Record demand for this week

Joe

Paulson: Hi, this is Joe Paulson with YAGVIEW Pitch. This is for the week of September 2nd through the 6th, and today we have Greg McBride with Allendale on with us today. How's it going, Greg?

Greg

McBride: Wonderful. Great day to be alive.

Joe

Paulson: A little bit cooler today than it, uh, than it has been. We're recording this on the On, on Thursday the 29th, I think it is. And yeah, a lot better than it was earlier in the week. Do you think that heat did any damage?

Greg

McBride: I— short answer, maybe. I think it did. I mean, I'm, I'm looking around at talking to customers anywhere from, you know, the Carolinas all the way out to to Colorado and up to basically Canada. And they all saw something different. But some of the dryness issues that we've seen over the last couple of weeks, some of these rains that have missed or any of that stuff, plus the extended heat that we just had, you know, I mean, shoot, what was it? Monday or Tuesday was 95 plus humidity. It was ridiculous out there. So I I think we've seen maybe a little bit of the top come off of the beans. I want to say a little bit of the top coming off the corn, but it's still, it's still going to be a record crop, still going to be record yields.

Joe

Paulson: I completely agree with that. I was down in Indiana, around the Remington area, doing a peer, a peer group. And I think, I think we touched 100 degrees on Tuesday. I mean, it was just blistering hot, but I will say stuff looked, stuff looked fantastic down that way. And, and I really didn't see any stress. So, you know, there was, they're just getting ready to start seed corn harvest down, down that way. So, let's, let's, let's talk a little bit about the Pro Farmer Tour. You know, there was some big numbers that came out of that. What's, what's kind of your, your take on the results of that?

Greg

McBride: The corn numbers. Well, I guess none of it really surprises me. The corn numbers were lower than what— where the USDA was at, especially when you're looking pretty well across the I states. And, you know, depending on who you ask, that's all that matters anyway. But the— those numbers were lower than expected, but also in line with, I guess, where I would be. 180 to 182, not this 183, 84, 85, or any of that stuff. I mean, the way we're trading, we're trading like a 190 at this point. So I think we're undervalued. On the bean side of things. I mean, astronomically higher than I would have guessed. 50, I think they were 54.9. Some of the pod counts in Indiana, Illinois, Iowa were just ridiculously high. I mean, we're talking what, like 9, 10, 16% higher than, than last year, the 5-year average. Just monster. And I don't know that I necessarily disagree with the numbers.

But we all know that we, we won't know the bee number for real until, you know, the yield counts going through, going through the combine, that, that yield monitor tells the absolute truth.

Joe

Paulson: Yeah, I mean, I have some beans that I planted early that I was stunned at the pod counts I was seeing per plant. And then my later planted stuff, you know, that was, you know, mid-May through the end of May. I'm not overly impressed with it. I don't, I'm not overly optimistic with my bean yields here. I mean, corn, I think corn could be possibly as big as last year, possibly bigger. We've actually had slightly better weather, you know, during the growing season than we did last year. But no, I mean, it's, it's gonna be a big crop. So what, what is a guy to What does that guy do? I mean, to me, there seems to be no reason to sell anything right now until we see what October does, you know, for crop insurance.

Greg

McBride: Yeah, that's, that's kind of where you're at. If I mean, the biggest problem we have right now is just the— and this is going to be talking specifically to corn, but it's purely the amount of corn that's left in the, in the hands of the, of the farmer. And it's, you know, this week we've seen it a couple of times where the funds might have actually been getting out of some of their short position, but it was met immediately with farmer selling because you had first notice, you have first notice date tomorrow. A lot of those elevators that are in possession of corn from, from guys that are on forward contract or haven't been, you know, haven't actually taken their, taken their their numbers on it, we get a point where they say, we're not going to roll this into the new crop, you need to deliver. And here's what it's going to be, or let's price it.

The other problem is you've got a lot in the hands of the farmer, it's in the bin still. And we know it's, you know, we're getting to moving day, because once those combines start rolling for the new crop, there's only so much space that you can— you have, or any So there's going to be a lot of old crop that's still come to, come to market here over the next few weeks, probably 2 weeks at least. And just to make space, and that's going to hurt us a little bit. You know, nothing stops a corn rally or bean rally like farmers selling, especially on the, you know, specifically on the corn side. On the bean side of things, and this is true on corn as well, the demand is really good right now. So if I told you, Joe, that you needed to go out and sell corn or beans right now, you'd laugh. We're right off the lows.

And I don't expect, I don't expect anybody to go out there unless they have to do it for cash flow purposes. It's just, it's, it's not, it's not a time to do it. So here's what I'm looking at the demand side of things, the export demand specifically. We are better priced than Brazil in the next 2 months for beans. I think we just as of today, it's $14 per ton in beans. And then through October, it's like $6 per ton cheaper. So that's why if you've been following along, you see, we get these flash sales from China is actually buying soybeans right now. This week was, this week was the best, the best soybean sales, new crop soybean sales that we've ever seen for this particular week in history. 2.6 million, 2.7 million tons. Phenomenal. Corn was similar. It was the best, best for this particular week in 14 years. So you're getting you're getting demand right now.

We're 30% behind where we should be for, for bean bookings. But these new, these new sales give us a little bit of hope to say, hey, let's maybe we, the funds have a reason to lighten up the short position. That's where you get some of these, these bounces right now, you're 30, 35 cents off the, off the lows from, for the beans, you get back up and you test $10, $10.25. Well, shoot, that's, you know, that's $0.80 off the lows, might be time to make a couple of sales, maybe engage some hedges. If corn can get back above $4, maybe in that $4.10 to $4.30 area, maybe that's a good spot to get something done. But at this time of the year, that's the, that's the thing we have to watch. And typically, you know, when you're looking at seasonals, it's about the last week in September to the first week in October when the seasonals start to take the corn and bean markets up higher.

And a lot of that is more what's going on in Brazil, and it's dry down there.

Joe

Paulson: So, but, you know, I mean, this is— it is dry down there. This is their dry season.

Greg

McBride: It is.

Joe

Paulson: And like anything, I mean, that can, that can cure itself real quick too.

Greg

McBride: Yeah. And that's why, that's why it's, it's not a today type conversation. It's a what, what does it look like as you get closer to the end of September?

Joe

Paulson: At least we got the groundwork laid for a possible problem if it would continue on.

Greg

McBride: Yep.

Joe

Paulson: Yep. So, uh, you know, everybody's looking at basis right now. You know, I know within my local elevator, uh, her, their basis was typically about as narrow as I've seen it. It's probably, um, and I was, I was actually shocked at that. We're looking at a pretty big crop here, um, and when I look at what, uh, you know, the, you know, kind of the push bids for early harvest are like, it just doesn't track to me that, uh, it doesn't seem like there should be any reason for basis to really pop at all, especially with a large crop, there's a lot of it around. You know, what is— what are your thoughts on basis improvement or decline?

Greg

McBride: More likely decline. Honestly, in big carryout years, and that's what we're dealing with. You're talking about 2.1 billion for the old crop corn, which, you know, the end of the marketing year is essentially tomorrow. The new crop is 2.1 billion. So we're talking about two large crops in a row. Basis doesn't have to get better because those elevators, those ethanol plants, they can just knock on the next person's door to find corn. It's not like it's hard to find. I mean, it's a huge crop out there. So I wouldn't expect anything to get that much better. Now, if you start to see another market improvement in, in export demand? Maybe. But I mean, short term, I don't have any reason to look at basis getting that much better, mainly because you're coming off a big crop in Brazil, even though it was somewhat smaller than what they wanted it.

But they're also going to start— they've started their, their planting progress right now. For some of the early corn, and they're expected to have a record crop down there too. So you go with two record crops in the powerhouses of the corn world, or even the bean world. And there's no reason to pay up at this point. They can go and like I said, they can knock on somebody else's door and find corn. On the bean side of things, it's going to be similar. I mean, Well, USDA was 560 on the last, on the last report. That's, you know, over half a billion in carryout for beans. Another, we don't have to pay up for it. Demand looks good. Right now it does. Like I said, we're still 30% behind. Crush is huge. Crush will improve and, and do better into the fall. So you might see some better numbers if you have a crush plant that's local to you.

But that's, that's, you know, kind of, that's not exactly the norm just yet. That's expanding. We're going to see 23, 23 new, new or improved crush plants across the United States this year. But it's not, it's, it's not everywhere just yet. It's not as prevalent as like some of the ethanol plants that are out there. They're, you know, seems like they're on every other block like Walgreens.

Joe

Paulson: Gotcha. So before we go here, one of the topics we should probably cover is Cary. You and I were talking Cary a little bit on Monday when I was driving. You know, this question is twofold. Is, okay, I may, you know, I have HTAs. I have storage. What kind of things should I be looking at as far as rolling those out to capture some carry? It looks like, you know, if you take into account interest costs and whatnot, there is a little meat on the bone there. So what should we be looking at? Do you have targets from these to March and then these to May? And then, and then, and then secondly, You know, let's say you have unsold bushels, you have storage, should we, you know, do you know you got to sell it in order to capture the carry? So what do you, what do you do with that? With that stuff?

Greg

McBride: Yeah, I think with regard to, to the carry, your, your best bet right now is to, if you have HTAs, you have even board hedges, You can, you can roll those out to March. Right now we're at full commercial carry for corn. And I think we're actually there for beans too. Out to the March contract, you could do it into the January contract for the beans, just depending on when you harvest or when you want to make that decision of letting some go, you know, we don't, we don't typically hold beans nearly as long as we'll hold on to corn. But that's— you're at— I would go out to the March contract if I was looking to capture some of that carry and then make that decision again as you get closer to, say, January with regard to do I want to roll further out from March to May and kind of just piecemeal it that way. Right now, I think you're at— oh, I think it was like 60% or 70%.

Carry from Dec to May for corn. So it's not, it's not as advantageous as it could be. And even the March to May carry is not at full, I think that was even lower than might have been 50 or 60%. So I would just stick to going to the next major contract, which is typically going to be your March contract. But that's— and that is something that's, you know, yes, you know, you mentioned that you kind of have to sell it to take advantage of it. But you can also try to, you know, if you work with a broker, you can try to trade the board with it by trading the spread. So there is that possibility. But it's, you know, at this point, I— with a big crop, I'd be more likely to I— what you would want to do is you'd want to sell, you know, maybe the— you'd want to sell the front month.

And at that point it would be like sell the, sell the March and buy like the May contract or sell the March and buy like the July contract looking for that, for that carry in a big crop year to go to full carry later on. The way you wouldn't, you wouldn't necessarily want to do it December to March because that's already at full carry. Yes, it could go a little bit wider, but you're only talking about a few cents probably. So it's something to watch and play the spread. You can play the spreads that way or you can, you know, if you do have cash sold or even board hedges, you can, you can roll out now to, like I said, that March contract because that is a way to capture that at full, at full carry.

Joe

Paulson: Gotcha. What, what else as far as news should we be watching for? You know, is there anything else that you'd like to share before we hang this up?

Greg

McBride: Yeah, I, I mean, I don't want to throw a lot of like— I'd love to tell everybody they could just get long and stay long and do some Texas hedges and stuff like that. But it's not— this isn't the time to do that. It's, it's patience now. We've, we've in a lot of cases, we've missed the opportunity to make sales. If you do, if you do a makeup sale here, you might be selling darn near the bottom. You've got insurance that's probably going to pick you up at this point anyway. So if you can get a little bit of cushion from the bottom here, like I said, maybe that $4.10 to $4.20, $4.10 to $4.30 point on corn, maybe $10 to $10.25. Get yourself a little cushion off the bottom, you can come in and make a few sales, maybe get some hedges in place. But it's— that's the thing you have to be looking at is do we get an opportunity to do that?

And some of the things that can get us there, better demand, that, that demand, that export demand has come through. If that continues, that's going to help the funds. Just even lightening up on some of these short positions could help. And then it's really watching that, that weather like we talked about with the with South America, with Brazil specifically, is if you see, as we get into late September and early October, if they're still dry, you could have a situation where that pushes back some of those bean plantings. If you push back bean plantings in like Mato Grosso and some of those regions, that will push back your safrinha corn planting. So that's a twofold potential for friendly, friendly market activity. Extended dryness into October, November, and December, like we saw last year, can, can give us a little bit of a bump.

But if they start getting rain after they've planted, watch out, because they are expecting to have a big crop. I think we're talking 163 to 169 million tons for beans, and like 125 to 135 million tons for corn. It's just, it's going to be a monster. So you've got to be careful. This is where bounces need to have some, or rallies need to, you need to take action on it. It's, this is not like 2 years ago, 3 years ago where we only sold it when we needed the cash. And even when we needed the cash, it was still good. It was, you know, $7 corn or was $14 beans. People didn't have to hedge. This is not that year. This is one of those years where you've, you've got a big carryout until you don't. And right now it's, it's looking like it's going to be a big carryout all the way through until next, you know, next spring.

Joe

Paulson: So. Okay.

Greg

McBride: Yeah.

Joe

Paulson: Well, I do appreciate all of your perspective, Greg. And yeah, we'll talk to you soon. Thanks, everybody, for listening.