About This Episode
What started as a microphone test became a short July 2019 market conversation between Chris Barron and Duane Lowry. Lowry's focus is stabilization in corn after a surprising USDA report. The market traded more than 10 cents lower on the week at one point and still finished the week in positive territory, which he reads as the trade refusing to run with the bearish number. Stabilization, he says, is not a five-minute or single-day event; it takes a course of a few days.
Soybeans went the other way, taking liquidation pressure all week despite an initially positive reaction to the report. Lowry cannot offer a fundamental explanation. Too many acres planted too late, possibly fewer acres than assumed, recent Chinese purchases, and renewed US-China discussion all argue the other direction. He calls the break technical and chart-driven and expects beans to find the same footing corn just did, meaning the worst prices may already be behind both markets.
The frustration Chris raises is that the trade does not seem to see what growers see in the field. Lowry agrees and does not expect traders to come around on their own. They look at a forecast of rain every few days and read it as bearish without weighting delayed maturity. Changing that takes a new storyline: a hot, dry forecast, a friendlier acreage number in August, or USDA cutting yield again in the July 11 report the way it cut corn 10 bushels in June.
“It's like the pendulum on a grandfather clock, you know, it spends the least amount of time in perfect balance, but yet it keeps perfect time.”
— Duane Lowry
Key Takeaways
Corn was down more than 10 cents on the week at one point and still closed the week higher, which Lowry reads as real stabilization after a bearish USDA report.
Stabilization takes several days to confirm, not one session; his image is a grandfather clock pendulum that keeps perfect time while rarely sitting in balance.
The soybean break looked technical rather than fundamental, and he expected beans to stabilize the following week.
Traders will not price in late planting and delayed maturity on their own; it takes a hot, dry forecast or another USDA yield cut like June's 10 bushel corn reduction.
The producer's job now is farm by farm: expected yield, expected revenue, then a re-established margin target, with the plan prepared even if it is not executed yet.
Growers at both ends of the crop-condition spectrum are re-running the math, some adding foliar treatments and nitrogen, others deciding whether to skip fungicide.
Full Transcript
Narrator: Hey podcast, listen in as Chris and Duane have an impromptu mic test Churn Podcast today about where the market is now and where it's going in the next 10 days or so.
Duane
Lowry: Enjoy.
Chris
Barron: Welcome to the Ag View Pitch. Today you got Chris Barron and Duane Lowry here, and we're really going unpracticed here because I wanted to have a conversation with you, testing a little new technology as well. But, um, so, you know, you haven't had time, you've already put your stuff away. We just got done with the meeting. With some clients, and I think the markets closed here today, and so we'll have a further, more in-depth conversation tomorrow on the markets. But basically, the way they closed, what do you think's going on as we go into Monday?
Duane
Lowry: I don't know exactly how they closed, but I think corn finished up a penny or two, and I think beans were down, you know, 10, 14, something in that range. And I felt a week ago when we did a podcast that it was important for the corn market to show stabilization. And stabilization isn't something that happens on a certain 5-minute segment or a certain 3-hour segment or even a certain day. It's something that happens over a course of a few days. It's like the pendulum on a grandfather clock, you know, it spends the least amount of time in perfect balance, but yet it keeps perfect time. So the to get stabilization, we need a little bit bigger view of time.
So here we've had a week go by and we managed to trade lower on the week from last Friday, probably double digits, 10 cents or more at one point in time for the week in negative territory, and we finished the week in positive territory. So I, I'm very pleased with the corn price action this week. I think we did get stabilization, and I think along with stabilization, that causes different sectors of the trade to feel good about it and want to buy it on weakness. That provides support. It provides the technical community a reason to re-enter the market after seeing a sell-off. It provides the fundamental community with some semblance that, okay, the report that we got from USDA, as hard as it is to believe, at least the market didn't just fall out of bed and run with that completely. We stabilized. So I'm very encouraged by that.
The bean market, on the other hand, which had a positive report— response after the report, managed to experience liquidation pressures this week. And to be honest with you, I find it very difficult to offer a fundamental explanation why. Most of the fundamental information that I see would produce a counter reaction. It would produce an idea that too many acres planted too late. Maybe less acres than what we thought we had, even looking at prevent plant. And we had China get— purchase some beans recently, and we had some developments, at least in the discussion picking up again between China and the U.S. And so that was certainly stabilizing on the trade front. And so I think that the weakness we've had in beans this week was more tech-related and chart meltdown after weakness that was started on Monday.
But I think that'll be over very quickly, just like the corn break was over very quickly, and I think we'll see stabilization in beans. And so I'm quite optimistic that we're in the process of having seen the worst price reaction to the report from USDA on corn, and I think it's very possible we're looking at the worst prices we're going to see in beans for a while too, and we've experienced this correction and technical sell-off. So I'm kind of pleasantly optimistic about prices from here.
Chris
Barron: So do you think the trade has continued ideas on really what stuff looks like out there? Because, you know, we talked earlier in the week about how small the beans were. I talked to a grower today that, you know, sitting there with 4 inches of rain this week and are going backwards, and so, you know, both the corn and the soybeans, more so the corn, you know, do they have any kind of a perspective on what's really going on out in the field? I mean, and does that even enter into the equation at all at this point?
Duane
Lowry: Honestly, I wish I could say yes to that question, but I don't think I can. I think that a lot of people in the trade may have been concerned about the planning progress, may have been concerned about the planning date, but they were concerned about it for a moment in time, and then now that the crop's planted or that's in the past, they forget about it and it doesn't have a long-range thought process to them, doesn't affect their long-range process. Instead, when they look at weather, they don't look at weather from how does this impact the crop that's delayed in maturity and possibly a threat there. They just say, you know, are we getting some rain, and rain makes grain, and They don't care about what was already too wet.
Chris
Barron: What's it going to take?
Duane
Lowry: I mean, you know, right now, in order to get a bullish weather reaction from the people that you're talking about in the trade, we probably have to have a hot, dry forecast. We have to get a new storyline.
Chris
Barron: Well, the way the weather looks, it's going to be rain every 4 days or every 3 days or whatever with the heat and humidity and these systems going through. So we're going to probably have the rain.
Duane
Lowry: But right now, the trade will look at that forecast as you describe, and they'll say that's bearish. And they'll forget or not care about how late the development is. They'll just have a basic assumption that, well, from here forward the weather looks real good, so we'll be just fine.
Chris
Barron: Well, at what point does the maturity have anything to do with it? In their minds, do we gotta get to past pollination, or where do they even start factoring that into the equation? Because there's definitely some frustration out there with growers looking at some crappy conditions and saying, you know, does anybody have eyes here? You know, I mean, it's It's just, you know, I sense the frustration, I guess.
Duane
Lowry: The frustration is there, and I would love to be able to tell you that I think the traders will pick up on that and come around, but I don't see that happening. I don't think that will happen. Now, if you could fast forward and USDA gives us an update on acreage and all of a sudden that acreage report that we get in August looks more friendly and there's less acres than they implied before If you could fast forward to the next monthly S&D report we get here in July coming up, I think it's the 11th, and USDA happens to lower the yield again, which would be a reflection of planting date, all of a sudden that gives an opportunity for that narrative to come up for discussion again, but they're not going to come up on their own.
They're going to have to get price action that strengthens and then they look for an excuse as to why that strengthened and then that storyline, as you described, comes up again. And it— or it comes from USDA lowering yields again in the July report, just like they did in June when they lowered corn by 10 bushels an acre, and nobody saw that coming. And if they happen to lower another bushel, for instance, the only reason they would do that primarily would be due to the planting dates. And so if they do that, then that allows the opportunity for people to talk again about planting dates, maturity, and they start to embrace what USDA is talking about. But on their own, I don't see that happening.
Chris
Barron: Okay, well, that's, that's just the frustration that's out there among us as producers.
Duane
Lowry: So I understand.
Chris
Barron: Is there, you know, is there anything, um, you know, we kind of just struck up this conversation and I think we go with this as a podcast because it's a, it's just a true conversation here. But is there anything, you know, if we get together here on Sunday that we need to be thinking about between now and then, or, you know, we get together again here Sunday Anything you want to wrap up with on the marketing side of things to think about from perspective or not really?
Duane
Lowry: Well, just for the record, this did start out as a test of a microphone system.
Chris
Barron: I told you that the best podcasts I think are when we actually have a conversation. If it were just you and I having a conversation and me asking the question, that the growers that we work with are going to ask, you know.
Duane
Lowry: Based on that criteria alone, this must be a gem then. But in terms of final thoughts here, I'd like to say that the marketplace was dealt with a surprise from USDA. The marketplace reacted negatively. I'm talking about corn here. And now we found stabilization, and that means that the market didn't completely fall out of bed. And sometimes things that happen when markets turn south at the end of June or July, they just continue to fall. And I don't think that the price action we saw this week was indicative of that happening at all. And I think that for the producers that are frustrated that the trade maybe isn't buying into everything that they see with their own eyeballs, I think we can feel good that the trade at least is not responding in a full-fledged price liquidation. And we also have the cash basis story that still is strong. That provides a pretty solid backbone.
And now the market can benefit from the stabilization, hopefully get some recovery. So now we're— today we're the same place we were a week ago on corn. Next week it's going to be very important for the soybean market to find that stabilization. I think it will. I think we'll see the recovery. I think we'll perform just well, just fine. And the producer's role now is just, again, even though we're not at the price levels we were at 3 weeks ago, it is still the job of the producer to start laying out a plan about how many bushels am I going to grow on my farm. Forget about national average. How am I going to do on my farm? What prices do we think we have a chance at? Compare that to current prices. Compare it to what it was at the beginning of the season. And it's time to start formulating some plans. They may not be executed—
Chris
Barron: re-establishing your margin target. Exactly. That's how I would put it.
Duane
Lowry: Yeah, re-establish that and start focus on what it takes to get the margin profit that you desire and then start preparing those plans. They may not be executed for a while, but it's time to start thinking that way.
Chris
Barron: A couple of the other things too, you know, we've had a few questions just from growers on, you know, how much more money do I spend on this crop? In some of the cases, if things are going backwards, and so that all factors into what you're talking about because the impacts of certain farms, certain fields, or the whole total, a grower's almost to calculate what you're talking about, we just about got to go farm by farm, figure out sort of an average yield, expected average yield from that, figure out what kind of revenue we're looking at farm by farm, tally it all up, and work on the margin target from there.
Duane
Lowry: Yeah, I know firsthand there are producers producers that are looking at what can they do to enhance their yield. They're looking at foliar treatments, they're looking at adding nitrogen, they're looking at all the things that they wouldn't normally consider, but they're looking at maximizing yield potential because they're happy with how their crop looks, they're happy with their planting date, and they're happy with the price. On the other end, you got people on the other end of the spectrum that are wondering, how much do I not invest in this crop and do I Do I put fungicide on? Do I put the extra nitrogen down because it looks like I'm going to be below my threshold and this may not work. So there's a lot of different ways to look at it, but the most important thing is to start the process, do the calculations, and prepare a plan.
You don't have to execute the plan, but it's time to prepare those plans.
Chris
Barron: Right, and if anybody needs help, you know, we're obviously here with the tools to help kind of work through those decision-making processes from both the insurance side and, you know, where you enterprise or optional units. And a lot of factors to kind of think through, you know, what's the maturity of the crop relative to where we're at on GDUs, and, you know, is there a finish date, hopefully, and that kind of thing too. So I guess that's about all we have for now. Let's plan on reconvening here on, on Sunday. That sound good? Sounds good. I'm glad you did this podcast. I just, for all the listeners out here, I just did pull a good one on you here, didn't I? Don't Dwayne.
Duane
Lowry: Yes, you did.
Chris
Barron: I said we're just going to record here for a second.
Duane
Lowry: This is the longest mic test I've ever experienced.
Chris
Barron: So anyway, thanks a lot, Dwayne, for the conversation here. I think everybody will appreciate that we were able to kind of discuss the markets in kind of a real-time discussion. And thanks everybody for listening. We'll catch you next time on the Ag View Pitch.