Numb: an American farmer play written by the USDA

Shay: And it all comes down to this. Two on, two out, bottom of the ninth. The Farmers lead by one.

Duane

Lowry: Full count. Here comes the play at the plate, and it's the Ag View Pitch.

Shay: Welcome back everyone to the Ag View Pitch. This is Shay Foulk, and I'm joined with Dwayne Lowery today. How's it going, Dwayne?

Duane

Lowry: Good, uh, Shea, thanks for being here today.

Shay: Yeah, I appreciate you making the time on this. So You know, I wanted to keep it a little shorter here this afternoon and maybe just do a little bit of the USDA report digesting from a 30,000-foot view. Wondered if you could take a couple minutes just to talk about some of the highlights or some of the overviews from the report here today, Duane.

Duane

Lowry: Okay, I'm going to take that lead in and look at it kind of backwards. Let's start with how we finished up today and at the end of the close. We had corn up 2.5 in the March, uh, December contract was up 2.75, so pretty much flat in terms of spreads. The beans finished up 2.5 in the March contract, finished up 3.25 in the November, again pretty much flat on the spreads. The wheat finished up 4.5 in Kansas City, finished up a couple in Chicago. And I think before we get into the, the report, I think it's important to start backwards today and see how the market looked at the end of the day. And at the end of the day, there was nothing bad about today's reports. So now if we go back and we look at the actual numbers in today's reports, there's a certain level of disappointment that could be said about today's reports.

From the standpoint that we didn't get any real earth-shattering news. We didn't get a real jump start to point us to the upside. We didn't get some piece of data that we can say, aha, look at that, now we're going to go up. We didn't get that. But what we did get was quite a few adjustments in numbers, none of them super large. But if you look at the most important number at the end of the day, the carryout numbers— carryout numbers were left unchanged in beans. And in the case of corn, they were, they were reduced slightly, not by much, but we were down approximately 18 million bushels. So largely statistically insignificant. So even though they reduced harvested acres in corn, Even though they raised yields in corn by a bushel the acre, they increased feed usage, they left ethanol about unchanged, lowered exports, and we ended up with a slightly less carryout.

I would summarize both the corn and bean reports today with— from the data itself— and say that what we have here is we don't have a bear market. We do not have a market that's going to trend lower from the price levels that we're at. And whether or not we continue to traverse sideways waiting for the next bit of fundamental development, or whether we're able to find a reason to trade higher and trend higher, I guess what that remains to be seen. But I don't think we have a market that wants to decline very much. This afternoon, some of the corn basis levels actually were firmer. And I think a lot of that has to do with the fact that the cash buyers, they were also hoping for something that would be bullish to futures so they could buy cash basis in cheaper.

And that since we didn't get the futures rally, that was one thing that they were hoping was going to motivate the farmer to make sales over the next several weeks. And now we don't have that. And I think that's probably one of the reasons you might even see some improvement in basis already yet today. Um, the beans, uh, were almost statistically unchanged in, in all the categories, uh, from USDA. Um, the acres was down 600,000 for harvested acres. Yields were up a half a bushel, so production was up when you netted that out, only up 8 million bushels. They left the crush unchanged. They left the export figure unchanged, and the ending stocks were unchanged. It also tells you that USDA did not appear to take anything into consideration regarding U.S.-China trade deal. On the one hand, you can say, well, that's disappointing.

But on the other hand, it's very common for them not to make those types of adjustments until they actually see the business taking place. And since they didn't make those adjustments and yet carryouts were left, you know, statistically unchanged and lowered slightly, the encouraging part is, is that if China does come in and increase its pace of buying beans and begin to buy some corn and wheat like they haven't been doing in the last few years, then that would be a plus. And I think the marketplace probably also looked at it from that perspective for a reason, to negate some of the knee-jerk reaction to the report headlines when they came out. At one point in time, corn traded, you know, several cents lower, and then we finished higher in the day. I think the, you initial several cents lower was based on the yield number going up.

And as you dive into the numbers, you find out that we didn't have much of a change. I think the same was probably true in beans. They had that initial sell-off, um, that probably got 7 or 8 cents in the negative territory, and then we finished 2.5 higher. So at the end of the day, the only numbers that really matter out of today's report was the carryout, and they didn't change very much. I think there are also indications that maybe our livestock demand may continue to grow as in the months ahead, and maybe in general the demand outlook is better as projected by today's report than what maybe it has been projected in recent reports, or maybe by what the marketplace in general has been wanting to talk about. And so if that is true, that is probably a thread that continues in the future reports.

And so the demand base has got to be seen as improved versus what, you know, people have been talking about. So I think that's somewhat constructive. The next fundamental wildcard we have is to see what happens when— after China signs their trade agreement, which will be on the 15th at the White House. So that'll be what, next Wednesday? And then I think that the next thing after that, of course, will be spring weather, acreage mixes, and things of this nature. There probably wasn't anything in today's report that really drives the acreage battle discussion, and I guess I'm a little surprised at that, and to some extent disappointed, because I was hoping for that to happen. But in terms of today's report, we did not get anything that should be very concerning, and I think the marketplace will say At worst, we don't have much downside potential here.

Shay: Shay, I think that's a great overview there, Duane. Anything else that you wanted to add to that? I don't know if there's much more here that we need to be covering. You know, I think you pretty much laid it all out.

Duane

Lowry: There's some nuances in today's report that are interesting and to some level frustrating. Since I'm in Iowa, and that's pretty close to home, I thought it was very interesting that they pegged the Iowa yield for corn above last year, and I think they had it pegged at— I don't know, I can't seem to see it at the moment, but I think it was a couple bushels above last year. I find that very hard to believe that we're, as a state, averaged more corn per acre this year than we have in— than we did last year. And I don't know how you feel about that, Shay, but I find that to be very, very strange. And I'm using kind words when I say very strange.

Shay: From a farmer's perspective, Duane, do you think that people are maybe just numb from the last year looking at, you know, the expectations that you're laying out there of surprises that have come along, you know, not seeing what fields are expected to be. And then we have reports that I think in our heads, we maybe get a little bit of hope and optimism built up that it might have a positive effect based on what we've seen from the year. And we don't see those types of movements. Do you think Do you think the farmer here is just numb to these reports anymore?

Duane

Lowry: He's numb and with a backdrop of fear. And I think there was a lot of numbness and fear before this report. And maybe some of the fear might leave now for some of the later reports, feeling that this was their last chance to deliver something negative to the as far as a farmer is concerned. But the numb part is probably a very good word to use for it because there are so many different aspects of the report that we find ourselves questioning or, you know, squinting our eyes over that, finding it hard to believe. Even in today's report, and I haven't looked it over close enough to be well-versed to, you know, talk about it here in this particular podcast, But they adjusted the stocks report that was just released in September, and they adjusted both on-farm and off-farm stocks. You know, to adjust on-farm stocks would be one thing.

Off-farm stocks seems extremely difficult to figure out why those would be adjusted. Those are pretty much regulated. Everything's with a scale ticket in and a scale ticket out. There's, you know, pretty serious books kept on all those types of locations, and why they would all of a sudden adjust that, I find that hard to believe. But when I look at a map of the country, of the United States, and I see Iowa is 2 bushels above last year, and I kid you not, I find it very difficult to find operations that had yields that were better than last year. Most of them are in the double-digit decline from a previous year. And I just find it extremely difficult to believe that, you know, we have no choice but to believe it until they change it. But I just find it hard to believe. You look at a map of the U.S., you got Iowa down 2, you got— or excuse me, up 2 from last year.

They got Missouri up 15 from last year. And, you know, all the horror stories that were coming out of Missouri this summer. That's hard to believe. Kansas was up 4. Nebraska was supposed to be quite good. It was down 10. Then you have Illinois was 29 bushels off of last year. Indiana down 20. Ohio down 23. And then the only places that you have up of sizable production, you got Texas up about 25. Oklahoma up 3. That's not a big corn-producing state. Kansas up 4. They're producing more corn than they used to. And then you got Missouri up 15, Tennessee up 9. The whole Delta was down from a year ago. The East Coast was down. I don't know how that all averages out. Obviously it does, but I find it extremely difficult to believe some of this stuff.

Even the, the comparison where Iowa was 2 better than last year and, and Nebraska was down 10 when we were told all summer long Nebraska was the bright spot. So there's just a lot of things that don't seem to fit in with what you hear in conversations. And I just find myself shaking my head over the whole thing.

Shay: Well, Duane, we'll be back on Sunday to discuss this a little bit more in depth, take a closer look at the report in the week ahead there. You know, I want to take this opportunity for the listeners out there that if you have specific questions, if there's anything that you want to pick our brains about, Chris and Duane or myself, you know, please shoot us an email, cbarron@agviewsolutions.com. You can always get a hold of Duane at duanel@netins.net. You know, we know if you're anything like us that you have lots of questions out there too. We want to make sure that we're providing the most value for you all who are listening. Anything to add to that, Duane?

Duane

Lowry: No, I don't think so. We'll, we'll talk about it some more on Sunday and maybe into some of the detail. But I think the— for me anyway, the biggest takeaway here is we don't have conditions that warrant trending lower prices from current values. Might we have conditions that warrant some sort of sideways thing? Maybe. Do we have conditions that might keep basis levels firm. I think that's probably true. Could we have conditions develop on the demand side that would be better than what the trade is currently thinking or has been thinking? I think that's possible. The fact that we don't have anything out of the China trade agreement reflecting in today's reports, I think, is encouraging because I happen to be one that believes China will be aggressive aggressively buying U.S. ag products here. I think they will live up to this deal, at least for the first year or two.

So I think there are things to be optimistic about, but we did not get any, you know, shot in the arm out of this report. In the same token, we didn't get anything to cut the knees out from under us either.

Shay: Duane, as always, pleasure to have you on here. I really appreciate you taking the time to provide value to the listeners. Again, please reach out to us if you have any questions. Thanks, Dwayne.

Duane

Lowry: All right, thanks, Shane.

Shay: And for all you listening, we will catch you next time on the Ag View Pitch.