USDA's report to set new baselines

Chris: And it all comes down to this.

Duane

Lowery: Two on, two out, bottom of the ninth.

Chris: The Farmers lead by one.

Duane

Lowery: Full count, here comes the play at the plate, and it's the Ag U pitch!

Chris: Welcome everybody to another episode of the Ag U pitch, and we are heading into a new week.

Duane

Lowery: You've got Chris Barron and Dwayne Lowery.

Chris: What's cooking, Duane?

Duane

Lowery: Not much, Chris. How are you doing?

Chris: I'm doing pretty good. Just caught a little bit of a shower here this morning in our farm operation, but it was only like a tenth of an inch. We would like to have about 10 times that amount, but I think it's getting kind of dry in parts of Iowa. Obviously the drought monitor kind of showed that in western Iowa, some, some severe levels, and I think some of that might be reaching our direction. What do you think?

Duane

Lowery: Well, actually, uh, if you look at, uh, some of the precip as a percent of normal over the last 2 weeks or even the last 30 days, that dry part of Iowa, the most dry, has now shifted to be more in the northern part, or the northeastern part of the state, even more so in some of the western areas. So, um, It's— there are definitely a lot of Iowa acres that are under moisture stress. Whether or not that stress leads to much of a yield loss is a completely different discussion, but we're definitely lacking moisture. And I think it's important to point out that we have not lacked moisture in the forecast. We've just lacked actual forecast-verifying what they had projected. That's been the problem. We've had lots of days where in a 7-day forecast we've had plenty of moisture, but many of those forecasts have not verified.

The driest part of the state in terms of recent moisture, not overall moisture, is probably north central and northeastern Iowa, and that spreads out to parts of southern Minnesota and Wisconsin, and even northern Illinois, northern third of Illinois. But over the weekend, we did see areas in Minnesota pick up some pretty decent rains. Northern half of Wisconsin picked up some decent rains. But you still got a chunk of Iowa that's too dry, and parts of southern Wisconsin and northern Illinois. But on a national yield projection calculation, I'm not sure it's— it hasn't been a market mover so far, let's put it that way.

Chris: Yeah, being in East Central Iowa, if I didn't travel around a lot, I'd probably have some backyarditis right now and wonder what kind of craziness some of these private yield estimates and where they're coming from and how they're coming up with these numbers, just because of looking at our own crop and looking at things to the west of here and how dry things are. But having said that, being in Indiana last week, front part of the week, and driving clear across that state, up and down some, and kind of all around Illinois, I just am flabbergasted. And I think Alyssa was getting tired, she was riding with me, of me saying, man, look at that field, wow, look at that field, look at that, look at that, wow. You know, it's just I've never seen such a massive crop. So I guess I can kind of see where maybe some of these private estimates are coming from.

Why don't you talk a little bit about that? I mean, it just seems like the market's kind of looking at things as, you know, maybe supply is, is still yet from the market's perspective outpacing the demand. What's your take on that, especially as some of these private estimates come out? And we'll get to the report. I want to ask you some questions on that. But address kind of the supply outpacing demand. Is that kind of what's, you know, putting pressure on the market, or what's your take?

Duane

Lowery: Well, I'm not sure what's exactly putting pressure on the markets per se, but the perception of supply is that it's abundant, excessive, and that's not changed. It's been that way all year long, but it is important to also reflect back that We spent the— all of part of the— well, let's just say the March through June period with these private forecasters telling us we were going to have 3.5 to 4 billion bushel carryout, and now they are telling us it's going to be more like 2.5, 2.8 billion carryout, something like that, depending on who you listen to, but the carryout numbers have come down because we had, you know, 5 million less acres at the end of June.

But in terms of national yield, today's snapshot of what people expect is not too much different than what they figured that we might get earlier in the year, and that was that we could exceed USDA's 178.5 yield projection, which was a record projection. Now you got people that have ratcheted up the conversation to largely 181 to 183, and, um, that's a mouthful, um, historically. I mean, it's a record yield, and it's a big jump from the previous record yield at pretty lofty levels, but a lot of people are super comfortable with that projection. And so that's the supply side. That's the easy part to talk about. The demand side is much more difficult to talk about. I would argue there's a lot of optimistic things on the demand side, but even if you plug in those optimistic demand numbers, you still get a burdensome carryout.

The— but that doesn't necessarily prevent you from getting, you know, better pricing opportunities at some point in time. And the last thing that I would say, which I think is kind of important, If you— once you lump in all these projections on supply and all the discussion about demand and all the large carryout, there's still one thing that of history from since 2009, I think you've had about 12 total weeks in that time span that you've had spot corn prices below the price that they are right now. So if you want to be bury corn and say prices will never get any better, just recognizing that you are up against that, you're making a statement that is very, very bold versus the last 11 years worth of prices.

Chris: Mm-hmm. Yeah.

Duane

Lowery: What—

Chris: so let's continue this conversation, but I kind of want to lean into the China thing too, because it just seems a little confusing. Looking at it from the standpoint of, you know, China is stepping in and buying this stuff. Is there just skepticism yet that they're going to follow through and take deliveries on this stuff? Or why, you know, is it— you know, it's back to that question, it's supply versus demand. It just seems like China is indicating that if, you know, they're buying this stuff It's probably keeping up with demand or with supply, isn't it? And so, I mean, why is— why do you think that's not giving us some strength?

Duane

Lowery: Well, I don't even know where to begin with that, but I'll start a little bit with where you finished. And you're implying that we have all these corn sales, but it doesn't seem to have any influence First of all, your entire question or series of questions in there has one flaw in it, and that flaw is an assumption that the market is logical. Okay, so that's the first mistake made in your question. The market is not always logical, and certainly not logical— well, it's certainly not logical in a snapshot-by-snapshot type of analysis. Maybe in the full length of the motion picture, maybe if there's some threat of logical part to it, but not taking still frame snapshots of the motion picture.

But as far as China's purchases, there is a constant aura of expectation, fear, demoralization that says, "Well, they're not going to honor it or they'll sell it back or they'll cancel it." I think that assessment is wrong. I think that they are going to— take delivery and continue down this path. And my argument is that China demand is probably far greater over the next 12 months than what the market has plugged in. And I'll offer up the following for logic on that. In the last several weeks, China's had their weekly corn auction out of state-held reserves, and the buyers have largely taken 100% of what was offered in the auction. Historically, that is unusual for them to take that large percentage of what is offered. The other thing, since— or this year, they have auctioned approximately 1.8 billion bushels of corn, and that's how much has been taken.

And a year ago, they had taken about 800 million bushels. So you got about 1 billion bushels of demand out of stocks that wasn't there last year. You have a price domestically in China that is— I've heard people say it's over $9 a bushel. These auctions, recent auctions, seem to average around $7.50 a bushel. You have— China has imported soybeans at a pace that is about 17.7 or 17.8, I forget exactly what the figure is, percent of growth from the previous year for— that's for the first, you know, 7 months of 2020. And so that implies, along with the corn demand coming through the auction, along with the fact that they are paying this price for corn, taking this larger percentage of auction despite having, um, all the new U.S. purchases on the books.

Most of that will arrive there sometime in the new crop marketing season, but they are— this implies that their livestock sector has had robust, very aggressive growth, and Despite the— this is another thing I need to add in it— despite the fact that China's soybean imports are up almost 18% versus a year ago, their crush margins are extremely profitable. So typically, as they import soybeans, their crush margins shrink. That's not happening this year, and so they must have a tremendously robust livestock demand. And so I think that their purchases of U.S. corn to date is likely only to grow. And to the extent that they max out their tariff-reduced quantity that's allowed for import, it is highly, highly likely that in the months ahead China's gonna open that up to more imports because the demand clearly seems to be there.

And their soybean growth in imports is truly impressive, and it really implies something strong for demand, and the fact that their crushing margins are still robust despite this large increase, I think gives a lot of validity to it. So I don't think we should be worried about China reneging on their corn purchases or canceling them, and I, I think we should be expecting them to continue a very strong pace on soybean imports, which means the U.S. is going to get, you know, a larger share in the next several months going forward. And I think that, you know, we're going to see increased purchases of U.S. from China or by China. And I think that the likelihood is that we're going to see a continual amount of purchases of U.S. corn unfold by China in the months ahead too. I don't think these are one-time-and-done type of purchases.

So, I think demand outlook is, is quite good, but there again, trying to equate that into a price, it's a lot more difficult to get your mind wrapped around a number than it is to talk about a yield that's 178 or 181, which by the way, if you remember back when Phase 1 was announced, USDA went out of their way multiple times in multiple different venues to say that they would not factor in Phase 1 projected purchases. They would not estimate those, they would not guess on those based on Phase 1, and they would not do so until the purchases became in the public domain. Well, uh, they are now in the public domain, so there's also a chance that in this coming Wednesday's USDA report and in future USDA reports, we may see USDA increase our demand base more than what maybe people are anticipating, possibly chewing into some of the yield increases if in fact there are yield increases.

I would capitalize the word "if" myself, but just the purchases that China has made so far to date equates to, you know, approximately 3 bushels an acre worth of yield. So whatever they purchased, that kind of displaces a 3-bushel increase, assuming these purchases were largely not in USDA's balance sheet. So there are some demand aspects that are going to try to neutralize some of the supply optimism that is out there. And I would also caution everyone going into Wednesday's report that this is not a survey-based, and so this is going to be a projection probably based on a bunch of weather data, temperature data, and other types of things. And some of those factors might not be so conducive to getting a big yield bump here in August, even if there is a big yield bump to come. It may not occur in August. So the bar for getting a bearish report right now is set kind of high, I would say.

So whether the USDA lives up to that or not, we'll find out. But the trade, and especially the farm sector part of the trade, is extremely fearful anytime USDA enters the arena.

Chris: Mm-hmm. See, for not knowing where to even start on that question, you answered that question plus some. So see, you got it handled really good. So, so having said all that, let me pick on you a little bit and just ask the question. You know, you hear— in the industry, you know, talk about when a harvest low comes in and all that kind of stuff. And, you know, and you don't have to say, well, this is where I'm at, or what, you know, or you can tell us what you think.

Duane

Lowery: But, you know, what—

Chris: so there's, there's one camp that says we're going to see a harvest low on the early side of things. There's a camp that says we're going to see a harvest low on the late side of things, you know, maybe November timeframe on the late side. The best side of it for a farmer is actually if we would see a low during the month of October, kind of in the middle of harvest. Do you have anything that producers should be watching for, for some kind of indications to that, or what, what's your take on the odds of the early harvest low versus a late harvest low, and what, what plays into that?

Duane

Lowery: Well, here again, I'll probably give you multiple answers, but the easiest answer to give is the one that says if the farmer— the best thing for the farmer is a low in October. Well, let's rule that one out because that's not going to happen. I say that, I say that with humor, but I actually, I actually have already thought this through multiple times, and I do not believe that's going to happen. Okay, well, over the last Over the last several years, it's not been uncommon to get a market that bottoms out in sometime August or early September, and it's— and oftentimes that is occurring at a time of extreme bearishness that also anticipates that bearishness to continue on through harvest, only to be proven wrong that it didn't work out that way.

This year I think there was a window of time where I would have anticipated that we could have had a harvest time low, an October low, maybe even a November low. There was a time, a window here where that looked reasonable to me, and there was a time and a window where it looked reasonable to me that new crop basis values could be quite weak and spreads could have a lot of carry and, uh, and, and be on the wide side of history. All right, I don't think that is any longer the case. I think there are two primary reasons that that is not going to happen, meaning we're not going to be making our bottoms in October, November, we are not going to have super wide basis, and we're not going to have super wide historical carries in the futures market. And the first thing that happened that in my mind changed the world, so to speak, on these particular factors.

They— none of these are flat price-oriented really, but changed the world on that. One was losing 5 million acres, okay? That's roughly 900 million bushels of supply. That significantly changed the amount of pressure that was going to occur during the harvest season due to raw space availability that would have forced farmers to make sales at depressed levels. So that, I think, is one reason this doesn't happen. Another reason this is not going to happen is we're going to have increased levels of government revenue coming to the farmers prior to or during the harvest season than what may have been anticipated, you know, months ago. Therefore, the cash flow needs might be somewhat lessened that have to come through sales.

We've also got going to have a very strong export program, therefore the river and the rail tributary systems to the export markets are going to be aggressively bidding for corn supplies out there. That, a few months ago, wouldn't have been part of the equation. We have— we have the ethanol industry that right now is somewhere between 7 to 12% of a year ago in terms of producing ethanol., and that they reached a point where they were only— they were down about 45% from a year ago levels, earlier on, and there was, there was concern somewhere in that March-April period that the ethanol industry might not ever recover, and they might not ever come close to being equal to last year, and the recent data is there— I don't remember exactly, but they're somewhere around only down 7 to 10% from last year.

And given all that that industry's been dealing with, that's quite an improvement for what was one time expected. So I— and the other thing needs to be pointed out, the ethanol industry has been aggressive bidders here in the last, you know, several weeks, and more so than, than you would have expected. And I think that now looking forward, instead of having the ethanol industry heavily harmed and only operating at near 50% capacity, now that picture looks a lot different. So I think as we get into the harvest period, and even at current basis values that are offered for new crop, and even at current spreads that are offered in the futures market, the ethanol industry is going to want to buy every single bushel they possibly can at their current bid. They're going to want to build a pile. They're going to want to maximize whatever they can do.

That's their best ownership, and every ethanol plant will tell you their best and cheapest ownership is what they buy at harvest time. And I think they are going to be aggressively bidding. At the same time, the export system is going to have to be bidding aggressively, okay? And then I think that all this thrown together creates an environment where the cash market might already be too short on basis. So I think basis values could actually improve, um, as we get into the harvest season versus what is being bid now for the gut-flat harvest season. Um, I think the basis values have stayed firm recently, more so than what people would have anticipated. So I think the basis— so I think the basis levels tend to improve The spreads, the Dec '20 versus July '21 futures is about a 27-cent spread. Historically, that's on the wide side of where it's been.

It's not the widest, but it's on the wide side. It's not as wide as it one time would have been anticipated or feared for plenty of logical and reasons that had merit. Uh, but now those reasons have changed as I just described, and so I wonder if the 27 cents offered now might be a good, um, carry, and therefore any producer that has an HTA that's in the DEIST might want to, uh, seriously consider rolling that out to the July now as opposed to, um, making that decision later. And so when you— when I throw all this together, I think that we're dealing with a situation that we're going to see a firmer tone to basis spreads from now into and through harvest. Whether that eventually gains traction and produces something firmer in the futures market, we'll see. But I think it— I think the basis and spreads can get stronger than what's offered now.

Chris: Yeah, we're seeing the same thing here locally already, what you're talking about. I was just looking at it as you were talking there.

Duane

Lowery: We're—

Chris: we've already, you know, I mean, people are still cleaning up the, the old crop obviously, and we've gone from, you know, almost a 25-cent improvement in basis in a couple of weeks just on, you know, August and September deliveries yet cleaning up old crop just because people kind of slowed down deliveries or sales or whatever, and then I just was looking here at October, they've already slightly improved the basis there. But it makes me wonder if, if in fact you say, okay, in October we're not going to see a low price there, maybe we see price strength start to occur there, then wouldn't that have a negative impact on basis during that time frame?

Duane

Lowery: Well, not necessarily, and the reason not necessarily is maybe that the futures market is coming up because because basis and spreads have first done the job, okay? A lot of times, first you get the basis, then you get the spreads, and then comes the futures market, okay? That's an oversimplified statement or phrase, but it's not— even though it's oversimplified, it's not too off of what would be a good summary of how things happen. And so If the futures market is going up because it's being driven by basis and spreads, then no, maybe basis and spreads might not weaken that much. So I, I think that rather than worrying about a futures market hurting— rally hurting those things, let's first focus on those things maybe being the things that happen here first.

But I would I would also say that if for some reason there was a surprise futures rally, and I'll say, I'll quantify that by saying, if for some reason there was a futures market rally that went back and exceeded the highs that we had in early June, which now would imply a 45-cent or higher futures market rally, if we were to get that level of a futures market rally for some unknown reason that's in front of us, either that's a disappointing, uh, USDA projection on yield, uh, increased Chinese demand, whatever it may be, then you do run the risk that that type of a futures market rally or more, that probably would hurt basis and spreads because of all the other things that are going on in the, in the farmers' calculations, those prices might end up being attractive in producing a total net revenue that meets his goal.

So that, that's possible, but I don't think the futures market rally at 20 cents is a threat to those— to basis and spreads, but it would have to be something larger than that.

Chris: Yeah, I think that's good conversation. I think this is one that we kind of continue on a little bit next week, or maybe even midweek if we get together after this USDA report and kind of want to recap that and have a discussion question on that. With that said, is there anything going into this next week as we head towards this report and after the report that farmers should be watching or thinking about? And we haven't really said much on soybeans, so, you know, we're getting close on time, but if you want to kind of wrap some stuff up there, anything that I didn't ask or anything you want to hit on with soybeans in this report as we get into this next week, kind of a two-part thing.

Duane

Lowery: Okay, the first part, as far as what does a farmer be looking at You have current prices 10 cents below the 85% RP price. They are 60 cents below the 95% margin protection policy insurance price. You have— the farmer has little incentive to do anything, in my opinion. He's just on hold waiting for an opportunity to present itself, and I don't see how this is an opportunity. The producer has to be looking forward to the report on Wednesday. Like I said earlier, the expectations, the bearish expectations for this report are, the bar is set quite high. It would not be unreasonable to think USDA will not achieve those level of bearish results because they might be more optimistic towards demand and they might be slower to raise the yield even if they are going to ultimately raise the yield, they may not do it in this report.

Weather is a factor for— not sure how much of it is a factor on the price discovery process, and I make that statement true about whether it rains or doesn't rain related to the corn market. Soybean market's different. We haven't talked about soybeans, soybean price action last week was not good and harmed the charts, and so there are chart-related people who are definitely selling beans here. The argument could be made that there could be more liquidation pressures in beans due to— because of the poor price action. That's not a bad argument. It certainly could end up being true. On the other hand, generating follow-through in this beans could end up being, being disappointing. I think it's possible that we could see China step in here with more continued purchases and maybe some larger purchases.

Weather is probably negative on beans, and so the bears are probably going to focus more on beans this week than they are on corn. But something tells me that beans may not perform as bad as what the charts imply, but that is certainly part of it. And the trade is anticipating that USDA is going to increase bean care or bean yields by, you know, 1.5 or 2 bushels an acre. I don't know if that's plausible or not. But it's— I do understand why people feel that we can ratchet up bean yields. I just don't know, have a feel for what the number is. So it is possible that the soybean market has not fully digested an increase in yield. It's possible that prices have been more levitating at the upper end of parameters in the last several months.

And so it is possible we have weakness, but the countering, countering part to that is to take a look at beans and realize just how cheap beans are in relationship to the last 10 or 12 years worth of price history. And the only time we've been at or below these levels in that time, in the last 10, 10 years or so, has been when we've had a trade war with China. Well, that's supposed to be over, at least on the ag side of it, and so I'm concerned that— I'm concerned in both ways.

I'm concerned that the bean market could have some downside pressure here, but I'm also concerned that the bearish sentiment that is around for what seems like all logical reasons for the beans right now, I'm concerned that that's a trap, and the reason I'm concerned about it being a trap is when I look at where beans are priced versus history of the last 10 years, and this is a current— this is at the very bottom side of parameters, and yet soy demand globally is extremely robust. China demand, very robust, and they're the world's largest importer, and yet we're supposed to be at the bottom side of price parameters in the last 10 years, and we're supposed to be fearful that prices are going to go even lower. Something about that just doesn't ring logical to me, and it seems— it just feels like a trap.

And yes, we've got carryout projections that, you know, will range, but a lot of people are going to be expecting new crop bean carryout to be $600 million or more. But even so, we've had higher projections than that, and we ended up having times during the marketing year where we had prices well above current prices. So I just feel that it's possible that all this negativity in beans, while it probably has logical merit, it just doesn't seem to— it feels like a trap when you look at where prices— the price history of the last 10 years.

Chris: Gotcha. Last real quick question, we're really up against time here, but It's, it goes back to, to the same question we've talked about for I don't know how many podcasts in a row now, but with storage and an impending really good crop, and this is probably more so for the areas that are sitting there looking at potentially a huge crop and storage being an issue. You know, making some sales here, is that Is that totally not advisable then, or is that something— I mean, obviously each individual producer's got to look at that, but does it make sense to have the corn be the cash crop to make room for some beans, or does it make room to make sense the other way? You know, because sometimes the producer's got to make a choice. Do I put beans in the bin? Do I put corn in the bin? What— any quick thoughts on just on storage?

You know, if it's a finite number between the corn and the soybeans.

Duane

Lowery: Holy cow, that's quite the question.

Chris: Yeah, answer that question in 30 seconds too.

Duane

Lowery: Yeah, first of all, every individual farmer is going to have a different set of criteria that would make it relevant to the correct answer to that question. I will say that in the last 2 weeks I have talked to some individual producers who plan to store their entire soybean crop, and I have talked to them about the merit of moving the physical soybeans and then converting that space into corn and capturing the carry in the futures market plus an expected improvement in basis. And I, I said, I think you're going to make more money on your storage if you do that. Most were uncomfortable doing that. Okay, so people don't like to get out of their comfort zone, and that's for a lot of different reasons. But I think there was some merit in that argument, and maybe the argument is less so because beans are now 35 cents cheaper than they were when I was having that conversation.

Chris: But that price is relative to yield though, because some of these guys are sitting here with a they continue to get rains, their yield keeps going up, their profitability is increasing at a— almost at a faster rate than the price decline. And if they're sitting there in this next week and, and the markets kind of trade sideways, your, your corn-bean ratio stays similar, and they do need to move something, most of the guys that, that we see anyway from our client base tend to use the the soybean is sort of the cash crop anyway. And just as an observation, we see growers at a lot lower percent sold on soybeans than typical this time of year. So I'm just wondering if, you know, I kind of agree with you, but I, you know, obviously, like I said, every farmer's got to make their own decision, but I think it's something that warrants some thought process and crunching some numbers on.

Duane

Lowery: Well, I'm gonna finish with this. I don't care whether you choose to sell corn or you choose to sell beans. I think it's very, very important to take a look at what these prices are in the last 10 years' worth of history, and I think making sales here and calling it done, I find that to be a mistake, and I think that could become very regrettable.— because the trade sentiment is almost universally bearish everything, and it has been for a long time, and that's one ingredient that it takes to get a rally. Secondly, the dollar index, the dollar value is down, I don't know, 11-13%. You have— that's something that eventually gets traction and makes commodity prices strengthen. You have inflationary things we've talked about before in other podcasts, all the trillions of dollars coming in.

You're like got this massive amount of kindling here sitting here waiting for a spark to get something to cause it to burn, and I'm very uncomfortable doing anything that would, would get farmers sold out. I don't care what the final net total return is. I think it's a situation that if the farmer makes sales here, there's a good chance in 6 months from now he's going to look back and wish he wouldn't have made it or wish that he would have re-owned it. So if the basis and the spreads and your cash and your storage cash needs and your storage supplies warrant that you have to make sales, then I'm would try to find a way to have a reownership strategy attached to it. In terms of corn, because of what I said previously about basis and spreads, I don't want to make any cash sales of corn here.

I don't want to make any flat price sales of corn here based on the prices we're at in relationship to history. If since 2009 we've only spent 12 weeks below current spot values in corn, what's the motivation to— for me to go out and tell a farmer to make a sale in corn. I think it's, it's, uh, it would be a poor decision on my part. In the case of beans, when you look at the price history, these sales are not good, and we've had other years where we've had large supply expectations, and based on China's import pace, and it's been over, you know, the entire last several months, not just one month, the demand base out here both in China and globally on— for soy and for protein is really, really robust. And I struggle to make the sales there also. And I just don't see anything that's really a good opportunity. Now, the farmer has to make the decision based on his total revenue.

And that total revenue includes his price, includes his government support payments, includes the crop insurance payment if he happens to be in an area that that's going to be a factor. And those decisions are on an individual level, and that makes— what I think about a market outlook is irrelevant. If he's got the return, the net total gross returns that keeps him in operation and puts him in a position to farm again the next year, then that's what he's got to make a decision on. But if you're asking me just about price, I've given you all the reasons why I can't be excited about making any sales here. And the time frame of the year, this typically is not a good time to make sales.

Chris: Good information, and I really appreciate it. So you don't have any problem even when, when you say you don't really know where to go with that question, you seem to find exactly where to go. So I appreciate that.

Duane

Lowery: Well, I may have gone somewhere. I don't know if it was exactly the right place to go, but I did, I did end up going.

Chris: We all, we all get to make those fun decisions on where which, which direction might be the right way, and hopefully we all listen and get enough good information around us. And then like you said, I think you said the best part of what I took away too is just, you know, each individual producer's got to make some, some decisions, and, and we need to pay attention to what's going on in a macro sense as well. And, and we all do the best we can. That was the— I advice we heard in one of the dads' wisdom. I think it was Mike Paulson and his dad's wisdom. He made the comment that his dad had made a comment that we did the best we could. And I think that's— if we all do that, we're going down a good path if we all do the best we can.

Duane

Lowery: So, well, you know, sometimes on the journey, you— on the journey to trying to make the right move, sometimes you get caught You've gotten a roundabout and you're not exactly sure which exit to take, you just go around it again. And in some respects, that's kind of the advice that I'm telling producers here now.

Chris: There's just—

Duane

Lowery: I just don't see an opportunity. And I think as soon as you make the sale here, you're really opening yourself up to other areas of risk. And I think I'll just make another trip around the roundabout and know that in 10 seconds I can to look at all 4.

Chris: Yeah, well, the other part of it on the roundabout is we're going to get to see what the USDA says on Wednesday, and then that's what's probably going to get traded for a little while anyway. And if you're available Wednesday and we get some good information there, we'll have a little conversation and get some of that data and information out and have a little dialogue in that as well once, once the information's out.

Duane

Lowery: So Yeah, Wednesday's report is going to be very interesting, and if there's one thing that the farmer can at least hope for, he can hope that USDA is slow to make some of these bearish moves that everybody's expecting, and maybe everybody's expectations are far ahead of where USDA is at, and maybe we can get a recovery bounce there. I think that is a legitimate thing to hope for, and for those conspiracy theorists out there, and which by the way, just because just because it's a conspiracy theory doesn't necessarily mean that it's wrong. It's just a label.

But I just want to throw out there, there is a thought process out there that has some merit, and people will listen to this and it'll probably ring true with some of people's ideas, but if you're USDA and let's say that you did overstate last year's crop, and I'm talking about corn here, and whether that was because of your acreage figure, because of yields or anything else, But the corn basis, despite the ethanol demise this year and despite all of the black swan events, the corn basis here at the end of the year, in the last several weeks, few months even, has been very strong. And yet we're supposed to have a carryout of about 2.3 billion bushels and very strongly connect— cash-connected commercial interests will, will tell me in a conversation they do not believe that there's 2.3 billion bushels out here, and they'll point to basis activity for reasons for that.

But let's just say that USDA did make some mistakes last year. One way for them to offset those mistakes would be to underestimate this year's crop and to kind of keep that camp down. So that's the conspiracy theory that is out there in the commercial grain circle. And so I would offer that as the last little tidbit for those diehard podcast fans that has listened all the way to the end, is to ponder that as you go into the next USD report.

Chris: Right.

Duane

Lowery: Yeah.

Chris: Well, it will be interesting. Well, just like every single one of them, there's always, always some hype around it, and then we'll get right back to all the other stuff again once we get a few days past the report. So with that, Duane, I think we had a pretty good conversation. A little longer than I thought. We kept trying to squelch it down, but we keep finding good stuff to talk about, so that's okay too.

Duane

Lowery: All the time. It was so much fun that it didn't seem like a long podcast.

Chris: Yeah, exactly. Well, hopefully there's still somebody listening at this point. But hey, hey, Duane, thanks a lot, and we'll look forward to chatting with you on Wednesday, and we'll kick out a a little response to the report and kind of a little summary on that.

Duane

Lowery: Appreciate it. All right, thanks.

Chris: Yeah, thanks, thanks, Dwayne, and thanks to everybody listening. And we'll be back with a little update on the USDA report after that happens on Wednesday, and we'll look forward to talking to you next time. Thanks for listening. We'll catch you next time on the AgVet Tech.