Plant24 delays continue: weekly market outlook, May 20-24th

Chris: Welcome everybody to another episode of the Ag View Pitch. We're heading into another marketing week. We're getting into the latter part of May. A lot of planters trying to run, a lot of planters not able to, and going to be some replant and all kinds of fun stuff. Going on on the agronomy side. But for today, we're going to talk markets and the impact of some of the challenges with planting. We're lucky enough to have with us today Ryan Moe at StoneX. Ryan, how's it going?

Ryan

Moe: It's going pretty well here so far. So, uh, yeah, we'll, we'll see how the next 20-25 minutes goes. But, uh, yeah, going good so far.

Chris: Yeah, well, you had to, you know, in fairness to everybody here, you had to remind me that we needed to record. I was we had a planter— well, we were planting, but we actually planted a planter this morning. And so we had to unplant the planter and get that out of the mud holes. And so I think, you know, there's a lot of, a lot of people, I think, really struggling with planting, the delays that are real. You had mentioned, you know, we, we still show in northeast Iowa we're in a drought zone. We're in— we're flooded. We are not in a drought zone. I mean, there's areas where guys are going to be able to get planted. There's a lot of stuff going in in crappy conditions by virtue of necessity. And in some cases, I think— I guess my question for you, the first question is talk a little bit about what the market's thinking. Are they worried? Are they not worried?

Or is the rally we had last week the rally for the delayed planting? And we're hitting, hitting, you know, farmer sales and kind of capping things out. What's your thought on all that?

Ryan

Moe: The market's certainly concerned about the halt in the progress of some very, very key growing areas. Um, it's interesting to watch and talk to all of the people that we talk to around the Corn Belt, though, how localized that is. Um, you know, so the one thing that a lot of my clients always talk about is that last 5% of producers is always the hardest to get. I mean, it's the same thing with planting, it's the same thing with harvest. You know, it's that same group of that last 5% seems like it's harder to get them in and done than it is the first 60% of the crop. This planting season has been defined largely by an explosive start out of the gate. I mean, when you look at the progress that was made pre-April 25th, I was writing in all my comments about how just grossly underestimating— how grossly underestimated the USDA was on their planting progress.

I did a road trip to southwest Minnesota, and I saw almost every field planted and in great shape and in great conditions. Then we hit a 2.5-week stretch of rain where many producers did not turn a wheel. And that, that is more than just anxiety that builds during that point. I mean, that does start to put some real risks to the crop that's already in the ground and then the stuff that's still in the bag. Your podcast from last week, if people have not tuned in to listen to that one, is definitely something that must be listened to. And I think that goes for not just producers in the audience, but also the people that are in the trade in the audience, because there was some really good and insightful information. Lots of words that I cannot spell nor pronounce were used in that. So I'm assuming you guys are really, really sharp on that.

But there was a lot of really good insight and information that everybody from Chicago to Brazil to your backyard needs to be listening to. So the market is concerned. But the market's also not going to underestimate the tenacity of the US farmer. They find a way, they have the will, they find a way. Granted, we don't have the price incentive this year that we've had in the last couple of years to really, really ram this thing home. But it's still there. I mean, farmers are going to farm and they're going to do a good job at the end of the year. It's just we need, we need Mother Nature to really, really give us a hand here because she's really dealt us a poor hand so far in the last 2.5 weeks.

Chris: It seems like— and I'll echo what you said too about Troy Deitemeyer. He did a great job on that. So if you haven't listened to that, it's not me, it's Troy. He's— he is one sharp dude when it comes to agronomy and explaining things. I appreciate that, Ryan. But the question I have, so, you know, we did see a rally. The market is concerned, but it seems like there's like this wet blanket over the top end of what we can do or where we can go, because every farmer I talk to, every client that I work with has orders in. I mean, they— there's offers all over the place at $5 Dec '24, all over the place. And then also all the old crop that's out there. People have their, their targets in about where we got to, you know, on the cash stuff. And we're also seeing basis levels in a lot of areas not be so good.

When it starts raining, guys get out of the planter, get in the truck, and all of a sudden there's these lines. The, the processors are getting enough bought that they're comfortable, so they're starting to hammer on basis. Talk a little bit about that impact, and, and does that wet blanket just continue there? Do we have that much stuff out here yet that You know, what's your perspective on that?

Ryan

Moe: Yeah, there's still a lot of corn to move off farm, you know, and then there's still a lot of corn to market for new crop. I mean, we talked to people not just in the US but all around the world that are, what, 10% sold on new crop. Dec corn got within sniffing distance of $5 here earlier this week, and then turned around and ran like a scared dog. Not a great look for Dec corn, but I think that just goes to show you the amount of selling interest that is out there for that. I mean, in those areas that did have, you know, slightly positive new crop basis, those orders probably are what turned this puppy around. So there is definitely some pent-up sales in and around that $5 mark that can't be ignored because there's still a lot of crop to be sold. To be sold. As far as the old crop is concerned, this has been something that we've been talking about for a long time.

We talked about it down in Arizona here earlier this winter about the size of the farmer long versus the fund short. The fund short was talked about at length about being— they've never been this short in this time of year. And it's, you know, historical, historical. But that farmer long had also never been that long. I've got a picture that I used that I've been using in my presentations all winter that our friend Scott showed us how to— showed me how to make it using AI. Maybe you can use that for the, for the picture here. And it's this giant farmer, you know, standing next to this little tiny guy in a suit. And that's the funds, right? You know, just to kind of echo the size of their positions. Now they are taking— they are taking some swings. At that short position, that's for sure.

We got the CFTC report out here just a few minutes ago, and it's showing that the funds actually continue to sell some corn. Beans, they're just very narrowly winding that up. But, you know, there is, there is a substantial amount of farmer long here. And what I'm telling my customers on the commercial side is I don't necessarily want to be the first one out of corn and beans, but I certainly don't want to be that last block of people that's out. Because it could potentially get very ugly. I'm very worried about the soybean processors calling up my commercial customers, you know, at the end of May, in the early parts of June saying, hey, we've got all of our needs booked through basically August. We don't need any more beans. And I want to make sure that we're positioned for that appropriately.

Chris: Do you think there's that many beans out there yet?

Ryan

Moe: Because I do.

Chris: My view is, and it's our clients, I guess, that I only get the view of. So what's your perspective? I mean, there's a lot of beans out there.

Ryan

Moe: There's enough to get it. There's more than enough to get us a new crop. Right. They're not. Yeah, there's more than enough to get us to new crop. And it's something that's been sold pretty hard. When you're talking about the lines at the processors, I mean, that it goes for the soybean plants. I mean, those lines were real long while people were waiting to get into the field. And so I don't know if this is going to be— I don't know when the next push is going to come, if they need beans. But if that's going to be— if we do get another push, I'm willing to bet that's going to be our last push for the year. That's on beans. Corn, The farmer has proven to be far more resilient than any of the experts have thought they were. They have a very strong ability to hold corn off the market as long as they want.

And a lot of really long-in-the-tooth professional cash grain merchandisers are really tired of trying to outguess them. So I don't know if they're gonna, you know, how long or how much they're gonna hold in a new crop. They're gonna have to hold some because when you're staring at a— let me look at my carryout. Yeah, from earlier this week, you know, the carryout still sitting there at 2.1 billion bushels. It's a lot of corn. And it's a really crappy export environment to take us out of that.

Chris: Mm-hmm. What about, what about the demand picture? I mean, obviously we're sitting on so much. Is there anything out there that's going to give credence to anything on any of the, you know, wheat, soybeans, corn, anything? Is there, you know, just, or is it just still a big nothing?

Ryan

Moe: Yeah. From a wheat perspective, most people listening to this podcast have forgotten more about wheat than I'll ever know. Um, Mike O'Day, who's kind of our chief wheat guru, always, you know, says, ladies and gentlemen, trade wheat, the rest of you guys just trade pig feed. Um, I'm, I'm one of the pig feed traders, but the, the scars that so many people in the trade have from chasing wheat rallies higher and then failing, they're very real. And a lot of, a lot of your bigger city traders are going to just avoid that. I know there's some issues taking place over, you know, both geopolitically and production-wise in the Black Sea, but I am very cautious to try to chase wheat higher as a corn and soybean trader. Export side of things, it would really help if we could go ahead and have those tariffs put on YUKO.

That's something that was a big miss earlier this week for the soy industry, and Truthfully, you know, when you talk to folks like Joe and you talk to folks like Pete, they're right. Our government needs to get their rear in gear on all these biofuels. That's, that's a major green shoot. That's something that we in ag really need. And then when the trade war, which feels like it's inevitably going to happen with China, regardless of who wins the next presidency, We just need to go ahead and keep ag out of it. We should have been out of it in the first place, uh, here a few years ago, because there's nothing wrong with our ag deals that we have with China. Um, if you're gonna go fight that trade war, go fight it with Facebook, Google, and Netflix money. They got way more money than we do in ag. So have a trade war on the technology side, and then let's get TikTok out of here.

So Yeah, let, let, leave us alone on ag because they need what we have and we want to produce it.

Chris: So with that said, you know, there's a lot of things that are out of our control, unfortunately, from the producer's perspective. So the, the question I want to ask you as we get closer to wrapping up here, and we'll keep this one a little shorter, but I want to ask you, in the next, you know, 2, 3 weeks as we get into that first part of June, hopefully wrap up planting. What should producers be watching real close, assuming that, you know, and I'm making a broad assumption here, they've got a little bit of '23 to clean up yet, they've maybe are not sold to the level they need to be potentially on, on the '24 corn and soybeans for that matter. What things do they need to be watching? Are there any parameters or anything that are kind of key things that guys need to to really watch on at the farm gate?

Ryan

Moe: They need to adhere to their orders. They need to adhere to their good—

Chris: need to have them in first, right?

Ryan

Moe: Need to have them in and they need to stick to them. I sent out a tweet through our Midday Thoughts tweet here the other day. I said, I'm pretty sure we could go ahead and put an end to this cancel-if-close culture if we charge just $1 not a dollar a bushel, not a dollar a ton, not a dollar of anything, just $1. If we, if you put an open order in and cancel it when it gets close, you have to show up at that office and give that person that you just canceled that order with a dollar. I bet we would save, we'd save millions of dollars for the producer here in rural America. So adhere to your stops, adhere to the orders that you've got in. If it's a good idea today, it's going to be a good idea if the market rallies up to it. Because We're sick and tired of missing these opportunities. So that's what I would say. The one thing to watch for is have your targets in and stick with them.

We are likely going to have another weather scare between now and the 4th of July. It's just kind of how things work. But don't look that gift horse in the mouth again, right? Because that's been one thing that if you— if we could look back at the last couple of years, You know, if people are like, they would really eliminate the woulda, shoulda, coulda. And that's what I have right back here is the South Park character from an episode several years ago. It's Captain Hindsight, and he's got his trusty sidekicks, Woulda, Shoulda, and Coulda. If we were to have, you know, perfect hindsight vision, we would look at, boy, the missed opportunities we had when we didn't adhere to those stops or we didn't adhere to those orders. Yeah, that's what That's what the portfolio managers do. That's how, you know, the best of the best of Wall Street behaves.

They put a trade in, and when they put the trade in, they also execute their exit plan, right? That's how they do it.

Chris: Right. And I've seen it, and I know you— it's kind of what you're saying here. A lot of times people will be waiting for that other 2 cents, and it ends up costing them 30 cents. Because they wanted that other 2 cents, you know, or whatever. It's— it don't have a number, have a margin target has always been our philosophy. The other thing too is, and we've— we did this on our 19 Minutes episode, but we've got a 3% better tool that, that for our 19 Minutes listeners. And on that 3% tool, it's interesting on corn, 3% better on, I think it was, we were using 4 $4.54 for a price, 3% better was another 13 cents a bushel. So, you know, in 3% on the bottom line between marketing, between your yield, and between your cost of production made an 800% difference on the bottom line managing those 3 components.

And so it's one of those things that I think a lot of times we reach for the sky and maybe we should be reaching for the next rung on the ladder to to try to get to where we want to go.

Ryan

Moe: Yeah, I think your best, your best traders, they don't, they don't hit home runs. They collect a large series of base hits over the course of a long period of time and look at the average, right? That's, that's, that's, that's, that's how they look at it. And that's the, the best merchandisers that are out there. They, they very rarely go and try to swing for the fences. They just are really good at collecting a lot of base hits.

Chris: Yeah. Last, last question. You mentioned July 4th. Hit on seasonals for a second because I'm thinking the same thing. I mean, I've got targets in— just in full disclosure, I mean, I could be wrong, but I've got targets in on corn and soybeans to get to 50% sold by the time our, our crop's in. Hopefully, if we do get some strength here, I've got the orders in good till July 1st, they don't hit, I'm going to ratchet them the other way and go ahead and sell to get to that, that level. Give me your two cents on, on seasonals. What, what do you think?

Ryan

Moe: I'm looking at the seasonal charts right now, and sadly, when you look at them, we had counter-seasonal moves in both corn and soybeans this year. What is going to be the catalyst to change that? You know, that's going to have to be a big demand story. I mean, the supply situation around the world is so darn well known. And, you know, something we can go ahead and cover on a different day is the spread between CONAB and the US on, on their soybean estimates is the equivalent of the care of what the carryout was here just 2 years ago. I mean, so like, we can go ahead and talk at length about those kinds of things. But it's Either way, the supply side with what the South Americans are able to do, we're not going to get a supply surprise out of this. It's going to have to come as a demand surprise in order to really blow those funds out.

And unfortunately, I don't really see that surprise coming between now and July 4th. But if we do happen to get a weather rally in there somehow, some way, um, yeah, the seasonals are essentially working against us and the funds know that. You know, the big money in the trade, they do know that. They know that, that they know that that seasonal trend is out there. And they also know that there's quite a bit of corn still left to move in the country. And so they're out there betting against that. They're betting on that from the bear side. But yeah, the seasonals unfortunately are not your friend. Much longer. So if we get a weather scare, that's going to be a great opportunity to really go ahead and make some sales.

Chris: And we kind of already got it. Hopefully we get a little bit more of it.

Ryan

Moe: Yeah. Yeah. I mean, I'm hopeful too, because we got a little bit of a— we got a little bit of a push and we were busy. I mean, on the hedge desks, we were really busy for a few days there. There's still more to move. But I also don't— I also don't know if I see us like crashing this thing through the floor either. The, the theme for my Winter Outlook presentation series, it was based off the Pink Floyd song Comfortably Numb. I just think we're, I think we're set up here to have a very long, dull, boring stretch here of, of grain markets because of the amount of supply. And then the potential demand that we've got coming our way, we just, we just don't know yet.

But like, right now, We just got to chew through a lot of supply, but I think we're just going to stay pretty darn boring in the board and the cash markets because every time the board rallies, we see a bunch of cash corn come in from the farmer. But then every time we try to see the funds break the market, the funds just shut it off. Or excuse me, every time we see the funds try to break the market, the farmer shuts off sales. And so then the cash market gets starved, right? So I think we're just going to stay in this ebb and flow and it's— yeah, and it's just— and just lower your expectations on volatility, you know, called recalibrate, recalibrate. Right. They're just going to— yeah, because I mean, the farmers have proven they'll shut this thing off big time.

And then, then all your cash grain merchandisers like, oh, I just thought— I thought, I thought it was about ready to break loose. I thought it was about ready. And it just never— it just doesn't seem to get done.

Chris: Yeah, well, at some point you got to get the bins empty for the next crop.

Ryan

Moe: So do you though?

Chris: Yeah.

Ryan

Moe: I mean, I mean, who's going to carry it all? I mean, somebody's going to carry it all.

Chris: Yeah, it's got to go somewhere.

Ryan

Moe: But, right. I mean, so that, but that's the thing is like, man, it just, it just does not seem to show up. So, yeah.

Chris: Well, hey, I think this has been a good conversation. I'm not sure we have all the answers. I think we got a lot of questions though.

Ryan

Moe: So yeah, we got a lot of questions and then just, but let's not look a gift horse in the mouth. Yeah, if that's a, if that's a trading recommendation, I, I don't think that really counts as one. But, uh, yeah, adhere to your, adhere to your targets.

Chris: One, one good perspective from what, what you said though is get, get some targets in and then stick them there, figure out what your margin opportunity is and, and, um, take advantage of it. Because if you do look at the, the seasonals, like you said, there's a lot of things that are indicating we probably got a gift here a week or two ago, and hopefully we get one more shot at it. And who knows, we'll find out.

Ryan

Moe: I don't know how many more shots we're gonna get.

Chris: Yeah, exactly. Thanks a lot, Ryan. Really appreciate it.

Ryan

Moe: Appreciate it, Chris. Thank you.

Chris: Yep, Ryan Moe at Stone X. And thanks everybody for listening, and, uh, hopefully you guys are staying safe out there and getting, getting the planters going where you can. And, uh, remember just to be safe. That's really the key thing. Sometimes we get in a hurry when There's rain coming and, and take care of the important stuff, which is yourself. With that said, guys, take care and we'll catch you next time on the Ag View Pitch.