Harvest expands, but prices appear well supported

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Chris

Barron: Welcome everybody to another episode of the Ag View Pitch, and we're heading into a new week. And I've got Chris Barron and Dwayne Lowery here. And, uh, heading into a new week, Dwayne, how's it going for you today?

Duane

Lowery: Going good, Chris. I'm sure you've been very busy with harvest and trying to burn the candle at both ends, so I'm, I'm, uh, it'll be interesting to see how alert you are today.

Chris

Barron: Well, I'm more alert today. I actually got some sleep last night. I got— I've been going on about 3, and last night I got about 6 or 6.5 hours. So that works pretty good when you get a little rest. But before we kind of talk a little bit about what we're seeing out in the fields and stuff, we closed the market, you know, last week on Dec corn at about that $3.91 range. What do you— any news or anything that we should be aware of going into a new week on the markets for corn?

Duane

Lowery: No, I don't think so. I mean, I'm not aware of anything new per se. I mean, harvest is advancing slowly. I think last week people were working on beans as much as possible. And in many cases, corn is not ready, or it's too wet, or it's wetter than people desire. So it's not been a primary focus. The weather forecast is such that we'll have a little bit of disruption here in the next few days. But overall, any disruptions we get look like they'll be relatively short-lived. And I would say in general, the harvest outlook isn't too bad. And as far as the market is concerned, you know, we finished lower on Friday in the corn market. But I think you've got to take a step back view and realize, you know, you're— as of right now, you're $0.40 off the low, you're a dime off last week's high.

The market has had relatively minimal corrections during the move from early September up to where we're at now. And when we did get a correction, it tended to be very short-lived. And I think there's probably a lot of different reasons for that. But the Commitment of Traders report shows that the funds are still short corn, but they've been buying, net buyers of corn for 4 weeks. They were net buyers of every agricultural commodity in this last weekly reporting period. And they're long most everything except for corn. And once they got out of their shorts in beans, they immediately added to build a long position. And when I look at all that, I say all of that is very constructive. And I want to focus on the part that, that says that when we've been getting a correction in the corn market, it's been very minimal despite the fact that harvest is upon us.

Basis levels are still firm and we may have lost some spot premium bids and we may lose a little bit more over the next week or two as harvest expands.. But overall, I think we'll maintain a strong basis and, and a well-supported market. So I think everything looks pretty encouraging.

Chris

Barron: Good. And you know, as far as guys, you know, doing harvest and stuff, I mean, back to the basis, I mean, you kind of mentioned that, I mean, do you think it makes sense if the basis has started to erode in certain places where guys have been doing some harvesting, but they know they need to make some sales yet for either storage reasons or cash flow reasons. What's, what's the plan there? Any suggestions?

Duane

Lowery: Well, if they got a, you know, premium for a spot bid in their location, it's probably okay to take advantage of that. If they know they have to move some, and the question is, are they going to move it right away? Are they going to move it, you know, late in the period? I'm not exactly sure what the best approach would be. I certainly don't want to paint a picture that basis is going to weaken a lot because I don't think it will. But it is possible that it could weaken some. And so I guess the producer can— it's all right to go ahead and make some sales, but I don't think he should be worried about basis returning to a normal level. We're talking about opportunity for basis to weaken some because of harvest.

But then as soon as harvest is, you know, more than 50% done, or it gets past that point where it's, you know, much closer to being done, I think basis is going to stay very firm. So I would, you know, I wouldn't, I wouldn't encourage somebody to get nervous and sell a lot of basis thinking that it's going to weaken, but it can weaken some.

Chris

Barron: What do you think the trade's thinking as far as, you know, harvest goes, you know, there's pockets that have advanced further than others. Some areas have done nothing, obviously, with snow and, and weather problems. But do you think the trade is sensing any kind of a trend on the corn side of things at all yet that you've heard of?

Duane

Lowery: Well, I think you got people that are in a few different camps. And I think they have a predetermined mindset that's weighing pretty heavily on them. I think you have a certain group of people that throughout the growing season felt that we would have, you know, significant disappointment in yields. And maybe they thought the June planting was going to be significantly disappointed. And for the most part, we probably haven't gotten far enough into that to really be able to give a clear indication. But the people that expected yields to be sharply reduced, they probably evaluate what they've seen for harvest data, either their own or what they've picked up within the industry. And they probably come away thinking the yields aren't as bad as worst fears. And I'd say that's probably a legitimate answer. But in the same token, USDA has us down 8 bushels over from last year.

And I would characterize the corn yields that we've seen so far as being some very good yields in there. But when you drill down into the questions, you find out they're still maybe 15 or 20 bushels below last year, even the ones that are very good. You have people that will say the yields are better than they expected or better than worst fears. And I think that's probably legit. But when you drill down in and ask more questions, you still find out that they're well below last year. I think there are only few places or few fields within a geographic footprint that, uh, turn out to be equal or better than last year. And I think there's a relatively small amount that's equal to last year.

And I would characterize that most areas, even an area that might find a good field here or there depending on drainage, planting dates, etc., most of them are still far enough below last year that I don't think we're going to maintain a national yield that's only 8 bushels below last year. So in my opinion, the yield trends I've seen so far to me translate to some yield level that's lower than what USDA is currently plugged in. And I think for the most part, people are starting to move into that direction where they think the yields probably will get further shaved in both corn and beans. I think that feeling of confidence about lower yields coming is probably greater in beans than it is in corn. But part of that is driven by the idea that you, like you said, maybe we just don't have enough acres of corn that we can be confident yet.

Chris

Barron: Well, do you think, you know, from the, from USDA's perspective, does a slower harvest equal a slower adjustment to the downside on, on on it, do you think, for the November report, say, for example?

Duane

Lowery: I think that was a legitimate argument for the October report. I'm not sure if that's going to be a legitimate argument for the November report. I'm guessing USDA will take a fairly aggressive stance in the November report, and a very fairly confident directional move in towards what the yield is in the November report. So if it is correct that the yield trends are going to be coming down from what we've had, my guess is USDA will take a fairly aggressive move in that direction in the November report. I think they'll have enough data to be able to do that. And I think they will do that. And whether or not that means they lower it more in January or not, I don't know. But I don't— last month I felt they just punted. They just didn't want to take a chance on fourth down, so to speak.

I think they will go ahead and make a statement about the yields in the November report is what I'm saying.

Chris

Barron: What's that mean for price direction if they don't change it, or if it does change a bushel or bushel and a half or something? To the downside, or stays the same? I mean, we're assuming it's not going to go up.

Duane

Lowery: Right, we are, but I'm not sure that's always safe either. But let's— sorry, for sake of argument, let's say that they only lowered it by, you know, even 2 bushels. 2 bushels an acre is going to be, you know, 150 million bushels, something like that. That by itself doesn't seem like enough to sponsor a rally, or doesn't seem like enough to, to inspire people. But I'm not sure that it would be considered bearish either. And I think the market made an attempt at feeling bearish after the October report that lasted like half a day and the next day it was all taken away and more and the market rallied right up. So I think the market is going to be well supported if we get, you know, only a minor yield reduction. And I'm not sure how, what level of disappointment will be able to depend on what the market is thinking at that time.

We're still a few weeks away from getting that November report. So it's a little dangerous to know exactly what that mood will be going into it. But I'll say this, if you can get, you know, if you could get 4 bushels shaved off that, then all of a sudden that, that generates a whole different outlook on price. And that, that spurs a market rally. And the large funds are still short corn. So they're still buying energy that can come there. The other thing I thought of interest as I was looking markets over this weekend, the wheat markets had a pretty strong rally here relative to corn. It's gained like 70-some cents on corn from early September. And I'm not sure if that's going to be able to be maintained. And so to the extent that people were buying wheat, selling corn, we might see a reversal of that coming.

So another source of buying energy that can come from, from that particular area. And I still think it's a bit of a wild card, but it's worth mentioning. We seem to be moving towards a deal with China and some sort of semblance of a return to normal, and China seems to have an appetite for a lot of different things. And I, even though it's not widely talked about in the trade, I don't, I think the expectations are low. I'm suspicious that they may very well buy some U.S. corn before this is over. And I think that sets the balance sheet too. So there's a lot of things that in front of us that could happen. But I don't know what the, the national yield level is going to be from USDA. But, you know, it doesn't take too much of an imagination. And listening to yield reports, I don't think it's too hard to even come up with a 160 national yield. That's 8 bushels below what the USDA has.

And if that happened to be correct, that's a big change in what is being thought about right now. And I don't even know if that's just foolish thinking on my part that I shouldn't even say such a thing, but it doesn't seem like it's that difficult. The yield reports to me are, are well below 8 bushels off the national yield. So I don't know, what's your thoughts, Chris?

Chris

Barron: Well, I, I think kind of like you, you know, said, I mean, as far as corn goes, I, I think there's not enough information yet, in my opinion. It appears to me like yields are off from everybody we've talked to. I mean, on the harvesting side, they're just not very much done though in, say, Iowa and big areas of Illinois yet too, although there's more being done in Illinois and in Indiana and stuff. But I don't know, I just, I think we need another week or two. That's why I was curious if you thought USDA would be slow to change any numbers because we're so slow with harvest here. I mean, we're just not getting, you know, maybe as much information as we'd like to see on the corn side of things anyway.

Duane

Lowery: Well, maybe, but I think by the time 1st of November rolls around, even if we're not advanced in harvest, I think by that time we will be much more advanced than it feels like right now. I think USDA will be able to look, take take a look at their plots and still come up with a pretty solid objective yield. And I think they'll be fairly aggressive. I don't think they're going to be punting again in November.

Chris

Barron: Gotcha. Well, that's pretty good conversation on the corn. Let's shift over to soybeans. There's obviously a lot to think about on the corn side, and we can come back to harvest stuff or whatever in a minute. But on the soybean side of things, what's your thoughts there? I mean, we closed Friday out or last week out in that $9.34 range for Nov beans. What, what's your thoughts for a new week going into the soybean side of things?

Duane

Lowery: Well, the soybean market has hovered up here pretty well, performed pretty well the last several days. I'm a little suspicious there's some downside risk early this week that might violate last week's lows. Those are only about 7 cents away from where we settled. So that's not saying a lot. But I think there's lots of support from the technical crowd, 15 cents below where we settled on beans. I don't think that level will be tested myself. But could we trade, you know, you know, 7 or 10 cents lower at some point in time from Friday's close early this week? I could see that. But I think the bean market is going to continue to be well supported. And I think the underlying fundamental theme there is that USDA lowered the carryout in October to 460 million.

And I think you've got the trade, a lot of people in the trade that are quickly getting to a point where they're willing to anticipate carryout ultimately being under 400 million. And that's really without any yield reduction, and/or minimal yield reduction. And yet the yield reports that I'm picking up and my sense of the trend is Again, while there are some very good yield reports, there aren't many that are above last year. There aren't that many that are equal to last year, and there's a lot of them that are falling 10 or 15% below last year. And I think versus what USDA had, you know, to be able to shave another 2 bushels or even 3 to 3.5 bushels off the national yield from what they had in October seems very plausible to me, not that difficult and not that far-fetched. And suddenly you're talking about, you know, a carryout that is probably under 300 million.

And so the narrative is so much different than it was, you know, just weeks ago or even months ago., and, uh, I think the marketplace is still adjusting to that. The other thing I think that I want to find that's very interesting, the large specs did never cover their short position in the summer rally, but, um, this time go around they just barely got out of their shorts, uh, in the last week's report, you know, that was released a week ago, and then the one that was released on Friday just a couple of days ago They had stayed very quickly established, you know, fairly decent long position. So I'm— my sense is that speaks to the significance of that they see a change in the fundamental foundations.

And I think that goes back to the discussion about how I started this conversation about how carryout is no longer a billion bushels, and it's got down to 460 from USDA and the trade's comfortable getting down to 400 or less with hardly any change in yield. And I think there's a fairly, I want to say kind of a growing belief in the trade, whether that's on the producer level or the spec level that watches some of the fundamentals and gets farm reports and has an understanding of this. I think there's a growing embrace of the idea that the national yields could easily be down 2 bushels an acre from where it is now. And I think that— so, um, that creates a completely different narrative. And I think a type of narrative that the markets are going to be well supported. I think the technicals are supportive.

I think we're going to continue to operate in an environment here that we get small corrective weakness. We're not able to put in a large break. And I think all that looks fairly supportive to me.

Chris

Barron: Well, and on the soybean side of things, just to give you some feedback there and see what you think there, and kind of like we did with the corn, but you know what we're hearing from a lot of people is, you know, we were off— that have finished beans, and some that are got a ways to go but have a pretty good handle or calibrated their eye on what things are going to finish up like, but it's pretty common to hear people somewhere between, you know, 10 15% off of last year's yields. And, you know, and in a lot of cases, maybe worse than that, but, you know, we were that way. I mean, we finished beans last— early last week, or late— mid to last week, and we were off about 13.5% from last year just with yields. And we had, we had one farm that actually did 70, but we had some farms do 50. So, you know, it's really variable too.

But when you average, even though like you said, there's some good yields out there, but when you average those good yields with those poor yields, it just appears to me that we're way off of maybe what the USDA thinks. Do you think the USDA will have a reaction in November at that point then?

Duane

Lowery: Yeah, I think they're going to be aggressive with their yield projections. I don't think they will be—

Chris

Barron: again, assuming they go down, right?

Duane

Lowery: Yeah, that's the assumption, you know, right? You know, so that doesn't mean we're right, but that, that's the assumption. And I think they'll be fairly aggressive, and I think they'll be fairly confident in how it's delivered. I don't think it'll be any question of that. They punted again. If they come in with only a minor loss in the yield,, from what they had this last month, I'm, I'm going to go under the assumption that, uh, they must feel confident about that. Okay, that's not where I think they're going to fall into play, but, um, whatever it is, or, or the rest of the correction comes in January, maybe, but I'm not going to bet on that. I think they're going to be, uh, quicker to, uh, be aggressive with their yield adjustment. That's, that's going to be my my opinion. And you brought up 15%.

If you take 15% off of last year's yields, instead of what USP is, it would be huge. If you, if you instead of what they are currently projecting, that alone, not a factor in any improved demand outlook from China or anything else, that alone puts you under a 200 million carryout. And if you, if you you know, don't go that down, you just go down the 10%, that still puts you, you know, well under $300 million. But your 15% takes you down under $200 million. That's a significant thing. And, you know, we're— it doesn't take much of a decline in either one of these corn or bean yield projections. And, you know, we're gonna— we're going to have an acreage battle discussion. Between now and the time that farmers make those decisions. And to me, that's a pretty significant thing, probably more significant towards beans than anything. But, um, these yields are still very much in play.

And, uh, like I'd said after the October report, we should not read anything into their figures there because all they did was punt. And so we shouldn't equate their minimal change or their slight increase in corn as being any statement at all about the yield trends, because they pretty much just punted. It meant absolutely nothing. I think November will be— we'll get a taste of what the real yield trend here is going to be, whether that's up or down, whatever USDA tells it, I'll accept it. But I'm just saying, I think we will get a real taste for that in November.

Chris

Barron: You think the trade feels that way? Or what do you think?

Duane

Lowery: Generally? I think the trade anticipates that they'll be slower to do that. And they won't get that done until January. But I think the trade is out of step. And I've said this before, and I think they've been out of step for quite a while. I think they're finding it very difficult to be confident in a yield reduction, or a big change in yield, because that would imply a bullish thought process. And the trade has not recovered from being beat up by having a bullish bias in the summer by USDA. And they cannot bring themselves to, to have, having a confidently bullish opinion during harvest, knowing USDA is still lurking out here with a more significant and meaningful statement about yields and what they got in October. And I think they are still fearful of, you know, something bad happening to them if they turn bullish.

And I think that makes the trade choose to say USDA will be slow because that's a lot easier for them to digest. In other words, they want a world where USDA is slow. They want the harvest to get over. They want the price to work lower. They want neon signs to show up in the yard say Okay, Chris, it's now okay to go buy corn and buy beans. That's what the trade wants. And based on my, based on my years of experience, the trade is not going to get that. And so I think they are, they are out of step, because they're hoping for something that's not going to happen. And I think they're hoping for a better opportunity. They've been unable to figure out how to get long from the September bottoms to where we're at right now. And they can't bring themselves to be long.

And if so, if they can't bring themselves to be long, that means they can't bring themselves to think in terms that USDA is going to give us much of an adjustment in November, because then that forces them to do something that, like I said already, they're not comfortable with. So I think that means the trade is not at all expecting this big yield adjustment in November. They might be expecting one is coming. Okay, it might very well be that they believe that or see it. But they're not prepared to expect it in November. They don't want it to happen in November. They want those neon signs to show up in their yard. That's what they want, and they're not going to get that.

Chris

Barron: Darn it. Oh well. Well, what, what else haven't we talked about? I mean, other than we can chat a little bit about harvest progress and, or the lack of it. Anything else on the strictly on the marketing side? We can kind of hit that topic for a minute too.

Duane

Lowery: Well, again, I think because yields are off from last year, price— prices don't mean the same thing to us that we might think that they mean. In other words, if the producer had X amount of bushels for per acre last year, and he sold his crop at a certain price, then that means something to him. But if he's 10 or 15 bushels an acre of corn off from last year, if if he's 5 to 8 bushels off his beans from last year, and in some cases, it's certainly more than that, then suddenly those prices that he thought were profitable, or maybe he thought were his price targets, acceptable price targets in spring of this year, and with basis levels the way they are, he might be getting the price targets he wants, but he doesn't get large enough bushels to multiply them against. And so I think that is weighing a lot on people's mind about what is a good selling price.

And I think for the time being, the producers don't feel the urgency to make a sale. And I think if they do the calculations, they're not generating enough gross revenue for that to be an attractive sale, not to mention the fact that their drying costs might be double of what it was a year ago. So they're continuing to stare increased costs in the face and the price and then gross revenue just doesn't calculate up because they don't have as many bushels as they had calculated in the winter and spring and their cash flow statements. And I think all that makes them, you know, reluctant seller, even if they're not super bullish or even fearful about what the price will do.

They just don't want to sell at something that, you know, just doesn't cover their cash flow needs the way they feel that they want to and I think most of them are in a position that they probably don't have to make a lot of forced sales right now. They can wait. I think they're electing to take that time and to wait.

Chris

Barron: I would agree wholeheartedly. In fact, I may just have a tool on that specific topic where if anybody wants it, let me know. It's, it's a side-by-side scenario planner, but it's very simple tool, but you basically, you plug in your price and yield from the prior year. And then plug in your scenarios, and you can plug in about 4 different scenarios and kind of look at price times your, your either expected or final yield to kind of just help you think through where to pull the trigger, or maybe where not to pull the trigger, like you're talking, Dwayne, because I'm just sitting here doing some math when you were talking. And if I use our whole farm yield average last year, which was a record for our farm operation, across the board. And I shouldn't be saying the numbers, but I'm gonna anyway, because it's— it makes the point that you were just bringing up.

But $244, but our average selling price last year was $385. So that's $939 an acre, versus this year, we're looking at still really good corn, like you said, it's really good, but it's $220. So it's 24 bushels off of last year. And if you take that times $4, which is about where we're at right now, you in, in Iowa with basis and everything, that's $8.80 an acre gross. So we're $60 an acre off. And then that doesn't even mention the fact that we're, we're drying, you know, 25 to 29% corn that's probably not going to dry in the field much more. And so we're spending an additional $30. So now we're at $90 when you add the additional drying cost to the lower yield and a higher price. So basically what that's telling me, doing the math and my, my tool here real quick, is that I need 25 cents more per bushel than where we're at right now.

So that solidifies what you're saying, and I'm buying into it now as a farmer because I'm sitting here doing the math as you're telling me that, and I need another 25 cents respectively on my corn to match the revenue that I got last year, if that's the revenue or the margin target that I need. I mean, I'm going to look at it from a margin target like we've talked in other podcasts and tools we have on that as well. But I think what you've said makes a lot of sense, and I just wanted to throw some numbers to solidify your comments.

Duane

Lowery: Yeah, actually, I was doing the math while you were talking. I came up with about $0.25 more than what you need, and that was before you made the comment about drying. And I thought that might even put it up closer to $0.36. Either way.

Chris

Barron: Well, it does, it does. That's true because I, I didn't do that. I didn't get to that part. I was talking, I guess. But yeah, you'd have to add that drying cost on there. So there's a, there's another 11 cents or so, you know. But, but that's, you know, a lot of people don't think about drying costs in terms of cost per acre, and you really should because we always think about things in a certain, from a certain perspective, either per bushel or, or a you know, per acre. And we always think of drying and trucking and handling and all that per bushel. So I always like to convert that over to cost per acre. And we've talked to, I don't know, 8 or 10 clients in the last 10 days on drying cost issues, which they really are this year.

There's some major issues out there for either not having a dryer or trying to figure out how, with drying capacity being too low, how are they going to manage the time element of that. But, you know, it's really a cost issue primarily, primarily, and it's, it's anywhere from $30 to $50 an acre more than what people are maybe used to spending, which is a big issue, I think, this year.

Duane

Lowery: Well, the calculations you went through, you compared it to last year, and you're basically looking at yields 10% off of last year, and you're looking at increased drying costs. And basically going through all that, even with the good basis levels that we have this year, to recoup and equal last year's revenue. That's 35 cents more the market has to go up from where it is right now. And right, farmers might come up with that differently. Maybe they have those type of figures in their head, or whatever. But as they start to do those calculations, suddenly the current price just doesn't seem very attractive. And as harvest drags on and drags on and goes into a bigger window, number one, it you know, helps ease transportation issues, helps the storage space issues. And it makes it more difficult on that cash buyer that's trying to accumulate a position.

He's finding that he's had to bid up and struggle to get it. And all of that is supportive basis, maybe not without having some dips in the basis, I get that. But as an overall bigger picture, it's, it's somewhat supportive and And so I think it's going to be very interesting. But I think it continues to paint a picture where markets can be well supported even though it's harvest time. And then the buyers will become very nervous, you know, once that harvest is put away. And speaking of harvest, what are you— this is changing the subject a little bit, but what are you hearing out of North Dakota with this snow? And what are the impacts and how much of that translate to a yield loss? How much of this means fields won't even actually be harvested before the calendar year is over?

Is some of this stuff going to be harvested in the spring, or what are you picking up in that part of the country?

Chris

Barron: I'm going to answer your North Dakota question in just a second. I want to make one other comment on what you— what we were just doing on the math, if that's okay, real quick.

Duane

Lowery: Sure.

Chris

Barron: So the, the slow sales I think that's going to slow sales down a lot, which is going to— where our basis is going to get better. Because to your point, I think people are going to sit and not make sales. And when this basis is eroded a little bit here temporarily, I think that solidifies the fact of what you were saying, the basis probably improves eventually, because people will continue to slow down, even if you don't have space for this stuff. We're in that boat here in our own operation, we don't have space for all of it. But I've slowed down sales immensely when I've realized how much, how far off we are yet in price and trying to think through it. So now that I've said that, the North Dakota question that you have, I think it's a mess.

We've talked to a lot of growers, North Dakota, South Dakota, and as you go east of, say, east and south of, say, Fargo, it gets a little better, but it's still a mess in a lot of areas.. As you go north, it gets a lot worse. And as you go north and west, it gets way worse. And so, you know, our hearts go out to those producers up there because it's not good. And I just got off the phone a little bit ago with, with a grower that we work with that's kind of south, south and west, but he's a little more west of Fargo. And, and he said that they're just really wet too. But his comments were, you know, a lot of the corn before before the freeze, and they didn't have a real hard freeze, but enough to kind of shut the crop down, wasn't even black layered.

And so he has affiliation with a grain, large grain elevator in that area too, and his comments were, you know, they're expecting that, that corn really won't dry down much in that area anymore at this point now because we're so late in the season. And, and there's going to be a lot of still, you know, by the time you get to December, they're expecting still a lot of, you know, 25 to 28% corn yet, even, even well into December. So I think there's a, there's a mess up there. And there's, there's going to be some big challenges and people, you know, he was doing some planning on an additional corn head. And, and I think there's still a lot of people up there that haven't turned a wheel on anything, beans or corn. And so it's, it's tough.

But I know he was telling me his dad had a quote, he said, You know, that weather basically after the 31st of October that's nice is purely a gift from God. So, you know, I mean, once they hit November 1st, anything goes. And you know what, we're 2 weeks away from that. I mean, most of those guys need more than 2 weeks, and that's not to mention that they're There's a lot of people without corn dryers, and this grower was telling me he could do some custom drying. I mean, you know, we work with a lot of people that do collaborative efforts. This might be one of those things where some of these growers up there put their heads together and, and try to figure out how they're going to accomplish harvest, because, you know, you can do more working together. And, and so hopefully things improve.

Hopefully we get, you know, get some nice days up there and get some sun and— and dry things out and let these guys get at it. That's really all I got to say. I'm— we're gonna— Shay's gonna do a podcast with, with a grower in North Dakota and get really into the details though, later this week.

Duane

Lowery: Yeah, it's been quite a year, 2019, and it's quite a, a, a cap to it, uh, for those guys up there especially.

Chris

Barron: Oh yeah, they said, you know, there was just west of where this grower was at, he said there was a lot of areas where they had 2 feet of snow, or snow is as high as top of the beans and it takes a while for that stuff to melt and then you got a mess anyway. I mean, it's just a muddy, sticky mess. He was telling me he's thinking about setting up a truck and a conveyor out to the road so they can load trucks on the road. And it's like I said, a lot of those guys are, are in still in planning mode because they haven't turned a wheel yet. So they're just kind of trying to plan how to, how to bring this crop in. It's crazy.

Duane

Lowery: And then all this delayed harvest, we don't know what the weather will be like and how much field work will be allowed this fall or not. But, you know, it— there's the potential for it to have implications for 2020, or certainly something as well too.

Chris

Barron: Oh, definitely that, you know, that, that was brought up in our conversation. And I think Shay and that grower will talk about that in a little more detail. But yeah, that's going to be an issue, you know, Same thing we had last year in our area and a lot of, a lot of the state of Iowa last year, you know, during the first 10 days of October, we had, we had 10 inches of rain in 10 days. And that was after 25 inches of rain in September. So we were, we were in flood zone harvesting last year. And, and so it can be done. It's just not much fun. And I think safety is really the biggest thing people people got to not be in a hurry and try to get your rest and just plug away at it. And, you know, there's gonna be some field losses, and there's gonna be some issues. And I think the market eventually is going to have to recognize the impact of all this stuff. It just may be a while.

Yeah. So I think anything else that we haven't talked about, and we kind of hit, hit the high spots on a lot of things. Anything else, Dwayne, that you had?

Duane

Lowery: Well, the— on the bigger picture, I've been writing in my daily comments that $4.30, $4.40 basis December corn, spot corn, whichever happens to be— I think personally it could be the Dec. I think that's a pretty significant technical resistance point. And I'm not saying that prices, if they get there, couldn't end up going to a higher level. But it's interesting that that price zone at $4.30, $4.40 area happens to match that price calculation that we just went through, that to, with say a 10% reduction yield, and that price level and current basis levels would equal revenue equal to last year and in excess of last year, enough to cover the drying costs. So I think it, it adds some credibility to the idea that we, if we get prices up into that zone, producers will need to sharpen their pencil and see if there is something that works for their operation.

And I guess I'll use that comment as a launching pad to remind people again that this is a year that doesn't matter what you or I say or anybody else writes in print or any market advisor puts out for what is a quote unquote good price. The only good price is something you will determine solely on your own based on your basis, your, your price levels that you can get, and your yields on your farm, which could be significantly different than somebody 20 miles down the road that maybe has different farming practices than what you have, or whatever, because the yields are that wide variance within a small geographic footprint. So, you know, everybody's got to do their own calculations, and they got to find that profitable level, that gross return, that net return level that works for their operation, and they need to tune everybody else out.

When that works and they get the desired profit, they need to be willing to take it. And the last thing I would say along that same line, everything I've said has been, you know, certainly had a bullish flavor to how I'm saying it. But in the same token, if we get a situation where a combination of futures, basis, and some help from USDA,— gives us a nice push in prices into that December-January timeframe. It might be very early in that marketing year, but I think that this might be a year where maybe our best prices could occur in that December through, say, February time window. So I'd be very interested in seeing producers find those profitable levels in that window, something that works for their operation. And being willing to be fairly aggressive with price protection at that point.

Chris

Barron: And for 2022?

Duane

Lowery: I don't know yet. We'll find out. I'm suspicious that you'll get a chance to sell some Dec '20 corn somewhere in that $4.20 to $4.30 range. I doubt if you're going to get a chance to sell it for $4.40 or $4.50. And if you do, it won't be until you're in the thick of a growing season that next summer. A more realistic price target for Dec '20 in my mind is something above $4.20 with I would consider a reasonable chance of getting the chance to sell at $4.30. I would say probably unlikely you'll get the chance to sell it at $4.50. So I've just basically given you a $4.25 to $4.40 range that my guess is until you got into a, an actual summer growing season problem, that's going to be the top side of your parameters.

So if So if you happen to get Dec '20 corn to $4.25, and it's the 25th day of November, I would still be very anxious to figure out a pricing strategy that worked for your level of comfort and your risk and, and margin exposure. And a lot of it depends on what kind of crop insurance you're going to have. Crop insurance can be a very good marketing tool if you have the right type of policy or coverage. So there's a lot of different factors that need to be considered, but I think that, uh, that $4.25, $4.30 area basis Dec '20 might seem attractive, and it might be at the upper end of price limitations without getting into the growing season and experiencing a problem in, in late June or July. And I don't think this will be a year that you want to wait and have very little marketed into that June-July period.

I think this will be a year that if you get a price level that works and can be married with your crop insurance strategies and, and things of this nature, I think it's going to be a price that you're probably going to want to do some serious consideration on at least.

Chris

Barron: Yeah, and some of that strength may come in beans at the same time. And it might be that hard, or, you know, that acreage battle or whatever. And we can talk about that in more detail in other podcasts. But that might be part of it as well.

Duane

Lowery: In relative terms, the bean potential is much more significant than what they— I just described for you in corn. I mean, in corn, Dec '20 corn right now is at $4.10. So I mean, I'm not saying anything all that glorious, which is to say that there's maybe 15 or 20 cents more in that. That's not a very bold statement. But if I were to go and use the same type of parameters for, you know, Nov '20 beans, I might come up with, you know, a $10.50 target, which is like 75 cents up from where it is now. And who knows what— how that South American growing season will go and whether there'll be an acreage battle and the urgency on all that kind of things.

Chris

Barron: But—

Duane

Lowery: it seems to me that $10.50 is a, is a viable target for Nov '20 beans.

Chris

Barron: Yeah, and what the, you know, what we end up with a crop from this year that's looking like it's a lot less than what they expect, so.

Duane

Lowery: Absolutely.

Chris

Barron: All right.

Duane

Lowery: Well, there's a lot of moving parts yet.

Chris

Barron: Right, right. Well, I think we had a good conversation here, Dwayne, and, um, hope, uh, everybody enjoyed the conversation, and, uh, thanks for your time today, Dwayne. Appreciate the conversation.

Duane

Lowery: Thanks, Chris. Appreciate your conversation too.

Chris

Barron: Yeah, you bet. So well, we'll be back again. And just want to thank everybody again for listening to our conversation and our perspective on what might be going on with the markets and, and look forward to seeing everybody again next time on the Ag View Pitch.

Duane

Lowery: Thanks.

Narrator: Thanks again for listening, everyone. If you would like to hear more content from Ag View Solutions, listen to our other podcasts such as Dad's Wisdom or our Current Harvest series. Ag View Solutions works as an integral part of operations like yours, side by side for farm profit management, business collaboration and structuring, facilitating industry-leading peer groups, and coaching and consulting tailored to your farm's unique needs. We know that no two No two farms are the same, and we are here to help make your farm be the best it can be. You can learn more at agviewsolutions.com, email us at agviewpitch@gmail.com, or call Chris Barron at 319-533-5703. We really look forward to talking with you.