Weekly market outlook: June 6th-10th - summertime market volatility

Joe

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

Chris: Welcome everybody to another episode of the Ag View Pitch. We are heading into a new marketing week, the first full week of June, the 6th through the 10th., and we have with us today Joe Vaklovic. Joe, how's it going?

Joe

Vaclavik: I'm good, Chris. Thanks for having me.

Chris: Yeah, thanks, uh, a lot for being here. You're, uh, a great one to have on this week, um, after last week's performance and, um, fair amount of market pressure. Um, one of the things I'll say, and then I'll, I'll kind of phrase it as a question, but, you know, a lot of the planters in a lot of areas that Weren't able to go, did get a lot done. I mean, there's probably always a pocket or two here and there that there's still a struggle. So it's frustrating if anybody ever says, "Well, the planning is done," 'cause it's never done, but it is done enough for the market to feel comfortable. Talk a little bit about what that means and what else is pressuring the market besides the pace. And where we're at and stuff.

Joe

Vaclavik: So I think the market, generally speaking, and this is just an opinion, but I think the market is kind of trading as if, you know, in regard to corn in particular, what will be planted has been planted for the most part. We don't need to buy acres or anything like that at this point. The acreage battle is over. So like your new crop, you know, corn versus soybean spreads, they don't really mean a whole lot anymore. They've kind of done whatever job that, that they were going to do. I think, uh, by this point in time, uh, you've seen some liquidation in the corn market in particular. Uh, large speculators or your big funds, they've, they've pulled quite a bit of length out, um, just over the last month or so. And I guess that has to do with a couple of things.

I mean, first off, the crop has largely been planted, and we know that there are problem areas up north, and, and there are still some slow places, uh, elsewhere, but largely the crop's been planted. And also this, I think this chatter about Ukraine and the potential for exports out of those ports, I think it has caused a little bit of speculation. I know that that possibility seems to be pretty slim, that all of a sudden, you know, Russia is going to say, go ahead and export grain out of these ports and we're going to make it easy for you. It seems like a slim possibility at this point, but I think even the possibility of it is enough to maybe push some speculative money to the sidelines. You've also got seasonals that kind of turn negative around this time of year, give or take.

And you can certainly have, you know, weather rallies into, you know, as late as, you know, mid-July or even later depending on the year. But for the moment, like a lot of your shorter-term stuff is just kind of soured, I guess, especially in regard to corn and maybe wheat also.

Chris: Hmm. Yeah. Interesting. So you talked about seasonals. Touch on that for a minute. You did— I'm gonna put a plug in again for your subscriber-only videos that you do for your clients, me being one of them. Last week you did an excellent video on the corn and some of the history of what you've seen and, and kind of the probabilities one way or the other. From a seasonal perspective. Would you hit on that a little bit?

Joe

Vaclavik: Um, so the, the video you referenced, what I did was I, I tried to like kind of answer this question. So we've, we've seen, um, what, a 70-cent, almost 80-cent sell-off in December corn from the highs that were posted just, what, 3 weeks ago? So I, I guess the question that I tried to answer was like, okay, has there been— have there been years in the past where you saw a sell-off, say post-planting or right at the tail end of planting of this magnitude or something along these lines, and then returned to the highs or made new highs during June, July, or August. And there is some precedent for that. There are a few years here and there where you've seen a nasty sell-off in May or in June, and then you'll come back and make highs in July or even into August if you have a big-time crop problem. It's not a guarantee by any means.

I mean, I think we have to a significant degree shifted into a weather market and the weather right now. I mean, quite frankly, and it could change by the time people listen to this, but the weather looks bearish to me in regard to row crop markets. It looks good for production potential, but not good for the markets. I mean, we've got a wet forecast, we've got a cool forecast, and that's not just the next few days. That's even out to the extended timeframe, which takes you out past the middle of June at this point. So I'd say at this point, the weather deal is like what really matters. And if you're going to get those new highs in, you know, later in June or Fourth of July weekend or whatever, you're probably going to need some sort of crop scare deal to do it. And that doesn't mean that you have to end up with a below-trend corn yield even.

It just means that for a moment in time, you'd have to convince the market that you've got a threat. And for right now, I just, I don't see the threat.

Chris: Well, and sometimes it's the difference between what the forecast is and then what actually happens too, right? Because your forecast could be one way and then, like you said, over a long weekend or something, all of a sudden it, it's the opposite and that, that's what'll move things.

Joe

Vaclavik: Yeah. So there doesn't have to be any, uh, crop problem at all in reality to, uh, rally the market. What you need is just the perception of a possible crop problem. And, and I'm not trying to make any prediction or anything about the yield or the size of the crop or anything like that. Just as, as far as the market's concerned and as far as like big speculators are concerned, They will react if they view the forecast as being threatening, even if just for a minute, even if just for a couple of days. There have been years where you'll see weather rallies that last like 3 days, but they can be really sharp. And you could rally the corn market in a deal like this. Corn could rally 60, 70, 80 cents in 2 or 3 days if the right forecast shows up. But we don't have that forecast now. And I'm not saying we're going to have trend yields or anything like that.

I don't have any opinion on that this early, but you don't have a forecast that is threatening the way that the market views it. At least that's the way I view it.

Chris:

Preston

Pysh: Talk a little bit also about the technical side. This is back to the seasonal thing, but we've seen a fair amount of pressure just say Dec corn, or I mean even how we closed last Friday, what kind of ranges potentially from a technical standpoint could we see? I mean, how extreme could it get one way or the other if we do get bearish news or bullish news?

Joe

Vaclavik: So say you just assume that you skate through the next 6 or 7 weeks, you get out to mid-July and you have no real weather problem. You're you're generally, you know, enough precipitation across the Corn Belt, no big heat wave, nothing like that. I mean, I'd venture to say there's sizable downside for, you know, another 2 or 3 months. You know, your normal seasonal trend, of course, would be that you post some sort of high in May, June, maybe July, and then August, or, you know, the last half of July, August, September can be really ugly months for the corn market. So, you know, at this point in the calendar year, If you're to assume that this is a normal year, and maybe it's not, but in a normal year, you'd want to kind of have your bed made in regard to grain marketing.

Like, what do you like, whatever you're going to have to deliver, you know, at harvest, you know, say before October or before November, you're going to want, you're going to kind of want to know where you stand and have a lot of that either protected or priced or something like that. Because historically, I mean, if you don't get a weather deal here, it could be a long couple of months here in regard to the markets. I mean, you could very easily trend lower through harvest. That would not be unprecedented at all. Now, there's a lot of other factors this year, like you've got this geopolitical stuff in Ukraine and Russia, which is not something that we have in a normal year. So if that situation were to escalate in some significant way, I mean, that could be very friendly to market and you could see some sort of counter-seasonal rally.

So the seasonal stuff, Chris, I mean, it doesn't— it works when it works. It doesn't always work. If it did, this would be easy. And we all know that this is not easy. Um, but yeah, I mean, there's— what's a downside target for corn? I mean, for Dec corn, if, if the crop's really good, I, I don't know. I mean, you know, back in just the first part of March, Dec corn was, you know, under $6. We were $5.77 at the low on, uh, what, February 25th, and just above that, you know, in early March. So I mean, to take a run down back below $6 or something, if, if weather's good and if, you know, you don't see some sort of geopolitical blowup, I I wouldn't say that's outside of the realm of possibility. I think you could be even cheaper than that in the right circumstances.

Chris: Mm-hmm. What about soybeans? What would you see there?

Joe

Vaclavik: I always find soybean price action to be a lot more difficult to predict, but the bean markets acted really well. I'm looking at the December corn chart and it looks like it's kind of rolled over technically. Doesn't look like this big strong bull market anymore. It looks like we finally kind of done some damage there where the beans still look really good. I know we had that reversal there last week and we posted a fresh high there on— was it Tuesday? And then closed lower. But I mean, I look at a Nov bean chart, it still looks really friendly to me. It still looks like a bull market. I think you're seeing some mean reversion in the spreads. Like, uh, you know, following, uh, the survey period in March, largely you saw corn, uh, kind of lead the way to the upside.

Corn gained on beans, and I think it was kind of like a last-ditch effort to buy acres back in corn, uh, because USDA told us that, you know, we're going to plant 89.5 million acres of corn, which a lot of people would say is, is just not enough. So I think that the spreads did their job, and now they're kind of reverting back to the mean to some extent. And also the bean crop, I mean, we've still got more beans to plant. It's a crop that's made later in the season in regard to weather and production and that sort of thing. So for the moment, the beans have acted much better than the corn. But I mean, if corn's gonna— if, if, you know, the right circumstance plays out and weather's good and you don't have a geopolitical blowup and maybe tensions go in the right direction, I mean, beans are not going to be immune to some sort of sell-off either. And that's not me saying I'm bearish.

I'm just saying if the right things happen, if weather cooperates, you don't have a big, you know, something escalate in Ukraine or Russia or elsewhere. Yeah, I mean, you've got downside risk here, certainly, there's no doubt about that.

Chris: So talk a little bit about, you know, you talked— one comment you made that I really like, because it's a management thing, and it ties into margin management and stuff. But it's, it's the idea of having the bushels sold that you don't have a home for.

Joe

Vaclavik: Yeah.

Chris: And what I want to ask you, and let's start with soybeans because soybeans is in that boat for a lot of producers, or at least a segment of the soybeans. And then for a lot of producers, it's the entire crop. It's their cash crop. It's what they harvest typically and have for a lot of years off the combine and goes to town. If you're making a bunch of those sales You know, we can talk volumes and that and everything, but my question really goes back to the basis. So if you're making those sales, talk a little bit about some best management practices on, on managing that basis, because sometimes that's the, you know, if you're going to be harvesting really early, um, you're probably better off not to set basis. Conversely, if it's, uh, you know, a little, you know, if it's going to be right in the middle of the the season, you got to be a little more careful.

Talk a little bit about basis management from your perspective.

Joe

Vaclavik: I don't— this is probably not a popular opinion, but I don't get too worked up about basis when beans are $15 and corn's $7. Like, I'm not overly interested in like trying to nickel and dime these markets when the prices are this good and the profitability is this good. Like, To try to hold out for an extra nickel or 10 cents in basis in this sort of market is not the same as it is in a $3.50, $4 corn market or a $9 soybean market. It's just a much smaller percentage of your total bushel. It's a much smaller percentage of your total profit margin or things like that. So I would be in favor of like, rather than if it's delivery bushels that you've got to deliver at harvest, I'd be a fan of having cash contracts almost more so than HTAs if your basis is good, and basis is good in a lot of areas for new crop. And I don't have any prediction about what basis is going to do.

I just like to know where I stand. The situation that happened back in early March following the, the initial invasion when the nearby spreads blew up and the basis went to hell, or the buyers stopped bidding off of those spot contracts there for a few weeks, That really scares me. That's a scary situation. What if you're somebody that has HTAs and you're on a timeline and you have trucks that need to move and you just don't have a home for the grain, like you said, and that happens again? That's really scary to me. And that's probably a very low probability scenario. I understand that. But I just think that I'm not overly interested in holding out for another nickel or dime in basis appreciation, especially if basis is good already. The board's already good. I mean, like, what are we waiting for here on these delivery bushels?

And I'm not saying you got to go sell them, but I like having that stuff at least protected in some way, shape, or form. Some people like options, some people hate options. Just however you need to do it is fine. But I feel like at this stage in the game, given what we know about seasonals, and the seasonal stuff is really obvious, that there's a probability at least that you got a few ugly months ahead of you.

Chris: So, you know, we talked a little bit about weather earlier too. How much, um, is there any, is there any weather risk in there right now, do you think, at all, in any, in any of the markets or on any of the grains, or, or is that pretty much out of the equation and just waiting for something to happen? I meant to ask that earlier and I forgot.

Joe

Vaclavik: Um, that's just, it's a total opinion question, just like a lot of this, of course, when it comes to markets. But yeah, I think there's still plenty of weather premium in here. I mean, if we if we knew that the corn yield nationally was going to be 180, where would the board be? We'd be cheaper, I would be my guess. So I— and we still don't know the acres either. I mean, there's a lot of variables here. But yeah, I still think there's— I still think there's weather premium. I still think there's acreage premium because, you know, we don't get our next look at the acreage numbers until June 30th. So we're kind of left in the dark. And we all know that to some degree, those margin intentions were wrong for so many different reasons. I mean, the spreads moved drastically after that survey period. We know the survey responses are low.

We know that report is just not historically extremely accurate to begin with. So I think we've still got acreage premium. I still think we've got weather premium. I mean, you can't say with any degree of certainty what the yield is going to be here in early June. We've got to get through, you know, this month and most of July really till you can start to get a feel for the that. So yeah, I still think there's a lot of, just call it general production premium, like size of the crop type premium, not only weather, but also I think acres still at this point.

Chris: Another question, I probably am bouncing around here, but I thought of another thing too, just kind of looking at when we were talking about the basis, and knowing what you need to deliver, whether no matter what the crop is, what you can store, what you can't. When you look, there's really no carry in anything, or I'm just looking, and correct me if I'm wrong here, but what's the incentive? I mean, what's it going to take? What would it take so that it paid to have stuff put away? Because when you look, you know, talk a little bit about that, I just don't see anything there that's incentivizing to hang on to stuff beyond too much beyond harvest.

Joe

Vaclavik: Yeah, right now there is not, and I haven't looked at, uh, the cash markets admittedly out to like March or May of, of next year. The board gives you what— there, there is a nickel of carry from, uh, say Dec '22 to March '23.

Chris: Um, yeah, as I look at it now, there's maybe, there's maybe 5 cents or 6 cents on corn.

Joe

Vaclavik: So in any given year, I, I send out, like, tell my customers, I send out carry targets and I'll say this is where you should look to roll your, your Dec HTAs to March, this is where you should look roll into May. This is where you should look to roll into July. You may get that opportunity this year. There may be an opportunity to capture carry. Typically, of course, in normal markets where we've got a comfortable or mostly comfortable supply and demand situation, they'll give you that chance to capture carry. It may not happen this year. I mean, if we end up with a lighter crop or the demand remains really strong despite high prices or whatever, they don't have to offer you carry. And it is a tricky question because people, you know, guys spend all this money on bins and they want to use them, right? It's not always the best. It's not always best practice.

I mean, it's a tool and it's not the tool for every single year. So I guess we'll kind of get to that. We'll cross that bridge when we get there because things may look a whole heck of a lot different by the time harvest rolls around in regard to those spreads. But for right now, I mean, no, there's not going to be a ton of incentive to put corn in the bin and wait because the markets may not offer much carry or any carry at all.

Chris: Well, especially on soybeans too. I mean, there's like 3 cents there. And in the last, I don't know how many years, and maybe there's been an exception to that, you know better than me, but it doesn't make sense to put any beans in a bin if you can put corn in the bin. Typically there's more carry opportunity there. Plus, On the cash side of things, from a revenue, cash flow, paying rents, all that kind of stuff, it's a better crop to get the cash in on typically than the corn is.

Joe

Vaclavik: It's a tricky situation though. It's not as simple as it sounds. If you get to harvest and there's no carry in the market, let's just assume there's no carry in the futures, there's no carry in the cash. So the market's saying, give me your grain right now. Right? That's a spread decision. It's a spread decision, but it doesn't mean that the flat price can't rally. I remember the end of 2020, harvest 2020, the soybean market was still in the 9s or 10s and it was inverted and there was no incentive to carry beans, yet putting your beans in the bin and doing nothing would've actually been the best decision because they did nothing but rally past that and they were $2 or $3 higher by spring. So just because there's no carry doesn't necessarily mean that putting beans in the bin is the wrong decision.

I know it sounds kind of backwards, but it's not as simple as just putting it in the bin or not putting it in the bin because there's always that flat price implication, which in markets like this with this sort of volatility, the flat price is a bigger deal than the spreads. Then you get in the conversation of, okay, well, maybe I can sell the cash and deliver it since there's no carry. Then maybe I'll reown the cheaper contracts on paper. We know that trading paper or trading futures or options can be messy, a lot messier perhaps than just holding grain. It's not an easy decision in any year. They make it easier, I guess, when there's carry and you know what to do. You look for those targets. But when those targets aren't there and you're in a bull market, it actually makes those decisions trickier, I think.

Chris: I, I am one of those guys though that, and I'm not a big fan of futures, uh, however, in that situation it's really, there's not much difference if you've harvested the crop and you know exactly how many bushels and you buy a percentage of them back and use that bin space for corn and you own it, own those beans on paper. There's really not that much difference though, is there, between having it on paper and having them in the bin? Other than you don't have to shovel them.

Joe

Vaclavik: So if you're a guy who understands all of that, then fine, that's great. If you're cool with paying margin calls and stuff when the market goes against you, but a lot of people, I would say most people are not. Most people don't want to do that. And it can get messy. I mean, in a market like this, reowning the board at harvest, if say we're still at $6, what's to say that the thing couldn't go $2 against you. How do you manage that board position? Um, it can be a messy, messy deal. I am typically, uh, in, in the vast majority of situations, I'm not a big advocate of reownership. I just, I hate looking back at past sales and chasing past sales. But I mean, if you're somebody who's, who's more advanced in regard to your marketing, you understand, uh, the mechanics of all this, then yeah, that's fine.

I mean, it's essentially the, a very similar position in terms of your business, but I floating the margin requirements and all that can be very messy.

Chris: Yeah. Well, one good rule that I like to see that we look at with profit managers, if you have a 10% ROI, your profit margin is 10%, then you really got to ask yourself, why would you reown anything?

Joe

Vaclavik: Right.

Chris: And for most guys in a year like this, it's going to be better than— probably going to be quite a bit better than that. Then it probably wouldn't, to your point. However, on the other side, if you you know, there was a bunch of years from '13 through '19 that it was maybe 1 or 2 or 4 or whatever, and you were trying to capture a little bit more, and then you would set yourself up so if it was gonna go lower, you'd stop yourself out or whatever. And you might give up a percent or two to, to take a little risk to open up the top side. But, you know, but like you said, it's, it's an individual thing because some, some guys you can explain that to and you can manage it and you can do it. And like I said, and some people are like, no thanks, I'll take— I just—

Joe

Vaclavik: I've personally, in my experience, one of the things I hate, hate, hate seeing like the most is when a farmer loses money being long the board. Like, it just—

Chris: yeah, we're already long.

Joe

Vaclavik: It never, it never like adds up in my head. Like, I under— I understand the, the mathematics of it and how it looks on a spreadsheet and everything, and I made these sales for this reason, now I'm reowning them for this reason. I mean, I've said before, like, you know, what other business in the world takes their profitable transactions and then tries to like go back and retrace them. I mean, they always look forward to the next year, to the next transaction. Like, it's not— it's not— I just also feel like I could talk about this for, for hours, but I mean, I feel like it's not a big reownership in general. It's just not a healthy mental practice. Like, the fact that you're trying to look at, at what you still have to price yet at the same time you're looking back at, at what you've already priced and trying to manage that, it's a lot, it's a lot to manage.

Chris: Yeah. Well, when the price comes back down, it makes you feel better on those earlier sales too, right?

Joe

Vaclavik: Yeah. And everybody's going to have that in years like this. I mean, well, maybe not everybody, but I know I certainly have advised early sales. I'm not afraid to admit that in this sort of deal. And you may feel better about them, but I think best practice, which in theory, this is great, but in practice, it's impossible. Best practice would be to just forget every sale that you've ever made and just only look forward. We know that that's impossible, but I try to do that and it's tough to do.

Chris: Well, what we try to do is just look at the average. It doesn't matter where you started or where you ended as much as where are you at with regard to that margin target that you have. If you're accomplishing that, that's really the goal. I think too often we get— there's so much noise, there's so much media, and there's so much crap out there. I think that's why it's important that we talk about the emotional side of it here for a second, because you can get so distracted away from your own stuff because your deal is what's important. It's not, "Who cares what 15 other people are doing?" Look at your deal, look at your margin, and let that dictate your decision-making.

Joe

Vaclavik: You know what's interesting about Grain marketing is like what you, what you see or what you hear from other people about grain marketing. You might see it on the internet or you might hear it in the coffee shop or whatever. Uh, it's kind of like, it's kind of like social media. Like, you're gonna hear from other people like the highlights of their grain marketing, whereas like, you know, you log on to Facebook, you're gonna see the highlights of a person's life. You're only gonna hear about the good things. Like, you don't hear about the bad stuff. Just like when you go on Facebook, you don't hear about like the bad stuff that has— that somebody has going on or like the, the lowlights. You only see the highlights. You see the highlight reel.

And that's like what you see when you, when you're compared— when you think you're comparing yourself to other people, when in reality you're comparing yourself to other people's highlights. It can be a bad— like to, like, even, even notice what anybody else is doing is, is probably also a poor mental practice because it's probably false anyways.

Chris: Yeah. Oh, it's just it. Social media and the general media have really screwed with people's brains. So, um, anything, anything on the market front, you know, we talked weather, seasonals, technical stuff, the, the war in Ukraine, anything out there that is a big watch out? I mean, and we can hit on the USDA report that's on Friday. Here this week. Any comments on any of that stuff?

Joe

Vaclavik: Generally speaking, I mean, everybody and their brother's talking about recession, right? Mm-hmm. Are we headed to a recession? We may be. And when they talk about we're headed into a recession, I mean, I think most people are just talking like the textbook definition of recession, which is 2 consecutive quarters of negative growth or whatever. And we may get to that. I do worry about these higher interest rates. I worry about high fuel prices and their effect on the economy. And Like I said before, I think there is a tipping point. I don't think we're there yet, but I think there's a tipping point where if things like the stock market get bad enough, that there could just be a total risk-off event where nobody wants to be long anything. Maybe that's way off base.

It's what I remember from 2008, and I know a lot of people have made that analogy, but this time might be different. This might be closer to I don't know if there is a good analogy for it. Some people would say maybe it's like the '70s, but in the '70s, we already had really high interest rates when a lot of this inflation started, much higher than what we have now. So it's kind of an unprecedented situation. But I do worry that if— I'm actually not bearish the economy. I think we're going to be just fine. But if you were to get into a situation where gas is $7 this summer and people just stop doing stuff and stock market loses another 15%, 20%. I mean, there's going to be a situation where it's just risk off everything. I think that that's at least a possibility that you've got to entertain.

And that's kind of scary in an environment where these large speculators are still really heavy long the corn market and the soybean market. The positions have come down a little bit, but that— it's just one thing to be aware of, I guess, that that's a possibility. It's not a prediction by any means. And you could have an opposite scenario where crude oil just continues to run up and corn decides to follow along. This commodity bull market continues and maybe equities are under pressure for a little bit. I mean, that's a scenario too. Commodities is a good inflation trade. If inflation doesn't go away, maybe the large money managers do stick around. There's a lot of variables there.

Chris: Well, a recession, let's say that we do get into a "recession" or worse, and it starts to get not very good, what about the energy prices with that? I mean, what typically would you expect to see there? Would that put that energy price, oil price and all that stuff under pressure too then?

Joe

Vaclavik: I think— I'm not an energy expert by any means, but I think that oil has got to go, or gasoline prices maybe have to get to a level where, um, it really reduces driving habits, and we haven't got there yet.

Chris: Yeah, you need the demand destruction.

Joe

Vaclavik: Yes, and you're not there yet. Um, and a lot of this is— there's so many problems. We've lost refining capacity. Uh, it's a better deal for oil companies to ship crude overseas where it's more profitable., and, and rather than refining it in the U.S., our stocks are real low. Um, but you look at the gasoline demand numbers, and gasoline demand last week I think was only down like 2% versus the same week the prior year. That's not demand destruction. I mean, not, not in a material fashion. And it was actually up 2% versus even the prior week. So we've got gasoline prices that were— I think we're recording here on, uh, what, Saturday morning? They were up just a nickel. Just overnight, national average into new highs again. So, I mean, I think you may have to get to a gas price nationally that, that does in fact restrict driving, which is very tricky to do.

Like, I don't even know that we saw a whole lot of that in 2008. And remember, oil got to $147 in 2008, but gas was never as high as it is right now. So you may need to get— you may need to get to a level that really restricts usage. And I just don't think to this point we're there.

Chris: Interesting. Yeah, this is, this whole economic conundrum or whatever we're in is going to be interesting. And have you heard anything? You work with a lot of producers on the, you know, land markets have been crazy. It's one of the questions I get a lot. I was in Michigan last week here, and it's just interesting when you go from one area to another, the prices are different. They're relative to the given areas, but they're extremely high, essentially everywhere relative to a given area. What are you hearing there?

Joe

Vaclavik:

Jason

Fetter: I mean, I think that the obvious answer to that that most people would give is these higher interest rates, they're going to have some sort of impact on real estate values, land values, whatever. I don't know to what extent. I really don't. I mean, you know, like I do, that first off, A lot of farmers who buy additional land, they're averaging in to prior purchases at much lower levels. So they've got a ton of positive equity. There's also outside money that is looking for a home that would love to own a bunch of farmland. I mean, old Bill Gates would probably like to buy a few quarters from you if you have it. But I don't know. I just think the demand's really good. I think the demand for it is really good. They're not, you know, they're not to sound like a broken record.

I mean, they're not making any more of it, you know, in this prime farm ground, you know, in your part of the world or in Illinois or Minnesota or wherever. I mean, it's, I just, it's pretty sticky, Chris. I don't know that I see any big collapse. I mean, a lot of the debt that's out there has been refinanced at very, very low levels for the long haul. And I think that's, it's going to make it sticky. I think real estate's that way too.

Chris: Yeah. I would concur with all of that. It's interesting on the land side of things, because if you go back to 2008, when everything crashed, of all of the assets that were under pressure, land probably— land was for a period of time as well, but to a much lesser degree than all the other sectors. And so land continues to be one of those pretty safe places, I think, to—

Joe

Vaclavik: Oh gosh. I mean, it seems like everybody that I talk to, I mean, most farmers, I mean, it's like they would all jump on that prime piece of property that's adjacent to where they farm or whatever in a lot of situations right now. And maybe these rates are a deterrent to some extent, but gosh, there's just a lot of money out there. Again, all the old debt's been refied and it's locked up at 3% or whatever for 30 years. I mean, I still think that financially, there's just some very strong hands out there, and it doesn't appear to me like there's going to be a ton of weakness there.

Chris:

Preston

Pysh: My last question, and it does tie back to that interest rate. If you throw your crystal ball out there, how high do you think this Fed is willing to take the interest rates? Any guess?

Joe

Vaclavik:

Jason

Williams: I don't have a guess, but you've heard different talk from different members of the Fed. There has been some talk talk among Fed members that they need to get to what they'd call a restrictive rate, where they're trying to just get back to a neutral rate right now. Keep in mind that they've raised rates from 0% to 1%. I mean, we're not even at 1%. They're still super low. The markets and everything from the stock market to your longer-term rate markets, to everything else on the planet, they've already discounted the idea that the Fed's going to be 2.5% or 3%. By the end of this year, I think, or by the end of next year. They've already discounted the fact that we're going to get to a neutral rate. And then the question becomes, do you get to a restrictive rate where they take their Fed fund rate to 3.5%, 4%, 5%, 6%? A lot of people think that's impossible.

Some people think it is possible. They're very much actively trying to tame inflation here. It's just that as high as the If they're going to raise rates another half point this month and a half point in July, then they're off for August. Does that do anything to bring down gasoline prices? Probably not. They have limited tools to work with. So I don't know. It's a big wild card. Some people would look to the '80s and say, "That's your roadmap." I don't know if it's the same thing. We've got so much government debt., and so many different factors now. It's a very difficult question and it's unprecedented and nobody has the answer to it. And you're really talking about just the decisions of a handful of people.

Chris: Yeah. And it probably slows down if the economy— they'll be adjusting things as everything else flows.

Joe

Vaclavik: Yeah. I mean, most of it comes back to inflation. If inflation starts to be reduced, then they're not going to have to raise rates a whole lot more.

Chris: Yeah. Exactly. Yeah, it's going to be interesting. And then you got all the supply chain issues and all that stuff that's going to— on the sidelines— going to be affecting all that stuff too. You know, it's one thing to have the money for something, it's another thing to not be able to get it too.

Joe

Vaclavik: Yeah, and they can't fix supply chain issues either.

Chris: Right, right. So, all right, well, hey, Joe, this was an excellent conversation. If people want to listen, they're not already listening to you, they need to be. Talk about out real quick where they find you and where they see your stuff, especially on YouTube is really good.

Joe

Vaclavik: Yeah. Just check out the podcast or the YouTube channel. So every business day, Monday through Friday, I very rarely miss one. I upload a podcast episode about 6:00 AM Central and a YouTube video about 6:00 AM Central. It's the same content. It's just a matter of do you want to watch it or listen to it in the truck or whatever? But basically, I run through the headlines, and then I'll give a brief kind of commentary what my opinion is on that particular headline. I don't really bark out too much in terms of like opinion or anything like that. I try to keep it more of kind of an objective look at what's going on is what I try to do with a little bit of opinion mixed in. But I know it's become real popular. I've been doing it in the official form of like a podcast for, I think, going on 2.5 years now maybe. And I don't know, it's gained a lot of traction. People seem to like it.

So it's updated every day. It's called Grain Markets and Other Stuff. It's on Apple Podcasts and Spotify and Google and on YouTube and everything.

Chris:

Preston

Pysh: Yeah. And then also your subscriber-only videos, I think are awesome too. So if you're not listening to those also, that's something, what, $50 a month, right?

Joe

Vaclavik:

Justin

Donald: Yeah. And I talk about that stuff in the podcast every day. So if you haven't heard anything from me and you're interested, I mean, check out the podcast. It's totally free. And then if you think you want to get more involved, that's fine. But Um, yeah, give it a shot.

Chris: Awesome, Joe, thank you very much. Really appreciate your time today.

Joe

Vaclavik: Yeah, absolutely. Thanks, Chris.

Chris: You bet. And thanks everybody for listening, and we will catch you again next time on the Ag View Pitch.