Thanksgiving week markets: weekly market outlook, Nov. 20-24th

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

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch. We're heading into another week. The week of Thanksgiving, the 20th through the 24th. And we are lucky enough to have with us today Ryan Moe with StoneX. Ryan, how's it going?

Ryan

Moe: It is going pretty well so far, but it's, you know, it's late in the week, so we're good.

Chris

Barron: Yeah. So we are in kind of a shortened trade week. We were talking just offline a little bit, probably going to be a little bit lighter trade this week, but— it's going to be something to continue to watch. I think there's a lot of producers out there in different stages. We've got guys in the East and the Northeast that are still trying to harvest wet corn. And there's a lot of it. And so it's taken a while. And there's a lot of guys that have been done for a long time. There's a lot of crop insurance indemnities. There's just a lot of different scenarios out there for a lot of producers. And I think that the overlying question, though, that a lot of producers have is okay, I've got X amount of unsold bushels, you know, for some, they feel like they did a pretty good job and have enough sold that they're okay. I think a lot of producers are okay financially.

And that's probably what drove some of the decisions to not sell, because they were okay financially. And, you know, the market kind of lulled us to sleep at $6 for a long time there. And then when it's going down, it's even harder to sell. And then when it's not raining, and you compound all those things, It's not an excuse for not making sales, but it creates a situation that a high percentage, percentage of the farmers find themselves in. So with all that said, everybody has a different amount of unsold bushels, corn and soybeans. Let's talk corn first though. What's, what's producer to think about it? What should the producers be watching? What opportunities can they either hope for or look for? Or manage for.

Ryan

Moe: Yeah, so behind me here, I've got a quote there. I've got Captain Hindsight right here, you know, with his trusty sidekicks, woulda, shoulda, and coulda. Everybody's always in that position. But then next to that though, I do have a quote from Theodore Roosevelt that says, "In any moment of indecision, the best thing that you can do is the right thing. The second best thing that you can do is the wrong thing. The worst thing that you can do is nothing." Teddy Roosevelt's a pretty smart guy, so I think we should go ahead and take some advice from him on that. Coming into a very thinly traded holiday week, you're going to see a lot of hedge funds that they're already— they're already gone. They're already at their house in the Hamptons. They are— some of them have cashed in for the year already, you know, depending on where they're at.

But this week is a week that's typically highlighted by light trade volume. And so you can see some rather irrational runs made on markets just because there's not a lot of volume out there to be traded. How this correlates into the physical space is we have two very, very different markets, east of the Mississippi versus west of the Mississippi. East of the Mississippi, they are drowning in corn. They are in a position to where, I mean, we even heard in some places they went essentially no bid for corn in parts of Indiana and Ohio. And that's a struggle to market into that if you don't have anything already sold. That's a— there's challenges associated with that because what do you do now? Hopefully there's enough volume out there to compensate for other mistakes that have been made as far as price are concerned. But that's going to take some time to iron itself out.

Exports are not looking super attractive, which is going to be the bailout mechanism for, for that part of the country. And so there's, there's going to be some very— there's going to be some difficult times coming up as far as grain marketing in the eastern Corn Belt is concerned. On the western Corn Belt, it's like we're a completely different continent. Over here, we have a decent crop. We have supplies that have been in the bin here for several days. I think you told me ahead of time here, you've been, you've been done with harvest for 10 days, you know, and that's, that's great, you know, good, strong, successful harvest. We have a lot of end users that have corn, they just don't own the corn. And that's getting to be a problem for those facilities that just don't have near the ownership that they would like.

And so they're going out and giving some rather significant basis pushes on that corn, because they need the ownership to basically zero out their positions. So we could see some very interesting things as far as basis is concerned here in the western Corn Belt this week. And some producers should be looking at taking advantage of some of that. If I'm asked what risk do I want to own, I don't really want to own any risk right now. But telling people to sell corn substantially below breakeven is also not going to allow me to win a popularity contest. But that is something that we have to kind of consider here at this point. I definitely don't want to own basis risk in the western Corn Belt. So if you can get a really handsome push this week, probably look at going and taking advantage of that.

And then if they want to own something, then own the board on top of that, own that board risk back if it's not a sale that they're totally in love with. So that's how I would carve that up in different geographies, because we're sitting in such a bifurcated market as it sits today.

Chris

Barron: Yeah, the, the basis is really the, the thing to watch. And, you know, like we were talking offline a little bit, you know, I think it's going to be a little bit regional too, though, isn't it? Because, you know, there, there are still going to be some areas in their smaller pockets, but like I'm in a pocket that, you know, if you look at the drought monitor, I've said that for numerous podcasts now, but we, we were in that deep red zone. And, you know, like Cedar Rapids, Iowa is going to struggle for corn all year, just because that's, that was the heart of the drought. And that's an area that takes in a ton of corn, but they've been moving corn from the, from the west and the east. And, you know, one of my truck drivers was like, you know, hey, I'm seeing trucks in here I've never seen before. Well, yeah, right. Because they're pulling it in from, from other areas.

Ryan

Moe: And that's what's strange looking license plates out here.

Chris

Barron: Yeah, that's what makes basis you know, it's regional for a while, but, you know, grain can move. There's, there's wheels and there's rail and there's all kinds of ways to mitigate that. And so to your point, I think, is it's not a forever thing either, you know, it's a, it's a, it's managing it. And I think, you know, the holidays are opportunities, the, you know, probably in the spring. I mean, I would argue that in the spring, you know, it seems like when everybody's planting, that's always an opportunity too. And guys aren't going to sell all their stuff that's under the cost of production. But on the same token, I mean, I think an average price is what a person has to look at. I mean, if you're, if you could, if you're selling corn at $4.80 and your cost of production is $5, but you sold 60% of it at $6, you're in pretty good shape.

You don't worry, you continue to look at the average and say, can I live with this? You know, what, what's the downside risk? What do I have on line of credit? What's my interest rate? You know, all those things that I've talked about for numerous podcasts now is, is the algebra of the scenario that each individual operation's in, I think is really a key thing to think about. With all that said, just to ask you another question on, on soybeans too, because, you know, I'm— and we, we can get into 2024 here in a little bit, but I'm sitting there looking at at soybeans, you know, it's been kind of volatile, and it's gotten close enough to where like maybe some '24 sales on soybeans made sense here a week or so ago on some rallies and stuff. But it's all, it's all a weather market, isn't it?

So talk a little bit about the weather market, South America, and how that relates to getting rid of some old crop and maybe even thinking about new crop soybeans.

Ryan

Moe: Yes, there's two factors at play here in the soybean market. And the first one is the soybean meal market, which has been led by the cash market. And I talk for 2 days here about the business decision that the soybean crushers had to make 9 months ago. 9 months ago, when we were looking at the projections of the amount of crush that was going to be coming online, those crush facilities had to do the prudent thing for their business, which was sell meal and sell meal hard. Because Everybody assumed at this point in the year here, you know, November of 2023, that we were going to be awash in soybean meal. And if you're a plant that doesn't have your soybean, your soybean meal sold, and you're backing up the plant, so you can't sell the profitable oil, extremely profitable oil coming out of it, you haven't done your job.

And so these people all did their job, they did their job extremely well. Well, they essentially oversold the marketplace. And so we're watching soybean meal exports go up, we're watching soybean meal demand that was all booked, you know, far in advance, that's kind of caught this, you know, cash market pretty short. And that's what drove the soybean meal volatility here, which, you know, previous last couple of days here, we were looking at almost, you know, over $100 move in December soybean meal. Well, that drove beans up along with it. You couple that with a South American drought story, which everybody still loves to go ahead and talk about a drought. You know, this is, this is the market pundit's job is to kill a soybean market at least 2 or 3 times during the course of a year. But this is the equivalent of us having, you know, not ideal weather in May or June here in the US.

I believe there's plenty of time for the South American crop to, to make it. The other thing we have to consider is just the sheer landmass that the South American crop encompasses. And you there in Raleigh, Iowa, you probably have examples of over the course of the year, you know, let's say it's July, and a farm on the north side of town got 1.6 inches of rain, farm on the south side of town got 4/10, right? That was extremely variable. Well, they're experiencing the same thing down there in Brazil, and they're gonna experience the same thing down in Brazil. But what did we discover here as the year progressed? Agronomists are fantastic, seed genetics are absolutely outstanding.

And even though they were kind of in the have-not category of rainfall for the quote unquote general rains, these darn, these darn hybrids, they yielded pretty well considering the terrible situation that they were in at some points during the growing season. Now we had cool July evenings and stuff like that, that helped our crop along here quite a bit. But we did learn that the timeliness of the rain was far more important than looking back on it and saying, hey, I got my above average rate or below average amount of rainfall for this particular piece of ground. So Brazil's in the middle of that right now. I don't want to sit there and say that it's over and done with yet. But we had some people that were expecting 163 million metric ton crop out of there this year, which was 8 million metric tons above this last year's record.

Well, at 155 million metric tons that was just harvested, or not just harvested, was, you know, harvested here a few months ago. That that crop was very hard to put away, because they just, they ran out of room for it. And then they're going to double up and put a bigger one on top of that. We've had a lot of analysts come and say that they're still expecting that crop to be 153 to 155 million metric tons, which, even though it's slightly off of the top end, it's still an enormous soybean crop down there.

Chris

Barron: So what you're telling me in this bodes for corn too, then, is that, you know, and it's so cliché, you know, rallies are meant to be sold, you know, I mean, plugging in sales and being fairly proactive on those remaining bushels. Say you got 50% of your bushels on price, you take 10% of them. And every time you get a rally, you know, this isn't a recommendation, but it's a, it's a, you know, it's a decision that when guys do the math, I mean, look at the, you know, the cost of the money, you know, and unless they're sitting on a lot of money, and sometimes that's really dangerous because you sit on it and really watch it go low. Um, I've asked this question to a few people in the last month or two that we've had on the podcast. What positive things are out there? I mean, we talk about all this negative crap.

Uh, what is there anything out there that's as a positive opportunity for corn or soybeans or wheat for that matter, any, any, anything out there that, that bodes well for commodities? Or are we going to be in another 2013 through 2019 scenario and guys better buckle up and get ready for this ride?

Ryan

Moe: What's your take? Yeah, so during the presentation that I got, I felt really sad. I really felt really sad for the crowd because I had to fill 50 minutes of talk time to give them a neutral outlook. You know, so yeah, that's fine.

Chris

Barron: Yeah, that's the thing.

Ryan

Moe: Yeah. So you just, you know, cuss and swear a few times and make the crowd laugh and then try to make people not feel too bad about it. But I would forecast with just the amount of supply that we're able to go ahead and put on the marketplace. The one thing that you have to be friendly about is the American farmer is really, really, really good. And so they are able to produce a significant amount of crop in less than desirable conditions. And so the optimism upon the agronomics and the ability to grow in the future is, is, is significant. When we look at what are some opportunities here, when you're looking at heavy markets like this, we're supply-heavy markets.

Like this, um, if we are going to be range-bound, one has to kind of think about, is there some things that they can do with like sold call option strategies when the market gets to tipping towards the upside, to the upward, um, upper end of the, of the range, to go ahead and sell some calls on top of that to try to enhance some margins? You don't want to go nuts with these strategies because that's how you end up getting in a lot of trouble in case you catch a burner and the market does really do something wild crazy. But there's some ways to enhance, uh, enhance margins in a range-bound trade by, you know, selling some options on one side of the range or the other. Um, and so those are some things that we have people looking at. We've also seen, um, the more progressive marketers going out into like Dec '24 and Nov '24, and they're putting on some accumulator contracts.

Uh, that's what some of the, the smart producers— we saw a pretty significant chunk of that volume getting done here late last week. And start thinking about some of those strategies so that you can give yourself a leg up and an opportunity for new crop of next year. Because it looks like everything's setting up that we're going to plant a boatload of corn acres once again, just because of the profit margins that you put together for your customers are showing. Planting corn right now is your best opportunity for a return. In 2024.

Chris

Barron: Yeah. So as far as what we know right now, right, right. You know, as, as this point in time in the third week of November, the way it looks. But let's, let's transition over into 2024 then, because when we look at our— look at cost production, when the price on soybeans, no soybeans, is at or above 13. And when corn is at or above, let's, let's just pick a number and say $5.10, $5.15, at or above those levels, our average client somewhere in that 7% ROI on corn and about 3 to 4% on soybeans in that 13 range. And it's different for others. I mean, I can— there, there are situations where there's producers that are making more money on soybeans than they are in corn. I can identify some of those. Areas where they just have really high soybean yields. But that's what you need to lower your cost of production, right, is that higher yield environments.

And so with that said, I mean, how, how heavy should a producer be sold? Because you, you're, you're laying out, with all due respect here, pretty damn bleak outlook. And does that mean that producers should be selling a little heavier going into the new year in front of not knowing what the insurance number is going to be. And, and does a producer get to 30% sold or 20% sold or 50% sold? Or, you know, or like Shay, and he's, he's set it on, on subscriber-only stuff. I mean, he's, he's pretty heavily sold for '24, but he did a long time ago. But like he always says, you know, he's in a position where he can't tolerate any risk. He doesn't, You know, he's always very actively sold ahead. So where— what's your farmer hat tell you? What should you be thinking about?

Ryan

Moe: If you have a farmer hat on, you also have to have a portfolio manager's hat on. This is— if you've got a crop to market, you have to take it from a portfolio approach. We've always really stressed that, that you're never going to make every decision exactly perfectly, and you're never going to pick the top, you're never going to pick the bottom. You know, your job is to do the best thing that you can do for your farm. If you're looking out at— and we've got some producers that are only 10% sold for 2023, and they're really kicking themselves right now because they've got 90% of their crop left to merchandise. And you get a call from a clown like me saying, hey, how about you start focusing on, you know, 10 to 15 to 20% of your 2024, right? And they're like, oh, I'd have more crops sold for '24 than I do for '23. How does that make sense?

Chris

Barron: That, that might, that might make a lot of sense though.

Ryan

Moe: Right. I mean, and when you just— we just look at farmers around the world and their abilities to produce. We are in that position where we're going to have to depend upon a demand shock in order for us to get us out of the rut. And what is that demand shock going to be? And I don't have a great answer for that as it sits today. So since I don't have a great answer for the demand shock side of things, and it's going to be very hard to supply shock this market, with just the sheer amount of landmass that Brazil has planted, you have to start thinking more conservatively then for upcoming marketings, whether it's '23 or '24. And so if, if, you know, they are going to be looking at having 15 to 20% of their '24 crop sold, I can, I can sleep well at night with that.

Chris

Barron: One thing, one thing I would say too, that I think producers need to keep in mind is that if you were, you know, you're, let's say that you had a really good crop, you're in, and there's a lot of areas that they had better than expected. Shay always calls it better than expected season instead of fall harvest.

Ryan

Moe: And when you're in better than expected, you should, you should get a t-shirt made for that.

Chris

Barron: Yeah, better than expected season. And so, you know, all of a sudden they went from, they thought they were maybe let's say 40% sold, now they're 28% sold or whatever, because they had that many more bushels. But that's where the algebra comes in again, too, doesn't it? Where it's like, what's my, what's my gross income? You know, if I'm selling it at $5.10 or whatever price is your price objective, versus, you know, $5.50 or $5.70 or whatever the number was, you may not still be achieving that level that you were hoping for. But with those prior sales and and the new sales, maybe that, that keeps you in the black and, and just being in the black might be a win. Thoughts?

Ryan

Moe: Absolutely. Because if you have people that are drastically undersold and we also have to stop giving so much credit to our neighbor's marketing acumen, because just because you think your neighbor has it all sold at the top, It's just not true, right? There's— it's amazing how they have— they've— their portfolio probably looks very similar to yours, right? I mean, it's, it's kind of groupthink mindset to where they are all, you know, everybody just wanted this thing to find a bottom and bounce, find a bottom and bounce, and it just didn't find a bottom and bounce.

Chris

Barron: Um, and so, and from what bottom point does it bounce too? Because if— there you go, you know, does it bounce from $4.50 or does it bounce from $5? And that's the, that's the challenge, right?

Ryan

Moe: And so there's in the market and there also needs to be recognition that overall the market doesn't care where your breakeven is.

Chris

Barron: Mm-hmm. All right. So, so we're going to wrap this up. First, I have two questions. First one is what, what didn't I ask you? Is there anything that we didn't touch on other than, you know, the demand thing? We need demand. Everybody knows that.— that's an unknown thing right now. Anything there? And then if there's nothing else there, I got one more question for you.

Ryan

Moe: Yeah, I mean, the soybean industry is going to continue to grow here in the United States. There is— there's a lot of green shoots with renewable diesel. I'm very friendly— that industry, I'm very friendly for US domestic consumption here. Another thing that is going well for soybean growers is there's been a lot of great relationships established here in the last few months with the export market on soybean meal. So just because we're not exporting soybeans, it's not all doom and gloom because we're processing so many more. And we're finding a home for that meal, it's going to support the— it's going to support the crush margins at the soybean crush plants, which is going to allow them to pay up, you know, likely via basis at the, at the soybean crush plants. So that's something that I just want people— you're wanting something positive.

That, that's something that we have to be very optimistic about, because 99% of the renewable diesel in the United States is being used out of California. Folks, we have 49 other states that could be using this product. Yeah, there's opportunity there. So yeah, there's, there's long-term and short to midterm opportunities.

Chris

Barron: Well, and it takes, it takes low prices to build demand too. I mean, that's the other side of it is I see it anyway, is it, you know, it takes low prices to build demand and cost of production in terms of land rents, and some of the inflationary things that we've all had to deal with, with putting the most expensive crop in ever last year in 2023. None of those things balance unless we get a balance in price. And, you know, you get the highs, you get the lows, and that's what creates balance. But that's, that's my two cents. Last question for you here. Get ready because I didn't warn you. First of all, we're heading into Thanksgiving weekend. What are you thankful for?

Ryan

Moe: I got to be thankful for the way relationships are going within my family there. Yeah, things are going extremely well for You know, my mom and dad, my son, Tiffany, everything is going really well for that. So personally, things are, are really rocking and rolling. Well, it's travel basketball season, and so awesome. I'm going to be, you know, just yelling and screaming in some sweaty gym all winter. Yeah, I love— I'm loving this season in life. And so did I get to go pheasant hunting this year? No, but we got to go ahead and watch some, watch some 6th graders, you know, go and start launching threes and making them. It's, it's, it's those kinds of things that guys got to be real thankful for.

Chris

Barron: That's right. Yeah. Well, I'm thankful that, that we had a safe harvest and I'm thankful that for family and thankful for all of the farmers that are out there that are doing what they do and provide what, what we all provide, I think is a huge deal. Where, you know, you don't have to look very far in other countries to see how good we have it. So I think that's a blessing and it's, we need to be, we need to look at our challenges. And my wife always says, you know, that's a first world problem. It's not a, you know, be happy that that's your problem, you know. So, right.

Ryan

Moe: I think that's I've got, I got a Post-it note right here on my desk. And it's just, you can't see it. It's just right off camera here. And it just says, I get to. Right. You know, and that, that's really true. Like, oh, yeah, harvest is dragging on. And this is a real pain. You know what, I get to get up in the morning and go do this. Not everybody gets to. And so the fact that we get to do those things, we need to be very pleased that we're in this position in life that we do get to do some things here that other people in the world, they just don't have those advantages that we do.

Chris

Barron: Yeah. You get tired, you get frustrated. Um, I've been—

Ryan

Moe: everybody does.

Chris

Barron: I've been driving a fertilizer truck all week, feeding our strip-till bar, you know, and it's, and it gets, you get tired and you get worn out, but, um, we get to, I think that's a great, a great way to, to wrap this up. We're pretty fortunate, pretty lucky that, uh, We live in America and, and, uh, we need to stop and be thankful.

Ryan

Moe: So that's from the Iron Cowboy. So just, uh, check him out if you're looking for somebody that's really done something. Look him up. Iron Cowboy.

Chris

Barron: Iron Cowboy on YouTube or what?

Ryan

Moe: Uh, he's all over the place. He's a motivational speaker. 50 marathon or 50, uh, Ironman triathlons in 50 states in 50 days was one of his old records. And then he did 100 in 100 days here a couple of years ago. Unbelievable story. So check that out. That's, that's a fun one to read.

Chris

Barron: Sounds like a physical challenge. We'll have to look up.

Narrator: So.

Ryan

Moe: Oh, yeah.

Chris

Barron: All right. Hey, Ryan, this has been a great conversation. We got a lot of, a lot of things to be thankful for, but we got a lot of challenges, a lot of things to pay attention to, a lot of math to do. And if people need to get a hold of you or want to check out you know, StoneX, what's the best way to do that?

Ryan

Moe: Yeah, ryan.mo@stonex.com. Something we're pushing out right now. We do a Midday Thoughts every day, comes out about noon. It's a little bit goofy. It's definitely in the infotainment realm, but yeah, that's free for people. It's been really well received. Client base on that is really growing. But yeah, ryan.mo@stonex.com. Let us know, we'll get you put on that and Yeah, you'll get to hear from us every day at noon and what some of the things that we're seeing.

Chris

Barron: Yeah, I recommend people give you an email and get that information. That is, I just looked at it today. It's pretty awesome information. And like I said, it's kind of funny, but on the same token, it gives you some good perspective and stuff too. Keeps you in the loop. So with that said, thanks, Ryan. Appreciate it.

Ryan

Moe: Thank you very much.

Chris

Barron: Yeah, thanks everybody for listening. Again, have a great Thanksgiving and we'll be back again next week with more more of the Ag View Pitch.

Narrator: Take care, thanks.