Market fear; is it justified? Sunday night market outlook

Shay

Foulk: And it all comes down to this. Two on, two out, bottom of the ninth. The Farmers lead by one. Full count, here comes the play at the plate, and it's the Ag View Pitch!

Duane

Lenz: I was just going to talk about how wet everything is across basically the entire U.S. agricultural district in the middle of the country, all from the Southeast to the Northern Plains, but You've got soil moisture conditions in the southeastern U.S., which they're, you know, going to be wanting to do field work pretty soon. They are— have— they have, you know, very excessively wet soils. That's true to some extent in large portions of the Midwest, and especially true in the northwest. I saw a map from NOAA that actually showed that, like, the Dakotas, Minnesota, and Wisconsin, all that northern tier, as being in the, you know, 95 to 100% ranking of historical levels of soil moisture at this time of the year. And, you know, it can all dry out.

They could go 6 weeks without a rain up there, but when you got wet soils, you know, climatically it's just easier to get rain, you know what I mean? And so there's going to be a lot of apprehension in those areas, one waiting and wondering if they're going to get dried out in time and how that's all going to work out. I'm not trying to imply there'll be a repeat of last year, but you know, there's going to be some anxieties associated there this year too, I'm sure.

Shay

Foulk: Well, and that's, that's interesting that you bring that up. I was recently at Iowa Center for Ag Safety and Health meeting on the advisory board and looking at how wet it is to start off with. We were talking about What are the ramifications moving into 2020? And what are the lessons learned from 2019? Because so often we provide all these resources and have, you know, heartache working through and finding the solutions, and we tend to forget that. Well, we're looking at the reality that we might have back-to-back seasons like that that we don't see all the time.

And so just making sure that we can get some of those resources distributed And so for people that listen to this podcast, what are the things that they dealt with last year that they may have thought, oh, we need to change this for next year, or this is something that we would do differently if this situation were to arise. And so just as people kind of think through that, what is it that they could maybe be putting into place now to prepare themselves, especially those that are along the Missouri, Mississippi Rivers, or whatever major waterway it is that affects their farmland.

Duane

Lenz: Yeah. Um, you're exactly right. And then from a market perspective, uh, because we experienced it last year, um, even if we end up having what would be considered a good spring, it's very possible the marketplace could go through a period of time where they were fearful based on forecast that, um, it was going to be wet. You know what I mean? You could, you could have the market trying to rally in March because they think it's going to be too wet in April. It's not really— it seems wrong, but I mean, I've seen it happen before.

So I mean, if we can just get stabilization here and ease off some of this fear and panic, which I think is highly probable we will, but if we can do that Markets have a way of reversing and coming out of what we experienced in the last week and going in the opposite direction for a prolonged period of time and surprising people with what it does on the upside.

Shay

Foulk: Welcome back, everyone, to another episode of the Ag View Pitch. This is Shay Foulk joined with Duane Lowry. Duane, are you planting over there yet today?

Duane

Lenz: No, there's no planning going on here, but we, with the change of the calendar, we can at least begin to start to imagine that process unfolding not too many weeks from now.

Shay

Foulk: Dwayne, we're already side dressing over here. What's taking you so long?

Duane

Lenz: Well, we're just waiting to be schooled by you guys out there in Illinois.

Shay

Foulk: I think that's a quick way to get people talking, get the planter out and start rolling down the road. Everybody will be thinking they're maybe a little bit behind. But, you know, in all seriousness here, there's planters already rolling in the South. I know some of the people listening now are probably listening from the tractor cab that's headed north. And realistically, we're about 45 to 60 days out from the majority of people throughout the Corn Belt starting to get planters rolling. So I wanted to take a look here as we kind of kick things off and maybe talk a little bit about what we've seen in historical trends in the last decade or so about this time of year and maybe how this year is a little bit different. Is it the same? What can we kind of expect here as we move forward, not only in the week ahead but this time of year?

Duane

Lenz: Well, I think that there's probably— let's talk about that a little bit of a dual track. Try to address that as you described it and also put it in the context of last week's trade, which I think is probably first on everybody's mind here. Um, it's not uncommon in the history of the grain trade to see weakness in the last, uh, week or two of February. Um, it's not uncommon largely because there's always a lot of producers that have March basis contracts that maybe have reownership positions, specs have put on long positions after harvest. Trying to position for some post-harvest rally, and it's not uncommon for them to be placed in the March contracts. And so, um, there is a certain amount of selling pressures that can develop in that time frame as people are forced to either roll or, or liquidate positions.

Um, and a lot of times, like this year being the case, I think there's been a buildup of an extended period of time of discouragement and somewhat levels of fear. And when you had last week the world equity markets tumbling, you know, by an extremely historical sizable amount, I think record size in terms of actual points lost and extremely large for one week to occur. Add that to that, a disease that, you know, is going to ultimately impact probably every country on the planet. And I think all of that adds to whatever selling pressure might normally be there in a normal year. It just makes it all the more intense and all the more emotional-filled. Um, the other things that are happening at this time of the year, we start to zero in on what these acreage decisions are going to be.

And, uh, I don't have the numbers exactly in front of me, but I believe on Thursday, um, Farm Futures, uh, put out some acreage numbers. And they had soybean acreage down at, I believe it was 80-point-something, under 81 million. And that was probably about 4 million less than what the marketplace in general had. And they had corn acreage at 96-something, which was, you know, 2— 1 to 2 million acres more than what the trade anticipates, depending on where you've seen the average estimates for the trade. Um, but, uh, I think that that paints a very clear and accurate picture of the soybean versus corn ratio. And, um, there's nobody out here in the Midwest that's wanting to plant beans just because they know they're gonna make so much money on it. They, they don't see the profitability there. They see it probably being worse than, uh, corn.

And so the incentive to plant beans just from historical price relationships just is not there. And I think it's possible that Farm Futures acreage estimate, which I think they have a history of being, you know, you know, decently accurate, I think that that paints a strong narrative that maybe over the next 60 days the marketplace may have to send a signal to them, to the Midwest growers, that hey, we want that last field or two that you're contemplating, we want that into beans, we don't want it into corn. So I think the acreage discussion could be quite important this week, or excuse me, this year over the next, let's just say, 45+ days. And the last component that's probably important ahead of us is, you know, the question about will there be any Chinese business, what's the impact going to be, what markets are we going to see some announcements in.

It was also interesting that in the midst of all the panic and emotion that was going on last week and focus everywhere else, that little old weekly export sales report revealed that China had bought a, well, not a huge volume by listening to corn or bean export sales number, but it's a very large number for sorghum. And I think it was the largest sorghum purchase by China from the U.S. in over 5 years, and it was the largest weekly export sales in general for the U.S. over 5 years. And I think that's interesting because to me that's one more indication that they are moving down the pathway of ultimately fulfilling Phase 1. And in that same discussion last week, you had the Secretary of Agriculture again reiterate that he fully expects them to honor Phase 1, as well as some of the other trade negotiators that were high profile also came out last week with that same consistent theme.

And those people have been consistent with that approach. And then China, while we're not— haven't gotten U.S. sales, they've been very active buying South American cargoes of beans. And they bought 1 million tons of wheat during the last week or two from non-U.S. sources. But again, if they're playing the game, it remains at least plausible that they are actively buying all non-US origin products as much as they can in the current environment, with the idea that the US sales come after those purchases are made, under the presumption that if they were to buy US sales first, it might have a greater psychological impact on the market, and they might find competitors, you know, trying to— competing, buying, trying to compete with them and then, you know, drive up the prices. They might view it as they would be hurting themselves if they bought U.S. first.

And the other thing is, tomorrow, March 2nd, I believe is the day that China is accepting some registration requests for tariff waivers. And they had indicated before that when that came around that they would expect a very quick turnaround for an answer to that as it quick, as it measured, I believe they said within 3 days. So to the extent that export sales to China have been disappointing in the last period of time from say January 15th when they signed Phase One to present, there are things developing that gives us an idea and some encouragement that we might begin to see some of those Chinese purchase announcements, you know, in the days ahead. And, I think that the weekly export sales released Thursday that showed, you know, large sales of sorghum to China is certainly an important and a constructive, manner.

And I think that needs to be, uh, pointed out too, because last week every— all the focus was on the panic and the fear. So what's your thoughts, Shay?

Shay

Foulk: No, I'm glad you went over that in depth and, and we'll get to that. That fear there, because I think that's definitely playing a huge role right now. And you had some, some great points. I think it's really interesting looking at that sorghum purchase as well. One thing that I want to talk about is this, the price ratio between corn and soybeans. Now, historically, it's something that we talk about a lot here. And I want to make sure that, you know, the listeners kind of understand the impacts that it has, and how that relates to some of these acreage decisions being made.

So I didn't know if you could maybe talk a little bit about the historical impact that has had on acreage, because one thing that we see in working with clients day in and day out, not only myself on the seed sales side of the business, but with the consulting, is a lot of times these planting decisions with a lot— with a majority of growers are just made based on rotation, based on events that happened last year. And there's not as many growers that look at it from a projection standpoint, right, wrong, or different. That's just how it is. So historically, how has that, you know, price ratio affected acreage decisions maybe over the last 2 or 3 decades, Dwayne?

Duane

Lenz: Well, you make some very valid points, and there are certainly people that, you know, right now today are in a rotation that they may have reasons other than economics as to why they're in that particular rotation. I think it's true that at least in my world, in my way of thinking, that we went to a new paradigm of circumstances back in 2005-06 and from there forward when that— when ethanol became a new major component of corn usage. And at that— from that point in time, I think there has been a tendency to move away from a 50/50 rotation that was probably much more common, say, in the '80s and '90s. And we started after that, the ethanol started to expand significantly. I think then we had a move towards more corn on corn acres. And I think the seed industry has developed seed that has addressed the corn on corn yield drag that used to be there.

And now is, I would argue, is probably not there. And you could also find a producer that to say he can grow better yields of corn on corn versus corn-soybean rotation. And so the last decade, or last 15 years, let's say, I think the acreage decisions have motivated more by other factors, less by economics. And I think the, the last thing that's changed in the last 15 years that it has affected the acreage mix is the fact that whatever a guy was growing for a corn yield in 2006, let's say, he has seen a much larger increase in production yield capability than he has soybeans on a relative term. And so we've had more of these acres go to corn, and the tendency is, is backed off the beans. And right, wrong, or indifferent, I would say, over since 2014 at least.

I think people have found that at the end of the season they have probably made more money on their corn acres than they have on their bean acres. And I think a lot of that has to do with the fact that we've had some, you know, very good corn yields in the last couple years. We've had some people are able to get some larger soybean yields, and some of those are notably larger, but they don't have a the same degree of confidence about getting that the next year and on a consistent basis that they have in the corn yields being, you know, quite what— quite high. So all of that helps to kind of hold back this expansion of soybean acres, in my opinion.

And then if you look at it from, say, 2006 forward, and specifically, say, 2000 and late 2007, 2008, from there forward, we are— we have the corn versus soybean price basically in the bottom, just eyeballing it, I'll say in the bottom 10% or 7% of the range that it's been if you took soybean price minus corn price. And if that is true about the price and the other things I said about corn yields improving more so than beans, then that means that the combination of those two factors makes soybeans just all the more depressed in prices. Because if soybeans are underperforming corn on a net return for producers, and you have the prices at the very bottom side of the price relationship parameters since 2007 forward, then you have, you know, a maximum amount of, uh, incentive, or disincentive I should say, for producers to grow soybeans for a lot of areas.

And so that, that background allows me to believe a number like Farm Futures. And if their number actually would— is proved— is an accurate assessment of where we stand now on those acreage decisions, and what you made for a comment that some of those acreage decisions just are not changing anymore on economics, Well, with that as a backdrop, if the marketplace really believes we have 4 million less acres and you just say 50 bushels an acre, as this— throw it out there— that's 200 million bushels. Well, USDA a week ago from Friday, we came out with their Ag Outlook and they projected, I believe, 85 million acres. And that came in to produce a final carryout for the 2021 season of 320 million bushels. If Farm Futures is right and you take 4 million acres out of there, now you're down to 120 million carryout.

If the marketplace really believed you had 120 million carryout environment, we'd be at $12 soybeans. So the marketplace is not currently looking at it that way, but this is crunch time from here to the next 45, 60 days. That's the end of the line. If the marketplace wants to send that signal that we need more soybean acres, it's got a short window here. It's going to have to perform. Now, it doesn't have to get to $12, but just imagine if beans put on a dollar, which is not at all unreasonable even in the current environment. That if you could get a dollar, now you're talking about something just under $10 nearby soybean futures. Well, farmers might make that decision to plant a few more soybean acres not because the $10 price is, is the, the, their, their, their target.

It's because if the market gets to $10, then it's all of a sudden, you know, the farmers are thinking they might get to $10.50 or $11. There'll be some narrative that comes along with that. And so I think that, you know, we're really looking at a time window here that always can have the potential for an acreage battle discussion narrative. And I have felt for the last few months that it was likely that we would get that narrative. And I was driven to think that because of the relationship beans are versus corn historically, me being in that bottom 7% of where it's been in the last 15 years. And the other part was that I have optimism towards Phase 1., and I felt that combination would drive, uh, to lower carryout expectations in both the current marketing year and the next year in beans.

So far, those two things seem to be accurate with USDA projecting along a pathway and a trend that those two concepts are correct. But so far, it hasn't manifested in a marketplace that wants to trade that. So, um, If you were to say that, uh, the most important thing to the soybean market is the narrative we're having right now about acreage— and I'm not saying that it is, I'm just trying for a sake of argument to remove other things, to filter other things out— then, um, it would have to be seen as very, very encouraging that we could suffer all the anxiety that we had last week all the fear, all the panic, all the emotion, all the liquidation pressures that occur at the end of February before first notice day, any basis contracts that were forced to be rolled, any reownership that producers got tired of carrying or specs got carried.

You take all that, absorb all that selling energy along with pandemic, you know, disease fears engulfing the globe and equity markets is, you know, dropping thousands of points. Then when I think of that as a backdrop and I go back to last week and realize that Monday, Tuesday, Wednesday, Thursday, that first 4 days of window in that whole environment I just described, soybeans settled 3 of the 4 days higher for the day. So for the week, last week, beans were down 6.25 cents. If you compare where beans were at, you know, versus say a December low or a January low, we're actually above, above those levels. The soybean market is performing much better than what it feels like based on everything we had to absorb in our mindset when we evaluate, evaluate markets that we had to absorb from last week's trade.

So I realize that some of this gets off the discussion of acreage, But I'm trying to point out all the reasons why it remains very plausible that soybeans still have a job to do to try to encourage a few more U.S. acres, and with that means a few less corn acres. All of that story, narrative, if the market starts to gain traction on that, which I think it's reasonably possible that it will, um, that could impact price activity here over the next 60 days. And if the beans are serious about it and we get a few of those other things to occur with it, such as some Chinese purchases and a little more confidence in Phase 1 than the market has right now, we get equity markets to stabilize, you know, suddenly the bean market 30 days from now could look significantly different than it looks at— it looks like today. And, and I think the core part of that may very well be the acreage battle.

Narrative.

Shay

Foulk: Great. I think you did an awesome job covering the acreage and how that looks, especially as we move forward in the next few weeks. Let's talk a little bit about the fear. You know, you and I were talking about this a little bit offline. Talk about how these pandemics, or potential pandemic— I guess that's not the right word to use technically— how has that been affecting the markets? And, and then I'm going to ask you some questions after your initial thoughts on that, and we'll talk about some historical cases there, Dwayne.

Duane

Lenz: Well, anytime you're dealing with a fundamental discussion that clearly is filled with facts— this is not all pie-in-the-sky imaginations— that you have to respect the truth within that discussion. And in the case of the coronavirus, What do we know about it? We know it's factual. We know that its beginning point was China. We know that it's possible it wasn't public knowledge as quick as it should have been. Therefore, some of the opportunities to prevent or contain or prepare for treatment may have been not maximized. Let's just say it that way. And, and we know that these numbers exist, and we know it's been disruptive to China's economy. We know that it's been disruptive to equity markets, but those are based more on fear than it is based on facts. We know that China's had a large amount of their industries shut, businesses shut for an extended period of time.

We know that their recovery and re- building of that, you know, economic engine is going to take some time. But I think it's fair to look at the statistics and say they are already beginning to move towards recovery, if you define recovery as in terms of factories opening, getting back to work. Now, all of those things that I mentioned about China, which really elevates the fear, has to be looked at differently when you go to another country. Why? Because all the rest of the countries, including the US, have the benefit of number one, knowing it's out there, so we're gonna know, be more prepared for when it arrives than China was. We have learned at least 30, maybe 60 days' worth of experience as to how the virus moves, spreads, can be identified. They're working on treatments, vaccines, those things might be more important down the road for the next season.

We also know that it's a part of the coronavirus family that tends to be somewhat seasonal and diminishes as we go into the seasons that are in front of us. And we're also, in the case of the US, we're now starting this problem, so to speak, or I shouldn't say starting, we're starting to experience this problem in the first of March. China experienced in the first of January. Since it's from the same family, maybe more deadly, more troubling, but still from the same family, it's not unreasonable to assume that just as flu diminishes as the season progresses and the calendar progresses, it's reasonable to see that, think that we're going to experience the same thing with this coronavirus now. And SARS was part of that same family. We saw that occur in SARS as it developed also. It diminished off just like other flu strains within that same family.

I think we can look at that as somewhat calming, and I think we can look at the fact that the US has the luxury of knowing it's coming before it gets here, unlike China. We can prepare for it. We have all hands on deck, so to speak. And I think that there's some history with all of these types of things that build up a level of fear, only to find out that that level of fear develops into a crescendo and a culmination event, and then it begins to diminish. And so I guess I'll kind of go from there, and I'll ask you— you said you had some statistics or some perspectives of previous similar type threats. Why don't you fill us in on what you got there?

Shay

Foulk: No, I think you led into that perfectly, Duane. And just for the listener's perspective, none of this is scripted. This is all just conversation-based. So, uh, you know, I think you led into that perfectly. So I'm going to read off some, some dates and look at some, you know, past, uh, fears that have come out into the marketplace. And I'll say them a little slow so you have some time to think about it. So in 2002, something that had a dramatic effect on the markets was the West Nile virus. Okay, so we'll move on to 2004, SARS, which was much more deadly. There was much more concern, and initially there was much less done as far as containment goes. 2005, it was the avian flu. In 2009, it was the swine flu. So keep in mind, those are two, that had an impact on livestock as well as, uh, humans. 2014, it was Ebola, and in 2016, it was the Zika virus.

And so I, I wanted to bring this into the conversation, right? So 2019, we're, we're rolling into with the coronavirus, and every 2 or 3 years, if you look at this historically, on average, we have one of these events. So You know, you mentioned kind of that crescendo that we come to, thankfully, because none of these have turned into a true global pandemic. So is the coronavirus different, or in the words of Ray Dalio, is this just, is this just another one of those?

Duane

Lenz: Well, I don't know exactly what the Webster word or definition of pandemic is, but when we hear the word pandemic, We're thinking, you know, television, movie, you know, theater-type arrangements where, you know, half the world's dying off from all this. I think the more accurate definition of the word pandemic is just means that it spreads to an entire part, an entire part of a country, entire part of a globe. And I am sure that coronavirus will will reach, if it hasn't already, the label of being a pandemic disease. It probably already gets— crosses the bar of being a pandemic disease in China. But when we think of that word pandemic, I think it's— our thoughts on that are much worse than what the word really means and what the medical profession means when they describe it as pandemic.

I just think that means that it's infecting the entire region, the entire country, the entire planet, whatever part of the thing they're trying to describe. So the pandemic doesn't necessarily— word doesn't necessarily translate into massive deaths, and that's what I think that people hear when they— or think when they hear that word. So I just kind of want to touch on, on, on that a little bit. But I— we can't be surprised that it's in the U.S. We can't be surprised that we're going to get more cases in the U.S. I think it's reasonable to assume that whatever the death rate is for coronavirus from this particular strain in the U.S., the death rate will be less than it will be, will be in, in China or some of the other, other countries. And I think that's just a statement about how well the country is prepared to treat it.

I gotta believe that we're more prepared to treat it just in general, and certainly more prepared because we have the benefit of having watched it unfold over there for 60 days before it gets here. So I think all that gives us good reason not to, to view this as being— we shouldn't be overly fearful. And the WHO director came out this weekend and pretty much said the same thing. And you can find that same narrative coming from a lot of medical and research professionals So I think it's legitimate not to be overly concerned. And the last part is, despite all that logic and probably reality and facts, the marketplace was still under massive panic all last week. And I'm sure some people will say, oh gee, there was a coronavirus reported case in Chicago and somebody died in Washington State. And, you know, in the days ahead, we're going to get more announcements here in the US..

But I don't really think that's going to be seen as, or should be seen as, anything that's all that unexpected. And the last part of all this thing that we need for stabilization and to minimize the fear is we're going to have the Fed's going to lower interest rates, other central banks will do something stimulative, other governments will come up with stimulative measures. I strongly believe, and maybe it's somewhat fantasy, it certainly isn't based on fact, but what I'm about to say is clearly based on logic. I think if you go back a few years, China was motivated and their people highly demanded that they wanted their energy— or excuse me, their air quality cleaned up. And they were moving down a path where they were embracing ethanol. They were going to build ethanol plants. They were going to use their corn stocks to funnel through ethanol. The U.S.

ethanol industry was prepared to ship massive quantities of ethanol to China. And that was the path we were going, and that was all driven by clean air desires. Well, fast forward to today. We look back, and China had to put a stop to that because, one, their corn stocks were declining faster than they anticipated; two, they were seeing on the horizon where they were going to end up having a trade war with the U.S. And all of a sudden that whole thing comes to a halt. Well, look at what they're looking at today. China's a dictatorship, a communist country, power's concentrated. President Xi is basically an emperor for life at this point in time. And after people are shut up in their homes, they got travel restrictions, quarantine bans, they can't go to work, they can't earn a living, the shops can't pay the rent.

You know, this is massive unrest there, and in a country of 1.4 billion people, and a country that has a history of recognizing the importance of maintaining stability in the population, I got to think if I'm China, one of the things I'm going to do for stimulative measures, I'm going to reinvigorate this clean air program. I'm going to put my steel mills back to work to build ethanol plants. I'm going to import corn to satisfy Phase 1. I'm going to import ethanol to satisfy Phase 1 and move down this air quality. And I'm going to make a big splash about how we're addressing this. Because the people in China can't be happy.

They might not be— they might not necessarily have merit in placing the blame on the government per se, but they're certainly unhappy just like we would be if we couldn't go to work or we couldn't travel or anything of this nature, and our economy was, you know, significantly hurt by what's gone on for them in the last 60 days. And they have to do some stimulus measures. They're going to lower rates. They're going to pump funding into their banks. They're going to weaken the regulations on banking to allow more funding. They're going to do direct infusion to state-owned companies. They're going to do direct infusion to, you know, medium-sized companies that are not state-owned. They're gonna do everything that a government and a bank and/or a central bank would do in their position.

And all of that actually is probably gonna be friendly agricultural consumption and agricultural trade in, in the months ahead. If we go back to 2008 when we had all our financial crisis and equity crisis and the stock market declined and We had double-digit unemployment and everything associated with that. That's far worse of a backdrop economically than what we are dealing with today. And if the— even then, with all that was going on in economics, from 2009 forward, energy prices went from $30 all the way back up towards $100. Agricultural prices boomed. Why did that happen? Because the Fed dumped in money. All right, China's gonna do exactly the same thing, and the outcome is gonna be exactly the same. The only argument is the speed at which they're able to recover and how this unfolds.

But this whole thing about clean air and importing corn and ethanol and that, it goes a long ways towards phase one. It goes a long ways to be in a stimulus to their economy, and it goes a long ways to providing the public with something that they can feel good about And that's this movement towards clean air again. The public there was very excited about this clean air proposal when they came out with that a few years ago and very disappointed when it kind of got shelved. So I see things like that. Granted, this is an imagination in my mind, but it's still a plausible imagination in terms of specifics. But in terms of— in generalities, the fact that they're going to stimulate their economy and the U.S.

will stimulate their economy, and the fact that there's probably going to be a, a coordinated effort by central banks everywhere in the world to provide support and stimulus, that is not at all an imagination in just my mind. That is clearly going to be a fact based on their history. Now, you— we can argue about how successful it will be. Well, there should be no argument that this is exactly what is going to happen. And there's probably shouldn't be any argument that the best time for them to begin to do that is probably after a week like we had last week. So while I'm sure there's anxiety around the marketplace because of the coronavirus moving into the US and the probability that we're going to get more and more cases and things of this nature, there had to be a certain amount of culmination effect in the equity markets last week.

And the— there has to be an assumption in the marketplace that we're going to get this central bank global stimulus, whatever you want to call it, coming from multiple different countries all at the same time, with China being the very, uh, greatest one of focus. And I have, I have a high degree of probability that all of those things are going to unfold here in front of us, and I would argue they're probably going to unfold here very, very quickly, as in measured in days. So that's one of the things that could help to stabilize what we experienced last week, just for— not to mention just the sheer scope of how much equity markets fell. And I've been in this business, you know, 40-plus years, and it's always difficult to anticipate what we experienced here in the last week or two.

Even if you anticipate it, to believe that it will turn into basically a historic amount of a decline in the US Dow and some of these things, you know, it's very hard to anticipate that. It's just such a massive thing. You just— you're just not in a frame— nobody's in a frame of mind where they can really anticipate the full thing. They might see parts of it or anticipate parts of it, but you just can't experience the same, the whole thing.

At the same time, every time in my 40 years that I've seen something like this happen, what happened last week with the, with the, you know, extreme buildup of panic and emotion and forced liquidations because of first notice day and basis contracts and everything else I said, that is almost always without exception culmination periods that lead to opportunities in the market going the other direction, as opposed to that being the beginning of a trend, the middle of the trend, or anything else. These almost always occur at what would be the end. And you go back to 2008 when the stock market declined, that decline actually was in place for about a year before it bottomed out. And how did it bottom out? It bottomed out when Hank Paulson, Treasury Secretary at the time, came to Congress basically over a weekend and say, hey, by the way, guys, no panic, but I need $1 trillion.

And yes, I need it Monday before markets open. And this is a weekend. And the government, Congress basically said, no, we're not doing that. They passed, they tried to vote. It failed the next day or that same day. I don't remember exactly the timeframe of the vote. But either the same day or the next day, the Dow dived like 1,000 points. And then immediately Congress said, okay, here's your trillion dollars. Okay, so that thing was in place for a year, but it ended with that culmination of panic. And from there forward, it was nothing but a move up in the equity markets to where we are today. And the degree to which it went up, you know, you can argue, but that was the end of it.

And you can point to it happening in corn, wheat, soybeans, crude oil, you know, the list is endless in all these markets that what we witnessed and experienced last week is so, so, so often a culmination event, not the beginning of something, or not the middle of a trend. So I offer that to me, to be seen as an encouragement sign that maybe we've experienced the worst of this, and maybe this actually paves the way for something, you know, much better than people are expecting right now.

Shay

Foulk: So if you're a farmer, you just pulled the planter into the shop there, you're getting things ready to go for spring, you're looking at everything that's going on, you know, of course here on the Ag View Pitch, we don't make recommendations, we're just providing some perspective. And I think you've done an excellent job of that today, Dwayne. But what does this look like, you know, in the week ahead? What are some things that you would be considering, or some other things that maybe producers out there should be watching for, uh, before they hear from us again next week? Or, you know, if they're receiving your daily newsletter, however that looks, what are some things they should consider?

Duane

Lenz: Well, if we start from the point where you started that, where you're a farmer and you got your planter in your shop and, you know, you're 60 days away from being half done planting if you have a good spring or whatever it may be. If you're in the South, you're far— you know, you're going to be planting much sooner than that. If you're in that position, it's not uncommon at this time of year for farmers to be somewhat apprehensive or discouraged or nervous about the price and the economics because Oftentimes producers are not offered— the system doesn't offer you a really attractive price right now that you could lock everything and have a happy, you know, quiet summer and just can't wait for harvest and then go sit on the beach somewhere. You know, it very seldom happens that way.

Normally, you're on pins and needles trying to figure out how you're going to make this work and you got to have good yields. So this is part of it, it's not uncommon. The farmer, anytime, he always goes to the spring with a level of optimism about the plant and the start of a new growing season. And unless we get something like we experienced last year where you couldn't get it planted, you know, that optimism kind of continues. But the economics are different. So all the things I've said today to try to offer some encouragement or minimize the fear and point point a picture of stabilization, none of that is designed to tell a producer not to take a profitable opportunity. You still have to do business job one, and that is trying to figure out how you're going to get the price that you need. For many people, the price that we have right now just doesn't work.

But I would say that since 2000 and I believe '07, 2002, There's not— there's only been one year that we didn't get above the high in Dec corn that was in place during the December, January, February time frame, that it was not exceeded, that high was not exceeded after March 1st. And that current level in Dec corn right now is $4.04 and three-quarters. So if you want to look at some historical point of reference that gives you strong odds of getting some sort of price recovery, I would lean on that. And the one year that that didn't occur was in 2013, I think it was, when prices were retreating from the very high levels in 2012. So while the current price in Dec corn may not be attractive, if you could target in like a $4.05 level and say, you know, I can, I can deal with that, and maybe you do some price protective strategies that at that point in time.

Um, I would, I would look at it from the standpoint that if given an opportunity that we get some improvement in the narrative in the next 60 days, maybe it's the acreage battle, maybe it's China actually coming through on things more than just sorghum, maybe it's the infusion of capital and stimulus from central banks and governments and equity markets that are stabilizing, and we're able to get a price recovery. I would encourage producers to find a way to try to lock in a floor price that ends up being better than what your crop insurance price is going to be. And I'm talking about the spring price, which is going to be $3.88. And so try to find that opportunity and be willing to do that. However, there are a lot of different marketing tools that you can pull out of that toolbox.

You can pull a cash forward contract, an HTA, you You can sell futures, you can do a lot of different things, and many of those things are things that you commonly do. This year, in my opinion, 2020, 2021 should be the, the types of year where you're choosing marketing tools and marketing plans that give you more flexibility and less finality. Because if you make aggressive sales at, say, 405 D-score— let's just pull that out for an example— or you make aggressive sales on a, on a relatively small recovery in beans at current levels, you are actually making sales at what would be the bottom side of parameters for this preseason, in-season type of price level. I'm not sure with all the wild things we haven't going on, I'm not sure having finality to your marketing decision is the best, best approach.

There are tools out there where you can establish a floor, provide some level of additional upside potential if the market goes up. And so I think that the job one might be to find ways to protect economic survivability at profit levels that work. But at the same time, rather than just go to that toolbox and grabbing the old rusty vice grip and pliers, 'cause you know it'll fit any bolt head, take a little time, do a little research, you know, talk to somebody and try to find a marketing plan that you can build that utilizes more fine-tuned tools that give you greater flexibility in a year like that.

So I guess that would be my general comment about what farmers can be thinking about here in the next 60 days while they're getting their planter ready and try to keep a focus on and a little bit of hope on the idea that you will get a marketing opportunity that, that's better than what you're looking at now. And then it's a matter of trying to find the right tool to make that work.

Shay

Foulk: Awesome. I think you gave everybody out there enough to chew on here for the next week or so. And, you know, just kind of as we, as we close up here, moving away a little bit from the from the marketing. I'll give you a couple minutes if you have any other additional thoughts there, Dwayne. But, you know, we just want to remind everybody to stay safe out there. We hear more and more stories coming in of grain that is not, you know, wasn't stored in quality condition. A lot of grain collapses and fatalities associated with that. You know, guys, if you're out there working with that kind of material, just make sure you're taking the extra step, the extra safety precaution. One thing that we like to say around here is there's no good reason to die farming. You know, if you take some time to think about that, there, there really is no good reason for that.

So take the time, find the help that you need, make sure that you have the safety things in place. And same goes, you know, as you start to work on this equipment, getting it ready to go. As we roll into spring, it's simple things, making sure everything's blocked up appropriately, that you have the safety pins and hitches in place as you begin working on equipment. You know, it's something major that we look at this time of year, as well as electrical hazards. And just if there's stress going on in your life, if there's stress for other people in the community that you know of, be sure to reach out and say something. If it's yourself going through some stress or some struggles, reach out to someone that you can confide in. You can always call us here. But, you know, find the help that you need and reach out to those that you know that are struggling.

So just wanted to make a couple notes on that. As, as we know that this can be a stressful time of year for many. So, Duane, any, any lasting thoughts kind of on the marketing side as we wrap up here today?

Duane

Lenz: Well, out of all the things we said, what you probably just summarized is probably foundationally more important than anything else we talked about. You know, we are experiencing very difficult times. We have people that are struggling with working capital, no fault of their own, just the conditions of the marketplace, and everybody's got a different economic set of conditions. It's very difficult, lots of emotion going on, and like you said, make sure you got some support, you can take a step back view and try to think, see things in in a better perspective, and sometimes you can talk to somebody about it, you can think through it differently, and you'll find that the situation might be more workable than you think.

But I think that the last thing that I would want to say is there's a lot of things that I've said here today that I think have tried to offer some level of encouragement and try to dial down whatever panic and fear that you might be feeling. We're recording this Sunday afternoon, and it'll probably be published and sent out before markets open tonight. But, um, this week's, uh, equity markets, they're probably going to be volatile. But if we're trying to find signs of stabilization, and I would say there's going to be a high probability that we will find those stabilization signs in that environment I think it gives us a really good opportunity that the grain markets can recover. Even, I would even go so far to say we can relatively quicker, quickly recover all the losses from the last week or two.

So as bad as it might look and feel, focus on getting ready for the planter, focus on all the, the good things and the, the, the hidden storylines that are out here in the spring optimism that the growth of a new plant and how that can develop from the power of sunshine and all these kind of things and look at those optimistic things and just be somewhat confident and less fearful that, you know, you're going to get some opportunities here to make this all work from an economic standpoint as well.

Shay

Foulk: Great, Duane. Well, hey, Duane, thank you so much for taking the time to have these discussions today. I know we appreciate it as well as the listeners do. Really appreciate your time.

Duane

Lenz: All right, thanks, Shay.

Shay

Foulk: And thank you everyone for listening. We will catch you next time on the Ag View Pitch. Thanks for joining us on today's episode of the Ag View Pitch. As always, you can reach out to us at cbarron@agviewsolutions.com or duanel@netins.net. We'll catch you next time on the Ag View Pitch.