Big bushel, little demand

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch. We're heading into a new marketing week, October 28th through November 1st, and it is the end of October, crazy enough, um, pretty wild. Um, also today we have with us Pete Meyer to talk markets and to educate us today. How's it going, Pete?

Peter

Meyer: Coffee with Chris on a Saturday morning. I got my Dunkin' Donuts cup. I'm good to go.

Chris

Barron: Yeah, well, good, good deal, good deal. Before we get going here, I do want to, um, put a plug in again for the Ag View Executive Business Conference. Uh, it's going to be January 22nd through the 25th in Fort Lauderdale, Florida. And Pete, you're going to be one of the, uh, premier speakers, presenters there. And you were there last year. So pretty good conference, wouldn't you say?

Peter

Meyer: Yeah, no, it was a really good conference. But I wouldn't call me a premier speaker. But, but no, I thought it was, it was a very good conference. It was in Arizona last year. Good people, good conversation. The social events really allowed you to network with, you know, with other farmers and stuff like that. I think that the, you guys took the time to make sure that the the social events matched up well. And I saw a lot of conversation. A lot of people seem to strike up conversation with new people in different parts of the country. And at the end of the day, that's what it's all about. Right? So, yeah. God willing, I'll be there.

Chris

Barron: Yep. Yeah. Well, we're looking forward to it. Going to have you and Jared Creed and Joe Vaklovic on the stage arm wrestling on where the markets are going and talking economy and lots of different things. And we got Paul Niefer talking on all the new tax laws and things that might be coming our way. And, and, uh, Dr. David Cole, um, and just some really good educators, um, and some people from Farmer Mac will be talking about the economy, land values, all kinds of things. So if you're not signed up, please do that. You can go right on the Ag View Solutions website to get signed up. We do have some slots yet, and that's why we're advertising it, because if you We have room for 150 in total. We keep that a small group on purpose. And so if you are going to get signed up, please do it soon because it will get full and then we have to turn people away, which we do not want to do.

With that said, Pete, let's, let's talk markets. I just mentioned Paul Neiffer and taxes. I think we'll start kind of in reverse order. Let's, let's hit on the election, a big thing. We'll come back and talk about harvest and stuff, but we're not very far away. You know, this is probably the last week before the election. I know a lot of people are probably going out and, and doing that. Is there any correlation directly to the commodities or things that we should be thinking about from, from one administration versus the other? If anybody wants to send hate mail, send that to Pete, not to me, because I'm busy. But what, what's your thought? What's your take, Pete?

Peter

Meyer: I think it's critical. And I don't think it's a— excuse me. I don't think it's an ideological issue either. I think it's going to have an impact. You know, I was watching Paul Tudor Jones on CNBC this week. And he said all roads lead to inflation regardless of who's in the White House. You know, that on its own would be very bullish commodities, but he is long commodities. And he admitted that on the show. But, you You know, the inflation view for me is a bit worrisome. I don't really think— you know, everybody was all hyped up on getting a 0.5 rate cut before the end of the year. Now it looks like that could be just by the wayside. We got our half a point and that's the end of it because inflation has cooled a little bit and they're not being as aggressive as they wanted to.

You know, Trump has suggested that should he get elected, he's gonna push interest rates lower and that the Fed should not have as much control over it as it does. Harris has said nothing. Trump is very anti-biofuel. Trump is very pro-tariff. Harris has said nothing. To me, Trump's comments in his acceptance speech in Cleveland when he took the accepted the nomination, you know, and he called the Inflation Reduction Act a Green New Scam. Let's not forget that 45Z and all that entails as far as sustainable aviation fuel and the federal tax credit is all in the Inflation Reduction Act. He's pretty vocal about it. You know, he's pretty angry about the fact that John Deere moved these jobs to Mexico and any part coming in from Mexico now is going to have 100% tariff and You know, so I, you know, and we all know what he said about China. I mean, he hates China. China hates him.

Even though I saw in the news last night that China seems to have hacked into both parties' phones to listen to what they're talking about. But, you know, in the long run, if you believe that Kamala Harris is going to continue Joe Biden's policies, then that would that would include the Inflation Reduction Act, that would include 45Z, that would be positive for prices for agriculture. If you believe Trump and what he says, that's not gonna be positive for agriculture. Now, you know, I've already heard pundits and other people saying, well, you know, when Trump gets in, it's gonna be okay. He's gonna take care of the farmer. He's gonna hand out all this money. Okay, that may be true. But in my humble opinion, that's how this whole inflation thing started with the Market Facilitation Program followed by the PPP, even though PPP was not his deal, I get it.

But free money causes inflation, and then inflation causes everybody in the support network around the area, in this case farming, to want their piece of the pie. And in this case, that was the union that represents the workers at John Deere. And then it just grew from there, right? We've seen no reset of inputs. So it's hard to say, Chris. At the end of the day, a guy much smarter than me in the business who works on the grain origination side, works for a major grain company, said to me 2 weeks ago, we got to find more demand for this shit.

Chris

Barron: It's true.

Peter

Meyer: It's true. And I don't, you know, exports. Yeah. Okay. We've had some nice exports here and everybody's jumping up and down and yeah, yeah, yeah. Let's go. Let's go. Let's go. Well, we all, you know, That's all great. Mexico's buying a lot of corn. Mm-hmm. Is Mexico pre-hedging an election? China's not buying corn. Is anybody buying corn at the moment pre-hedging an election, including Mexico? Because Trump has already said on the record he's going to impose all these tariffs. I mean, it's gotten to the point now— I saw recently where he said that he thought tariffs would take the place of federal income tax. God bless him. But, boy, I don't— I don't know. I don't see it. But, you know, the problem— I think the problem we have, Chris, in the corn market is that, you know, we need a lot of demand. You know, so let's talk about next year.

Let's just talk about where the profitability is at the moment. And you correct me if I'm wrong. At next year's prices, you could lose money on both ends, but you're more likely going to lose less money on corn. Is that correct?

Chris

Barron: Yeah, in most scenarios there's exceptions to that in places, but in general, yes, I would agree.

Peter

Meyer: So I hear that from a lot of people. I hear they don't want to plant, you know, don't want to plant beans, tired of losing money. We produced a 15 billion bushel crop this year. Can we produce a 16 billion bushel crop next year? I think you can. I mean, unless we have a drought. So, you know, I mean, 183 and change. I don't think the yield is going to change much, Chris, now, certainly not in November. Maybe we get a little adjustment in January. I know there are folks out there beating the drums. Oh, we're going to get a cut. We're going to get a cut. Anyway, let's say, let's say it's 185. Let's say it's 95 million acres, which was the 2023 number. So let's not think that that's just thrown out I think we planted 94.6 or 94.7 or something like that. It's not that far off. You get to a 16 billion bushel crop. So my point there is that we need demand. We need demand.

We need demand, especially for corn. I don't know, given the current— no matter who gets in the White House, Chris, I don't know of the current way the pie is being sliced, if I could point specifically to one sector and say, yep, That's going to be our growth sector. I just don't know.

Chris

Barron: Yeah. I think regardless of what administration, there are double-edged swords everywhere. And I think the big thing is that people just need to be educated and then ultimately need to vote for what they think is the right thing. I mean, I'm staying right in the middle lane here and not going to get too risky, but I think it does come down to that though.

Peter

Meyer: I'm a Republican, but at the end of the day, you have to take a step back and just have to look at, you know, consequences of either, either side. Ideal, idealized, correct, correct. I mean, look, both of them are going to affect your wallet, uh, you know, one way or the other. So I don't know. And there's, look, there's no guarantee that if Harris were to get elected that, um, that, that she would keep the Inflation Reduction Act and all of a sudden we would get this miraculous information on 45Z, which we desperately need. We desperately need that. And we were promised it in March. We were promised it again in July. Now we're promised it in December. You know, if, uh, who knows when it's coming? It's probably coming at the same time as the farm bill, which, excuse me, which will be next March sometime. So, or this coming March, I should say.

Yeah, we'll be— well, I, you know, I don't know.

Chris

Barron: Yeah, we'll be a lot smarter on some of that stuff by the time the conference comes around too, and we'll be able to kind of slice and dice that stuff at that point for sure. Um, you know, the election, you talked about that, and that leads to demand and that type of thing. Um, let's, let's, um, ratchet that back to a little bit more short-term. Um, what do you think You know, as we wrap up harvest here, do you, do you see for some kind of a price ranges, um, with the absence of the demand and everything else and all this abundance of grain and basis issues in a lot of places, is there— and I'm not talking basis first, I'm talking flat price for both corn and soybeans for that matter— what, what kind of ranges, you know, can a farmer kind of be looking for and maybe maybe pull the trigger if a person needs to on some more sales before the end of the year?

Peter

Meyer: I think this week was a— it's an interesting point you bring up here. I think this week, let's start with corn as a microcosm of what the range is, right? I've been saying for a while, Chris, that I think everything below— and we're talking basis December futures, right? Just, just not basis, but basis December futures. Everything below $4 is noise. Everything above $4.25 or $4.30 is noise. I live by that. It's— I've been saying it for a while. We traded down to the $3.90s and then we bounced back up, and this week we traded in the $4.20s, $4.21. Everybody gets all hyped up. Boom, there it comes. Here we are, we close right in the middle of that range at $4.15 on Friday. So I think that— I mean, it represents opportunities either way, right? I mean, below $4, it represents a buying opportunity. I'm not suggesting farmers reown their crop.

That's the last thing in the world I would suggest for anybody. I don't believe in that at all. But, um, you know, above $4.25-ish, I think you have to kind of look at it because I don't really see anything on the horizon. The production story is done. If we get a production story— let's talk about this a little bit— I think that if, as a, as a US farmer, you now have to trade South American seasonality, and I've said this on Chip Flory Show, I've said this to other people, Joe Vaclovic, I've said this, that's just the way it should be. Because, and the reason for that is because we've lost the soybean export market for sure. And the corn export market is teetering.

So I could make the argument that, you know, Brazilian seasonality or issues with the Brazilian production, if you want to trade production issues, you know, should be looked upon by the US farmers as a selling opportunity, just given their prominence in the export market. So above $4.30, kind of noisy, Chris. I'd let some go. Obviously, anything above that, and I get it that it for some, it may not, still may not make them profitable. Below $4, I don't, I don't get too excited about stuff. Beans, I think, are in a ton of trouble. I think beans have a dollar downside. I think you could see sub-$9 beans here. And so, and I think this week, we traded up to $10.12 yesterday, or I'm sorry, on Thursday, and boom, down 25 cents like it was nothing. I think that sellers above $10— I don't see any issues in Brazil with that production.

Uh, the crop— everybody was jumping up and down, uh, about how dry it was. And then on top of that came Chinese stimulus, and then we traded up to $10.50, and everybody's like, yep, here we go, here we go. Uh, I, I've really become a contrarian on this stuff, Chris. I really have. I, I don't, I don't like to think with the herd. And I think that we've, we've found over the years, the most recent years, that the market adjusts itself pretty quickly. I mean, what's the market telling me now? You know this. You know me for a long time. I like— I'm fond of saying sometimes I just sit back and listen to the market. The market's telling you it's $4 and $10. All right. I mean, it's a 2.5 multiplier. And here we are.

Yeah, the market is— the market is telling you, despite the fact that the spreads really narrowed before they widened later on, but really narrowed in the middle of the week, especially I was looking at the Dec, Dec, Chris. And, you know, it narrowed into 20 cents. It was, it was, I don't know, 35, 40 cents just a little bit ago. I think nobody is interested in owning deferred crops. Nobody's interested in owning next year's crop just based on what we said a little bit earlier. So, you know, I looked at the even the Dec March that everybody says, well, there's my carry. I mean, you kind of lost some of your carry. Okay. Went back out to $26 yesterday. It was in as far as $23 and change. The day before was $35. Just last week, I think $35 or $36 a couple of weeks ago. But if you, if you zoom out, Chris, the July price hasn't changed at all. It's all the noise in the front.

Indeed, in December. And the algorithms and whatever trying to push that market around. So again, I'm listening to the market. The market is telling me that's a fair price for July. July is kind of— if you zoom out, it hasn't moved. So I do not get too excited about any movement in the spreads. And again, I'm, I'm not, I'm not very bearish soybeans. But I think that there's a— that's where your risk is. Your risk is sub-$9 beans.

Chris

Barron: Yeah. And it's a little different for soybeans as we, you know, are in this week of, you know, the last week of October because the soybean harvest for all practical purposes is pretty, pretty well done. What I— but corn is maybe not so much yet in some areas. It's obviously completely done in a lot of areas, but still hot and heavy in some, in some pockets. What I want to transition that over to for a minute is basis. When the doors get shut on corn in another couple of weeks, kind of like they are with soybeans, does basis have to do the work? And how much work does basis have to do? Because I think a lot of farmers, you know, you give that range— now let's just use corn as an example— to, let's say, $4.20, there's still going to be a lot of guys that will just sit on that.

Is that going to create an opportunity on the basis side, or do you think there'll be enough of grain, you know, being sold in those ranges that that's going to make basis not give us that much of an opportunity?

Peter

Meyer: I think if last year taught us every— anything, it's locking the bin is very dangerous.

Chris

Barron: Yeah, well, I think it is.

Peter

Meyer: I mean, at the, at the end, at the end of the day You know, all you got to do is go back to the June quarterly stocks report when we had 5 billion bushels of corn, 3 billion bushels of soybeans, and the market imploded. Yeah, right. Look, here's, here's, here's the way I look at this, Chris. I mean, I don't— I know you and I were talking before, before you started to record about the fact that where you are, it's— you're getting going and you're drying corn, you know, or you're, you're, you're in the in the middle of it, so to speak, because you got the late plantings and this and that. I mean, there's a lot of stuff in Western Iowa, Southern Nebraska, some of these other states where these elevators are full. They're full and basis is imploding. Ethanol guys are full. And, you know, I mean, you've seen gas prices. Is cheap, right? Gas is below $3 nationally for regular gas.

So that's not telling me there's going to be a lot of additional ethanol demand coming forth here for demand. So, you know, I don't know about— I don't really know about— I would take the lead from you on basis opportunities, Chris, because I just— And maybe I'm just a little gun-shy. But, you know, when we look at a 26-cent carry from Dec to July, so that's what, 6%, 6.5%. Okay, from $4 corn, I can kind of see storing it. But I think you have to take advantage of every opportunity that presents itself. And don't be stubborn here, because last year, You know, we saw that it would only take one— if we can get corn back up, let's say to $4.25, it would only take one of these big cancellations, one of these big buy cancels that we've seen over the last few weeks, cancellation in early next year to just kill the thing. So I don't know, Chris, the storage thing.

Chris

Barron: It's, it's definitely, yeah, it's definitely difficult to think you're going to close the doors and sit on it. And that's kind of was my point for asking, I guess, is that, you know, there's going to be some pockets where basis is probably going to be okay in areas where the yields weren't that great. But you're also going to have the majority of the areas where the yields were excellent to better than excellent that like you said, if the elevators are full and, you know, the processors are running at 75% because of where demand's at, you know, it's really gonna limit our opportunities, I think, on basis. And that's my two cents anyway. I think it's gonna be real limited.

Peter

Meyer: Well, yeah, I think you have, you know, the other thing you have to worry about, in my opinion, is how dry it is, right? So the, The market may start, even though I see that there's some, some rain coming for a lot of folks, even though I totally understand. And, you know, I've spent the last 2 weeks in Iowa. It's just, it's unbelievable how dry it is, is dry throughout, throughout the country. But, you know, there will be folks making a story about how dry it is, trying to push the market higher. Right. And, and for next year. And I get that. But as I said earlier, December '25 has been kind of staying around the $4.50 level and hasn't really moved. So I don't know if that story— but the dryness also has another issue, and that's the Mississippi River levels. So, you know, you want to talk about basis. I mean, you need demand to create, you know, higher basis rate.

And if the river goes— if it stays dry, maybe concern about next year mitigates the fact that the Mississippi River is going to drop because, you know, what export market we have. And look, the ethanol demand for corn is kind of flat. So we're going to have to depend on export demand. And we did get excited this week about export demand to Mexico, whatever, and we traded above $4.20, almost to $4.25. But if the Mississippi River gets too low, and it really gets dry, you know, that's, that's, that's gonna, that's gonna be your That's going to kill basis. That would crush basis.

Chris

Barron: Yeah, yeah. Well, the last thing—

Peter

Meyer: oh, it's—

Chris

Barron: yeah, and the last thing I want to hit on here and is, um, and you kind of gave us a segue to it, is just the new crop. Um, you know, when we see that 425, you know, horn on the, on the D24 or whatever, um, and you're looking for, you know, a decent price or a place to start some sales or whatever, kind of quickly here, and we'll wrap things up. But kind of what are some ranges you're looking at on the, on the corn and soybean side on the, on the new, new crop? I mean, soybeans are kind of hopeless currently, unfortunately.

Peter

Meyer: Well, yeah, one side specifically. Where do we close? So we closed, closed December corn at $4.41. And then we closed November '25 beans at $88 or something like that. I mean, you know, I talked to guys that are claiming that beans have to get to $11 before they even make a penny on it. So a lot of that's a, that's a tough level. A lot of guys, what?

Chris

Barron: There's a fair amount of guys that won't make money at $11. So unfortunately, See, that's, that's, that's really the issue.

Peter

Meyer: Right. So if, so if we agree, if we agree that soybeans have to be well above $11, I mean, can we get to $11 by spring planting? So then, unless, unless a massive implosion happens in with the, with Brazilian weather, and we have a, and it doesn't rain between now and, and and April 1st, right? Okay, then we get it, then we get it to that level. So what does that mean? That means more corn acres. It gets back to our other, our other issue. Um, certainly I think that if I believed that $4.30, above $4.30, or especially above $4.50, uh, is noise in the front, um, I would just add 25 cents to that in the back. So I think that if you got corn up to, you know, $4.60, $4.70, $4.75 level, I would certainly be making some sales, but I know that may not be profitable for some folks.

I'm just, you know, I don't— I'm just very concerned about the— about what the corn bean acreage numbers are going to look like next year. Based on my conversation with farmers, it's very concerning. And, you know, and we get the USDA Outlook Forum in February. I don't know, that thing seems to have lost its impact on markets, but I would expect them to be, you know, 183, 184-ish on yield, maybe even a little bit higher than that. And certainly I would think they're going to 20, 23 acres, which would be 94.6, 94.7 in corn. So yeah, I don't—

Chris

Barron: yeah, I think it's a— we need to be— make sure we're calibrated for, for the likelihoods of what's coming our way in the next few weeks, months, figuring out the financials for the end of the year and that type of thing. I think it's going to be a real big thing. And then looking at that cost of production for going into 2024, I think it'll be huge— or excuse me, into 2025 will be huge, I think, too, just because like you said, you know, if there are some opportunities in that $460 range, that does get a lot of guys close to at least kind of covering the majority of their expenses. And people got to get started at some point probably on that. But any— I'm going to give you the final word. Anything I didn't ask, anything we didn't talk about that, that we need to hit on, and then we'll wrap it up.

Peter

Meyer: No, I think we're good. I just, I'm very disappointed in the lack of information around 45Z. As I said, Chris, I mean, I think that the production story, production stories in general have corrected themselves much, much quicker over time. I think that speaks to the resiliency of the global farmer. So now we have to focus on demand. And I just don't like the demand story enough to get us to, let's say, $5 or $5.50 corn, or certainly $11.50 or $12 beans. I just don't like the demand story enough. So, you know, we've had one round of failed Chinese stimulus. That's really what pushed the bean market up to $10.50 a few weeks ago or months ago or so. Will they— if they come back with another round of stimulus, will the bean market react the same way? Probably not, because Fool me once, right? Fool me twice, I'm done. So I just think we're kind of stuck here.

And I don't think that the funds have really any interest on it. If the funds have an interest or believe, as we started this conversation with Paul Jones, who's one of the most successful hedge fund managers in history, you know, all roads lead to inflation, then commodities are cheap. But I don't know. I don't know. I mean, oil is just hanging around $70, hanging around, hanging around. I mean, we were joking a few weeks ago with a group that if this had been 5 or 10 years ago and we had everything going on in Israel and Lebanon and Iraq and Iran and everything that's going on in there, if that had been going on 5 or 10 years ago, oil would've been at $100 like it was nothing and it would've dragged everything else up with it. And now we don't see that anymore. We see this big reset on commodities very, very quickly.

Granted, there's a lot of issues with oil that as far as domestic production, domestic supply here in the US that have, that have changed over the last 10 years. But it's, you know, I don't know, it just seems stuck. I mean, I, we're, we're most likely everybody's waiting for the election.

Chris

Barron: Yeah. Well, it'll be interesting. And the one thing I can tell you, um, Pete, is I think the listeners that listen here, that are on here, tend to be really good business people that just happen to farm. And I think I'm pretty optimistic. I think even when, you know, margins are tight and things look the way they do, we'll navigate that. We've done it before, we'll do it again. And I think we all got to stay positive. And I think we'll get through it regardless of what administration's in there. 99% of the guys listening to this are going to be, going to be pretty, uh, prosperous anyway.

Peter

Meyer: Yeah, I would, I would agree. You could never, never ever underestimate the resiliency of the U.S. farmer. I mean, it is what he or she does, and they do it the best in the world. And, but it's just, it's, it's hard. I don't think people realize how hard, how hard it is.

Chris

Barron: Yeah, yeah, for sure. Well, hey Pete, I really appreciate your, uh, time today, and, um, We'll get you back here in a few weeks as we get completely through harvest and we kind of have a little bit more maybe to talk about after the election and kind of see where your 45Z and some of this stuff could be going and what things kind of look like. And really appreciate your time today.

Peter

Meyer: Sure, my pleasure, Chris. All the best. And I hope everybody out there stays safe through the remainder of harvest. Yeah. And go vote. Regardless of which way you want to vote, go vote.

Chris

Barron: Yep. For sure. Go vote. And, uh, and then also the thing I've wrapped up with the last, uh, couple of weeks is if, you know, it's dry as it's been, nobody's gotten any rain days, and very few rain days anyway. And so if you're not getting your rest, uh, take a rain day, make a rain day, um, get your sleep. Um, and that's kind of what keeps you safe. And with that said, again, thanks to Pete, thanks to you guys, and we will catch you again next time. On the iView page.