About This Episode
Two thirds through October and the entire country was harvesting at once. Creed had not seen it before and neither had people who had been in the business for decades: 100 to 120 million acres of corn and beans coming off with no breaks, everything north of I-70 starting the same week. The infrastructure was never built to take that volume all at once, which is why basis went so wide across most of the Corn Belt. He expected a snap back once harvest cleared 80 to 85 percent.
Flat price had no story to trade. The WASDE and quarterly stocks were behind them, corn was moving in a 15 to 30 cent range, beans in a 60 to 75 cent range, and USDA had nothing that mattered until January. What was cheap was option volatility. Creed calls options price insurance and contrasted them with property insurance, which is expensive right now because rebuild costs and weather losses are high. In grain, the opposite is true and nobody is paying up for protection.
That made the move simple. Sell the bushels that have to go, buy calls out to March, May or July, take the cash and ship it. March corn back above $4.50 is where he wanted producers letting go, though the range could run from under $4 up to $4.50. January beans near $11, with buying likely above $10.50. For 2025 he was defensive, since costs are not falling, and he defined a successful year as breaking even while retaining working capital and building equity.
“Option volatility is so darn cheap across all these markets that it's basically screaming to the farmer, sell your grain, buy some calls, turn it into cash, get it shipped, and move on.”
— Jarod Creed
Key Takeaways
When option volatility is this cheap, sell the cash grain and buy the call. You get the money and keep the upside for the price of insurance.
March corn above $4.50 is a place to let bushels go. The range may run from under $4 up to $4.50.
January beans near $11 is the target, and buying interest shows up above $10.50.
Wide basis during a harvest with no rain days is a false signal. Expect the snap back after 80 to 85 percent is out of the field.
Turning grain into cash beats paying interest to store it, especially with 2025 prepays and input shopping ahead.
Define a break even 2025 as retaining working capital, building equity and paying yourself. That is a real target, not a consolation.
Full Transcript
Chris: Welcome everybody to another episode of the Ag View Pitch heading into a new marketing week, October 21st through the 25th. Amazingly, we are already two-thirds of the way through October, and today we have with us Jared Creed. Jared, how's it going?
Jarod
Creed: It's going really well, Chris, and maybe I need to to give you the reminder for a list today. Are you supposed to put a little plug in there for some conference coming up?
Chris: Oh yeah, I probably should. Thank you for reminding me of that. Yeah, our Ag View Executive Business Conference, January 22nd through the 25th. I've said this enough, I guess, on the last few that I can actually remember the dates now in January. Guaranteed better weather in Florida than any place else in the US probably at that time. We have great educators. Jared, you're one of them that's going to be there. We're going to have a arm wrestling match with you and Pete Meyer and, and Joe Vaklovic, and, and that'll be interesting. We got a lot of really good educational opportunities there, so if you're not signed up yet, please go to the Ag View Solutions website and get signed up because, uh, their spaces are becoming more and more limited. We still do have some slots open though, so if you're planning on going, please get signed up.
With that said, Jared, What are you hearing for harvest so far as we're two-thirds of the way through October now?
Jarod
Creed: Well, the constant theme, it really doesn't matter where you're at. First-time experience for me and first-time experience for individuals who have been in the ag industry for decades. It certainly feels like we're going to try to harvest, you know, 100, 120 million acres of corn and soybeans combined, nonstop from start to finish. Without any type of breaks. That's probably been the biggest storyline here in the last couple of weeks. You know, the US infrastructure is not designed, not built to handle so much volume come at it all at once without ever having any breaks. And quite honestly, starting everywhere pretty much at the same time. Once you pretty much get north of I-70, that's been the resounding theme. Obviously, lots of dry corn, lots of dry beans, a lot of debating around if that's going to really have an impact on national yield.
Oh yeah, maybe I'll give you a little bit that it could impact it somewhat. But when we actually figure that out, it's probably a good year away from now and it really does not matter with a very, very fast harvest. You know, it's making it maybe a— it's just, it's making this basis situation probably throw some false signals. To a lot of producers across the US that you have very, very wide basis levels in pretty much, I would say, the majority of the US Corn Belt at the moment. I get it. There's places that are not in that camp, but in the next couple of weeks, we should have like a rubber band reaction. We should see basis values see a pretty stern pop higher once we kind of get past that, call it 80-85% harvest mark. Once it becomes a little bit easier for the crop that's coming out of the field to be put away and just give the system a break for a second.
And at this point, still, the, the grain market as a whole doesn't really have the ownership from the farmer that they'd probably like to have. And that's going to have to change through the balance of the year. I think we're already seeing a few signals like that in a few places where basis has started to move. But I think that's been a story, Chris. Yields are kind of as advertised. Pretty good beans, pretty good corn. We don't have a lot of people necessarily knocking off records, but it's a far cry from any type of a story that it's not very good. Basis values low and everybody just focused on trying to put this thing away as it seems like, you know, moisture this crop is just dropping on a daily.
Chris: Yeah, it's It's a quick, like you said, you know, to put it very simply, it's a really fast harvest. And I think, you know, the last week or so, you know, I mean, I still, I would still say we're maybe 5, 10 days away yet from really having some issues in some areas where, you know, people start looking at each other and like, okay, what do we do with this now? Where do we go with this last 300 acres or whatever, you know? Um, it just seems to me like basis still could get even a little worse. What's your thought on that?
Jarod
Creed: You know, there's going to be areas that that's going to happen, but I think there's probably areas that they're still weak on basis values, but they've already recovered off the lows, right?
Chris: Yep. Um, you know, we'll keep this one short and sweet because I know guys are busy, and, and, but, but I want to ask you, you know, what's your thoughts, you know, for those bushels that are are still, you know, yet unpriced and maybe those, those last few or, you know, people are going to need cash flow towards the end of the year and stuff. Do we, do we hold on a little bit here yet? Let basis improve like you said. And, you know, any hope on the, on the flat price type side of things or anything that you're looking at there that might create some—
Jarod
Creed: I think there's kind of like 3 answers there. Let's start with the flat price. You know, the market just really doesn't have a story right now. Once we got past last month's WASDE and especially the quarterly stocks report prior to that, it pretty much was a view of the future that it's going to get pretty quiet here. Now, you can make the argument that, yeah, you've got corn trading in a 15-30 cent range, you got beans trading in a, you know, 60-75 cent range, the beans being a little bit more violent than anything else. But we actually finally put some moisture in South America. But outside of that, there's just really not a lot of news. And I don't think that there's going to be any type of fundamental changes that we need to be thinking about on the radar anytime soon from the USDA. That's really not going to be any changes until January that are going to matter.
We got the election looming. That can definitely spur some excitement across multiple different commodity classes and markets. Maybe that can be a little bit of a, you know, a lightning rod to the grain market. But I don't mean just higher. I mean, that can be both higher or lower. You know, not going down this political path here, but the— in my personal opinion, one man's opinion here, so nobody get their feathers fluffed here—
Chris: that— send your hate mail.
Jarod
Creed: If you're voting for your wallet versus the possibility of what you think is voting for what you think is right, there's a possibility that the US farmer is plant— is planting, excuse me, is voting in two different ways. Is right versus voting for your wallet. And that's how I would kind of sum up US agriculture at this point, from a political perspective. It's not all blue, it's not all red, there is still, and there's going to be folks who are going to lean one way, for multiple reasons, there's going to be folks who are leaning the other way for various reasons. At the end of the day, my point being, is that we still have to be mindful of a return to office by President Trump, the possibilities, negative ramifications that they could still have on the ag sector.
So that's maybe something that scares me a little bit for the decisions that people need to make here in the near coming weeks. Yes, basis still should continue to get a little bit better. But here's the probably the most important thing here. You know, this is where you got to say, oh, it's not advice, it's an idea. Option volatility is so darn cheap across all these markets that it's basically screaming to the farmer, sell your grain, buy some calls, turn it into cash, get it shipped, and move on. That basis could still get a little bit better, but option volatility, I just like to explain it to folks, price insurance. That's what options are, price insurance. Think about price insurance on your, on your property insurance today, Chris. It's so high, right? Input costs to rebuild structures are high. Mother Nature volatility is high.
Well, the exact opposite is what's happening in the ag sector today. There is no volatility. So it's very, very cheap, for lack of better words. There are opportunities to go out to March, May, July in both corn and soybeans. And just own your upside potential if you so desire it on any bushels that you really do need to be selling right now, whether you don't have space for it or you need cash, what have you. I would almost err on the side that most sales, anything made here in a short while, probably really should consider some type of an option strategy out there into next summer.
Chris: Mm-hmm. Interesting. Yeah, I think I like the idea of turning the grain into cash too, just because, you know, you don't have to do a lot of algebra, but you know, when you look at interest rates, you look at, you know, prepayments and some of the things that, you know, that we're going to need to do for the '25 crop in terms of trying to minimize our expenses, you know, prepaying some things, doing some shopping, being disciplined on the cost of production side of things. I think there's some ways to navigate that, but it always helps to have cash on hand to do, to do that.
Jarod
Creed: So, yep, sure.
Chris: Any, um, anything— like I said, we want to keep this one kind of short, but is there anything that you're watching, um, in say the next couple of weeks that guys need to be paying attention to that we didn't mention? You know, we talked about obviously the election and, um, you know, and managing basis and paying attention to flat price and options are cheap. Anything else that you got?
Jarod
Creed: No, I think that basically covers it right there. I think there's just in this next 2 to 4 weeks stretch, there's going to be these little basis pops and guys are going to need to be cleaning up bushels and making some sales and stepping into some minimum price type of contracts via options. That you nailed it on the head, short and sweet. Really nothing to talk about.
Chris: Yeah.
Jarod
Creed: I mean, South America is starting to plant. Yeah. Yeah. You're still a little dry over in Ukraine. But what's new to report on the Israel and Iran front and Ukraine and Russia front? US production is going to be solid. You've got the traditional harvest pressure. There's just— it's kind of getting into the doldrums of the winter pretty quick here.
Chris: Yeah. One last question on the— on corn specifically, and you could answer this on beans, and I don't need an exact number, but if guys are putting targets out there for, you know, for like that December timeframe, you know, I mean, like in our area, it's like around Christmas, between Christmas and New Year's, usually is a really good basis because everybody wants to park their trucks. Is there like a flat price target you would be looking at? Range? You don't have to give me exact number, but like a range on, you know, on that March corn that makes you feel warm and fuzzy or not really? Or what's your thought there?
Jarod
Creed: Warm and fuzzy? Definitely anything back above $4.50 again. You know, we were just at, what, $4.52, $4.53. Here a couple of weeks ago. You get March corn back above $4.50. I think that is most definitely a place where producers probably need to be letting go of stuff. But I'll tell you right now that that range could easily be wider than $4 to $4.50 with maybe a little bit of a bias that that low end of the range is probably lower than $4 with that top end being closer to $4.50.
Chris: Okay, I lied.
Jarod
Creed: Don't— on the beans.
Chris: Yep, yep.
Jarod
Creed: Good. On the beans, it's probably somewhat similar to where we just were as well. And I would probably look at January futures, not necessarily March, but give or take that $11 area. It saw South American activity, it saw U.S. farmer activity a little bit firmer, a basis. I would say that a national cash average, $11 March, more probably buying beans greater than $10.50., with the possibility of 11. And, you know, we don't need to buy our crop all at one time. It's just going to be a matter of who's kind of, uh, first to get their fill, uh, before maybe some of that buying subsides again.
Chris: Right. Awesome.
Jarod
Creed: Well, uh, one last question.
Chris: Yeah. Well, a last, last question. And I, and you can do this one quick. When those opportunities are there on the on the old crop now, the '24 crop, should we be pulling the trigger on a little bit of '25 crop? That's my last, last question. I promise.
Jarod
Creed: Yeah. I mean, it's still almost every decision that could have been made in the last 6 to 9 months on next year's stuff, 2025 production to this point has obviously turned out right. I mean, selling some $5 corn, selling some $4.75, selling $4.50 just recently. Yeah, all of that has kind of worked out. I'm just nervous that our costs are just not changing in the next year and still seeing some that costs are going to actually be a little bit up. So it just turns into that defensive mindset, turning this year into cash, not paying exuberant interest for no reason, try to stay fluid and all at the same time, just kind of how do you define success for next year? I'm willing to define success for next year of breaking even. And when I talk about breaking even, that means I'm retaining working capital and building some equity.
Chris: Yeah. And paying yourself.
Jarod
Creed: Correct.
Chris: Yep. Awesome. Hey, this has been a great conversation as usual. We get this harvest wrapped up here in the next couple of weeks, we'll get you back and we'll start figuring out what we need to be doing to wrap up '24 and get, get setting up for some success in '25 and And thanks for reminding me about the— reminding people on the Executive Business Conference in January. If people are not signed up, get signed up. It's going to be a great conference. Guarantee it'll be the best one you've ever been to. They get better every year. So thanks, Jared.
Jarod
Creed: Oh, thank you, Chris.
Chris: All right, everybody, please be safe out there. We haven't had any rain days, so take one, make one. We're going to make one on, on, on Sunday. And if you have to make one, just just, uh, take a day and park stuff if you have to. Uh, everybody get your rest, be safe, get things wrapped up, and we'll be in touch again. We'll catch you again next time on the Ag View Pitch.