Red everywhere: what's going on?

Narrator: Hey podcast, today Chris and Grant have an excellent conversation on what's going on with all the red in the marketplace. This is an excellent complement to some of the fundamentals that we've been hearing from Dwayne and looking at it from a more technical approach on this side. Again, be sure as you're listening through today that you keep in mind this is just perspective, we're not giving any advice.

Chris

Barron: Enjoy. Welcome to the midweek Ag View Pitch. You got Chris Barron and Grant Schimek here, and Grant is a broker that I work with. And Grant, go ahead and reintroduce yourself. We had John here with Duane and myself here a couple weeks ago, but go ahead and give another introduction to yourself if you would.

Grant

Shimek: Sure, my name is Grant Schimek. I'm a broker with Black Oak Financial in Fort Atkinson, Iowa, and been in the commodity business for over 20 years and also do some consulting with farmers throughout the country.

Chris

Barron: Gotcha, great, thank you. Um, so a little bit of red on the screen here for the last couple of days. What's cooking? What's going on here?

Grant

Shimek: Oh, I think it's just emotion, just back and forth, just the volatility in the weather forecast. There's really nothing that's fed the bull. You've had crop conditions make some slight gains even though in the states that were the worst. You know, take a state like Ohio, had a big percentage increase in the good to excellent, but not a very large percentage good to excellent in some of those states. So it's— there's nothing here. I think there's also some, some technical history, so to speak, as you, as you move away from the week of July 11th and you, you take— if you were not below last week's low yet, that's down there at $4.30 and a quarter. But we did take out the low of Friday, which was the day that made the high last week.

And there is some technical history when you go back and look at December corn where if you take out the low of that week, that the bar that made the high and not yet the— yet done the low of last week. Some of those things I think are just models that are selling the market. And I don't really think there's anything, anything more to that, except seasonal pressure.

Chris

Barron: So do you think, you know, the forecast kind of hot and dry, and then maybe there's a chance of rain? How much, you know, how much of the forecast is a percentage of the movement, do you think?

Grant

Shimek: I think it's part of it. You know, we came in the weekend, it looked like it was going to be intensely hot and in a wide area and not have any give up. And as time has progressed here, the models, the weather models took it out in the intensity of it in a lot of cases. We've had a lot of pop-up showers mainly, and I'd say in Iowa, Minnesota have had the pop-up showers, not, not as much in some of the, the, the more southern areas that are, are hotter, but there have, have been some rain. So it's just not as bad as feared a few days ago.

Chris

Barron: Okay. What about on soybeans? What do you think in there with the movement of soybeans?

Grant

Shimek: And on the soybean market, I think it is, it's just moving in unison for the most part. But as we get closer to August and the more critical phase for soybeans, I think there's more, there is potential for something to happen there. And, you know, just from a very short-term technical standpoint, I'd like to see us stay above $8.90 on a close on the November contract. If that's the case, maybe we can still build, build from here. And I think there's history that, you know, things can still happen in August. And there's still a lot of weather to be dealt with for soybeans. In other years, you wouldn't have as much weather to deal with. For corn relatively, but we definitely do this year. Given the planting dates.

Chris

Barron: Yeah, and Dwayne's talked a lot about the spread difference between corn and soybeans and soybeans being pretty cheap. Do you, do you kind of concur with what the sentiment has been that, you know, historically beans are really cheap right now relative to corn and wheat?

Grant

Shimek: They are, they are, they They are. And I know what the reply to that is, is like, well, duh, there's lots of soybeans out there. We have a lot of carryover, even in the context of, you know, maybe a smaller yield this year. But if they're— the thing about that is, if we do have issues, weather issues that pop up, and we can impact yield, then I think soybeans become the one that can probably have more relative volatility than corn or wheat. Over the, say, the next 60 days. And it may be more upside potential. I personally would still doubt the sustainability of strength. But if we're just talking about can we have some volatility in a pricing opportunity yet in beans, I'd say yes, I think we got a very good chance of it.

I just still, I do doubt that they'd have sustainability though, because I think it's going to be tough to, to work off the weight of the amount of beans we're carrying until we get into the next marketing year.

Chris

Barron: And get to harvest and figure out what's really there and what's not there. A lot of unknowns. It's a huge amount of time between now and harvest as well. So, right. What, what do you think that— what kind of risk are we dealing with right here to the downside for those who are long the market right now, you know, should they be concerned, nervous, or just kind of sit tight? And well, I think, okay, what's your thought there?

Grant

Shimek: Well, you always have to have some kind of, of point where you're gonna, gonna have some kind of plan B and not just say ride it out. That's when you get complacent with your risk management, that's when Murphy shows up. And knocks on the door. So, you know, I think that downside in soybeans, another— I'm going to throw out maybe more extreme levels that some people might not think is possible. But on beans, you know, getting into that $8.67 to $8.70, high $8.70 zone, I wouldn't rule it out. I think that's possible and really hard tree shaking. And in the corn market, we still haven't filled that gap that was left in just above 420.

And if you really want to have a moment of doubt and confusion where people think that this market can't come back, you go down and, and close that gap and shake the tree down there, maybe into the, into the 4-teens, that 413 to 419 zone, and really gun some stops and trade at levels we haven't all for a long time. And, you know, by the end, you could do that intra-week, and by the end of the week, close back above, you know, even back above $4.20 or $4.26 area and, and, and be done. So, but you could definitely shake the tree that hard and, and still recover, in my opinion.

Chris

Barron: Any comments on wheat, on kind of what we've seen in that market?

Grant

Shimek: Uh, wheat market dealing with this harvest pressure and getting through that. I mean, I think it's holding up fairly well. I think the timing for wheat is going to be real similar. I think having— getting through the harvest pressure and getting into that, say, second week of August timeframe on— I think we could have another opportunity there to take us up into that upper $5 handle. And I definitely take action on it as a hedger. But, you know, as far as the $6-plus level on the front months on the Chicago contract, I would— I personally wouldn't swing, swing for that. But I think we've got another— I think we got a really good shot at all 3 of the big grains here to have an emotional volatility event yet here next month.

Chris

Barron: So if that happens, say during August, and we see the volatility, you know, that we've seen here now, and we get the volatility back to the upside, You know, basically what you're telling me is you better take action, pay attention real close and make some sales when the opportunities are there. Is that what you're saying? And kind of what levels for the 3 crops are you thinking? You know, knowing it's perspective, but—

Grant

Shimek: You better play defense even if things look dire. And that might not mean you don't necessarily have to sell with committed sales and run for the hills. But you're going to want to do, you know, if you don't have a very light on committed sales and you're at numbers that, and especially in the context of crop insurance, are viable, you got to take action. But as far as on corn, you know, I think December corn, anytime we get up in the $4.60s and we start to lose momentum again on that Dec contract, you're going to want to— if we go up again, we really need to, you get through that high, in my opinion, that $4.73 area. If you get up in the high $4.50s to low $4.60s and start to lose momentum yet again, then you better play defense, make some sales, create some kind of other strategy on paper.

And but past that, the low end of the, of a new high to me could be as low as that $4.77 to $4.82 on DEEZ. Otherwise, this mathematical targets, I think there's a shot that it gets up into the $5.07 to $5.30 zone. And whether something looks dire or not, I really would definitely floor aggressively or protect aggressively at that point. On the beans, you know, you get north of $9.40, you got to pay close attention just because of the calendar. Otherwise, to me, history says, well, I think we still have a shot. Our potential to go up and, and test that February high, which is $9.69 and a quarter. So, you know, north of $9.60 on up, I'd be very defensive. And on the wheat, those numbers to me would be in that $5.60 to $5.95 zone on the front month.

Chris

Barron: So Grant, you're one of the most probably technically minded people I've ever met as far as paying attention to the technicals, really knowing what's going on. Let me ask you a fundamental question. You know, if, if the fundamentals as we move forward, let's say we get really super dry, you know, how much, how much weight do you put on the technical side? Do you think, do you think the fundamental outlook has enough strength at some point to work through your technical numbers, or, or is that just wishful thinking on a farmer's part?

Grant

Shimek: Oh, I would— the technicals don't say something can't happen. So maybe if you get through one level, you can go to the next one. It can be very— I mean, if there's enough emotion driving the move, it can go a lot— moves could go a lot higher. So, I'm not going to say that it can't. I think that's where instead of assuming you know what will happen, that's what I mean by playing defense, is to create some, a floor in some way, shape, or form, or to have a backup plan in case you are wrong. And so, let's say you get to $480,000 or $510,000, and maybe we just As time goes on, you've taken action at those points, and time goes on, it keeps going higher. Well, that's where I want to avoid this saying, you know, if you, if you have, say, 75-80% crop insurance, it's not me saying sell up to your insurance guarantee, but create a floor so you can still ratchet those up.

That's how I would approach it.

Chris

Barron: Yeah. Is there any, um, other things we'll kind of keep this this one short just because I wanted to kind of touch base on all the red ink we've been seeing here, um, and, you know, in the market. Any last comments you have or things that, that growers need to be watching if they're, um, you know, in terms of their positions or anything that you can think of that, that needs to be recommended or discussed yet here midweek going into the end of the week?

Grant

Shimek: Uh, I don't have anything specific, and, you know, it's, it's best not to get into specific recommendations because Really don't know what individual's operation to make them, but it's just, I really sincerely believe this next 45 days in particular through the, as we go into the, from here to the end of August are going to be key. And if we do ramp up into that time frame, I'm, I would be caught, I would caution everybody on assuming that, wow, it's just going to get better, wait till we roll the combines, because a lot of times the market is gets way out ahead of those events. And we have a way of pricing in things faster than you ever thought. So I continue to hear people want to wait and see exactly what they have. And we might not, you know, the best price might come before the combines roll if we get that kind of setup with weather and get the emotion behind it.

Chris

Barron: Gotcha. So pay attention, expect volatility, and take action if it's approved. Right. Did I hear you right?

Grant

Shimek: Gotcha.

Chris

Barron: Yep. All right. Well, hey, Grant, thanks a lot. We'll get this out to everybody and appreciate your time here today, and we'll be back in touch with you again. And it's to get a perspective from somebody that, like I said, you know, you really pay attention to the technicals and have a great understanding of that. And I think a great complement to a lot of the information that we're— that— there we're getting here in the Ag View Pitch as we move forward in the marketplace. So anyway, thanks everybody for joining us on the Ag View Pitch, and we will catch you next time. Thank you.

Narrator: Thanks for listening, everybody. We hope you got some good perspective out of this episode with Grant and that you keep some of these things in mind as you move through your week. Remember, this is only perspective. We're not giving advice here. We'll catch you next time on the Ag View Pitch.