Report, report, hear all about it

Narrator: Hey podcast, in today's episode Chris and Duane talk about the most recent report and how it may affect in the weeks to come. Be sure to listen through the whole podcast as there's some excellent content in here today. Enjoy.

Chris: Welcome everybody to the Ag View Pitch. It's Friday afternoon here and we just got done hearing the report. Market's closed now and I've got Duane Laurie on here with me. How's things going today, Dwayne?

Duane

Laurie: Good, Chris. It's been kind of a volatile last couple of hours.

Chris: A little bit of a surprise from the marketplace, wouldn't you say?

Duane

Laurie: I'd say there were some surprises and there was some aspects of confusion. And on a day that you hoped and some— at least I expected to find some clarity, even though I expected there to be asterisks associated with the report, I expected some level of clarity. And, and I was disappointed, we did not get clarity. In fact, I think we got more questions than we got answers. And so, so from that standpoint, there's certainly some disappointment in today's number, or at least in the way that things were presented. But I guess we'll kind of get into that. Did you want to just talk about the report right now?

Narrator: Or—

Chris: Yeah, why don't we, why don't we hit that part first. And let's just talk a little bit, you know, do corn first. Let's talk a little bit about that unless you want to start with beans, but let's do one crop and the other and I'll throw you some questions here too.

Duane

Laurie: Okay, well, let's start with the easiest one first, which is neither corn nor soybeans. Let's just throw wheat here out first. Wheat largely was statistically insignificant numbers and really had no bearing on anything. Wheat market was lower, but I don't think there was anything there of substance in the report. So we'll set that aside. And then if we go to corn, The quarterly stocks was about 100 million less than the trade expected. And I think that was kind of a surprise. A lot of people were talking about rationing of demand usage, etc., which I really didn't— I've said before, we hadn't been here really long enough to do that. But the fact that, you know, export numbers haven't been all that good, people have been concerned about ethanol usage, to have the corn stocks $100 million less than people expected. You know, that was a pleasant surprise, I would say.

And the acreage number on corn, this is the part that probably was the one of the biggest shocks, at least in terms of headline, was the biggest shock of the day. They pegged the corn acreage at 91.7 million acres, and the trade expected that number today to be 87 million. So that was 4.7 million acres higher than what they expected. To give you another perspective, today's estimate at 91.7 million was 1 million less than the March intentions. And I know you want to separate corn and beans out, and we will. But for right now, I'm talking about this acreage, I need to bring, bring beans into the mix here too. The bean number was 80 million, which was 4.5 million less than the trade expected. And that was about the same, 4.6 million less than what was expected in March.

And if you look at the combined total of just corn and beans, and I didn't take into account all the other crops, but if you look at just the combined totals of corn and beans, what was estimated to be planted on the March 29th report was 5.5 million acres more than what they had for a total combined of, uh, in here in June today. For corn and soybeans. So this— today's report was down between corn and beans a total of 5.7 million acres. It's hard to quite figure out where USDA drew the line in terms of coming up with an acreage, what was intended versus prevent plant. And as you dig into the numbers and you dig into the verbiage that they put out, it appears as though they, did nothing to address prevent plant acres. And if they did, it would have only probably been in South Dakota.

And so out of this 5.7 million less acres total today versus what they had in March, you probably have a couple million acres that were flooded out. That comes from a few different sources that have been talked about over the last 30, plus days. So you probably got a couple million, um, there. And then when you look at a state-by-state, um, in the case of, uh, you're gonna probably hear some paper shuffling here, so I apologize for that. But South Dakota was, uh, from the March report, was down 1.2 million acres. And it's possible that, um, when the surveys were taken at the 1st of June, it's possible, very possible, that the South Dakota farmer would have already known that he's, he's going to take some prevent plant acres in corn. And so that's why I say that's possible that some of that was factored in.

But if you just look at a state-by-state here on corn and compare the numbers that they had for today compared to March, um, I think you'll come to the conclusion that it's probably safe to say that USDA didn't really factor in hardly anything to do with prevent plant., and maybe a little bit of flooding, but maybe not even all of that. Um, and they factored in, uh, some reduction in harvest yield as a percent of normal, which implies they factored in, you know, some drowned out spots and things of this nature. But in the state, for the state of Illinois, um, today's acreage number was only down 200,000 in corn. Indiana was unchanged. Iowa was unchanged. Kansas was up a couple hundred thousand. Kentucky was up a couple hundred thousand. And Michigan was only down 50,000. We know there's problems there. Nebraska was up 300,000. Missouri was down 100,000. We know there's problems there.

And then you got North Dakota was down 350,000. And Ohio, they only lowered that by 200,000. And then you have South Dakota down 1.2. And it appears that what we witnessed today in terms of USDA's acreage numbers today versus March, it would appear that we saw the farmers' reaction to price changes. And if you go back to where prices were on the 29th of March, and versus where they were on June 1st, The corn prices had increased about $114 an acre. And soybean prices had been about unchanged in that timeframe. So maybe the farmer made a decision sometime between the March 29th report and say June 1st, that he was going to plant more corn and less soybeans. And if you go to May 13th, which is when the markets bottomed, At that point in time, soybean prices had dropped about the equivalent of $48 an acre of revenue from March 29th to May 13th.

But the corn prices that had probably also dropped, you know, $20 an acre during that timeframe. So statistically, I didn't think there was that big a difference there. And I felt that even in the March report, at that time, and throughout most of the winter, the outlook for beans was quite poor. And while there, the outlook was corn was still struggling, there was some level of optimism that we had had the conditions that we could see something better. And so there was already a move underfoot to plant more corn acres and less beans. Today's numbers would imply that the farmer made a decision, probably sometime between May 13th and June 1st, that he was going to plant more corn and less beans.

So on the fly during the process of, uh, of, uh, planting, he may have decided to go ahead and plant more corn acres and less beans, or at least left the impression that the— he intended to plant more corn acres. Because remember, this was report according to USDA's own context, was done in the— as of the early days of, of June. And at that particular time, USDA in their report today reminded us that it was 67% of the intended corn acres had been planted by June 2nd, and 39% of the soybeans had been planted by June 2nd. So even as of this data was done, 33% of the intended corn acres had not even yet been planted. So I think we saw a reaction to price possibly and what the farmer chose there.

But when you look at the breakdown and compare the March numbers versus today on a state-by-state breakdown, it would strongly imply that they haven't done anything to address loss of acreage due to prevent plant. There are many different sources in the trade that over the last 2 or 3 weeks have been oscillating lost acreage between 6 and 11 million, few people maybe higher than that, and in the, in the recent days had, had pretty much narrowed in that, that we probably had 9 or 10 million acres of corn that will end up being in prevent plant. And there's been some early indications from county FSA offices that, that may very well be on track to where we were at. And so today's report doesn't seem to factor in any of that.

And if you take today's numbers at face value, and then from that, You say that we, uh, a couple million acres of flooded acres have already been involved, uh, maybe out of there, and maybe a million out of South Dakota's PREVET plan has been factored in. You probably still have to take 5 or 6 million acres off of today's estimate, uh, and to come up with a possible, or at least a plausible, uh, estimate for what the final acreage number may end up being. Now that would be historically a pretty big drop to see a June acreage report versus any subsequent supplemental, you know, survey. We've never had this big of a drop before, but this is historic this year on many different levels. So at the end of the day, we might find out that the final acreage is the same or even slightly less than what the trade anticipated this morning before seeing today's USDA report.

So that's why I say it's possible. We may know less or be more confused today now that we've got the report out of the way.

Chris: Hmm, interesting. So, you know, when you talk about the acres and where this all shakes out, I mean, and then how the market responded to the, to the news and it being a bit of a surprise, is this a, you know, does this carry forward into next week? And keep pressure on the market? And eventually, does it become a buying opportunity knowing what we know supposedly as farmers? If I got my farmer hat on, I'm sitting here thinking, well, there's, you know, this is a flash in the pan. That's what I always hate about reports is, is they come out, there's the reaction, the trade loves it because they get to trade the up and down and all that stuff. But as a producer, I'm sitting here saying, you know, I'm seeing reality, which sometimes is very frustrating from the producer's perspective. Being a producer myself, looking at this saying, you know, well, what's this mean?

Is this, you know, is this pressure going to be on here for a little bit? Is it a buying opportunity? I mean, it's going to make some of us feel better that felt like we sold a little too quick. Now all of a sudden, maybe we feel better about that. But at the same time, there's going to be more to market, there's going to be, you know, more to come. So what's to come? What do you, what do you think there?

Duane

Laurie: Well, in this business, you always have to be question yourself whether you're looking in your own backyard and trying to extrapolate your own backyard into the entire country. And you also have to be careful that whatever bias you may have for a price outlook, that, that you're being open-minded in your expectations on a daily basis going forward, and it's not being overly influenced by your bias. So that we all know that that is something that we all have to to, to guard against. That being said, USDA came out today and said that they're going to resurvey 14 states in July, and then update the acreage number in the August— I think it's the 12th— August 12th monthly supply and demand report. So we know that we're probably going to get some adjustment.

We don't know exactly how that'll turn out, but The fact that there's 14 states being resurveyed— in the past, if they've resurveyed states, my recollection is it's been a much smaller number of states, and 14 states is pretty sizable. So I think they're kind of on one hand telling you that they don't really know exactly what it is, but they still came out with the data as, as of intentions. And I think the way we have to think of this is as of June 1st, say, these are the intended acres, and the acres are higher in corn and lower in beans, probably due to price incentives that occurred from March till then. Um, but I don't think, and most farmers didn't know on June 1st if they were going to plant less corn or less beans due to prevent plant, and in the case of beans, I don't think anybody had on their radar that they couldn't get their bean crop planted.

And I think that on corn, however, they did see that as a possibility. And, and so, you know, it's possible some of that was factored into this, but I don't, don't think all of it by any stretch of the imagination. And so we have, we've got another month here where we have to contend with this uncertainty, and we won't really know. And, you know, I always say that at the end of the day, we trade money here. We don't necessarily trade corn, corn and beans, we trade money. And today's price action creates some pain on anybody that was long corn, and so it probably takes a few days to digest that out. And so that might keep the market somewhat pressured or stay in, stay in soft. It doesn't necessarily mean that we have to get follow-through selling, uh, in any aggressive manner to the day's performance, but it may mean that we have to stay here.

What you're really asking is, is are we at a situation where this is it, it's all over, this is a big change, the whole fundamental outlook's changed, and the high is in for the year, and, and it's only going to get worse from here? And I don't believe that is the case. And if that's the case, the marketplace does not yet know that. And there's still a lot of growing season ahead of us. And we still have the uncertainty of the acreage thing ahead of us. So I don't think the market will even act like that's the case. I also don't think it will act like that for the reason that I don't think that the marketplace is carrying a large burdensome amount of longs in it, whether that's corn or beans, either one. And the other thing is you do have the cash market that's been very firm. And we'll see if that backs off any today or next week, I should say.

I doubt if the cash market backs off much on the old crop positions. I think it is possible that new crop positions back off some on their basis strength. If they don't back off, then it tells you that, you know, there's still a very large entity out there that thinks we have a very major problem, and they don't buy into anything that they saw in today's reports. We all know that we have acres that didn't get planted, and The people that put out these estimates of 6 to 10 million acres, or maybe a little bit more, um, there's plenty of support that, that, that may prove to be correct. The part of today's report that increases corn acres that probably wasn't anticipated, it was due to the, the decision of the farmer to, in the process of the planting season, very very late in the decision-making process, must have decided to plant more corn and less beans.

And probably that was driven by the price incentive that occurred with the corn rally. And if that's true, number one, I underestimated that because it's not that, you know, we didn't see the price incentive. It just seemed like it was awful late in the decision-making process for the farmer to make that alteration at the end. And try to scramble to get in more corn acres. But apparently that, that is what's being presented in today's report. But we still have the, the lost acreage that to contend with. And it's quite clear when you look at the state-by-state breakdown of like Ohio and Indiana, it's quite clear there's absolutely nothing addressed in terms of prevent plant there.

And you also got to go back to Monday's planning progress report that just those numbers themselves show that we didn't get all the acres planted that was intended, or at least hadn't had them planted yet as of this last week. And, um, today's acreage number is largely an intended, uh, acreage. Normal years, today's number would be seen as the final, the confirmation, this is what was planted. But this year, everything being so late, this is still just a, a estimate of what was intended. And USDA is presenting today's data as the intentions as of early June. And they seem to kind of go out of their way to say that. So as of early June, we know we didn't have everything planted. And we had less than half, less than 40% of the beans planted and less than 70% of the corn planted. So everything was still in an intention mode rather than a confirmation mode.

And so we have a lot of things that can still change here. I guess that's what I'm trying to say.

Chris: So why did it, you know, I'm just asking questions from a producer's perspective. So why did it change so much then if the market's smarter than what, probably that you're telling me that's a pretty delayed number, then that's information that, that's probably not accurate. So the market only has that to trade, I understand. So is that the, you the computer algorithms making that change so drastic? Or what, you know, why did we see such a drastic— I mean, we didn't, we didn't close limit down, but close.

Duane

Laurie: We traded limit down, we did not close there. In fact, after trading limit down, we probably rallied 10 cents off that low in the case of corn. As far as why, or is it an algorithm? You know, it's easy to blame things on the algorithm because we can't even identify an algorithm, you know, most of us. So it's easy to blame an algorithm. But the reality is, goes back to what I've said many times before, at the end of the day, we trade money. And if you happen to have a long position on and you see it going against you, you don't care what the reason is. You just see you're down $500, you're down $1,000 a contract, and all of a sudden you're scrambling to protect that and to liquidate that position. And that creates selling. And, and so the motivation really is the money. The motivation is the shock of the report or the shock of the price movement from the report.

And that's the motivation. But all that motivation quickly winds down within 2 or 3 trading sessions. Then that's over.

Chris: Okay. And that's where the flash in the pan is. I mean, that's where— I mean, it's a flash.

Duane

Laurie: So we have that influence today that kind of selling comes at the market, that kind of liquidation comes at it. And we might end up having some more of that early next week. But it might be a situation that the people that are selling for those reasons will sell regardless of whether the market's down a little or up a little or whatever. They're just looking to cut down on positions and what— cut down on risk. And so that can quickly come to an end. By the time we walk in Sunday night, Monday, we'll still be dealing with this. We'll still be dealing with margin calls related to the price movement, whatever. But people will have a chance to do exactly what we're doing right now, is to look at the report, think out loud, and not have the noise of the market moving up and down to go through this thought process.

And I think at the end of the day, what we're going to find is the narrative is going to be okay to Friday's report. Today's report was strictly still an intention report, is not a confirmation report.. And they're going to come out and survey a large number of states. They're going to give us an update in August. And then we go back and we think about all the things we think we knew. And we think we still know, and we can still see if you drive the routes, or if you call somebody up in those areas, you still get the reports that I had 50% of my acres I didn't plant, I went prevent plant, I had 70%, I had 20%. You know, we have these reports, these are facts and, and, and, uh, figures. We, and we just don't know exactly how they line up in terms of a national total, but we know they're there.

And it's quite clear when you look at today's number on a state-by-state basis that that part of the 2019 planting struggle is not at all included in today's report, with the possible exception that some of South Dakota's, uh, prevent plant acres is probably factored in. The rest of it, I would— I'm very comfortable in saying it's largely not factored in. It's probably true that some of the flooded out acres and the damage from the early floods, those are probably reflected in today's report. That probably still leaves conservatively 5 or 6 million acres that could be reduced, or today's number, Corn Acres number, could be reduced conservatively by 5 or 6 million acres yet. Just due to prevent plant. So we could find ourselves at the end, at the end of this process, saying that we're right back to where we thought we were before we got today's USDA report.

Now, I want to fast forward after having said that. There will be all kinds of people over the next 30 days will say, yeah, but look at the historical revisions USDA has done in other years, or in any year from June to a later time. And if they've had a supplemental resurvey, so to speak, that from a historical standpoint, we've never been more than a couple million acres off. And here I'm just, I'm just telling you, there's— it might be a case for 5 or 6 million acres off. And I know— so we're going to have to listen to this argument over the next 30 days about whether, you know, is it reasonable to think we could have, uh, still have that big of an acreage change from the June acreage report Or is that just foolishness? And I guess it depends on how one believes that 2019 was historic. And like, like I said before, and if I didn't say it, I thought it.

In today's USDA report, they're using phrases like, you know, historic flooding and, you know, merciless rainfall. I think they use the word merciless. So I mean, if you read their, their commentary within the USDA report, and you didn't see the numbers, and you didn't look at the price action, they just handed you that. And you read it, you know, you'd read that thinking, oh my God, this must be really a bullish report that was released today. So there's a lot of different ways to look at this. But the debate will continue, the, the uncertainty will continue, how the cash market responds will be important over the next week. What USDA does with the supply and demand report in early July will be important. Remember, they were very aggressive lowering yield in the June report.

I'm guessing they will continue to stay on that pathway, whether that means they lowered anymore or not, I'm not sure. But I don't think they'll be raising it. And they might be lowering it. And it'll be interesting to see how they handle usage. And they have to factor in the stocks report, which is less than expected. And so there's a, there's a lot of things here. But I am not of the opinion that today's price action nor the data itself is any indication that the corn market rally of 2019 is all over, nor is it an indication that it has to evolve into a trending lower pattern from here forward. I think that we will find that the marketplace consolidates I would consider today's levels as a worst-case scenario.

Chris: Like you're talking about these acres, isn't, you know, in the end, and which is a long ways from now, but in the end, isn't it about harvested acres anyway? And so like you said, you take however many million other acres out of that 91.7.

Duane

Laurie: Well, it is. That's, that's true. And if you have adversity like flooding and things of this nature, that will be reflected in a lower percentage of harvested acres versus normal. And I don't have that in front of me, what normal is exactly, nor do I have exactly what today's is. But I know when I was looking at the report, you know, an hour or so ago, I know that they did have a lower percentage of harvested acres in today's report versus normal. So to some extent, they are factoring in that to some degree. But probably not yet to the full magnitude that this year has presented it. So, but that is a factor. So it's just, it's just going to be very interesting, especially I'm most interested probably to see how the cash market responds. What's the tone?

You know, we know we've had a user out here and/or some entity that's wanted to buy this physical corn, both old crop and also to be an aggressive bidder on new crop. I'm very anxious to see, did anything happen in today's report or in today's price action that caused them to back away from that approach? Or are they still wanting that approach? Do they still feel threatened that they're going to be able to get supply? If they had been getting their information from boots on the ground in Ohio, boots on the ground in Indiana, or boots on the ground in Illinois, because this is where they tend to source their supply. If that's where they had been getting their information and the storyline about why they wanted— they were concerned about supply.

I find it very difficult to believe that whoever was the entity passing that information along from Illinois or from Indiana or Ohio is going to look outside their window or look outside their car window as they drive around this weekend and suddenly find all these acres with flourishing green corn crops. I That's probably not going to change. So if they were bare before, they're bare now. If they were flooded yesterday, they're flooded today. If they were, you know, too late to plant yesterday, they're too late to plant today. So I don't think that's how it pans out. I think that those storylines that are feeding that user to be concerned about supply, I think that will still exist. But I'm very anxious to see how that unfolds over the next week. So I think there are some realities in terms of boots on the ground that make today's report not seem up to date.

I don't want to say it's not accurate. It just doesn't feel like it's complete and up to date. Today's report probably accurately reflected the impact of price changes from March to in-season, and the producer responded to that, what the market was telling him, the market was telling them they wanted more corn and he responded. I did not think the producer would respond that way so late in this within the planning window. I thought that the— because that didn't, that didn't occur until after May 13th. So we know that he didn't get that price incentive until sometime after that. And for the first week or so after that, people didn't believe the rally. So I mean, it's almost like the decision was made in the last few days of May or June 1st. And I'm surprised, even if today's report does show that, I'm still surprised that, that, that the farmer made that decision so late in the game.

Chris: Well, a lot of, a lot of those acres are planted way after the, you know, the optimal planting window anyway. So when you look at the conditions they went in, like we've talked about in all the other podcasts a long time ago, I mean, a lot of that stuff's not very shiny. Like you said, it's not like a flourishing, you know, ready to tassel on the 4th of July.

Duane

Laurie: I'm quite sure that USDA's reduction in the month of June on their S&D report of 10 bushels an acre on national corn yield projection was solely 100% due to, uh, planting dates. And, uh, nothing— today's report changed the date you or anybody else planted your corn, so that hasn't changed. And all the agronomic reasons that we've expressed concern about before, nothing's changed about that either. But what has changed is we have some level of a larger number of acres to work with in terms of intended, okay, but then we had before, but if these intended acres were also increased in the eastern Midwest, and they ended up not being able to get stuff planted, you know, where do— where does this prevent planting come? Is it going to be a bigger reduction in corn? Is that where they ended up not doing it? Or is it going to be in beans? Or is it going to be some combination thereof?

Who knows? But the story is not over yet. We did not find new clarity today. We found maybe some new inputs, but we found no new clarity in terms of prevent plant. And we know that USDA is going to survey.

Chris: Hey, back to the— for a second on when you were talking about like the cash market. So do you think like next week, as producers, as we're watching our local cash bids for both old and new crop, you think the basis is a tell on what's really going on? If this basis stays the same or continues to, you know, to improve, that's telling us something. Conversely, the other way, right? Am I understanding what you said correctly there?

Duane

Laurie: In general terms, yes. I don't know that necessarily Monday's basis is, but as the week unfolds, if we find out that basis is holding its own, which is at lofty levels already, then yeah, I think that is telling us something, especially the new crop. And what's, what's really going to be interesting— and one of the reasons, um, I won't even address old crop, let's just look at new crop corn. One of the reasons new crop corn basis has been so firm is because on the one side you got a user that is concerned about his supply availability and he wants to get it booked. And you also have the elevator on that side and the producer. And the producer is not willing to make the sale, whether it's whether you sell on basis or sell on flat price or anything, he's not willing to make that sale.

And the elevator, which normally would be willing to go in and establish a short basis position fully expecting that over the next days, weeks, months, he was going to be able to buy corn in, and he'd probably think he could buy them at a cheaper basis. And he would be willing to take that short basis position and sell it to that user. Well, this year, that elevator is not willing to do that. And the reason he's not willing to do it is because that elevator also sells fertilizer and chemicals. And he knows he didn't get all his fertilizer and chemicals sold. So he knows the acres aren't there. He also drives through the countryside, sees that they're not there. And he talks to the farmer and knows they're not there. So that elevator is not willing to sell that user without having the corn bought from the farmer, which he does not have.

So you have to ask yourself, has anything changed today other than USDA given us a new piece of paper and some new figures? Did anything change on their end that makes them suddenly think they're going to have new supplies of grain in the corn in their trade territory that they can now go to sell to that Southeast feeder? My, my thought process is nothing has changed in their eyes. And so I think the basis will stay at what is lofty levels, and we won't see basis weaken. And I think that is a tell, but we won't know that for— until we assess the basically the next several days. That's my suspicion.

Chris: Okay, another quick question too. So like back to the, the corn and bean ratio, you know, obviously we, we closed, what, 19.5 lower on Dec corn and up 10.5 or something like that on Nov beans. So, you know, if that were to continue for a little bit yet, and that, you know, do you, you know, we talked about beans, you know, earlier in the week, you know, being a little stronger and kind of pulling corn back. To the positive? I mean, is it going to be even more emphasized? You know, if the soybeans are being positive, does that help the corn come back a little bit quicker too? Or does that not really have much correlation?

Duane

Laurie: Well, psychologically, it has an impact. Beyond that, I'm not exactly sure. I think, and we may have talked about it in some previous podcasts, that, that some people have been long corn short beans. And I felt that the beans had a potential of rallying on short covering, and they hadn't even covered all their shorts yet. And today's reports and today's price action might help to further facilitate that. And so beans may very well find some follow-through next week, especially if we could happen to get any type of good headline news from President Trump and President Xi meeting meeting in Japan tomorrow morning, which actually is— they're 14 hours ahead of us. So really, probably within probably 4 to 6 hours from now, we'll probably start to get some headlines out of that item because they were going to meet Saturday morning. And like I said, they're 14 hours ahead of us.

So by 8 o'clock tonight, we're probably going to start to hear something about that. That's my guess.

Chris: And we can talk about that stuff on Sunday a little bit too, whatever starts to materialize out of that as well.

Duane

Laurie: We do need to talk a little bit about the beans. The bean acreage today was 80 million. That was 4.5 million less than people expected and down about the same 4.5 million from the March intentions. And again, when you look at this thing by a state-by-state basis, you find that the Only place that showed any sizable decline that was probably outside of the economic reasons was South Dakota, and they were down 800,000. Other than that, otherwise, all the bean acreage stuff was much smaller increments, which implies to me that, again, we don't have the prevent plant aspect of this into it. And what we have is the economic decision and the economic influence of corn price increases versus the soybean prices. And that led to, you know, the soybean acres down 80 million. Now, if you stop and think about it, 80 million, that's 4.5 million less than March intentions.

Very few people were willing to go out on a limb and talk about prevent plant acres on beans being greater than 3 million acres. We all sat there and talked about 12 million acres, 15 million acres, whatever, that hadn't been planted. Okay, we did all talk about that, but people weren't— were uncomfortable extrapolating that comment in into an idea that we're going to get a very large number of prevent plant bean acres. And that was just this last week. We don't know how that's going to pan out. In conversations that I have from people in the east that didn't get stuff planted, a lot of the guys were saying they're done, they're, they're going to prevent plant the rest, they're not going to go back in and plant and they're past their dates, and, and they made attempts, and then they get rained out, and they're done. So we don't know how that's going to work out.

But if it's correct, that this report today on the case of beans is intentions as of June 1st, I contend to you that virtually no producer was so pessimistic that he didn't think he'd be able to get his beans planted. Okay. And yet, 3 weeks later, he was fighting it every day, every week to find a planting opportunity. So I think that if today's report reflects the financial impact, the financial influence from corn being on beans, and that caused more corn acres and less bean acres, we still have probably a few million acres to lower this bean number. And all of a sudden, we've got a bean number that's far below anything that's been talked about. So today's bean numbers are significantly different than what any of us had talked about hypothetically over the last couple of weeks. So it's very possible that the bean market has more to go to the upside in response to this report.

It's also true that we still have the fact that, that today's report doesn't change it. That a very large percentage of your bean crop was— has been planted at dates that are so far past optimum that we think there's, you know, a few to several bushels an acre on a national level that we've probably lost in production potential just based on planting the date. And it's also, as long as I've brought that up, you know, USDA, even in today's report in their weather segment, they talked about crop conditions and temperature, cool temperatures and slow development. And that was another thing they had mentioned that I just thought of again, I wanted to throw out there. So the point here is we'll see what the commitment traders said this afternoon. But we know that the commitment traders has shown the large specs still short beans. And so here we are with tonight's settlement.

You know, we're not at the highs, but we're not very far away from the highs. You know, today's settlement in August beans is probably, you know, within $0.20 of the highest settlement we've had in this entire run from May 13th forward. So the short does not have any relief here in the beans. And that, I think, makes that market well supported. And, and so the bean numbers probably appear more bullish than the corn numbers appear bearish for, if not for no other reason, is we, we're not sure that the corn number actually is the final number. And in the case of the beans, this may not be the final number there either. But the only place they got to go with the bean acreage number from here forward with an acreage survey in July is lower, they're not going to raise it. So I don't know whether the beans drag the corn higher or not.

Psychologically, it might, but we may need a couple of days for the corn to absorb what transpired today. But in the case of the beans, it will not surprise me at all if we find follow-through in beans right away Sunday night and into Monday and Tuesday.

Chris: Yeah, that, and that corn-bean ratio is so far off anyway, there's probably room for a fair correction yet between corn-bean price anyway.

Duane

Laurie: I think from a historical standpoint, it's probably a long ways away from normal and a lot of room to correct. And for months, if not almost years now, the corn-bean ratio has been tossed aside. And they say, well, we can't get back to normal because we got all— the world's got all these beans and the US has a billion bushels of carryout, blah, blah, blah. And the reality is we don't have a billion bushels of beans in the US. And that, that is, that is no longer a cloud over us. So that's no longer a crutch. We might have 500 million carryout, but I think today's report might draw that into question. But we don't have a billion. That's no longer a storyline. But that is the storyline that kept beans under pressure along with the China trade issue.

And in terms of the corn-bean ratio getting back to something normal, which has been talked about in the discussion in a manner that it kept a lid on, on soybean price potential. The main reason for that, the big carryout of a billion bushels, that doesn't exist anymore. So maybe beans have a lot more room to run in relationship to corn. Um, I'm not necessarily saying that as a prediction, but I am casting it out there as a very real possibility that is something that hasn't been widely considered.

Chris: Gotcha. Well, and that, that just emphasizes the reasoning too, why, you know, our cost of production from the grower side of things, and back to my, um, my point of view always on knowing your cost of production, it's a moving target. And, and looking at these margins along the way with the soybean side of things, as the soybean market maybe gives us some opportunities, we're going to watch that one real close too, because A lot of the growers we work with were still in the red on soybeans. And if we get some price opportunity there, that's something we're going to need to be watching in the coming weeks probably as well.

Duane

Laurie: Yeah, and hopefully there's quite a bit more potential for better prices to occur in the beans. I don't think this is something that, like today's rally in beans, I don't think this is something that, you 3 days from now, we'll find out we're lower than today's low or something like that. I don't think that's going to be the case. But we'll find out. But there was a lot of things in today's report. Pretty significant data in the soybeans. Big surprise in the corn numbers. But to whatever extent it was a surprise in the corn number, it's also, you know, we're still got so much uncertainty here that we can't really be confident at all that today's numbers are even anywhere close to what the final number will be.

Chris: Gotcha. Any, any last thoughts? I mean, we can kind of wrap up here. We'll reconvene here Sunday afternoon after we have a little bit of time to metabolize a bit of a surprise on probably both fronts here and think about it and discuss some things on Sunday. Any last comments or, or things that you didn't touch on that you're thinking of?

Duane

Laurie: I'll just— last comments, I'll start with beans. I think you take a step back view and realize soybean prices have been in the bottom side of its parameters for the last 12 years. And even the rally that we've had from May to where we're at right now, we're still historically, by modern history, quite cheap. And a large part of why we are cheap are driven by two reasons when they're somewhat interconnected. One is the lack of China as a buyer. The second is the billion bushel carryout in the US beans. And I'm here to tell you, we don't have a billion bushel carryout scenario anymore. That's gone. Okay. And so there, there is opportunity for things to get better in bean prices. There's opportunities to be— have the market be more apprehensive about the growing conditions from here forward, the month of August and associated with beans, etc. And the planting dates, etc.

So I think you take a step back view. And you're as a producer, you're not troubled by the bean price, you're not troubled by the downside risk, you got to be respectful, but you're not overly concerned or overly troubled by it. And hopefully some things will get better there in terms of price. If you take a step back view of the corn market, today was a surprise in terms of the number and the price action, and then that creates the, the forced selling, the liquidation pressures. And like I said, we trade money. And so you got everything associated with that causing selling pressures. But that can quickly be over in a day or two.

And if we are able to stabilize the corn market, and we don't generate a lot of follow-through tech-based liquidation-based selling, and I don't think we will, then if you also are able to look into the future the next 5 days and we find that cash basis tone has stayed somewhat stable, and that means if that's true, it stayed stable at what is still lofty levels. So that provides a supportive feature. And I don't think that we have to— on a step back view, we have to look at today and say, oh my gosh, this is really, really bad. And we're going to be down another 20 cents on Sunday night or Monday. I don't think that has to be how we look at it. And I think that if you take another step back view, we still have December corn today at $4.30. And if you went back in time to the 12th day of May, and you said, what's the corn outlook?

And at that time, you know, May corn or December corn was probably less than $3.80. And everybody would have said, well, the top side in the last 4 years has been basically this $4.40 zone. Okay. So if you feel bad because the corn market is down 20 cents today, I understand that. But take a look at where it is. It's at $4.31. That means it's 10 cents off the best price you've had in the last 4 years prior to the last 2 or 3 weeks or whatever. Okay. So current prices are significantly better than anybody expected in, in December, January, February, March, and the first 2 weeks of May. And if, if we are able to stabilize here within pennies of where we're at right now and basis levels are able to stabilize here, then, hey, we are miles ahead of where we were in early May. And that still is a, is a good place to be in terms of prices. And price outlook.

And that, that would, that would be constructive. That means we've gained a lot. And if we can, can manage to not lose much off of today's report, and as the time of the weekend wears on, and people get out of the emotion of the moment and in the market's volatility of the day of the report, and we start to get people to say, yeah, you know what, we're going to resurvey these acres, that probably means they're going to have some lower acres than what we thought. We still have all these other factors, cash basis still firm, all of a sudden you can find the market consolidating at price levels that were within a dime of the highest we've been in the last 4 years. If that's, if that is how the next, say, 10 days unfolds, that would be a very constructive thing.

Chris: Good deal. Thanks a lot, Duane, for bringing perspective to the listeners here. And again, we want to encourage people to, if you haven't yet subscribed, please subscribe to our podcast. You know, tell your partners or your other business partners or friends about what we got going here. And again, we're just trying to bring really good perspective and just conversation about kind of what's going on in the market. Not really any recommendations or anything like that, just really trying to have a true organic conversation when you say, Dwayne, it's just, just talking about it.

Duane

Laurie: And well, I think what we had, I think what we had today in our podcast was exactly the same conversation if we just met at the coffee shop and talked about the day. That's all we're doing. And I think everybody out there has probably had similar conversations or, or feel like they're participating in this conversation that we're having right now. And that's what we hope that's happening. We hope that we're providing value in, in a sounding board and a discussion. And, and through this process, everybody, you know, gets more comfortable and becomes more, you know, have a better handle on what to expect and how, what type of perspective things should be put into. And we'll find out. But after today's performance, if we can just find stabilization in the case of corn, that would be a big plus if we could get beans to kind of build upon today's gains.

That would certainly be a big plus. And if beans are building on today's gains, hopefully that means we didn't get any bad news out of China and US trade discussions that are going to take place or taking place pretty soon.

Chris: You bet. We'll, we'll talk about that, hit that stuff on Sunday. But it's great talking with you, again, Dwayne, and we'll reconvene here on Sunday. And we want to just thank everybody for listening. If you've got questions, please email them to us, or things that you'd like us to discuss or talk about. Again, thanks for listening to the Ag View Pitch, and we will catch you next time.

Narrator: Thanks for listening to today's episode of the Ag View Pitch. Remember, if you need to reach out to us, you can contact Chris at Cbarron@agviewsolutions.com, and you can reach Dwayne at Duane@agview.com. Michael@netins.net. Have a good day.