Don't raise 230 bu corn to break even

Shay

Foulk: Welcome back everyone to another episode of the Ag View Pitch. Today you have Shay Foulk. Matt, how are you today?

Matt

Bennett: I'm doing good, are you? How are you doing?

Shay

Foulk: I am doing well. It is February 26th, Sunday, for our Sunday morning outlook— Sunday market outlook rather. Matt, I just kind of thought we'd start with a recap of last week. Things closed a little bit ugly there at the end of the week. Could you maybe talk the listeners through a little bit of what what was going on there and what we can maybe anticipate in the week ahead.

Matt

Bennett: Yeah, so basically last week was a big week whenever it comes to this corn market that's basically lulled us to sleep, you know. The corn market for quite some time had been sideways, you know, just kind of a chop sideways, do-nothing type market. I know a lot of folks said, hey, when's this market ever going to do something? And, you know, I guess my thought process and what I was relaying to people is that, you you know, just be glad it's not doing anything whenever we're just kind of sitting around here at, what, $6.70, $6.75. And so basically what happened last week, you know, you had all of your moving averages within less than a dime, and then you come in here, you know, you rallied the first day of the week on Tuesday, just a slight rally up by 2.75, 3 cents, you know, and then you came in the rest of the week and you just couldn't find any buyers.

And so essentially You know, you dropped the market, you know, as far as March was concerned. I mean, heck, we dropped 27.75 cents, I believe, on the week. You know, and so, you know, you moved out of the range you've been trading in, definitely below support levels, and, you know, you look at, for instance, December corn and same type of action, but at the same time, whenever you look at soybeans, soybeans held in there. I mean, and so typically, whenever you see corn market taking on the chin kind of like it did, beans usually aren't far behind. They kind of trade similarly. But as far as cash was concerned, that wasn't necessarily the case. It was interesting to me that these '23 corn yields down 19.5 cents. And so cash beans didn't do much, but then Nov beans were down 12 and— oh, I don't know, I think 12.25. Yep, so 12.25.

And so essentially, I think this bean market has continued to try to maybe buy a few acres. But I guess— and it's a long-winded answer, I hate, I hate that—

Shay

Foulk: but I just think we're going to need a little bit more than that though for, for the beans to try to buy acres back. Would you agree?

Matt

Bennett: I agree, I agree, because fertilizer's gotten cheaper. And so, you know, your swing acres, a true swing acre, you've got to understand, uh, that a true swing acre, you know, is going to be dependent upon what what it costs to put that acre in the ground, not just what you can get out of it. And so we all know that dry fertilizer prices and anhydrous ammonia prices, especially for those flexible enough to take, for instance, a semi-load, those have gotten pretty competitive, especially versus the price of corn before this drop in price. And I do know that some of the larger producers that I talked to that have that flexibility and buying power that I'm kind of talking about, some of those folks stepped in and did something about it. And I've got to think that that's going to have a little bit of an impact on some of those quote unquote swing acres.

But at the same time, I do also think last fall you had a pretty good run of weather. And I think a lot of acres are already locked in. So I've been using that 91-ish. But I do think that maybe you creep over 91 with the kind of, again, relief in fertilizer prices. I think that's more important, in my opinion, than just simple price of beans versus corn.

Shay

Foulk: Yeah, no, I appreciate the perspective on that. One thing I would add to just some conversations I've been having the last several days here, when we run cost of production analysis on corn versus soybeans, typically if you have a higher land cost and higher return to management, that corn is going to look more favorable, less risky day in and day out. If you're an operation that has a higher percentage of land ownership, lower cost on land and maybe a lower return to management as well. Soybeans, you know, they are looking actually a lot better than they did here a while ago. But like you said, Matt, I'm not sure that we're at the point of any major changes. And that weather that you brought up too, I mean, it was— there were a lot of guys that we talked with across the country that said if I could have a fall like that every single year, you know, I'd pay a lot to have that.

So with that being said, Looking at the week ahead, closing out the insurance pricing period, corn we're going to probably finish somewhere around that $5.94. Where are soybeans at right now? Could you remind me?

Matt

Bennett: Yeah, I believe that the average on Nov beans is sitting like $13.75 to $13.76. So, you know, with that being the case, I mean, obviously you're well below last year, which was an all-time record. Yeah, but at the same time, I mean, it's easily the second best spring insurance price we've seen. I think most producers take a look at $13.75 beans, you know, as a guaranteed level for insurance and say, well, you know, that's actually a pretty tough thing to beat. And so, you know, I've talked to a lot of growers, as you guys do, you know, and some folks have said, oh gosh, this is a little tighter than what I'd like it to be with my cost structure. But if you run that cross-production analysis, you'll do a lot of the same type of stuff. You know, to me, we find a lot of black ink there.

So, you know, we've been just been trying to tell producers just be mindful of that and understand that when it gets right down to it, you know, if you see the price action, for instance, corn, the way that it happened, that can happen with soybeans as well. And soybeans can move $1 in a day. So, you know, I at least want to be respectful of that. It's two different markets we're looking at as we look forward to this week. You know, essentially We know this Argentine dryness is kind of an old story, but last week actually, you know, the soybean meal market actually rallied $6 a ton. So there's still, I think, some concern and some angst among world buyers of not only bean meal but beans, especially whenever you're able to see, you know, March beans kind of hang right in there. You look at March beans and it still looks like a good upward trending market.

But again, I want to be mindful of the fact that if the dam breaks, so to speak, like it did for corn this past week, all of a sudden you could lose a dollar, you know, or two pretty rapidly. And so, you know, I don't want to be sitting here without some sort of level of risk management, or at least knowing what I'm going to do, you know, in the event that we kind of break out of this nice-looking uptrend that we've seen here the last, you know, several weeks.

Shay

Foulk: For perspective too, Matt, I would add that 70-cent drop on corn and a 70-cent drop on soybeans puts about 75% of the producers that we work with at breakeven or maybe a little bit below. So it's not, you know, earlier, earlier in the year, several months ago, we were saying, well, you know, we're kind of going violently fast. And like you said, it kind of peaked off a little bit, maybe lulled us to sleep. And now here we are again, it's probably looking us in the face. Little bit more risk exposure, I guess I would say, on the downside potential there. Last thing I wanted to hit with you, Matt, here as we wrap up, anything on exports, anything coming at us this week that you think a farm operation listening needs to take into consideration here?

Matt

Bennett: Yeah, yeah. First, I want to go back to something that you just said about the— about how tight things are. And one thing I've said, Shea, is that you don't want to be a grower in 2023 where you raise 230 or 240 bushel corn and lose money. We've got a lot of money invested in this crop. And if the thing turns on us, obviously you're not going to be collecting much in crop insurance if the market just plummets and you still raise 240 bushel corn, you know. So you just got to be mindful of the fact that this is a different game overall. The producer is going to put more into the '23 crop than we ever have. I know some won't.. But overall, it'll be the most expensive corn crop ever gone in the ground. So we've got to be mindful of how that should impact our marketing. And then what are we looking for this week? I mean, we really need to see corn exports pick up.

We've seen a little bit of an uptick here. Uh, you know, the bottom line though is that with Brazil, uh, you know, their export program's really getting ready to go into, into overdrive as far as soybeans are concerned. So our bean program is going to pretty much dry up. Been slowing down, something that you'd expect, but corn really needs to pick up the pace. And so, you know, a couple things come to mind. We really need to see that happen. Shipments need to happen. It's prime time for that. The other thing is, though, you know, the corn market definitely looked pretty rough this last week. And I know for the most part I wasn't surprised by this type of action. I think we were ready for it, you know, and it sounds kind of bearish. You hear a lot of people down in the mouth, but Be careful to, you know, to ignore the weather in Brazil right now.

It sure looks like they're having a hard time getting that bean crop out of the ground. With that being the case, areas that are too wet, you know, they're having a hard time getting the safrinha crop planted. So they're getting past the ideal planting window. I'm not saying this is going to make the market really surge, but it could be an underpinning that we kind of need right now. I'm not saying we're going to go back to $7, but I do think that you'll find some support in here. Especially whenever a safrinha crop that gets planted late typically really struggles later in the growing season.

Shay

Foulk: Absolutely. Matt, I think that's great. Any final, final things you want to add here before we close out?

Matt

Bennett: Yeah, I mean, just final, final— again, it all comes down to the same type of stuff you guys talk about. Managing your profit margins, managing your bottom line. Whenever you know your cost of production, you can market based upon black and white and spreadsheets. And Again, breakevens, I think that that's going to serve you well. And don't make the assumption that the kind of price action you saw in the corn market last week can't continue or the beans can't join the party.

Shay

Foulk: Great advice. Matt, if someone wants to reach out to you and talk a little bit more, what's the best way to get a hold of you or see what you have going on?

Matt

Bennett: You know, the best way to get a hold of us, just go to AgMarket.net. You can get all my contact info there or any of the guys that I work with, or AgMarket.app. We've got an app that you can find about anywhere as well.

Shay

Foulk: Very good. Matt, thank you so much for your time. I really appreciate it.

Matt

Bennett: Absolutely. Thank you.

Shay

Foulk: And thank you everyone for listening to another episode of the Ag View Pitch. We will catch you next time.