Post report winner: old crop

Jeremy

Doetch: All right, welcome everybody to Ag View Pitch. It's Jeremy Dutch hosting the Ag View Pitch this week for the week of January 13th. I'm lucky to have Jared Creed. Jared, how are you doing, buddy?

Jarod

Creed: Don't think I've ever been told that you're lucky to talk to somebody, so appreciate the optimism there.

Jeremy

Doetch: Oh heck, I'm the first. Well, I'm glad to be your first on on that side of things here. So we're lucky enough to be able to talk after this Friday's report that came out. So I guess maybe that's where we dive right into. What's your take on this report that just came out on Friday here?

Jarod

Creed: A lot of sticker shock, Dermy. Quite a few big unexpected changes, especially from the yield side. And that definitely drove the price action all day long. And, you know, March corn traded a tremendous amount of volume. Soybeans traded a tremendous amount of volume. And like I said, on the heels of some relatively hefty yield cuts, and, you know, there might be some folks out there that want to talk about, oh, well, the yield had to come down, the yield had to come down. There's nothing historical that suggested that we were going to see as aggressive of yield cuts as what we actually did experience. So just a very quick recap on that. Yield per acre on US corn dropped by 3.8 bushel an acre down to 179.3.

Something that is a little bit interesting on that front, I believe that is the— I want to say the 5th time in a row or 6th time in a row that we have actually came in below the USDA trendline yield. Maybe something to consider here for the future. On the soybean side, we cut production by a bushel an acre. And then obviously, after you start cutting production, you start thinking about some of your usage. What that resulted in was cutting US corn stocks by about 200 million bushels, albeit we cut the production by about 276 million bushels. Now, naturally, in an Economics 101 type of environment, more supply, more demand, lower supply, lower demand. However, trying to avoid wearing a little bit of a tinfoil hat approach here. USDA had to take some other considerations here.

And one of those happened to be cutting Chinese soybean— excuse me, Chinese corn imports by a pretty fair hefty clip. Less supply, less demand. Export sales reports leading up to this report had kind of dwindled from where we once were. Keep in mind this stocks report You know, stocks in a commercial hand, stocks in the farmers' hands was really not all that much different than year prior. Albeit you start thinking about a stocks-to-use ratio that is a little bit different with, give or take, a 200 million bushel spike in demand between ethanol and exports in Q1 of the USDA marketing year, which would be SEPAC-Nov. So what's my takeaway on the corn side? Globally, our world-ending stocks, I believe, dropped by a whopping, um, about 3 million tons. We dropped from 296 and change down to 293 and change. Uh, and at the same time, the drop in just the U.S.

was about 6 of that, so maybe even closer to 7. So that leaves a little bit more to be desired. Excuse me, uh, closer to, uh, ending stocks, uh, oh yeah, 6 or 7 regardless. That leaves a little bit more to be desired here for the future, um, that, you know, we've had some very exciting times on a spike up in demand after coming off of what seemed like years of the inability to gain that demand. And that's going to be the focus here moving forward. Now to flip that just a little bit more, you know, soybeans, don't get me wrong, it had a story. Yeah, we cut our ending stocks. We really didn't do anything on the export side, they left South America production unchanged. There's probably room to adjust soybean production in South America in due time. Leaving Brazil at 169 million tons is definitely I don't know, I shouldn't say definitely, probably a little absurd at this point in time.

They're gonna have to rip that bandaid off and raise it in due time. But the takeaway on the corn side, nothing's changed on the front that we have to continue to find new demand. And I look out at new crop corn, you close old crop corn up 15 cents. And for the majority of the day, new crop corn was only up a penny or two. Yeah, that's kind of like a deal. Like, okay, yeah, we got a little bit of a nearby issue.. But it's expected to be shorter lived. When I say shorter lived, obviously that's a 6 or 9 month type of a deal, maybe only 6 months until we start resupplying the global balance sheet on corn with the possibility of a safrinha crop following their bean crop here in a little bit. So definitely a little bit of rambling there. The only other piece I was flipping around in the last 30 minutes of the market looking at different basis levels, they're changed day on day.

Pretty big bloodbath in basis values in some certain places. In fact, there are some places that I have noticed the close corn up $0.15 and cash corn was unchanged on the day. Really, the farmers engage in a market that's part of that big, big volume. Probably lots of sale orders still above the market for the farmer to continue to engage, and rightfully so. Definitely should be. You're definitely talking about some of the highest cash values. The farmers had access to more or less for the last 12 months.

Jeremy

Doetch: I was gonna say probably for the last year, roughly. Yeah. Yeah. Well, it's pushed basis to get a little wider, or at least leave unchanged then, huh?

Jarod

Creed: Yeah. And, you know, the rhetoric has been for quite a while that we have plenty of corn acres coming our way. Maybe, just maybe here, if we don't see any changes in South America production, especially raising their production. Maybe we can soften that tone just a little bit. But we're a far cry from being able to do that yet. I mean, okay, we can get excited about beans trading between $10 and $10.25 for a long time. I still don't think that that competes with $4.40 to $4.50 corn. No. And so here we are, you know, what's on the horizon for the next 2 to 8 weeks? Obviously, in March, we got planting, prospective planting report, that'll be a big one. But we maybe set the tone leading up to that. Maybe now we need, just need to, if we can dodge some bullets from, you know, President Trump after his inauguration, application of any possible tariffs, things along those lines.

Maybe we've turned a corner, maybe. And that's a big, big, big maybe.

Jeremy

Doetch: Yeah. Well, you know, you brought it, I have it here on my notes, you know, just to to kind of go through this, you know, crop intentions. What do we, you know, what is, what does this really do? And obviously it's really, really early to start talking about, you know, early plant numbers and intentions. But, you know, you brought the point up is that you look at this, you know, March and May corn seems like a lot of the movement was there. The Dec '25, you know, didn't get a lot of movement. Figure a normal basis, along with the November beans, we're still, you know, I haven't seen a ton of cash flows coming through. But I know the ones that I have, we're still in a better position or less of a loss proposition by planting corn. And so does that continue to, you know, push the narrative of are we going to grow more and more corn?

And should, you know, should a guy be or girl be looking at throwing some beans, you know, if you're not shifting that way, just because we're going to oversupply the market with corn. What's your thoughts on that?

Jarod

Creed: Slippery slope, especially if we do what the financials tell us to do. You know, at risk of sounding like a broken record, what feels like going on for 3 or 4 months now thinking about what this production looks like for next year. Next year's corn just hasn't moved. It's been between the same $4.30 and $4.50 price range since basically 4th of July last year. And that's a little bit dangerous. It's a little bit dangerous that we watch that price for that long here. Just in the last week or two, we've started taking some pretty hefty, aggressive positions towards next year and using some of the tools that are in the marketplace to make sure that if the decision to sell is wrong, then we have an outlet to participate in a better price environment. But I think the, the, the main slippery slope here is making the decision to go after more corn and not doing something about it. Yeah.

And I don't blame anybody for going towards more corn. Because quite frankly, in our book, it's anywhere from $100 to $200 an acre advantage to corn. And in most cases, the worst case is a heck of a lot more manageable in corn than it is soybeans. And sometimes the worst case in corn is even better than the best case in beans, believe it or not. Yep. I'm a little gun-shy at the idea of somebody making moves to plant more beans to, you know, counter maybe what it seems like the masses is going to do. I don't really believe in that type of concept as of today. I would rather just take matters in my own hands. And like a broken record again, for it feels like the last 6-12 months, it's just finding a way to make sure that we continue to find a way to make money. And even with what the market has done, there's still a lot of people that are severely underwater.

And quite frankly, you know, maybe too late for some of who's had to turn stuff into cash leading up to this. And I get it, there's already going to be this, you know, possible conspiracy theory out there about the idea of, well, the government already forced the farmer to sell arguably 50 to 75 cents lower because the farmer needed cash. You know, stocks report is just that it's data as of December 1. And after accounting for all the demand, that basically leads us into understanding what the actual yield was. And that's not, it's not able to be tracked on September 1 before the combines rolled, that's tracked after the combines are done, and then it's surveyed. So it is a, that's maybe a little bit of an unfortunate circumstance for with what the market has done. But a lot of people are going to get gun-shy on opportunity cost.

That, that, you know, Jeremy, that just talking that out loud, that might become one of the bigger risks that folks are looking at, the relationship of old crop corn to new crop corn, says I'm not going to do anything about new crop corn because of the value of old crop suggesting that it needs to go higher. That's a, that's a dangerous proposition as well. So when it comes to these acres as well, I do think that the US farmer has a little bit of history of recency bias. You know, what I've actually just been able to sell out of my bin in the winter months impacts maybe those swing acres of what I'm actually going to go after that following spring. And we're definitely not talking about, you know, 180 million acre pie, we're really talking about that last 10 to 15 million acres that has the ability to move.

Probably Northern Plains, maybe in some places up and down the river in the Delta. And to a lesser extent, the far west, west Corn Belt. But collectively, they can move the needle enough. And I've yet to see a situation on any type of a cash flow in our book that suggests beans is, is the lottery ticket. And at the same time, that's cotton, that's, that's wheat, That's anything else that can possibly move the needle.

So, you know, my last comment on those acres is that thinking about a timeline here, today's market, today's data was actually a really, really big win for the US producer, that hopefully it provides a lifeline and lifeline sounds so dramatic, but a lifeline to keep corn at least at its current values, or maybe a little higher between now and, you know, middle of February, late February, well in advance of the planting intentions, giving everybody the ability to take a very serious risk assessment on what's the right insurance strategy, what's the right marketing strategy with my insurance, because at that point, I can allot I can be more certain about a direct, a direct path towards bringing those two together to make sure that corn does not hurt me a year from now. And I, it's, I'm gonna get flack for this.

I know that here in a couple of weeks when we're down in Florida gonna get flack for this. We're talking about this for one day's price action.

Jeremy

Doetch: Yeah, yeah.

Jarod

Creed: Let's see what the next week brings. Let's see if the Trump administration has any tricks up their sleeves. Let's see what South America weather does the next couple of weeks. It was actually a little funny that right after the report release is right about the time when updated weather models start to flow out. And lo and behold, the moisture forecast in Argentina is no longer an issue.

Jeremy

Doetch: Yeah.

Jarod

Creed: So yeah, what does that mean? Global production, you got all these things to balance. Just certainly no need to be getting bold up. This is still and have been for a long time. Leverage the tools you have access to. That's a broken record comment. Been saying that for months and months and months. Yep.

Jeremy

Doetch: I've heard it. I've heard you say it on all of the podcasts. Don't use the tools.

Jarod

Creed: So maybe there you go. There's a follow-up. If somebody have used those tools in the past several months, don't forget about them. Yeah, if you stepped into something to give yourself a minimum price and a seat at the table in a higher market, it's time to reassess. What's that strategy look like today? What's my next step? What do I need to do? Do I need to liquidate? Do I need to pocket the money? Do I need to adjust it? So on and so forth. Don't just forget about it. And I can't help but laugh, Jeremy. I just had a message come in from— I'll leave the location out, but Poet Corn Buyer says very trustworthy source here. He's been in the industry for plenty of time, says this is the most corn I have ever bought in a single day. Obviously, we're recording this on Friday afternoon.

Jeremy

Doetch: Yeah.

Jarod

Creed: So there you go. The farmer's an active seller and basis reflects it.

Jeremy

Doetch: Yeah. Well, you know, one of the things too is just as a follow-up and, you know, from a farmer's perspective, I know we've talked about this on the Ag View Pitch at times before, but this really is, if one of my takeaways and from this report and this price movement is if this, between this and some of the relief payment that's coming, if this gets you to close the books on '24 and start focusing on '25, maybe you should do it. 'Cause some, you get to a point sometimes too, you know, where you're, where '24 clouds your decisions on '25. And you know, I don't know if you feel the same way, but sometimes it's just nice to get rid of that crap. You, I don't know, maybe this is that time where you're able to do that and start focusing on '25.

Jarod

Creed: I'd agree with you there. Maybe to throw a little bit of perspective at this as well. I don't know if we've done enough for the average US producer to be willing to close the book. Correct. Basis values in October, November, much firmer than where we presently are. And there was a handful of opportunities to sell darn near $4.50 March corn in that timeframe in quarter 4. And so here we are now at $4.70. I don't know if the cash price payable today is really all that much better than where we actually were. And that's probably one of the more likely situations here. So is that a possible situation that we feel like we're You know, we're chasing our own tail. Okay, I'm waiting for this higher cash price. Boom, the board brings it in and cash takes it away. Yeah. And that's, you know, again, Economics 101.

If we're going to, if we're going to unload a billion bushels of corn from the farmer in a couple days timeframe onto the open market, naturally cash is going to back off because we can't handle it that fast.

Jeremy

Doetch: Yep.

Jarod

Creed: Yep. So I hope that that's the case to what you're bringing up, the government money coming in. The rally that we've had, maybe it puts— I would like to think that the Ag View listeners that, yep, it's putting us in a position to, you know, to close the books. And, you know, for a lot of folks, especially if they went into harvest with a solid marketing plan in the first place, this probably is enough. Yep. And a lot of solid marketing plans, there's always buyers and sellers remorse out there in the marketplace. There's probably some folks who had a really, really good marketing plan going into harvest and then liquidated the balance of the crop in the last $0.20, $0.30. And now all of a sudden sitting there saying, oh, did I do it all too soon?

Jeremy

Doetch: No. Yeah.

Jarod

Creed: Oh, I had a young, young kid in the office here this morning that was talking about seed corn that he had sold and showed him what the market was even before the report. And young kid is, is going to be exposed to a lot of things. You got exposed today probably to, you know, volatility and it was, you know, for a second it was emotionally like, oh my gosh, the market's $0.03 higher than where I sold the corn. Yeah, that, that's, that's probably for corn and beans. That might be what we're actually building to, a little bit of a psychological deal here of making sure that we're keeping the foot on the gas in an appropriate way.

Jeremy

Doetch: Yeah. Well, you know, and you bring up a good point, you know, buyer's remorse. But, you know, from the financial standpoint, you know, interest, if you're, you know, if you've got those dollars locked up on a line of credit or something, you know, let's say it takes you another 30 days to get that rally, you know, your interest cost on some of that could have been eaten in those, you know, that $0.03 that you've got buyer's remorse could be eaten in, you know, for the next 30 days it takes to get back to this price level. You know, we never know. But I mean, you got to look at all of that, not just what you could have lost out, but, you know, what is it? What's the opportunity cost to get liquidity back into your operation too?

Jarod

Creed: You know, and I think that just warrants that we ought to take a real look real quick at just cash to cash. I'm going to use like Cargill Blair processing, another place that just smacked their basis today. Cash corn is $4.56. We had the opportunity to sell $4.50 to $4.55 clear back in November. Yep. So if we just take into content— into consideration November, December. If I'm selling it now for January, I'm probably not getting my money until the beginning of February. Correct. Interest alone is probably at minimum 6 cents a bushel total, maybe a tad more depending on the operation. Sometimes storage isn't free.

Jeremy

Doetch: Yeah.

Jarod

Creed: You know, maybe you have other things going on, but I don't stop at just the interest that you might have spent, but the interest you could have possibly earned too. Depending on the operation, there's an opportunity on both sides there, let alone I need to go digging into some of this price later stuff that might be out there that basis goes backwards and paying the price later fee. Congratulations. You're at the same price that what it was when you dumped it off the combine.

Jeremy

Doetch: Yeah, yeah.

Jarod

Creed: But that's, that's not going to go away. And now we might even be when you start thinking about we've had this big rally, But Cargill Blair is no joke on size. I'm just going to use them as an example here. They're now showing a $0.15 carry from today until basically May, June, July. What does that mean? They don't need the corn in the front anymore.

Jeremy

Doetch: No, no, they don't.

Jarod

Creed: And that's been slowly deteriorating. We have an inverse on the board from market participants But we have a cash carry. They're saying that, Jeremy, I don't want your corn now. I want you to sell it to me in 5 months. I'm going to try to give you a carry there. And 15 cents, 6 months. It's a break-even proposition. It is from a logistic standpoint, it might be necessary for some. But the fact of the matter is, cash being in a carry like that is not necessarily the most attractive thing now either. And inverses are definitely made to die with what old crop and new crop have done. I mean, that's a— just again, looking at their bid sheet, they're 40-cent inverse from old to new now.

Jeremy

Doetch: Yeah.

Jarod

Creed: Yep. So that's all the more reason to make sure that this, this old crop gets a lot of close attention if it's still there.

Jeremy

Doetch: Yeah. Well, and I think too, and you know, I, and I'm sure the audience does, you know, I don't want to say I'm a recovering banker, but, you know, I've got certainly the banker mentality. As I've been on here before, and, you know, one of the other side notes to this is that I think that as you go into your renewal, it's a heck of a lot easier to say, hey, I got so I got everything sold, I have a known number. And here's my marketing plan for 2025, because everything, everything's been closed. And I understand that versus I'm still open. I'm still hoping there's carry. And I need more money for the '25 crop in rents that need to be made in the here in the next 60 days. So I think there's, there's some benefit to that on top of what you just outlined as well.

Jarod

Creed: Yep. And maybe the last piece just to compound on that, since you just brought up another idea, I'm sure over the coming weeks, there's going to be more expenses committed to for this next year. Yeah, I might be selling old crop corn to the elevator. But at the same time, I might be writing a check for— I don't know, name the product— NPK, seed, whatever it is. Every check I write, I am more or less buying back the corn I just sold. Yeah, I am buying the product that is going to get me long again. The crop that I'm going to grow. And there's never this situation that all of a sudden I'm out of corn. You know, you're never out of corn. Yep.

And presently today, absent of if you have prevent plant, if you get all your acres planted, which happens to 99.9% of farmers, they get their acres planted, you're already guaranteed bushels to the APH of the crop that you're planting on corn, soybeans, wheat, don't care, milo, you're guaranteed those bushels. And goes back to what I said before, knock on wood, we can keep these prices or a skotch higher into the month of February. And there's going to be some very attractive opportunities to marry up some marketing and insurance decisions. And all of a sudden, '25 might not look as bleak as maybe where we had the risk of it going prior to 11 AM Central Time on Friday the 10th before the report.

Jeremy

Doetch: Yeah, yep. Yep. No, I hear you. I know we've kind of, we've talked a lot of here on corn. I guess the last thing I want to just touch on is soybeans. I mean, you know, I'll give you an example. My father and I, maybe it's our risk tolerances, we have a little bit different thought on soybeans. You know, I feel like I'm to the point where I'm wanting to defend against any further losses. He's to the point, he's to the point where he's saying, I think time might be on our side. What, what ideas do you have for soybeans? What, or what's kicking around in your head about the soybean market? And the budgets you're seeing that shows the loss proposition? Are we, are we at a point where we need to be defending it? Or is there hope still out there?

Jarod

Creed: At the risk of individuals maybe not fully comprehending at times exactly what that, what that true conversation of expense on corn and soybeans, where that really comes from, why the margins are negative. It's very rarely is it just a variable expense. Yeah, it's all the other fixed expenses that are on the farm.

Jeremy

Doetch: Yep.

Jarod

Creed: And which crop gives us a better chance to cover the balance of those fixed expenses? I think the long-term risk in beans here is probably 2 or 3 different paths that we can go down. And as a key reminder, risk is both good and bad. So South America production is obviously going to be front and center for the next 30 to 45 days. Odds are high that it's going to be plentiful. How big? Anybody's guess. Can it take a step back? Sure. But it's still going to be enough. Yes. The thing that we track called G6, your 6 largest exporters of soybeans to China. Quarter 1 of the USDA marketing year, SEPAC, China soybean imports from those countries was 5 million tons less than last year, and below the 5-year average as well. It's 200 million bushels less beans than they bought. They haven't bought any US corn. Are they going to come to the market and buy any US corn or soybeans?

Maybe, but it doesn't really look probable. And that is a glaring sign for the world's largest user of soybeans, that their margins on crush and hogs and all this stuff is not great. Today. Their financial situation as a country is not great. They probably are not in a— keyword probably, it's hard to ever understand what's happening in China, but the odds are elevated that they're not in a mood to stockpile grains and oilseeds today. Because I think it was for the prices where we got to what we've seen. I think they would have tried to step in. But if they haven't, well, maybe that means that they're actually even more bearish long-term flat price, and it's going to take them a while to get in. Maybe their bid to buy all this stuff is much, much lower.

But now I take into consideration their demand, I take into consideration South America production, I take into consideration, you know, 81, 82, 83 million acres of US soybeans, the long-term highest probability is that the global production is going to exceed the global demand. Yeah, by give or take 500 million bushels or greater. I have a hard time thinking it's going to be anything less than that. That's going to take a Hail Mary last-second production issue in South America. And that's going to take a production issue in the US. Both has to happen, not just one. Yep. And so what does a guy do with that on soybeans? As, as much as it sounds like a get out of jail free card here, I legitimately think that maybe the best risk tool for soybeans is to load up on insurance to the gills. Yeah, don't have to worry about marketing the crop.

Presently, but make sure that an insurance product is full boat. I don't have a lot of risk should the market go lower, should my yield slide, giving me time, giving me the ability to look for a higher bean price. It's called spade to spade. Most guys need $2 to $3 rally in beans even to talk about a breakeven.

Jeremy

Doetch: Yeah, well, and that's— Jared, that's, that's my point, is that, you know, at what point do we start admitting that this is, this is loss protection at this point. We're trying to, we're trying to keep it from going any worse. And, you know, in your idea of the insurance, you know, whether you, you know, whether you sell it in cash or you've got it in the insurance product, you're trying to get time or at least getting a floor established, I think, at this point.

Jarod

Creed: Mm-hmm. Yeah. A floor is important. There's other ways of going about it.

Jeremy

Doetch: Yeah.

Jarod

Creed: Certainly an individual can go to a hedge account., you know, put options, minimum price type of stuff. But I think I'd presently would prefer to use the subsidized dollar of the government. Yep. On an insurance product until at least they get the crop planted. And then maybe take an assessment in that July-August timeframe. And historically, that should be our seasonal, our best seasonal opportunity. And the risk in all of that between now and then is a change in the administration to the biofuel policy and the possibility of tariffs. Yeah, so pick your poison.

But you probably need to do something of the nature of making sure that whatever that what-if is, doesn't all of a sudden turn into, you know, you have an ag listener that I was kind of dropped my jaw, Western Corn Belt producer that more or less laid out that his profit margin on soybeans is even tough to pencil in anything less than a $500 an acre loss. What do you do with that?

Jeremy

Doetch: I don't have an answer for that, Jared.

Jarod

Creed: What do we want to do? Let's put offers in to sell beans $8 a bushel higher. Yeah, that's real proactive on our part. I mean, it's, it's not a magic wand to wave to fix that issue on the bean side.

Jeremy

Doetch: Yep.

Jarod

Creed: Yep. But every case is probably different, Jeremy. I would say that in the environment that we're in right now, there's probably more of a one-size-fits-all approach. For corn production relative to good insurance policies. Everybody's in the same camp, we're gonna farm, margins are tight, inputs are sticky. I don't want to let it get worse. The strategy is probably very similar for corn farmers. On the soybean side, it might be, it's probably not just as black and white.

Jeremy

Doetch: Yeah, yeah. No, I think that's great commentary. I'll give you the last word here as we close out. Anything else you want to share?

Jarod

Creed: I think maybe it's just important to remember a timeline here is maybe we get a little excited about what the markets are doing. I'm personally worried about what are the first steps going to be after President Trump's inauguration. Nobody can act surprised. Nobody can act surprised. I don't want to hear any of these. Well, I didn't know he was going to place tariffs. I mean, this caught me by surprise, so on and so forth. We can't do that. Absolutely cannot do that. So make sure we have our ducks in a row for that possible risk that is looming, maybe as soon as 11 days out, given inauguration is 10 days out. It's been advertised over and over and over again. It's been discussed recently. I'm not going to be surprised if day 1, day 2 after inauguration, implementation of tariffs start right away. And that's where I think this Farm Act money is coming.

That's a tinfoil hat approach. The government didn't do anything to drive down prices in 2024 from trade policy. That $10 billion seems awfully convenient to throw in when you're trying to get a spending bill done, to not have to recreate the wheel in another 30 or 60 days. To put the producer in a position that, oh, we're implementing tariffs. Here's your money. Yeah.

Jeremy

Doetch: Yep. No, I agree. Well, it's been a great conversation. I appreciate it, Jared. Always love having you on the Ag View Pitch. And before we close out, I just wanted to let listeners know, if you guys have not reached out to us, it's renewal season. We've got a financing toolbox to help you get your house in order to have a better, more successful conversation at this year's renewal with your bank. If you're looking for that, email Chris, myself, Joe, Andy, or Shay and let us know that you're looking for those tools. We'll get them out to you. So thanks a lot, Jared. Appreciate everybody's time. Thank you.