Sunday night market outlook 11-10-2019

Narrator: The Ag View Pitch is created by Ag View Solutions to provide value to its clients and farmers like you. We'd like to welcome our new listeners today and encourage you to check out our other podcast on The Ag View Pitch, which can be found on Apple Podcasts, Anchor, and Podbean. You can also find us on Facebook at Ag View Solutions and online at agviewsolutions.com. Enjoy.

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch. And as we head into a new week, you've got Chris Barron and Duane Lowry here to have a little conversation and perspective on what we might be seeing in the new week in the markets. How's it going, uh, Duane?

Duane

Lowry: Good, Chris. Um, we'll, uh, talk about the USDA report, but, uh, First, let's talk a little bit about harvest. How's harvest going for you, Chris?

Chris

Barron: It's going. It's interesting in our area in northeast Iowa where we're located, there's a massive shortage of LP, and I know there's, there's significant other areas that are experiencing the same thing. So we've got a lot of growers across the state of Iowa that are, that are either short or completely out of LP and stopped at this point. We're seeing that in some other states as well in pockets here and here and there, where it seems like the pipeline is just not, not delivering the product like, like they, you would think they would during the heat harvest. But I think we're running, what, a month late with harvest. And so I think a little bit the industry is caught off guard a little bit too, just in the amount of volume that, that is being requested in essentially the middle of November.

Duane

Lowry: I mean, so far to date, how much, uh, in percentage terms, how much more LP are you using than you did, say, a year ago?

Chris

Barron: Well, in our operation, we're, we're almost double the amount of LP of normal. Um, I would say, you know, we always look at, you know, what are we— how many bushels of corn are we getting through the dryer per gallon of LP? And we're, we're running, like I said, about 50% of, of what we did the last, say, the last 2 years. So we're getting, you know, maybe 6 to 7 bushels of corn dried per gallon of LP. And, you know, normally we're 12 to 14 or something like that. So it's, it's going to be an expensive ordeal, like we've talked about in the previous podcast, just on the, on the cost of production impact that that's going to have. But there's another interesting component to that too. And, you know, we were just talking offline before we started the conversation here about the impact of that bringing some bushels to market too.

I think, you know, in our, our local area, and I've heard from some others in some other pockets and in other states as well, where if, if the growers are out LP, you know, option 2 then is in order to keep combining, you just start hauling the corn wet to the processor or to the elevator or to wherever your, your destination is, so you can keep keep combines rolling. And so that, that is in fact given, I think, the processors and/or the some of the elevators, some of the, the corn they want, which I don't know, that's the question I'd throw at you. Does that, does that pressure basis a little bit more in the next week or so as we move further into harvest?

Duane

Lowry: Well, it's probably true that that's been part of the reason for the basis weakness that been experienced at some locations during the last week. But I think it's also interesting to note that despite the fact that the farmer is a little bit over the barrel here, and he needs to move some grain, the processor at the same time has given some moisture discounts and still has basis levels well better than normal. And they haven't backed it off that much. They backed it off, but not, you know, a lot. And so it still implies a relatively tight market and still implies that the processor wants it.

The other interesting thing is, to the extent that this is all true, and the farmers being forced to move grain into the pipeline, whether that's his local elevator, maybe for storage or DP, or whether it's into the processor, either one, because of his lack of LP, and he wants to be able to continue to keep harvesting because it's late. I mean, they're, you know, they want to do whatever they can to keep advancing the, their harvest percentage. But to the extent that that's happening, that also means that when LP becomes available, it's very possible that the processor better enjoy those bushels because they may be the last bushels that he receives from the farmer too.

Chris

Barron: Yeah, they're delivering I guess, what do I want to say, preemptively or whatever, you know, that those overrun bushels are coming now in a lot of areas, I guess, to your point. So for sure, but it, to me, you know, I talked to the truck driver, we had a tanker in here at our operation yesterday, and I talked to the driver and, you know, I said, how long do you think this is going to last? And he said, until harvest is over, you know, I mean, his point was You know, they're so far behind, it's like, you know, you're just, you're not going to catch up. So it's just a matter of trying to keep everybody somewhat operational and specifically in those areas where, where they're really low, it's going to be tough to ever catch up.

Duane

Lowry: So yeah, I'm sure that's true.

Chris

Barron: Yeah. Hey, so let's, let's get into a little bit of a recap on the report and we'll kind of get into, you know, what that might mean for the markets in the new week. But give us some of, some of the highlights, you know, what out of that report, what, what do you, did you glean out of there that, that is something that as farmers we, we need to take away from, from it? Is there anything in there that, that we need to be aware of or, or think about?

Duane

Lowry: Well, the first thing that probably needs to be said about Friday's report is they managed to thread the needle and, and disappoint both bulls and bears. I mean, the The bulls were disappointed because we didn't get much of a yield change, although the corn yield was down from last month. Bean yield actually was up a little bit, but let's talk about corn. So the corn yield was down, but not by very much. So bulls were disappointed in that aspect. They expected something a little bit more dramatic because they felt we had more harvest done and thought that we would get something, you know, a little bit more of a significant change. The bears were disappointed because over the last several days to 2 weeks, the bears were quite building an enthusiastic stance towards that, very stance over the last several days.

And they expected that they would get a larger estimate than what they got. And so they were disappointed as well. The result ended up being kind of a wide-ranging, erratic performance with settlements not that far from unchanged considering it was a report day, but USDA, uh, came in at 13.661 production. That's down about 118 million from last month, and, uh, yield came in at 167. That's down from 168.4 last month. Harvested acres were not that much changed. The ending stocks came in at 1.91 which is down only about 19 million bushels from last month. That was probably down less than what the trade had anticipated. So in terms of how much it changed from the previous month, that's not very exciting considering that the market has had a— been in a correction mode since about the 15th of October, almost a month now, and that was after experiencing probably a 6-week rally phase.

This amount of— this, uh, USDA report, um, may have been kind of, uh, been— might have been kind of a climax to the correction event. If we can't get more weakness following a USDA report, which would be kind of like a new input, if you can't get new weakness after that new input, and yet the markets put forth a lot of energy into a a bearish stance over the last several days, then all of a sudden, you know, the tables kind of turn. And where's the bear going to get its next level of new energy? I don't think they're going to be able to look to the cash market and point to some new bearish input there. They were, they were betting a lot on getting something bearish out of USDA, which, you know, we might have got something that was disappointing to the bulls, but we didn't get enough new energy for the bears either.

So I would imagine that it's going to be difficult to build downside momentum after building up anticipation of a bearish report for the last several days. And if we can manage to get the trade above Friday's high, which is about 6.5 cents above where it settled on Friday, then all of a sudden all this energy that was spent the last several days weakening up corn values is going to be turned into a short covering process. So The report itself is not that significant, and I think that is not conducive to, to building downside momentum. The other thing I want to point out about this report, in the case of corn, I think it's interesting to see where we're at. And in this particular report, they peg yields at 167. We go back to June 1st, in the June report, they had yields pegged at 166.

So, uh, as of the 1st of June, when they projected this 166, we had, um, 54% of the corn crop was not even emerged yet. On July 1st, they projected the crop at 166, and we still had 6% of the corn crop not emerged. And then in August, we went to 169.5, backed it off to 168.2, in September, increases in October to 168.4, and we end up here Friday at 167. So all that's happened from the 1st of June, uh, forward has managed— USDA has managed to keep yield projections in a 3.5 bushel range, with Friday's estimate largely in the middle of that range. Either that tells us they're absolutely brilliant in their ability to forecast production before the growing season is really underway, since, you know, much of the crop wasn't even emerged when they first came with this number, okay, at 166. Either they're extremely brilliant, or they really haven't addressed what that harvested yield is.

Maybe they haven't addressed that harvested data completely. And I don't know the answer to the question, but I just find the whole thing at minimum very interesting because, um, if they haven't addressed the harvesting completely, did they tip the hand by lowering it 1.4 bushels from October to November? I mean, that was the largest they'd moved that production scale, um, since, uh, They went up in August to 169.5. Since that time, each month, it had never moved 1.4. And yet Friday, they offered a 1.4 bushel decline. That was the biggest move they've had. So I'm not sure, I don't know the answer to the question.

But number one, I don't feel personally that the yield is low enough yet based on, you know, a large influx of data from farmers, crop scouts, etc., of actual harvest data, where you have large areas of key production states in the east that are significantly below a year ago, and you got areas in the west like in Iowa that was considered probably one of the garden spots, where we do have fields that matched or even some— a few cases exceeded last year, but you also have areas in, in the state of Iowa that were, you know, 10 to 30 bushels an acre below last year. And how that all comes out to only being down, you know, about 9 bushels from last year, I'm not sure that makes sense to me. I accept the fact that USDA is judge, jury, and executioner, and whatever they say, that's what it is until they tell us differently.

But, uh, you know, we were just reminded in September that USDA isn't always exactly right at every moment in time when they lowered last year's soybean production by 1 bushel an acre in September of the following year. So I am, I'm a little suspicious of two things. One, I'm not sure they have fully factored in the data that's occurring during harvest. And secondly, I find it interesting, and I, I tend to think it might be a tipping of the hand, that from last month to this month they lowered the yield 1.4 bushels an acre. And I think it's very possible, if not probable, we're going to see further reductions before they come out with their final yield estimate in January.

Chris

Barron: Okay, that sounds good. On, on the report, let's, let's stay on the report for a minute and, and Switch over to beans. What about highlights on soybeans? Anything there that, that stuck out to you or any, anything that we should be aware of as producers on the soybean side of things in the report?

Duane

Lowry: Again, I think there— USDA's lack of a major change is, is quite significant. I don't know what it means, but I find it quite interesting. Uh, again, they, they came out with the yield on beans of 46.9 that was unchanged from October, that was slightly above what the trade expected. They came in at total production at 3.550, which was virtually identical with what they did in October. So are they telling us that the crop didn't change from their October estimate? Or are they telling us that they haven't fully computed what the yield is yet? And I don't know the answer to that question. An argument could be made that Maybe they want to see more harvest data. I don't know. Maybe they want to see the latest harvested data before they come out with a number. I'm not sure how to respond to that. But here again, I think it's interesting to also go back to where they were at.

On May 1st, they had a yield projection of 49.5. Okay. On June 1st, when 81% of the U.S. beans had not yet emerged, they were at the same 49.5. So they did not make an adjustment in yield based on planting dates as of June 1st. By July 1st, you had 17% of the U.S. bean crop not emerged, and they only lowered the yield at that time 1 bushel an acre to 48.5. So throughout all the planting dates, the, the emergence dates, all the lateness of the crop, they only lowered yields by 1 bushel an acre for that input by itself. Okay, and then if you go from what— where they were at on July 1st at 48.5 versus where they are Friday at 46.9, that's only down 1.6 bushels an acre. But yet it's also important that in between that time, at the end of September, USDA lowered last year's by 1 bushel an acre.

So you would— wouldn't it be reasonable to assume just like you have to recalibrate your combine, wouldn't it be reasonable to assume that if they in September of the following crop year decided that they had the data that said they had to go back in time and lower the previous year by 1 bushel an acre, okay, wouldn't that imply to them that maybe they got to recalculate their yield formula for the next year? And if that's the case,— since they're only down, um, 1.6 bushels an acre from July versus Friday, and you had in that middle of that time had an adjustment of last year downward of a bushel, that implies hardly any reduction from the 1st of July to where they're at now. And we've already covered the fact that they hardly reduced anything due to planting dates at the beginning of the marketing year and all the calculations.

You throw all that together, all that's happened in 2019 left what I would consider to be a minimal reduction in soybean production. And yet, and I want— after I'm done talking, I'm going to throw it on to you, Chris, to respond. But It seems to me that you could go almost any place in the major Midwest growing regions, as well as the outside parts of the Midwest growing regions, and find that yields are consistently below last year, and not by a small amount, and often being, you know, a quantity measured in double-digit figures from down from last year. Well, double-digit figures implies a 20% reduction or more, and what USDA came out with is down about 7.3% from last year. So, um, I, I'll throw the question on to you, Chris.

With USDA hardly offering any changes really throughout the entire growing season, are they telling us the crop— it didn't matter that the, the crop was 81% not emerged on the 1st of June, and the sunlight and the photosynthesis had no impact. It didn't matter that we had soybeans under snow in North Dakota. It didn't matter that we had green beans freeze. It didn't matter that we had beans end their growing season early because of freezing temperatures. It didn't matter that we had all this lack of sunlight? And, and does it not matter that we hear broad yield reports that are talking about yield reductions much more significant versus last year than what we're getting from USDA? So I throw it back to you, Chris. What, what is wrong with this picture? What am I missing?

Why is USDA hardly changed their yields at all from the beginning of this marketing year to the end despite all that we've gone through?

Chris

Barron: Hey, and you're asking me that, that's kind of funny. I'll tell you from a farmer's perspective, I can't answer the USDA question, the why behind that, I guess. But, you know, what all I can do is tell you, you know, our cross-section of the world is growers in, you know, multiple states across the Corn Belt and outside of the Corn Belt. Few instances. But what we've seen on average is, you know, and it's not a statistically significant number, but it, but it is having communicated with a lot of growers, and we're seeing somewhere between— and I think I mentioned in an earlier podcast, we saw the trend occurring and it's maintained— of about a 13 to 15% lower yield than we saw last year, pretty much across the board. There's a few exceptions where there were some areas where the beans were actually quite a bit better, but they're few and far between.

So I guess I would just concur with you. I mean, I don't, I don't know how to answer the USDA question, but I can tell you that our cross-section of the world, which is usually pretty representative, you know, it's not all the growers and it's not as big of a sample size obviously as the USDA has, and what they say matters and is what counts, but I can just tell you from our client base, 13 to 15% reduction in yield hits it pretty close. I don't know if that answers your question or not.

Duane

Lowry: Well, given the answer that you gave, and being on the conservative side of that, that implies a yield— and based on your percentages, that implies a yield that's about 3.5 bushels less than what USDA offered to us on Friday. If that were to be correct, that implies, uh, carryout—

Chris

Barron: is that being conservative? I mean, are you—

Duane

Lowry: you're saying that's on the bottom side of the percentage estimates range that you gave me while you were talking? Okay, that's another 3.5 bushels below what they gave on Friday. That's about 270 million less bushels. And if they've got carryout pegged at, uh, let's see, what did they have pegged at? Uh, $475. That gets you down to about 200 million carryout, okay? And, and this had— none of this has touched harvested acres, which by the way, going back to corn as well, harvested acres has, has hardly been touched at all. And going back to when we had the acreage report and data, there was widespread belief by number crunchers and analysts, uh, in the industry, not myself, that, uh, felt that harvested acres would ultimately end up being lowered, probably in beans and certainly in corn, was kind of the tone.

And they also indicated that harvested acres probably wouldn't be dealt with in any big way until they got the silage data. And I'm trying to think when that comes out, but I don't think it comes out until possibly not till January. I'm not sure, maybe it's in December, but I, I find myself thinking it's January. But we're doing this broadcast on the fly, so I didn't think that we were going to talk about this, so I didn't check into it. But I think it doesn't come out until January. Well, since that time, there have been Other people that have zeroed in on this idea that harvested acres might yet decline by 2 or 3 million acres in the case of corn, and I don't know by what extent in beans, usually they don't change a lot.

But given, like I said, the conditions that we experienced in the, in the north with snow and some frost early ending seasons, it's possible that, that either yields are down or that some acres maybe don't get harvested. That's certainly a possibility. But there's still things in the, in ahead of us here in terms of harvested acres that could surprise us. And we have seen, you know, USDA come up with some pretty notable yield adjustments from November to January in the past. And with this year being probably one of the latest harvests on record, it's, it's seems reasonable to believe that this year would have an increased chance of being possible to have a big reduction or a big change. I'll just say it that way, a big change from November to January.

If that is true, then I, it finds myself, I find myself going back to what I had said earlier that suggests maybe USDA has still not gone out into the deep end of the water and has just got their toes in the water, so to speak, and hasn't really made a clear and concise statement about what that production potential is. There's a certain element of me that wants to say, like they did last month where they kind of punted and didn't give a yield production number. I find myself thinking maybe they didn't this time either. When, when you have bean production unchanged from October, November, and you have yields unchanged from October to November in beans, when we should have more data, I find myself thinking they haven't really addressed it. So I think we're still faced with a situation where we could have, still have, a significant change in the final numbers versus what we got on Friday.

Now, how do you feel about that?

Chris

Barron: I agree. I mean, but I don't know, I still find myself wondering though, you know, if the, if the USDA is being hesitant mainly because, you know, everything is so delayed, there's still a pretty significant— you probably have the number there of how many soybean acres there are yet to harvest. And, you know, and obviously there's a ton of corn yet, and it's almost like they're delaying, you know, you talk about the— well, they punted last month. It almost looks like, you know, they're— maybe they are tipping their hand a little bit, but yet at the same time being conservative to not, you know, to not be so aggressive when they're still yet to get the real information actually comes off the combine, you know, is where the rubber meets the road.

And it's almost like, you know, it's, it's, you know, let's hold back and, you know, give the numbers we've got, but not, not get too aggressive here with the expectation of a ton of harvest yet to go.

Duane

Lowry: Well, we, we definitely are behind normal, uh, in terms of harvest progress. In the most recent report, as U.S. as a national level, we were 52% harvested in corn, we were 75% harvested in beans. Personally, I think that's enough data for USDA to, to make a little bit more of an aggressive stance towards yield, but when you look at the data they released It does give you the flavor that they're really not given a full look, and maybe they are holding back until they see more data. And maybe if they're using lot, they're holding off because the latest harvested would— was the latest planted and might have quite a deviance. And so, you know, if you give USDA that benefit of the doubt, um, Maybe, well, that's just it. I mean, come yet.

Chris

Barron: Yeah, I mean, that's just it. I think, you know, with half the corn yet to harvest and 25% of the soybeans, that's, that's giving you, you know, all the rest of the beans yet to harvest are primarily with the exception of where they got snow and everything else. They had some issues with— no, it didn't matter the planting date, but a lot of areas that are yet to harvest are those areas where it was the really late planted stuff. And you know it's going to be not nearly as good. And, and the same thing for corn. Not to mention, you know, I was at a meeting with a large processor earlier this week and their indications were— and there was about 20 employees there, high-level ones I was able to talk with and listen to their conversation in a hallway. And one of the big things they were talking about is the light test weight.

In the corn and the concern they had with what that was going to mean for their margins, um, and, and some things. And, and, you know, wondering if that was going to continue. And if they're already getting light test weight and those kind of issues, you know, what's that mean as we get into the later planted stuff if they're already seeing a lot of light test weight?

Duane

Lowry: Well, let's use that for a little jumping off spot here. All right, um, you brought up the light test weight thing. Before we went into harvest, we have talked about the idea that, you know, how that test weight, how that quality plays out, will have an impact on the usage and the consumption efficiency and things of this nature, nature. So let's also give USDA the benefit of the doubt here, and let's say that they haven't strongly made a statement about what these final yields are. And the, the small variance from month to month would certainly suggest that that's a plausible possibility. And we also know that from October or November to January in history, we have seen some sizable changes. Okay. And with this being a very late year, it would not be unreasonable to think that that sizable change might still be ahead.

And now you bring up this low test weight thing and, and the idea that we may see more of that in the latter part of the harvest season. That brings up the idea that in the future when we start to get these quarterly stocks reports, we may find that the feeding rates and the consumption rates are, are better. Um, where it's taking more corn to get the same result on the, on the, uh, feeding ration end. So that is something that we can look at and wonder about. We also have to go back in time and look how strong basis was all summer despite this, you know, 2 billion carry-in that we were supposed to have. We also have to look at how strong basis has been during harvest versus normal and how much abnormal amount of push there's been in bids during the harvest season.

And how abnormal it has been to find processors coming up with other enticements to try to get the farmer to move grain to their facility, such as half rates or reduced rates on their, on their drying or their moisture discount schedule and things of this nature. All of this stuff implies a tight cash market that the, the, uh, user is not able to build the supply to the extent that they hoped. And now we have the LP situation moving some supplies into the pipeline that maybe otherwise, otherwise wouldn't have, or would have occurred at the end of harvest, but not have occurred now. But all of this, to jump off into more of a market assessment standpoint, again, we had a 50-cent rally in the corn market from early September to mid-October. Since that time, we've had a 30-cent correction to Friday's low.

Okay, that's, I think, about 25 days up and about 19 days in correction, and it's a 60% correction. If we look forward and we look at the cash market, the tightness, expecting basis and spreads to narrow in the, into the winter, expecting it to be difficult to get for the farmer to release those bushels, make sales, because he has higher costs associated with drying costs like we've already talked about. In many cases, he has lower amount of— fewer number of bushels to market than he did a year ago, and he's got less gross cash flow and less net cash right now than he projected that he would have sometime this spring or— and things this nature. All that suggests that maybe this 50-cent rally and this 30-cent correction, a 60% correction, might be part of a bigger move yet to come. And that's what I think is the case on the technical side.

And with that being said, with Friday's low, uh, a 60% correction— I'll ask any technician out there, how often does it pay to sell into a market that's had a 60% retracement if that market is in fact in a trending higher pattern? And I think that's a very reasonable and plausible scenario that it is in a trending higher pattern since the 1st of September, and it's not unreasonable to think that that trending higher pattern can continue into the winter months. And so if that backdrop is somewhat close to correct, then virtually no technician is going to tell you selling into a 60% retracement is going to reap you rewards. Instead, it's most likely you're going to cover that short position with loss. And then keep in mind how much the market has been selling aggressively in the last week. And then further to keep in mind is the large specs have been short corn here for some time.

And further to keep in mind, in the spring they were short corn, they got ran out with sizable losses. In the summer they got— finally got long corn, They got ran out with sizable losses. In September, they were short corn. And they've had to— they've been forced to cover a sizable amount of that position with a loss. And they are still short. And I suggest that they might— they have a history of losses here, and they might have more losses ahead. So the corn market outlook to me has a lot of different reasons to be much more encouraged than what current trader sentiment is right now today.

Chris

Barron: Okay. All well said. And as we head into this next week, based on some of the things you just said, you know, and you can touch on corn first and then hit beans, but, you know, what, as a farmer, do we need to be thinking about going into this, you know, next week or two, and especially this, this next week? On decision-making and stuff, you know, from either a technical or fundamental, whatever sticks out in your mind on either crop do we need to be paying attention to as we, as we head into this next week?

Duane

Lowry: Start with corn. Based on what I just said, in the case of corn, I don't think we should expect a lot of weakness right here. The market absorbed a lot of selling going into this report. They were not able to get a report that fed on that negative energy. And we ended up having a wide-ranging, wide-ranging day. We ended up with a higher close, which not by itself means a lot. But we are into a correction phase that probably doesn't have a lot of more downside energy to go through. As far as what the farmer has to deal with in the next week or two, could he possibly experience some additional basis weakness because more bushels moving into the pipeline because of the LP situation? Yes, that's possible. Is that likely a long-lasting trend? No, it's highly likely that's a very short-lived thing. And once harvest is put away, basis will have no place to go but to strengthen.

Chris

Barron: But by short-lived, Dwayne, by short-lived, you mean a couple of weeks, right?

Duane

Lowry: Correct.

Chris

Barron: 2, 3 weeks. Okay.

Duane

Lowry: Right. And otherwise, we've had a, a strong basis theme as a backdrop, uh, when we had a lot larger supply, uh, than what we, uh, think we have now. And we have, uh, the farmer has the entire marketing year ahead of us to make sales. And, um, I'm guessing that, uh, as of right now, the producer that had contracted grains probably already delivered it. If he had some extra bushels that he wanted to eventually market, he's probably in the process of marketing that now because of the LP situation, and the selling pressures going forward could be significantly reduced, and so basis levels could strengthen. And I think ultimately that leads towards a futures market strengthening as well. And, you know, a lot of times going into the report is kind of a maximum amount of activity and anticipation. As soon as that report's gone, somebody ends up being disappointed.

Like I started out this broadcast, bulls and bears both were disappointed from this thing. But the, the energy and the focus in the last several days has all been on the bears anticipating a bearish report, and we really didn't get that. We might got some disappointment, but we didn't get a really bearish report. And I think Friday's price action response seems to kind of give merit to that conclusion. And so finding new sellers after getting a lot of new sellers in the last several days and now having the report behind us that, that didn't give them the downside energy they thought they were going to get, now trying to find new sellers in the futures market may prove to be very difficult.

And if we are able to get enough strength to get above Friday's highs, which are 6.5 cents away, all of a sudden the potential to build some short covering and short chasing activity, I think becomes very real, real. And I would say that's the most probable scenario.

Chris

Barron: What about soybeans?

Duane

Lowry: New week. Well, I don't even know exactly what the focus on the bean market is going to be, to be honest with you. You know, we've got China has been buying, they've been showing up in the weekly export sales reports, they've been showing up in the daily reports. That's all constructive, but that's not necessarily new news. The U.S.-China trade agreement seems to be proceeding down a path that is favorable towards completion and signing of a deal. I'm not sure there's something new there that we're going to find out on. The bean market also has been in a correction mode since mid-October, and in relative terms, this has been a very shallow correction. And the price that we settled at on Friday was at $9.31 basis Jan beans. Well, the first time we got a settlement at about that same area was on the 25th day of October.

And since that time, you know, you have about 15 days that have— trading days have evolved, and 10 out of those 14 out of those 15— excuse me, 10 out of the last 11 settlement prices have been in a 7.5-cent trading range. Now you got the report behind us. They were not able to build downside energy from that report. We didn't make new lows following that report, and those lows were made on the last day of October. We've not been able to build downside energy there. That's not a good technical sign if you happen to be a bear. And the, the correction events that we've had since the first September have been shallow, and even the current setback we've had is still a shallow correction by most standards. If they're not able to build downside momentum with the report, now that the report's behind us, I don't think that's going to generate new selling.

Here again, Friday's highs become very significant. You get above Friday's highs and all of a sudden you're only a few cents away from having the highest values you, you will have had in about 3 weeks of trade. So the, the market needs to quickly build downside energy here or else the bear is going to be forced to the exit door. I think the bear is going to be forced to the exit door because this report did not deliver enough negativity to, to build downside energy, and the correction is almost a month old, that it's getting pretty mature and probably due for some reversal of activity anyway. So I don't see a lot of downside, uh, ability here to build up, develop any momentum. And like I said, it doesn't take much strength and you'll have the highest values you've had in 3 weeks, and all of a sudden you're back to, uh, building some upward energy.

I think it's also worth noting that the large specs, even though they sold during the last week, they've still been long the marketplace for at least 5 weeks. And they probably for 4 or 5 weeks before that, they were in the process of covering shorts, which means they've been buying the market here for several weeks. And my guess is that sponsorship is going to continue. So the cash bean basis has been strengthening. Spreads have been in a little bit of a correction mode. But if the futures market starts to turn back up again, which is what I think is going to happen, basis and spreads are probably also going to firm. So here again, in the beans, I don't see a lot of downside. I don't see a lot of ability to build downside momentum from either a fundamental perspective or from a technical perspective.

And the technical conditions require very little strength that before it starts to trigger some enthusiasm for not only new buying activity, but also short covering activity.

Chris

Barron: Yeah, the other tell in soybeans I think has been, and you mentioned it, is the improvement in basis we've seen. And I've been texting to you some of, some of the emails and text messages we're being getting for them to try it, for the processors to try to enhance growers to, to bring, bring stuff in. You know, we'll, we'll take beans at 16%, you know, was one of them I think I sent you, with no discount and some other things. I mean, so they're obviously all of a sudden getting starved in some areas for, for soybeans and starting to realize that, you know, the basis, you know, the market can lie to you, but basis really doesn't. And so that really tells you kind of what's going on in some of these areas and how either the beans aren't there, or guys really did a good job of stashing them away, or else they haven't harvested them yet, or some combination, all the above, I guess.

Duane

Lowry: Yeah, and that processor industry is, is about the most, uh, you know, um, they act like a princess. I mean, they want the smallest amount of hours to dump. They force trucks oftentimes to wait 6 hours in line to dump. They're never open on weekends. And yet you told me you were shipping here a couple of Sundays ago, they were open on Sunday, and there was like 3 different farm operations that were bringing them beans. You know, a lot of people have asked me in the industry, especially the cash side of the business, where's all the beans? And we had a billion bushels virtually carryover from last year, we're in harvest. And, you know, all you hear while you're at line in the processor is cricket sounds. I mean, Why is that? Where's all the bushels at? And, you know, don't know, I don't have the answer for that. But it's very, very interesting situation nonetheless.

Chris

Barron: For sure. Well, as we kind of wrap things up, we've kind of touched on going into a new week. Is there any, any other things that we haven't hit on as we kind of wrap up the conversation here?

Duane

Lowry: If there's something we haven't hit on, it's strictly by accident.

Chris

Barron: Feels like we've been a long podcast. Yeah, we've talked about a lot of stuff here, but I think that's good. You know, it's really, you know, like we said in the past, these conversations aren't scripted or anything. It's just you and I having a conversation here for perspective on kind of what we're seeing. And hopefully if anybody listening would like to reach out to either Duane or myself, let us know if there's things that we aren't talking about that you'd like us to address or things that you'd have questions on. Duane would be happy to answer any of those questions, wouldn't you, Duane? Absolutely. Sounds good. All right, well, um, thanks for the conversation today, Dwayne. It was a, it was a good one, and hope everybody has a productive, uh, upcoming week here and can get some things done.

It sounds like the weather is going to be a little dicey in a few areas, and, and we just hope everybody stays safe and, and, uh, keep at it, and eventually we'll get this crop in. So thanks a lot, Dwayne, for the conversation. Appreciate it.

Duane

Lowry: Alright, thanks Chris.

Chris

Barron: You bet, and thanks everybody for listening, and we will catch you again next time on the Ag View Pitch.

Narrator: Thanks again for listening everyone. If you would like to hear more content from Ag View Solutions, listen to our other podcasts such as Dad's Wisdom or our Current Harvest series. Ag View Solutions works as an integral part of operations like yours, side by side for farm profit management, business collaboration and structuring, facilitating industry-leading peer groups, and coaching and consulting tailored to your farm's unique needs. We know that no two farms are the same, and we are here to help make your farm be the best it can be.

Chris

Barron: You can learn more at agviewsolutions.com, email us at agviewpitch@gmail.com, or call Chris Barron at 319-533-5703.

Narrator: We really look forward to talking with you.