Early harvest price action: weekly market outlook, Sept. 16-20th

Chris: Welcome everybody to another episode of the Ag View Pitch. We're heading into a new marketing week, September 16th through the 20th, and we are lucky enough today to have with us the master of markets, Pete Meyer. Hey Pete, how's it going?

Peter

Meyer: Well, if I was the master of markets, I wouldn't have to work for a living, and I'm still working for a living. But, but, uh, no, it's going, it's going fine. Thanks, Chris, and I hope the same for you.

Chris: Yeah, yeah, we, uh, I think we're gonna start harvesting, uh, this week, front end of the week here, um, on some soybeans. I think towards the end of the week, uh, in our operation, I think gonna start on a little corn, some of the early planted, early hybrids and early varieties on the soybean side. Um, the, the reports I've heard so far from, from a lot of the operations going early, at least on some of the early soybean varieties that caught the rains and in A lot of the areas sound like they're pretty good. And, and sort of the same thing with corn, especially corn in some areas, they're way over APH. But, um, sounds like there's some, a lot of rough areas too where the rain was, was pretty shy during the month of August. What, what are you hearing on the early harvest side of things?

Peter

Meyer: On the early harvest side of things, you know, where it's good, it's good. Where it's bad, it's bad, right? But I mean, most, not from the lack of rain in August, but more from the flooding in earlier in the year. Southern Minnesota is a— I mean, I'm getting silage reports out of southern Minnesota, sub-100. You know, southeast South Dakota, that area is pretty rough. Outside of that, you know, yeah, it's okay. I haven't heard anything spectacular. I mean, certainly it was a poor finish for the soybeans, in my opinion. And when I go back and look at at the Pro Farmer numbers of a 59 bushel per acre soybean yield. I think that's hard to, hard to get to given the fact that, you know, that it just didn't finish well, just didn't get much rain at all.

So we'll see, you know, I mean, I'm sorry, Pro Farmer's at 55, I think I said 59, 55, 53, you know, 53 where USDA was and in this week's report, they— or last week's report, they didn't change anything there and increase the corn yield by a half. You know, I— yeah, I guess we can get into what the report had to say if you want.

Chris: Yeah. Real quick though, I was going to ask you, you know, as far as, you know, seed size is going to be one of the things that is affected by that lack of rain in late August. But it sounds like the pods were there. So it will be interesting, I think, to see how things— I mean, soybeans are so impossible until the combines go to figure out, you know, how good or how bad are they.

Peter

Meyer: And well, I think that's also why— I think that's why NASS left the yield unchanged, right? They know that it's almost impossible this time of year, even though they had pod counts and they had ear counts for the first time this year in the September crop production report. The fact that they left the soybean number unchanged on the yield is, you know, indicative of me that— indicative to me that they really, as you suggest, nobody pays much attention till October.

Chris: Yeah. Excuse me.

Peter

Meyer: Can you—

Chris: you want to share? I know we talked before we started here. You had some things that you could share from the, from the report last week and kind of give us a little bit of perspective on, on some things here.

Peter

Meyer: Sure. Can you see my screen now? Yep. Got it.

Chris: Okay. So yeah, so the first thing, listeners, let me say real quick for the listeners on the, the podcast, this is on YouTube now too, so you guys can, can pop over to YouTube if you need to.

Peter

Meyer: But I'll read this slide. So this first slide says that it's a special note and it says each September NASA has the opportunity to revise planted and harvested acreage estimates for a whole bunch of crops, including corn and soybeans. Revisions are based on all available data, including the latest certified acreage data from the FSA, blah, blah, blah, blah, blah. So the reason I bring this up, Chris, is that there's been a lot of conversation about that flooded area in southern Minnesota that we just mentioned earlier, southeast South Dakota, northwest Iowa, and the fact that there are still folks out there, analysts who are saying, well, we're going to lose a million acres, going to lose a million acres. What I'm inferring from this note is the fact that they're not going to make any changes until January. So we're stuck with these acres. They didn't change the acres this month.

So, you know, that tells me that they're, they're going to stick with it. And I think that they're kind of telling you that in this, in this number. Based on all they have is the FSA data at the moment. They're very comfortable with the FSA data in August, which is a good thing. This is the first year really where they felt super comfortable with the August data. The last couple of years, we've seen them bring the August data in and then revision again in September, or maybe even October, as the, as the data matured from the FSA on the acreage. But this tells me that they're going to wait. So if you're waiting for a million-acre cut to have a bullish sentiment in the market, I think you may have to wait until, until January. Let me see if I can get the— for some reason I can't get the next slide up. I don't know why that is. Let me see what I got here.

So that's, that's really my, my first, my first thing, Chris. And, and I just think we have to be, we have to be careful about it. The second thing I really wanted to talk about was the, was the objective yield plot data here that you'll, that you see here in a, in a moment. Let me stretch this out a little bit. Got it. So, you know, what we've been looking at with it, you know, we had a record yield last year, a record yield this year of maybe 6 bushels higher now than the record last year of 177. Now we're at 183.5. To me, it always depends on really on your corn ear count. And what this is, is this is a graph of the last 5 years. It's actually 5 years plus this year. The blue bars are the ear count and the red dot is the yield. This is a NAS chart. You can see that the ear count is not as high as it was last year.

It's not even as high as it was in 2021 for September, yet the yield is way off the top. So, you know, I called— I called them. I called Lance up and— oh, I'm sorry. Let's go. Let's go to soybeans then. So at the same time, You know, we mentioned about soybeans, not really knowing much until October. Here you have a pod count that's lower than last year. The yield's a little bit higher. But as you can see, Chris, the pod count, or for the listeners, maybe pod count always has a tendency to increase in October. So when I talked to, to NASS, I said, you know, what are you doing here with the soybean yield? Your soybean yield and your corn yield are way off the top of the charts to, you know, based off of your pod count in your objective yield plots. And Lance, Lance Honig, who's an open book, nice guy.

He said, look, Pete, he said, pod counts go up every time in October and then again in November. And I looked at the chart, this chart, and I said, yeah, okay, I can see that. I see that the pod counts go up, but the yield goes down. So I'm not really sure. You know, what's going on here. And I asked him, I said, you know, neither the ear count nor the pod count match up with your yields. So what he said was, he said, look, Pete, he said, we're using this NASA Terra MODIS model. I said, okay. He said, you see the slides in the report? I said, yeah, I see the slides in the report. He goes, take a good look at those and you'll see. He goes, we've never seen so many dark areas through a majority of the belt. Now, for the, for the viewers out there, you can see this. For the listeners, I'm going to have to explain it.

So what they do is they have all these remote sensing and then they have the satellite modeling. And what they do is they create— there are dots created in certain areas of each state. A red dot is very bad. A purple dot or dark blue dot is very good. Now, to give you an idea, so this is the corn Satellite data. You see how those dots are all like blue or purple, Chris? You see that like throughout central Illinois, even throughout western Indiana, throughout central Iowa. And then they kind of, when you go north, they get green and a little bit yellow. Those purple dots are over 300 bushel an acre. That's a pretty good— I don't have the purple dots, but I have the color, the flow color. Right. The darker, let's say this, the darker the dot, the better, right? So you have lighter, lighter yellow, then you go green.

You're going, you're going basically in the, in the, in the color spectrum. But as you can see, the dots are just very, very dark. And they said, you know, we've never seen this before. Now, you would think that when you look at Illinois and, you know, they brought Illinois down by 3 and brought Iowa up, you would, you would think that that's counterintuitive to this. I like the fact that they brought Illinois up and Iowa down just, just for the reasoning that they should be closer together. They really had a big disparity in the numbers last month between Iowa and Illinois. And then, but so this is their, this is their modeling. This is what they're looking at, those dark, those dark spots. Now here you have last year's modeling in September versus this year's modeling. And for the, for the watchers that are watching it on YouTube, you can see a clear difference.

The darker the dot, the darker blue shade, whatever. That's what the satellites are telling them is going to be better yield. You can see clearly on the left, September of last year was okay. It was good. And if I was sitting in their seat and I looked at the September modeling and said, okay, I have 177 last year, and then I look to the right and I see all these darker blue dots throughout Iowa, a huge chunk of Illinois, including some of the biggest production areas and western Indiana. I understand why they're going that way. But they're putting a lot, a lot of weight, a lot of, a lot of weight, a lot of weight in there. So let's look at the soybeans. Now the soybeans here, not quite as pronounced as the corn. But yet you still see a fair amount of dark blue or purple dots. That's over 75 bushels an acre, what they, what they think is going to be 75 bushels an acre.

You see it throughout. Illinois, not again, not quite as pronounced. You see it throughout Iowa, you see it in eastern Nebraska, and then you see it occasionally in southern Minnesota and, and a little bit in South Dakota. What's more important here is that this is the year-over-year comparison. And here's where you can really see the difference. On the left, on the left, you have last year's Terra Modis modeling in September. It's all greens and yellows. And this year, you don't see any You know, you see some greens, but you don't— you certainly don't see a lot of yellow. So this to me, this was, this was the story, right? The story was they were— they, while they got their objective yield data, Chris, they also, you know, they relied pretty heavily on the, on the, on the satellite modeling. Now, well, so two takeaways. A, the anchors aren't going to change till January.

B, I also, you know, the modeling, the modeling suggests tremendous yields in a lot of places. Whether they come to fruition or not, I don't know. Now, there is a conspiracy theorist in me that thinks that the reason that they left them a little bit high is because we have the quarterly stocks report at the end of the month. So this September quarterly stocks report, you know, if that doesn't match up as of September 1st, what exactly what the WASDE said, well, then they're going to have to make some adjustments to that. Some folks are saying that last year's crop was larger than they anticipated. Last year's crop numbers, I'm trying to find here. I know the yield off the top of my head was 177. But in corn last year, What was it now? It was, yeah, 177.3 on 86.5, production of 15,342. So production, you know, should be lower this year.

But if that care— if those stocks don't come in exactly around 1.8 billion bushels, you know, we're going to have to make an adjustment in the October WASDE. Like I said, some folks think the crop was smaller last year than the 177.3 on 86.5 harvested. Some people think it was bigger than last year. So I just wonder if this lack of change, both in corn— well, corn was up a half a bushel— but I think the lack of change on the production side is likely attributable to the fact that they may be waiting until September. Now, that's not a NASD thing. That's a World Board thing. And speaking of World Board, you know, if we look at the demand side of things, I think that much like Congress, the World Board probably took the month of August off because there were no changes at all. There's no changes at all to the demand side of the equation in corn.

Yeah, we did lose 55 million bushels, they increased— we lost 55 million bushels in stocks due to the fact that they increased demand by 55 million, or some number, some number around that in old crop, I think it was 5 million ethanol and maybe 30 million in exports and, you know, whatever. But, and the same thing in soybeans, they made absolutely no changes to the soybean S&D at all. But they lowered, they lowered the carry-in by 5 million bushels. And thus the carryout for this year was lowered by 10. And that's just, that's just rounding and math. That's why those things don't add up. Price-wise, they lowered their price from $4.20 to $4.10 in corn. And in soybeans, they left it the same at $10.80, despite the fact that that's not even close to board prices at the moment.

Chris: What, you know, all of that data and everything, you know, and then I think the right now, I mean, then that's, that's great stuff, because I think it actually kind of confirms it for me anyway, you know, driving around this summer, it's probably one of the best crops I've seen. The problem is that doesn't, you know, you're not looking at the grain, you're not looking at the weight of the year. You're not looking at kernel depth and all that kind of stuff. And so, you know, it will— the tale will be, you know, who got some, who got some rain in late August and who didn't in terms of test weight on corn. And, and I think also that soybean seed size at the end of the season is kind of where that extra little bump comes from. So it's going to be interesting to see how this all shakes out.

My question for you moving forward is, you know, as the producers get into harvest and start to see the reality of stuff, um, what's, what's your thought? I mean, I think a lot of, a lot of growers are going to realize they probably don't either have enough storage in the areas that it's good, they're probably not going to have enough storage for a couple of reasons. Number one, the elevators in a lot of areas are already, we're already still, we're carrying over from the '23 crop some farmers were also carrying over and the pipeline's moving a little slower in terms of the stuff moving through the processor. Any thoughts on what farmers maybe should be thinking or doing, you know, as they get into harvest and any activities, actions they should be taking?

Peter

Meyer: I think the scary thing for me is the fact that, that NASS has commented publicly that they hear there's still a lot of, as you suggest, old crop corn in the farmer's hands. That's going to be a real problem, right? And that's why I think the September quarterly stocks report could tell the tale, right? Though, at the, at the last quarterly stocks report, we had 5 billion— in round numbers, 5 billion bushels of corn, 3 billion bushels of wheat was in the farmers' hands. Now, after that report, we broke down and we traded down below $4. And, and a lot of the folks in the market said, well, that's the farmer just getting rid of everything, cleaning everything out, whatever. Boy, I hope that's the case that we can start new because if it's not, then we're going to start with a bit of a cloud over the market.

As far as what they see and what's going on, yeah, there's no question that this time of year typically, and I can speak firsthand from some ethanol plants, this is the time of year where they're trying to pull some corn to keep everything going until the combines run. They're having no problem pulling the corn from, from, you know, I would say the central part of Iowa west. They don't— now some of them are showing nice basis levels of plus 15, plus 20. So my advice would be, I don't think it's going to get— it's going to get much better. If you still have old crop and you're like you are, Chris, you know, getting ready to go, you said you're getting ready to go on some corn. Yeah, I'd get rid of it and just try to clean slate. I know it sucks at these price levels and you feel like you're raising a white flag.

But, you know, as far as your new crop sales are concerned, you know, what do I see on the high side in case something happens? Now, I'm not a believer that there's a 183.5 yield out there. I think it's probably closer to 181.5, 182, something like that. I think Pro Farmer issued a 181 number, their number. I think that's probably right. It's very hard for me to get to 183.5 on all these records. Could very well happen. But even if we lose 2 bushels an acre, let's say down to 181.5, what does that really mean, Chris? That means maybe $4.25, $4.35 on the board. That's it. I think there's a lot of people out there waiting for $4.50. And I think at the end of the day, Chris, there's going to be a lot of very difficult conversations with your banks this year, right? Especially, unfortunately, for folks that held on to their corn.

And, you know, maybe it's the bank that pulls the trigger on some of this stuff. But yeah, we— it's— I don't really have any price targets. You know, I understand the seasonality of the market. And everybody says, we make the seasonal lows around September, sure. And we've rallied 10 or 15 cents out of the post-report lows, traded corn yesterday at $4.10, $4.15, something like that. I don't have my screen on at the moment. But to me, it just feels like the market could be landlocked here at $4 and $10, which oddly enough is a 2.5 multiplier, which is about, you know, normal, so to speak. Certainly, there's a lot of eyes on what's going on in Brazil. It is certainly dry in Brazil. I do have to chuckle a little bit though, because there are some folks out there that have already killed the safrinha corn crop in Brazil and said it's going to be cut by 50%, this and that, given the patterns.

And that crop doesn't get planted until the January to March window. So, you know, it's, it's one of those things where, you know, I also worry once we get through harvest, and then we get into January, February, and I realize this is, you know, what is that, 5 months away, you know, the USDA then is going to come out with their, with their numbers for next year. And given the economics, I would imagine they're going to come out with a pretty heavy corn acreage number, next year, which is not what we need. And I also would— excuse me— and I also would suggest that if the 183 holds and we're 6 bushels above last year and 2 records in a row, I mean, they're going to come out with a, with a big yield. I bet you it's going to be over 185, maybe 186. You know, I mean, the natural progression would push it closer to 190. And I'm not saying that that would be their beater yield.

But, you know, nonetheless, yeah, I mean, think about all the problems we had last year in western Iowa, Chris, eastern Nebraska, all those spots there, and we still had a record yield of 177. So to me, I think that the World Board and the Office of the Chief Economist, they may have some beer muscles here and pushed a number a little bit. But I do worry about the yield. Now, granted, that's not till February when the Outlook Forum comes out. When those— when that data comes out. But nonetheless, you're, you know, we have a couple of things we have to worry about here, Chris. The September Quarterly Stocks Report, that could absolutely tell the tale for the rest of, for the rest of the season. If there's still a lot of corn in the farmers' hands, that's going to be a problem. The market will take that very negatively, right?

Um, Brazilian weather, we have— we're watching it closely, okay? Then we have maybe, uh, October WASDE or Crop Production Report where numbers get changed a little bit based on the maturity of the data, the weights. And then we're going to have the November WASDE, and then we're off until January. So you're going to get a lot of data here within the next few months that, um, you know, hopefully will create some volatility and hopefully will create some, um, opportunities to market some stuff.

Chris: Yeah, short term for both corn and soybeans, I guess You know, there's, there's quite a bit of algebra we have to do as producers. I mean, we have to do that every year, but this year it seems like more so because, you know, we have interest rates to consider. So, you know, getting lines of credit shut off, delivering the grain even at a lower price is a higher price versus the carry. You know, there's, you know, you look at the carry and it looks really good. However, when you calculate in interest rates, you kick, you know, you calculate in, um, probably the shortage of storage in the areas where yields are going to be good. So people are going to need to be moving that stuff sooner rather than later, probably selling more.

If that does come to fruition where producers end up needing to sell quite a bit more, with the position the funds are in right now too, is there any correlation there or anything that could give us some, some some potential downside. There's always the conspiracy of October, the price is going to go up. And I know there's a lot of people in the poor areas hoping that the price actually goes down in the, you know, during October. And it doesn't matter what we hope for, whatever's going to happen is going to happen. But do you have any, right, any, any perspective on, you know, some other things that could occur based on farmer selling, based on what the funds are doing in correlation?

Peter

Meyer: Uh, well, let's start with interest rates. I think that the recent PPI CPI data, while it, while it will certainly point towards a, a rate cut here in September, I don't know if it's going to be a quarter or a half. Initially I thought it was going to be a half, but now I don't know. The PPI numbers were not, not as conducive. So we'll see what the Fed does there.

Chris: There's a lot of thought the banks aren't going to change the interest rate anyway for months on lines of credit anyway.

Peter

Meyer: I mean, right.

Chris: But then there's a delay before anything.

Peter

Meyer: But there's also, you know, I mean, there's a lot of thought out there that we— that initially a couple of months ago that we could cut rates by 1.5% by the end of the year. I don't know that this data suggests that, you know, maybe we get a half this month, a quarter next month and a quarter in November and probably maybe nothing. Maybe we can cut it by a point. I'd be surprised if we go up to a point and a half. The other thing is, you know, regarding downside risk here, I don't see it. I really don't. I think that— I hate to talk about the fund position because I really don't think it matters in the market. That's just my personal opinion. But, you know, and everybody loves the funds when they're long and they're right, you know, or they're quote unquote right according to everybody, and they hate the funds when they're short.

Well, the funds The fund's had a hell of a year this year, let's be honest about it. But they're not holding out for the last, you know, nickel or whatever. And a lot of the funds that we talk to, you know, most of that, most of that trading is on autopilot, it's algorithms. So they're just trading the flow. They probably traded the flow on Friday, and that's caused the thing to trade up to $415. But to the downside, you know, my worst-case scenario is something around $375. I think we're still kind of stuck in this range. Between $3.85 and— and we're, we're at the higher end of the range now, maybe $4.20. We've been in a range like that for a while now, and I don't really see how it, how it busts out there, because the only way it's going to bust out of there, Chris, is if we have a— if the yields fall flat on their face, or if, uh, if demand starts to pick up.

We have seen a little bit of demand come in here. Certainly we'd be very disappointed if we didn't see any demand below $4. We have seen it. On the bean side, though, that's a tough call for me. I would think that bean prices probably stay pretty depressed here. Don't really see much coming in the pipeline there. And it may very well stay depressed until such time where we find out that we're not going to plant a lot of bean acres next year because a lot of the farmers that I talked to are just tired of losing money. Planting beans, whether it's $100 an acre, $200 an acre, $250 an acre. And I really think you're going to see a lot more corn next year. So that's— we're going to need to, we're going to need to hold on tight because that's, that's going to have to flip-flop things a little bit.

Chris: Yeah. Last question, then I'm gonna have to let you go because I'm gonna have to bounce here in a couple minutes. I'm going to give you, um, I'm going to give you a question and give you, I don't know, a minute and a half to answer it. Uh, 2025, if we do see some sort of price rally, you know, during harvest for some reason or after harvest. At what point do we start looking at the 2025 on, on, on these grains? You know, what, where do we pull the trigger, I guess? I mean, I'm looking at, at margins on the 2025, and, you know, on corn, for a lot of producers, we're probably 20 cents away from black ink sort of on average on corn, and probably 50 cents to a buck on a lot of them. And I'm not as dialed in on the soybeans yet. It's like we've done more corn analysis, but do we see those kind of levels, a buck on beans?

Peter

Meyer: And, and, uh, the Dec— so the Dec Dec went out around 35. I don't, uh, yesterday I think it was around 35 cents. So, so that puts your put your, your Dec '25 around $4.50, let's say, or even $4.60. I think if we get over $4.75, but you're good, that's going to have to be driven by the front, right? So I don't see much, there doesn't really seem to be much risk in that spread. So, you know, maybe if we can get, if we can get Dec corn above $4.30 or something like that, and we can get the, the red Dec up to the Dec '25 up to $4.65 or $4.70, I think that's probably That's probably a place to start looking. On the bean side, you know, I really don't know. Very, very difficult, going to be totally driven by South American weather. That's going to be a situation that's going to be in flux the whole time.

I think no matter who gets elected, we don't have a great— excuse me— we don't have a great relationship with China. So that, that market could be lost unless we become the low-cost provider, the low-cost exporter, which, which could very well happen, and Brazil runs into some trouble. So that's it. I mean, it's a, it's a tough spot. Excuse me, Chris. It's a tough spot to be in because, you know, I have— we have this other business called Regenerative Root Solutions. And what we do is we match up CPG companies, consumer packaging goods companies, with farmers that are exhibiting or using sustainable practices. We've seen some programs come this month, but the deluge of farmers that are coming to us to sign up for these programs outweighs the programs that we have by at least 10 or 15 to 1. Yeah.

And I think what I'm saying there, Chris, is that that suggests that, you know, no matter how good you think your economics look at your farm, everybody is looking to kind of, take advantage of other possibilities.

Chris: And every 10 cents, you can— every anything.

Peter

Meyer: Yeah. Now, Tom Vilsack has said that, he said just recently this week that he promised that they're working hard on this 45Z tax credit, which is the sustainable aviation fuel credit that we do a lot of work on. And he promised, or he said that it's on the fast track and they do intend on having that, all that stuff out by the end of the year. Before the Biden administration is over. If that's the case, that will help, certainly help matters, but it'll only help matters for those that are using sustainable practices and have a relatively good carbon intensity score. So a lot of moving parts here, but yeah, as far as next year's corn, I think anything over $4.75, you got to start to look at it.

Chris: Yeah, yeah, sounds good. And, uh, um, I think we'll have to pay attention to that real close because we get up to those levels on both corn and soybeans, I think that's going to be a place where people could start and and probably be pretty close to breakeven. And breakeven in our definition is covering the cost of paying yourself and those overhead expenses.

Peter

Meyer: So we'll do more. And I do, you know, I don't see many storing soybeans this year. So I mean, we may end up with some harvest pressure here at the end going into soybean harvest, I would think. Corn, I think, you know, folks will, We'll store it out like they usually do and just hope for the best. But store what we can.

Chris: It's hard. What you can help. And there's going to be, going to be interesting. I think we get towards the end of harvest, it's going to be tight for space for a lot of stuff and in some certain areas for sure.

Peter

Meyer: So I agree.

Chris: Um, people want to get a hold of you, have any questions, is there a way if, you know, somebody wants to reach out with some questions, what's the best way?

Peter

Meyer: Yeah, you can just email me, Pete@muddybootsag.com. Or if you're interested in what we're doing with our soil health initiative initiative. And like I mentioned earlier, this, this, uh, CPG, uh, programs, and actually government programs as well. We just, we just enrolled 120,000 acres in the USDA long-term no-till program, which paid out about $25 an acre. Uh, all that information can be found at our website, regenerativerootssolutions.com. And if you need anything, again, Pete@muddybootsag.com, and I'm happy to pass along, uh, the website address if you need it. Yep.

Chris: Awesome. Sounds good. And a reminder for the Ag View Executive Business Conference, if you are not signed up, get signed up. It's getting filled up and Pete will be there in person, so you'll get to chat with him in person. With that said, Pete, thanks a lot. Appreciate you being here.

Peter

Meyer: Well, I appreciate the time as well. And if you're, you know, yeah, you get to chat with me, but you also get to throw a tomato at me if you don't like what I'm talking about on stage. That's funny.

Chris: Bring a couple extras along.

Peter

Meyer: So there you go.

Chris: Sounds good. Thanks, Pete. Thanks, everybody.

Peter

Meyer: See ya.

Chris: You bet. And we will catch you again next time on the iView Pitch.