Sunday night market outlook 02-23-2020

Narrator: And it all comes down to this.

Chris

Barron: 2 on, 2 out, bottom of the 9th. The Farmers lead by 1.

Narrator: Full count, here comes the play at the plate, and it's the Ag View Pitch! Welcome everybody to another episode of the Ag View Pitch, and we're heading into the final week of February now, and you've got Chris Barron and Dwayne Lowry. What's cooking today, Duane?

Chris

Barron: Hi, Chris. I'm not sure what's cooking, but you bring that up, I'm starting to get a little hungry. So it must be getting ready to eat. Yeah.

Narrator: Yeah. Well, that's always a good thing. So, hey, let's dive right into this. We've got, you know, the end of the month here in February. What's the insurance numbers looking like they're going to shake out here?

Chris

Barron: Well, they're not going to shake out anything great. We're at just over $391 right now, $391.16 in corn, and soybeans just under $920 at $919.9. And we're running out of days to, you know, dramatically alter those numbers. So it looks like you're going to be $391, $392, and $920 basically in beans. It looks— is looking like where we're going to be at probably.

Narrator: Okay, well, it'll be interesting here, and there's going to be some insurance decisions that'll need to be made, and that's probably something we can talk about in another podcast or two here. But, uh, one of those things that I think, you know, if people haven't been out having conversation with the insurance agent, it's definitely time to, to be getting on that, isn't it?

Chris

Barron: Definitely. Uh, there's, uh, different things to look at. Some of the rates are going to be maybe a little higher than what they've seen previous years if they want to try to up their coverage. But the— probably the biggest disappointment will just be the revenue protection that's being offered through the insurance this year because of the price. That's probably going to be the bigger disappointment.

Narrator: Gotcha. Well, and there are some opportunities out there to do some buy-ups and that kind of thing. So again, I think you You know, it's probably important that, just say it again, you know, make sure we're all getting a hold of the insurance agents and getting that plan put together. So having said that, Duane, let's, let me ask you a question. You know, I've been traveling a lot. I was in Arkansas this last week and different places. And every time I tell people what airports I've been through, they run away from me because this coronavirus seems to be hot and heavy in the media. Both in the general media and in the ag media and everything. So what's your take on this? I mean, how big of a deal is this? It seems like it, you know, we talked about it maybe not being as big a deal on the front end, but the media sure is making a big deal out of it. What's your take?

Chris

Barron: The media wants to make a big deal out of everything because that's their nature of their business. They have to, they're fighting for viewership in a time frame that People don't watch the mainstream media like they used to. You know, our kids don't, don't probably even have a subscription to a cable network. They're getting every— all their information somewhere else. So they're in a fight for survival. And they're— part of that plan for them is to make everything, you know, sensationalized and try to build viewerships. So having said all that—

Narrator: Breaking news, breaking news, right?

Chris

Barron: Everything's breaking news on a continual 24-hour cycle. But having said that, the coronavirus is— it's a big deal in terms of if you live in China or you're somewhere close to where this is happening, that's a big deal. The loss of life, the infections. Those are big deals. The loss on tourism, airline industries, transportation industries, you know, hotels, things of this nature, that is a real impact and probably a tradable impact on certain stocks. In terms of agriculture, I don't see it as a factor. You know, there, to the extent that there were food shortages or temporary loss of demand in China based on quarantines of certain regions, you know, maybe that's true. But at the end of the day, everybody's eating. And the other thing to keep in mind is this does have a negative impact on, on their economy.

But as soon as they are able to contain this, China will immediately take on stimulus measures and try to boost the economy. They've already done it with their lowering their, their lending rate. They'll probably do it with easing of bank restrictions. They'll probably do it with multiple different ways to stimulate the economy. I just don't see any real short-term or long-term impact on global ag trade or demand at all. And I would argue that it's possible that we come out of this with a stimulus package out of, out of China that actually is able to ramp up demand at a greater rate than whatever amount of agricultural demand might have been lost on a temporary basis up front, which I would say is very small. So I just don't see it as anything more than a headline.

And to be honest with you, if you look at the fact that the corn market's been in a 9-cent range since late, uh, January, so basically a month, and the soybean market in about the same amount of time has actually rallied 30 cents off its lows, I don't think there's any direct correlation between price action, whether it's on a day-to-day basis or even a step back you know, longer-term window of the last few weeks basis. I don't think that the, uh, January decline in beans was connected to coronavirus. And like I said, the last few weeks certainly it can't be seen as connected to it because the market's gone up. You know, you got to go back to, uh, just off top of my head without looking at chart, probably at least a month to find a time where soybeans traded higher than they traded on Friday.

So I, I just don't see the correlation between price action and coronavirus, and I don't think there's a foundational fundamental, uh, tie-in or fundamental negative narrative coming out of that either. And if I had to stretch to formulate an opinion, I think that the stimulus measures that China is certainly going to do following, uh, this coronavirus situation is going to have much more positive, longer-lasting impacts on demand than anything that occurs short-term. And again, I recognize that we have negative economic responses from that, but they're not affected on agriculture. You're not going to— they're not going to consume less food or anything else. So I just don't see the factor, and I think the price action really backs up my theory, to be honest with you.

Narrator: So, you know, we were having a fairly lengthy conversation before we started recording this podcast. And you were talking a little bit about just, you know, being able to kind of paint a picture with a chart of kind of what's going on in the market. Talk to us a little bit about what you really think's going on with corn and soybeans. You know, obviously, you talk about this tight range and everything. And we've got all this news of coronavirus. And we've got all this this, you know, we got really strong basis on old crop and all this. I mean, what's the picture that you can paint for us, you know, going into spring? I mean, we're at the end of February, we're going into March. There's bushels that need to move on the old crop side of things. And then there's also, you know, a lot of growers still trying to figure out what the heck their marketing plan is going into 2020.

That's about 15 questions all wrapped into one, but You know, talk to us a little bit about, about some direction here, if you could.

Chris

Barron: Well, corn and beans both probably have an interesting narrative and answer to those questions. And realize that there is none of what I'm going to say is a quote-unquote definitive answer, but it is— they are, I think, hopefully valuable points in the discernment process of trying to figure out what there is to do. Let's start with corn. The first thing that needs to be said about corn is the market's been in an extremely narrow range. And when you try to analyze price action and, and try to use price action as a tool to help forecast what's ahead, which in essence we're all doing, whether we're looking at a chart or we're not looking at a chart, if the market is up or down on a given day, it has an influence on how you think about the market, regardless of whether that influence ends up being correct or not. The price action itself has that influence.

And so when the market has been going sideways here for basically a month in a narrow, narrow 9-cent range, any little— we tend to view the market under a microscope, and that usually is not beneficial. Usually when you're spending your time up against a microscope, you're missing some bigger picture things, or you're trying to force something into being more than it is. And in the case of the corn, the other thing that needs to be said about that, that the trade has had a negative or fearful or discouraged outlook to corn going back to probably last August. And from that time forward, the marketplace has been worried about large acres in 2020. And at one time people were fearful of 100 million acres being planted. I still hear that talked about. I think that more common right now is probably an estimate that is somewhere around 95 million acres. I tend to think it won't be that much.

I think by the time we get to the final numbers at the end of June, we're going to find out that the corn acres are somewhat less than anticipated, and I'll get to that a little bit later as to why that is the case. But that has created a very negative outlook. And so you have the large specs, they're short corn, been short corn for a while, struggled to ever get to a long corn position. And they've been adding to short corn positions prior to this last week. And yet we're not going down. We're still in the same 9-cent range. It is true that we are sitting here perched at the bottom of the recent zone., with Friday's, uh, price action of Friday's settlement. But I would point out that this particular move down to this $3.75, upper $3.70s in March corn, this is the 8th time that we've come down and probed this area.

And the previous 7 times that we've done that, um, if you sold at what would be the settlement on Friday, um, if you'd sold at that level on any of those other 7 times, it was a loser. You never had a chance to make a profit. Now, granted, we're in a $0.09 range, so, you know, it hasn't been a destroying type of losing position, but the market has refused to go down. The other factor that I would point out, that typically when markets liquidate and during the month of February, you always end up having a lot of producers with basis contracts that need to be priced by the latter days of February. They either have to price or roll it. And a lot of times you get to a point where the trader, the producer is discouraged and they say, forget it, just price it. I'm done with this. It's not gone up. It's not going to go up.

They're looking forward and seeing something bearish or fearful of acres or whatever the storyline might be. So this happens, you know, frequently. And so the marketplace has, in essence, a liquidation phase going on, on the cash side with these basis contracts. And with a rolling fee, a lot of people aren't going to want to pay that, especially if they're, if they're all discouraged. On the futures side, you have people liquidating March positions before first notice day because they're not going to stand in for the delivery process.. And for anybody that's trying to be bullish corn, you know, from, from October forward, it's not uncommon for them to either start out in the March contract with that reownership or whatever spec play they may be doing, or to ultimately get to the March after rolling out of the Dec. Okay, so this is a common place to have a liquidation phase.

Well, here we are, just not that many days before first notice day. And the spreads— you got March gaining on July, and the spread where that, where that spread settled on Friday is probably the tightest level that's been since July. Okay, that's not consistent with the liquidating market. So here I've already described that February in this time frame often results in, you know, liquidation activity. Well, typically liquidation activity means the front end where the liquidation is taking place is, is weak. It's weak versus in the relationship to spreads. But yet when you look at a March-July corn spread chart, we're at the tightest levels, meaning the March has gained on July, that the tightest levels it's been since July. So that's not consistent with the liquidation.

It's also interesting that the large specs are short, but they're not getting sizably larger in these shorts and not sizably larger than they have been in recent history. And in fact, on Friday's Commitment of Traders report, their shorts actually diminished by 10,000 contracts, I believe it was. So things aren't consistent here. So I'm inclined to believe that once again, for the 8th time, we are pressing and knocking on this door, and we might find that even if the door is opened, we go down, you know, a couple more cents, poke out a low, generate, search for sell stops, find out there's nothing there, and then whatever is the fundamental motivation that's causing these spreads to be firm, the firmest since July, suddenly reverse, and we find that the corn market moves higher in the last couple days of the month.

And/or during the first week or two of March, which is, you know, kind of a snapback reaction. And this is all happening against a backdrop where USDA on, on Friday offered a supply and demand projection on corn with 94 million planted acres and a carryout of about 2.6 billion. And this is after they had increased feed usage by 275 million and they had increased exports by 375 million. So those, both of those things are somewhat optimistic. You still got $2.6 billion that was in the trade all day Friday. The corn market finished down a penny and a half in the front end and Dec was down 2.5. Considering that level of bearishness, that's not much of a reaction.

So either the marketplace has already been dialing this in, which I think is significantly true because the market is— that's why trade is so negative and fearful and producers are so fearful is because of the large acres expected for next year. So that's the corn market. So it's not performed well, but it hasn't performed super bad either. It's just been in a very narrow range. But my point in this whole dialogue is that maximum selling pressure is about to end. Once we get past this March liquidation of the basis contracts, the futures positions, we get into the, into the calendar month of March, those pressures are over. And so I wouldn't think that the maximum selling pressure is at hand here. So I think that sets up for some level of improvement. I also think that the spreads are telling us something contrary to what is the main talking points.

And, and, uh, and I think the spreads offer something a little bit more optimistic. The last thing I would say regarding corn, um, and we'll talk about corn when I, when I get into the beans here in a second, the last thing I would say about corn is that, um, we have, uh, these assumptions based on these acres. But as we talk about beans you're going to see how there's a possibility that the corn acres might not be as high. And what will the market do between now and the time the farmer pulls into the field to plant? What, what's the market going to do to send a different signal? So as we go to beans, the most important thing that I see here is, uh, in February, the WASDE report lowered bean carryout for the current marketing year by 50 million bushels.

That was a surprise to most statisticians, and, um, USDA went out of their way to tell us that that was, uh, nothing in that WASDE report had anything to do with Phase 1. Uh, last week when they gave us the, uh, 2 weeks ago now, when they gave us their 10-year baseline projections, USDA went out of their way to tell us multiple times in multiple formats that Phase 1 was not part of their baseline projections. Last week in the Ag Outlooks, a material that was released Thursday and Friday— acres on Thursday and full S&Ds on Friday— they again went out of our way, out of their way, to tell us Phase 1 wasn't included. And yet they have carryout for 2021, which will be the crop we plant this spring,— and the carryout in August of '21, they have the bean carryout at 320 million bushels. Well, that's a far cry from a billion, and it's a far cry from 500 million.

And if Phase 1 is not included in that, then you have to ponder whether this carryout will continue to get lower. You know, if you go back over the last 20-plus years, I would imagine virtually every year the soybean carryout given by USDA early in the marketing year did nothing but continually erode to a smaller level. And that— it seemed as if the global demand, probably led by China, but global demand in general, was on a constant and steady climb. And it was almost as if USDA couldn't keep up with the with the demand increases. And so with the trade war basically behind us as far as agriculture is concerned, you know, I wonder if USDA isn't going back to that same model where growing demand— and in their baseline projections they talked about rising, and notably rising, increases in meat demand, in livestock production, in feed demand. And therefore in protein usage.

So, um, with a 320 million soybean carryout, I would say that that argues for the marketplace to try to generate more soybean acres. And you and I have had this discussion multiple times in the last few months about how beans are historically cheap versus corn. They, they do not dollar up for this central part of the Midwest. To give any incentive to plant beans over corn, even with corn at cheaper prices than we want to see. There still isn't a dollar-up advantage and enticement to plant beans. So as we go forward in these next 60 days, is it possible that we're going to see the marketplace try to alter the current corn and bean acreage estimates? I think that's it. Sorry about that, folks. We had a technical glitch that we lost connection there for a minute. Basically, I'll pick up where I was at and was talking about soybeans and going forward here.

I think between now and when the farmer makes that final decision, the marketplace may very well decide that it has a mission to do, and that is to try to encourage more corn— excuse me, more soybean acres and maybe less corn acres. And given the historical price relationships and how cheap beans are, beans have a long ways to go to generate that signal. So Chris, I'll ask you, first of all, is that premise correct that if the marketplace really wants to try to encourage more soybean acres and maybe less corn, what kind of price movement would— do you think would be required to, to get that type of reaction from, you know, the heart of the Midwest?

Narrator: Well, we continue to see that, that soybeans aren't anywhere close to corn in terms of profitability potential, and I don't know how to answer that exactly. I would say probably, you know, 70, 75 cents yet, um, gain on corn in most areas. In some areas it's more than that yet. It kind of depends on what your yield relationship is from corn to soybeans as well. And the other thing too is just the basis is so strong on corn relative to soybeans too in some areas that it just makes it really tough to, to try to even want to grow soybeans in the first place for a lot of growers.

Chris

Barron: Well, if what you're saying is correct, if it took $0.75, and I would say that that's probably accurate, and even then I think the incentive for the producer to plant more soybeans would probably be less about the raw 75 cents they got, because that probably really wouldn't be enough to do it, but it would be the, uh, the psychological impact that type of price rally would have, whereas the farmer would make a decision, hey, if they, if they're trying to buy acres and we don't have enough and the carryout is going to be $3.20, they're enticed to plant the beans because of what they think might eventually come not necessarily the 75 cents that did arrive. But a 75-cent rally coincidentally would basically take you back to or just above the January highs.

And at that point in time, you'd have, you know, the technical world and, and just the world in general being much more excited about what prices are doing. And, uh, so it's interesting that you said 75 cents. So I think that And that is an important narrative over price action in general over the next 60 days. And I think that the soybeans have— are in a position where they certainly can lead the upside gain. I think that soybean oil, global veg oil prices have had a massive sell-off in prices, and yet they have strong fundamental foundation about why we had the price increase that we had there going into early January, and I think those fundamentals will resurrect again. And so I think it's possible that we can have a pretty good soybean market near-term right in front of us.

And all of that is without anything to do with Phase 1 or Chinese purchases beginning to show up or anything else, which I think, um, by the time the river navigation system becomes fully operational If we're ever going to get any business, it's going to be known by then. Um, so we've got an important, you know, 30, 60 days in front of us here. And I think that, um, the soybean market has a very optimistic feel. The specs are very large shorts. Um, I would say very out of position. And, uh, again, um, for 3 to 4 weeks, the soybean market has been working higher while they've been adding to short positions. And I'm not sure that that continues without them being forced to chase and run out of their shorts. I, I fully expect that, and I think in that narrative, uh, that the impact on the corn is that suddenly people might start reducing some of their corn acreage ideas.

So the— there are some storylines here that seem legitimate to me, uh, fundamentally based, uh, foundationally relevant., and I think the opportunities for some sort of price strength here is good. The other thing I would point out with December corn here now at about $3.86, the highest that we've seen during the December, January, February timeframe was $4.04 and 3/4 in the December contract. And in the last 17, 18 years, there's only been one year that after the 1st of March we did not violate that December, January, February high., and that was during a year that we were falling off of those highs from 2012, which would be significantly different than the type of price levels we're dealing with now.

So I think there's a strong historical tendency that the producer still has, uh, legitimate, uh, historical reasons to feel that he's going to get better pricing opportunities than what he's looking at right now. So, um, I don't remember the, the entire long list of questions you had, and what— before we got cut off, but that would be my answer on your corn and beans in the near term.

Narrator: The one, one quick question before we wrap things up, back to soybeans for a second. Um, what, what's your thought there with the South American crop? There's always a lot of discussion about that, and, you know, China going elsewhere and all that kind of stuff. What's your thoughts there?

Chris

Barron: Well, people have those discussions and they act like though the China doesn't need any of our supplies. That's just That's just wrong. During the trade war, they said they weren't going to buy anything, and people had them plugged in for not buying anything, but they continued to quote-unquote offer these olive branches, which I argued from now till forever, they were never olive branches. They were, they were making those purchases out of necessities. And in the— at the end of the day, China's imports in '19 was above their 2018 levels. And they purchased U.S. soybeans, and there's not enough supply for them to not buy our soybeans. So as I understand that the South American production is large, uh, but that's something we contend with every year. And, uh, our carryout this year is now pegged at around 425 million. The year before it was closer to a billion.

The year that we're in was expected to be a billion, you know, before all the problems associated with that occurred last summer. And so the world is— has got ample soybean supplies, but we have less soybean supplies than we had a year ago, and we've got prices on the bottom side of recent parameters. And I think we— the most important thing is, is forget about the past, what's ahead of us is a rising demand base globally based on livestock production, meat consumption, and we still have US acres for 20— for this spring is still projected to be clearly too low because we're gonna have carryout decline next year versus this year, which means we're going to produce We're going to consume more than what we produce based on the current model. I think something probably has to give on that. And again, you can't look at markets, ag markets, from here forward without addressing Phase 1.

You either believe Phase 1 is a legitimate thing that China is going to live up to it, or you believe it's not. If you believe it's not, there's nothing that I can say that's going to make you feel good if you believe that they are going to fulfill Phase 1. They can't fulfill Phase 1 on just normal business. They're, they're going to be doing some stockpiling, even though they may shift supplies around and purchases around to satisfy part of it. But they clearly depleted and reduced their stockpile of soybeans during this trade war period. They have been experiencing declining corn stockpiles for probably at least 10 years, and we don't know exactly what they are, but they made this, you know, magical fictitious adjustment over the previous 12 years a little over a year ago on— in order to get their corn supplies back to something that they weren't statistically out of corn.

And we know that they had plans to do a clean air policy because that was driven by the demands of their people. They had plans to do that, that they had to scrap, and that was going to rely heavily on, on corn and ethanol and increase their ethanol production. And it was also going to result in increased ethanol imports. They had to scrap that. They didn't scrap that because they didn't— they no longer wanted to clean the air. They scrapped it because they didn't have the supplies to do it. And they were involved with the trade war with us. So I think on the windshield in front of us, there is a lot of optimism towards global demand increases, and I think that we've probably seen our worst-case scenario in terms of pessimistic viewpoints on demand. And I think those viewpoints still exist, but I think in the, in the months ahead, those are going to be changed.

And I think that Phase 1, I still am a firm believer that they will honor it. I'm not at all troubled by the fact that they are buying aggressively South American supplies in the last 30 days of soybeans. And to me, that is even a stronger indication that they are going to fulfill Phase 1 because they are buying far more aggressively ahead of normal pace for their South American purchases than they've ever done before. And I have to believe that China being probably the— having the longest history of being a global trader or a trader in general, um, they don't tend to make big mistakes. And so I think they're smart enough to realize that as soon as they start to buy U.S. soybeans again, the marketplace will start to run and race on them. And why not buy the South American supplies first It serves dual purpose. It makes everybody think they're not going to honor Phase 1.

It makes people get nervous in the US that they're not going to buy US. So they continue to soak up these supplies at what is near-term or even 12 years worth of history at very cheap values. And then they'll come to announce their soy US purchases sometime later. So I don't see anything at all concerning. I only see positive things about the fact that their demand in '19 was better than '18, and that was despite Asian swine fever and U.S.-China trade war. So I think the outlook is quite optimistic. I think USDA is tipping their hand a little bit that they, they are saying exactly the same thing I just said, that the optic demand outlook is optimistic when they lower carryout for the current marketing year by 50 million bushels during February.

And go out of their way to say it's not Phase 1, do the same thing with next year's balance sheet, increase demand and lower carryout down to 320, that's another tipping of the hand. And, you know, a little bit on the cynical side, when the U.S. and China negotiated this trade deal, there were specific quantities by commodity in that mix that was not to be announced publicly for— to protect China so that the marketplace didn't try to race them. And I, I understand that, and I think that's a legitimate stance for them to take. But it almost seems like USDA has given a directive to all their analysts to stop thinking with any Phase 1 and don't imply anything that's Phase 1, because they have gone out of their way, like I've said, to specifically tell us in multiple different venues that they're not factoring in Phase 1.

Well, that only leads me to believe that factoring in Phase 1 would do exactly what they're trying not to do, and that would be to try to offer up a strengthening price scenario. So I, I, I, I— maybe I'm the only one that looks at it that way, but I I think the, the demand outlook is very, very constructive. And if it's really true that Phase 1 is not part of these balance sheets, you might argue that in the case of corn, we have plenty of room to spare. And I think statistically, I would have to agree with that. But in the case of the beans, if there's no Phase 1 in this and we got 320 million carryout, somebody's in for a huge shock. Over the next period of months. Either the bears are in for a huge shock that China actually does buy, and all of a sudden the marketplace feels that we don't have enough acres and we don't have enough supply, despite what the South American crop is.

So I think, you know, we're sitting on something very dramatic here. And, you know, you know, you hear the term, you know, playing with fire. I don't think the Bears are playing with fire here. I think they've walked into a bomb demolitions site and they're walking in blind in the dark and they're just cutting wires at reckless abandon and not even thinking about where they're at. That's how serious I think it is. I think the Bears are just very, very vulnerable here to being blindsided by something that seems obvious to me and I'm the only one that can see it. So at least one of us here is a major fool. So I accept that I could be that fool, but right now I think the, the outlook is so much different than the rhetoric and the interpretation of price action represents. So beans look to me to be extremely undervalued.

Narrator: Well, there's definitely a massive amount of pessimism out there in comparison to some years. And it seems like every year there's a period of time when the market gets under pressure and the pessimists come out of the woodwork. And so it's always encouraging to listen to some optimistic logic, I'll call it. As you were talking there, I'm sitting there thinking, you know, there's— you're, you know, one of— out of the majority. What's that?

Chris

Barron: One of one?

Narrator: Yeah, you are the one I think that's sitting there with that much optimism, but you got a ton of logic behind it to back it up. So I appreciate, you know, and I'm sure the listeners appreciate that too.

Chris

Barron: For those that think I am a fool, I'm going to toss them a softball here and give them something to really point to that I am clearly a fool for. So, you know, how's that old saying go? Something about it's better to, to be stupid and be quiet than to open your mouth and to prove it, or something like that. I don't remember exactly how that goes, but I guess I'm about to step off into that trap. But for those that think I'm a fool, I'm gonna give you a verification of that. I think we're dealing with a situation we already mentioned where the January highs are 75 cents away from us. I think we're dealing with a situation where beans could rally $1 before any Midwestern guy takes his planter to the field. So that's the type of scope I think we're dealing with. I think the marketplace can make an abrupt change here, and I think that—

Narrator: but when we see that, that is at a time to— we need to be pulling the trigger on some of that and rewarding that, right?

Chris

Barron: Well, no matter how much I might talk about some optimistic things, at the end of the day, I am not at all telling people not to make sales at profitable levels. But for the vast majority of people, current levels are not profitable. And yet I see people that are making sales out of, out of fear. They are placing hedge orders in that are so close to current prices they might as well be current prices. And all of this is being driven by fear, and I think that's a mistake. So I think that if you are able to get to profitable levels for your operation, I certainly wouldn't want to discourage that at all. In fact, I would take the approach that it would be very, very wise to do protective measures because of my overall demand outlook. And I think the world over the next 12 or 24 months is a lot different and a lot better than what most people think today.

I have a tendency to steer people into their marketing plans for 2020 to look more towards using put purchases, uh, as your price protection, as opposed to just outright HTAs, outright sales, outright cash-forward contracts. Because I think 2020 and 2021 are two years that offer some significant potential for price scenarios to be much better than what they feel like right now. And so I think choosing a vehicle for price protection that gives you more upside potential is a good way to go. So whether that's buying puts or a combination of buying puts, selling out-of-the-money calls, you know, there's going to be multiple different strategies that one can use. But I think the worst strategy to use will be the one that offers finality with that sale.

So an HTA, a forward contract, you know, unless you're doing something separate, you know, your own trading account, hedging account, those things are very final. And I'm not sure that you're going to want to use those. And I'm not sure that when you go fast forward 15 months and you look back, what was that the best sale to— to way to make your 2020 sale? I think it will not have been. But, uh, that's just an opinion. So I'm not encouraging not to make sales at profitable levels. I am encouraging you to, um, be more optimistic and try to be patient that you will get a profitable selling opportunity. And I'm also encouraging producers to consider marketing tools that are in the toolbox, but ones that you don't normally use. And so rather than than to just grab that rusty vice grip and pliers because you know it'll fit on any bolt head.

Try to find the tool that more closely matches the bolt heads that we're going to deal with here in the next, you know, during this next marketing year, and try to be a little bit more finesse on your marketing approach. So that would be— that would be my thought of the day, I guess.

Narrator: Sounds good. Well, hey, we're getting up against time, and I think we did a pretty good job of kind of covering some things. Appreciate your, your optimistic outlook in this pessimistic world that we're living in right now, and, and backing it up with some really good logic and everything. So really, really appreciate that, Duane.

Chris

Barron: All right, I do have one last thought.

Narrator: Okay, I was afraid to ask because I put a quarter in and we get like we get $2 worth. Go ahead.

Chris

Barron: Well, the last thought is I would just encourage everybody, however they can look at price history, I would encourage you to look at soybean prices now over the last— going back to say 2007, so 12 or 13 years— look at soybean prices now, look at soybean prices versus corn in a similar period, look at, uh, corn prices now versus going back to, say, the same period. And, um, you need to recognize all this stuff is in the bottom side of its parameters. Not saying it can't get a little bit lower, but from a historical perspective, you're in the bottom 10% of your ranges. And so, uh, be very careful getting too depressed, discouraged, too bearish.

You could be very careful getting your sales scrunch up here in a narrow window at these price levels without having some way of having opportunities to participate if the market goes up, because the odds are— the odds suggest that you should be cautious in trying to get to that approach. And I've given the Bean fundamental storyline as probably the poster child for this particular argument that this is not a place to be negative beans. And if beans rise for whatever reason and they do it in the near-time window, it's probably going to have an impact on corn acreage decisions as well. So there's a lot of things could look a lot different just 30 or 60 days from now.

Narrator: Well, and I would imagine we'll stay on it and, and, uh, we'll keep your eyes on it and we'll keep everybody abreast of things on, on next Sunday as well.

Chris

Barron: Thanks, Dwayne.

Narrator: Yeah, thanks for your time, Dwayne, and again, the optimistic logic. We appreciate that. And thanks everybody for listening, and we will catch you again next time on the Ag View Pitch.

Chris

Barron: Thanks for joining us on today's episode of the Ag View Pitch. As always, you can reach out out to us at cbarron@agviewsolutions.com or duanel@netins.net. We'll catch you next time on the EggView Pitch.