Opportunities ahead?

Narrator: Hey podcast, thanks for listening in today. We hope you had a great Fourth of July weekend and that you're enjoying the content that we're putting out. As always, we would love to hear any feedback that you have, and if you have any suggestions for the podcast, please reach out to us and let us know. Enjoy.

Chris: Welcome everybody to the Ag View Pitch this afternoon here on Monday afternoon. Uh, Dwayne and Chris here, and we got a report out here this afternoon, the crop condition report, and then also the planting pace. Have you ever, Dwayne, had anybody ask you about the planting report or the planting pace at this point?

Duane: No, it's certainly unusual, and some of the, the statistics on the planting progress numbers and the emergence are still very interesting, but to a large extent, people are tired of these numbers and tired of these reports. They're not tired because of the season, they're tired after USDA came out with their acreage number last week, and, or two weeks ago now almost. And people are just kind of disgusted and so unsure of what the final acreage number is going to be. People almost don't care about this anymore.

Chris: Yeah, it's a little late. I wouldn't think you would have been dealing with this ever before, at least after the Fourth of July weekend like this.

Duane: No, no.

Chris: So, so tell us a little bit about what you, what you see in the reports today.

Duane: Well, first of all, for the last couple of weeks, people have been expecting improvement in crop condition ratings, and they— that really didn't happen. We even had a decline. People were expecting improvements again this weekend, or, in today's report. And, uh, that's not really what we got. Corn condition was, uh, up 1%. Uh, that basically went from, uh, out of the fair category into the excellent category. And the good excellent was at 57% versus 56% last week. Just to give you comparison, it was 75% last year. That was not as much of an improvement as people had kind of expected. And in the case of soybeans, which I think some people thought might see the bigger improvement, uh, actually, uh, went down 1%. They're at 53% good/excellent, and last week they're 54% good/excellent.

I know that after the last USDA acreage report at the end of June, people have kind of largely quit trying to guess what we've got out here for planted acreage and prevent plant, etc. And I'm kind of in that category. I've given up trying to guess because, um, USDA just kind of blew everything out of the water with their numbers. But in the same token, I do find it interesting without trying to put any acres to it. Um, in the case of, uh, um, soybeans, Illinois has 86% of their soybeans emerging, Indiana 85%, Michigan 79%, Missouri 76%. Ohio 75%. So here we are on the 8th day of July. And we've got, you know, if we have any crops, unless they're double crop, which probably most of these are not. If we have anything out here that's not emerged by now on the 8th of July, it's just, you know, almost unheard of.

And for have some of these key states to have figures like that, I just find to be, you know, astonishing. And it may not mean anything right now. I'm not trying to make an opening call off of that number or anything else. I just find it very interesting. Even in the, in the case of corn, you've got Illinois, they've got 95% of the state's corn crop has emerged, Indiana 93%, Michigan 95%, Ohio 92%, Wisconsin 94%. To have anything that's not emerged yet in corn is just, it's just hard to really picture.

Narrator: I said—

Chris: You're probably talking silage on those late planted things anyway though, right?

Duane: I suppose, I suppose you're correct on that, but it's still pretty significant. And, you know, that if that's the case, then that means we should be able to extrapolate some prevent plant figure out of there. But nobody's looking at those kinds of figures at with any confidence anymore. Um, the other thing I thought was interesting that out this afternoon is a National Weather Service 6 to 10 and 8 to 14 day maps. They show a lot of heat in the Midwest. That was similar to what was around this weekend. A lot of people didn't really believe the weekend forecast, but here we are with the Monday afternoon forecast showing the same heat consistent in both periods. Um, the precip is still showing, uh, on the above-normal side in the 8 to 14-day.

The 6 to 10 is a more, much drier outlook, and I would point out that there are people in Iowa and Illinois, probably even Indiana, some locations that are complaining about a lack of recent moisture. And I spent quite a bit of the day today scouting fields, and one thing that I noticed that it's not indicative of the entire field. I don't mean to imply that. We're actually in an area in North Iowa here where we're sitting pretty good in relationship to normal and definitely pretty good in relationship to a lot of troubles that other people have had to experience. But what is interesting is in the parts of the field that you knew were under stress before, they were either planted too wet, had soil compaction issues, excessive water, whatever the case may be,— some of those spots have kind of been covered up a little bit with the greening of the crop.

But in, in other areas, even today where it was probably, you know, 79 degrees at the time I was scouting these fields, you see corn leaves that are rolled up from lack of moisture. It's not a lack of moisture necessarily in the soil, but it's certainly lack of moisture of what's accessible and being able to be uptake by roots. And maybe to some extent it's a lack of availability of nutrients as well. But my point here is that over the next 2 weeks, if the current weather forecast verifies, and by that I mean that we have several days of pretty warm temperatures, well into the 90s, we have some warm nights.

And if we, uh, in fact go, you know, 7 to 10 days in locations without precip, I guarantee you the Twitter world is going to be, uh, abuzz with all kinds of pictures of crops that are showing stress because the soil conditions, the root conditions, just general crop conditions are such that these kind of things are going to manifest much quicker in a year like this than they would in a normal. So that's the, that's the other side of that coin of excessive moisture. And, uh, when you have that excessive moisture with The flip side of that coin oftentimes occurs later in the growing season when you end up having a warm and dry period, and, and the forecast looks like that's what we're going to have. And so I would imagine over the next several days, uh, we're going to see and hear a little bit more about those areas that are, that are going to experience some stress.

So that's going to be something interesting to watch. The most important thing we got on the fundamental horizon in terms of headline importance is the USDA's report on Thursday. And I'm not sure, I personally don't think it's the most important thing fundamentally out here. I think weather and crop conditions is most important. But in many people's eyes, that's going to be the headline fundamental news item for the week. If we have weather forecasts that appear somewhat concerning, that will be a trump card to the report. And no matter what USDA comes out with this report on Thursday, until we get a handle on prevent plant acreage and something more official, which won't be until August, people are going to have a very difficult time believing or trusting anything that they offer. Not that they, they question their legitimacy, but they know it's still a number that's very fluid.

It's still in the process of trying to be determined. So I don't think Thursday's reports are that important. I think weather is important. I think the stage of crop development and what you hear from crop scouts, I think that's important. And the weekly crop condition reports not showing the improvement that people expected. I think that shows, again, that's consistent with the last couple of weeks. And, and I think that paints a picture of that probably most people see as somewhat troubling.

Chris: Do you think the market's not going to think Thursday's reports are important, or what does it take to move something?

Duane: Well, they're always— always have respect for them, and most people will think they are important. I'm probably the odd man out there, but all I'm saying is once they come out, it's going to be very difficult for the market to gain a lot of downside traction off that report regardless of what it says if the weather forecast shows some semblance of concern. And I would consider today's forecast and what we had over the weekend is showing those signs of concern. We have some, you know, very warm temperatures, and they seem to stick around for a while in the forecast. And we have areas that are going to go without rain for what normally might not be a problem for the number of days they're not going to have rain. But in, in these areas that were excessively wet, and they have soil compaction and all these other issues we talked about, they need this continual flow of moisture.

And, and some of those are probably already complaining about the lack of the moisture. So I do think it's important. And I think that's more important than the report. You know, whatever USDA gives us on the report Thursday, people will still think there's still an adjustment coming in the acreage. And so we'll largely, you know, not have a lot of confidence in that report, at least that's how I see it.

Chris: Yeah, and I'd probably echo what you're saying. I'm seeing the same thing driving around today on the end rows, and you know, we're, we're 86, 87 degrees right now, and when you can see pineapple corn on the end rows, and, and we're in a good area supposedly, I guess, um, that tells you that, you know, and we also notice it more on the corn that is— you know, that was planted in June. The later planted stuff's definitely showing it, you know, but they probably were in the field under not as good of conditions as well, like you said, from a compaction standpoint.

Duane: You know, a lot of people went to the field out of necessity, not necessarily thought it was the best time to go, but they felt they had to go. And, you know, sometimes that's what they have to do, and they hope things work out. In some cases, that probably will work out okay. In other cases, it may be more of a challenge point. But from everybody said if you move the calendar clock back, you know, a couple of weeks when people were making these decisions, and they were getting their stuff planted, and, and they were seeing some of the later planted come up, you know, a lot of people made comments that, you know, it might look okay right now, but it's going to depend a lot on what happens from here forward. And I think the last thing people want to see is excessive heat and a period of too many days without moisture.

They're looking for— to walk a very narrow line between wanting enough heat to try to speed the process up as much as possible, but not so much heat that it creates stress. And the same in the moisture. We need enough to make sure we don't have stress. And the, the backdrop of the current situation that we're dealing with, it just leads to a case where many acres are going to experience and show stress much quicker than they would under similar type conditions without having the baggage of having the excessive moisture so much early in the season and the poor root growth and the soil compaction that went with it.

Chris: Yeah, and to echo off the last podcast we had, we were talking about, you know, how quick the market might be to respond to issues. We're still, what, a couple weeks away from tassel before, you know, before we're in pollination, in the heat of pollination. You know, obviously that's probably going to be a big deal too.

Duane: Yes, it's going to be important what kind of temperatures crops are going through and the pollination. That's another thing, the pollination windows kind of be kind of wide. You know, we're going to have some places starting, you know, pretty soon, but not very much. But 10 days from now, we'll probably have a chunk of it. And then We got another chunk that's probably, like you said, 2 to 3 weeks away from it. So we're going to be having different acres experience that at different times, which creates for a large window where the marketplace doesn't want to see a lot of stress. And it's— if we continue to have the forecast that we've had yesterday over the weekend and what we saw today from the National Weather Service, if that continues to develop and be the case, we could see market— markets respond a lot in the next, you know, 1 to 2 weeks of trading.

Another thing that people were focused on today weather-wise was an idea that there's going to be tropical moisture coming into the Midwest. And I don't have an opinion on that. All I know is I've seen different forecasters spin that differently. And I know personally, I've seen moisture from the, come into the Gulf of Mexico, Mexico, and you think you're going to get something in the Midwest and it falls far short of traveling north from what you expected. So I'm not trying to make any case because I, I don't have an intelligent opinion on it. I'm just reading what other people are saying about it. And I think there's a certain amount of uncertainty to how that will unfold, as is always the case with any time there's a tropical moisture system coming through the Gulf.

But I think the common reaction to weather in the trade today was to downplay heat and dryness that expressed itself in the weekend forecast and to give more weight to the idea that there was going to be tropical moisture coming in the Midwest. So if the forecast that we had over the weekend, and which I think was mirrored again this afternoon from the National Weather Service, If that continues to be the forecast over the next day or two, I think the marketplace is going to gain more traction on that. And we'll have to see how this tropical system plays into it. But I'm just confident that the marketplace is not going to gracefully handle a hot, dry forecast if that continues to be the theme that gains a little traction over the next few days. If— and, and I'm not saying it will, but I'm saying it certainly could.

Chris: From a technical perspective, what kind of range are you thinking if the market were to start to react to fundamental news or whatever? What, what kind of ranges do you think in both corn and soybeans kind of quickly here?

Duane: In my opinion, the technicals, if we start to move to the upside and people start looking for those areas, I think at minimum we're talking $4.80 on the front month. That in corn, that's basically 40 cents away. And I think that a case could be made for it to be in that $5 to $5.20 zone. At that, those kind of levels, I think the resistance becomes much more significant.

Chris: It's unlikely though, you'd get to that, that higher range you're just talking about though within a week, isn't it?

Duane: Well, it might be unlikely in a week, but I'm not sure it's unlikely in 2 or 2.5 weeks if we actually had a forecast that remained hot and dry. You know, there's a lot of ifs in that, but I'm just trying to find the areas in response to your question about technical, what are they? I think the first one's that $4.80 area in the spot month, that's $0.40 away. And after that, it becomes $5 to $5.20. In the case of beans, the first area that really stands out to me is like just under, under $10. So that's basically $1 away. And that sounds like a mouthful. But if the bean market trades some hot, dry weather, starts to build a little upside momentum, I don't think it would be difficult at all to put a dollar on beans in a short period of time.

Chris: Is there any technical downside risk on the other, on the other hand, if everything's perfect?

Duane: Well, there's always downside risk and there's always some technical numbers that people can generate no matter what. I would say that the technical conditions that we have right now, from a short-term perspective, do not seem very conducive to building downside momentum. And if you were to see weakness, I think it would be minimal based on technical opinions alone. In the case of corn, we should not go back and revisit or violate the lows that we made, you know, a week or so ago. We should not even get back close to going back to that point. If we do, I think it's a it's a warning shot of some kind. I don't know what it means, but it would definitely be a warning. In the case of beans, I think it's just like the last few days, you know, you've made a new low by, you know, a penny or two each of those days, but you're really gone nowhere.

And here we are, it takes one up day, and we're going to eclipse, you know, 4 or 5 days worth of settlements in the beans. And so I don't think the technical conditions open up much of a downside window in beans. And my definition of that would be I don't see 20 cents down in beans. But, you know, I guess you could always get a government report that could make that statement look foolish. But right now, I don't see that kind of weakness. And so I think the technical conditions are such that they will encourage buying and support to build under the market. I don't think they're set up to encourage a lot of precipitous weakness.

Chris: Any final comments before we sign off here going into the week, aside from the report that we've kind of talked about that we need to be looking for, watching for? Any final comments?

Duane: I guess I want to go back and revisit something I talked about on, on one of our last podcasts, maybe it was two of our last podcasts, last one for sure, and also something that I've been writing about in my written daily comments, and that's the intermarket spread relationships. And I guess what I want to say about that is while weather may affect both markets equally well, it is possible that the intermarket spread activity could cause people to be somewhat disappointed with how corn performs in relationship to maybe the news or the emotion that will be evolving, or maybe in terms of follow-through and sustainability potential once we get, get that type of reaction. And so what I'm describing is a situation that if we get a weather market to build some upside energy, and that's probably a big if, but still it's an if, and it's plausible given the current forecast.

If that happens, I think that producers need to be on the lookout that maybe corn either underperforms or it gets to levels, but then even though the weather may still be, be a headline, it may not be able to generate much follow-through and it may actually falter. So I think that's what I'd like to— and that has to do with what I see in the intermarket spreads. And the soybeans, on the other hand, might gain more traction than we think they should, and they might perform much better than maybe logic might suspect given the weather forecast. So I would just be on the lookout for these markets to trade somewhat independently, even though they might both be trading weather markets initially. Maybe they're both getting good energy out of it, but I'd be very suspicious that the corn market may lack the follow-through that we might think it should have.

Chris: And the main driver of that exactly is the trade.

Duane: I think it's, I think it's the intermarket spreads and where, where people are going to put their money. And I think that they might be focused on weather and they might get excited about that. They might want to be long something. But I think when they take a look at all the different factors that people like that look at, I think they're going to walk away and say they'd rather own beans than corn. They're going to say that beans have more upside potential as a general feeling. That's kind of how they like to think. They like to own beans more in a weather market. And they're going to look at corn and say, well, shoot, corn corn's already at $4.50 or $4.60, or wherever it happens to be at the time they start making those decisions. And they're going to look at, you know, a 2-to-1 ratio and say, wait a minute, why do I want to buy corn? Why don't I want to buy beans?

And that's just strictly a decision about where I think they're going to put their energy, money, and focus.

Chris: Yeah, and it just might be a little bit counterintuitive to how we think as producers that, you know, why wouldn't it be corn that leads the way that, but yeah, that makes a lot of sense.

Duane: And the other thing, even though I've been under the opinion that prevent plant acres are going to be large, and I'll define large as somewhere in that 8, 9, 10 million acres, you know, it is sobering to get that number from USDA on their acreage number at the end of June. I can't explain it, doesn't make any sense to me, but we still have to accept it that they put it out there. And if there's some storyline there that, that we have to be looking over our shoulder that says, oh my gosh, the corn acres aren't down quite as much as we feared. And, you know, that could be a part of it. I don't know, but I'm just throwing it out there that, you know, we have to respect what they gave us, even if we don't really agree with it.

Chris: A lot of volatility out there, which I guess on the good side of things, that does give us as producers some opportunities to do some things a couple months ago we never thought we'd have the opportunity for.

Duane: So that's right, there's opportunities, but opportunities that are not planned for or not planned on how you're going to handle them a lot of time can come and go. And all of a sudden they were, they were for naught. And that's, that's what the producer's job is right now is start mapping out different scenarios, different yield scenarios, different price scenarios, looking at profitability. And and trying to make sure that they're prepared to make a decision, be— with being prepared being defined as knowing their own numbers, you know. If they get a really good return based on their location, their yield prospects, and the price, you know, an opportunity is, is, uh, is created. And in order to get the opportunity, they have to do something to capitalize on it. And when we're talking about $4.80 futures or in corn, anything from there on up.

There's going to be opportunities for people to make money, even people that feel like they've got less crop potential than they'd like to have, there's still going to be opportunities. But if you don't have a plan mapping that out, and you're thinking about it now when the emotions are not high, by the time you get into real time and trying to make that decision, it's going to be a lot more difficult. So I would encourage people to sharpen their pencil and, and get some of the tools that you've got to offer and, and make sure everybody knows where they're at so that if that opportunity presents itself, they're able to, to react.

Chris: Yeah, and you did see that offline, you and I talked, you know, we do have a tool here now for scenario planning that we do have lined up. I'm not quite ready to launch it, but if anybody wants it, I, I would send it out. It's just not prettied up yet, but you know, where growers can run their baseline and then they can draw scenarios from that based on price and yield and, you know, any other income, MFP payment, and the crop insurance calculation that factors into that depending on yield and price that growers want to kind of analyze. And so we can lay out 100% of those, literally 100% of those scenarios, probably create information overload if we wanted to. But, you know, the main thing is, is to get, get some scenarios out there, like you said, Dwayne, and get thinking about this stuff and try to get some margin targets in place.

And I think we'll, we'll draw the line at that part of the conversation, but we'll definitely hook back up here and have a conversation on, on some strategies for, for structuring some margin targets in another podcast.

Duane: So, so that's about what I see. I think that the weekly crop condition reports, to the, to the part that they're relevant, because they didn't change much in relationship to what expected, people will be disappointed. And so they'll probably get a little supportive reaction. But I think the weather forecasts are going to be more important each and every day over the next 2 weeks. And right now that the trend in those forecasts are, in my opinion, are slanting towards, you know, warmer and some period of sustained heat, and in my opinion, some cases too dry for areas that need the frequent rainfall.

Chris: You bet. Well, hey, Duane, thanks a lot for the conversation. It was good, good talking to you, and we'll probably reconnect here midweek. I will be driving here starting Today, later on, we'll be hooking up with Alyssa and I and Shay will be driving across Iowa, Illinois, Indiana, and well into Ohio. So we'll be able to get some eyeballs out across some of the east area and give a little bit of report back when we talk to you next time too, Duane. So appreciate the conversation and we will be back with the everybody again here soon later in the week, and thanks for joining us on the Ag View Pitch, and we will catch you next time.