Fund selling pressures grain markets: weekly market outlook, Jun. 1-5

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch. We're heading into another marketing week, June 1st through the 5th. We're already into June and I'm lucky enough here to be visiting with Jeff Fickleman. Jeff, how's it going today?

Jeff

Fichtelman: Yeah, it's going well. Definitely a key week, obviously getting to the tail end of like planting window according to crop insurance. So. And out east, it's been a little bit more of a messy spring. So I know we'll talk through that.

Chris

Barron: Yeah, it's been a dusty one for me here just today as we, as we record here on Friday, after the markets close going out on Sunday with this, I've been in a 130,000-bushel bin eating dirt or dust, I guess you could say cleaning, cleaning the last of the '25 crop out, hoping that we captured the good basis. And we'll get on that here in a bit too. What I want to start with first, though, is you said kind of a messy situation. I know we've got some clients out in Ohio that have been sending some pictures that there's a lot of water standing in a lot of places.

Jeff

Fichtelman: Yeah, it feels like the I-70 corridor. I live just north of Columbus, Ohio, so central Ohio, but kind of that southern central Indiana straight east into central Ohio. I mean, just in the last 2 weeks, we got in some areas north of 7 inches. I mean, it's been relentless. Now, the next 10 to 15 days are sunny, 83, and maybe light winds. I think it'll dry up in a hurry. I don't think it's going to be a major story other than the fact that we've created just, yeah, this window of no planting progress at all. There's going to be a fair amount of replant. And then now the last half of the crop is going to go in late, late May, early June. And it's anyone's guess how that's going to outperform, perform on yield. And what's interesting, I'm far from an agronomist, I've only ever looked at markets my whole career.

But it's interesting, I remember being told early that if stuff gets planted late, it always underperforms, which I think is still probably generally true from an agronomy perspective, you would know far better than me. But there's also been some great corn yields, I feel like, planted in early June. So I think guys that I get to work with out here in the Eastern Corn Belt are obviously not loving the situation, but none of them have really told me that, like, this is a doomsday setup. I think they're all still cautiously optimistic, mainly because of the forecast and feeling like, okay, we'll be able to finish this up. And what I think most importantly to how the USDA handicaps the US national— the national yields I mean, one, they hardly make changes until August. They tend just to leave the yield the same. So we're going to look at 183 for at least another few crop reports.

But we've really spread out the planting window. And I think that's both a blessing and a curse. I think it creates an environment where it's hard to have another record national yield when it's been so spread out, but it's also hard to kill it. There's so many different start dates and maturities, I think. I don't know. I think we'll talk through kind of the market dynamics now. Obviously, we traded a lot of geopolitics for about the last 45 days, and those seem to be kind of slowing down a little bit. We got to hand the baton to supply. And as much as there's pockets of stories, I don't think there's really a national production story today.

Chris

Barron: Yeah, it's interesting. Like you said, you know, from the 50,000-foot view, the market looks at things on average, and on average things are okay. So even though it's super wet in some areas and super dry in others, on average, it's, you know, I had somebody tell me, I think it was Joe Paulson, one of our associates, said his grandpa always used to tell him, average is when you have one foot in the scalding hot water and the other foot in freezing water. So that's average. So, but for sure, You know, with those challenges, you know, we all have local challenges and stuff. Talk about— let's hit on old crop for a minute. You know, it's on top of mind for me right now because I've been shoveling behind a sweep. But you know, what's your take on basis? I mean, you know, there's— how much old crop corn do you think is out there? I mean, you talk to growers both in the East and West.

And so What's your thought on old crop out there? And what's that mean for basis?

Jeff

Fichtelman: It's been interesting, like take the Far Eastern Corn Belt, Ohio, parts of Michigan, parts of Kentucky. Basis was really strong December, January, February. It was 20, 30 cents above normal. And now I feel like we kind of flatlined basis and not falling off, but it's also not gotten into new levels. We had a ton of guys take advantage of the strong basis levels. I think that sucked a large majority of the crop out. And logically, you would say, because I mean, you look at ethanol margins, feed margins, or at least the ethanol margins are still positive. Depending on where you're at in the basis, the feed margins are okay. Exports are still really strong. You would assume with very little corn left in farmer hands, from what we see, that basis would strengthen even more. But we're We're not really seeing it just kind of flatlined.

I don't know if maybe people felt like they filled up on their needs or maybe bought a little more aggressive than they had planned. You kind of move to the central part of the Grain Belt, we got some farmers in our furthest west is pretty much Champaign. But like the Indiana-Illinois border, the crops there were definitely a little better than where they finished in Ohio. So there probably is naturally going to be more corn in farmer hands. And it's been somewhat frustrating because it feels like you go 50 to 100 miles east and basis was $0.20 or $0.30 better. Wasn't worth making the commute. But that basis improvement never really made it out that far west. So we've seen kind of lackluster basis markets, not bad, but not great either.

One thing that's notable, though, is feels like a lot of these grain elevators, especially out east over the last 2 or 3 years, at this time of year, they're posting new crop harvest basis at pitiful levels 2, 3 years ago. And they bought nothing. And almost all of them, by the start of basis to the end of basis, had pushed levels up 10, 20, even 30 cents on beans, and bought very little. So we're already seeing somewhat aggressive, not, not great, But like, take an area that normally is 30 under, they're posted 25, willing to pay 20, if not even 15 under right now. Whereas 2 years ago and 3 years ago, they were posted 40 or 45 under. And by the end of harvest, they're paying 10 under. So I think they have gotten hurt enough times that they're actually starting a little aggressive. And I actually think this year might actually make sense to lock in some harvest basis.

Early because of that. If you can negotiate decent levels and you know you got to move it, just kind of flipping the other side. How's it been out west on a basis out there?

Chris

Barron: You know, it's hitting— it is such a localized thing. Like you said, you can drive 50 miles one way and 50 miles the other way and see something quite a bit different too. It also depends on where the processors are at, you know, what's their grind like? What are they— what are they doing? What are they producing? Is it ethanol? Is it You know, a lot of our grain in our part of the world goes into Cedar Rapids, Iowa, and majority of ours goes into Cargill and, and to Quaker Oats both. And, and so, you know, their, their basis has been strong in comparison to normal. I mean, normally it's $20 under and it's been, you know, or $25 under probably, and it's been, you know, $5 under and flat once in a while. You know, they're posting a little higher than that. But you know, it's, it depends on, you know, if how many bushels you got, and if you can get things delivered.

It was interesting, I had a conversation with a buyer the other day that was really struggling getting corn bought from farmers. And, you know, this is the time of year where everybody's spraying, and everybody's doing field work and stuff. And so it is hard to get farmers to move anything right now, you know, but that's a great time to do it too, because basis is better, and there's not 18 trucks in front of you while you're trying to get dumped. And, you know, but was struggling to get farmers to sell even with a really good basis. And so I think, you know, that's, that's where the elevators sometimes I think make, make money over the farmer because they're going to deliver it when, when the processor is paying for it. And I think that's a lesson that some of us on the farm side need to figure out, how do we get trucks moving? You know, it's easier said than done. I get that.

But planning way ahead of time and having a— having, you know, some infrastructure lined up to move those bushels when that basis opportunity is there. And even if the flat price isn't where you want it, get them, you know, it's never the basis and the flat price never line up on the same day anyway. So you got to kind of do one and then do the other. And so speaking of that, that's a bit of a transition into, you know, as we watch the prices and we see what's going on with oil, it feels like You know, the oil prices are settling down. It's driven, you know, the corn prices down. Everybody's tired of the story of drought in the wheat area, which was helping bolster some things for a little bit. And so it just seems like there's a little bit less news to the positive side for grains right now.

Is there anything you're watching or anything guys should be paying attention to as they either clean up the old crop or— and we can start talking about new crop here too.

Jeff

Fichtelman: Yeah, the funds really are key. And it's interesting, I talk a lot about them and I think a lot of farmers have a net hatred towards the big speculator. They feel like they can manipulate markets.

Chris

Barron: They've driven the price way up then.

Jeff

Fichtelman: Yeah, that's right. They can be friends and enemies. It just depends on the moment.

Chris

Barron: But they're frenemies.

Jeff

Fichtelman: Yeah, it's— yeah. But one thing I would say is like in my entire time trading these markets, the single greatest indicator by far is the speculative the big large spec fund position. There's only been 5 times in history they've been this long. And they've only been this long at the exact same level, we've never exceeded it. And that's long, almost 400,000 contracts of corn and 200,000 contracts of beans. And to put that in perspective, I mean, that's well north of a carryout in corn and almost half of the production of beans that they're spec long in. The tough thing with the big speculators, when they decide, hey, I don't believe in the story anymore, they don't sell in a patient manner. They don't readily leak it out. They just decide I'm done and they get out in 2 or 3 weeks and they push the market down. We're kind of seeing it.

And the other important factor is a speculator, because they trade such enormous size, they tend to have to put their position in the front months because that's where most of the liquidity is. So right now they're long the July, not— I mean, probably some of the Dec as well, but they're not long March, May, or July of next year, even Dec '27 or '28. And what happens when they liquidate is the spread goes wider. In other words, July gets hurt the most. And we're seeing that right now, which, to your point, Chris, I'd say could actually be a sweet spot to really try to negotiate basis because this is a good time when farmers are busy. That's when basis tends to be the best. And because of boards going down, that makes that flat price harder. You might capture a processor that needs a grain that's willing to pay up. So this is a great moment to lock in a basis-only contract.

The hard part is the funds who are this long have maybe only liquidated at most a third of that position. And there are times where you get to $400, they sell off to $200, and then they bounce back up. I was looking at the other day, when they've gotten this long, there's been 5 other times in history and they started to sell only once did they bounce back up. The other 4 times they sold it all the way down to zero. And some of the best sales were actually after the market turned over. So I've really challenged my guys, where's the easy sales right now? If you feel like your crop's in decent shape, you're not, you're you didn't draw the short stick on planting this year. I would say new crop bin bushels, March '27, it's still $4.90 plus as we film this today. Nov '26 beans, a lot of guys move beans at harvest, they're still $11.80 to $11.90 as we film it today. That's still near $12.

And what I've learned, a lot of guys benchmark, I say all the time, like, made 5 calls today, like, hey, you've made huge progress. Let's get some more beans sold. They wanted to make sure they got the crop in the ground. Well, now they've been getting that crop in the ground. I call them up, say, okay, port's still nearly $12. And they, they all asked me the same question. What was the recent high tick? And I'm always afraid to tell them that, because then what will happen, it's around $12.20. They'll say, okay, well, I'll put an offer in at $1,215. And I'm like, well, the market's $1,190 today. We might not ever get back to $1,215. Maybe we do. But I've seen more dollars lost trying to pick up that last nickel, dime, or quarter as guys are unwilling to sell the current market because we've fallen off.

So I always challenge guys, like, if you know it's time to make a sale, sell it at the market. Do not put an offer in just above it. Maybe break it up a little bit at the market, put an offer on some, but get something done. I just worry greatly. And obviously the funds are long because there's a story. Demand is fantastic. But they could push markets down for months before we have another shot at it. So just need to be careful here.

Chris

Barron: Yeah, one thing that's always scary to me are those bushels that you do not have room for at harvest time. You know, and you have to estimate them. Obviously, you don't know your yield, but you know your average yield, take your average numbers, calculate that and say, okay, I got 50,000 bushels, 100,000, whatever the number is. Do I have those bushels priced?

Usually by, you know, if just looking at seasonals, you know, if you have those things priced by the middle part of June, and maybe, like I said, maybe we've seen it, maybe we haven't, you know, in terms of the high, who knows, but, you You know, getting those bushels, I think, is the pressure point, right, is making sure, you know, because sometimes I'm inclined to say, so what percent do you think we should be sold at, you know, and that's a leading question that, you know, that's basically, you know, get under this rock so I can drop it on you, you know. It's like, you know, it's those overrun bushels, though, that are so important. Same thing with soybeans, too. Historically, a lot of our clients anyway, it seems like that's kind of the cash crop, right? They harvest the soybeans and they go off.

And so there's always a lot higher percentage of soybeans that need to go right out of the field, right? Because people don't like— they're like storing them, or, you know, there's more money there. Where do you think people are at from your perspective on soybean sales now that we've gotten to numbers that probably people didn't think we would, even though we're still borderline barely barely at the cost of production.

Jeff

Fichtelman: Yeah, that last point is important, of course, to remember. But I would say it seems like the farmers have been more willing to sell this rally. And I mean, from our gauge, the clients we work with are 30 to 50% sold on beans and corn, a similar percentage. But we push our guys hard. I would say the national average There's some brokers who take some really good surveys. I think they've estimated beans in the 20 to 25% range nationally, which, I mean, there's been years where we've sold 5 to 10% or even zero at this time of year. I would say, to your point, most guys deliver their beans at harvest. So by middle of June, ideally, you'd have half your beans sold. Because, I mean, occasionally you get an August story, but a lot of times we don't. Most of the time the lows are set August, September. When we're starting those harvest windows.

So yeah, I would challenge guys, if you're under 25%, we probably need to be making a sale here and take it as a blessing because you're starting at $11.90, not at $10.20 where we started the year. And one last point, and you made a really important distinguish—

Chris

Barron: distinction.

Jeff

Fichtelman: Let's say a guy grows 200,000 bushels of corn, and he could store 150 of them. And he knows he's— I mean, assuming he has a normal yield, is going to have to move $50. He should want to price that $50 first. But what I have found is, like, take right now, Dec corn, as we're filming this, we'll say is $4.75. And March corn, we'll say is $4.90. For simple math, it's roughly around that area. I think it's $4.77 or $4.91.5. But in any case, $4.75, although it's still a great level, it's off the $5 mark, and guys really struggle to pull the trigger there. They're more inclined to not do anything. Whereas $4.90 to $4.92 still feels like it's actually a decent sale. And if I'm talking to a guy who has nothing sold, I actually would rather him sell 50,000 bin bushels just to get something on because really it's one pocket versus the other.

Because a lot of times what happens is, we logically should want to start with the bushels that have to move at harvest. I agree there. But because we don't like that price, we end up doing nothing. And that's kind of the takeaway. So I always challenge guys, like, don't be stopped. Now, of course, it makes— it's mathematically kind of the same. If the market goes down 80 cents, like, they're both— you're glad you sold at least something. But if the outcome is I can't sell the current market for my harvest bushels because the price just isn't good enough, I'd rather you at least sell some bin bushels. Is kind of my point.

Chris

Barron: And when you look at the cost to carry, I'm going to get on my high horse again here now on cost to carry. But you sell December corn at $4.75, you need $0.30, $0.35 better depending on, you know, that's assuming you're storing it yourself too. It's not going to an elevator, but you're storing it yourself. That, that $4.75 sell, sale is $5 corn in, in March. If you're delivering it right in front of planting season, you know, when you're paying bills and you're paying your cash rent and stuff, it's a feel-good number is what it is, which drives me crazy. It's like, well, I'm okay to sell the March because it's close to $5 or it is $5 versus the $4. You know, it doesn't look as good on paper. Well, it doesn't matter. It's the same damn thing, right? It's, that price is the same. It just makes you feel better. And it's an emotional thing.

It appears to me a lot of times, Plus, you know, the bankers look at this stuff when it's loan renewal time. Loan renewal time for a lot of people is in that December, January, February timeframe. And you're sitting there with unpriced bushels, you know, versus— or maybe priced, but you don't have the money. So you're paying that interest and they're sitting there watching your marketing. And, you know, we make decisions and there's consequences to them. And sometimes it's the right thing too. I mean, sometimes people You know, they'll, they'll get the base opportunity, they'll deliver some stuff or whatever. And, you know, and you hope the price comes to you, but it's got to come quite a ways, you know, to offset the cost to carry. So that's my soapbox. Sorry, I'll get off of that now.

Jeff

Fichtelman: I mean, well, last comment on that. I mean, I remember the joke from my college economics class is the professor would always start and say, assuming we have rational actors, right? And the problem is us humans, we're not rational. To your point, like, emotion, feel-good way to make a sale is to know that that final price will be at a round number that I'm okay with. And to your point, like $4.75, you roll it out to March, you add hopefully some positive basis, and you're at $5 cash. And if, like, we just have to trick ourselves. Like, I would love for this to all— we'd all be robots and hedge in a perfectly simple way, but we're not. We all, we all get in our own way constantly. So, uh, it's all about tricking our brain to feel good about the sales we make, right?

Chris

Barron: Right, exactly. And, you know, I think as producers too, as the market goes up, just kind of like we've had, you know, with the oil prices going up and the funds jumping in and all that. And we've had these pretty, pretty reasonably good price opportunities. And we've, we've settled back from that. And then I think you get the non-seller's remorse, right? I didn't sell, I wish I would have. But at the same time, when that was happening, it's like, well, this might go a little higher and I'm busy. I don't have time to look at it right now. And I think that that's a bad, bad thing that I think happens to a lot of us. We get busy and, you know, and then that's where having those offers in, you know, having those working and having somebody like you calling up and saying, I know your hands are greasy right now and you're under the planter, but you need to be getting these offers in.

If you, if you don't have them in, because we get, we get bullish when the price is up there. But I'm going to give you the last word. I'm going to go back to shoveling the last little bit of our '25 corn. What's the last word? What do you want to leave growers with? What do they need to be thinking about next couple of weeks as they finish up their spring or, or replant again here?

Jeff

Fichtelman: I always challenge guys, it's easy to be pessimistic about crop potential, but we are so resilient nowadays at growing these crops that we have to assume that's the likely case, not the opposite. And if you're under a third sold on corn and beans, I challenge you strongly to consider making a sale and however you got to get there, however you got to trick yourself into making that sale. $4.90 looks great on the way up and terrible on the way down. Let's not be irrational. I really advise guys look ahead at $26 and not even— don't forget about $27. These $27 and $0.27 are good levels as well. I know they're not necessarily profitable if you really pencil out the math, but a market doesn't always give us that. Opportunity. Looking at the funds where they're at, we could push the market down more than we could push it up.

So I'm not saying sell everything, but at least make a sale here to lock in something.

Chris

Barron: If you're 50% sold, you got half of your crop to sell yet, right?

Jeff

Fichtelman: That's how that's all in perspective.

Chris

Barron: You got to think about it on the other side too. So half the crop to sell yet. Yeah. All right. Well, hey, really appreciate your time today, Jeff. As always, it's been a great conversation. I look forward to getting you back here in a few weeks once Ohio gets finished up planting after the third go-around, probably in some cases. I think between— you guys got nailed. You got, you got some really nice weather early. Everybody got to go out. Not everybody. A lot of people got to go out, plant early, and then it froze. And then you got to replant and now you're getting deluged with water. So I feel for those guys and hope everybody—

Jeff

Fichtelman: It's gonna be a long harvest.

Chris

Barron: Yeah, that's for sure. Hope everybody can be safe out there and just enjoy the, enjoy the ride. Take some time off and enjoy family. It's getting to that summertime where hopefully we can do some things with family and recognize why we do what we do. You know, this is— we're lucky to be in this industry and take some time to enjoy it as well. So with that said, Jeff, really appreciate your time today.

Jeff

Fichtelman: Yep, absolutely. Thanks for having me.

Chris

Barron: Hey, real quick, if somebody wants to get a hold of you, what's the best way to get a hold of you too? Forgot to ask that.

Jeff

Fichtelman: Yeah, honestly, go to jp2risk.com. You'll see all our information in there, contact, and yeah, I appreciate it.

Chris

Barron: Awesome, sounds good. Well, thanks everybody, and we'll catch you again next time on the AgVie Pitch.