Trending higher to end 2025?

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Garret

Brown: Thanks.

Shay

Foulk: Welcome back, everyone, to another episode of the Ag View Pitch. Today you have Shay Foulk with Garret Brown of Kodak Risk Advisory. Garret, we're recording Friday, December 12th here. The holidays are not that far away. Do you have your Christmas gifts bought yet? It's an important question.

Garret

Brown: Everything is bought. Oh, not everything's picked up yet.

Shay

Foulk: So, okay. Has, has Santa's elves wrapped everything?

Garret

Brown: Pretty much everything's been wrapped. We got one little surprise for the kids here yet that I don't know. I happened to talk to somebody internally that You know, it'd be really fun if we could find not the step up from the kitty cats, you know, because, uh, see if we could find something like that for the kids. And about 10 minutes later, I have a client text me, says, hey, I hear you're looking for one of these. So I said, does that count? Does that, you know, cover delivery from North Dakota to Illinois? And he said he'd meet me in Fargo.

Shay

Foulk: So that's close to halfway, I think.

Garret

Brown: Uh, yeah, yeah, it's about 45 minutes of the 10 hours, but, uh, But, you know, we're headed up there for Christmas this year, so it'll be, it'll be perfect and kids will love it. And sounds like there's plenty of snow up there.

Shay

Foulk: So yeah, well, and, and I guess for the listeners, you're a North Dakota native, implant to Illinois. And, you know, if you could just give a quick overview of kind of who you are and what you do to reintroduce yourself, and then we'll jump into some questions here.

Garret

Brown: You bet. Yeah, so, um, you know, grew up in North Dakota on a corn— well, they don't grow corn, actually. They're growing corn again, actually. They had '90, '95— this was the first year since '95 that they planted corn. Dad always jokes they quit growing when everybody started. But yeah, wheat, sugar beets, edible beans really covers a lot of it. Some soybeans up there. But basically, back in 2016, left the ethanol industry. And we started working with farmers on risk management and merchandising their cash positions. So now at this point, you know, we have a pretty good allotment of the business that we work with is in North Dakota, because that's where our majority of our offices are at. But now we stretch from North Dakota to Kentucky, Ohio, and Tennessee. Yeah.

Shay

Foulk: And a growing team there too, which is cool to see.

Garret

Brown: Yeah. So yeah, it's been great. And, you know, it's, it's fun to find good people that have a commercial background that are looking to just get a little more tied in and really focus on working with their favorite producers.

Shay

Foulk: Yeah. Amen. Well, we're, you know, closing up the second week of December here. Lots going on in the news. You know, quiet in some areas, and I would say pretty volatile in others. Just kind of want to get your picture for what your feelings are here as we wrap up 2025 and look ahead to 2026. You know, what's the sentiment? What are you feeling? And what are maybe some things that farms should be thinking about as we wrap up this year?

Garret

Brown: You bet. Sentiment, I mean, obviously this week we saw March corn down 4, Jan beans down 29, Minneapolis wheat up 2¾, I think here Chicago wheat down about 8 cents. It could be a little bit better. It feels a little bit like holiday trade. The managed money crowd got pretty long with all that news coming in. Has all that news been factored in? You know, that's something that we can continue to ask. We don't know. Time will tell. I mean, we saw something very similar last year in terms of prices rallied. And they kind of fell off. And I think it was December 18th last year, the corn market took off and didn't really look back until mid to late February last year. And we're seeing some things that are very similar to that. I mean, there's going to be some that will debate it.

But, you know, basis, you know, improved, and it's kind of stagnated a lot because we've had a lot of beans show up in corn space for obvious reasons this year. So if that happens, you got a lot of acres, you got a pretty decent crop, I don't think anybody's debating whether this crop was large in terms of yield, whether you're thinking it's a 180 or 186, it doesn't really matter. It's still a large amount of bushels, right. And so despite all that, we've seen, you know, delivered values, I think, been running pretty good along the Illinois River. And that's helped keep the spreads— I mean, the Dec market got into 7 cents carry, which is when you think about it, after what I just said, I mean, that's pretty remarkable. Beans made their $1.50-plus run on the cash. You know, a lot of people didn't have that on their bingo card.

It just feels like we're kind of marking time until January, personally. You know, and like, obviously nothing that we're saying here is a recommendation, but I probably lean a little more open-minded on all this stuff. It certainly seems that way than what we're reading and what we're hearing people talk about. I mean, I'm, I'm questioning, I guess, where the harvested acres are going to come in. Just from the anecdotal evidence that we have, central Minnesota, parts of North Dakota. I'm not great in southern Illinois, but just from things we heard, I think harvested acres could come down. I mean, when you go through the, the highest CRP acres since I think 2013, you have the, all the solar projects, all the wind projects, your urban sprawl. I mean, Fargo probably took out a couple thousand acres just for their diversion project.

I'm not sure how many, but it was a pretty big deal up there. And that's just one small regional area. I just really struggle to, I guess, to see the acres as big as they are as a whole. I don't know the breakdown. Corn obviously should have had the benefit for the way profitability looked. But I just— that would be one of the things I guess that I'm looking for. And over the summer, I had a buddy of mine that's from central Minnesota, just sending me pictures of lakes, basically for miles and miles and miles and miles. And it's like, those acres ain't getting harvested. I don't think somebody can call us up and fact-check us on that, let us know. But the other thing is, you know, on the yields, I guess it's, it's hard to know again, into this report, I think I told you 182 was kind of my number. That's probably this, probably over my number is maybe on the top end.

The corn and beans were in kind of a downtrend as far as USDA estimates, but you can't really look too much further into that. So fresh demand is phenomenal. Exports are very easily can be counter-seasonally traded. So I think you got to wait on that yet. That's too early to say for sure. And then corn exports are just absolutely through the roof. And then feed residual, you know, you got the rounding error with the feed, but lots likely to come down. So there's just, there's just too much. To really go on at this point as we head into January.

Shay

Foulk: And you alluded to the fact that, you know, this December to February time period, you know, I— what, 8, 9 years out of 10, you're going to see some movement on the uptrend here. Anything to significantly negate that that we haven't talked about, you know, any major tariff changes or, you know, some of the other things that are on people's mind is what if Ukraine, Russia do get a peace deal signed, you know, Any other global factors, I guess, to take into consideration there as South America, you know, planting and kind of weather concerns come on board at the same time?

Garret

Brown: I mean, it seems like the Black Sea deal has kind of been a moot point for about a year at this point, maybe not. I don't— some of those things that we're just not going to know. I don't spend a lot of time sinking my teeth into because it could all change tomorrow. Yeah. But we've been hearing, you know, I think last basically earlier this week, USDA reduced production in Ukraine, reduced production in different parts of Europe, followed Stats Canada's move in for Canada. But we've been hearing apart from lower yield, lower acres, and lower quality in Ukraine, kind of the same thing in China. Chinese corn futures have rallied significantly here this fall on the back of their second consecutive record crop, which coincidentally, those two crops are budgeted by USDA to be within like 0.1 or 0.2 million metric ton of each other, which is just amazing.

12 years, a 12-year low for stocks to use for corn, and 60% to 62% of that supposedly going to be in China. And their ending stocks are plummeting. So deep breath and just see what happens.

Shay

Foulk: We don't—

Garret

Brown: Oosa. Yes, we don't know. That's, that's a fair statement.

Shay

Foulk: One other thing that's kind of on my mind here, you know, Fed's looking at another potential interest rate cut. Questions about, you know, inflationary quantitative easing outlook. A lot of times we see, at least when you look at over the last 5, 6, 7 years, you can see inflation trend pretty closely with where we see some of these commodity prices coming in. You have any merit in that? What are your thoughts there?

Garret

Brown: I'm not sure the short-term ramifications. I was just talking to a friend of mine, similar line of business here, about it yesterday. And he said, you know, with all the doom and gloom that we had, kind of pre-COVID there in 2020, we couldn't— or when all the doom and gloom that we had this summer with this record massive crop, massive acres, whatever, we still couldn't trade corn down to those prices. You wouldn't even trade corn down to the prices from last year. And so the question kind of became, is, are we kind of finding that new price floor that, you know, the next decade, you know, yeah, kind of seems like there might be some merit to that increasing that. But again, I think it's one of those things, you almost got to look back 10 years to say, okay, did we actually see something?

Shay

Foulk: Yeah, or go back to 1975 when corn was $5. And, you know, it is kind of interesting when you think of it from a perspective standpoint, but Certainly something to watch and something that they're going to continue to look at as we head into May of '26 here when they look at a new Fed chair appointment. Yeah, going to be kind of interesting. As far as wrapping up 2025, I know it's been interesting to see— actually in the middle of a consulting meeting right now— and the comment that the gentleman that was here made said, you know, me and the entire world are waiting on a 20-cent rally. And, you know, when we look at where we're at from a Dec and March corn pricing standpoint, I think there's a lot of truth in that. My instinct is you get that 20-cent rally, and I don't know how long it's going to last because you're going to have a massive flow, massive flow of pricing in crop.

What are your thoughts there?

Garret

Brown: That's probably fair. You know, again, I try not to outguess what's going to happen before we get there. Because how many times have we— I mean, I'm just playing advocate, right? I'm not saying we're going to blow through it or whatever, but how many times you've seen where you go down and you trade low, so low for so long, and all of a sudden you do get your $0.20 bounce and it's like, oh, we got it, we got it, we got to sell this. Everybody goes out and blows it all out there. And then pretty soon you rocket higher as soon as that first— that big chunk dries up, essentially.

Shay

Foulk: That's when you sell the next year, Garret. You know, and I think part of the factor that weighs into that too is let's look at the broader ag economy. And I think this is a serious consideration for the people listening is the conversations that are going to happen over the next 3 months with your lenders are going to be more intense than they have been the last 2 years. '23 into '24, it was, hey, you know, prices dropped off substantially. I know our balance sheets got hit pretty hard. You need to watch it in '24. '24 into '25, it was like, you know, things are tight. What are we going to do? We're going to burn through some working capital. We're going to do some refinancing. We're going to get creative. In 2025, there's going to be some serious discussions that are happening. And, and it's the point where I think the buck's got to stop somewhere.

And I think you're going to have people saying you need to have a marketing plan in place or you need to cash flow or you need to, to do X, Y, Z. It's not a— it's not an ask or a nice to have anymore. It's a you need to have a plan in place or there will be non-renewal or not loaning to the amount. And so I think that is a serious consideration for those listening. If you don't have a plan in place, either from a marketing standpoint or understanding what your cash flow needs are as you prepay or cover final expenses, you know, prepay '26 or cover final expenses from 2025, you have to have those strategies paired together. They can't be mutually exclusive, whether it continues to run up higher or not. Because on top of that, you're still continuing to eat 7.5% plus interest on your operating line of credit.

And whether that storage pays or not, to this point it has, but nothing says that it has to for the next 3 or 4 months. Yeah. I guess anything else on your mind here, Garret, that, you know, listeners should be thinking about or that you, that you want to not think about as you head into Christmas, I guess?

Garret

Brown: You know, over the last couple of years, it's just what's come to mind is if you disagree with something that's going on in the data, or you disagree with something that's going on in price, that's fine. But you just need to know, can I get to the other side of that logistically, whether it be for just the physical moving of those bushels or the cash needs?

Shay

Foulk: Mm-hmm. So let me know when the other side of it is too, Garret.

Garret

Brown: Well, exactly right. You got to have some sort of indication of when you think that is. Um, I know a lot of times we think we got to have something going all the time, and you know, sometimes doing something is nothing, but that doesn't necessarily mean it is right. So, um, yeah, time will tell. Like I said, it feels like we're marking time.

Shay

Foulk: One, one simple exercise that I would maybe leave listeners here with is, um, we had put together a cash flow marketing sheet that essentially says every month by your major line item expenses, when are the expenses throughout the year, how much do you need on a monthly basis, and then what's that on a total line item expense. And it's kind of interesting when you map that out, you might have 4 or 5 months that are 2%, 3%, 5% of your cash flow needs, and then you got 4 that are 15, 20, 25%. If you're not matching those up accordingly, you're going to have a disparity in your numbers, you're going to have ugly year-end tax implications. If you don't have a pulse on that, just reach out to us. It's a free tool. shay@agviewsolutions.com. I'll send that over. Don't, don't be stubborn about your either lack of a plan or the things that you don't know.

That's the time that you need to reach out and, and get some help. So Garret, I appreciate your perspective here. I hope you enjoy some time up in North Dakota. And if anybody wants to reach out, learn more about Kodak Risk Advisory, how can they do that?

Garret

Brown: They could just visit our website, kodakgroup.com. We have some contact links on there. And yeah, if anybody's got any questions, have them reach out. We're not, not really high-pressure sales pitch, just want to see people succeed. And, you know, if we're, if we're growing the relationships we're looking for, ones that they actively want to participate, they're looking for what we have to offer.

Shay

Foulk: So awesome. Thanks a lot, Garret.

Garret

Brown: Thank you.

Shay

Foulk: And thank you everyone for listening to another episode of the Ag View Pitch. We will catch you next time.