Spooky season! Weekly market outlook: Oct 16-20th

Narrator: Thank you for listening to the Weekly Market Outlook. It is our pleasure to bring an industry-leading market analyst to provide you with the most value possible in your farm business. Please reach out anytime by emailing cbarron@agviewsolutions.com.

Shay

Foulk: Welcome back, everyone, to another episode of the Ag View Pitch. Today you have Shay Foulk and Matt Bennett. Matt, you are wrapped up with harvest. That's got to be a good feeling.

Matt

Bennett: Yeah, for sure. You know, this year we started, corn was 24-25%. You know, we don't always start in there, but we decided to go ahead and reward ADM a little bit. They had a free dry and shrink only type deal going. And, you know, we want to kind of get a start there. And we realized pretty quickly based on the weather and the forecast, you know, that whenever we decided to go ahead and start cutting beans, by the time we were done with beans, we knew that the corn was just going to be as dry as could be. So we really hit it hard once we got started. You know, we did throw some in the bin. We don't have a dryer with our current setup. That's in the future.

But regardless, you know, we, we hit some wetter corn, and I think it paid off for us later because we didn't get into any of that excessively dry corn, you know, that a couple of my neighbors have been talking about here over the last few days.

Shay

Foulk: Yeah, we actually just recorded a Phantom Yield Boss video with Ben Blair out of Iowa for Joe Vaclovic's subscriber-only video yesterday. So that's an interesting topic, and I think you guys probably made the right choice as you move forward there. And we were talking offline here too, Matt, sounds like you got a really awesome crew that works with you. And, you know, just congratulations on getting wrapped up. I was joking, I said, what are you going to do for the next 2 weeks? And there's always one thing to do, I think.

Matt

Bennett: So Yeah, we've got some field work to do, got some dirt work to do, you know, if this weather holds off for us. You know, there's certainly several things going on. You know, my, uh, my Nightmare House project is not finished yet. Um, man, uh, it's been going on for, oh, I don't know, 15, 16 months at this point. But it's just been, uh, you know, it's just one of those things. I want to try to get a couple of these things wrapped up while the weather's good too. But for the most part, yeah, I mean, there's always something going on, as you know, but it's certainly nice to get done this early because it gives us so many options as far as, you know, some of these dirt work projects that you don't always get a chance to do.

Shay

Foulk: It also gives you some time to be thinking about maybe some strategic things that a lot of other folks don't have time to think about right now, and that was one of the things I wanted to focus on with the Sunday Market Outlook here today. You know, we're middle October, we're middle of harvest, people are in the throes of breakdowns and WASDE reports and, you know, harvest lows maybe. What do people need to be thinking about right now historically this time of year? I'd start there, and then where are we at today with the environment that we're in? So historically, what does the farmer need to be thinking about right now?

Matt

Bennett: You know, the thing that jumps to my mind the quickest, what I wrote about this weekend that was on my mind the most is, you know, you're sitting here, you're going to come into this week with essentially half of your harvest price established. So, you know, I think you've got a pretty good crop. I had a pretty good crop, you know, but I do know there's a lot of folks that didn't. And so, you know, the crop insurance definitely comes into play whenever you're sitting here a dollar below crop insurance price, you know, or 98 where we settled here, you know, on Friday. But, you know, essentially a lot of folks have used crop insurance kind of as their safety net, so to speak, or, you know, their put option, you know. And they felt like they missed the boat as far as marketing was concerned, but they felt like they were also very much protected.

You know, now that you're halfway through the month, you know, if we would just basically march lower throughout the rest of the month, maybe you go down 50, 60 cents— God forbid, I hope that doesn't happen— but if it did, you know, your crop insurance price isn't going to be 50 or 60 cents lower, unfortunately, because you've got so much of the average already established. So that's one thing that really comes to mind for me is that this is the time of year where you absolutely have to know what you're doing. You've got to know what your plan is. And so I'm a big fan, of course, of storage on the farm. You know, I do think that a person can make that storage pay this year.

Shay

Foulk: You know, I don't I don't like the carry that we currently see.

Matt

Bennett: I'd like to kind of see it maybe a little bit stronger. I feel like it should be based upon interest and whatnot. But as far as bushels going to town, you know, I guess the last thing I'll say about whenever I'm kind of marketing here is that, you know, I don't know that I'm a big fan of paying storage right now with what storage rates are. You know, I got to think that with the cash needs a lot of producers have, they could probably be in the game still on those bushels, which I hope are few.

You know, on those bushels, the thing is, Chase, that if the market goes down, you know, between now and let's say March, whenever you're wanting to get your money, February, January, whatever it might be, if it's 25 cents to get out there, you know, for storage, you know, not to mention the extra shrink and, you know, the extra drying, but if the market goes down, you're still gonna pay storage, you know. And so we wanna be cognizant of that because I do think there's a lot of folks that feel like, The market typically rallies off the harvest low 50, 60 cents. We all know that. I think it's fairly well advertised, but that doesn't mean it's going to this year. And so, you know, I want people to understand, you know, how to approach this moving forward because this is one of the more precarious times of the year.

Shay

Foulk: Now you're talking 50 or 60 cents and talking about carry, which is, who knows, you know, 15 to 30 depending on where your area is. But I push back a little bit because you're talking to people, you know, that are listening now that kind of looked a gift horse in the mouth and saw $6 and $7 corn and didn't do something with it. And I mean this lovingly to everybody listening, but I'm going to ask the question how it needs to be asked is, are people going to have the discipline and get a plan in place to really take advantage of that bounce back if we get it or to take advantage of that carry if the opportunity presents itself or are they just going to watch it come and go again? Yeah, and I think that Thursday was a real good example, for instance.

Matt

Bennett: You took the bean market up 40+ cents at one time. Of course we closed with extremely strong gains, especially relative to what we've seen the last several weeks. And I had growers calling me and we weren't even $13 and they said, do you think we can get back to $14. I'm like, okay, okay, you know, I'm just shaking my head, rubbing my head like, oh my gosh. You know, I'm like, okay, first of all, what'd your beans make? You know, and I think it's pretty well known a lot of folks in our part of the world, especially the early beans, were just really impressive. I think even the later beans were probably beans that they would have been okay with on their early beans. They just weren't maybe as good as their early beans. So the thing is, is that, are they going to lack the discipline? I would say that's a very real possibility.

But what we have to understand, in my opinion, is that missing the boat on $6 and $7 corn is probably going to be one of the tougher things over the last several years that growers are going to have experience, because most of those growers bought very expensive fertilizer.

Shay

Foulk: And so— Yeah.

Matt

Bennett: The unfortunate reality is that '23 very well could be a year where a handful of growers—

Shay

Foulk: I'll just go ahead and say it—

Matt

Bennett: several of the bankers that I work with have people that are going to lose money in '23 in some fashion. And the reason is they booked really expensive fertilizer. So I mean, I don't want to just move right into a new topic, but of course, you want to talk a little bit about '24. Because with '24, you look at where fertilizer prices are, and yes, it's a huge relief from a year ago level. And so I think people feel this, oh, I don't know, they feel like, well, you know what, I don't have to do anything from a marketing standpoint this year because we're so much cheaper than we were a year ago. You know, and I think that makes me concerned as well because there's no question in my mind that you could be looking at a lot of corn a year from now, you know, if South America has a decent crop and if we plant decent acres here in the U.S.

Given the fact we've got a 2 billion carry, you might see corn $1 lower than where we're at today. So I think whether I'm talking old crop or new crop, yes, we have to get— if we've missed the boat and we weren't disciplined and we really screwed ourselves up, then how can we fix that moving forward? What can we do? And I would urge a grower just to look at this from a profitability standpoint. How can I lock in a worst-case scenario and still stay flexible? If there's someone that's always bullish— let's face it, the farmer typically is always bullish. And if that's you, you know what, put a plan in place that allows you to participate at least in a portion of it if it goes up. But lock in a worst-case scenario now.

Shay

Foulk: So one thing I want to mention here, and I would share my personal experience this year as I have several times throughout the year, you know, we made some poor agronomic decisions, not in fertility in our operation, but with some cover crops that we didn't get terminated in a timely manner. And I'm sitting here at my house looking out the window, and the field outside of my house looked like it was going to be an absolute train wreck, like insurance claim for sure until the first week of July. There's 4-foot-tall rye out there. You couldn't see beans until July 10th or something like that. Field went 10 or 12% above APH at the end of the day.. And it was just crazy. You couldn't explain it.

So we got lucky there, but there was a time early in the growing season, probably middle of June, when I just felt in our operation, uh, between my father-in-law and I, I just felt like we weren't making good decisions. We were getting too wrapped up in, uh, what the growing conditions were like, the lack of rain, you know, the fields look terrible, yada, yada, yada. And, and I finally just stopped and we had a meeting one morning and I said, We have got to get past this. I feel that we are caught in a rut of having all of these pressures and all of our decisions weigh on us, and we can't afford to make bad decisions right now. And, and that was my line in the sand. I said, now from here until the end of the year, we have to make nothing but good decisions because 2024 depends on it. How this year finishes depends on it. And we've been obviously very happy with what we're seeing.

I mean, you've referred to it several times in our area. We're, we're 10% above APH on soybeans and 10 to 15% above on corn in a year when we had about a third of our normal rainfall. And the switch in mindset, the story or the message here is if you're someone that's missed the boat, if you're someone that is still incredibly low in your marketing percentage for 2023, are frozen on 2024, my comment or my message to you would be just draw a line in the sand right now and say we're going to make nothing but good decisions as we move forward. And so Matt, when it comes to getting fertilizer price, when it comes to getting something on the books to protect some of that marketing, there's a lot of farm operations that really need to hear that message. So I appreciate you I appreciate you sharing that.

And, uh, you know, I appreciate the timeliness of that too, because there's, there's a lot going on right now. Uh, a lot of farm operations just have a lot of responsibilities, a lot of different hats that they need to wear this time of year. Um, with that being said, anything as we move into specifically the week ahead, and then I'm actually going to pick your brain a little further into the future after that, but anything as we move into this third week of October, Matt?

Matt

Bennett: You know, I, again, I just think that, as you said, I mean, the fertilizer discussion is a big one. I understand that some people might want to time this and say, hey, you know, due to this, this, this, and this, I may, you know, I may want to hold off on some of my purchases. But I think with all the stuff we've got going, coming from a global standpoint, I got to think looking a gift horse in the mouth, like you talked before. On commodity prices, I think you're looking one in the mouth on fertilizer right now. And so I'm not saying that it can't get cheaper, it absolutely can get cheaper. But the thing is, is that it can also skyrocket due to things that are completely out of our control with global tensions where they're at and, you know, what could happen with oil prices potentially.

Shay

Foulk: So, you know, I think that we just need to sometimes not overcomplicate things.

Matt

Bennett: And that's about all I would say about where we're at currently. But yeah, as far as moving forward, you know, So, you know, the main things I think that we've got to do is, you know, as we wrap up harvest, I mean, you get to halfway point or more, typically what you'll start to see, you know, is basis will start to improve for you a little bit, especially in some of these areas where, you know, actually they don't have 10% or 15% above APH type yields. You know, elevator systems will really push hard to get ahold of bushels once they start to see the light at the end of the tunnel. I think there could be some opportunities moving forward. I said all along early season basis was going to be pretty darn good. Middle of the season basis was going to be junk, you know, and end of the season basis was probably going to be pretty good again.

And I still believe that that's going to be the case.

Shay

Foulk: Yeah, I do want to look ahead a little bit. So, you know, looking at Dec '24, we're back to the highest levels we've been on Dec '24 in a few months now. And as Chris and I are running cost of production numbers for 2024, if this fertility is locked in, there's still good profit sitting in that $515, $520, $525 for a lot of folks. I mean, not the profit levels we've seen the last few years, but there's profitability there. What are your thoughts on '24? Do you have or know of people that are at least covered on their fertility costs for 2024? What's your mindset there, Matt?

Matt

Bennett: Yeah, I mean, my thought process all along, recommendation if you will, the discussions I've had with my growers was the bare minimum I wanted to have covered as far as these '24. If you want a flexible plan, that's fine. If it's an HTA with maybe a chance to participate in some upside, but I want some flexibility there. But I would do the bare minimum, just the bushels that it's going to take to cover your fertilizer costs.

Shay

Foulk: Now, I do have growers that are up upwards of 50% covered in some fashion.

Matt

Bennett: Now, once again, whenever you get more aggressive, you know, a year on out, then typically you have some, some flex in that type of a program. But I'm certainly— I'm not only willing to do it, I, I do that type of stuff myself. So, you know, I'm very, I'm very much on board with, you know, locking in— once again, people get tired of hearing me say it— but locking in a worst-case scenario, you know, to where I know at the very least, you know, I'll be able to let's say $40, $50 an acre, whereas I could actually do much better than that if the right things fall into place. Now, you know, there's so many tools that we can use from a marketing standpoint that I wouldn't say are speculative in nature. They're, they're actually a limited risk in nature, but they give you the opportunity to still participate if the market goes on up.

So yeah, I mean, I'm pretty aggressive as far as '24 is concerned on corn, you know, and even soybeans. I know that these are—

Shay

Foulk: I know '24 beans at $12.51 to a lot of folks don't look all that great, but you know, you're talking about a situation where Argentina is—

Matt

Bennett: it's extremely unlikely that they're going to have a worse crop than last year because it was a historic type drought for them, you know, whereas Brazil is going to come to the table with significantly more acres of soybeans. And so, you know, with that being the case, world production on beans could be awfully good. So, you know, I'm fairly aggressive on '24 beans as well.

Shay

Foulk: Hmm. Interesting. I have not heard that yet, but that does not surprise me. Again, just knowing that there's profit there's profit margin in there, and it doesn't matter whether you exactly like the numbers there. But like I said, I think finding some way to participate is good. And that leads me to my follow-up question here of 2025. Have you, have you touched that with a 10-foot pole yet, or where you at there?

Matt

Bennett: Yeah, absolutely. '25 over $5, I think, you know, I've got a couple of growers that again are fairly aggressive, you know, and they, I believe that the most I've seen anyone do is $20 to 25% of what they feel like will be their production. And I don't really have an issue. Historically, $5 corn is a pretty good place to be able to sell some corn. Now I would say, like Brian Split on my team, our technical analyst, he's made the case that he feels like we could be looking at somewhere between $3.50 and $4 corn a year from now. Now he's not saying it's gonna happen. He just says there's a very decent chance that it could based on a variety of factors. And of course, charts are one of the main things he's looking at.

If that were the case and you were sitting here on a $5 hedge, if you did get that depressed on prices, then there are some opportunities there where you can cover that hedge and participate if the thing goes on up. But again, when historically you're at good prices, after riding this wave, you've got to look at a couple different things. And one of the things you have to look at is how do the markets perform after multi-year highs? And after multi-year highs, typically the markets perform like crap. And so, you usually have 2 to 3 years at least, you know, of what I would say are depressed markets. Now, yes, it's a global marketplace. Things have changed since the rally of '08, since the rally of '12, you know. But if we have anything like we had following the rally of '12, you know, that '15 through '19 ballgame was just zero fun whatsoever.

Shay

Foulk: Yeah.

Matt

Bennett: I would say my best sales, you know, for '13, '14, and '15 were made during the height of the rally of '12. I wasn't at the tip-top of it, but I was just looking out over the course of the next 3 years and said, you know what, I don't know how these prices could be bad prices. Now, I've done that before, and they ended up being bad prices, don't get me wrong. But when you're looking at historically very strong prices, typically, if you want to hang your hat there on a portion of bushels, I think that it's a good risk management tool. And I'm not scared of these $25 or $5 one bets.

Shay

Foulk: It. Yeah, interesting. And, and I would remind people too, when you talk of that multi-year high, uh, we're still in the multi-year high year, you know, being 2023. So that ugliness that could be ahead of us, uh, we're, we're not, we're not even getting into it yet. I also wanted to reference here before we wrap up, you know, uh, the, the pricing for insurance, period. I think we're somewhere Is it $4.90 on corn? And I don't remember exactly where we're at on soybeans. So it would take a significant move to change that. I mean, you know, you would need drastic movements actually in order to change those numbers at this point, correct?

Matt

Bennett: Oh, absolutely. Yeah, you would definitely need a pretty strong move. But yeah, I just think that, you know, once again, I think one of the main lessons that I'm going to try to help folks with as I go out, you know, over this winter is just going to be '21 and '22, we made extreme profit margins. Like, we got spoiled a little bit, which was fun, you know, but it's not normal to have those kind of profit margins. And we've got to realize that, you know, there's nothing wrong with making $100, $150 an acre if that's what we can make, you know. I mean, those were really good years for most, most people's careers. So, you know, expecting to make $300 to $400, $500 an acre, you know, in '24, you're probably going to be, you know, fairly disappointed.

Shay

Foulk: Yeah, well, I think we need to wrap up here. Any final thoughts, anything you want to close with here for the farmers that are sitting in the combine seat this week or maybe twiddling their thumbs thinking about, hey, you know, what do I need to be doing from a strategic standpoint?

Matt

Bennett: You know, I just, I always think there's something to be doing as far as, you know, as far as putting your plan in place. And again, I think this is an extremely strong time for, or a good time, if you will, you know, to make sure you know what you're doing and to make sure that your bases are covered. And if, you know, there's some really good folks out there that can help people. I mean, even if it's just your banker, even if you're not wanting to do a, you know, a risk management plan, I think that a person has to understand the ramifications of doing nothing at this time.

So the last thing, of course, I just hope everyone, as they push towards the end, I know we always struggle to take the breaks that we need to, and then we just have to force us, force ourselves to do so, but just to be as safe as you can be, because I know, you know, as rapid as this harvest has gone for most people, people are getting pretty wore out.

Shay

Foulk: Yeah, it's interesting, the harvest always seems to get done every single year. I'm not sure how that happens, but we always get there. So I appreciate that advice. Matt, thank you for the time here. If anybody wants to reach out to you, what's the best way that they can get a hold of you and your team?

Matt

Bennett: Yeah, just the best way is just to go to agmarket.net. You can get any of our contact info, check out our research and the technology that we put out there as well. So agmarket.net.

Shay

Foulk: Very good. Matt, thank you so much. Yep, absolutely. And thank you everyone for listening to another episode of the Ag View Pitch, and we will catch you next time.