and January. You have to sell your cash grain 21 cents higher than where we are today just to break even.

Narrator/Chris

Barron: Mm-hmm.

Jarod

Creed: And I'm not talking about the market going up. I'm just talking about what the final cash-to-cash equation is from today until then. We just had the exact same conversation with a producer yesterday that he's being bid 10 under basis, uh, for delivery for the next 10 days. A pretty solid bid for his area and, uh, the time of the year.. And just basically had to say, all right, well, we gotta generate probably 30 cents a bushel more between now and January 1st to offset that 10 under. And that's from the combination of storage, interest, interest they can earn, and then also taking the, the grain in and out twice, right? More or less. So you start thinking about where the board carry is at. You've got 15, 16 cents from December to March. It's not enough. It needs to be $0.18, $0.19 in the interest rate environment that we're in. I don't think it's going to get there, though.

That'd be kind of a new— that'd be a new move for the corn market. It might get there during delivery, but it's going to have a tough time getting there before then. And you take that a step further. Most of the basis values that you see across the countryside still have a slight inversion to them today. As in the cash to cash after considering interest and cost to store the grain, you're still better off shipping it now rather than later. So can basis get better long term? Sure. It's probably gonna depend where you're located. If you're along the river, don't plan on it.

Narrator/Chris

Barron: Mm-hmm.

Jarod

Creed: If you are away from the river and more dependent on strong domestic crush, You can have a little bit of optimism, but don't forget about all that trapped grain closer to rivers that has an uncanny ability of moving at 440,000 bushels at a time from point A to point B on a train. And it will happen this year. It will happen that we've fielded numerous calls of all the crop in this area is just not as good as it has been in the past. You know, these, these folks are really going to have to push their basis, aren't they? No, no, they're not. The cash market's job is to move grain from point A to point B. And it's a lot more efficient and easier to move a shuttle train than it is deal with 200 different farmers to accumulate the same amount of grain for the time slot that you're needing it, let alone deal with the possible performance issues of the farmer.

So soybeans needs to be 10 to 11 cents. I just think that it's— yeah, you got your algebra equation, but I'm kind of giving you the answer to the algebra equation.

Narrator/Chris

Barron: We're at—

Jarod

Creed: if you're not netting yourself. Yep. If you're not netting 7 cents a month in corn and 11, 12 cents a month in soybeans, you kind of spinning your wheels. Yeah. So just have to be mindful of that too, that we were talking about the insurance situation. You pass up a basis value today because you don't like the basis value. You might not like the board of trade price, but you know what? There's ways to go do something about that basis. There is no reownership type of opportunities. So your risk is doing absolutely nothing and still being faced with that $0.15, $0.20, $0.25, $0.30 cost in the next 3 to 4 months, and then all of a sudden have the grain market be backwards 25, 30, 40 cents as well. That is a bad, bad situation. I mean, it's, it's not all that crazy to think, Chris, that let's just say a cash bid at the elevator is $4.75 today.

Um, a guy holds out till July next year and the market doesn't move in his favor and he's paying storage and interest, that's going to be sub-$4 corn when it's all said and done. There's a real possibility of that being able to happen a little bit lower in the market and rack up all those charges. And all of a sudden it's like the old cattle joke. There's only one way to turn $4 corn into $3 corn, and that's to feed it. Well, now you can feed the interest machine too.

Narrator/Chris

Barron: Yeah, exactly. Yeah, it's scary too, because this time of year and, you know, you said, well, yesterday you were out combining beans. You got to roll here in a little bit again. I do too. We all get really busy. We're working probably harder than we should. We get tired and then we don't make the best decisions in the world either during the time when we really need to be paying attention to stuff too. So my advice is, you know, sometimes it's okay to shut all the equipment off for a day, spend half the day resting, and then spend the other half a day in decision mode analyzing, okay, what do we got so far? Where are we at? What's going on?

And kind of try to get that done midstream because If you just keep go, go, go, go and you don't get a rain day or whatever to catch up on your rest and to get to have that decision day, a lot of crappy decisions get made because they're, they're made too late. And, and, you know, so that'd be my only thing is, is, you know, take a pause, hit the pause button and, and think about what you're doing.

Jarod

Creed: In no way, shape or form is this a plug for myself. I don't know for you, but when you start considering that interest cost on a cents per bushel per month and how fast that can add up on a per acre basis, there is a lot of valuable individuals in the industry who are on top of that on a daily basis. So when you are busy, they're looking out for you. You're making decisions when you might be in the heat of the moment in the field, but that stuff's still being done. Yeah, you know, that's kind of the structure of a good business, right? Not letting operations outweigh the business, not letting the business side outweigh the operation side. The management tree is important. So, you know, there's a lot of good merchandisers out there who can understand that too. Just pick up the phone and— whoa— hire in the cab, ask, hey, what are you thinking about the carry market today?

What should I be doing? Here's my situation. Open communication is critical.

Narrator/Chris

Barron: Yeah, yeah. Because I think a lot of those December, you know, those who have December HTAs did a good job of getting enough sold are going to, are going to need to roll some of those in the, in the carries. Good. Maybe it'll get better. I don't know. But it's pretty good now and enough to cover the interest if you're okay on, on cash and you're delivering that stuff still yet in this year if you want to. I mean, those, those Ds to March kind of makes some sense. Not advice, but just kind of some things to think about, I guess, from my standpoint. The last thing I want to hit—

Jarod

Creed: I want to look real quick, just a comparison, you know, Monster in eastern Iowa. That's kind of an indicator of impact on the river. Again, just posted bids right now. ADM Cedar Rapids is at $4.70 for October. You know, they got a quick ship bid, looks like probably just to for next week. Um, but you're talking about $4.70 for October, $4.90 for January, talking a dime out into December. That dime to December is legitimately just a logistic play. I can't deliver it all town, I can put it in a bin, but I'm almost breaking even picking up that dime. But when you get anything past January, I would not— I agree with what you're saying, the carry on the board is attractive, But in no way, shape, or form am I interested in $0.20 a bushel from October to January.

Narrator/Chris

Barron: Yeah.

Jarod

Creed: And just—

Narrator/Chris

Barron: right.

Jarod

Creed: Too much risk associated with that.

Narrator/Chris

Barron: Yeah.

Jarod

Creed: Yeah.

Narrator/Chris

Barron: I guess the last thing that I want to hit on and we'll keep moving here is fuel. I did get a question or I've had a few questions on, you know, what's our perspective or what are we thinking on fuel for 2024? Do you have any comments on You know, fuel is one of those things I never get super concerned about because as a percent of the cost of production, it's not that big a deal. I mean, people think it is. And, and with all due respect, it's, you know, you look at it as a percent, your machinery is the big thing. But what's your thought there? What are you seeing on the, on the energy front?

Jarod

Creed: I know that most of your listeners are probably just listening, not watching. Well, I'm going to get the quarter out here and I'm going to flip it. I'm gonna tell you what fuel is. It's a heads or tails.

Narrator/Chris

Barron: Yeah, right.

Jarod

Creed: I don't know. I don't know what 6 months fuel prices look like. Heating oil and crude oil have been all over the map in the last 2 weeks. Um, I'm, I'm always just a hand-to-mouth guy, Chris. I'm not gonna let myself ever run into a shortage, uh, but I'm not going to be opposed to having to pay just let's say I can buy it for sub 3, but then I end up buying some for over 4. I don't know if I care that much. It sounds really, really bad. We want to be as efficient as we possibly can. Um, but very rarely does the farmer have every single bushel of the output sold that they have the need to make sure the balance of the inputs all have a price. Typically it's the other way around.

If you're a very aggressive marketer and you have a significant amount of next year's crop sold, yeah, I think you got to put that in the budget and say, I just need to lock up as much fuel as I possibly can for a while if that relationship is advantageous. But it just doesn't move the needle that much. I mean, you think about what your cost per acre would do if diesel went to $5 from today. And banking on the idea that there's just an ever so slight correlation to the corn and soybean market on energy. If crude oil wanted to rally $30, corn's gonna have to do something with it. And even if it's a 10-15 cent rally, that more than offsets pretty much your entire fuel costs at that point.

Narrator/Chris

Barron: Yeah, usually what we see is, is, you know, sometimes people don't do so good on fuel purchases, sometimes they do a good job. But when you look at the cost on a per bushel or a per unit, I don't care if it's cotton or corn or wheat, whatever it is, on a per bushel per unit, it's not that much. It's very little. It's, you know, we look at what we write the checks out for, which is important. Like you said, we want to be as efficient as we can. But on the same token, there's bigger fish to fry, so to speak. You know, there's bigger, bigger areas. I think you just, you take a stab at it and, and, you know, if you're unsure and you think it's a good deal, maybe do 50% or something and You know, again, not a recommendation, but it's just those things, you know, are, are kind of individual producers got to make those, uh, big boy and big girl decisions.

Jarod

Creed: So just a very fast example of that. If think about harvesting 60 bushels soybeans, and let's just say you're using a gallon an acre, which, which is obviously high. I'm using a gallon an acre. Um, and fuel goes up $2 a gallon. Okay. I just increased by $2 an acre. $2 an acre. And how many in 60 bushel beans? That means I need the market to move 2.5 cents. Exactly. Yep.

Narrator/Chris

Barron: Yeah, that's why it's not much. Yeah. Because whenever we're watching it on Profit Manager, it never doesn't even move the needle. You know, even, even with big moves. So, but anyway, I guess that's everything I had to quiz you on. As I look at my notes, is there anything I mean, we talked a lot about basis, the funds, you know, just I think we're just going to have to go week by week. We'll see what the USDA report has to offer and see what the market does from there.

Jarod

Creed: I think the to-do right now, Chris, what guys are busy in the cab, it's that time of the year that you need to be calling the banker and you need to be on the phone with the accountant, getting a little idea of what you're looking at into the end of the year. Open communication. And I'm afraid there is going to be some situations that no, we're not going to have that conversation until we're done with harvest. And then all of a sudden, there could be worse marketing opportunities, then that conversation is not going to want to happen at the bank, right? And there has already been— I'll leave the area and bank name out of it. But there has already been last weekend, a serious amount of notifications sent to their, through their borrowers of, you know, who's now classified as a high-risk producer. And what comes with the high-risk classification? 12.5% to 13% interest. Mm-hmm.

Narrator/Chris

Barron: Not good. No.

Jarod

Creed: And things are just slipping, right? The bank's measurements are slipping. They're getting out of regulation necessarily, but outside of their own comfort zone. That sometimes a farmer can't do much about that. Yeah.

Narrator/Chris

Barron: And then, and then the rains tighten and yeah, it's, it's, uh, gonna be interesting. People are gonna have to pay attention. That's where, uh, I think, um, we want to end up on a, on a, on a good note. Any good notes to end up on other, other than yield, other than yield or better than expected?

Jarod

Creed: I'm hopeful that the next time I'm on with you, I'll be able to share, uh, a very, very exciting announcement of an addition to our team. So I'll leave it on that. I'll leave it on that standpoint.

Narrator/Chris

Barron: Okay. Well, Jared with JC Ag Financial, if people want to get a hold of you, what's the best way to reach you?

Jarod

Creed: I actually have a legitimate company email now, Chris.

Narrator/Chris

Barron: Okay.

Jarod

Creed: We finally had to put our big boy pants on and do something. So it's Jared, J-A-R-O-D, at Elite agins.com or 402-680-1744.

Narrator/Chris

Barron: All right. I'll have Mac put that in the show notes too. So if somebody wants to click on it and get a hold of you. So, hey, with that said, really appreciate your time, Jared. Again, reminder to everybody, 12 slots left for the executive, the Ag View Executive Business Conference. So make sure that you, if you're going to go, I don't say no., but I don't get to say anything if, if it's full. So you're, you're outta luck. So with that said, again, Jared, thank you very much. We wanna thank everybody for listening. Be safe out there. Get your rest. Spend a little time doing some math. It, it pays. With that said, we will catch you again next time on the Agri-Pitch.