About This Episode
Recording from the Ag View Summit in Phoenix, Ryan Moe and Brian Splitt start with what they saw in the room rather than on the screen. A producer asked how to think about marketing December 2028 corn, which Split calls uncommon but not unreasonable. Both read the optimism and the three-year budgeting in the audience as a signal that runs against the tone of agricultural social media, and as evidence of who is positioning to still be farming years from now.
Split's macro argument is about relative value. Gold near $5,000 an ounce and silver above $100 sit alongside corn, soybeans, cotton, and rice at or near multi-decade lows, and money managers holding large profits eventually look for cheap places to put them. He also flags a dollar index that has trended higher since 2011 and is close to breaking that trend, noting that the dollar against the Brazilian real and the Mexican peso matters more than the index itself.
On the crops, the pair sees no weather problem in Brazil, which means a very large soybean crop and a timely safrinha planting, while Argentine conditions have declined three weeks running with double-digit weekly drops. A five to ten million ton cut there could quickly offset much of the recent increase in global production. Their marketing conclusion follows from volatility rather than direction: with option premium cheap, this is the environment to buy protection, not to sell it.
“Buy puts or buy calls when you can, not when you have to.”
— Brian Splitt
Key Takeaways
Relative value moves money. When one commodity sector sets records and another sits at multi-decade lows, expect rotation toward the cheap one.
For U.S. export competitiveness, the dollar against the Brazilian real and the Mexican peso matters more than the dollar index.
No weather problem is itself the weather story. A quiet South American forecast is bearish information you can act on.
Buy options when volatility is low and you can afford them, not when a crisis has already made them expensive.
Low price, low volatility markets tempt producers to sell premium for a few extra cents. That is the wrong direction of trade.
Record demand is a cushion, not a guarantee. Demand takes time to change, so a single event can reset the whole view of the market.
Full Transcript
Ryan
Moe: Hey, good morning everybody. This is Ryan Moe filling in for Shay and Chris while they are doing their jobs very, very well at the Ag View Summit down here in Phoenix. I'm here with Brian Split today. Brian, say hello to everyone.
Brian
Split: Hey everybody. Thanks Ryan for the introduction.
Ryan
Moe: Yeah, so down here in Arizona, just got done with a panel with Joe Vaclovic. We had Pete Meyer, we had yourself, we had Matt up there. Learned a lot from each other. At least I did anyway. I don't know if I offered you guys anything, but it was a pretty engaged group down here, right?
Brian
Split: Yeah, I was really impressed by the level of questions from the crowd. Had a gentleman already asking about December '28 corn and what we thought about marketing that, that far out. And it's, to me, an uncommon, event for a producer to be thinking 3 years ahead. And I don't think there's anything wrong with that. I just don't see it very often.
Ryan
Moe: Yeah, it's something that's really significant to me as I've gone around and done a lot of meetings here in the last month and a half is the optimism that exists in an industry that if you read all the crap you see on social media, it should be the doldrums and the worst time ever here in agriculture. We're dealing with some very sharp producers here, like you said, that are in that position where they're looking 3 years out, they're running budgets, they're running numbers, they're very confident they're gonna be farming 3 years from now. Those are one of the things that are the green shoots that we wanna be looking for here in our industry. And I think seeing this and seeing more and more of it It's really good. Like you said, great questions that came from the audience. Anything that stood out for you here before we kind of kick into what we're looking at next week?
Brian
Split: As far as standing out, you know, I just have seen a lot of eye-opening things this weekend in regards to AI and capabilities of AI, how it can be used to your benefit in agricultural production, from developing, you know, tools to track costs of breakevens and sales and all of that and the prompts that might need to be done to do that. I think there is a good level of optimism right now. And, you know, I think one of the last things that was said on the panel was it's always darkest before the dawn. And I really feel like we're in that mindset right now. And I think some of the bigger picture views of what's going on in the world and what's happening in the metal markets and interest rates.
So Things that will have an impact on operations, not just the price of corn and soybeans and fertilizer, but some of these bigger picture macro things that will undoubtedly have an effect on what we're dealing with for the next years to come.
Ryan
Moe: Yeah, and I want to get into that about, 'cause you said something before we got on here, but I want to kind of stick a fork in that for right now. Matt Bennett brought up a great point when they were asking for something optimistic for the next 365 days. We're sitting at record corn demand both domestically and internationally. And that's a really good thing because we've got 17 billion bushels of corn that we've got to chew up. However, it does look like we are giving it the old college try and doing a really nice job of grinding through that. And when you look at that demand story, it's really something even highlighted by export sales that just came out here, right?
Brian
Split: Correct. And so when I kind of extrapolate that to what does that mean for big picture, it means to me that the world is very accustomed, they've gotten very used to being able to use the corn that they want to use. They're making very good money using the corn. Um, and that can continue for some time. But what happens is that, that demand, um, it's going to take a little bit of time to change it. And so if something does happen, the world is used to operating on being able to use corn as much as it wants. So if there is a cycle, and I know maybe we'll get into Argentina here a little bit, but Things can change very drastically and quickly in commodity markets. We've seen it all the time, very cyclical in nature. And so I do think that there's, we're one story away or one event away from having a complete shift in what our view of the marketplace might be.
Ryan
Moe: Yeah, and I know people wanna see that shift come sooner than later. However, these things do tend to last a little bit, but we've been in these doldrums for quite a while. So shifting gears into this coming week. We got very few things going on market-wise really. I mean, it's been a pretty soft news cycle even though the news cycle never seems to stop 'cause we're always just seconds away from the next Trump post on Truth Social. But boy, the market's gotten somewhat exhausted from some of that stuff. And so since we have no way of predicting that, we have no way of predicting what kind of activities are gonna be taking place in Iran over the next 7 days, What are some other things that you guys are watching out there? And I would like you to go ahead and talk about that macro factor that we were discussing about bull markets creating attention in commodities.
Brian
Split: Yeah, right. So I think if I am a money manager, and I'm not, but in my mind, if I was, and I look at a commodity portfolio, and then there's certain ones that are obviously getting a lot of attention right now, you've got metals, Gold is trading near $5,000 an ounce. We had silver trade over $100 an ounce, and that was $30, what, 6 months ago. And so we have certain commodities that are making new all-time record highs, and then you have others that are at or near multi-decade lows. And so, and it's not just the corn and soybean markets that seem relatively cheap, but you think about cotton, think about rice. The rice market recently had traded into the low nines and we haven't had rice sub-$9 since 2006.
So I do think the money manager is going to start to say, hey, we've got record highs in a lot of commodities, but there's a lot of other commodities, specifically agricultural ones, that are near, uh, big picture, low level, uh, value areas. And I think that is something that will come into play as far as we've got a lot of profit here, let's rotate out of that and start putting it in some things that look very cheap historically.
Ryan
Moe: A little bit of that Dogs of the Dow trade kind of mindset there. And that could come in and put some kind of wind in the sails of these grain markets potentially.
Brian
Split: Yeah. And I think what's happening in the metals is also maybe a signal of what we could potentially see moving forward in the dollar. The dollar index has been trending higher since 2011. It's been about a 15-year uptrend. And we are dangerously close to breaking that long-term uptrend on the dollar. The dollar to me looks like it has a head and shoulder top pattern on it in the March contract, and if we get the dollar sub-97, 96.50, I think the metal markets are telling us that is something that's going to be happening here over the next few months.
Ryan
Moe: And bearish dollar typically pretty good for US commodity production.
Brian
Split: Correct. So if we see the dollar lose value versus other commodity or versus other currencies, then those currencies have more buying power relative to the dollar. And then we really need to focus on what's going on specifically with the dollar versus the Brazilian real. I think if there was one currency that we would really like to, uh, to show strength versus the US dollar, it would be the real.
Ryan
Moe: Yeah. And the Mexican peso. Yep. And so those are the two key crosses that folks need to keep an eye on. That's more important than the dollar index. It's how is the relationship of the dollar versus the— peso and versus the real. Absolutely. Which is an excellent segue into Brazil. We're extremely confident that we have just an absolute behemoth of a crop in Brazil. The weather story on Brazil can be very short in that the biggest problem that we have with Brazil is that we have no weather problem with Brazil. And that is gonna be a big soybean crop. And then also a very timely planting of the safrinha corn crop. And so things are looking very good in Brazil, but the neighbor to the south, not so much, right? Mm-hmm.
Brian
Split: Yeah, Argentina has had crop conditions decline for the last, what, 3 weeks in a row? And these are starting to be double-digit declines week over week. And I think there's gonna be a point here where the market has just gotten the January WASDE quarterly stocks, all that information digested. We saw global corn production increase because of the size of the domestic crop And very quickly we could take a large chunk out of that increase in our understanding of the global balance sheet with a decline in Argentine corn production. I don't know how much realistically we could lose. Could it be 5 million tons? Could it be 10? I think sure. But, you know, we just had the, the US domestic production increased about 14 million tons with the extra yield and the extra harvested acres.
So we could very quickly go from, hey, this is all this bearish information to, okay, maybe it's not that bad and start getting a little bit of a lift here.
Ryan
Moe: Yeah, and that's what it's gonna take to go ahead and chew through such a gigantic US corn crop. Just little chips, little bites out of it. I mean, that's, a mentor told me a long time ago, the only way to eat an elephant is one bite at a time. And these types of things that show up, again, back to the comment very early in the show here, it's always darkest before the dawn. So anything else you can kind of think of here before we wrap up? I know we gotta make this quick and get everybody back on their way on their Sunday.
Brian
Split: Some of the themes that I think that were talked about was not getting too over your skis as far as feeling like you need to have a ton of marketing done at levels that really probably aren't profitable or maybe are only very slightly profitable. I think another theme was if you haven't gotten in tune with options and how options work, you might want to spend some time to educate yourself because they are a very good tool, especially in the current environment where the volatility value of grain options specifically is very low. So they're not expensive to buy, they're not expensive to use, which also means probably not the best time to sell them. And we kind of toyed into the accumulator strategy and all of that.
So I do think that as we move forward, I think there's a lot of reasons why this market has dealt with a lot of the worst of the worst news here in the last couple of months, also with wheat. Wheat production was up 35.4 million tons globally just from August to where we are in the January report. So we've dealt with a lot, a lot of bad. I just don't know how much more bad there is out there.
Ryan
Moe: Yeah, and a low vol environment and a low price environment is the right environment for long option strategies. Correct. So that is— and that is oftentimes gotten backwards, right? And the utilization of short option strategies seem to be what shows up in low vol markets, and that's the exact opposite mindset.
Brian
Split: We could go into a huge long, you know, we could take another half hour about that, right?
Ryan
Moe: But that's not gonna— that'll put people to sleep, and that's not what we want to do here on this trip.
Brian
Split: Yeah, but you know, just why does that happen? Because when prices are low like this and market's quiet, people are looking for a way to get a little bit more. Can I add 5 cents here, 10 cents there? And they try to do it by selling options. But, uh, you know, that's just one of those things where if you get a change in the perception of the marketplace selling cheap options can really come back to haunt you. And, you know, one of my old friends in the industry used to say, you know, buy puts or buy calls when you can, not when you have to. And these low volatility, low price environments are when you can.
Ryan
Moe: Fantastic stuff. With that, we're gonna go ahead and put a wrap on it. We want to make sure everybody has a great week and enjoy the rest of the time down here in Arizona.
Brian
Split: Okay, cheers.