Recalibrate your marketing plan - weekly market outlook: Nov. 4-8th

Chris: Welcome everybody to another episode of the Ag View Pitch. We are heading into a new marketing week, November 4th through the 8th, the first week in November already. And I think a lot of, a lot of guys out there getting harvest wrapped up. There's still some out there chipping away at it and hope it, hope Everybody's safe and getting things kind of wrapped up and in the bin, hopefully. And with that said, today we've got Jim McCormick. But before we corner Jim on some stuff, I want to remind everybody about the Ag View Executive Business Conference. Again, that's going to be in Florida this year in January, the 22nd through the 25th. And it's going to be an outstanding education opportunity for all you guys. So, you know, we do have some slots left open. We limit that to 150. On purpose. The networking will be pretty awesome.

And just again, some of the topics, I just want to mention that just so you guys, you know, remember succession, business development, strategic planning, employee attraction, retention, and development, land values, the economy, the markets, just the new administration, what are some of the tax laws, those kind of things. And again, just the networking with all of the great producers that will be there. So with that said, if you're not registered, you want to get registered, go on Ag View Solutions website and you can get registered there. If you've got questions, reach out to myself or Alyssa. Enough of the commercial. Now we're going to talk to Jim McCormick at AgMarket.net. Jim, how's it going today?

Jim

McCormick: Yes, thanks for having me on. I appreciate it.

Chris: Well, it's good to have you again. We had you on a few weeks ago. We were kind of in the heat of harvest on our operation. I still kind of am. We're just kind of getting wrapped up here. Hopefully this, this will be our last week of harvest. Um, got some weather going through and finally getting some rains and, and, uh, making things a little bit more tolerable. I think it was the driest harvest we've ever seen by a long shot, and I think it really sped harvest up for a lot of operations. A lot of people got done. I think there's still some people trying to wrap things up. Yields look really good. Beans, I think from what I've heard, off the pace a little bit from what expectations were, and corn maybe right around expectations or slightly better. What are you hearing as people kind of wrap things up?

Jim

McCormick: That's, that's kind of what we're hearing. I mean, we do have a November report that's coming out here at the, at the end of this first number. Our group is looking for the bean yield to get a little bit lower. I think we look for the national yield to drop 0.8 of a bushel. And I think that's what a lot of my clients have said. It just, you know, the latter end of the beans crop did tail off. This dryness and heat did take a little bit of a toll. But not dramatically, but enough to look— tail it, you know, pull it down a bit. Corn, on the other hand, I think our group average guess is unchanged. I actually wouldn't be surprised if you see this corn crop get a little bit better.

I've had a lot of clients as they're just finishing up are still relatively astonished about how strong this corn crop is hanging in there, even how late this crop was planted in some of these areas and then turn around up that late August, September heat and the crop's still there. So Overall, when it's all said and done, we're looking for that corn carryout to be right around 2 billion bushels, a little bit bigger, a couple hundred million bigger than it ended up being a year ago. So we are going to grow the U.S. carryout. Bean carryout is going to bounce somewhere right around that 550 million bushel carryout. But, you know, that's a little bit burdensome. But the bean carryout, Chris, is really going to look burdensome if Brazil has a big crop because a trendline yield out of South America would essentially put the world carryout at all-time highs.

Stocks have used at all-time highs, unfortunately.

Chris: If you think the corn market is looking at the size of the crop, is there, is there some pressure ahead, um, do you think, on the, on the flat price? I mean, basis will be interesting because, you know, once guys do finally get done, they probably are going to slow down some sales. And, and do you see that given a little bit of price opportunity, or any kind of a window there? What do you see and what do you hear and what do you think?

Jim

McCormick: I think you're going to get a window here between now and the end of the year, Chris. I mean, like I said, it has been one service. It is amazing how quick everything came out. We'd have to dry it. So it's there. The farmer put it away. The prices aren't great, you know, when you compare to where they were earlier in the summer. So I think you are going to see an opportunity where the basis does a little heavy lifting near-term because most producers, I think at this point, are going to say, hey, it's in the bin. I'm going to wait until next year. A lot of it's tax deferral, stuff like that. So you are hearing some pushes as elevators, you know, and primarily end users, maybe ethanol plants, are essentially going to put something to pry that grain out of the, out of the producer's hands. So I think look for that. As for the board price, that's a little bit more challenging.

I think that is where we're going to go. That may lean on what happens on the presidential election. And how the market views the results of the election, who gets elected, may have more of an impact on a flat price board-wise because, you know, the market may decide is that bullish or bearish policy and that will influence what the funds are doing. And the funds, let's face it, Chris, are the ones who drag this market where they want it to go.

Chris: Do you think, you know, with the corn yields being kind of where they're at, do you think it's Do you think it's going to be basis that does the work to get the producer an on-farm price, or is it flat price, or do we need to really be paying attention and maybe not doing both at the same time? You know, maybe looking for that flat price opportunity with an HTA or something, or hedging something and then kind of catching that basis later, or what's your thought there?

Jim

McCormick: Right now, in the near term, you know, the board just continues what it does. This past week it really did nothing. It just traded kind of in a sideways range, and if it stays relatively in sideways range. I don't think that's going to excite the cash market. And that's when you're going to get the basis to essentially firm up to pretty much pull that grain out of the system. Now, if you would get a bullish run and start breaking out and take, you know, trend lines and 100-day moving average and you get the board to move up, I think that will essentially what'll happen, what'll go up. But then the basis may take some of that away because the board price will get people excited. I think because the reality is, Chris, we still have a ton of grain right now. The projected ending stock, even with the adjustments, it's going to be a very comfortable 2 billion bushels.

You're looking at a stocks use around 13.5%. And historically, when we've had stocks use up 13.5%, we've gone down and tested that $3.50 price level. So, you know, I just— I don't think you're going to get a whole lot of movement in this market when it's all said and done. Because the other question, I think, within the industry is, is the producer going to do— once we flip the calendar here, And it's hard to believe I'm talking about flipping the calendar, but like I said, it's the first week in November. It's going to happen quick. A year ago, Chris, a lot of producers, let's face it, they went into the year, they had $5 corn, they went to the bankers, they were feeling very, very good with their economic situation.

Fortunately, what we found out in the industry, a lot of the corn did not get sold last winter, early spring, and a lot of producers unfortunately held on to the corn way too long, waiting for the reality that just never developed. And they sold last year's crop at a very weak price. They didn't get a lot of this year's crop sold at a very good price, unfortunately. So I think this upcoming marketing year, I think it's going to be a lot of pressure by the banks and just psychologically to be— to get this grain moved. I mean, I've been doing this almost 30 years now, and it does feel like in general, it seems like a lot of people do this upcoming year what they wish they would have done the previous year. And storing grain into the summer did not work. They should have moved it.

And I think you're going to see people be a little bit more aggressive in trying to get that grain sold, which may make it easier for their end user to get his, his hands on the grain if the farmer does tend to push it out a little bit quicker than normal. So maybe that basis appreciation we like to see at the very beginning of the year, it may not be as strong this year as farmer— like I said, I believe he'll be a little bit more aggressive in moving grain.

Chris: Mm-hmm. Yeah, that'll be interesting to see because I think there's To your point, I think there's a lot of producers that are in the wish mode, wish they would have done something different last year, probably may change their behavior this year. On the same token though, I think there's some producers out there that are financially still quite strong. And so it's going to be interesting, I think, to see kind of how some of those producers— I had a conversation with a grower the other day and he was frustrated from the standpoint of, well, I'm— I've got bins, I've put it in the bins, and I'm going to wait for it to go higher. And I, and I was like, um, Can I look at your crystal ball? Because I, you know, I don't know that it's going— I mean, I don't know if any of us know which way it's going to go.

But, you know, I think we probably need to be thinking about some levels that maybe work or some levels that are practical. And so that leads me to the next question for you then is, as we think about some ranges that we possibly could see, What's your team looking at for, you know, some places to maybe be throwing some targets out there? Because it seems like, you know, that, that flat price, you're— you sometimes you get about 5 minutes to make that decision and then something changes, right? And so is there some ranges or some things both on corn and soybeans, maybe wheat that you guys are looking at that are some ranges you guys are thinking on?

Jim

McCormick: Well, I think the first thing you got to look at, Chris, is when do you plan on selling the grain? Okay. I think as you look at the price ranges, because if you look at the spot price, I don't think you're going to get much over $4.20, $4.25, maybe up toward $4.50. If you're looking at maybe your goals, you want— you're one of those people have the bins and you want to store the corn in the latter part of spring, maybe in the summer, you might get a better shot of getting the July corn over $4.50, a little bit higher. But the one thing I'm going to encourage people to do, if that is your goal, to store grain into the summertime, and a lot of guys do that, there's nothing wrong with it. Be very cautious about not trying to, you know, just waiting and see the market.

Always you see those higher prices, Chris, and it's always kind of that siren of I'm going to wait, they're going to pay me $4 in the fall, but they're going to pay me $4.40 in July. But if we truly are moving into a bear market, what usually happens is by the time we get to July, the July corn is no longer— that enticement is no longer there. And the corn is trading at today. Somewhere in the low fours potentially. So if you're a producer out there, I would encourage you to at least consider maybe at a minimum selling some out-of-the-money calls. Say, hey, look, there's a strike price I like. I'm willing to sell some corn at $4.50, sell a call out there, maybe try to collect some premium.

Or the other way to do it, I've highly recommended for several clients, is consider buying a put, selling a call, kind of put a bracket in there, say, hey, this is the worst-case scenario I'm going to sell corn for and make sure I don't get worse than X price. But also sell a call where you're willing to say, hey, look, I want to take this price. I know it's profitable because there is a lot of uncertainty in the world right now. And the one part about it's going to be the beans. You're asking what we're doing with the beans. I am relatively encouraging people to get aggressive moving beans. I am very bearish beans, unfortunately, at this point in time. I think we'll have some opportunities the next couple of weeks potentially. But the fact of the matter is we've already moved into November. Our window to sell beans onto the international market is shutting very, very fast.

Brazil to take over that market share. And if Brazil has a trendline yield, like I was mentioning before, it will push world stocks to all-time highs. It will push stocks to use to all-time highs. That's not $10 beans historically. It's closer to $9 beans. And if beans go to $9, there's no way economically you can justify $4.50, $4.25 corn. Historically, at $9 beans, if it goes there, So what, a 2.6 ratio is going to put you somewhere around $3.50, maybe $3.75. And that, that's where we could be at. And that doesn't excluding what could happen on the presidential side. If President Trump, who, you know, it's neck and neck, if he would get elected, we got to be honest with ourselves in agriculture. He is saying he is going to put everybody, not just China, let's put them on Europe for the cars, let's put them on Mexico.

And I fear that if he does get elected, the trade is going to say, well, we know what happened last time. He started the trade war and the beans went to $8 and there's more beans in the world now than there were then. So there is some economic risk. So that's why I'm being a little bit more aggressive selling beans. It's the same situation, though. If you want to hold off marketing beans, I would at least go out and maybe buy a March put, buy a put, sell a call, do something to at least mitigate that risk, at least until we get a clearer picture of what the administration, whomever it is, this next move's gonna be.

Chris: Mm-hmm. Interesting. Yeah, a lot of things to think about there. That kind of leads me to another thing to consider, which is USDA report coming out this week on Friday. What's your thoughts there? What are you guys looking at? Any impacts there that we need to be aware of or be thinking about?

Jim

McCormick: All right. Now, I mean, like I said, we're looking for the corn yield to go steady, maybe a shade higher, raise up demand a little bit. Carryout for corn is going to be right around 2 billion bushels. So it's going to be down a little bit. But in general, it's still going to be cumbersome by historical measures. That bean carryout could tighten up a little bit with the lower stocks— or lower production, excuse me, Chris. You could bump demand up a little bit. But it's the same situation is you're still looking at a carryout, you know, over 500 million, 550 million. It's still very burdensome. What's going to be interesting to see for this report is what do they do with demand? Because if you look at demand the last couple of weeks, it's been fantastic. We're actually running ahead of pace where bean sales are behind pace of the 5-year average. They're actually ahead of pace.

The corn sales have been phenomenal. Mexico, Chris, right now has bought half of their anticipated purchases. We're anticipating they import a little over 23 million metric tons of corn this year. They've bought a little over 11.5 so far. So now the real question is, and what will be interesting to get the government's viewpoint on Friday, is, were these aggressive sales— is that a change in habit? In essence, is that a signal that the world is going to buy more of the US product, or was it more of a situation where they're just frontloading their purchases as a way to spread out the risk as they're waiting to see who becomes president? And that could be a little bit bearish if that's the case, because even, you know, a lot of people fear if Trump gets elected, you're going to get a trade war. But if Kamala gets elected, maybe we're back to status quo.

I'm not sure what that means for prices because if it is front loaded and let's say Mexico was aggressive buying corn because they're fearful of a trade war or tariff war with the United States, if Trump does not get elected, does that just revert the Mexican buying back to normal? In essence, since they've already got half of their needs bought, they now spend the next 9 months just fully building, you know, you know, essentially pricing corn here and there. And that's disappointing the bulls because it wasn't a change in policy, it was front running. So I do think there's risk. The election may actually have more of an impact on the price direction than this actual November report, in essence.

Chris: Interesting. Yeah, it's going to be You know, the election is, is one of the things that leads me to kind of a final question here too, is you've also got the, the money, the funds and everything kind of on the sidelines right now, it seems like. What do you think after the election, or, you know, on either side, is there anything that you guys are kind of watching where the money could go or might go? Or because that has a direct influence on on these prices, too, you know, whether they decide to go long, short, whatever. Any, any thoughts there?

Jim

McCormick: Well, I mean, the one thought is you're right there. I think the money market— I think 10 days ago I saw had a little over $6.5 trillion with a T sitting on this. I mean, it's amazing amount of money that is on the sidelines that is going to make a shift one way or another. Which way is that money is going to shift, Chris? That really is hard to answer because You know, because, you know, where everyone's fixated on the presidential election, is it going to be President Trump or is it going to be President Harris? But that's only part of the equation. You know, remember what happened when President Trump was elected first go around? What was his— what was his first policy? It wasn't the trade war. It was the tax— the tax bill that he passed. Okay. Well, that bill runs out here. All those tax cuts, a majority of them all fade out here in 2025. Okay.

So if he comes and gets elected, is he going to go right in with a trade war or is he going to do like he did the first go-round and try to concentrate on getting those taxes, you know, essentially re-up to keep those tax cuts in place? But on the other hand, if he becomes president but the House is Democratic, he probably isn't going to be able to get any tax policies done. So does he just move directly on to whatever policy wants to push. So the reality is there is a lot of unknowns, I believe, in this marketplace. And if you're carrying a lot of unpriced grain, I would encourage people to, you know, if you're worried about it, consider buying puts. You know, you don't have to go all the way out. You could buy a December corn, $4 corn put for relatively cheap money.

You say, look, I just want to get something covered to see how the world reacts, to see how the policy track, because let's face it, there's just a lot of uncertainty of, of the policies because we know when both these people are out here talking, you know, a lot of stuff they're saying is more just talking points. It's not ever going to be implemented. We really don't know what's going to be implemented. But, you know, history does give us a little guidance. Do start ratcheting up tariffs on other countries. The history, unfortunately, is they push back and ratchet up tariffs on U.S. products. And unfortunately, we're in an industry that we supply, supply the world with food. So we get the brunt of the pushback on the tariffs in our industry, and we've got to be cognizant of it. There is some economic risk out there.

Chris: Mm-hmm. Yeah, we're going to be a lot smarter this week. By the end of the week, hopefully we know something anyway. And so it's not up in the air as to, as to which way it's going to land. And we should have a pretty good idea in the House and Senate. And like you said, that'll give us some give us a little bit of insight and stuff, and hopefully we'll know who the president is by the end of the week. So, um, with that said, um, I, I'm going to give you the last word. Um, you know, the election, the funds, harvest wrapping up, just making, trying to make some good decisions as the year wraps up, as we, you know, head into and toward Thanksgiving and the holiday season. Um, you know, let me give you last word. What do farmers need to be thinking about in the next few weeks and paying attention to?

Jim

McCormick: Right now, I mean, first thing I think you got to look at, now everything's wrapped up, Chris, I think you got to start redoing your, you know, relooking at your books, look at your breakevens. I mean, the reality is a lot of people, maybe I've had several clients say, look, wow, my farm average was a lot better than I would have thought. I've got more bushels to sell. You need to recalculate. If you're a producer out there, you need to recalibrate where your breakevens are. And then I think you also got to be realistic of what we what we are staring at right now and put orders into market grain where, you know, you're profitable. With the uncertainty we've got in the world, we've got an election that's up in the air. You've got the Middle East that's still very, very tenuous. You've got what's going on in Ukraine, which could have an impact on exports.

And then let's face it, we're very, very dry right now. Now we've got a big rain event coming in here the beginning of the week of November that's going to help maybe ease some of this drought. But we do have some people talk about drought for next year. So there's a situation that you want to, I think, be able to market grain now, but keep your opportunities open. If you get aggressive selling cash grain, use options maybe to own it. If you're one of those people want to carry a lot of cash grain, I'm going to encourage you to try to take some risk management approach into it because there is a lot of uncertainty. These markets, one thing I can tell you, Chris, is the funds decide they want to sell this aggressively, it could go a lot lower than any of us ever want it to go.

On the other hand, if they decide to get bullish on a policy, on an inflationary policy per se, look at gold and silver screaming at, you know, have gone crazy. If that money decides, hey, I want to own grains, grains are cheap to gold, you want to have some ownership as well. So I think right now the key is going in to the end of '24 and into '25 is protect your profits, but be flexible.

Chris: That's pretty good stuff. I think you just gave me the title. The external issues are going to have to be solved with internal solutions. So I think that's a really good, good way to kind of wrap it up. I think we got to, we got to sit back and do the math, like you said, recalibrate our stuff. I love that part because that's, that's what we do in our world is make sure we got the numbers right and look at that so that we're, you know, making good decisions. And I think 2025, you you know, it makes 2025 easier to analyze too and to structure once you can kind of wrap up this year and kind of know how this year shook out. So, um, hey, this has been a great conversation. You always, um, bring a ton of really good stuff to the table, and we super appreciate that.

And, um, next time we get together, we'll know who the president is and we can talk about, uh, and, and who's in the House and Senate. We can talk about that influence and probably a few other things. But with that said, Jim, really appreciate your time today.

Jim

McCormick: Well, I appreciate the opportunity. And, you know, for the people of finish up harvest, hope it's a safe one for you.

Chris: Yeah, appreciate it. And if people want to get a hold of you, right behind you there, if you're on YouTube watching this, AgMarket.net, they want to reach out to you, that's the best way to get a hold of you.

Jim

McCormick: That's the best way right there. If you want to look at our company's research, go to the website.

Chris: Awesome. Sounds good. Well, again, thanks, Jim. Thanks, everybody. Reminder, make sure you, if you're not signed up for the Ag View Executive Business Conference, make sure you get that done because we are going to get full and we want to not have to say no to anyone. So if you're, if you're busy, take a minute and do that. Also, make sure you get your rest. If you are still harvesting and it's been dry and you haven't had a day off, take one. With that said, thanks everybody. We will catch you again next time on the Ag View Pitch.