Hold your breath: weekly market outlook, Mar. 9th-13th

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Daniel

Elsner: Thanks.

Shay: Welcome back, everyone, to another episode of the Ag View Pitch. Daniel Elsner, how are you today?

Daniel

Elsner: Doing great, Shay.

Shay: How are you, man? It's been a week. It's been a week. Uh, first week of March is behind us, and I should say the first year of March is behind us. A lot of movement, lots going on here, um, particularly coming off of the Iran— I don't know, do you call it the Iranian war, the incursion, the, uh, strategic assessment, whatever, whatever we're calling it today? But we've seen, uh, dramatic impacts in the commodity markets, I guess. Where do you want to start?

Daniel

Elsner: Yeah, I guess we can start with that. I think energy is the big driver here of all commodities. Oil up another $10 a barrel here today, over 12%. And it was barely struggling to get over $60 just a few months ago. And now we're over $90. So, A move that quick and, and of that magnitude is having ripple effects across all commodities. I think you're seeing a lot of support broadly, regardless of what you're looking at. And corn and beans are, are seeing some benefit from that. And you have the funds just piggybacking here on this headline risk, and they're just funneling, you know, they're they're trading into all commodities, especially corn and beans here. And we can talk about kind of the setup that's happened there. But funds are definitely interested, they're engaged, risk is on, broadly speaking. And we'll see where it goes. Obviously, no one likes a war to get good prices.

But that's the situation that we're at right now.

Shay: Absolutely. And I should, you know, I went back and was looking here before our call, you know, crude a month ago was sitting around $64, silver, like you said, just came over $90, $90.90 here, actually, when I checked before our call. And then from the commodity standpoint, you know, this week alone, we've seen corn go $4.40 up to over $4.60 on nearby, looking out to Dec '26, $4.84, Dec '27, $4.80. On the year, soybeans have traded as low as $10.35 and closed today with a 12 on the front of the handle here for May. Pretty incredible movement there. You know, as far as kind of setup and what we're seeing as far as some of that, you know, fund movement there. Talk to me about what's top of mind for you.

Daniel

Elsner: Yeah, I think from a farmer perspective, it's about risk management right now and taking advantage of some of these opportunities that we're seeing, especially in a tight margin environment. You know, when moves happen of this magnitude this quickly, it's sometimes hard for the farmer to understand why it's happening or where we're going. And that can lead to some hesitancy in making some decisions. But I think just look at your numbers, you know, see where we're at, look at where we've been, not only this year, but the last couple years and look at what, what numbers make sense for you. And don't be afraid to execute on something. I think there's just so much risk here from a corn and beans perspective this month. I mean, on beans, you have this Trump-Xi summit that's supposed to happen at the end of the month, early April.

You also have some, some prelude talks to that in the middle of the month as well. So you could see some headline risk with that. And then for both commodities, you have prospective plantings and quarterly stocks at the end of the month. So there's a lot of potential headline risk here, and some hard numbers that will be coming out at the end of the month that I think we just need to keep in the back of our heads. You also have a WASDE report here on the 10th as well.

Shay: So on the, on the why, you know, I want to— I'm going to play devil's advocate here a little bit. You said sometimes farmers struggle with the why. And my question back to you, I say this somewhat facetiously, is does it matter why? And I think it matters why, because people are thinking, well, if this is an ongoing issue, prices are going to continue to rally and maybe not have the mindset of, hey, you know, we've had suppressed commodity prices, we're now above cost of production, we have margin capabilities. How do you, how do you handle those conversations on the why versus, hey, here's a target margin, do we need to capitalize on it?

Daniel

Elsner: Yeah, I think the why is important, like what you said, in determining where we're going and seeing what the potential is for prices. I also think it's important to distinguish when we have a fundamental reason for prices to rally versus, you know, something that's a headline reason, that's kind of a knee-jerk reaction. And that's fun-driven, because they're buying into corn, not necessarily for any fundamental reason. Same with beans, that there are some fundamentals behind it. And we've seen, we've seen that over the last couple months. Corn and beans having support. But the last week has been driven by political risk, geopolitical issues, and obviously the war in Iran and inflation and, you know, fears with that. And you see energy spiking as well. So we had kind of a good, a good setup for, for corn and beans to capitalize on this. But this is blowing the top off.

And there's not much fundamentally here to justify where we're at and the move that we've seen this week. So when I have farmers texting me and asking, why is corn up? What happened last night? Well, nothing happened to corn or beans. It was outside markets. Yeah. And so when that's the case, that's when I really push them and say like, yes, we could go up 10, 15 cents here, but this could also run the other way tomorrow. So I think understanding the why, um, you know, at least of this past week is important just for getting in the mindset of how much risk should I take off, you know, should be more aggressive, less aggressive. In this case, I'd see— I would say more aggressive. But I think that that's the— that's why it's important to understand, um, you know, what's driving the market right now.

Shay: And, and I think the move in the market is different than some of the other moves we've experienced over the last, call it, uh, 18 months. You know, maybe the last time we saw something as close to this was the invasion of Ukraine by Russia. And I'm not comparing them or saying we're going to have a run-up like we did at that time, because there was just so many other factors involved there. But I think in these scenarios, the farmer sentiment does not matter as compared to what the funds are going to do, how the global markets are trading in relation to commodities. And that whiplash effect can maybe be a little bit harder to manage or to think about. My, my tee-off question there for you is, okay, if we run to the downside or have the potential to run to the downside, what are those indicators? Is it, you know, the Strait opening back up? Is it negotiations with Iran?

Is it, you know, what are some of those things that you think is the possibility that, hey, we fall back off this cliff and go back the other direction?

Daniel

Elsner: Mm-hmm. I think we need to watch energy. Energy is the biggest driver here, especially oil just for fueling the world and natural gas. And some of that's inputs into some fertilizer. So watching the energy markets and politicians don't like expensive gas. They don't like it when energy costs are high because that just leads to broad inflation throughout your whole economy. So I think there's going to be pressure here on politicians on all sides of this to get oil prices down, at least domestically. I mean, if you're Putin in Russia, you probably love high oil prices. But domestically, we can't have this for too long. Otherwise, there's going to be a lot of political pressure there. So I think that's going to be the main driver is energy prices and getting those under control.

And I think that's what we'll need to watch because if the momentum stops there, if there's some news about some safe travel, over there on the strait or some other ways to, you know, increase the oil flow, that could be an indicator that, you know, things might be cooling off here in the markets.

Shay: So take, take the Iran stuff out of this, which obviously we can't, but let's look at it in a vacuum here. Early March, planters are rolling in Texas, like you mentioned, we got prospective plantings coming out. What's your feeling right now with— I guess I can't look at it in a vacuum because I'm going to ask you a related question. But we've seen a dramatic increase in nitrogen prices here as a result of some of the war outlook. And if that continues, what's your feeling? And I'll share mine. What's your feeling about the possibility of massive acreage shift or even something that has a fundamental impact from an acreage shift standpoint? in relation to where the anhydrous or where the nitrogen outlook is?

Daniel

Elsner: You cut out there on my end. What was the question again?

Shay: Yep, sorry. Uh, the outlook of nitrogen impacting acres for 2026— have we already solidified those acres, or, um, is there still a possibility that we have a significant, uh, change?

Daniel

Elsner: Locally, what I'm seeing here in Northeast Iowa is not much of a change. There's been, you know, some impact, but I haven't had people tell me they're throwing a whole bunch of acres into beans here. I think at least in my area, a lot of that has been locked in in the fall. I get a lot of fall application. So there's just not much that can switch. This is also corn country. People love to grow corn. I think it'll take a little bit more than what we're seeing now to get them to switch. Not saying I haven't heard of people talking about, you know, potentially doing more beans, but I don't think in my area it's as much of an impact that we're gonna see. Now, I like to hear from you, you know, where you're at in Illinois, you know, where some of those guys can grow 80-bushel beans. That might be more of a place that could switch over to beans here potentially.

And then, you know, you could also look at our fringe acres that we picked up on corn this past year, maybe they switched to beans 'cause they can't really handle the corn-on-corn rotation like we can here in the I states. But I'd like to hear your thoughts on that as well.

Shay: I think so much nitrogen went down in the fall last year that we're not gonna see a dramatic shift as a result of the conditions that we had and the anhydrous application that was done across the Corn Belt. On top of that, you have insurance products that are propping up corn production in those fringe areas that still make it, highly insurable and protected on the downside. You have guys that weren't necessarily aggressive on, or historically aren't aggressive on forward marketing, seeing a bump in the corn for 2026 to lock in significant profitability, especially if they got inputs bought early. I just don't see soybeans buying back a lot of acres. Markets are telling us they need soybeans right now. They're not telling us necessarily that they need soybeans this fall, at least not yet. And again, some of that can change.

Like you said, we got the US-China talks again towards the end of the month here paired with prospective plantings. We could eat our shoe here next week with a change in the headlines. But my sentiment, my outlook, just from the folks that we talk with, is a lot of those acres are already built into whatever their projection was, whatever their planned rotation. I will say that, you know, some of the operations in Missouri, southern Illinois, they've had a rough go here for a couple of years as far as weather and delayed planting last year because of the sheer amount of rain that they had. And then on top of that, you know, how much money are we going to spend? How much money is the bank going to let us spend? So you might see some switch in those areas there.

But they, they're looking at profitability and still seeing that corn's coming out on top for most of the budgets that we're running here within the Ag View Solutions outlook. And, you know, I had mentioned earlier in relation to that of Dec '26, you know, closing here as we record Friday, March 6th, somewhere in that $4.84 range and Dec '27 sitting around $4.80. How do you think about opportunities for farm operations looking at Dec '26 or even into, into next year from a marketing perspective?

Daniel

Elsner: Yeah, I think that this is a really good opportunity. I mean, if you just look at the chart, Dec '26 hasn't been this high in 2 years. You're breaking past all different types of resistance that we've had on the charts just in this week alone. So you're getting to the higher end of where we've been over a multi-year period. You know, all-time contract high is $5.12 for that, just for reference. You have kind of a gap there at $4.97, but we're getting to the higher end of it. Not to say we can't go another 10 cents higher next week just on momentum here. I mean, we'll see what happens with the funds and in Iran and what the headlines are. But I think if you have nothing done, this is the time to do something. I'm telling the farmers I work with, be, you know, 12% to 25% sold before this March report comes out at the end of the month.

I think it's a good, good place to lay off risk here and to get something done before busy in the field planting and don't have as much time to watch the markets. And I think when you also look at insurance, I mean, you've had other people on podcasts talk about it, but, you know, you don't like to do it, but insurance has been a big part of your total farm revenue here. You know, just looking at our county, and I'm not an insurance expert by any means, but from what I understand, you can probably expect 30 cents a bushel here for next year just on that alone. And then, you know, with your $4.62 RP level there, if you add your 95% ECO, that puts you at $4.39 protection on trendline yields there on your APH. So there's a good shot of getting 50 cents a bushel here just on insurance and who knows what the government throws at us as well.

So if you're selling $4.85 futures, let's say you're in the I states at a 30-under basis, puts you at $4.55 cash, add 50 cents to that, you're at $5. Now it's kind of a different way of looking at it. But I think people would love to sell $5 cash today if they could. And I think that's profitable for most of your operations. And maybe you could add some, some of what you're seeing on the profit manager side. But from what I hear, people are, are looking, you know, that $4.60-ish range for, for what they need. And I mean, you're almost there just from a pure cash perspective for the fall. And then if you go into the deferred months, you can get into $4.70s, $4.80s out there as well. And then if you add on what you can expect from insurance, I mean, you're $5 plus.

Shay: I, I was saying this at $4.65 to $4.70 when we had some opportunities there here a few months ago and even back into the summer, I kind of forget timeframe there. But it's like any time that you can protect some of your variable expenses upfront and you're making a profit on those sales as a percentage of your production, you know, if, if 60% sold covers all of your variable costs and then you have all of your fixed assets beyond that, get some of those variable costs covered. Look at the opportunity to make a profit if you know what your cost of production is. And, you know, we're not counting our eggs before they hatch on the insurance or on government payments by any means, but we will be getting, you know, bridge payments as an example. They are coming in 2026. We always allocate those expenses to 2026 because that's when they were received then.

So you need to be taking and tying those back to a cost per bushel of what that payment is going to be. Stack on ERP, STRP, any other programs that might be forthcoming on top of if you have a projected county payment from any of the programs in 2025 that will be paid out in 2026. Put all of those numbers in there, dial them back to a per bushel benefit. And like you said, if you can get in there and sell these '26 for $84 and then you got an additional $0.50, $0.60 on top of that minus basis, you're $5 to $5.10, $5.15 until the cows come home. And, and depending on your storage situation, you might even be further ahead than that. So I think there's tremendous opportunity on the table right now. I wouldn't sleep on the long term, you know, not, not just focusing on what you have for any old crop that's remaining. But what do you have for Dec '26?

And, you know, I was talking with Chris here this morning a little bit, I think I'm probably going to start locking some in on Dec '27, just if that's my worst sale at $4.80, I'll sleep pretty good, you know, looking out to Dec '27.

Daniel

Elsner: For sure. And yeah, the spreads have kind of narrowed out there for new crop and, and the following crop as well, just with, with how the market's been. So not as much carry, I think you only have 9 cents from Dec '26 to March '27 here. So something to keep in mind there just with cost of carry, if we expect, you know, your carrying costs to be high over the next year or two. But yeah, I think $4.80 is probably a good place to start out there for Dec '27. And I mean, if you're someone that utilizes options or, you know, other marketing programs, you know, through your end user or through a broker, there's ways to get $5 out there too on Dec '27 that you can, you know, capture $0.20 of premium out there, you know, using options and other tools like that too. So if that's a tool in your toolbox, I mean, there's plenty of opportunity out there for the next two crops for sure.

Shay: The only thing we haven't hit on heavy here is old crop soybeans. You know, a survey that we had run here a couple of weeks ago showed that there's probably less than 25% of old crop bushels sitting out there. That's across our client base and some surveys could be more or less, obviously. You're looking at a 12 on the front of it. You know, everybody, everybody wants a 13 on the front of it. But Seems like, seems like there's still some good opportunities. Any, any parting thoughts on that?

Daniel

Elsner: Yeah, I wouldn't be afraid with the beans. You know, we are getting down into the last quarter of the crop, like you said, and I would agree with that number. Soybeans are so hard because they move in dollars, not cents at times. So yeah, I know it'd be great if you could do $13. But there's opportunities, at least here in Iowa, to get $12 cash, or we were very close to it today for the summer. At some locations. So if you look at the last couple years, and even this year, you know, $10 at harvest, or maybe less depending on where you're at, I mean, you've had quite a rally and you've been rewarded for being patient and holding those bushels. So take your profits where you can. Don't be afraid to sell at a profit is, you know, what I would have to say on that.

Shay: Yeah, I sold all mine like 10 days ago at $11.50. And I thought I was doing good. So apparently I screwed up. But That's okay. You know, and we, you know, my grandpa always said you can screw up at the speed of light when it comes to marketing stuff. And I think that's where taking some of the emotion out of it right now, saying, where do we need to be to get '25 wrapped up? If that's a situation that we're in, where do we feel comfortable profit taking? You know, and this is something I've joked with Joe Vaclovic about, of people always say, oh, you know, those fertilizer companies, they're just out there profit taking. It's like, well, now's our time to profit take. You know, are you going to be a profit taker when you have that opportunity from a commodity standpoint to really take advantage of it or not? And I think there's opportunities on the table.

Any, any parting thoughts here, Daniel?

Daniel

Elsner: Yeah, I think just know your numbers. Don't be afraid to take some profit. Think about your total farm revenue. I think that's really important nowadays. And just have a plan in place, work orders, know where you want to be. What numbers work for your operation, and don't be afraid to execute on the plan.

Shay: Yeah, well, I really appreciate the conversation here, Daniel. If anybody wants to reach out and has questions for you, what's the best way to do that?

Daniel

Elsner: Yeah, you can just shoot me an email, Daniel Elsner at Rockmail.com.

Shay: Very good. Thanks for the time. Thanks, Shay. And thank you everyone for listening to another episode of the Ag View Pitch Sunday Market Outlook. We will catch you next time.