Top 10 fall marketing tips

Chris: And it all comes down to this. 2 on, 2 out, bottom of the 9th. The Farmers lead by 1. Full count, here comes the play at the plate, and it's the Ag View Pitch! Start whenever you're ready. Okay, welcome everybody again to another episode of the Ag View Pitch, but this is the video style, and so if you're listening on audio, you're just gonna have to bear with what you can't see I guess. And if you're watching on video, welcome. It's good to be here. And I've got myself, Chris Barron, and Dewayne Lowery. How's it going today?

Duane

Lowery: Great, Chris. Welcome everybody. We're happy to do our first video podcast.

Chris: Yeah, we're gonna see how this works, right? We're novices, but we'll get better as time goes on. So what we want to do today is talk a little bit about some marketing principles. Typically Dewayne is the one that is rambling on and talking a lot and I'm throwing questions and I think we're gonna reverse roles a little bit. I'm gonna ramble on a little bit and Duane's gonna, you're gonna ask questions, right?

Duane

Lowery: Yeah, for those of you familiar with our regular podcast, this time I get to throw Chris under the bus. So I'm looking forward to this.

Chris: That'd be good. I get to see what it looks like under there. So that's good. So let's go ahead and get started. And again, it's the, what we came up with, or what I came up with I should say, are the top 10 marketing principles. And I want you to pick on me a little bit here or throw me under the bus or whatever you want to call it, but the number one thing that I think as growers we need to really be thinking about this fall as we go into harvest and as we're working through harvest and even after harvest is our cash flow needs. Okay, so I just want to give a quick example here of we got $200,000, $250,000 of revenue that needs to come into the farm by the end of the year. So let's say by the end of December. Let's say that this grower has— and I can kind of use my mouse here— let's say that this grower has 25,000 bushels sold at $3.80, so he's expecting that $95,000 to come in.

Well, additional income yet needed then is $155,000. So again, what you're going to want to be thinking about is how many bushels do we got to sell based on whatever this price opportunity is that's out there. We're not going to predict price today, Dwayne. I'd like to ask you, you know, what's that price going to be? But, um, really it comes down to figuring out what is that objective that we need to go for, because this cash flow is king. You know, of all the things we talk about here in this discussion, I think it's all going to come back to cash flow. You know, you always talk to Wayne about how, you know, we trade money. The traders trade money. Well, as farmers, we we trade money too, you know, we buy inputs and we sell grain. And but it's really not about the grain. And it's really not about the inputs. It's about the dollars at the end of the day, right?

Duane

Lowery: So right now, the focus is satisfying your cash flow needs, make the banker happy, find out how you're going to do that. And then in terms of market price, marketing decisions, that's a separate decision, using a different toolbox and finding the right tool for the situation. But we're trying to make sure we manage the cash flow, right?

Chris: Because if you're, if you're, if you know you need $250,000, it might be $1 million, it might be whatever your number is. What is your number that you need for revenue so that that way you can accomplish that by the end of the year at whatever price opportunities are there? And then we may have to get a hold of you and say, okay, what tools do we need to be using to leave the upside open? But we got to bring some revenue in. We'll be talking about basis and all that kind of stuff here in a little bit. And I think that's a really big key part of it. The other thing is just to keep in mind is the cost of money too over time. So if we're not moving this physical stuff as time goes on, you know, you can pretty much count on 2 cents a month for corn and about 4 cents a month for soybeans. And so those are just things to keep in mind when you're doing, doing the math.

Duane

Lowery: And looking up here, 2 cents doesn't seem like much, but 2 cents on 200 bushels of corn is $4 an acre if you hold grain for 5 months, all of a sudden it's $20 an acre, right? That's, that's real money that people can— right.

Chris: And we don't think about, you know, we're spending $20 an acre when you hold on to the grain for 5 months, but you are. That's how we have to think about this stuff when we make these decisions. It's like I was telling you offline, when we make these decisions, we make these decisions, um, in one area, but it affects all the other areas of the business. So That's number 1. Number 2 then is storage. Okay, so what am I trying to bring up here, Dwayne, is, you know, can you store everything? That's one of the things that in the areas to the west, guys can probably store, may not be able to store everything. You go to the east, guys will be able to probably store everything. So what is your situation? If you can't store everything, you know, what's the quality of the storage?

What I see have happened, and if you're in an area where you are going to be tight on storage or you're using offsite storage, I was talking to you about this offline, Dwayne, and I think it's something a lot of us don't think about. But if you're, for example, renting a farm down the road, you get 500 acres down the road, there's 60,000 bushels of storage on that offsite farm, and you got it all planted to corn. So you go harvest the corn, you bring it back home, You dry it, you turn around, reload it, haul it back to that location, fill the bin, and then eventually you gotta take it back out. Well, there's an expense to all that, and we have to factor that into our cost of production. A lot of times I see those things get omitted, and, you know, "Well, I've gotta store it." Well, that's fine, you have to store it, but it's a cost that has to be assessed.

And so, you know, and what we see a lot of times is, you know, you figure 6 cents a bushel getting it to the dryer, from that 500-acre farm, okay? You got 3 cents in probably getting it in. You got your drying cost. Then you got, you know, your moving it back out cost. So there's probably another 3 cents bringing it out. How far away is that farm from the drying or the main setup? Haul that to that location. Now you got another 3 cents in it, you know, or maybe 6 or whatever it is to get it trucked back over there. You gotta auger it in, so you got a cost there. And you've got a cost getting back out, you know, and whether it's, you know, labor, fuel, time, you know, and, and we see that happen a lot, you know, guys that have to be transferring corn when they could be harvesting. This year though, I think guys are going to be waiting on the dryer.

Duane

Lowery: Would you say that this is a decision that shouldn't be made just out of habit, just because you've done that every year, that each year needs to stand on its own? For example, this year we know basis right now is stronger than normal, right? And so that needs to enter into your calculation as well, right?

Chris: Exactly. And we'll get to basis here in a little bit, and I think that's One of the things that we need to make sure we keep in mind when we're making those decisions. The other thing is commercial storage. You know, like we talked offline on that one too a little bit, you know, 18 cents a bushel, let's say, to go to commercial storage. Well, does that make sense if the basis is really good? Or, you know, or if you need the cash flow, back to the cash is king thing, you know, what does that do to help you to bring that cash in You know, maybe bring that in and reown it on the board or buy some, some kind of, do some kind of an option strategy or spread or something.

Duane

Lowery: It's also true that once you put that into commercial storage, your marketing opportunities have been limited. Right. So you're going to market that through that elevator as opposed to other opportunities that may exist, whether that's a local feed market or multiple different, you know, ethanol plants or whatever type of facilities you have for choice. You know, that's part of a cost because when you have limited choices on how you're going to market and where you're going to market, that does limit your opportunity.

Chris: Right, right. You haven't thrown me under the bus yet though. You're agreeing with me so far.

Duane

Lowery: So we'll see.

Chris: We'll find something here that you can throw me under the bus on. So margin opportunity number 3 of 10. So I've told you this probably 100 times. All the clients that I work with hear me get on this soapbox, but I can't stand it when people talk about a target price. I couldn't stand it the last couple of years when people said, "Four dollars, you need $4 corn and you need, you know, $9 beans or $10 beans or whatever it is." I don't know why anybody knows what that number is for the masses. It just doesn't exist in my mind. It's all about a margin target. Well, how do we get to a margin target? Well, what we want to do is we want to look at the objective profit. You know, what's the objective? Okay, I want to make 25 cents I'm just using the number here, but you know, anybody can put their own number in there. But I want to make 25 cents a bushel on corn.

I want to make 25 cents a bushel on soybeans. Whatever that is, is going to depend on yield, but it's coming back to saying, okay, what is your target in terms of per bushel profit that you want to make? Once you've established that, then you take your cost of production. We're to the point now where The only thing we really don't know is maybe on corn, on drying costs and some logistical expenses yet. So we've pretty well got that cost of production dialed in. So let's say it's $3.75 on corn and $8.75 on soybeans. Well, that gives us then that magic term that I like, which is called margin target rather than a price target. Okay, that margin target then tells you where you're going to sell your grain, what price objective, and that doesn't mean you sell all of it there. It doesn't mean that you might not start sooner than that.

It doesn't mean that that's the end-all be-all, but it gives you a target. If you don't have a target, it's pretty hard to go shoot at something if you don't have something that you put up that you're going to shoot at. Otherwise, you're, you know, shooting in midair. So that's really what I'm trying to achieve there. How do you want to pick on me on this one?

Duane

Lowery: Well, the first thing that comes to mind is the most important thing the producer needs to know. He needs to know his cost of production. He needs to be thorough on knowing his cost of production. And then the margin, you know, you don't really care if that comes from price or it comes from yield or if it comes from an indemnity payment or where it comes from. But you want to make sure you're getting that margin right. And getting that focus on the margin itself and away from the price per bushel is really important because now that we're at the harvest time, now that we know what the yield is going to be close, we know what the price is going to be close, at least what we're dealing with now. It's now capable of generating that margin. All of a sudden, what we had in our mind for a price is completely irrelevant if our bushel has altered or the price has altered.

And where the focus needs to be on the margin, that's what you're focused on, right?

Chris: Right. And then, you know, I think what you were picking on me offline on, I was waiting for you to throw at me, is the, you know, I don't know what my yield is, so I don't know what my cost of production is. Well, that's a bogus response once we get into harvest. Because I don't care if you're only 10% into harvest, you poke into 2 or 3 fields, you have a pretty darn good idea of what that yield's going to be in, in your corn and your soybeans or whatever crop you're in. And so you can start to calibrate those numbers based on that yield. Now if you're looking at a whole new year, then I, I would— I use the 5-year actual production yields if you're talking 2020, but we're talking 2019 here specifically corn and soybeans. And you know, you get rolling, you have a pretty darn good idea.

And so there's really no excuse to not, not document that number and then document an objective price. Then you truly have a target. Otherwise, all you're ever doing is shooting from the hip. And let's face it, the majority of producers shoot from the hip when it comes to marketing. That's just how we do it. But I'm challenging people to sit down and document those two sets of numbers, four sets of numbers.

Duane

Lowery: And right now at harvest time, it's easier to calculate that margin because you have a better handle on, yeah, on yield. You know what price you're given, and we've already talked about the cash flow, that there might be limitations on the window of when you're going to have for opportunities to make a marketing decision, right? But you really want to make the case that all year long, even like now when we look at 2020, the focus in your mind needs to always be on margin target.

Chris: Margin target, because I don't know if the price is going up or down on grain. I mean, you have somewhat of an idea out a little ways, but most market analysts, with all due respect, Dwayne, are, are about as accurate as weatherman. You're a little bit more accurate than weatherman.

Duane

Lowery: I'm not sure the weatherman might argue that.

Chris: Well, that's true. But, but, you know, so if we knew where the price was going, that'd be great, right? I mean, so that's why we have our podcast on perspective. You know, we talk about odds all day long, but reality is what your cost of production is, what your margin target is, and when that's achieved, that's when the discipline comes in, is you pull the trigger and you execute that opportunity to make some money. Now, you might be in a situation— I think you and I talked about this earlier— last 6 years I've seen a lot of operations have to sell grain at prices that never achieved a profit, right? So maybe it's zero. Maybe that number is zero. So you have to determine what that margin target is. Otherwise, a lot of times you'll give up some opportunity to make a sale because it never gets to that price level. So that's why I'm saying, you know, you get this documented.

It doesn't mean that you might sell some below it. You might sell some above it. But it's that you know what that number is. So the foundational piece is knowing your cost of production and understanding what profit objective you want to try to achieve to make your operation— that's your goal. What's your goal? You know, if you don't set a goal, you can't achieve it. So, so that's, that's number 3. We won't spend as much time on, on the rest of these as we just did the first couple here, but it's really important, I think, that we, that we drive those factors home. Basis opportunity, I'll be— help me out a little bit with this one, Dwayne. But you know, you got local basis. We do have other options this year, right? Because as you go to the east, the basis levels are significantly higher, you know, maybe plus 30, 40, 50 cents.

You go to the west, maybe they're not as good, but they're still pretty darn good.

Duane

Lowery: Still pretty good. And we're going to find grain this year moving in directions that, that are outside of the norm. And if you happen to be in an area that is short on production, all of a sudden you need to broaden your horizon and find that local feeder that is maybe going to struggle to find supply. Is there an opportunity to establish a relationship with them that they know they can count on you for X number of bushels? You'd find a method to figure out the price, but you need to broaden your horizons and try to establish new relationships or just be aware because on any given day, under any given circumstances, somebody could be paying you know, several cents or a dime or more above what is the prevailing market just to get supplies.

And this is a year that those things happen because we have regionalized shortages of grain, and we have buyers that are going to be nervous because of that. That causes them to pay a little bit more, and you want to be in position to try to look for those opportunities.

Chris: The other thing too is, you know, deliver when the processor wants the grain. The example I always use is You know, in our local area, Cedar Rapids, they want the grain when the combines are rolling in the fall because people are filling their bins, they're not delivering, you know. So like I said, if you have overflow, you know you're going to be full, don't wait until the bins are full to start hauling that grain. Watch the basis and deliver when they want the grain. Or the other thing that happens in our local area a lot of times is we're all busy combining soybeans and nobody's delivering corn at that time. There's big lines at the soybeans. Well, maybe you dump the soybeans in the bin and haul corn when everybody else is, you know, doing soybeans.

Duane

Lowery: Would you say that a part of everything you just described would be having offers, basis offers into that local buyer that are well above their bid, but they at least know that you're interested, that if they have to reach up and grab some bushels, they know that you're there?

Chris: It may not even be putting a number on it, Dwayne. I think it has a lot to do with just just having that relationship and, and having that proactive phone call and say, hey, I got 20,000 bushel. I don't know what that great basis is, but if an opportunity comes up, let me know and I'll deliver it. And I don't care if it's a day when, you know, when I need to be combining, I'll shut the combine off and bring the trucks. Now that all of a sudden starts giving some people a headache, or a headache or a heartache, or it's gonna, you know, stroke them out. Well Figure out ways to do that, folks.

I mean, we have to figure out how, maybe we get another truck lined up, which is impossible to do, it seems like, in the fall, but planning that stuff ahead of time, it might be a situation where it's gonna be tough for a lot of people to step right into that and be able to do all the things necessary to capitalize on the maximum basis opportunity. But like I was telling you offline earlier too, a 20-cent improvement in basement— in basis, we've seen that 20-cent improvement during the course of harvest a lot of times get that much better. Well, on 200 bushel corn, that's $40 an acre.

Duane

Lowery: So there's not many things you can do to get $40 an acre that you didn't expect. No.

Chris: And if you shut a combine off for a day while you're getting $40 an acre, and if you say you move 30 truckloads that day, whether you hired the trucks to come get it or use your own trucks or whatever, that's another $6,000 just in that day. Or, or do it over a 2-day period and it's $3,000 a day. So, you know, we've got to be thinking about what opportunities is this basis really bringing us. It's bringing us a whole bunch.

Duane

Lowery: And this is another— this is a year where these opportunities are more likely to present themselves in maybe a year with abundant supply, plentiful moving Right, for sure.

Chris: So, and again, the margin target, that basis improvement, you tack on that to that margin target and that just brings you that much closer to that objective. So, um, MFP— what's, what's MFP stand for? I've told you several times, Market Facilitation, right? Program. The key word there is facilitation, right? It's, you know, facilitating means that, um, It's there to generate that extra revenue to offset what we lost because of the trade war. Okay, so what this is showing us is if you look at it, and I threw my county up there, the county that I live in, the payment is $52 an acre. Okay, well, if that's the case, then my encouragement to producers is to look at your payment on a per-county basis, and when you get done with harvest or during harvest as you figure out what your yields are, divide that number by those bushels by crop.

So for example, we're using 60 bushel beans here, we've got soybeans, that's 87 cents a bushel for my county that I live in, you know, if, if my final yield ends up being 60 bushel beans. If my final yield is 200 bushel on corn, that's 26 cents a bushel. So again, we're adding that price to that margin target, so that's bringing our price up, that facilitation is there to increase our price. Don't just think about it in terms of a payment per acre, but think about it as a payment per crop, per bushel. Because last time I checked, we don't sell our grain on a per acre basis, we sell it on a per bushel basis. And all of these numbers that we deal with, we gotta always be converting them back to per bushel. So we're always thinking that.

Duane

Lowery: And to build upon the theme you've created already before, you're converting it to cents per bushel, but you're also driving that back and converting that to your margin. So you want to add these cents per bushel into the price available. You already know your harvest yield approximately. And if that's getting you up to your margin target overall, then this is a time for action.

Chris: Yeah, my cost of production on soybeans, for example, is $8.50. Okay, and I can get $8 cash price, but my market facilitation number is 87 cents.

Duane

Lowery: I'm getting, you know, I'm adding that 87 cents to that $8 cash price, and you're getting the goal and the margin you had hoped for in the winter.

Chris: And maybe, or maybe not, that might not be getting me there, so maybe I don't choose to make that sale, but I might make that margin target, you know, you're gonna make that margin target way sooner when you have this market facilitation as part of that, of the bid that you're getting from the process.

Duane

Lowery: So consider it added directly right to that bid.

Chris: If you add it directly to that, 'cause if you don't, I think we're all gonna get in a situation in a lot of instances where we don't sell on an opportunity when we probably should, because one way or another, whether it's political or whether it's technical or whatever it is in the market, The market has this factored into it, wouldn't you say?

Duane

Lowery: I would say that's the case. A lot of times these payments, the marketplace has a way of looking at that from the perspective, well, if the government is going to pay that money to the producer, then we can pay them less.

Chris: And so you are correct. And that already occurred with the trade war, right? Yes. So that's why I'm saying, you know, this is being paid in absence of price, figure out where this price is now, because these price levels may not get to quite the levels we want to see them at. So, and you know, maybe they will. I know you're, you're optimistic on that, but at the same time, I'm guarded because I want to make sure that we do everything we can to make sure when we can lock in that margin and we're happy with it, we lock it in. And if the price goes up, we can buy calls.

Duane

Lowery: There's things, there's other tools we can do to try to capitalize on that without risking the entire way, right?

Chris: Because it comes right back to number 1, which is cash flow. Cash flow. So number 6 out of 10, we're getting there. Um, insurance. Okay, the growers to the east, a lot of indemnity payments are going to go out. I mean, we're just going to see, see that. Probably a lot less to the west, except for around the rivers and where we had all the flooding and some of the dry areas where we had some, some some dry weather, what is the indemnity payment on a per-bushel basis is really what we want to be focused on. And so I want to show an example. Do you have any questions on insurance?

Duane

Lowery: You're going to do the same thing with the indemnity payment, getting that per bushel, just like we did with the MRP.

Chris: Right. And so hopefully you can see this on the screen, and if you're listening, I'll talk through this. But what we're looking at is, and we have this tool, it's called an Indemnity Revenue Estimator. It's essentially 6 variables that you, that you plug in. So you plug in your acres, you plug in your yield, you plug in your APH, you plug in the spring price. We have an example here of corn, so the spring price at $4, the coverage level that you purchased on your revenue program, 85%, and then the fall price. And that's the unknown right now.

So a lot of times, you know, Occasionally I'll have somebody say, "Well, I'm not going to collect, my yields are going to be too good." Well, you could yield your APH theoretically, and depending on what the prices do during the month of October, as these prices, if they go lower during the month of October, you might be in a situation where you have an indemnity or you may have a payment. You don't know, and so you want to keep an eye on that, and that's the whole purpose of of this tool. But what I do want to point out is, and if you can see it here on the bottom right, is, you know, we're factoring in, we've got a, this is an actual grower that I work with in Illinois too, 1,724 acres. We're assuming 130 bushel yield, a 165 APH, that $4 spring price, producer bought 85% coverage.

If that fall price comes in at $3.80, then what we're looking at then is a fall guarantee because it was 85% of 147.6 in terms of bushels. What that's telling you then is an indemnity payment of $115,000. And as farmers, we're guilty of, of checkitis, and it's how much was the check or how much they have to write the check out for. We remember those numbers. So like, if, if you get an indemnity payment of $120,000 to win, you're going to remember that but are you going to go to the next step and divide it on a per-acre basis? Yeah, now you're probably at 50% of the producers that are doing that. And then I'm going to say, are you dividing that out on a per-bushel basis? Now you're down to about 3 to 10%, maybe some a lot lower percentage, that says, okay, I know what that means in terms of per bushel.

And so in this instance, for this producer, based on what he's projecting right now, we're looking at about a 52-cent per bushel indemnity payment. Back to that margin target numbers, it's, you know, understanding what that— what does that bring to the equation. It's 52 cents. Now the reason I say we don't know what that number is right now, that's just an estimate. Let's go to the next slide. The next one, the only thing I changed, still the same acres, 130 bushel yield, 165 APH, everything's same $4 corn and 85% coverage. The only thing we changed was $3.40 corn. So we took 40 cents off of the, the average daily close of the December contract during the month of October for corn. You do the same exact process for soybeans, we're just using corn as an example on a real farm. Now instead of the guarantee of $147.50 or whatever it was, we're at $164. $5.

So that guarantee goes up as that fall price goes down. So it's been— it's funny, I was in the airport a couple days ago and heard a producer saying, well, I hope that price goes up so my insurance is better. No, it's actually the other— it pays out the other way, you know. And I think there's a big confusion, you know. Insurance is the one— is the thing we make a decision on once a year and then we forget about it. And it's probably one of the most complicated things that we do all year long, that's a single decision that we have to make in the spring, in March. And so, you know, it's really understanding, okay, if that price goes down, you just purchased a revenue package. You didn't purchase, you know, a yield, you know, program, you, or coverage, you, you know, you're looking at revenue. So now instead of the $115,000, there's a $205,000 check, right?

Well, no, yes, but it's $119 an acre. Well, no, but yeah, that it is, that's what it is. But again, instead of it being 52 cents a bushel, now it's 92 cents a bushel. Now we're starting to understand, okay, well, what is it in terms of per bushel on all of these aspects of all these things that we do change how we make decisions in marketing and how we look at all this and And so my whole point here is that every situation is different. You're all— every operation here is going to have to look at this with their own numbers. If you want this tool, email us and I will send you the tool. There's no cost for it. I'll send it to you. You can run the numbers. If you've got questions on it, give me a call and I'd be more than happy to talk to them. You would be happy to even talk to them, right?

Duane

Lowery: Absolutely.

Chris: That's good. So I'm getting you so you kind of starting to buy into this a little bit. Do you have anything you want to throw me under the bus on here?

Duane

Lowery: No, I think you're making excellent points. And I think the margin target for somebody that's not heard you speak about it before is a difficult concept to get to because we always think in terms of yield. We always think in terms of price per bushel. But even if we're trying to know what our costs are, Getting to that margin, that's a different way of looking at things that is not common in how we've been brought up to look at it. But yet at the end of the day, there's probably nothing that does a better job of gauging success or failure or where you're at on that spectrum. And what you're doing with all these extra payments is applying them in cents to get to that margin and to try to determine where you're at on that spectrum.

Chris: Right, and the last time I checked, you know, it's interesting for the lender to know what your yields were, and the seed companies do a great job of putting out very detailed yield books. My challenge to all the seed companies is I'd like to see a revenue book. I'd like to see a book that shows me, based on the average production cost within that book, and the average selling price, what's the revenue? You know, and I know that's a really touchy subject when you start looking at that, but that's really, again, like you've always said, you know, the traders are trading money. Well, as farmers, we're trading money too. You know, and we got to start rethinking a little bit how we manage our business and how we look at this, and it'll impact our bottom line on the positive side of things. So number 7, so we're getting there, we're 70% through here.

Um, yield, gross income per acre, we just looked at that, right? We just looked, and I'll go right back to it for a second. You know, um, we'll go back here, and where am I at? No, I went too far. Oh, we're going to get to it. Okay, never mind, we're going to get to it. So gross income per acre local basis, insurance, and cost of production. And again, it's back to that margin target, which equals your selling price, right? So, and again, I want to say margin target about 50 times, because if you hear it 7, you start to remember it. By about 50th time, it starts to sink in, right? Because I keep pounding it into your, into your head. So let's take a look at these things We already talked about local basis, we talked about insurance. Let's look at the cost of production piece for a second. When I was trying to go the other direction, we're going the right way now.

This is an example of a real farm that we work with. We've got 1,454 acres of corn and 688 acres of soybeans. And what we like to do is look at these grain crops side by side. And so what this producer is looking at then is that gross income of $723 in corn and $507 on soybeans. Now, is that enough? Well, if you go through all these categories, and this isn't all the categories, we didn't have room on the slide to put them all on, but we've got a number of the categories. We want these categories side by side from corn to soybeans, and we want to look at them. We've got them plugged in on a per acre cost, but then that calculates out to a total expense per acre. So on corn, we've got a $668 per acre cost, which is, is basically giving us about $55 per acre of revenue, right? And again, I like to bring that back to that ROI. What's that return on investment that you want as well?

That's a whole nother topic for a whole other day to get into ROI discussions. And then, you know, when you look at the soybeans, we're at $507, that's selling the, selling the beans at $9. And again, that $9, where does that come from? Possibly an indemnity payment, MFP, flat price, and basis.

Duane

Lowery: All of that is calculated into that.

Chris: That's what that $9 is.

Duane

Lowery: There again, that's why it's important to convert all those payments into a cents per bushel, so you know when you're, when you're getting to your margin target regardless of where that money came from.

Chris: Otherwise, how do you ever know when you're, where you're going to market your grain? And, you know, so now the next question is, is, well, I can either go out and combine or I can sit in the office for 5 days and figure this out. Well, with all the wet weather we're having, I think there's been some time— there's, there's some time that people can sit down. Now again, with this tool, if you're sitting here looking at this tool, again, I'll send you this one as well. You go through, you plug in those costs on a per acre basis, and you bring that margin target together, you know, and, and you can really start to clarify and start to see what it is that maybe you've never seen before. Maybe you're already doing all this, and that's awesome, that's great. Maybe there's something that you— that we've brought up that you've missed, or maybe there's something that we've missed.

If we've missed something, we want to know, right? Because we'll plug this back in and You know, so if you got constructive criticism too, we're all about that because that's the only way we're all going to get better. Is there anything, Dwayne, here I'm not hitting on or anything that you have questions on? You know, this grower, that 193 was his projected yield for— and this is an Illinois grower as well— 56.4 on soybeans was where we were at with his average projection. And this grower, I don't think, has done any harvesting yet, probably in the next week or so. We'll be doing that. So anything—

Duane

Lowery: the only thing that I would add is every slide you look at, it always comes back down to margin, like, and it comes back to that margin target. And it's less important how we got those numbers, whether it was price basis, you know, a push on the bid because we picked the right day to deliver it, uh, indemnity payment, MFP payment— that's less important than the fact that we got to the $9 or whatever price you're trying to get. And I think if you're not looking at it on a margin per acre target, the price becomes more difficult to gauge.

Because, you know, certainly before we get to harvest and we don't know what that yield is going to be, but once we're at yield and we do know the harvest, if you're looking only at price and not all these other factors of components to get there, it's going to cause you to make significantly different decisions when it comes to marketing and too often than not, it will be the wrong decision.

Chris: Yeah, the two things we see is it causes pause. If you don't know, what do you do? If you're unsure, do nothing. You don't do anything, right? So you do nothing, do nothing, do nothing, and then you do something because you've been doing nothing, you know. And, you know, the two greatest emotions of marketing are fear and greed. You know, everybody talks about that, but This allows you to be proactive. Yeah, and you can focus on the numbers rather than the emotion, and it's pretty hard to apply discipline when you're emotional. I mean, it's just almost impossible. And so if you can get these numbers in front of you and allow that to drive the discipline decisions, you don't have to be a rocket scientist, you don't have to be super smart.

And I have met— and you're a super smart guy, Dwayne— but I have yet to find people that, that do market outlooks and then analyze the markets, with all due respect, that really can be right all the time. I mean, you'll be right more than, more than others possibly. But I, I notice and I watch this with farmers a lot of times, we have a tendency— because I do this too, you know— we sit there and we watch the market and the— I don't know what it's going to do tomorrow, let alone in the next 2 weeks. And so, you know, if we can get these numbers in place and settle our minds down a little bit and not be so hyper-focused on all the noise of what's going on with Trump and what tweeted, you know, all that stuff's interesting, it's fun to talk about, but does that stuff really make us more money on the bottom line at the end of the day?

Duane

Lowery: Well, at the end of the day, nobody's right all the time for sure. But also, at the end of the day, the only numbers that really matter are what matters on your own operation. And a price per bushel isn't the best way to gauge that. Everybody's cost of production is going to be different. Everybody's yield structure is going to be different. And yet we all try to make decisions off the same market report. And that's not the best way to do it. It's not easy. $4 corn means one thing to one guy, means something completely different to another. But everybody can get their decision down to a margin target point.

Chris: Right. The other thing I— one quick thing I want to make a comment on too is that a lot of times the more sophisticated your tools, the less you look at them because the tool's doing the information for you, right? And so you don't have to go overboard and spend 3 weeks calculating this stuff and put it into this ultra, you know, high-end, you know, program that's gonna do everything for you and clean the kitchen sink when you're all done. I mean, it's all about, you know, getting in those numbers and actually being disciplined and doing it, because a lot of times you have the tools there, but you don't always use them.

Duane

Lowery: Sometimes there's value in just going through this process, just actually doing this process.

Chris: Yeah, the analogy I always use is You know, if I asked you, Dwayne, how many phone numbers did you know 20 years ago?

Duane

Lowery: A lot more than I know today, right?

Chris: By a significant amount, right? Because your phone's keeping track of all those numbers for you. You don't have to know it, so you don't, right? Yeah, we're just human by human nature. If we don't have to do something, you know, if we could walk from here to there, you know, we're going to walk straight line. If we're not going to walk around a bunch of stuff, even if, you know, even if it's going to—

Duane

Lowery: I'm sure there was a time early in my agricultural career that I without any hesitation could memorize more than 100 numbers, and I'm not sure that I know the 5 numbers of my most important family members.

Chris: Yeah, exactly. And that's, and that's why I think we have to run through these numbers and we gotta actually plug them in, and the decision maker and the marketer, whoever that has that, those decision rights within each farm operation, is really the one that needs to dial these numbers in. So That's it on that soapbox. So the last couple of things we've got here, and we'll hit these fairly quick, is grain quality. This one's just, hey, you know, a watch out, right? So damage, I mean, there's a lot of fungal diseases out there this year, diplodia and all kinds of stalk issues and wind and different things that have happened. That's gonna, that's gonna probably give us some pause on whether or not we want to store some of the grain.

Duane

Lowery: And it's important to put some emphasis and weight on that because if you choose to store that, that can be very costly to you.

Chris: Yeah, you know, you're, you're taking that risk and it's an assumed risk and it's, and it's all right, you know, it's, it's probably manageable, but it's one of those things I think we need to be on top of. Moisture of the corn, I've got that one on there too. It's just, you know, drying cost time, cost, you know, how it's going to be a slow process this year. I mean, people might be watching this yet in December while they're watching their dryer. Yeah, you know, I mean, it's, it's just going to take a long time to get this crop through the system. And so, you know, are you drying the corn to 19% or are you drying at 14%? Those decisions are going to affect that quality. And again, I've got shelf life on there, you know, that's basically saying how long you gonna store that?

You gonna store that till, you know, August of next year, or is that something that you literally are gonna move in, let's say, March or February? And if that's the case, then that's right back to the basis and all the other things that we talked about and getting some of those things locked in.

Duane

Lowery: And we know each year the quality of the crop has a different answer to that shelf life. Exactly. Some of our crops are a lot easier to store than others. And in some cases this year, we certainly think there are areas that are going to have more difficulty in, in the, in the type of quality of the grain and their ability to store that for an extended period of time.

Chris: And the shelf life of that, or the shelf life of the corn in certain regions, you know, you might go one county away and the quality difference is going to be really big. And I think a lot of the livestock, you know, a lot of the dairies and a lot of the hog operations, the furrowed finish operations, or the— for sure the farrowing units.

Duane

Lowery: You got lactating sows and that kind of thing are going to be on the watch out for high quality, which is another reason to go back to one of those previous slides where it was important to broaden your horizon and make sure that you saw opportunities that maybe you didn't have. But if you happen to have high quality grain, then the odds are there's, there's a livestock operation that might find that in extra special demand because it's more difficult to find it. Exactly. And that's worth the value to them.

Chris: Right, right. So anyway, that's 8. Number 9, and then basically just logistics. Again, just paying attention to a few things here. You know, when do we start in harvest? You know, so we're sitting here recording this on about the 1st of October. A lot of operations aren't going to start for a couple weeks yet. Some of them might not start for 3 weeks yet. So now all of a sudden, that— what's that— gave you 1 week of harvest during the, during the month of October. I mean, we're, you know, we talked about this all year long. We've been, you know, 2 weeks behind, 3 weeks behind, 4 weeks behind. It really starts to hit home when fall gets here and it's dark at 6:30 at night, right? And you start realizing our day length is less. It's cold out, things are really changing on us.

Duane

Lowery: And there was a time where we thought maybe things could speed up a little bit in the latter part of the growing season.

Chris: Right, we're seeing it.

Duane

Lowery: But that's not happened. In fact, in some cases, you know, depending on the planting date, it feels like this is extended out farther. Like you said, we're 2 or 3 weeks away from some fields being ready to go.

Chris: Yeah. And so I think that's gonna, you know, gonna really stretch the drying capacity. And again, so that's where, again, looking at that logistics, having those conversations earlier rather than later. What moisture level will the processors take the corn to? Does it make sense maybe only to dry it down a few points and then ship it out when you otherwise would be storing it? Maybe there are some opportunities with basis being good and all that.

Duane

Lowery: You might find that by not drying it as dry, taking a discount could end up being a better choice even though you may take that discount. When you factor in the lower drying costs, the speed, the ability to get through that quicker. And this might be a year that's—

Chris: and it's a floor on your market, right? I mean, that is a floor. You can open the top side back up. So, I mean, we've established a floor. We've priced it and delivered it or whatever. Trucking capacity is just another one. Options and how far you go. And we talked a little bit about that earlier. But, you know, if you're willing to go an extra 50 miles, it might, might be another 20-cent basis improvement. Maybe something to keep in mind. And then again, that storage capacity— where do you want to go and how does that affect your logistics? I think when we get into December, getting this crop out of the field is going to be a big deal. And so it's going to be, you know, where do we put this?

Duane

Lowery: We've had just about every weather problem thrown at us this year. I mean, Who's to say we're not going to end up dealing with snow at an earlier period?

Chris: Yeah, easily could. And we see that with a lot of our clients in Michigan. I mean, those guys up— those poor guys up there, a lot of times I go up there in December to do some meetings and things, and the corn's out there in 2 foot of snow, you know, yet in a lot of areas. And it's not that they didn't just go out there, but, you know, we had a wet fall last year, we're starting out with wet fall this year. Who knows how it's going to last, you know, for the next several weeks. But logistics is a real key thing. And if you're sitting there installed and can't be going, be thinking through logistics. Last thing, number 10, elevator and processor. Again, just keeping an open mind, right, Dewayne? It's, you know, looking at the new locations, you know. So like I was giving you an example earlier today that, you know, I've got about 4 places in our farm operation.

We can take grain to. But, you know, we could go 200 miles, you know, maybe go twice as far, and all of a sudden instead of having 3 or 4, we've got 7 or 8.

Duane

Lowery: Yeah, if there's a year to look for those opportunities, or at least be open-minded to at least explore it and be aware of it on a regular basis, this would be the year to do it.

Chris: Right, right. And then just cost of storage, that varies from one operator, you know, one elevator to the other. Sometimes they, you know, some of these ethanol plants are taking in wetter corn like we were saying earlier, or maybe they have a deal where you can price later or whatever. So, you know, just because something is posted doesn't mean that's the deal either. No, you have to make phone calls and actually talk to the person to find out really what, what opportunity is there. I mean, it's the same thing with basis. You, you look at these basis sheets and and, uh, make some phone calls that just what's posted, don't take that number.

Duane

Lowery: I mean, you might end up taking that, you might, but if there's a year where there's more flexibility, that this is the year.

Chris: Yep, exactly. Um, so carry in the market, I mean, you can probably talk to that more than me, but those are some things that I think we want to look at if we are going to store it. We need to be talking to processor about when we are going to sell it, when we are going to deliver it, how that ties back the cash flow.

Duane

Lowery: Carry is an important thing. It should never be ignored. You know, right at the present time, we have some carry available, and that needs to be something that needs to be discussed and evaluated. If there's no carry in the market, whether there's no carry in the board futures or no carry in the cash market, it makes it more difficult to justify not making that sale.

Chris: It makes me go ding, ding, ding, ding, ding, move the corn now, or the beans, or whatever it is. If there's not carry.

Duane

Lowery: Tool in that toolbox if you, if you're really determined to maintain some price opportunities.

Chris: Yeah, because if there's no carry, they're telling you they want the grain now.

Duane

Lowery: Yeah.

Chris: So, and basis has been telling us what's going on all year long, wouldn't you say?

Duane

Lowery: I would agree with that.

Chris: So the last point, uh, deferred pay, third-party risk. And we talked about that a little bit offline too, didn't we, Dwayne? Um, The concern there is, I guess, if you're doing deferred pay and you've got grain in an elevator— not picking on anybody or any, any elevators or anything in particular, I'm just making the simple fact that there were a lot of prevent plant acres this year. There were a lot of elevators that also sell inputs, and it's been tough on a lot of them. I mean, it's been one of those years where it's just a real financial burden this year because they haven't, haven't had the revenue that they need in from selling the inputs. Now all of a sudden they've got all this, you know, or whatever amount of grain they can get in. Are they financially solid?

Because if something happens to them, you need to make sure you have your warehouse receipts, you need to make sure that you're protected. What was the question you asked me offline about I think, Dwayne, you asked me something about how do you know if they're—

Duane

Lowery: I asked you how you know, and then you made the comment, well, they ask us for financial statements at times, and so it's not out of line to ask that question. And this is not something that we hope is a problem or think that is a problem, but it is the type of year that it could be more of a problem than it'd be other years. And if it affects you, it becomes a very large problem. And it's not a small problem. So it's not something that should be not taken lightly. It's a serious discussion and it's a serious thing to think about.

Chris: Yeah, because you know, you know your supplier and you know who that is. And a lot of times they're friends and people that you know and they're in the community and the trust needs to be there. But all we're really saying, I think here, Duane, is just some some good due diligence from a business perspective, protect your business, um, just in the event that something's going on out there that you might not be aware of. So I think that's really about everything other than, um, we do want to promote the, the Ag View Pitch, and we've got that on Apple Podcasts. Um, well, check us out on agviewsolutions.com and My phone number's there. Duane, your phone number's there. So whether you wanted your phone number out or not—

Duane

Lowery: No, it's great. We're available anytime anybody would like to talk. Chris and I both, if you haven't noticed, we both enjoy talking. Yeah. So unless you want to get off the phone quickly, you might not want to make that call. But if you're looking for information or just want to have a brainstorming session, you know, we enjoy that very much.

Chris: Right. And, and I just want to publicly throw out there an appreciation to you, Dwayne. If people haven't listened to our podcast, please do that. You know, we've over the years, all I've ever done with Ag View Solutions is we've really focused our emphasis on the cost of production, the cost side of it. And when I started working with you, Dwayne, the one thing I really like is how you look at the markets, you're not afraid to to climb under the bus, like you said, and say, you know, I think this is where the market's going to go. Whether you're right or you're wrong, it's— there's probabilities and there's 40 years of experience behind what you're doing and saying and how you're analyzing that information. And so while we're not giving any predictions here, this is really just perspective and trying to get good information out to everybody, and that's really in the conversation.

And again, if anybody has questions, please let us know. We'll be happy to send you the indemnity calculator for the insurance or the cost of production analysis side-by-side tool for corn and soybeans.

Duane

Lowery: And I just want to say thank you, Chris, for those kind comments. The other thing I'll say, for those of you that are watching us on video for the first time and have just heard us on podcast, now it's quite visibly obvious that I've been around the the globe many more times than Chris has, but I can assure you in all my travels of the globe, I have never ever seen anybody as focused on detail, as focused on cost management, and yet still have the same level of sincerity in wanting to do the best for the farmer. And in Chris's eyes, the best thing to do for him, the farmer, is to find out, know exactly what those costs are, because that's the foundation that goes into the margin target, and that margin target is what determines success. And Chris is all about success of his growers and his clients.

I've sat in on a lot of meetings, and there's a tremendous amount of trust and confidence in that relationship, and it becomes a very important— not just a business relationship, it becomes a friend relationship, and also very much, you know, You're, you're kind of on the board of directors of their operation, and people find value in that. And it's been a pleasure to work with Chris, um, if for no other reason just because of the sincerity of— for his customers and all growers. It's just like these things that you're sending out free, um, you know, you're sincerely trying to help the grower. And that's what Ag View Solutions is all about, right?

Chris: It's all about solutions. And if this is getting thrown under the bus, I don't know you know, you can throw me under the bus whenever you do, I guess.

Duane

Lowery: I'm probably waiting for the time you're not expecting. Yeah, well, I thought you were maybe too much.

Chris: Yeah, I probably showed you too much of this stuff where you debated a little, a little bit offline on a few things. But I think, I think we're, we're good now. We got our first, uh, video, kind of a long one, but I think a very, very important one. It lays the foundation on a lot of the things that we need to be thinking about as we go through harvest and and, uh, and get— try to get things wrapped up this year here for a new year. So again, everybody, thanks for joining us again on the Ag View Pitch video style, and we'll catch you next time. Thank you. Thanks for joining us on today's episode of the Ag View Pitch. As always, you can reach out to us at cbarron@agviewsolutions.com or duanel@netins.net. We'll catch you next time on the EggView Pitch.