Sunday night market outlook 12/1/2019

Chris: Welcome everybody to another episode of the Ag View Pitch, and today you've got Dwayne Lowery and Chris Barron here as we look into a new marketing week and have a conversation around that. How's things going, Dwayne?

Duane

Lowery: Uh, good, Chris. Um, it's a new week. We got the first half of the holiday period behind us. We start a new month.. And we've got the USDA report for the month of December to look at, but basically we're going to start the slate with a new week with kind of all traders back, all hands on deck type of thing. And so it's going to be interesting to see how we start out the new month.

Chris: You bet, you bet. So there's a lot of harvest still going on, especially as you go to the north, and just a lot of, a lot of challenges out there for growers and stuff. And And, you know, so when you take a glance at the markets and how we ended last week, you know, we saw on Friday a lot of green on the screen for corn, you know, 6 to 8 higher, and beans not so much. And I know we talked offline, you know, corn was only up a couple for the week. But, you know, when you see that strength on a Friday like that, does that mean anything for the corn?

Duane

Lowery: Well, I don't know if there's an answer to that question that you could, you know, use every single Friday for a judgment. Moment. But looking at what we dealt with last week, and looking at what we've been doing for the last couple of weeks, the corn market had kind of been stabilizing here for more than a week. It did have a dump on Wednesday, a lot of that had to do with liquidation of positions before first notice day. It had to do with, with the cash market as contracts were people had stuff priced against the December contract where they were forced to either price it or roll it. And sometimes, well, almost all the time, the, that ends up being a weaker time window for pricing because they know that they've got people who are caught that are going to be forced to do things.

And a lot of times, especially when people are depressed and discouraged, as we've noted around here for the last few weeks, A lot of times people will just opt to price it and be done with it rather, and out of disgust rather than to, to roll it. And so a lot of that pressure was done on Wednesday. But I think the most important thing that we saw on Friday was the fact that we had no deliveries against the December corn contract. And that was a significant part of, I think, Friday's strength. And then we come in here tonight and we already know what the deliveries are for tomorrow. And that was no deliveries again for Dec corn. And so if you're short in the corn market, you're going to start to get nervous that, well, gee, if there's not going to be any deliveries, I got to get out of this short position because I'm not going to deliver it, that type of thing.

And so I think that was part of the probably the most significant part of Friday's corn strength. And I think the fact that we have no deliveries again I think tips the scale towards a better start on Sunday night for the corn. The other thing I want to point out last week, the wheat market has been performing relatively well for a while, but last week Chicago wheat was up $0.23, Kansas City wheat was up just about $0.14, and corn, like you said, finished up $2.75. Beans, on the other hand, they were down $0.20. Well, why were beans down $0.20? I don't have a good fundamental reason because I don't think there was a good fundamental reason. We're down 26 on liquidation pressure, chart pressure, disgust, throw in the towel, end of the month selling, take your pick from that anywhere you want, but that's part of it.

Some will point to the fact that we've had some uncertainty about the U.S.-China trade deal. I think that's true, there's been some headlines along those lines, but if you take the same logic and apply apply it to the stock market you can't make that same square peg fit into the circular peg of the stock market. The stock market did not react the same way the grains did so I don't think you can blame it all on the U.S.-China trade. And so looking at for this week, not just Sunday night but the week in general, the wheat market is performing well, probably will continue to build some momentum. We've got wheat above the October highs to put in perspective. The corn market performed well on Friday. That was the highest we settled corn since the 15th of November. So that's the highest settlement in 2.5 weeks worth of trade.

That's an abrupt turnaround for anybody that's caught short the market. So I think that tends to bring in some buying into the corn market this week. I think because we didn't have any delivery, everything will start out the week firm based off that right away. And I think you'll have short-term technicals encouraging people to try to buy the corn market as well. The bean market is the one that, you know, we're trying to find that point where the last of the liquidation pressure and the chart selling and the discussed selling is finished. Anytime you go into the end of the month, which is what we had on Friday, you know, there's always a good chance that your trend activity could be culminating at that time as people try to square up positions and they feel compelled to be forced out by the end of the month, that type of thing.

So in the case the market is going down, you get maximum selling pressure. So hopefully that's what we had on Friday. I don't know that I have anything fundamental to point out. You know, maybe we'll talk about the China and US-China trade talks and, and we're talking about that and we'll get into that later. But for right now, just recapping last week, I don't think any of that points to us starting the week lower this week.

Chris: Okay, what about soybeans? I mean, they've been kind of ugly on the screen. What, what's your thoughts there?

Duane

Lowery: Well, the first thing that people need to understand when they're looking at beans is they need to understand where beans are at from a historical relationship. And from a historical relationship, beans right now are at the bottom side of its relationship to corn values basically since, uh, 2008 forward. Okay. And the, the, the weakest they got to in that relationship was, um, uh, this spring and summer. So since that time, they've, they've kind of— soybean prices in general have improved a little bit, but they're still on the very bottom side of, um, price parameter relationships with corn basically since 2008. So soybean prices, my point here, soybean prices are very, very cheap when you compare it to the price of corn. And, uh, so that's I think the first thing that needs to be said.

Second thing that needs to be said is the type of selling pressures that we've had in the last week in beans where it was, uh, well, it's more than just a week, But I think off the top of my head, I don't have this written down on my notes. But I think we are in the last 3 weeks, maybe a little over 3 weeks, we've only had 3 days with a higher settlement in beans. So that's a very oversold condition. Those type of moves don't tend to occur at the beginning of a move. They don't tend to occur in the middle part of the move, they tend to occur at the end of price moves. So I think this price action is consistent with a, a washout, a culmination phase, and I don't think this is going to prove to be the trend.

And usually when these types of price moves occur where you get such dramatic one-sidedness, uh, and, uh, determined, you know, forced liquidation, uh, type of an atmosphere, usually it is something that precedes a pretty dramatic move in the other direction. Gotcha.

Chris: So, um, as we move forward, are there any, any things that farmers need to be doing? I mean, we've talked a little bit about, you know, the need for cash flow, having to move some grain. We've talked about basis and all that stuff. Is there any comments you want to make going into this week on anything from the cash side of things to echo what you've said in the past, or, or anything that the growers should be thinking about?

Duane

Lowery: Assuming the crop is harvested and put away, the farmer has no incentive to do anything here. It is true that basis levels are historically quite good, and somebody will argue that maybe that a guy should be selling basis here. If the futures market were to stage a good-sized rally, that might prove to be— have been a good move. But like I've mentioned before, if you're wrong about the futures market rallying, you know, you're not going to be very happy that you gave up basis here because otherwise basis is— looks like it's going to stay firm and has plenty of room to improve. So I still favor the idea that the farmer needs to look at flat price structures and look at a flat price that works for his operation. Current flat prices given reduced yields that most people had this year, it just doesn't pencil up, it doesn't dollar up.

And we're not even close and we're at the beginning of the marketing season. So I still opt for the producer to not do anything, sit on his hands, not give up the physical ownership to any type of cash connected contract that allows you to give up those physical bushels thereby giving up all your leverage to your cash buyer, and then converting that to a piece of paper. I wouldn't do it. Not— and if somebody says, well, I need the cash flow, well, then make that decision at that time. If you, like today, say, well, at the end of December, I'm going to need cash, well, then make the decision on how you handle that at the end of December. But I'm not willing to make that commitment now. I still am one that believes the USDA has overstated the crop yields on both corn and beans. I think they've overstated harvested acres on, on corn.

I don't have an opinion on harvested acres on beans, but I think they've overstated the harvested corn acres. And I still think there's a chance that we'll get an adjustment of that in either the December or the January reports. USDA has already indicated that they feel this is a very abnormal year because they've already said they are doing a resurvey of harvested acres with, I think it's 80,000 producers here in the first 2 weeks of December that will be part of that January report. That's unprecedented. They've not done that before.

Chris: Interesting.

Duane

Lowery: I think already telling that we have a situation that is quite— and we have seen large yield changes occur between October, November, and January. So For me to sit here and say that I still don't believe what USDA offers, that's not an unrealistic approach, and his history says it's not unreasonable to think there's still time for a change, and it can be a notable change. Considering the fact that this year's harvest is so much later than other years, that also adds to the credibility of at least pondering the possibility that we could have some notable yield changes coming up in this January report.

And again, going back from the producer level, since we're at the beginning of the marketing season for producers, why in the world should a farmer feel compelled that he's got to liquidate inventory, take all risk off the table, close the books on 2019 when current prices and, and reduced— what vast majority of producers experienced it just doesn't dollar up. This will be his worst year in the last 4 years. Why, why does one feel compelled to do that? Especially again, uh, U.S. livestock numbers are up everywhere you look. Feed demand is going to be very good. Ethanol, uh, uh, data this marketing year is actually quite constructive. So I think there are plenty of reasons for the farmer to not be discouraged.

And I would suggest plenty of reasons for him to be optimistic versus today's prices were versus what he might sort of get before he's forced to go to the spring next, or go to the field next spring. And if, if that still doesn't seem believable, then I ask you to look at what has basis done from May through current date, it's been very, very firm. And I don't see any reason to think that it's not going to be. Like I've mentioned before, the cash elevator that— what the co-op, the commercial elevator, they've come out of this harvest with one of their smallest long basis position that they've had under a normal harvest production type scenario of at any time. They have a very small ownership. And that suggests to me that basis levels will be very strong. So I, I see no reason for the farmer that's got his corn in the bin.

I don't see that he has any urgency to make a decision or make a move here, and I think his price targets should depend on what his operation, uh, where he needs to be, make, make everything work. Now some people will say the marketplace doesn't guarantee you a profit. That's certainly true, but the The, the, the, it also doesn't guarantee the livestock feeder guaranteed a profitable price by his grain either. And again, we're at the beginning of the year. The farmer does not have to make a decision here, and I see no reason that he should.

Chris: Gotcha. So that, that makes sense, you know, and I think there's a lot of, a lot of growers to the north and, and, and a number of them in the middle of the country yet too, still chipping away at harvest. And so It's just going to get probably more interesting and more information. And like you said, as we get closer to some of the reports, we'll get— become more and more informed. And if we don't have to, to move the grain for any specific reason, that makes a lot of sense. So let's transition.

Duane

Lowery: The last thing I want to say before we leave this segment, the last thing I'd say is, from what I have heard, the last part of the harvest, which would incur would involve the June plantings of corn and what remains out there to be harvested. All of that stuff experienced a, what seemed to me when I listened to people talk about their yields, that seemed to be a notable reduction from where they were, get what they were getting for corn yields prior to entering into this final phase of harvest. Did you hear anything that suggested differently?

Chris: No, there's, there's, you know, some isolated cases where yields were better, but the majority of everything we've seen with our clients, yields are off, off the pace, you know, 15, 10, 15%, if that's what you're asking.

Duane

Lowery: Yes. So, all right, that was the last thing I want to say on that.

Chris: Gotcha. Well, actually, what I want to do, Dwayne, is, is just kind of transition over a little bit briefly here on You know, you and I talked offline just for a minute there kind of on, on the trade talks as we go into the month now in a new month. Any comments on, on that that you want to make for the listeners?

Duane

Lowery: Well, number one, nobody knows what's going on with these US-China trade talks. And that's the proof of that is the fact that, you know, they've been— they've lasted for so long. So with that as a disclaimer, that still doesn't prevent us from trying to use our own discernment and come up with reasonable and logical conclusions. The most important thing that happened in U.S.-China trade talks over the last several weeks is the fact that they continued to talk and they continued to talk despite having some hurdles and obstacles to that. The second thing that was most important that happened in the development of the U.S.-China trade talks was the Hong Kong situation that went from being, you know, kind of a difficult thing to manage and wondering how that was going to play out versus a direct confrontation when the U.S.

House and Senate passed legislation basically supporting the protesters and supporting democracy. That put the legislation on President Trump's desk desk. Everyone knows that President Trump is not afraid to speak his mind and is not afraid to be loud, outspoken, and controversial. But on this entire Hong Kong conflict, he has been very careful not to be very outspoken. And when that legislation was in the process of being passed, got passed, came onto his desk, he had very little to say about it. And when it came to the time that he was going to sign that legislation, which I think was Wednesday afternoon or Wednesday night, whatever it was, he, as he wrote his response to that, he said that he was doing that out of respect for both the protesters and President Xi. So he was very careful and diplomatic about how he addressed that.

And he did it without any you know, loud bluster, and he did it probably the way we would expect most presidents to do that, but for President Trump to do it without bluster was saying something. And throughout that, the trade talks continued. I find it interesting that here on Sunday, the official China state media and the newspaper arms of the state media are talking about what China wants in phase one. Okay, the fact that there is still a phase one on the table, the fact that there is still a discussion, to me speaks volumes. That means that all the negative comments that China offered for, uh, President Trump's signing that legislation and/or the Congress even passing the legislation to begin with, all of that was largely for domestic consumption. Okay, it was not for— it did not reach high enough on the bar for China to end trade talks.

And China right now in their state media says that they want rollback of all tariffs. I think it's very possible that President Trump will give them that, and he will roll back the tariffs, and then whatever China is going to offer on the other side of that. If this is going to happen, it's probably going to happen prior to December 15th because December 15th is when the U.S. has new tariffs set to go on place. If they put those new tariffs on, then this trade deal is not going to get done anytime in the foreseeable future, but we do have a window here prior to December 15th where there's a good chance that we'll get it, and I think that now that we We are several days— President signing that Hong Kong legislation, and the fact that the Chinese state media is still talking about the terms of a phase one agreement tells me that they really, really want a trade deal.

And I think that it's worth mentioning that in that part of that process of whether China wants a trade deal and how badly do they want that trade deal, I think a lot of that has to do with other things that are going on with China. I mean, China's hog prices domestically are 2.5 times the, the average price of the last 4 years. Their soybean meal inventory is lower than each of the past 5 years. China's soybean inventory is at the lowest, uh, of the past 4 years, is basically the lowest it's been since 2013. U.S. pork sales to China in 2019 are up more than 40% from the previous year. And sales on the books for 2020, U.S. pork sales to China for 2020, and if you look at that as being a next year type of sales and you compare those same forward selling paces of the last few or several years, we're up tenfold for forward sales from U.S.

pork to China that we've been at any other time over the last several years. So what does that tell you? It tells you that they have a problem with meat supplies and they've exhausted all their reserves and they're trying to buy in advance. That's what it tells you. And the fact that the, the China soybean meal inventory is the lowest in the last 5 years, their soybean inventory is the lowest in the last 4 or 5 years, tells you they've exhausted all of their reserves. Okay, and so they really need a deal here, and President Trump needs a deal for political purposes with an election coming up.

I think there's a— the fact that China didn't completely end these trade talks because of that Hong Kong legislation, which that's a pretty direct shot across the bow really, I think it says that we're really on track and have a very good chance of getting a trade deal and getting that finalized before December 15th. So I think that's something that is right in front of us. That's probably going to be a positive development.

Chris: If their soybean inventory is as low as it's been, and however long you said, but really low, and they're buying a lot of pork, what's that say for their, their hog inventory or the utilization of the of the soybeans that they're going to need? I mean, are they— is that going to take a while to ramp that demand back up? Obviously, they're trying to not get some of that demand from— or some of that demand isn't from us. But, you know, what does that— does that spell anything for us on the negative side? Or how do you view that?

Duane

Lowery: Well, I'm not smart enough to answer that question. And I've not been smart enough to answer that question at any time during the last 12 months, because I Number one, I don't know how much you can trust the data. And I don't have a good handle on that. The only thing I would say about that—

Chris: The reason I asked, hey, Duane, the reason I asked that is because you hear a lot of other commentary about, you know, their, their hog numbers being so much lower, therefore the demand isn't there. Plus they're, you know, they don't want to buy it from us with the tariffs and all that other stuff. And so that's the whole reason why our market's where it's at. So what I'm asking And I know it's kind of not throwing you under the bus, but yeah, asking a pretty big question there. Like you're saying, you don't, don't know for sure, but you know, what does that spell for us?

Duane

Lowery: I don't know. I don't know for sure. I can't give an honest answer to that. I can't. I'm not smart enough to know that. I don't have enough access to enough data. However, I will say this in regards to what everybody else is trying to say. That prices are depressed because of poor demand, and then they're trying to extrapolate that into the foreseeable future with no help or no hope. I think they are completely guilty of looking in the rearview mirror where right in front of us in the windshield is every sign that China has been, uh, actively pursuing expanding their pork supply, expanding their their herd and, and redefining their hog production away from very small enterprises that can't control disease risk as, as well as larger operations. And they've had— they brought in U.S.-based consultants and business partners basically to help solve this problem.

I don't remember if it was a month of November or October, But they're— Japan or China's herd size breeding stock is starting to grow again. Okay. So we've already turned that corner. And so what's ahead of us is improving demand from a year ago type of levels. We've actually seen that in China's soybean imports versus a year ago. Okay. They've already turned that corner. They've already seen their imports rise from year ago levels. So all that argument about record demand, that's all in the past. That's in the rearview mirror. That is not the windshield by any stretch of the imagination. So while I can't offer you numbers or, or how long this is going to take or exactly what that looks like, all I'm saying is they were well in line with the process to ramp up their production again and move it up as quick as they can considering all the hurdles they're dealing with.

But what you're seeing by their import and booking of U.S. pork for even 2020 tells you that yes, they, they, they, uh, it's going to be a while before they have meat, um, ready to be delivered to the consumer. But considered, considering the gestation period of 4 months and, and growth of roughly 6 months, you basically got 10 months between um, when you start to build your, your, uh, reproductive herd and you— and before you actually get meat out of that, okay? In that 10 months, there's a lot of cows are going to be eating and there's going to be more mouths than they had versus a year ago because versus Yuriko data, so in bad or swine fever. So the feed consumption here is going to start to improve quicker than you see their meat hit their, their consumer shelf. That's why you got the meat production out there.

But we are well on our way to seeing them try to climb back out of production. Maybe this takes multiple years before they get back to where they were. I'm not saying that's going to happen overnight, but I'm saying when you compare it versus year-ago data, which was negatively impacted by all the things that you, you know, you, you implied, We're starting to see where this is going to start to turn, and you can already— you can see it in their own imports. And I think it's also worth pointing out that some of the other Southeastern Asian, uh, their feed demand and feed production numbers went up quite significantly. Well, you know, you'd have to be naive not to think something wasn't actually going to, to China and may very well have been source from US soybeans or soy— US soybean meal that went to a different country, got processed into feed, and then went to China.

You know, you know what I'm saying? So, right. I think the outlook now is different than it was before. And I think people that are wanting to extrapolate this negative demand from now to who knows how long, I think they're completely guilty of looking in the past, not looking forward.

Chris: Okay, that's good perspective. Appreciate that, Duane. And, and, um, one last topic, and it kind of spins off of, of the trade talks and, and what that might bring to a more positive, um, component to the market, give us some price strength, is as we look at 2020, um, what do you think there, um, you know, between corn and soybeans as we you know, start doing some planning and, and, you know, hopefully we get some strength in the market and we got to start looking at, you know, purchasing some of the stuff for, for 2020 and start thinking about, you know, what, when, and how, and, and what we need to be doing for crop rotation and marketing and everything into 2020. Any comments on, on, you know, what we should be thinking about there and looking at as producers as we— you know, move towards a new year?

Duane

Lowery: Well, uh, first thing I'll go back and say that, uh, if we look at, um, what Dec corn— what, let's back up— what, uh, new crop corn and beans were a year ago today, December 1st, 2018, what they were then versus what they are now is about the same. If we go back to March 1st of '19, the relationships are very similar to what they are now. You go back to April 15th, they're very similar to what they were now. All of the havoc that occurred with corn, bean, acreage changes and prevent plant, whatever, those are all weather related. So as we look to 2020, we have something similar to what we had prior to the weather problems of '19. You have mentioned to me before that you basically feel that beans are probably $50 an acre below levels that will entice somebody to plant beans instead of corn due to economic reasons. Okay.

And, uh, if that is, if that is true, then the question that we have to be asking ourselves, does the marketplace want more corn acres? Does it want more bean acres? Does it want less of one or the other? And where does it line up? And I honestly don't think we really know what that looks like. And we won't know what that looks like until we get that January production number from USDA. Because it's very possible that between December or January, and I'll probably have to say January now just because, um, it's very possible that one of those production numbers could alter carryout enough to impact whether or not the marketplace feels that we should be striving to encourage more corn acres or whether we should be striving to encourage more soybean acres.

I'm not sure, you know, we still have, based on the calendar, we still have a window of time ahead of us where South American production could have an influence on that. So the first thing that I would tell producers planning for 2020, make your decisions based on maybe other factors, but to the extent that it depends on price outlook, if that's what's going to motivate you, not your rotation, or not some, some other factor that's not so price-centered, then you're probably not going to make that decision until the 15th or 20th of January. You're going to make that decision after you've seen these final number production numbers from USDA. That would be my thought. But I believe that if we get a deal, with China on trade. That's going to— that by itself is going to change the market pool calculations about whether or not the U.S. should plant more beans or not.

Okay, if we get a trade deal, the marketplace is going to start to think, hey, wait a minute, like I've said before, the price of beans are too cheap versus corn, and they're going to say if there's a trade deal with China and the U.S., China is going to get back more of that business, bean prices have to go up because they got to encourage more acres to be planted to beans in the US, or the farmer in the US will take the cue and say, well, I'm going to plant more beans because I planted less beans last year, partly because of even before we got into the weather problems, they intended to plant less beans because part of largely be based on the outlook of the U.S.-China trade war outcome. So if that improves and the marketplace thinks that we have a need to buy, buy more bean acres, what's, what's that going to take?

And when, like I said, go back to 2008, beans are about as cheap as they've been from a relationship standpoint to corn since 2008. Based on what you told me that you need $50 an acre, If corn price was unchanged, you'd have to rally beans a dollar to get that. If beans at 30 cents went back to the October highs, 30 cents on 200 bushels of corn, that's $60 an acre. Now you got to go up— that's $60 an acre, which is roughly a dollar in beans. So a 30-cent rally in corn requires a $2 rally in beans just to get the $50 an acre more that you say. Needed to inspire somebody to grow beans instead of corn, uh, based on economics. So the point here is we still have a window here between now and the January reports where we could get numbers that completely alter whatever the marketplace is thinking now.

And so that decision on what that A is going to look like, I don't think is really— to be known, and I don't think the farmer can really make too much of that decision until he sees those January reports. And if he decides he's going to make that decision based on what he's looking at right now, there's nothing here to inspire him to plant bean acres, and he's probably going to be by default, uh, leaning towards planting corn acres. And I think the marketplace in general anticipates a lot more corn acres in the US this next year. And I understand where they're coming from. But I'm just saying, there are two big factors that could alter that. And that is one, a US-China trade deal beyond which alters what people view about bean price potential. And the other thing that could happen would be how USDA finalizes 2019 national yields and what that means to the carryout.

So I don't think we know yet. Well, I don't think we have all the inputs that are gonna affect 2020's acreage.

Chris: Yeah, and what, what we're seeing with limited data so far, but a lot of people leaning more toward, as you said, more toward corn. But, you know, a lot of people are going to stick with a pretty— they're pretty static rotation that they're already on, and maybe it's that one or two farms that they switch, you know, heavily, heavier to one crop or the other, kind of depending. And you get in the southern areas, you know, and you look at cotton and some of those other things can have an effect on the bean acres and stuff too. But yeah, it'll be interesting to watch as we get closer to 2020 and we get this January 10th report out there.

And I thought it was just, just good to bring up a 2020 conversation now as, as growers are starting to purchase some of the inputs and things, and just because you've got the inputs bought, if you don't have the nitrogen on the field or whatever, but you have some of the tillage done, or maybe don't have the tillage done, there's going to be a lot of flexibility, I think, this year for growers to go one way or the other. So, there'll be a lot to watch as we move forward for sure. Any other—

Duane

Lowery: Yeah, the other thing that needs to be said about 2020 I don't know about beans, so just set that aside for the time being, but in the case of corn for 2020, December 2020 corn futures at $4.20 or higher, and right now they're roughly $3.90, so that's 30 cents. Now some people say, well, we're never going to get there. Well, we were not that long ago, so it's possible that we could go back there again, but at $4.20, given what we know now and probably given everything that we're going to know between now and when the guy goes to the field and, um, taking a defensive price stance on 2020 production, meaning having some stuff sold at $4.20 futures and hedges, whatever, whatever strategy one wants to take, looks like it's probably something that, uh, we're going to have to seriously consider.

Because after going through all that we went through this year, the marketplace is not going to be very excited about being worried about a production season going forward in advance because they feel like we can grow, you know, a good crop no matter what. I'm not saying I agree or disagree with that. I'm just telling you that's what the marketplace is thinking. The other thing is, if there's a reason that the corn market rallies and it happens to be because USDA lowers production or, or something like this nature, maybe something associated with the U.S.-China trade deal, All the strength is going to be predominantly led by the front end. It's not going to be led by Dec '20. That's going to be the weakest thing on the board of trade, it will be Dec '20 corn. And so you could have a significant rally in old crop prices but not necessarily a big rally in Dec '20.

As far as beans are concerned, it all boils down, does the marketplace have a reason to want to entice more soybean acres? And I think a lot of that will have to do with what, how USDA handles the final production for '19 and how the marketplace looks at a trade deal and what that may mean to bean prices if in fact we do get a trade deal put together. So there are things out here in front of us I think are fluid that could cause prices to go up more than what we think in the K-beans, but may probably, we have a ceiling in the new crop corn price.

Chris: Yeah, and your, your $4.20 gets a lot of the numbers, or gets a lot of our growers at a margin target that's a reasonable place to, to be making sales. It's going to be hard to make many sales in front of that. So hopefully we get that 30 cents at some point there. But the other side of that, to echo kind of what you said on the beans and what we've talked about in the past about cost of production on the soybean side of things. If you look at $4.20 Dec corn and Nov '20 soybeans, you know, if you're at $4.20, then that means to, to generate the same margin number that we would try to be at, you're going to be somewhere around that $10.25 a bushel price, you know, that you would need. And for some growers, it's probably going to be around $10.50. Is going to be more like it, you know, that too, you know, and one way to figure that is—

Duane

Lowery: I think it would be close, and I was just going to say, I think it would be closer to $10.50 or $11 that would be required to entice somebody to plant the beans and not do the corn if corn was $4.20.

Chris: Yeah, yeah, that $4.20 is, you know, gets, gets people looking at it right around that $10.25 if they've already got it in their rotation, and then they look at it a little harder at $10 50, but the other way to think about that's just that corn-bean, corn-to-bean ratio. And for most of the clients we work with, you need about a 2.5, otherwise it gets really hard to grow soybeans relative to corn when you look at the margin on a per acre basis, plus what you can insure and protect the risk at, at, you know, at the gross income per acre And especially if you get into areas where the land cost is higher and all that, you just, you assume quite a bit more risk with the soybeans, where otherwise with the corn, uh, you wouldn't as much.

So that ratio, I guess what I'm saying, bottom line, that ratio needs to be, you know, 2.5 or higher before it's going to grab a lot of bean acres, in my opinion.

Duane

Lowery: Yeah, and again, like I said, from— the last 10-plus years, beans super cheap, and super cheap relative-wise. So if the marketplace had to send a signal that it wanted more U.S. bean acres, and I'm not even sure that we have that signal yet, I'm just saying if we were— if it was required by the marketplace that we needed more U.S. bean acres, bean prices would have to rally quite a bit in order to get that to happen. Because we're so cheap from a relative standpoint.

Chris: Yep. Yep. Yep. Well, hey, Duane, I think we're getting up against time. I think this has been a really good conversation, kind of hitting where the markets are going for a new week and a lot about the trade talks and a little bit about 2020 and what we need to be thinking about there. So appreciate the conversation today, Duane.

Duane

Lowery: All right, thanks, Chris.

Chris: You bet. So, well, we will be back again next week to have another conversation going into another week. And thanks everybody for listening to us this week on the Ag View Pitch, and we will catch you next time.

Duane

Lowery: Thanks.

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