Special edition: Sunday night market outlook

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch, and we're going into the last week of April. And today we've got Chris Barron and Duane, and also we've got Shay on board. How are you guys today?

Duane

Lowry: Good, Chris, glad to be here.

Shay

Foulk: Yep, good weekend.

Chris

Barron: Good, good deal. So, so we're looking forward to the conversation today. We brought Shay on board to talk a little bit about old crop corn and soybeans, I guess, for that matter. But Dwayne, let's kind of start on old crop. There's obviously still some corn and soybeans in the bin. There's some people scratching their head a little bit that are looking at the markets and know that, you know, now is probably not a good time to make sales, but on the same token, there's more fear and more craziness in the environment than we've ever seen. How do we calm people? What do we think about? And do you have some comments, or can you talk a little bit about just not only managing the market side of things and thinking through some strategies there, but probably the emotional side of it as well?

Duane

Lowry: Well, when you've made the comment, how do we calm people, I would make a little bit of an argument that this last week's price action where crude oil went into negative territory, of all things, was this, you know, very historic thing for sure. And on that day, or the day following that I should say, the grain markets had a panic dump responding and reacting to crude going into negative territory. On Tuesday, and that was completely rejected, and prices reversed and closed higher. And we spent the rest— next, next day or two also trying to go to the upside, and then we finished on a weaker note on Friday. But it's possible that, you know, all markets reach a point where they have factored in the bearish news, and I wonder if we aren't getting close to that point.

And because how much more negative could the outside market influence be than having crude oil trade in negative territory this week? The grain markets also absorbed more ethanol plant closings. They also absorbed problems with the livestock industry. And so I know that we have more negativity in front of us. And we also have a landscape in front of us that makes it difficult to see where there's something positive. But all markets have, have the ability of reaching a point where it's discounted. So maybe there's a little bit of hope there. As far as basis is concerned, or old crop situation, Um, we probably have a few more weeks in front of us where basis might have a chance for improvement.

Um, but we're going to soon run out of time because nobody wants to be the last person holding the bag when the carryout, uh, last, uh, for the current year is currently projected at 2 billion bushels. And that was after having a 400 million reduction in ethanol usage. Um, but there's probably, uh, another 400 million bushel reduction in ethanol usage that could easily end up on that balance sheet. And so there is a certain sense that nobody wants to be the last one, uh, holding the corn. But the reason I think there might be a few weeks in front of us where basis might have a chance to improve are basically two reasons. Number one, we're going to have people in the field, less farmers selling. And the second reason is we continue to hear from export-connected sources that we're likely or highly probable that China is going to make some corn purchases and it's going to be old crop.

And if or when that happens, I'm not sure how the market responds, but I would, I think there might be a temporary boost in basis. And so that's another reason I think that you might have a little bit of chance, but as soon as you're out done in the field and you're looking to focus on delivering corn, everybody else is probably going to be as that be doing that as well. So I think You've got grain quality issues for storing the crop, and people were noticing that already, you know, during the winter, that the 2019 crop wasn't storing quite the same, quite as well. A lot of bushels got put away wet. And so that's another reason to, to, uh, not, uh, look to hold your inventory till late in the year, like maybe you have other times before.

But I think due to basis only looking at that part of the perspective, a guy probably has to seriously consider making sure you're moving your final bushels quicker than maybe you would in other years. And if you want to reown it, maybe paper ownership is going to be a better place to be.

Chris

Barron: I'm going to come back to you with a question on that. But before I do, you know, we've got Shay, our safety resident expert, onboard here with us today. And that's one of the things that, you know, we were just talking about before we started the podcast offline a little bit about just the importance of managing this and everything. And, you know, we talked about basis and the volatility of that. And I'll have Shay— Shay can speak to basis in his area. But like in our area, we saw basis, you know, really widen out a couple weeks ago, even before the news of ADM idling their plant in Cedar Rapids, which is the one that we go 2. And, you know, they generally, you know, burn through about 800,000 bushels per day. So it's a massive plant. And they're— and from what I've heard locally, they're down to about 300,000. So they've really idled that thing back.

And, and while the same thing— while they've done that, at the same time, our basis in the last 2 weeks has improved by about 20 cents. And it's exactly what you said, Duane, it's because farmers aren't moving any grain right now. I sold some bushels yesterday. We ran the truck on a Saturday because they were taking corn on a Saturday and they gave us, you know, they were, they were pushing it, you know, an additional 6 or 7 cents on top of the already better basis just to keep corn coming in there while planters were rolling. Shay, having said that, what's your basis in your area? And give us, talk a little bit about your concerns on the holding on to this, this old crop.

Shay

Foulk: Yeah, Chris, we haven't seen quite that movement that you're talking about there. Actually very little affecting basis, which is interesting. We have some unique— yeah, I don't want to say unique situations going on. But the Illinois River is going to be shutting down here this summer. So that's a big consideration in our area as they go to repair some locks and dams, which really just ties this whole interesting picture together of what all we have going on. And you mentioned the long-term storage, you know, looking at that from a safety standpoint, and then how it ties into marketing is if you have poor grain quality, which so many people were harvesting corn that was extremely wet, some of the corn was not mature to begin with, and drying conditions weren't fantastic throughout the fall.

So you kind of have this perfect storm, if you will, of poor conditions moving into long-term grain storage. And as we got that one-two punch of the coronavirus coming in, and then oil on top of that, as Duane mentioned, uh, conditions are not great to be moving grain right now. But it's a consideration that farmers out there need to be thinking about because while we talk about basis and some of these movements that we could see, potentially purchases from China, If you have grain spoiling in that bin, that takes away from any gains, uh, that you can see on the, on the marketing side. So looking at proper grain storage management in the spring is maybe going to be a little bit more intensive than what it has been in the past. And so some of the considerations to be taking is, you know, are you monitoring the, the moisture content of that grain?

We saw a lot of guys in this area that thought they were drying the corn down to, you know, that 14.5, 15%, and they're checking bins here this spring, they're seeing 17, 18% corn, either because they didn't have a good front moving through the bin in order to get proper drying, or it just was not right at the time of storage. And then that compounds into not only quality issues, get mold issues, and even more importantly, uh, sidewall and storage issues, which as we know are a huge safety concern, uh, not only in 2019 but especially moving into 2020. A lot of experts are extremely worried with the impacts that we could see on grain storage quality. Any other comments on that, Chris or Duane?

Duane

Lowry: Well, from a marketing standpoint, uh, Nothing trumps quality. So if there is any chance of grain going out of condition or increased chances of grain going out of condition, that really is a bigger marketing decision, or more important than any marketing decision. And if a guy wants to reown it or wants to still be long, doesn't really want to sell it yet, you know, there are other choices that they could do. Granted, they won't get the basis, uh, they won't be in a position to gain basis strength if it were to occur. But like, uh, Shay said, you know, there— that, that is just a small consideration to something going out of condition for sure.

Chris

Barron: I noticed the corn we were moving yesterday, and I told you guys offline, um, I thought we did a really good job. I mean, I babysit our dryer and watch everything going in really closely, and I'm just— this corn has a different smell, look, stickiness to it, or something. And it's just, you know, it's just different crop this year. And I think that's intensified in, in some areas, especially to the north. I know in the Dakotas and stuff, those guys You know, and so we just want, you know, our perspective is really we just want people to be safe, number one, when they're handling this stuff and, and, uh, just bring that perspective. Any other comments on that topic from you guys?

Shay

Foulk: No, I think that's pretty much everything I wanted to cover there, Chris. Um, I do have a question, I guess, directed towards you and how this ties into marketing. So what should producers be considering when it comes to, you know, cash flowing these low commodity price grains, you know, in consideration with what we just talked about there, if they are worried about this grain going out of quality, but they're not real thrilled about the prices you talked about, you know, buy it back on the board. What are some other things that they should maybe be considering there, Chris?

Chris

Barron: Well, number one is having a conversation with your lender, because if you're working with, um, somebody like Duane, and, and it's not the ideal time to price because of maybe both basis and, and flat price. Just having that conversation with the lender about why you're doing what you're doing. Back to the check the bin, check the bin, check the bin. Maybe move a load here and there if you can get a time to do that, just to make 100% sure, because what comes out of the bin tells you that. So I'd be doing, doing that stuff, but I would have that conversation with the lender. And then if you're not happy with the price, I would be figuring I'd be talking to somebody like Duane to try to figure out what, you know, what strategies are there that we could use. And that's so specific to each individual operation that it's hard for me. And Duane, you can attest to this.

I could throw you under the bus 100 times here on this call. Just because, you know, I could say, well, what do we do? You know, what's the price going to do? What do we do? Well, that is so different for each individual operation. And so, you know, if you, if you want to think through that or want to have that conversation, I think that's, that's now is the time to do that. And it always, it never fails, it always seems like, and correct me if I'm wrong, Duane, but it always seems like the best time to market grain is when you're busy doing other stuff for some reason. You know, it's when you're not paying attention and when you don't have a plan, it can really mess you up. So I don't know, I think just having a plan, talking to the lender and paying attention to, to what's there.

And I, and I, like I told Dwayne too, and you can correct me, Dwayne, on this one, but you know, if you're sitting there with 10% yet to market, that's different than if you're sitting there with 90% of your grain left to market as to what decisions you make. And then that all ties into your cash flow, you know, what your, your, what your income needs are, what your liquidity looks like, what your working capital looks like, and what your lender is okay with or not okay with. Any other comments on that, Dwayne?

Duane

Lowry: Well, I would just say this, that this is a very difficult situation that we're dealing with, and I'm talking about '19 production right now. Um, and you're correct, it does make a difference whether you're carrying 90% or 10%, but it's extremely difficult situation. Um, as far as what to do, that's going to vary from producer, what they're willing to do. Um, it's not difficult to map out a few different choices that I could offer to maybe help try to enhance the situation. But the reality is that given what we know and what we think we know looking ahead at the landscape, it's possible there won't be a lot of options. There may not be a lot of choices to improve on the situation, or if there is, none of that comes without some level of risk also.

And, uh, I think that the approach is going to have to be that let's say that you had planned to get $1 more a bushel for corn than what your current bids offer in the cash market, because, you know, you thought you'd have a positive basis and you're tied into an ethanol plant area and you're dealing with, you know, $40 under, $50 under. $1.60 under, maybe, I don't know. It's going to be difficult to get that dollar back in one fell swoop because the corn market might not even move a dollar. And so you're going to have to be looking for strategies that tries to get you back 10 or 15 cents this month, maybe, you know, over the next 3 or 4 months, maybe if you were lucky, maybe you could find 25 or 30 cents worth of strategies to put on that were low risk but had some potential, but it's gonna, it's gonna have to come back to you quite slowly.

The last thing I want to say, which is maybe this isn't exactly the right sector, but you started out the question of this conversation by how to calm people, and we also talked about the outlook here. The outlook is really negative for, from the ethanol perspective, it's negative from the livestock perspective. Uh, we don't know if it's negative or positive from the export arena. There's a few things that we can talk about there yet. Um, but I would caution everybody to understand and remember that, um, grain markets can change significantly in a matter of months. And we are coming into the time frame of the year where, you know, a lot of times we get some of our biggest moves weather-related.

But there are other factors here that may have a role to play in price discovery, and we have to be— we have to look at the what's in front of us and realistically, but we also have to remember that things can change and everybody is negative corn right now. Everybody. And when everybody's one way, there's some caution flags that have to go up. So not necessarily prediction, but just a warning to remember just how negative we are. And, you know, I just want to get that, get that point across.

Chris

Barron: Appreciate that. I'm hesitant to ask this question, Dwayne, but I'm gonna anyway, so, so brace yourself. But if a grower has— is sitting there on corn and soybeans and needs some cash flow, and neither one of them look like a good option, is one or the other a better option on old crop to generate cash and reown or, or just sell?

Duane

Lowry: If I had if I had both, uh, and I was just trying to raise cash, which is the best sale, or which remaining—

Chris

Barron: which is the least bad option, right?

Duane

Lowry: It's more quite— it's more a statement about which remaining bushel still has an opportunity for something good. And I would, uh, I believe without— with fairly high conviction, I would be the seller of the corn and I would not sell beans. Okay, and the reason—

Chris

Barron: that's what I thought.

Duane

Lowry: But yeah, the reason for that is the corn has the obvious problems. Um, the soybean market may have some similar type problems, but, um, its carryout outlook, um, might be easier to get better than, than the corn outlook might. And beans are historically still very, very cheap, um, and very cheap relative to corn. But just the price history of beans themselves, they're very cheap. So I would definitely hang on to the beans.

Chris

Barron: Okay, so now let's, let's shift over. Um, if you guys are ready, let's shift over to new crop, 2020 crop. Um, I'm going to lay a couple things out here, Dwayne, and I'm going to throw you a question, but So we've got the obvious issue with ethanol, as you described. We've got some impending potential issues on demand on the livestock side. That's a whole nother podcast just talking about what's going on in the livestock sector with what's going on particularly right now in the, in the pork industry with aborting, having to abort sows, and, and just Obviously some major issues there. My question is, if, if China holds up to their bargain and even does additional, you know, purchasing, exports look really good. Are there enough exports to offset the challenges we have with ethanol? I mean, is there any hope for corn, I guess, is my question here, having said all that?

Duane

Lowry: Well, here are the, the positive things, and then we'll just try to, uh, put, quantify them. But, um, the ethanol situation, as far as this year is concerned, you know, might end up being down 800 million bushels, give or take. You know, uh, it's possible that was floated around this past week that Reuters had a news article on it that said that they expect, or they thought, that China might take 20 million metric tons of corn. Well, that's just under 800 million bushels, so there's an offset possibility. That seems like a very large quantity, but that's just something that was kicked around in the marketplace last week. As far as the livestock situation is concerned, It's possible that can change, and it's possible that, that the longer-term demand may not be altered that much.

And the reason I say it may be temporary is it is so terrible and so awful that— what about what's going on there now? And I'm not sure that it has to be that way. It seems to me like these plants should be opening up. And I don't know how— this is a type of thing that I don't think can linger very long before some government officials come in and say, you know, we will have those plants open. They are just about as important as a grocery store, because there were rumors this week that grocery shelves in some major cities didn't have meat. And the transportation issue is is so significant to the food supply. And you just can't, you just can't every day have, you know, tens of thousands of full-grown market-ready hogs being killed and buried. I just don't see how that can last for very long before somebody interjects it. That just seems to me to be unthinkable.

But, uh, as far as the 2020 impact, um, the livestock thing doesn't have to be long-lasting. I know there are boarding sows, and I get that, and it will have an impact. But almost just as quickly, um, this could be turned around. China's— there's still talk about very large pork exports to China. They're talking about making it available for them to import full carcasses. So if we did have reduced slaughtering, we wouldn't have to process the meat and we could just ship them carcasses. Don't know if that's going to happen, but that's been talked about as a possibility. I think the livestock part of this equation at this point doesn't seem to me to be quite as long-lasting as what the, the threat to the ethanol industry is. So I'm hoping that the livestock industry will quickly take an improving course here, but maybe that's just too much logic and hope and it's not realistic.

I don't know, but I'm hoping that's going to change quickly.

Chris

Barron: Okay. So a couple of questions, and then it leads to a final sort of question, but assuming the weather is good, and I don't know, I guess I could ask you on the planning progress, you know, it looks like some areas are gonna make out pretty good and some other areas not so much, but assuming that, let's just assume that we have normal planning progress throughout the season. Does it make sense when you look at the lack of carry in soybeans? There's— I was just looking while we were talking here, so this is off the cuff. There's essentially no carry in soybeans, it looks like, and there's about 24 cents from Dec '20 to July 2021. Does that sound about right?

Duane

Lowry: That's about what it is.

Chris

Barron: Yeah.

Duane

Lowry: Uh, yes.

Chris

Barron: So Here's my question. I mean, I've had a few clients asking, you know, do we build another grain bin? I talked to our local grain bin builder the other— yesterday, actually, and he said that the steel price has gone down 5% from their supplier for their bin. And I've had several guys looking at it, you know, saying, well, You know, maybe we need to, to be able to store all of the grain and not be pricing some of it that we have to price off the combine or price out in the fall. What's your thought on that? And this is off the cuff, so I didn't, I didn't warm you up on this question. I know that.

Duane

Lowry: Well, um, first of all, you mentioned the spread. Let's say that, uh, uh, everything has a great growing season, which right now there's no reason to think that we shouldn't have that as our default expectation. But let's say it does. That spread, these July, based off history, it could go to 40, it could go even 40 or 50. So there could be a lot of carry in the futures market at that time, and that, that would be something to expect given the conditions that we're looking at that is going to paint a picture of a very large carryout next year. So that would be an argument for grain being stored. You also run the risk of basis at harvest time being quite wide, and I think that would be the case even if the ethanol industry was back online, just because of sheer supply.

Um, another reason that basis could be weaker this next fall than, than we've had for a while is I'm assuming that there will still be an export program And I think the corn export outlook is kind of optimistic beyond just China, but I think China will take a chunk of old crop grain. I think that will create a situation where the commercial is able to get rid of their long position, which I think they've been carrying since the fall of '18. And once the commercial loses their ownership, their mission in life is to, is to get wide spreads and to get wide basis. And then they want to build their facility with ownership at wide basis. All of that would suggest that we have a chance for wide basis. So at a time when nobody wants to spend money on anything, you know, the thought of putting up a bin for many people is just— it's just not going to happen.

For those that might be in a position where they could build a bin and if they actually need that bin for their storage, you know, in general, it is possible that a bend going up this fall versus selling at a wide basis might, you know, you might get a lot of return on that investment very shortly. And to the extent that the steel prices have come down, that might make it another good choice as well. And I'm a firm believer that the trillions and trillions of dollars being created out of thin air by not only the Federal Reserve, Congress, and it's happening in every country in the form of stimulus that I don't know how the outcome of that isn't inflation, and inflation by a sizable degree, which would also be another argument to put that bin up now if it was something that you wanted to do and kind of it was something you needed in your operation anyway.

So I can see, I can see the merit of it, but I also we didn't talk about it yet for the 2020, but I know that some of the new crop bids— now if you're in an area where you're ethanol heavy, this might not be attractive, but if you're in a different area that has seen some basis improvement in old crop and has new crop bids that are not too bad, they're not good compared to last year, but compared to history they're not too bad. I'm not so sure that the strategy here for 2020, the first strategy that we should be looking at is getting some new crop basis locked in.

And, uh, um, so I think part of the reason, way to avoid this weak basis outlook for new crop, uh, if you're not going to, uh, if you don't want to spend the money to put up a bin, if that's just kind of out of reach this year, then I think maybe a guy needs to be more aggressive than normal in trying to lock up a good new crop basis. And some of these places have, you know, a very good basis, I would say historically, for, you know, that November-December slot instead of the gut slot October. So if your operation is able to allow you to have harvest and, and maybe delay some of your marketings to November, or maybe you can negotiate a deal. I think that there's room for negotiation in some of these new crop bids where you can offer them a package, meaning, you know, a good-sized quantity, and you might end up getting a better bid on that.

And maybe they'll blend in some of that November-December bid into your October as well. So, um, I'm not so sure that isn't something that needs to be done here regarding 2020, and it is trying to lock in some new crop basis, maybe not on all your bushels, but maybe on a much more significant number of bushels than you would normally do. I think there's a case to be made for that, and I also think there might be some option plays that you could do that once you have committed to that basis, maybe there's something else that you could do to, to kind of spread that risk off a little bit. But I'm finding myself, somewhat, um, confident in trying to get some new crop basis sales. Again, this may not work in all locations. If you've got only an ethanol bid, their bid might be so bad, or they may not even have a bid actually.

Um, but for other areas, if you can get something close to a normal basis, I think that might be a good idea.

Chris

Barron: Yeah, I think a combination of those things sound really good. That's a great idea on just paying attention to that new crop basis. The November, um, part of it is a little bit of a stretch for a lot of our clients, I think, though, you know, if you're going to wait till late November or for sure December with the exception of last year, because guys are still harvesting yet in places. But we, we basically almost need the bin if you're going to be delivering it in, you know, late November or December. So that's—

Duane

Lowry: it might not work for these, but it is conceivable that some people might be willing to leave some feet, some acres in the field and, and use that as storage until you get to November and make a November sale. It's not something people like to do, but it is something that could be considered.

Chris

Barron: Well, it's like you said, that's, that's, that's a conversation you have with the, with the processor now though, right? Yes, I'm saying have that plan, you know, I think you also need some really good stand hybrid.

Duane

Lowry: Yeah, if you, if you offer them a package and some, you add some bushels you were going to sell for November and December on the bushels that you were going to have in your storage and you throw it in, lump it all together, you might end up getting a better bid for your October or you might get some of those November bids moved forward in October. It's just a negotiation process. And I think there is some room for negotiation in those bids because a lot of those places just not that long ago dropped their new crop basis by a dime. And again, they may not be the greatest bid, but they're historically not a bad bid. And you can certainly see a scenario where basis at harvest time could easily be 20 or 30 cents less than what is currently being quoted.

And so going back to the original premise, if you are looking at building a bin, bin, and you can't do that, and you know you're gonna have to move some stuff at harvest time, um, I think getting the basis established now might be an attractive thing to, to do. And, um, maybe these basis bids are not gonna change a lot here for 60 days. So you may not have to force in and make the sale initially, but it's a great time to have a conversation and offer some quantity out there and see if you can't get, you know, a push in their bid. And, or in some cases, I've seen it happen many a time where they can negotiate a moisture discount, maybe get a half rate, half price moisture discount. And that might help with your logistics at harvest time also. So there's a lot of different things, but it's a lot easier to make a deal on new crop now than it will be in October.

And so, um, I think maybe a guy has to be somewhat proactive on some, some of this new crop, um, bushels. And the last thing I would say to that, it's a little bit of a spread play, and I don't really want this to be seen as a blanket recommendation, but I want it to be seen as some consideration. Um, you'd mentioned that spread between Dec and July is 24 cents. History says it could go to $40, and, and if we have a super wide situation, who's to say it won't go beyond that? So if, if somebody is bidding, you know, $20 under for October and you got a spread, that's the same as being $44 under the July. And it's possible that when you make a new crop sale, you might, even though you're going to deliver it in October, November, you might want that basis actually written up in your contract to read $44 under the July as opposed to, you know, $20 under the Dec. You follow what I'm saying?

Just because the spreads could widen out at harvest time and you're going to, you're going to prefer to have your ownership based off of July because if the spreads widen, the July will have gone down the least or will have gone up the most. However you want to look at it. So, uh, that's just something for people to, to think about and to consider.

Chris

Barron: Well, that's a good point. That's a conversation piece from your, your grain buyer. That is, that's a good point. So anything—

Shay

Foulk: hey, Chris and Dwayne, Chris and Dwayne, I got one other thing here, um, and we haven't really touched on it the, the last few weeks, but I think we're in a position now where there— it's early, but there's a lot of corn and soybeans going in the ground. And I know from talking with a few of the farms that we work with, they have been making acreage decisions, and there's a lot that's questionable when it comes to that. But any, any thoughts on that as we look at new crop marketing? You know, it starts with what are we putting in the ground here? Anything we need to be considering on that front?

Duane

Lowry: Well, I would say I'm interested to hear what Chris has to say about that. But from my perspective, there was a period of time immediately following the crash in crude oil, which immediately had an impact on ethanol. There was a period of time there that the initial reaction was maybe guys are going to put in more beans and less corn. But since that time, even though the corn market continued to get weaker, the beans also weakened. And my sense is that some people that had that expectation— I know some people that had— didn't actually make a change, and they're going to stick to that change, but they weren't large quantity shifts. Large percentage shifts.

But I also know people that now are sitting here wondering that with corn prices as low as they are, bean prices aren't that attractive, that people are wondering, maybe I'm going to get more government money if I have corn acres than I will if I have beans. Plus, current prices, depending on the crop insurance program you bought, you're either already into protection, revenue protection through your crop insurance policy. If you did margin protection, if you're at 85% RP level, you know, you're only pennies away from your crop insurance kicking in. And if people— there's a lot of people that are so negative everything there, they think the beans are going to go down to crop insurance payout values as well. Well, that's still quite a ways below current values.

And so, um, some people think that if they're going to, uh, there may be more opportunities to make money with crop insurance growing corn than it will be beans. So I know that some people are starting to think, because they're very negative overall, they're thinking maybe corn is going to be the better crop to have to maneuver and maximize government payments and things of this nature. So they kind of backed away from making any changes at all. But Chris, I'm here interested to hear what you have to say.

Chris

Barron: Yeah, so we've seen some shift to beans, but I don't know, I haven't actually sat down to quantify like a percentage or anything. But we've seen some producers do some shifting. And we've seen it in our seed business here too, a little bit where growers have taken, you know, like one farm and shifted. But I think there might be some shift remorse, to point out what you just said, when people start thinking about the potential for, you know, that price loss coverage. I think I heard something like 80-some percent of the growers chose, you know, price loss coverage for corn. And I'd say in our area and the majority of our clients that I talked to, that's what we chose. In most cases. There's a few exceptions to that, but primarily, you know, so there's money, as you said, Dwayne. The other one is the insurance.

Well, you can insure, let's say, you know, $300 an acre more revenue as an issue. You know, growers that we work with have done a really good job of looking at the agronomic piece of it, whether, you know, which, which is going to give us the most bushels, because bushels at the end of the day, the best way to lower your cost of production is increase yield. So it's looking at, you know, your corn yield potential on a given farm that's of consideration versus, you know, corn versus soybeans. The thing that drives me crazy, and because I've heard it from a few, and not picking on bankers at all, but I've heard it from a few bankers saying, well, there's, there's X amount of dollars in your line of credit available, you may have to go to some, you know, a less expensive inputs for, you know, so then consequently, they have to plant more beans.

Well, It's not about how much it costs to put the crop in, it's what kind of revenue can you generate and what's the, the, um, what's practical, what's going to generate, you know, what's, what's your— and in some cases is what are you going to lose the least amount on, you know, which is a really crappy way of looking at it. But it, unfortunately, you got to look at the two of them as an apples-to-apples comparison and say which one is the better economic decision. And, but to answer your question, I had to throw that stuff out there because those are all kind of some key components to making that decision. But I, I think I'm going to guess that we're going to have a few more acres shift over to beans yet. But I agree with you, Duane, that people are reconsidering that too. So time will tell.

I think the planning progress and how the weather looks and stuff will have a little bit of bearing on that as well. But Most of them that we look at, that we analyze, in many cases they've still been better off to stick with corn. That's not the case all the time, but I still think if anybody— and I'll say it right here on this too— if anybody wants, we have a side-by-side comparison tool that takes about 5 or 10 minutes, as long as provided your numbers are good, that you can put your, your corn numbers in side by side with your soybean numbers, and it tells you almost instantly, you know, of the two crops, you know, which is most likely to be the better of the two decisions. So did that answer your question pretty good, Shay?

Shay

Foulk: Yeah, thanks guys for hitting on that. I just know with everything else going on, we haven't really been looking at that. So hopefully that answers some questions for listeners as well.

Chris

Barron: Good deal. Anything, Dwayne, that we haven't talked about that we needed to or anything. This has been a little longer conversation, but I think it's a good one as far as the perspective that, that I think we need to be thinking about in this environment we're in right now.

Duane

Lowry: Well, I guess the last thing I want to say is that whether it's this conversation or almost any conversation you would have with a producer or a trader or anybody related to the markets, We've reached the point, in my opinion, where everybody assumes it's a given that we're going to have awful prices and massive supplies. And I'm not arguing the possibility of that, but again, when everybody expects the obvious, sometimes things have a matter— they tend to change. I would point out a few different things. This week Ukraine is going to have a discussion about possibly limiting their exports on corn. A few weeks ago Brazil's prices had gotten to the point where some people wondered if they might even become an importer of— have to import some corn., because their exports were so front-end loaded, um, and add that same situation that happened in Ukraine.

Um, I know, uh, export-related contacts have been telling me for a few weeks that the export outlook for corn was quite optimistic, and that wasn't even based solely on China. So it is possible that there will be a few things come along here that will be somewhat constructive. The other thing to add into that, the big part of the problem for the corn and prices in general is energy-related, crude oil-related. President Trump directed Secretary of Treasury Mnuchin to find a solution for the, the energy industry. The premise for them wanting to dive into the energy industry is that it's seen as a strategic national defense, a strategic important industry, and they don't want to lose that industry. And the definition of lose here is they don't want to see oil wells forced to close, fearing that they might not ever come back to the capacity or production potential that they had before.

If they are forced to close. There's something about the process that, you know, they kind of need to keep the oil flowing. They also don't want to lose the jobs in the current environment. And there's an argument can be made that oil is— and energy is extremely important. And so I think the government's going to act on this, and I don't know what that's going to be, but what I think what it's not going to be is It's not going to be just a loan. It's not going to be just a check, because you can't write a big enough check to keep the oil industry open and the jobs still functioning and continuing to pump oil. I think they're going to be forced to do something more dramatic. And what could, you know, something more dramatic or drastic be? It would be a ban on imports.

It could be a massive tariff on imported crude that would basically create a two-tiered price structure where inside the U.S. crude oil would be worth a lot more than it would be outside of the U.S. Now, that might mean we're paying more at the pump, but maybe we're only paying back to what the— what we've become used to as normal. And a decision like that by the federal government would not, uh, be easy. You've got Democrats that don't want to do anything to help the oil industry, and, uh, so it's not going to be easy politically, but I think it's almost a guarantee that it's going to happen, and I think it's going to happen very, very quickly here.

Um, so I'm expecting something, uh, bold to come out of this energy, uh, sector, and I think there's an excellent chance that when they put together an energy bill that is designed to not just give a check, but designed to actually keep those wells running, uh, it's going to have to involve somehow cutting off imports. Um, and I think when, when they put together this energy bill, whatever it is, that is ethanol's best chance to get some infusion into that industry. When the USDA a week ago announced that $19 billion to agriculture, ethanol was, you know, clearly missing from that. And Sonny Perdue has found it difficult to even utter the word ethanol at any given time. But ethanol in government circles is seen as an energy issue.

So if there's an energy plan coming out, and I firmly believe there will be, and I think it'll be very bold, and I think it'll be very extremely soon that this is going to happen, then I think ethanol has a chance of getting something there that might take the edge off, um, and maybe, um, help that industry in some fashion to maybe produce and stay running at a level, uh, maybe better than what the fundamentals of ethanol may imply. I understand there's a problem with ethanol supplies. But I still sit here and find it easy to imagine President Trump calling up President Xi and saying, hey, you know, we got a problem. The global— global's got a problem. You got a problem. You really want these tariffs removed. That's where basically why China did phase one.

And I could see a deal being cut, and we wake up one day and there's a tweet from President Trump says, oh, by the way, I had a conversation with President Xi and And we're talking about some ways that we can remove these tariffs on a quicker level. And, you know, suddenly it's some packages, some massive purchases of ethanol, DDGs. And for doing that and, you know, stepping up their Phase 1 commitments earlier rather than later, you know, China gets their tariffs removed. I still think that's a reasonable possibility that something like that could happen. And the reason I bring these things up is I do tend to think they're very plausible. In the case of the energy, I think they're a certainty. I bring it up to remind people that things can change.

And so I think there's opportunities for things to change there, and I think these are things that are going to be known very quickly, and I'm not sure it dramatically alters the fact that you might have 3 billion, or maybe it's going to be a bigger carryout than that. We don't really know. Um, but there, there are things that can come along here to change the outlook. And if they had something like that happen, the market would react. They wouldn't care if there's 3 billion bushels coming or not, because it would be a new narrative than what they've had before. And so, uh, a guy's got to be mindful of that. We also have to be mindful of the fact that wheat prices are at— not at the highest level ever because we had that one year where wheat went to $20 a barrel or bushel, basically.

But you remove that year, wheat, corn— currently wheat premium to corn is at the historically high side of parameters other than that one year. And there's some dryness problems in in, uh, parts of Europe, parts of Russia, and the U.S. wheat export picture is a little bit better. But, you know, you have something developing there. I actually can build a case both driven by fundamentals and technical conditions where wheat might have a 60-cent rally here. If wheat has a 60-cent rally and you're at the high end of the parameters of wheat premium over corn, um, you would think that's going to have some impact on corn. There again, that's another area where nobody's looking at, nobody's talking about out here in corn country, but, uh, I wonder if we don't have something there that can change the landscape.

So I guess my last thoughts are, are again designed to remind people that when everybody's thinking the same thing, especially with the level of conviction that we have, and especially the level of near certainty that we know this is a, you know, where this is the elements and conditions that we're dealing with, you know, things can change. And we all, we got to do to remember that is go back to June of '19 when we thought we had, you know, 10-20 million acres of prevent plant. We thought that there, we, the price of corn could, could no way go lower. And And here we are, you know, not even a year later and we got prices sub-$3. So things can change. And the last thing I would add with that, Brazil is experiencing record prices for their beans when priced in their own currency. And that's because their currency has weakened significantly. The U.S.

dollar is 30% higher now than it was during the '08 financial crisis period. I don't know how we come out of this scenario without the dollar being significantly weakened. I don't know the timetable of that, but that also is something that could suddenly change and have a direct impact on commodities priced in US dollars. And I think that could be another potential big thing and a big change that nobody's looking at. So Again, my last comments are focused on all the different possibilities of how things could suddenly change. So it's important to deal with the realities that we're dealing with, but it's also equally important to look ahead and say, where could the next surprise come, and how do I market my grain so I'm positioned for that next surprise if it develops?

And I think that needs to be kind of a central part of marketing plans is to at least consider the merit of using an option strategy for your price protection, or leaning heavily on your crop insurance for your price protection. And maybe you choose a vehicle to navigate sales that does leave you some opportunities for upside potential. At the same time that you're trying to protect downside risk.

Chris

Barron: Well, that gives us some hope, and that's really what we all need at this point in time, I think. So, and we'll have to kind of keep watching things, and we'll stay in contact and have conversations continue as things develop. Um, Shay, any last comments from you?

Shay

Foulk: No, great discussion today, guys.

Duane

Lowry: Thanks. Hey, Gramps, I do, I do have another last, last comment.

Chris

Barron: Okay, last, last, last one.

Duane

Lowry: Yes, the other thing to keep in mind for producers that back in November, December, January when you did your cash flow projections for 2020, one thing that you're going to probably end up having in, in your revenue stream that you didn't expect then is a government payment. And if you had a government payment projection in there, there's— it appears that it's going to be highly likely that your revenue stream coming from government payments is going to be higher. So that also can factor into what is a reasonable selling price, is the fact that you're going to have more government revenue. Do you agree with that, Chris?

Chris

Barron: Yes, I do. Once that becomes a known, then, then we start to factor that in as part of, part of your revenue on the price side. To reanalyze what your, your marketing objective is. But sounds like we're a little ways away from knowing what those numbers are, and it's going to come in a couple of tranches, it looks like, too. So as, as that develops, again, I think that's an individual farm-by-farm thing, and that's where we like to try to help people analyze that part of it. Good point, though. That's a good point. Anything else? And no other last, last, last, last, last stuff?

Duane

Lowry: I actually could have a few, but based on time, we'll call it. I shouldn't, shouldn't.

Chris

Barron: Well, probably, yeah, we'll probably call it good for now. If you think of something last, last, last, we'll talk on Monday or Tuesday or something. So hey everybody, thanks, thanks, Shay, and thanks, Duane. Both appreciate the conversation. That was a good one. And thanks everybody for listening on the Last week of April, everybody be safe out there and take care, and we will catch you next time on the Ag View Pitch.