Taking care of business

Chris: Well, welcome everybody to the Ag View Pitch. It's May 28th and Dwayne Lowry and Chris Barron are here with you with the Ag View Pitch to have a little conversation after the, uh, report here today on the planting progress. And welcome Dwayne, and how's it going on your end?

Duane

Lowry: It's all good here, Chris. I appreciate being here. Um, it's a little cloudy as you know, and, uh, I guess it's fitting for the season. It's fitting we talk about crop progress under the clouds, I guess.

Chris: Yeah, you bet. And I kind of wanted to start this podcast out with a little bit of BTO, taking care of business. I think we got a little business to take care of here. Talking to some growers the last couple of days, looking at percent sold and scratching their head and saying I had some pretty good sales on there. And this market's really taken off. And I thought I was 30% sold with a pretty good price. And now all of a sudden, My percent sold is a lot higher. My sales don't look as good and kind of wondering what should I be doing here? And so I think a little business to take care of here tonight in our conversation, just to kind of think through some things, keep some perspective. Again, you know, we're not giving absolute advice, but there's a lot of perspective to talk about here.

Duane, you want to touch on the, on the report and kind of what we saw from some of the progress?

Duane

Lowry: Well, on a national level, we are 58% planted in corn. The trade expected to see 63 to 65. Last week, if you recall, the trade expected to see planting progress farther along than what they actually got. And that pattern was consistent again this week. This is a pretty significant disappointment. Statistically speaking, we already know we have a problem. So maybe a few percentage points may not seem like a lot. But psychologically, it's a big deal when, when the market was hoping for 63 to 65 and they see 58. And the other part of the, you know, the sobering aspects is to look at it by state. I recall writing in my Sunday night comments and probably I think this morning as well, it didn't matter so much what these actual numbers were as far as what was planted.

The sobering aspect of today's report was always going to be the scope and the, just the sheer volume of acres that remain unplanted. In Illinois, they're 35% planted in corn. They made 11% progress last week, uh, versus normally being 95% done. Indiana is only 22% done. I was even surprised at Iowa. They only picked up 6 percentage points this past week. They're at 76%. Um, you're— we're definitely going to get some prevent plant acres out of Iowa. Um, Kansas, uh, excuse me, Minnesota 33%, uh, you've got Missouri 65%, Ohio is only 22%, and South Dakota is 25%. And, uh, I would say that, uh, this, uh, planting progress pretty mean— pretty much means we're going to have some very large prevent plant acres in South Dakota. An argument can be made that the price is going to have some influence on that decision.

And the job of the market right now is to try to find a price level to entice as many acres as possible to get planted. So that even if there is a smaller acreage, or yield per acre, the farmer feels that he's going to take a shot to try to get that. And so that's what the market is trying to accomplish now. On the bean side, planting progress there was pretty much in line with estimates, a little bit behind. It was 29%. I think they were looking for around 30%. But here again, the state by state is sobering. Illinois is 14% planted, Indiana 11%, even Iowa, which we felt, you know, parts of the state had respectable weather compared to a lot of other areas. They're only 32% planted. Missouri is only 12%, Ohio's at 11%. So even once it stops raining and the soils dry out, there's just going to be a lot of time required to get some of this stuff done.

So the planting progress report will be viewed as friendly. People will look at the afternoon weather maps and say, well, it's going to dry up a little bit in a 6 to 14 day window. Which is all true. But the problem is the calendar makes that a little bit of a moot point. And so I wouldn't be surprised we have another night session where we have a fair amount of emotion in the trade, Chris.

Chris: Well, I think so. And this, this had to be some confirmation for the market on its trend upward because, you know, 9% planted during this last week isn't very much and And you know, a lot of that wasn't put in in very good conditions either. You know, probably half of it was kind of in marginal conditions at best. And then that leads one to think about going into next week. I think you and I were talking offline a little bit, you know, we're already to Tuesday. You know, that gives us Wednesday, Thursday, Friday. And you know, what's next week going to hold, you know, and does that give us further strength going into next week? Because I don't know, I'm sitting here looking at the forecast on my phone.

From a lot of the areas of the guys that I know that have really struggled, and there's rain in the forecast in those pockets for the majority of those guys that are still going to be probably not able to get in because there's just enough rain that kind of keeps them out of the field.

Duane

Lowry: You know, every 3 days— There's— the soils are so saturated that even if the temperatures warm up like they're supposed to, just science tells you that that increases the chance you're going to get some moisture coming up and into the atmosphere and dropping back down as rain. It takes a little bit of time for these things to transition. And time is not something that we have. There's not a lot of people in the Midwest that want to plant corn after June 10. I don't care what the price is.

Chris: I would agree with that. You know, I, I do though think there'll be some of that still go in, but it's going to depend a little bit on where, you know, we started the conversation with percent percent sold, where, where some of the growers are at and looking at. And that's kind of why we started, you know, the conversation here with taking care of business. I mean, there's, there's a lot of number crunching we can be doing right now while we can't plant, looking at where we're at on current sales, what percent sold are we at a certain price level. And then, like, I was talking to a guy just a little while ago in Michigan about, you know, let's be thinking about what that cost of production looks like in terms of where's, where does your price level need to be as we ratchet these yields back down, and that cost of production number is going up pretty fast.

And so we got to keep that margin that we're trying to achieve in line too, to the best of our ability, you know, and so there's a lot of number crunching to do both on the, the marketing and business management side of things along with all of these challenging decisions, I think, that are going to come on prevent plant. I still think the heavy prevent plant decisions, though, we're still about a week out from really having the tough, tough decisions in some of these high production areas, don't you think, Dwayne?

Duane

Lowry: Yes, I think the key to your sentence there was the last part of it where you, you put a little asterisk by it saying it's in the high producing parts of the country. I think the the places that have dealt with prevent plant before, they're probably leaning or have been in the phase of leaning towards taking prevent plant if they're faced with that and holding off until it actually— the deadline comes, so to speak, in terms of where they mentally don't want to plant corn anymore. Price will have an impact, but maybe not a lot. But if you're talking about an Illinois, Indiana, Ohio farmer and they feel confident about their APH, they're going to want to plant as long as they possibly think they can have a shot at that based on the calendar, especially if the market is staying up. Having said all that, I think the largest prevent plant we had was 2013.

We had 3.6 million acres of corn. And I know statisticians in the weather world and that look at the current situation, the current forecast, the amount we're already behind, the amount of time we need in order to get the acres planted. They feel conservatively, if we had 3.6 million acres didn't get planted in 2013, it's very possible, and highly likely we'll have 6 million acres this year that won't get planted. And that number could, you know, get well above,, you know, that 7 or 8 million tons or million bushels, million acres if the hopeful planting windows, drying out windows, you know, for some reason don't, don't materialize real well. So I think there's a certain part of it that says we are, we're already at a point where we should fully anticipate we're going to have a record prevent plant acreage, even if the price, you know, goes up every day for the next 5 days.

I think that we're still at a point, statistically speaking, where we are going to get this prevent plant acreage. So it's all pretty soon the discussion is going to be moving away from prevent plant to just exactly what have we lost for yield potential. And we're not quite there yet, but, uh, that's coming.

Chris: You and I talked a little bit offline too, Dwayne, about, you know, the the speed in which the market's gone up or not gone up as much as maybe, you know, somebody might have thought, maybe limit up or something almost, and it could have got really wild. But you made a good point. You know, today we were up pretty significantly. We weren't limit, but we were up a lot. Part of, you know, you and I talked again offline a little bit about part of what might be doing that is, is just some of the position changing that's going on where, you know, some of the farmers are maybe buying back some of, some of their shorts along with the others. What's your thought on that? Do you think that's having any impact on, on the market move in terms of how quick or how slow things are going? Or do you, do you see any kind of a setback here along the way here in the next couple of days?

What's your thought there?

Duane

Lowry: Did you ask me whether I thought we could back off prices a little bit? Is that what you said? Yeah. I mean, do you think we're going to get some sort of a correction or do you think we're a ways off on that yet? Well, I'll say it this way. I don't think— let's put it this way. If the market were to sell off for whatever reason, there's a lot of people that are caught short that want to buy this thing. There are users that have been awoken in the last day or two that want to buy this thing. I think those elements prevent any near-term sell-off from been able to build much momentum. And as far as if that statement is true, it is probably also true that we haven't really seen the shorts completely exit. We haven't really seen the panic, emotional get-me-in type buying occur yet.

And we have done so much in price in just 2 weeks' time that the marketplace under almost any scenario has a difficult time adjusting en masse such a fast and rapid turnaround from despair and bleak and without hope and afraid the prices are going to, you know, just continue to slide type of mentality into an amazing shocking thing that has changed. And now we're talking about 6 million acres of corn loss. We are talking about 6 to 16 bushels an acre off the national yield depending on how you'd like to compute that. And these are dramatic and historic things. And so markets always— people are trained to view these type of quick moves with skepticism, because most of the time it's justified to be skeptical, skeptic.

But at the same token, every once in a while, something comes along that literally is historic, and literally, literally changes the foundational outlook And I would have to say that it appears that we have that type of situation on our hands right now. So I would say we're probably not done yet. And if we get a pullback right now, it's probably not much. Now, maybe we— in order to get a 30-cent pullback, maybe the corn market has to rally 50 cents before we can get it. And then that pullback takes you to a level that's still higher than where it is today. I don't know. Like I've said in a recent broadcast, it's difficult to talk about this without sounding real emotional, and yet I don't want to sound that way, but we must also see the, the historic part of what we're dealing with.

I mean, you got 41% of the corn, 42% of the corn is not planted, and we don't even have a forecast window in our forecast that we're confident that we can get that 42% planted. That you got 71% of the beans not planted. I mean, these are big statements. And if they're big enough statements, even if we had 10 days of dry weather in front of us, let alone having the forecast that we do, I mean, it's sobering, but it still seems factual.

Chris: Right. Any, any comments on soybeans on what you saw or what you think? I mean, did the soybeans kind of tag along here? Or what's your thoughts on the soybean side of it? And then we'll kind of wrap up here.

Duane

Lowry: I felt the speculator was more energetic about buying beans today, and to maybe even to a certain extent, starting late last week. But I thought maybe they were a little bit more energetic. And I think that's partially because they see what corn and wheat has done. And they don't want to get caught with in the same type of dire situation of beans. I don't think the trade is super concerned about what the balance sheet looks like in beans yet, because they feel that there's such a massive amount of supplies between the US and South America here. But in the same token, there is a definite unease, because they know that what we have is going to desire more corn acres next year, which means less bean acres. They feel that we're at risk of having prevent plant acres in beans. We're not there yet, but we're at risk of that.

So I think there's just the beans just 2 weeks ago were at the lowest they've been in 12 years. So they're so cheap. The market has been so pressed on the short side with record or near record short positions. I think a lot of people are just trying to get to the exit door, and I'm not sure they're thinking a whole lot deeper than that.

Chris: Gotcha. Okay, anything else you want to comment on, or I think we can kind of wrap?

Duane

Lowry: I guess I would like to make one comment going back to the opening theme of taking care of business. We can talk about all these things about how historic they are, and even though I don't intend to make it sound inflammatory, I'm sure to some it does sound that way. But at the end of the day, We don't know what that future is going to be. We don't know if there's going to be suddenly something new comes on the horizon that we didn't expect. We don't know how the ethanol industry is going to be able to handle a sharp run-up in corn prices. We don't know how the ethanol industry is going to handle a reduction in supplies. And we don't know, you know, who of the users are going to be asked to reduce consumption through the power of price. But what we can do is we can, uh, going back to that opening theme, we can take care of business.

And right now, taking care of business is number one, do an assessment of what today's price means to your operation based on either unsold inventory, unsold crop in the field, uh, your new yield or expectations that you may have, whatever it may be. Do an assessment of what, uh, your snapshot of your balance sheet looks like today versus what it looked like 2 weeks ago. And, you know, try to evaluate everything from the, the perspective of the new inputs that we have. And for the guys that have their crop in the, in the ground, and a lot of it's up, you know, it looks one way. For the guy that's still struggling to get in, get his crops planted, and is struggling between prevent plant or growing the crop, his world looks different.

But even that guy's world looks different today or tomorrow than it would a week ago, because suddenly he's got 40 cents more that he can apply to that, those bushels that he would grow if he planted as opposed to a prevent plant. And the best thing they can do is just take care of business, push the pencil, and try to remove the emotion and make the best decisions that they can. So I guess my last conclusion is we all have to try to find a way to take care of business.

Chris: Great, I appreciate that, and I'll just tack on to that real quick. The prevent plant tool is out there. We've sent it out. We do have it available if anybody needs it sent. More importantly though, if anybody wants to talk about the numbers, as Dwayne just— you just talked about, you know, thinking about the scenario because it's going to be different for everybody. The other thing I would say that we're starting to see that's a really big deal is the cost of production in terms of cost per bushel is really starting to ebb and flow depending on the situation you're in, whether you got a bunch planted or you didn't get anything planted or your crop's going downhill or whatever.

And so we really need to probably pay attention to that, um, pretty often right now, every couple of days maybe, just kind of look at the numbers and tweak them a little bit and think how that impacts the bottom line. And, um, with that, Dwayne, I think we'll finish up here with a little taking care of business. We'll wrap it up and, um, we'll, we'll be back with them here in another day or two here with some more information as as soon as it's pertinent.

Duane

Lowry: All right, thanks, Chris. You bet.

Chris: Thanks, Dewayne. Thanks, everybody, and we will talk to you on the next podcast here for the Ag View Pitch. Thanks a lot.