Crop tour? What now?

Joe

Paulsen: 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. Good morning, this is Joe Paulsen guest hosting the Ag View Pitch, and this morning we're going to visit with Jared Creed, who just came off the Pro Farmer Tour. Good morning, Jared. How are you?

Jerod

Creed: I'm doing well, Joe. Thank you for the invite. And I think I told you last time I was on with you that it was a refresher to not have to listen to Chris's voice all the time, right? Right.

Joe

Paulsen: Well, we'll try and fill his shoes here the best we can, I guess.

Jerod

Creed: You bet.

Joe

Paulsen: Yeah. So, you know, tell us about your experience on the Pro Farmer Tour and, you know, what that process was kind of like and, you know, what you saw.

Jerod

Creed: Yeah. So a little review of the tour. The Western tour starts in Sioux Falls, makes its way down to Grand Island. Over to Nebraska City, up to Spencer, Iowa, and then ends in Rochester, Minnesota on Thursday. So 4 full days. And there's also an eastern leg of the tour moving through Ohio, Indiana, into Illinois, eastern Iowa, and southeast Minnesota. Collectively, I can't remember the exact number, but I want to say that there was 1,400 total samples collected amongst both sides of the tour. That's obviously a very, very large number and competes with anybody else that is out and about taking any type of objective yield views on crop potential. But the main piece to remember here, kind of sharing the story of what the Pro Farmer Crop Tour is and then in comparison to Pro Farmer's own yield estimates. The crop tour is, in my opinion, more of an indication of a direction of yield.

As in, you're not going out there to try to prove that a crop is higher or lower or steady. You're taking an assessment of actually just what you see across all those samples. Then, based upon 30-some years now of data from that tour, you're able to measure changes year on year on multiple different facets from ear count, grain length, grain kernels around. On soybeans, you're obviously taking just a measurement of pods. There's not quite the similar calculation that you have in corn to translate it into a yield potential. I think it's important to remember that the Pro Farmer Crop Tour method for measuring yield is not your old-fashioned kernels around times kernels long, divided or multiplied times your population and using a kernel count of say 90,000 or 80,000. Instead, we're taking grain inches and it's divided off.

It's basically using a 90,000 kernel count to establish a yield estimate. At the end of the day, those numbers are just compared to years and years and years years worth of data. And on top of that, able to take all the past years of data against final USDA NASS yields. So I think it's important to remember that you're still— the sample process is incredibly random. Trying to go every 12 to 15 miles, you make the first right or left, then you come up to your first corn and soybean field and you get after it. Get past the end rows, 30 paces in, take your sample, get back in the truck, go to the next one. There is no visiting the same farm year after year. The takeaway from this year, that's kind of your process, that's a little bit of your background. The takeaway from this year is that Southeast South Dakota grows about a third of the state's crop, is in dire straits, very, very dry.

Arguably I would say that it's as bad as 2012 with the caveat that you have to adjust today's technology and genetics to make up for the difference of what we had in 2012. Uh, you get into Nebraska, it's the same story. What I found very interesting in Nebraska is that the irrigated corn is just not up to snuff and they've had to fight an enormous amount of challenges. And that's the other benefit of the tour. You gather a lot of information talking to numerous different farmers and agronomists throughout the time that, you know, you rewind the calendar. One of the pioneer agronomists, I think, said it perfectly. The planting season for 2022 started at the harvest of '21. And given the crop size last year, I don't think it's any secret that the Midwest producer has fought in the planting season this spring a lot of trash and residue from last year's crop.

On top of that, the Nebraska farmer fought wind, cold, and rainy conditions, pushed planting back a little bit, and then you had sporadic hailstorms move through the system. Two big ones came through in the first 10 to 12 days of June, and that dramatically impacted the decisions of the farmer from that point forward. Some individuals were forced to replant because of significant crop damage. Which some individuals decided to stay status quo. I'll tell you one of the nastier pieces, the farmer again couldn't do much about it. There's no doubt that we had problems with early residual or weed control early on in the season. That hailstorm did not do anybody favors. Common logic, it ruined the canopy and I swear I've never walked in as much weedy farms in the state of Nebraska as we have this year.

And to further that, some of these farms, especially on the irrigated side that had that damage, it almost— it has the perception to me that the damage was done so early, the yield potential was being so much that it almost shut off the desire or the need to keep pumping water on a crop. That did nothing but go backwards and not going to recover with how dry Nebraska is. And that's incredibly evident. That's the story in dry land. Yeah, you still have some hail damage in corn, but all the dry land, I mean, it's ugly. I feel bad for them. It's so, so bad from east to west, north to south. Yeah, you got a few pockets that are better. And maybe that has to do with some type of practices or just being the lucky individual to catch the moisture that the neighbor didn't..

But I really do think that the amount of challenges that's been thrown to the Nebraska farmer is probably the number one storyline for a national yield. You know, Nebraska's producing close to, you know, in between 8 to 9 million acres of corn a year. They're your number 3 or number 4 corn producer annually, and they got hurt bad. And when I talk about how much does the Nebraska crop impact the national scale, the crop production loss that I am firmly believer is gone in Nebraska can be as much as 3 bushels an acre nationally. It's probably 2 pretty easily. So I kind of speed up here, you know, from Nebraska, that's the big storyline. You make it into western Iowa, western Iowa, they would have an average crop that we would have been happy with. In 2015.

You look back at the last several years and there's been plenty of producers and counties that are yielding 220, 230, 240, upwards of 250, 260 farm averages. This year I think 220, 230 farm averages is going to stop it. That's going to be the top, and there's going to be a lot of 190 to 210 bushel corn. You might say that doesn't sound that bad, Well, when you compare it year on year, you know, Iowa yielded 205 last year. If you all of a sudden look at your western 3 districts, kind of starting in the northwest to the northeast, that's 1, 2, 3, from west central Iowa over to east central Iowa, that's 4, 5, 6, and obviously the same goes for the southern tier. But in Districts 1, 4, and 7, far western Iowa, you have basically 5 million acres of corn there in the state. The drought didn't stop at the Missouri River.

Some of your severe weather didn't stop at the Missouri River, and for sure the heat didn't stop. Again, talking to agronomists, they said, "Well, in this area, for the growing season, we're running 7 or 8 days ahead on GDUs, and on top of that, the crop was planted 7 to 10 days later than normal." That doesn't seem like a very good mix to me, and every single farm you walk through, with maybe the exception of parts of Minnesota, It's very evident that the crop is just going fast. It's just moving along very quickly. Kernel depth is an issue. Ear length is an issue. One other quick comment in Nebraska. I think that the string of good years in the last several years has maybe changed a few practices on dry land. It's all speculation here. Change a few practices in dry land, populations are higher, and it severely impacted ear size.

While the flip side, individuals who maybe have kept populations at lower levels, you know, I tell you that on average, if we got into a farm that was 18,000 to 22,000 final stand count, it was 99% of time doing better than anything higher than 22,000 stand count. I'm not an agronomist, but that's a stat. That's a fact as well. So Moving on from Iowa, Iowa, you think about those districts, I think that you probably run the risk of several of those counties. If you've got 99 counties in Iowa, 90 of them produce a crop. I think there's probably 30 to 40 counties in the state of Iowa that have every bit of potential of being at least 10 bushel off, if not closer to 20, 25 off the last couple year average. So that adds up pretty quickly. Also hampering the ability to keep Iowa at anywhere near a trend yield. You know, again, 205 was last year yield.

In my opinion, I think your range in Iowa based upon are we going to get rainfall here this weekend? If it doesn't, there is a chance that Iowa could perhaps slip as low as 190. Right now, I guess you probably call it in the middle, call it 195. With Eastern Iowa really having a good crop, but just not— there's going to be some records in Eastern Iowa, but I don't think collectively it's going to be a record, but it's not enough to make up for the holes in Western Iowa. Lastly, Minnesota, you know, the crop looked pretty darn good. They've had the timely rains that south of them have not. The further east you got away from South Dakota-North Dakota border, the crop was better. It's evident that, you know, the Minnesota populations tend to always be higher on the tour, and they've had the moisture to support that crop development. A lot of 200-bushel corn.

Don't know if Minnesota is necessarily looking at a record, but it'll be awfully close. But at the end of the day, kind of wrap all that up on corn, it's just nobody has the ability to make up for the drop in Iowa and the significant drop in Nebraska and the losses in southeast South Dakota is just kind of like an, oh, for lack of better words, icing on a cake. Not a disrespect to any listeners that are in southeast South Dakota. It's obviously a tough environment, but it's just not helping. And I'll give you one— sorry, one sentence on soybeans. If beans get rain, they're going to be good. I don't know about national yield being a record, but there's a lot of potential out there in beans. But you're going to have to get rain. And it's a fact that we have 50 million acres of beans between North Dakota, South Dakota, Nebraska, Kansas, Missouri, Iowa, Minnesota.

West of the Missouri River is just flat out been dry. And on top of that, there's nothing in the forecast for the next 7 days. We're getting to that critical timeframe, right? There's potential out there, but you're gonna have to put some more rainfall on it a time or two. If that doesn't happen, then we'll start talking about some losses in the western Corn Belt bean acres, just because of, you know, 50% of the acres are in those states that had its rattled off, and that can have an impact pretty darn quick.

Joe

Paulsen: You know, I, I'm up here in northern Illinois, and just what I'm seeing around here kind of echoes your synopsis of Eastern Iowa. I mean, I was extremely thinking the potential here was absolutely amazing. The stuff looks great. When we were walking in it here about 2, 3 weeks ago, I was really excited. Then we were out with my agronomist here the last week taking some yield checks. And I was shocked at the amount of tipback. And we've had absolutely fantastic rainfall, you know, an inch or two almost weekly here for the last 3 weeks. There's some weird stuff going on, you know, in the corn crop that's definitely shaving a little bit off. And then, you know, to echo your synopsis of the beans as well, is the beans just seem to continue to get better and better and better. I mean, you know, they're just putting on a ton of growth, leveling out.

I mean, the bean crop looks really awesome. Uh, it's gonna be interesting.

Jerod

Creed: So last week when I was on with Chris, I shared the message that I was starting to receive a lot of concern about tipback related to of all things, lack of solar radiation. I mean, hello 2022, let's just throw something else in the basket to cause variability. What you just said, you know, I'm getting an inch or two of rain per week. If those are coming at night in just one system a week, that's all great, but I'm making the assumption that your tit-back might not be related to heat. It might be more related to lack of sunshine.

Joe

Paulsen: Oh, for sure. I mean, you know, the rains come about, usually start about 6, 7 o'clock in the morning, and then we're, you know, cloudy the rest of the day. And yeah, that's, that's pretty accurate.

Jerod

Creed: I'm not suggesting that that's a massive detriment to the crop. It's probably, as you said, it's probably taken off the top end for individuals. And again, let me preface it for all your listeners, I'm the farthest thing away from an agronomist. I'm not going to pretend to do that, but I'm basically kind of regurgitating a lot of the different information that I collect over time. And it's just another sign of this crop is just the farmer in my mind has— I've always been optimistic, more than a glass half full, that the farmer overcomes the challenges thrown their way. They always have. But it just doesn't seem like that is possible this year. From all of the battles that has been had.

One more stat that I think is now pretty prevalent in my mind, some of the crop modeling software that I use, third-party software, they basically laid out that once you get literally 1 degree above normal in the month of July, you start to see negative crop development. Now, one degree, that doesn't seem like much. We ended up being above one degree above normal temperatures on a production weighted average view across all the Corn Belt on both daytime temps and nighttime temps. In years where the crop legitimately gets bigger, from the trend, you know, trend is just a benchmark. Crop can get bigger or smaller from that, from July 4th and forward. We're not getting bigger this year. And for that matter, the years that it does get bigger, you are always cooler than normal temperatures. So it's like a mix of temperatures, lack of sunlight, lack of rain. I mean, you name it.

Whereas some places unfortunately way too dry early and now just getting bombarded with rain over in like the Kentucky, Tennessee, southern Ohio area. So I rambled on there a lot, Joe. I apologize about that. No, you're good. That's the takeaway. And I think there's two other pieces to make mention here of kind of the process or maybe the information that's going to come our way. So after the markets closed on Friday, Pro Farmer themselves, ultimately just another yield estimate from a private firm outside of the government, They can use the data that they collect on the tour to, you know, promote or to provide their own estimate yield nationally. But the number that Pro Farmer puts out has— it's not tied to the results of the daily release on the crop tour. Okay, so just kind of keeping those two separate.

But Pro Farmer's national yield estimate was 168.1 in corn, uh, 7, almost 7.5 bushels lower than the last USDA NASS number, uh, and a couple tenths of bushel lower than the last bean number. Now on the August crop production report, it was heavily dependent on Farmer Survey, and I talked about this with Chris last week, and I think it's a good reminder again And maybe a little bit of a soapbox comment here. Oh, the USDA is wrong. Oh, the USDA is wrong. Well, what are they wrong about? They're reporting the information that the farmer gave them. Correct. That's the August report. So fighting the government is basically— that's not going to work. But you think in all reality, the third week of July, what did the farmer perceive their crop potential to be versus reality today. Now you open the doors to the September crop report.

That is the first month we will have OY data, objective yield data, in which USDA enumerators will be out in the field taking real samples, looking at populations, ear counts, ear weights. Well, maybe not ear weights yet. It just kind of depends on how developed the crop is. I think there's going to be places that are going to be ready to go ahead and be sent into the lab for ear weights. Oftentimes that's not happening until the October report. Those ear samples are being sent in at the end of September. But we might have some places that actually do have ear weights just because of the advanced development of some of this crop. September, when you think about data coming our way in the ag industry, we're going to get that, a new yield estimate. On both corn and beans and updated supply and demand numbers. And then later in the month is the big one.

We're going to get our September stocks report, and that's going to kind of put a bow on 2021 production from both corn and soybeans as we kind of get through the end of the marketing year that ends in a couple days. USDA's marketing year is September 1st to the end of August. We're going to get a look back at at total demand, total supply, total production all the way back into the 2021 crop year. And if history repeats itself, last year is a pretty big surprise. And one of the, one of the pieces that a potential surprise is that the process— again, it's important to remember the odds that the farmer really went from above average selling pace in the fourth quarter of this year to below normal selling pace in the second quarter, I find hard to believe. High prices have brought out crops that we didn't know was there before. So that's a caveat to that.

But again, if history repeats itself, I think we could see some cuts in the September report to maybe reflect a little bit closer what continues to be a very firm cash market on old crop corn and soybeans.

Joe

Paulsen: So, um, how does the Pro Farmer estimates kind of historically jive with what it actually ends up being? How accurate has Pro Farmer generally been in the past?

Jerod

Creed: Well, they will publish their nightly estimates, you know, I'm gonna break these two out: the daily tour samples versus the Pro Farmer private estimate. The tour samples have a, you know, a not a benchmark, but a measured spread of historically what the spread is from measurements versus USDA numbers. Okay, so it's not about if you get through, let's just say you get through Iowa, easy math, you get a 200 bushel an acre sample, but your historical spread you're about 15 bushel light, perhaps. Those spreads are kept in consideration when looking at the variances and differences from tour results versus USDA. I don't know what the accuracy level is of Pro Farmer's actual yield survey, and this isn't against them or anybody else that puts out a, puts out a yield estimate. I would say that's a better indicator of the direction or the belief of a direction of a crop.

And in the year that we're in, I mean, I would be— this is maybe what scares me the most, Joe. What if we're all wrong and the yield estimates actually go up from the USDA? And don't rule that out because at the end of the day, you're still getting random data samples, right? You're getting farmer survey and you're getting in the fields that You never know. There's no certainty. Yeah, there's no certainty that the production is going lower. Last year, the probability of production going lower is very, very high. Gotcha.

Joe

Paulsen: Because last year when I went out and looked at my fields, I— we had a really— the driest June I've ever seen. We, uh, the creek behind my, uh, shop here went dry in June and Nobody— we've never seen that. And then we started getting some rain in July, and when I went out there at the end of August, I was really disappointed at what I was seeing. And then when we got in there to harvest it, it was mind-boggling what was actually there. It was a way better crop than what I thought it was going to be. And my The agronomist that does all my scouting, he gives me yield estimates, samples all my fields, and I kind of take them with a grain of salt. And like you said, I use it as a kind of a bellwether for direction. If the estimate was more than it was last year, well then it's probably going to be a little better than it was last year, and vice versa.

Jerod

Creed: Yep. Now it's a great conversation to have about, you know, yield estimates and direction of the crop and such. But I think what's most important to kind of put a lid on all of that is historically the market just flat out might not care about a tour and all private yield estimates. That is always the risk. And quite frankly, it felt like maybe this year the tour results, one of your larger boots on the ground views of what's actually happening, it might have got some attention that created a little bit of nervousness or a little bit of more uncertainty. Because you think about the calendar and the production of a corn crop primarily by August and September, our, our, the, the fear or the uncertainty level on having a good crop on the table It's typically gone. We know we have a pretty good crop coming our way.

Yeah, you got some variances in yield, but as a whole, you know that the crop is coming. And that's, I think, where a lot of your seasonal market tendencies have kicked in before. You have a farmer that is comfortable with the crop coming their way and they liquidate the balance of their old crop corn stock and you get to the front end of harvest and the crop is okay or good or are really good and I don't have space to hold all this grain, so I have to go dump more on the market. That's what creates your seasonal tendencies that have typically just been very, very accurate from kind of July 15th into the, you know, quote unquote harvest low, middle of October timeframe. So this year, like I said, it kind of did feel a little different.

It felt like maybe the market has some— some question marks, but you can't lose sight that we do have a couple other bigger things happening in the market. The flooding in China. Oftentimes people want to talk about the dryness in China. Well, facts are facts. It's not dryness that's hurting their crop. The flooding is what's hurting their crop. Where it's dry is not big corn production areas. Where it's flooding, it's some of their biggest corn production areas. And on top of that, you obviously have a continued hot and dry spell that is daily harvesting corn out of Europe. So a combination of some fear of China corn production dropping and the fear of the EU corn production dropping, still question marks in Ukraine, uh, inflation and all these other comments out of the Fed that seems to spook the equity market one day and energies are flying all around.

I think we got more things going on the market than just, oh hey, it looks like our production, or overstated our production to this point, and a tour is, is confirming that. I mean, in years past it almost seemed like if you just looked at the calendar of the crop tour and you measure that against the market like almost always that Monday, Tuesday, Wednesday, at least Monday, Tuesday is higher. And then Wednesday, Thursday, Friday, we absolutely get buried. I'm pretty sure it was a Friday in 2016 or '17, one of the big, big crop years. We were limit down on a Friday after the tour. That could have been a situation that the tour went out and confirmed that we got a record coming our way. It was probably 2017. I think that was a record crop for, for many, many states.

Joe

Paulsen: Well, I know that it was surprising to me as I was listening to the crop tour progress. I mean, I guess I didn't realize that there was gonna— there was that big of production issues to make that big of a dent in some of these state averages. And yeah, it definitely seemed like the market was listening this year a little bit more, and I think everybody's radar's up with, uh, you know, all these other macro things that are affecting this.

Jerod

Creed: Uh, in no way, shape, or form is trying to look back at what did I say last week and what has happened since then. Please, I do not mean it in that fashion. The conversation last week was about some of these different things changing in front of us. From an inflation standpoint, from a natural gas issue and how that relates into the fertilizer market and fear of commodities still being short worldwide, the EU weather conditions continuing to get worse, you know, speculation around just how much corn is China going to have to buy from the U.S. And on top of that, yeah, U.S. weather was not that great and probably the expectation of yields coming lower long-term, which you always fight that issue of how much of that is priced in.

I have my personal opinion, and I typically hate giving these, but I'm telling you, I think the farmer is going to have a really good chance of selling a chunk of corn around that $7 cash market, maybe even a tad higher. But I'm going to have a hard time thinking that from a speculative money side, I think they're going to have a hard time establishing a big long position and get paid for that long position. You know, they're kind of— and that's at least for the next couple months. Maybe after the first of the year that's a little bit different, but the farmer is going to be relinquishing a lot of grain in the next 50 to 90 days, and that's selling pressure coming against somebody that's trying to buy. And historically, trying to be long above $7 corn just doesn't work that well.

Maybe an inflation trade can kick back in and rear its ugly head and drive commodity prices higher again, but I'm not so sure that on a strictly cut in production, drop in supply, that it can sustain significantly higher prices. So kind of my message here is, uh, in my opinion, I think that the bean crop is going to be okay. We know we have a tight balance sheet, and there's a whole bunch of emphasis put on and dependency on South America, specifically Brazil, raising a good bean crop. If that takes place and we have an okay yield, from a fundamental standpoint, beans are likely overpriced. But a lot of things have to happen before that's confirmed. On the corn side though, it gets back to— I don't think people can just count on a long-term sustained price. It could go nowhere just very violently, but still have opportunities in a firm cash market to be selling cash corn up and above $7.

And quite frankly, if I went and pulled it up, I'm guessing that there's I would guess half of or more of U.S. corn processors are showing above a $7 cash price for the last half of September right now.

Joe

Paulsen: I know we're very close. Locally, locally we got that going on for sure. You know, Ingredient in Chicago is posting a pretty healthy basis bump for the end of September, and I think even the first week in October If I remember right, I mean, they've raised that one up too. And so yeah, the moral of the story is know your cost of production. Yes.

Jerod

Creed: You know, the emphasis is— yeah, the emphasis is talking about $7 corn isn't just to pick a price point. The emphasis is talking about that is driven back to profitability, that even if you're in a situation you're sacrificing yield for price, if still pretty darn good. And maybe one of the things that just continues to get more— I don't know if interesting is the right word, but a couple, I don't know, 3, 4 weeks ago, I started watching CF Industries and their share price had went all the way down to $80 a share after being like $112, $113 when Russia invaded Ukraine. Given the lack of natural gas flowing into Europe and energy prices there being— what did I read this morning? The average consumer is spending 24 times the amount for electricity that they were from 2000 to 2020. That just blows my mind.

I mean, I've got your average listener, if they're like me, I mean, your energy bill might be, call it $100, $150 a month. Imagine a $2,000 bill per month to run your house.

Joe

Paulsen: You know, this is an interesting conversation because I had my office manager yesterday. I said, can you, can you look back on our power bills and our natural gas bills from 2020, '21, '22?. And just, you know, I've never really looked at, you know, the price per kilowatt or, you know, the price per therm. And 2021, the natural gas was double what '20 was. And in 2022, what they're charging per therm right now is double what it was in 2021. And even when it comes to electric, we're looking at almost double what it was back in 2020, almost. Or not quite double, but it's up. And it's the cost of energy is definitely higher. I think that maybe propane would have been cheaper this year than what natural gas is going to be. Yeah.

Jerod

Creed: I think my takeaway on that is Yeah, you're gonna— the farm's gonna have a cost increase from energy and such, kind of your— but sometimes it's just decimal point dust, it's lost in all the paperwork. But more importantly, CF Industries Thursday gapped above their high price back in the invasion, gapped above that price and traded over $120 a share on Thursday. It went from $80 a share to $120 a share, 50% increase in a month and a half time. What's the storyline behind that? It's likely speculation here. It's tied to people seeing, holy smoke, CF is going to have enormous earnings and dividends and return on shares, so on and so on, that I'm a little perplexed that what they've done, that I'm wondering if the fertilizer low is in and how long that low is actually in. Because you're not going to recover from this natural gas shortage in a 30-day time frame.

It's going to take a long time.

Joe

Paulsen: I had tried some Spring '32 on Thursday, actually on Tuesday, and then he was going to go back and talk to his powers that be. He called me on Thursday and he said, "I was just getting ready to call you to set up a meeting to get back and I got a phone call. We jumped our '32 price $35 a ton and we only have 500 tons to sell and then we're going to be in a stop-sell situation." I'm like, "Where the heck did that come from?" And, you know, there's some weird stuff going on.

Jerod

Creed: Out there. Yeah, I think if anything, for 2023, we talked about it last week too, and I think the importance is building. The margin that's on the table for next year's fertilizer in relation to the current new crop price for next year is favorable. And I just beg anybody that if you want to take on risk. There's better ways of taking on risk, in my opinion, than buying second highest fertilizer price that most will probably ever pay. Anybody that's pre-booking, uh, you know, buying that high of fertilizer price and not doing anything on the grain— the world can look a lot different by the time you wrap up your average price you receive on the 2023 corn crop. I mean, you're darn near 3 years old. You're almost 2 years away from knowing that number.

So I just, I continue to share the message with the individuals we work with that when you're buying fertilizer, we're just selling the grain. We're going to marry it up one for one, the same dollar amount, and move on. Call it a sacrificial lamb. I don't, I don't know. There's still margin associated with it. Uh, it's a, it's still a pretty favorable situation. Uh, and quite honestly, I would take $6.20 December corn. That's pretty much where we're at right now. I would take $6.20 December corn and over $1,100 a ton in hydrous every single year. Sign me up, bring it on.

Joe

Paulsen: Absolutely. We're still looking at better margins than what we saw in the previous, like, 5 years when we were doing this before. You were trying to scratch out, okay, how are, how are we gonna, how, how are we gonna stay in the black here? And, uh, so no, absolutely.

Jerod

Creed: And you know that history repeats itself eventually, that there will be a period of time where You might not even be able to avoid it all, but you're stung with higher input prices and a much lower price on the output.

Joe

Paulsen: 2009 is still very, very fresh in my mind, and that's, you know, '08, we had unbelievable prices and, and, you know, input prices, of course, followed right up behind it. And then, you know, the floor came out from underneath of us and we were selling $3.70 corn that next fall.

Jerod

Creed: Yeah, here's maybe my last comment on that. I still— some of the farms we work with, it's just human emotion that, man, why do I— I don't really want to sell 2023 corn because I'm looking at what's in front of me and I see, hey, a higher price, and, you know, yield seems to be going away. I just don't want to do it. And I just make the comment and this is one man's opinion, when you retire, are you going to remember the price of fertilizer paid and the grain sold in the fall of 2022? Or are you going to be more focused on what your balance sheet looks like? Because if you want to zap working capital and equity, the fastest way to do it in the here and now is buying the high-priced fertilizer and watching grain price go lower. That's the very fastest way to damage the bottom line right here and now. And we don't have that much wiggle room on next year's crop.

We're going to need to raise APH and we're going to need to be averaging, you know, hopefully $6 plus. So when you need to hopefully average $6 to turn around and make 10, 15% on your money, you know, return on investment. If you need to average $6, well, why can't we start at $6?

Joe

Paulsen: Amen. Amen, Jared. Is there anything else you want to, uh, add before we wrap this up?

Jerod

Creed: Uh, no, I don't think so. Um, I know Chris, uh, him and I talked a lot about margin protection in the past, and I believe he just had somebody on just recently talking about margin protection. Uh, 99% of the producers I work with have margin protection this year. Uh, so if I want to talk out of both sides of my mouth, um, I sound like a little bit of a hypocrite saying this, but knowing the cost that we have coming our way for 2023, I'm teetering on the idea of margin protection for '23 from a pure cash standpoint just being too expensive. There's going to be a significant amount of area in the Corn Belt that margin protection with MultiPearl is going to be $100 to $120 an acre expense for next year versus $60 to $70 this year. That extra $50 is really chewing in the margin.

It would help tremendously if we got a you know, a 30, 40-cent rally between now and the end of September when the decision has to be made to carry margin protection for 2023, uh, that would make the decision a lot easier. Because at the end of the day, from a bang for your buck, it still is probably the most valuable tool that we have in the toolbox versus going out there and protecting price and price only. And then having, you know, how do you go protect price? Are you using options? Are you using some type of over-the-counter product? Are you just flat out selling grain? Uh, you know, none of those are quote unquote free. You know, you're locking yourself into some stuff. You're, you're putting expense on a table where margin protection is obviously providing some more variability of coverage from yield, inputs, and price.

Uh, but I think our margin protection price is going to be, you know, let's just use simple math, $6. $6 times 95% is $5.70. So if inputs stay flat and yield just stays steady, right, with the county expected yield, if price is below $5.70, the yield trigger is going to go up. Now it's just a matter of what do you think price can be next October, and that's obviously a crapshoot. So nobody knows that. It's what you don't want to do is wait for 3 weeks to have that conversation. Uh, you're almost halfway through the insurance averaging period for larger protection for next year. Um, I think that that conversation needs to happen with your agent now so you have 20, 30 days to kind of stomach it and see, does it make sense? Uh, what are my other options? Instead of trying to rush that decision, because oftentimes when we try to rush the decision, we don't make good decisions.

Joe

Paulsen: That's 100%. I started that conversation yesterday with my insurance agent. I had him send me over a bunch of stuff on that margin protection, and that's a— it's a tool in the toolbox, and it may not be a good fit for everybody, but, you know, everybody needs to educate themselves on it and, you know, make their decisions and individually.

Jerod

Creed: You bet.

Joe

Paulsen: Well, Jared, thank you so much for this conversation, and informational as always. And I hope everybody has a fantastic week, and we'll talk to you soon.

Jerod

Creed: Sounds good. Thanks for the invite, Joe.

Joe

Paulsen: Thanks, Jared.

Jerod

Creed: Did you see any action?

Joe

Paulsen: Did you make any friends?