March WASDE report: weekly market outlook, March 11-15th

Narrator: Thank you for listening to the Weekly Market Outlook. It is our pleasure to bring an industry-leading market analyst to provide you with the most value possible in your farm business. Please reach out anytime by emailing cbarron@agviewsolutions.com.

Joe: Hi, this is Joe with the Ag View Pitch, and today I'm here with Greg McBride. He's the director of broker— brokerage at Allendale, and, um, I've worked with Greg a long time, and today we're just going to visit about markets and that kind of thing. So how's things going, Greg?

Greg

McBride: It's good. I was a, uh, an ideal, uh, finish to the day. Nice green, uh, on the screen everywhere we looked, so there's not much to complain about on, uh, what looks like a, a nice rainy Friday.

Joe: I, I— it seems like we found maybe a little bit of, uh, some firmness on the bottom side and, uh, allowing everybody to take a little bit of a deep breath. And, um, so we got a report today. What were your thoughts on that report? It was kind of blah.

Greg

McBride: Yeah, well, it was, but I mean, after everything we've seen, you know, it's been a very a very predictable bullish or bearish sentiment to every report. I mean, especially when we had that big January report, we had like 4 reports that came out January 12th. And it was from there, from there, it was just everything was the worst, worst possible scenario that we didn't see the cuts to Brazil's crop like we thought we were going to see their, their weather improved to start the year. And, you know, our production was, was a monster, our yields were record, or in the record area for both corn and beans. So, you know, everything just started out the year about as bad as it could be. And then it got worse in February. So we walked into this one thinking, well, a minor, minor decrease in corn, it was like 15 to 20 million bushels that we were looking for. So when you're talking 2.

2.1, almost 2.2 billion in carryout. That's not— 20 or 15 million is not, not very much. A slight increase was expected for, for beans to $3.19. That could actually get a lot worse if you start looking really and diving into how bad the exports have been. So that'll be something to kind of keep us on the defensive. But the big thing everybody was really looking for, because everything else was kind of status quo, was What is the USDA going to do when they update Brazil? And, you know, we saw last month CONAB made significant cuts to, to corn and beans, and the US followed by not nearly as much. And then once again, here we go on this report. We haven't gotten CONAB's numbers for, for February or for March yet. But the USDA only dropped the, the beans by 1 million tons, and they made no change to Brazil's corn. So we're, we're once again back to slow playing.

But like you said, though, it kind of feels like we've gotten some breathing room, or we've had a chance to breathe now after everything was so bad in January and February, that now we're starting to see the funds maybe lighten up a little bit. We're starting to see the open interest decline a little bit, which is kind of a positive there is potential. A matter of maybe we are kind of through that bear cycle, at least for right now.

Joe: I sure hope so. I mean, it's, it's been tough to watch. I mean, especially if you have unpriced stuff sitting in the bin from a from a farmer standpoint, it's just been absolutely horrific to watch. But, you know, we knew there was going to eventually be a little bit of a pause. You know, once the March basis contracts went away, you know, it's good that, you know, the fact that it was somewhat neutral, you know, maybe that's a slight, slight, slightly bullish in a way because we stopped burning them down.

Greg

McBride: Yeah, right, exactly. Well, and you mentioned it right there was the, the fact that the, the March basis contracts came in and had to be, a lot of them had to be delivered on or just they wouldn't let you roll them out. You got into that first notice period. It kind of felt like that was the, the last gasp there. You know, I did that meeting with where that you were at last week. And that's kind of what the beans the beans felt like too. You know, you get to that point and they make these new lows and it's like, it doesn't feel like they're making these new lows with any real gusto. And it's not like anybody who's wanting them to make new lows, but it was like, we're kind of reaching down. Then we see it bounce back up. And it was like there was some elasticity to the market, but that elasticity only lasts so long. Now we've gotten a little bit, a little bit off these lows.

I mean, I think you're like 30-ish cents off the lows in, in corn. You're about 40 or 50 off the lows in beans. And depending on what the CFTC says today, you might, you might see them lighten up on those short positions a little more, and we could start to get a little more, a little more upside. It wouldn't take much. They don't have to go long for us to, to even start to see some higher prices here, we could just see them lighten up on that short position.

Joe: So where's like the next level of like resistance as far as on the upside? Like what could we, what can we realistically kind of see here as a run during, you know, as we get into planting time and that kind of thing?

Greg

McBride: Yeah. So ideally $4.75 on the, on the July contract is what we'll be, we'll be watching for. We have targets up near $5.50. I don't necessarily have a thing to go there just yet on the beans. It's going to be, you're going to have $12 resistance. So you're, you're sitting closest on that July contract. I think we were $11.86 or something like that going into the close today. So you're sitting very close to your next level of of resistance. But the thing with beans is we can pack it on really quick. And it's going to be like, well, how did we get 90 cents in 5 days? Or how did we get 90 cents in 2 weeks? And that's probably where guys that are still holding on to cash need to start saying, okay, I've gotten 50, I've gotten 70, or I've gotten 90 cents, I need to do something with it.

And if you want to continue to maintain that ownership, that's where, you know, you can come in, you maybe can buy some calls. That way you've got it on paper. You're, you're limited as far as your risk is, because if the market then falls off going into, say, the March acreage report or even into, into April, that's where you could, you could say, well, at least I sold the cash. I don't have that risk sitting in front of me.

Joe: So I just find—

Greg

McBride: I think overall, I think you've got, you've got potential for 5.25 on old crop, on the, on the corn. And I think you've got potential on old crop beans to see $13 again. Now, I'm not going to get crazy and say $14. But that is something where $13 seems attainable, but anything within 20 cents on either side of it is, is fair game.

Joe: Finally threw the towel in on most of my, uh, old crop and, uh, decided that I was going to put all my focus onto new crop bushels and, um, you know, making sure that, you know, we had our targets in and, uh, you know, we got a little bit of a plan to take advantage of something whenever it does pop. And yeah, you know, we're coming into a seasonal time at an elevator that I work with and they're like, you know, they came out with this seasonal high contract where they just sell so many bushels every day during the seasonal high period. And I threw some bushels into that. I thought, you know what, that's— there's no better— you know, that's as good a strategy as any right now, it seems like.

Greg

McBride: Yeah, yeah. And honestly, that's the, that's the biggest thing is, is for every producer out there, it's, it's, it's one thing to come up with a plan, but it's another thing to stick with it. We get, we get enamored with that next 5 cents or that next 10 cents. And that's where guys start to pull, start to pull orders, you know, whether it's at the elevator with cash contracts or basis contracts or whatever. Or it's with, with people like myself where we've got hedge orders in place to trade the board. And, oh, well, I know you said, you know, $5.25, but you think we can get $5.30? Yes, but are we going to be mad if we sold $5.25 and it did and it went to $5.29? I mean, we've seen that in the past. It was when you and I started working together. There was a year we hit like $4.49 and 3/4 as our high. You imagine how many people had that number at $4.50 and missed it by a tick.

Yeah, I mean, it's, it's, it's heartbreaking. It's heartbreaking. And that's one of those things. And if you look at the like a longer term chart of the, of the corn market, especially the beans do it too, but the corn market you have these what we call wow years. You know, you get a— you get, um, go to 2008 where you had the, you know, the kind of the Lehman Brothers debacle that, that happened. Well, crude oil that year goes to like $140. Corn and beans, I mean, you're talking $8 corn, you're talking, I think, like $16 or $17 beans at the time. And it was like, man, this is— there's nothing going to stop this thing. Well, shoot.

Joe: That was my second year of farming, Greg.

Greg

McBride: What's that?

Joe: That was my second year of farming.

Greg

McBride: Well, your dad probably—

Joe: I thought money grew on corn plants.

Greg

McBride: Yeah, but that's the thing. You get these— you get these wow years and it's, oh man, it can only go up. It can only go up. And well, then it stops. I mean, look back at 2012. We had that drought. At some point, and it was roughly August or September for— I think it was August for corn, and it was September for beans— that market stopped going up. Now, we had elevated prices for 2010, '11, '12, and then they were still elevated in '13. And I can tell you that in '14, '15, we were still paying elevated prices for inputs, but we were dealing with what $3.50, $4.50 corn. So we'd have the price of corn at that point. You just did it again. You saw we came into that pandemic, we had the recession that washed everything out. We went down to, you know, basically $3 corn, $8 beans, came back out of it. We looked like champs.

We went for 3 years essentially where the market was never going to come down. And here we are. We just, you know, March corn just went sub-$4 for the first time in years. And beans were, you know, $11-something, $11.40, $11.50. So we've, we've seen the end of what I, what we call like a wow cycle. Oh my gosh, look at this. This is great. Now it's, are we going to get back into that $3.50, $4.50 zone? Maybe, but I think it's going to be a little bit higher, maybe $3.75 to to 5.25. But those, those markets, when they come down, it's like one of these, and then they go sideways. So we could, we could have a little bit higher this year, but then maybe next year, the year after, it's lower.

So, you know, when you start to talk about what you're doing for this year, um, theoretically, this is a good time to start looking at what you can do for next year too, you know, looking at that that '25 crop and saying, okay, if we can get $5, $5.25, because there's a premium in those deferred contracts right now, maybe if we can get $5, $5.25 for, for some '25 corn, that's not a bad place to start locking a little bit in.

Joe: That's excellent advice. I've started kind of doing some of the '25, nothing crazy, but started dipping my toe in the water there. And it's always good. You know, we're internally long. Yeah. And, you know, if, if you miss it this year, you've got more to sell next year. And, you know, you just always got to be looking out ahead. Right. And so it's a tough— it's a tough market, especially when not much is happening. So our next possible fireworks is our— was that the end of March, the planting intentions?

Greg

McBride: That's what's on the prospective plantings. Yeah. And it's a, it's also a quarterly grain stocks report. So we get a measure of how big the pile is at the, at the beginning of March. So they'll give it, they give it to us at the end of March. But so we're getting essentially quarter 2 data as far as usage, like whether it's the, you know, feed and residual, that kind of stuff. And a lot of times those— the— everybody walks into it talking acreage, but we walk out of it talking about what the USDA did or did not recognize in the stock side of things. So, you know, every month, even the month— the report we got today was ending stocks. Well, that's what we think, that's what we project the pile is going to be at the end of the year. Well, this, this quarterly grain stocks is what the pile is as of the end of that, end of that quarter.

So we've had a lot of times where we've seen swings of 100 million to 300 or even 400 million bushels on the corn side of things. And a lot of that is because of the feed and residual. Well, we start to talk about how many animals we're feeding, the livestock side of things. You look at, you start to look at uh, cattle on feed reports, and you kind of get an idea of what's, uh, what's out there, and you pay attention to that stuff. Well, the problem with that is that it's not a one-to-one ratio. We don't necessarily know, based on how many animals we have, exactly how much we're feeding them. So the USDA can pencil whip us. They can come in and they can make changes where they raise the feed and residual, and it's, oh well, that's That hurts us.

And then they, or they, they lower it and it's like, okay, well, now all of a sudden we've got lower stocks by 300 million bushels that we didn't realize. And all of a sudden it's friendly. You go back to what year was it? Might have been 2020, right after the— or maybe it was '19. But we had a, we had an increase to stocks one quarter. I think it was in March. Entire spring and, and summer with these higher stocks. And in September, after everybody had sold, sold their, their old crop cash for pennies to the dollar, in September on that report, they came in and moved it back and moved it back in the, in the farmer's favor. Well, prices take off. Well, that didn't do us any good because we'd already sold the cash.

Joe: Yeah, that was in 2020.

Greg

McBride: So we sit there and we're like, oh, okay, well, and then that's that also, you know, at the same time, '20 was one of the— it was the year where we started to see the inflation start to kick in. We started to see, you know, we had the Trump trade deal with China where we were getting corn and bean sales. We've been a bean seller to China forever. But corn was always the— we never got a chance to touch it. Well, we had a good 2-year stretch where we were selling corn to China, and that's kind of gone by the wayside now. We do sell a little bit to them, but nowhere near as much as it was during that 2021 timeframe.

Joe: Do you— as far as what did you say the targets were on soybeans, on new crop soybeans, what are some— what are some targets that would be good to put in on that new crop for planting, especially as we see, you know, they adjust something for Brazil or whatever, you know, we're— in your mind, what are you telling your customers as far as a good bean number?

Greg

McBride: Our official number, our official number is like $13.10. For the, for the November beans. I've been telling— and I, when we do our conferences and stuff, I'm the one that does all the bean presentations and stuff. I, I, we could hit that. I don't have any problem with that number. But I'm generally going to be a little more aggressive or a little more conservative and say, okay, I think we need to start sooner. So what I've told people is, I wouldn't be opposed to starting my bean sales, whether that's cash or even on the board, somewhere between $12.75 and $13. And you could, you could even stretch that a little bit further and start at $12.50. Because if you look at what we just set for our, for our spring insurance, that's still well above that level. Even if the market falls back off, which we think it will, we could put a 10 in front of this thing by this fall.

If that's the case, a $12.50 sale is not going to be the worst thing in the world. Now, there's a, there's a million things that can go wrong between now and, and when we harvest this thing that could give us higher prices. We're talking about La Niña right now. Well, if that comes in, we get a hot, dry summer, that could give us a reason to go higher than that $12.50 or that $13.14 or $13.10 area. But the problem that I have with all of these things nowadays is the genetics have gotten so much better in the crops that we grow since that 2012 debacle. It's, it's like you can't stress this stuff enough. And you still come out of it with decent crops. Now I get it, there's, there's going to be places that are, that are lower. But look at the amount of rain that, that we had, you know, you and I are basically in the same area.

You know, there were quite a few times where we were supposed to get rain last year, in the, in the late spring and early part of the summer where we got a quarter of an inch, maybe. And that, that was all we would get for weeks at a time. But at the end of the day, or at the end of the season, we still had a hell of a crop. We had, we had what, what was a record for a lot of producers in our area.

Joe: It was a record for me.

Greg

McBride: Yeah. And it's hard to— that's why it's hard to say that, that you can get and stay bullish on like a La Niña type forecast or a hot and dry forecast. Yes, it can give you some upside. But it doesn't necessarily mean that it's going to ruin that crop. Now, obviously, timing is everything.

Joe: Yeah, it goes back to the basics of having those orders in place. Yeah, having a plan. I mean, I like to make a plan because I can't rip it up until I make it.

Greg

McBride: And, uh, so, well, the, the idea then is, you know, if, if you have, if you have some sort of a combination of board hedges versus cash sales You know, there's some wiggle room there. There's also the idea that if you end up, you know, then that's okay. That's more that I sell on top. That's, you know, that's the cherry on top at that point. Hopefully it's a cherry that you can sell at a higher price or you can get a manageable price, or maybe you can just put it in storage and let it sit for a little while. And if you're waiting for the prices to come back around, But that's the, that's the kind of thing where it's work off of, you know, trying to get guys to work off of 50% cash, 50% hedge, or, you know, 75%. Because even when you go back to 2012, when we had that drought, what was, what was your cut to production? 30%, 40%?

Joe: Oh yeah. I mean, most— 35%.

Greg

McBride: Yeah. Most. Most producers had at least half of their overall production. So there's, there's your cash that you could deliver. You know, yeah, you would have taken a bath on the, on the, the board hedges. But, you know, if you do it, if you do it in a, in a, in a reasonable way, you can, you can limit that risk. So that's where it's, you know, that's why it's— I love having a plan. I love having You know, because that's why we can, we can call and we can talk to people, especially like you, who's a little more on the, on the cash side. And we can say, all right, what do you have done? Okay, let's lock in if we get up, up here, because then there's all the wiggle room of, I just don't know. Okay, that's fine.

I had, I had producers last year that were going into, uh, Fourth of July week or weekend, and they were riding the edge of the knife and they didn't know if they were going to have a crop at all. Well, next thing you know, they get an inch and a half of rain. They end up with a record crop and they're kicking themselves because they didn't do anything 2 weeks sooner when it— in June, because they just didn't know if they were going to have anything.

Joe: The psychology of that position is very difficult. I, I actually felt that as well. You know, Jim was crazy dry and it's like, how, how aggressive do I get in forward selling? And it goes back to, you know, if you've got a good crop insurance, you know, policy underneath you and you know what that is, when those market opportunities come, you know, a guy still needs to take advantage of it. But the psychology of that is difficult in the moment.

Greg

McBride: Yeah, yeah. And that's the, you know, the, that's the whole thing is to, to, you have a, you have a team that, that you work with, whether it's your agronomist, your insurance person, your, your elevator, your broker, you know, there's, there's your banker for that, for that matter. They all, they all kind of want this, they all want the same thing, or they should want the same thing. If not, you kind of want to make sure you get get them out and get somebody new. But the idea is essentially we want to try and make— we're protecting profit, and we want to— if there's profit to be made. And then we also want to be able to— if we miss something, we want to try and make sure that we've done enough or done as much as we can to just keep the lights on for next year. Let's get it next year. Let's try and make sure. So like when I talk about look at the '25 crop.

A lot of times I don't talk like that. I don't look out to those types of, those extra out. It's so hard to get people to do anything in the current year. So when they do that, it's, it's like, the guys that start to, to think forward like that, that's where you, you're like, okay, yeah, they, they get it. They understand they're going to be here next year. We need to make sure that we've got, we've got at least something. And like you said, you don't go crazy with it, but you at least are kind of dipping your toe in the water to get something started.

Joe: Super important. You always got to be looking ahead. Absolutely. As, as we get close to wrapping up here, is there anything else that you want to talk about or you think that our listeners would have, you know, getting more value out of What do you got?

Greg

McBride: Yeah, I mean, I, the, the whole idea this year, you know, like I said, we're coming off of a wow, a couple of wow years, essentially. It's, we've got to, we've got to take advantage of these, these market moves when we get them. We typically do get a move. Some years it's, some years it's, it's once you get past that acreage report, and it goes until, you you know, maybe Memorial Day weekend. Some years, like last year, we had a rally that didn't start until basically mid-June. We had a heck of a rally for about 2 weeks. The market pulled way back after that, and then we got another rally at the end of July. But it was, it was so stunted. Well, I mean, look, it's 105 degrees right now. This thing's going to burn up. We haven't had much rain. That you still have to come up with a plan. You have to stick to that plan.

And it's— yes, there's going to be a few, a few times where you're, you're sitting there like, oh, I wish I had, wish I'd done that. But a lot of times, and you probably know this as well as the next producer, but a lot of times the sales that you make ahead of time, you're not going to have a hard time with that. You're going to— those are going to be some of your best sales because you've taken some of that question, question mark away from it. You've got— it allows you to sleep at night. This is a stressful, a stressful industry, you know. This is one of those things where if you know you've got corn sold for— you know, last year would have been if you had corn sold for anything above $5.50, you were pretty good. Now you might have had some nights where it was like, this market's going going to the moon and I don't— and I don't know if I'm going to have a crop.

But it only waited— it only took 2 weeks to then figure out that you were right again. But that's the thing is that we have to continue to come up with a plan. Now, I don't— like I've told numerous customers today and recently, I don't have a reason to be bullish right now. I do not have a reason. I look at the exports for corn. They're okay. The exports, the exports for beans are terrible. Argentina is back. Brazil has a big crop regardless of how much the USDA or CONAB or whoever cuts. South America has a record crop. South America and the United States are, are going to have a record crop on this old crop. And when we look out to the crop that we're about to plant, the '24-'25 crop, that's projected to be a record. So you don't walk into record crops thinking that you're going to see the market go to the moon. That's why it's important to take action.

That's why it's important to have a plan and stick to it. So if you get a rally, which we typically do get, you have to start selling into that rally. And it's not necessarily that you have to sell everything right now. There's time, but it is one of those things where you have to be paying attention. And I know farmers are always, are always out there looking at, at the price. Well, why was it down 2 cents today? Why was it up 10 cents today? That's sometimes it's just because of extra information or lack of information. But the idea is once you start making those sales, just continue to work your way up and continue to lock more and more and more in to the point, whether it's cash or whether it's hedge, and give yourself that sleep easy at night knowing that you've got your crop sold. Because like I said, that, that 20, you know, 2012 year, we had a very big cut.

I think it was 122 bushels an acre or something like that, 124 bushels an acre. Down from 166. Well, that's a, that's a big cut. But that also means that we still had two-thirds of the crop out there. You know, so there's a lot of, there's a lot of producers that had corn. Yes, some people always get beat up. That's why I think it's, it's, it's great that you guys can tell me what, how much rain they got in Northwest North Dakota, when you just, you didn't get rain on your, on your farm, or the, or vice versa. You guys are always watching to see where, what's going on. But I think you have to go into it with the mentality of big crops. The USDA is going to tell us we have a crop until they tell us we don't. And most of the time, we don't know that until way later on, and it's too late. So it's October, November.

Joe: It's all about averaging into it.

Greg

McBride: It is, it is. I've— that's been one of those things that I've preached to my customers for years, is I don't like to just pick a number and sell that number. I like to start early and just average up. If I stair-step up, I'm going to bring that job— I don't like to sell into the crash.

Joe: Correct. Well, Greg, thank you for, uh, this conversation today. If somebody want to get a hold of you, what's your email address?

Greg

McBride: It's gmcbride, g-m-c-b-r-i-d-e, at allendale-inc.com. That's allendale-inc.com. So gmcbride@allendale-inc.com.

Joe: Right on. If anybody wants to get a hold of me for whatever reason, it's joe@agviewsolutions.com. And, um, yeah, well, uh, thanks, thanks for your time today, and, uh, thanks everybody. We'll catch up with you next week.