Episode 200: Sunday night market outlook

Chris

Barron: And it all comes down to this. 2 on, 2 out, bottom of the 9th. The Farmers lead by 1. Full count. Here comes the play at the plate, and it's the Ag View Pitch! Welcome everybody to another episode of the Ag View Pitch, and this is actually episode number 200. And so we're pretty proud of that. I guess we've been doing this for a while and we keep working on getting better at it. So hopefully if you're not subscribed, please do so. Go ahead, get subscribed, leave a message in there, and we'd really appreciate that. So with that all said, we are starting a new week and we are going to have a conversation here with Dwayne Lowery. And you're actually sitting right beside me, actually 6 feet away hopefully here. How's it going, Duane?

Duane

Lowery: It's great. I haven't measured the 6 feet, but for those government agencies listening in, it's 6 feet.

Chris

Barron: Yeah, yeah, we're 6 feet apart. And typically you're at your place, I'm, I'm here. And this week, I guess what we want to start out talking a little bit about is this crazy storm that blew through a little bit of Nebraska, uh, Iowa, went through Illinois, Indiana, and even into Ohio, 700+ miles, did a tremendous amount of damage. And, uh, want to just talk a little bit about that with you, Duane. I know you've done some look at kind of the area and have kind of an idea or at least an opinion on maybe what we may have seen for loss. You want to talk about that?

Duane

Lowery: Well, the loss is just absolutely heart-wrenching to see the crops flattened, you know, all the producers' efforts just gone in a matter of minutes. It's very heart-wrenching, the facilities lost, the buildings lost. It's very, very sad and it's very real. You know, typically the marketplace looks at weather events like this, be it a windstorm, a hailstorm, or what have you, and they tend to minimize it and say on a national level that's not that big of a deal. And this year's backdrop of expectations of a very large crop and large ending stocks makes that attempt to be that way, you know, even more likely. But I would say that this particular storm is gaining traction here in the in the days following it as opposed to losing traction. People are trying to get a handle on what the losses are. I think it's, number one, it's impossible to know.

I traveled along I-80, I came up north to Waterloo, and so I went through some of the worst areas on part of that trip, and I saw some of the, just the outside edges of some of the rest of it. And there's all kinds of other elements in the middle of that. But, um, I would say that, uh, if somebody said we lost 100 million bushels on a national level, I would say they're way too low. If somebody says we lost, you know, 500 million bushels on this particular storm, that's probably too high. But somewhere in that 200 to 400 million bushel range is probably a reasonable expectation or a reasonable guess at this time. Some of these acres is just absolutely, you know, a total loss and flat and won't be harvested. There are others that are, you know, broke off at a 90-degree angle, although broke off isn't exactly the right term, but kinked at 90-degree angle. That's possible.

Some of that will continue to feed that plant. So I don't know how to gauge it exactly, and I don't think anybody does, but we are taking— we did definitely lose, you know, a notable amount of bushels off of that windstorm. And I think the other factor that plays into is going to be, you know, the dryness that we've had in Iowa there and other places and what the forecast is. So, you know, looking at it from a from a national perspective, maybe in the days ahead with the storm being part of that factor and maybe dryness as well, we might be looking at a period of time where the marketplace starts to ponder, you know, the shaving of bushels as opposed to the adding of bushels.

Chris

Barron: So there's, there's two pieces to this. There's corn and we'll hit that first and then soybeans as it relates to the storm. Then we'll get to a couple of other topics. As far as corn goes, obviously the damage was more severe on corn than soybeans. And so you're talking $200, $400 million, whatever the number is, does it really matter? You know, as devastating as it is, I'm asked this question this way, does it really matter on the balance sheet to the trade? I mean, are they going to look at this even if it, you know, it is quantified, it will be quantified at some point. But does it really matter on the balance sheet? Is it enough to move the needle at all?

Duane

Lowery: Well, that's a great question. And it's a question that deserves an easy answer and implies an easy answer. But that's not really what you're going to get from me here. If you want to look at endgame, and you want to look at ending stocks, and you take off, pick a number, 200 million bushels, 300, 400, No, it doesn't matter because we still have ample amount of corn. However, in the process of trying to determine how many bushels is lost, and right now today you're 20 cents off contract lows and you have this uncertainty and we have a forecast that's dry that may cause traders to ponder a declining national number, the marketplace begins to trade and exit positions and then ponder getting long positions on that type of mentality.

And so it's possible that with market 20 cents off contract lows and a very large corn short in the marketplace that's been there for a long time, and if the, if the narrative is that the national crop size is going to shrink a little from what we currently have as opposed to increase, And if the narrative is that the finishing weather that we're going to experience here for the rest of August and early part of September is not the desirable finish, all of this along with maybe some additional Chinese purchases, you know, creates a momentum of itself of the market covering shorts and then contemplating getting long and things of this nature. And so maybe the storm damage and the number that is generated from that in terms of lost bushels.

Maybe that number is not worthy of moving the needle, but in the process of the price discovery process, determining fair price, it can be one of the components that could cause prices to move in a manner that would appear that this storm damage may have been the spark of that dry kindling.

Chris

Barron: Last, last week we saw strength right after that report. You know, you get a bearish report and you get a bullish response. Was some of that to the storm, you think, or what, what drove that? And there's a lot— been a lot of questions on, you know, what really drove that. Was that some short covering or what?

Duane

Lowery: It's not uncommon to get a bearish report and have the market, uh, reverse that direction quickly, especially if the market is very short going into it and it already had it factored in. Yes, already had a bearish mindset of which which certainly has been the case here for months. So that by itself could have happened anyway. The fact that the storm damage is right there in front of you certainly got attention and may have played a part in that as well. So it played a part, but it's not something that couldn't have happened without that storm damage.

Chris

Barron: Okay, so with that said, you know, as you look to the week ahead, you know, with your crystal ball as you think about the upcoming week, what do you see, or maybe even more importantly, what does the next week mean? Do we have any follow-through, or if we do, what does that mean something?

Duane

Lowery: Well, on Thursday we had a strong performance following Wednesday's market action also, and Friday we didn't give up much of that ground, which could have been something that would have been reasonable to expect. As far as the week ahead is concerned, the fact that we've finished on a firm note this last week, didn't give it up, just had kind of a pause day on Friday. I happen to think the weather is an important factor, but I feel like I'm in the minority focusing on weather. And traditionally, it's not advantageous to focus on weather on the 16th of August with any sort of a bullish mindset because you usually the marketplace isn't—

Chris

Barron: doesn't pay attention.

Duane

Lowery: Correct. But I want to point out the fact that from this perspective that we're dealing with right now, USDA gave us a national yield that was record this year that I believe was about 181.8, and I believe that is 5.3 bushels above any previous record. Well, that previous record In the, let's put it this way, in the last few years, let's leave out last year, in '17, '18, you know, we had good finishes to these crops. I think we did in '16. And one of those years we ended up having a crop that was much larger than was expected as we went along during the season. And that produced that record year. And all that credit was given to the strong finish that we had on the crops. This year it does not look to me like we're going to have a favorable finish. We are experiencing weather in Iowa and moisture conditions that we're going to suffer from dryness over the next 2 weeks.

All the crops are— the areas that are most dry and/or the soil types that are most suffering, they're going to see obviously the worst. But I think all acres will suffer. And so I, I think that we're on the verge of having a poor finish on a large amount of acres that extend beyond Iowa. And if that is the case, I think it's going to be difficult to achieve what USDA says, which is 5.3 bushels above the previous record. And that's what's dialed in now in the market size.

Chris

Barron: Part of that's going to depend on temperature though, too, isn't it? I mean, if we have cooler than normal temperatures, even though we are dry, we slow that process down, especially in the corn, you know.

Duane

Lowery: That is correct. I would agree with that. If it was— if we had hot temperatures with this, it'd be much worse. Right. But the lack of moisture, even with cool temps, I think is still a concern. And the other thing is, as early as we were planting this year's crop, our pollination dates were later than they would have been because we had some cool, cold, early, early So I think that, you know, there's a lot of acres that pollinated no earlier than July 10th, with a lot of them in the 15th to the 20th. And you start moving the calendar about how many days they need to reach maturity. You know, we're still barely halfway through that fill period.

Chris

Barron: Yeah.

Duane

Lowery: And I think that that's why a lack of moisture now is a concern. Is it a concern?

Chris

Barron: But does the market react to that or, you know, I mean, because like you said, they're really not paying that much attention to it moving forward, are they?

Duane

Lowery: Or do you think— well, sometimes the marketplace doesn't react and isn't paying attention to a certain item because the price action doesn't tell them to react. Okay, the price action is beginning to tell people something's happening here, you go find your own narrative. And as the price action goes up, we will reach back and grab something. We'll grab the storm damage, we will reach back and grab the, the moisture situation. I think that is a legitimate narrative. We'll find out. We're going to find out this week. Yeah. And then week after. But I think that the trade will have to begin to ponder a smaller crop than what they gave us in August. And going forward, if we have a dry forecast and dry conditions, I think that creates a level of uncertainty that will continue into the September report.

Chris

Barron: Yeah, so that's a lot of, a lot of, I think, good discussion on the production side of things. Let's shift over to demand for a minute and look at one thing I was going to ask you on is China, and they were going to meet on Saturday and they didn't, and the market really didn't seem to care. And would it have mattered anyway? So that seemed to be my question on all this stuff is, does it really even matter? With China. Talk to me a little bit about that. What, what do you see there?

Duane

Lowery: Well, the meeting was announced a couple of weeks ago that it was going to take place on the 15th of August, which is Saturday. Already in last week's trade, it was maybe going back to Wednesday or Thursday, it was determined that this meeting was probably going to be postponed but without a date. So when Saturday rolled around, yes, it was postponed. They did not have it. The reason given for not having was they said scheduling conflicts, which, you know, we find hard to believe.

Chris

Barron: Yeah.

Duane

Lowery: And then I think the other reason cited was that maybe because China is behind on, on their targets or their pathway. And I think that it's, it's reasonable to ponder that maybe the Trump administration didn't want to have that conversation at that time and maybe China didn't want to have that conversation at that time. And I think China could build the case that, "Hey, we're behind, but we've been ramping up. Let's meet 30 days from now or some other time to be determined later when we are closer to our targets." And I think the White House would be open to not meeting right now because if they meet now and have to disclose that they're so far behind on the target pace, of course, that becomes political fodder for the opponent. In an election. So everything it seems like is tainted with politics and this probably is one of them.

Chris

Barron: Yeah. And it was interesting too, because the vice president was in Iowa this last week and was kind of met with kind of a cool reception on the topic specifically of ethanol. So when we talk about ethanol, we've recovered significantly since all this COVID stuff has happened and the reduction in usage and now we're, we're rebuilding that. Does that matter to the market too? You know, so another question is, does that really matter on, on the ethanol side of things? And what do you see there?

Duane

Lowery: Well, let's go back and put this in perspective. The ethanol demise started on the weekend of March 7th.

Chris

Barron: Right.

Duane

Lowery: And it accelerated through March. And by mid-April, it became fully known by that point that the ethanol industry had been decimated and was going to run at like 50% of capacity. We didn't know for how long. And the fear was that this was going to be something that continued well into this next marketing year. Well, something changed and all of a sudden we got the ethanol industry back to about 90% of where they're at now. But I think it's important when you say, will the market care? Well, The market spent most of March, all of April, and the rest of the summer anticipating the worst. And since the prices that we experienced at even last week before we had the report and the market rallied, we first traded these levels on April 21st and we traded them every single month.

April, May, June, July, and August, those prices that were traded on the day of April 21st, which got into the $3.20s. In Dec corn and contract lows is $3.20. That was first traded in April. So the market's been absorbing all this negativity the entire time. So now when we have the ethanol industry coming back and it's 90% and there is a more of a level of optimism towards its future, and you have the storm damage and you have, you know, some dry forecast and all that creates some level of uncertainty for what the final crop will be. You can say that in the end the carryout will still be ample, it'll still be plentiful, there will be no shortage, and that will probably be an accurate statement. But the marketplace doesn't always look at just the final projection of ending stocks.

There's other influences along the way, and right now we're in the middle of just beginning the influence of having the market 20 cents off contract lows have it done very suddenly, very quickly, in an environment where the market is saturated with bearish thinking, bearish positions. And if that evolves, and maybe the dryness storyline will be the narrative over the next 10 days, if the, if that evolves into short covering, you know, the market is going to continue to work higher, and its first target is going to be those July highs that were like $3.63. So we're only 23 cents away from that. We're just as close to that as we are to contract lows. The short is under some pressure here, and this coming week we're going to find out whether weather anxieties might create him to be under more pressure. And what does that do? If a short's under pressure, they're looking to get out.

What is that? That's buying energy. So until that process evolves, the marketplace can look at things other than the end idea that there will be no shortage of corn.

Chris

Barron: Yeah, so this next week will be a bit of a tale as far as what, what we see. If we can have some follow-through from a little bit of that strength last week, that would be kind of a—

Duane

Lowery: I think that would be positive. It would be a positive. And if there is a weather narrative that suggests limited precip over a large portion of the Midwest over the next 10 days, 2 weeks, maybe beyond— and I think that is exactly the forecast we're dealing with that creates some level of anxiety about what that final U.S. national yield will be. And I think the mindset is at the edge of, you know, right at the edge of believing that the crop is going to get smaller. And I think this weather forecast—

Chris

Barron: they're starting to think that we've probably seen the high water mark or whatever on yield anyway at this point.

Duane

Lowery: And if the market firms on that and you get short covering and people have anxiety about what that what the final crop really is going to be, that could create a firm tone all the way into the early days of September.

Chris

Barron: And then does that mean that we've had our harvest low then at this point?

Duane

Lowery: It's not an unreasonable statement, and I would tend to believe that because— could be— even last week we did our podcast, I said I just don't think there's much downside here. I don't think the harvest lows are going to be that much weaker, and I think the, the what has happened this past week is probably a good indication that we have found the bottom side of parameters. Whether we revisit those again sometime at harvest, who knows, but I think it's reasonable to say we won't.

Chris

Barron: Okay, so that we've hit corn pretty hard. Now let's go back to soybeans, roll back to the storm here for a minute. It looks like that storm went through and all everything that I see, pretty much we still are seeing pretty pretty good soybeans. I mean, some of them were devastated in the zones where it was significantly and really severe. But on the same token, I go back to my statement I've made in the past few podcasts is when I go into Illinois, Indiana, and in large parts of Iowa, actually, the beans, you know, while that storm went through, still don't really look that bad. And you get out there and look at them, and it's impossible to guess yields. And there'll be some crop tours floating around and stuff that'll start to give us a little bit of insight probably on the bean side of things as well.

Are we on the high-water mark there on, you know, what USDA would they come in with? What was their yield? You know, if you look at that, does that— what's that mean for the market? I mean, did we hit the high-water mark there too? Because it just looks to me like we could have a phenomenal You know, I know I'm higher than you on the corn yield, and I know I'm higher than you on the bean yield, probably, as far as my interpretation. Where are you at on beans? What's your thought there?

Duane

Lowery: Well, USDA came out at 53.3, and that's a very lofty— I think that's a record yield also. The bean yield, to me, I would not say this is a high-water mark. I think it is possible that number is is larger. Now, the argument that it's not larger probably will be based largely on something that happens from now forward in terms of weather.

Chris

Barron: So if you don't get your rain or whatever.

Duane

Lowery: So maybe without weather we can, we're vulnerable to shaving that off, but we might be shaving it off from a starting point that actually is higher than what USDA gave us. And I'm suspicious that's the case. We have more people planting beans early. We had more people, you know, that put in and purchased another planter so they can do such a thing. We find that there are more people doing extra special things to soybeans to generate yields, such as, you know, foliar feeding and different types of nutrient focus on beans that they haven't done in the past.

Chris

Barron: Constant genetic improvement.

Duane

Lowery: And the seed companies have definitely had a genetic improvement in beans beginning here a few years ago. Right. And we're just kind of on the verge of seeing more and more of that. So I think it is possible that the bean yield is very real at what USDA gave us, and it might even be higher. And to the extent that dry weather here forward takes away yield potential, and I think it will, but I think it's taking it away from a higher number.

Chris

Barron: And so we agree on something that we agree on that.

Duane

Lowery: So clearly this is wrong. Yeah. Yeah, but I think that the marketplace is another animal. The marketplace may not look at it the way we're looking at it. The marketplace is more likely going to say, hey, August is the month for beans. We're not having a good finish. We don't have enough moisture. This is happening over a large footprint in terms of national production. And so the marketplace, I think, will be very nervous about bean yields. But what this does create It creates a situation that you need to kind of remember maybe as time goes by here. If beans get up and accelerate on some level of excitement associated weather, and I, I don't even think I have to capitalize the word if on that, because I do think we are going to see some strength here. But if that happens, maybe the merit of what we're discussing is a good reason that prices may not be able to sustain that.

And as future reports come in, whether those are USDA reports or yield reports, we may be faced with the reality that some of these bean yields are quite good. So I think our discussion may lead a farmer to think that, okay, if we get a rally and we can get one on fear and nervousness, but it may be a selling opportunity.

Chris

Barron: So from the standpoint, and this is back to the question that I keep asking that I've been asking for about a month and a half now, is on having to move bushels out of the field. A lot of growers are going to probably move soybeans out and store corn. Um, what, what type of numbers, if guys are sitting there with very little sold, I mean, from a technical standpoint, what's our upside potential and what do we need to be watching there? And any comments on any of that just for decision-making, a little perspective on the decision-making that guys got to be making here. Moving into harvest or toward harvest.

Duane

Lowery: Okay. The basis is a worthy something to be discussed. And immediately upon the market beginning to rally after Tuesday's report, that's when the threat of basis weakening just became more of a threat in my eyes. The more the futures market goes up, the more producer selling that is probably going to occur because with government payments either already received or expected, it is lowering the price at which the producer can sell.

Chris

Barron: And the more the yield goes up at the same time too.

Duane

Lowery: Right. The more that he can come out of 2020 with a nice profit. And I think as producers see that, they're going to make those sales. That puts pressure on basis. So as futures go up, I think there is a chance that that puts pressure on basis. As far as the storm damage is concerned and all the facilities lost, the storage bins, along with some yield loss, you know, how does that factor into the equation? And some people are looking at that part, the lack of facilities and storage bins may create forced sales by the farmer and cause basis to weaken. And I think there's merit in that argument.

Chris

Barron: Well, there was probably enough storage lost in the wrath of that storm that it's going to influence areas well outside of the areas where the damage was, because it's going to have a ripple effect on basis. Don't you think, to a degree?

Duane

Lowery: Well, it could, but there's another side to the coin like always. But let's just go along this storyline for a minute. Let's say that you're correct and caused basis to weaken. It caused basis to weaken in the gut slot, but then if that's happening because you got all these bushels moving forward in the marketing schedule, down the road it creates probably a tighter basis. So let's just pick on Cedar Rapids. They have the largest ethanol plant in the country. There. They're processing more corn there than any other location in the country. And the storm damage was almost an identical part of their footprint of where they generate these bushels from. So they're going to continue to operate those plants. Maybe they're going to get more forced bushels and maybe cause their basis to weaken. That's an argument.

But what happens to all those bushels in their trade territory, in their footprint that they would normally draw from. Now they're going to have to reach out farther number of miles away to pull corn. Where do— if they go to the east, they're going to be competing with the river market. The river market is going to have a strong bid because of the export program. So I'm not sure the basis question here is an easy answer.

Chris

Barron: Well, so to summarize it though, wouldn't it, wouldn't it be a possibility that we see a weakening basis during the heart, obviously, of harvest to where like right now, if we look at where basis levels are at, there could be an opportunity there. So the perspective would be, you know, watch this basis really close and know when you have to deliver and manage that basis. And what you're saying is the basis could actually improve pretty rapidly after harvest.

Duane

Lowery: Afterwards, yes.

Chris

Barron: You know, so it's just, I think the perspective here is just watch that really close right now. 'Cause there's a lot of people still, and I'm speaking now from profit manager and then cost production and looking at where people are at. There's a lot of bushels not priced yet that it looks to me like are gonna get priced between now and harvest. And a big chunk of that pricing decision has to do with basis and basis might be something that they need to manage separately from the price. Especially right now going into harvest.

Duane

Lowery: As soon as the futures market began to rally Tuesday, Wednesday—

Chris

Barron: Watch that basis.

Duane

Lowery: That's when the threat of the basis weakening intensified. And I can tell from whether the buyers are in the East or in the West, they are anxious or on the borderline of trying to weaken new crop bids, new crop basis. That's their reaction now and that's probably what's going to happen. So maybe there's merit in locking that basis in, if especially if you believe that the futures market has got more upside. The problem with this discussion is we're talking about a, a period of time where the basis weakens, but it won't stay weak all the way through harvest. It'll be just a gut slot forced sale type of period, and then the tables will turn and the all of a sudden the buyers who want to buy inventory at wide basis, want to fill their company-owned storage with that type of thing. Ethanol plants want to put up a pile with a wide basis.

Their desire to buy and everybody else's desire to buy, users' desire to buy, might overwhelm the pace at which the farmer makes a sale.

Chris

Barron: And those are all with the exception of the storm area because that is not an option there.

Duane

Lowery: That is correct. Right. But so I think there will be opportunities here for people to make good returns on their on-farm storage revenue. But it's interesting to point out while we're talking about basis possibly weakening, that normally would be associated with wider spreads. But if you look closely, Dec '20 versus say July '21 went from $27.50, you know, and has tightened 4 or 5 cents, you know, since its weakest point here. And that goes against the logic that we're currently discussing. How long that continues, I don't know, but I think that it's possible, and this is probably another place I'm in the minority. I think the marketplace is going to rally enough on the futures to generate a sizable amount of selling on the farmer, which could feed the weaker basis narrative.

Chris

Barron: That weaker basis, right.

Duane

Lowery: And if you're a producer in a storm-damaged area and you lost your build, your facilities, but you still have a certain amount of amount of crop that you're still going to harvest, you know, um, you may be given a good opportunity to make those sales. But I think that, um, it is probable that there will be an attempt by the cash market to weaken new crop bids as the futures rally on the expectation they're going to buy more bushels. And then whether basis stays weak or strengthens will be based upon nationwide how many farmers are making those sales. And as the carry basis widens and the carry is in the futures market, the producer has incentive not to make that cash sale, but to actually hedge in the deferreds and then wait and ship it. But there again, that's only on the bushels that they can keep off the market either for storage space reasons or cash flow reasons.

Chris

Barron: Right. Well, the basis is going to be definitely something to watch along with what price does this next week and see if we see some carry through or follow through, I should say, from, from the market. Is there anything I haven't asked? We're, we're getting up towards a half an hour here and we want to wrap up here. Anything that I haven't asked or anything that we need to, to hit on going into this next week?

Duane

Lowery: Well, I would say it this way. The market has got beans back at the top side of where they've been. They— we've got corn 20 cents off contract lows. We have a narrative in weather, storm damage, just a general idea by the marketplace that maybe yields will work lower, or we've seen the high water mark. Whether that's true or not, that— I think that might be the perception. We have opportunities to build upside momentum because we've got people caught on the wrong side of the short-term direction here. They're caught short.

And if we see strength and momentum build this next week, which I think is probably going to happen, then I think what the farmer needs to do, they need to make a calculation based on their cost, based on their own expected production, based on expected government payments and government payments received to date, and ask themselves, what price does it take on my remaining unpriced bushels to make 2020 a good year. And a lot of producers in a lot of areas are going to have an opportunity to make that sale, make that total transaction where they can look at all their revenue and this was— it turns out to be a good year.

If you're able to say 2020 is a good year when you're done with the marketing and you've made a good return, I want you to remember back about how terrible and awful you felt in March and April and May and June and July and the first few days of August wondering if you were ever going to get that opportunity. And so I think it's plausible, if not probable, that we'll find that opportunity, but that opportunity may end up being short-lived if we get a strong rally now that is weather-inspired and we get to levels— let's say, let's define strong as somewhere between $3.65 and $3.75 Dec corn, or $3.90 July '21 futures, or Dec '21 new crop, that's up at—

Chris

Barron: where does that put soybeans?

Duane

Lowery: $3.85. Then those have to be considered selling opportunities, and it's possible that, um, you later marketings may not get that same opportunity. As far as soybeans are concerned, I think a similar projection would be to see November beans get to $9.40, $9.50, and I don't think that's unreasonable. If you want to know how significant that is, that's basically taking out the highest you've been since June of '18. So it'd be the highest in, in over 2 years, and I think that's plausible. The other thing that—

Chris

Barron: if we see those numbers though, if we were to see those numbers, you really do start messing with basis pretty adversely, don't you?

Duane

Lowery: Probably, but in the same token, if you look at the futures market, the spreads have tightened quite a bit with Nov '20 gaining on all the deferreds where there's not a lot of carry in the market. So the futures market is not offering incentive to the producer to store, he's offering the incentive to just sell up front. But yet the basis is weak. And it's going to be interesting to see how bean basis works through the harvest when we've got a lot of sales onto China and we expect that we're going to have a lot more. So we're going to have a strong export program. And already you can see in the cash bids, I don't have any in front of me right at the moment, but I think there's about 16-cent better bid for, you know, late November versus October, and then December is even a little bit better. So the cash market is already offering incentives for producers to hold off if they can.

Yeah. But the one— but during the gut slot period, as the futures rally, yes, basis probably weakens for the guy that is forced to make that sale.

Chris

Barron: Yeah. And that's where, again, for the 800th time, it's those bushels that have to leave the farm that we really got to pay attention to because there's still a lot of those out there not yet priced. Yes.

Duane

Lowery: And because the futures market has now started to rally, I think the pressure or the intensity or the odds of that basis weakening in that gutslide when you are forced to make that sale are increasing. So you have greater incentives to maybe get that, take a look at whether that basis, setting that basis now would work for you.

Chris

Barron: Yep. Hey, Duane, I think that was a really good conversation. It's nice to get some of this COVID stuff behind us so we can actually get together and have a conversation. I do have, and you're picking up a piece of paper and showing me here, but that nobody else can see, but it's basically we have, we do have a margin target calculator. So if anybody is interested in doing the calculation, if you've got your cost of production figured out, you can go through here in this tool that we have and plug in your acres, you plug in your storage, you plug in your cost of production, and then your yield estimate along with other income that's come in. So it'd be like your government money, it would be some sort of a crop insurance payment that maybe you've already had hail and you know you've got hail insurance indemnity payment coming in or any kind of premiums or anything like that.

Once those numbers are plugged in, what that does is it really shows you where your margin target is. What price achieves what your target is for profitability. So thanks for handing that over to me, Dwayne. I wasn't gonna say too much, but I, now that you handed it to me, I did. So that's good.

Duane

Lowery: Well, you weren't gonna say too much, but I want to add something else. If you're listening to this podcast and you're a producer, you know, we're always looking for what is a good price, but a good price is a price that generates a profit.. And every operation definition of a good price on using that as criteria to define a good price is different. So you need to know your costs. Nobody does a better job of, and has a history of doing a better job for producers finding that than, than you and Ag View Solutions. You've done a great job. And, and I would encourage everybody to get this margin tool. Um, and I encourage it from a different perspective because I can sit here and talk about a price target going to $9.50 Nov beans or $3.70 Dec corn, and I believe it. I think there's a very good chance that happens.

But if you're, if you run this margin tool target and $3.60 corn or $3.50 corn, when you figure everything in, makes it a good price for you, then you need to look at it from that perspective. And have less concern about what I'm looking for. And I think that once you use this margin tool, it just gives a whole different perspective. And even different is— it'd probably be a better word to use— it just gives a clearer perspective about what prices mean to your operation. At the end of the day, that's all that matters. What does that price mean to your operation?

Chris

Barron: And this is a pretty simplistic tool. If anybody's interested in it, you can email either Dwayne or myself or Shay, and we can definitely send it out to you. It's definitely nowhere close to what we do with Profit Manager, but on the same token, it's a pretty easy way with 10 variables that you can plug in your information, which is specific to your own operation and establish a better idea on, you know, what truly is a margin target that you should try try to achieve as opposed to just chasing the price and trying to figure that out. So Dwayne, thanks for bringing that up. I wasn't going to bring that up, but that's good. We'll, we'll, uh, we will also probably be doing a, uh, at some point we'll do a YouTube, um, information on that and talk a little bit more about that. And so we'll, we'll be out with that here hopefully in the next week.

And then, uh, one other, two other quick things, uh, housekeeping. Um, Tomorrow or probably Monday or Tuesday, Shay will be doing a podcast with one of our clients that we work with out of Fargo, North Dakota, who handles baggers, and they're going to go through some information on best practices, cost structure, and pretty much everything you need to know about bagging grain, especially for those of you that either lost some storage or those of you that are looking at big yields and maybe thinking, you know, we want to hold on to some of this a little longer and are limited on storage. So we'll have that. The other thing is, if you did not yet watch our YouTube channel, the Ag View Pitch YouTube channel, I did an interview with my brother-in-law who was in the storm, and it's a pretty interesting conversation that I had with him.

And then on Monday, we will be doing a podcast on YouTube again on the storm damage with a producer that I'm distantly related to who was actually in the midst of the storm and essentially lost his entire grain setup. So we'll be having a conversation with him. So stay tuned to that stuff. Again, Dwayne, thanks a lot for being here and thanks for the conversation. It was good.

Duane

Lowery: Thank you, Chris. I've enjoyed it. It's a great way to celebrate our 2 200th episode.

Chris

Barron: Yeah, yeah, 200 episodes and we're gonna keep hammering away at 'em. So thanks, Dwayne, and, uh, thanks everybody for listening again, and we will catch you next time on the Ag View Pitch. Thanks for joining us on today's episode of the Ag View Pitch. As always, you can reach out to us at cbarron@agviewsolutions.com. Or duanel@netins.net. We'll catch you next time on the Eggview Pitch.