Weekly market outlook, May 1-5th: markets under pressure

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

Chris

Barron: Welcome everybody to another episode of the Ag View Pitch. We have Matt Bennett with us today. Matt, how's it going today?

Matt

Bennett: Going pretty good. Actually done farming for now. Planted all our corn and soybeans. Most of them are up, but not all. Got along really good this spring. Soil conditions were phenomenal. But as a lot of folks have experienced, virtually all of us, been a little chilly.

Chris

Barron: Yeah. Yeah. Well, it's— we're entering this First week of May, you know, the 1st through the 5th, that's kind of the sweet spot for planting. You're all done and you're doing some house remodeling fun stuff right now. What do you tell these guys, you know, that are up north and stuff? You think some of these guys that have been waiting for snow to melt and all that fun stuff, that they'll be able to roll here eventually, probably, huh?

Matt

Bennett: Well, you would sure think so. But really, the forecast doesn't warm us up all that much. I mean, heck, we have a couple more shots of fairly cold weather coming up. I mean, it's one of those deals where I kind of feel like we're going to go from winter to summer for a lot of folks. You know, and so, yeah, I don't know what's going to happen in the Northern Plains, Upper Midwest, you know. Bottom line though, I mean, you've taken quite a bit of wind out of the sails of this corn market. And so, I'd say if a person's in marginal conditions, you know, I'm not sure that they're going to be as fired up to push the envelope, so to speak, into less than ideal conditions., you know, or spend, as you know, $1,000 or more on a corn crop. So I do think that the way that the market has acted certainly could play a big role in where we end up as far as these final acreage numbers.

Chris

Barron: Mm-hmm. Yeah, for sure. You know, one of the things you said, you know, like you guys are done and there's a lot of areas that have a lot to go yet. Do you think any of these acres might shift over to a little bit more corn with some of these input costs going down, or Do you think there's going to be more soybeans? Because guys are planting beans in these colder conditions, and maybe they end up doing what used to happen. You guys used to be planting corn, and they'd keep planting corn. Or if they're planting soybeans, are they going to keep doing that? What are you hearing? What's your thought on the corn versus soybean acreage deal?

Matt

Bennett: Right. That's a really good question. The interesting thing— I know folks in central Illinois that were paying this spring. $1,200 or $1,250 for anhydrous, whereas a grower that I've got actually in Michigan, he lives in the vicinity of a larger-scale farmer that is able to take his own transport loads. And so this guy has $815 wrapped up in his anhydrous. So his cost of production looks different. As you suggested, these things have come down somewhat. I do think that given that crop insurance guarantee that your hypothesis might come to pass for some folks. Maybe they will switch some over. The hard thing for me to grasp onto that on a large scale of acres, you know, is just simply due to the fact that the corn market has taken such a hit here lately. And I just don't know that it gives everyone the warm and fuzzies about, you know, pushing a whole lot of corn on corn.

I mean, you know, there's been a lot of years in the past where I imagine you've had the same experience as me. Corn on corn has worked phenomenal. But the last few years, there's been a lot of folks complain about just really struggling to find the right combination on corn on corn. Of course, Mother Nature hasn't exactly cooperated. So I do think a lot of things have to come into play. Right now, I'd be shocked if our final acreage came in above the USDA's planting intentions number on corn. Originally, I thought it would come down, beans would go up. There's a lot that remains to be seen there. But we certainly need to see the weather. Play a little bit more positive role if we're going to try to even plant 92, in my opinion.

Chris

Barron: Mm-hmm. Yeah. Back to one of the things you said, and then I want to hit this corn market price pressure we've had here. But yeah, you mentioned, you know, a lot of the nitrogen anhydrous, especially in that $1,200, and now we're in that $800 and something. I mean, that's $50 an acre less, you know, for 200 units. And that's a big deal, you know. So it's something that— that I think, you know, it's going to affect some people and some people will be able to take advantage of that. But what I do want to hit on here next though, Matt, is, you know, and I'm sure you're getting some of these calls too, it's like, you know, is this market going to come back? You know, how much lower can we go?

You know, what's, you know, I think they're just, I wouldn't say it's panic, but I think there's a lot of concern and some frustration out there with the price pressure we've seen in particular on corn. As of late. Talk a little bit about that, kind of what, what your thoughts are and where's your head at as a farmer and an analyst, both.

Matt

Bennett: Yes, that's a great question. Yeah, I think you know, Chris, we were pretty aggressive earlier this year on our sales. We really pushed hard, and it's not because we had any idea we'd see this market move. I mean, I want to, I want to make sure everyone hears me there. I'm not trying to pat myself on the back. What we try to do whenever we approach marketing is look at that, you know, when we've got large profits or what we think are very respectable profits versus what it could end up doing, you know, we try to latch on to some sort of a worst-case scenario. And so we were pretty aggressive. So, you know, at this stage of the game, I do have a lot of customers that weren't near as aggressive. You know, guys I talk to all the time and gals that I talk to all the time that, you know, that told them exactly what we were doing and they chose not to.

So I totally understand where they're at, but then you've got to start and look at the whole picture if you're going to get real aggressive in here. I mean, for one thing, Chris, I mean, just a shade over $5 is 85%— or $5.91. And so you've got to understand the role that your crop insurance can play. The other thing we want to pay close attention to is if we do want to step in here, considering we're very close to that level already— I mean, $0.20 away— how aggressive do you want to be in a strategy without flexibility? And my personal opinion is you don't want to be very flexible— or you want to be flexible, and you don't want to be super aggressive unless you're flexible. Because it's easy to be bearish whenever the market's been going down like this. And I'm not saying I'm bullish.

I'm just saying if you sell down here without any flex in your plan, and then you end up, God forbid, in a situation where you don't raise a very good crop, I know you're not going to make money. Because, Chris, you and I both run the numbers. I mean, a lot of folks with their cost structure this year on the bulk of their acres, you know, right now are lucky to be making money. And so, you know, you gotta be very cautious as you get real aggressive now just 'cause you're afraid it's gonna go on down. We don't even have the whole crop planted, first of all. Um, you know, I'm not bullish, don't get me wrong. I just think that you gotta stay very flexible and on your toes if you're gonna sell after the market's gone down, you know, 70 cents from your, uh, just from your February average.

Chris

Barron: Mm-hmm. Yeah, that's That's the thing, you know, I do think, you know, and this is something that I've always been a firm believer of, is it seems like it makes a lot of sense to put some targets in or just have some offers in there that are working when you're working. And, you know, I think I may have talked to you about that like the last time I had you on. I mean, you know, and we put some targets in. I had some offers in for sales at levels that we didn't quite get back to, and I still think I mean, what's your thought on putting some offers in? And if that is a thought, what is a target area that a guy maybe could be looking at that would maybe make some sense to think about if guys wanted to catch up on some sales or, in some cases, get started, unfortunately?

Matt

Bennett: Right. I mean, you know, the first thing I'm always going to go to is, you know, let's say a guy's breakeven or a gal's breakeven, you know, cash at $5. You know, I want to get safely above that level with my target this early in the growing season. Okay, so, you know, if it was later on in the season and you're pushing up on pollination, I'd probably get, you know, a little more aggressive, you know, especially if I felt good about what kind of crop I'm looking at. But, you know, what kind of a price level would that be? Of course, it's going to vary throughout the countryside, but, you know, my personal opinion is if you would get back up into that $5.70, $5.75 area, it would be a good place to go ahead and, you know, maybe sell a few bushels here and there.

Now, I do know some growers that I've talked to in the last few days that, yeah, I'd I wouldn't say these are lower-cost growers, you know, maybe lower-risk type operations, but, you know, a lot of those folks were thinking about maybe hedging off some risk when you get back above the $5.50 level. I don't have any issue with that. I just think that for me personally, I'd like to see a little more meat on the bone if I'm going to get too aggressive this time of year. Bottom line is this may be the best— I mean, it could be the best price that you see between now and fall, but you got to remember then you still have the opportunity to market you know, after the fact. And so if we do end up building these stocks, yes, you're gonna have carry in the market again.

You know, there will be opportunities to use your bins, you know, just like the grain elevator uses their bins, take advantage of that carry, you know, and be able to hedge some bushels in that manner. So I don't want to get super aggressive knowing the fact that this marketing year lasts a heck of a lot longer between now and fall.

Chris

Barron: Exactly right. I was just thinking that when you were talking there, you know, We're having this conversation. That's— it's the first week of May and it's like, you know, there— this is— this crop's a long ways from being in the bin yet. So, you know, don't get super worried. I think, like we said, you know, put some— put some offers in and— and have— have a plan to, you know, to kind of take advantage of things. Talk a little bit about soybeans. What are you watching on the soybean side of the equation?

Matt

Bennett: I'm going to talk soybeans real quick, but if you don't mind, I want to throw one other thing out. Yeah, '24. Keep an eye on '24. We've got some sales on '24. We talked to some of our growers. You get into the $540s. I do think a person needs to pay close attention because, as you suggested earlier, the trend on these fertilizer prices has been lower. And if you stop and look at your ratios as to what your expected fertilizer price could be for this fall, You know, I think that a person can lock in pretty darn good income, you know, whenever you push back up on that $5.50 level. But as far as soybeans are concerned, you know, soybeans back down in the $12.50s here, you know, we were above $14 for quite some time. I know that I had a lot of growers tell me, well, why in the world would I sell at $14, you know, whenever I sold cash beans last summer for $17, you know.

And I mean, that is a hard mentality to get over. I totally understand you know, the psychology of that type of thinking. But at the same time, you know, I guess what I always go back to is, you know, what kind of money can you make? And so here's the thing, margins are awfully tight, you know, where we're at here today. The same thing goes for corn. You know, you certainly— most folks bought crop insurance. The nice thing this year, you know, is crop insurance was cheaper because that volatility factor, you know, was lower for both corn and beans. But, you know, you've got to think that the same thing applies supplies for beans as with corn, that I don't want to get terribly aggressive in here. Now, that being said, Chris, I've seen breakevens anywhere from $10.50 clear up to $13. And so there's a very wide disparity in what growers need to be able to make this thing work.

But personally, I'm not selling any beans right now here today. We've been fairly aggressive, just like we were with corn. If I have a grower that calls me today, though, and says, what do you think I should do? Should I go ahead and sell some beans? You know, in the $12.50s here. I guess I'm a little concerned here with all the talk lately that Brazil's beans are, you know, $2 cheaper than U.S. beans. That gives us really stiff headwinds to expect, you know, if you really need to get beans sold pre-harvest. You know, you got to ask yourself, what kind of rally could I expect without a major weather issue here in the U.S.? So, I'd put offers in there too, and I probably wouldn't be too far above the market, probably closer to $13. You know, I just don't, I don't see any larger-scale rally in this bean market without a major weather issue.

Chris

Barron: Mm-hmm. What, last thing I want to kind of wrap up with is have you hit on kind of, I think, what almost seemed like as soon as China canceled some sales and did some stuff, it kind of chased the market lower. Talk a little bit about that and the funds kind of in concert, or what you see that maybe either gives us the— continues the pressure or maybe relieves it a little bit if something changes here?

Matt

Bennett: You know, a couple of things went on this week. You know, of course, you know, Brian Split on my team, we talked a couple times about, you know, just the technical nature. I'd seen on the chart that July corn had actually bottomed out last summer, you know, in that $5.74 area. Coincidentally, that's what we went down and touched here. On Friday and kind of bounced off of it, you know. I mean, the market's down 9 cents there for a while Friday after taking an absolute woodshed beating earlier in the week, you know. And, and you're thinking, good night, this thing's just going to keep going. And all of a sudden, you know, uh, people saw that we weren't going to be able to bust through that level and, and the buyers stepped in. Now, does that mean we're going to see follow-through buying? You know, I'm not totally convinced of that. I mean, why do we see all the selling?

You said it, you know, China steps in and sells corn. Now, how many bushels is it? You know, I mean, you're not talking any substantial amount. It's around 600,000 tons. I mean, you're not talking about any extravagant level, but the bottom line is it's just the optics of it, first of all. And second of all, you know, is there more to come? And so, in the past, you know, we're in the grain business. My dad always told me when China's canceling shipments, typically, you know, it was beans that we were talking about in those times, but he said the reason they're doing it is to buy cheaper beans. And so the unfortunate reality, Chris, is they're probably not looking to buy cheaper U.S. beans. They're looking to buy cheaper Brazil beans because they're 60, 70, 80 cents cheaper on the world market than what U.S. beans are.

So, but they're still wanting to drive that market down to be able to buy more. Now the nice thing about it, Chris, is you and I both know, hey, yes, they may not be getting them off the U.S., but they're taking them off the world market. And so there is a good opportunity that the U.S. could pick some of that business up. So are we going to continue to see a resumption of this lower move. I'll tell you, we don't want to continue to see cancellations.

You know, if we can avoid these cancellations, maybe get some good demand news from somewhere, you know, ethanol margins have really improved here, but the bottom line for me on this May report is you're probably not going to see, you know, a real friendly situation on either old or new crop because new crop they're going to use, you know, your 92 million acres and probably going to use 181.5 because that's what they had for, you know, for the baseline numbers. And so old crop, they're about going to have to drop exports. So I don't expect a real bullish report here in May. Uh, and so I'm concerned between now and then, you know, if we can avoid these shipment cancellations, maybe we can go ahead and stabilize this market.

Chris

Barron: Mm-hmm. Yeah, hopefully. So, um, last thing I wanted to hit on, kind of where we started on planting pace and that kind of stuff. Looks to me like the market's not— has not put any, any kind of a premium for anything in there as far as growing this year's crop, at least as of yet. And it is dry, is super dry in some areas, and it's super been cold and everything, but looks like we're going to get this crop planted for the most part. What else? Is there anything else that we need to be watching, or what should farmers be thinking about in the next week or two as they, as they get their crop in the ground here.

Matt

Bennett: You know, I'm with you. I think that, you know, this is a big topic as far as the weather. You know, let's say that you only end up planting 90 million acres. Man, that changes the whole scope of the discussion. I'm not saying it's going to happen, but that's one thing that I'm paying very close attention to, something that I'm watching closely. You know, another thing I think we need to, you know, pay attention to, we already talked about, you know, your export business, but This May report is that first look at your new crop balance sheet. And so if I'm a producer, once again, that really needs to generate income during fall timeframe, it's not the end of the world to step in with some sort of a flexible type strategy.

Whether you're HTAN and buying yourself a call, like a synthetic put, or you're buying yourself a put option and selling a call $0.60 above the market, one of these types of strategies might not be a bad move just to protect yourself. 'Cause I mean, the last thing I want to do is be hauling it across the scale, you know, and be forced to make that decision during harvest, 'cause that's not really a great time to be forced to sell cash bushels.

Chris

Barron: Well, that's just it, you know, those bushels that you do not have storage for, if they're not sold, those are the ones that those offers need to be put in and you need to be having that factored into the plan. Not to mention, it's a good time to sharpen the pencil a little bit too on what is your true cost of production. Has it changed? Some of the inputs you've bought, or has anything changed that, you know, maybe you, you ran, ran stuff? That's what I see a lot of times is, you know, do you know your cost production in real time? And, you know, sometimes that changes your decision making along the way too.

Matt

Bennett: Yeah, for sure. Yeah, I mean, that's the thing, when you do finally get your final yield, you know, if you had 2.25, you know, plugged in trying to be conservative, uh,— as far as your breakevens go, 2.25 for your yield. And you end up with $237. All of a sudden, you can make a heck of a lot more money than what you thought you could because you're spreading your costs out over 12 more bushels. And I don't know that people always understand just how powerful that data is, but it's certainly something that we try to encourage our growers to keep a very close tab on because that can help make the decision as well and make it a little bit more palatable.

Chris

Barron: Yeah, that's for sure. Oh, well, hey Matt, I think this has been a great conversation as usual. You got some really good insight, some stuff to think about. Probably, I think you're working on a house remodel, so I probably need to— I gave you enough of a break here now that you're probably done sweating and you can go back at it.

Matt

Bennett: Yeah, I'll tell you, my wife, she's gonna get mad if you keep me too long because she's kind of a slave driver. But no, I'm kidding. We've been working on this for a while and I'm here to tell you it's It's been something else, but, uh, we tried to live in the place while we were remodeling and that just doesn't work very well. Uh, we, we actually did an addition, but, uh, you know, and remodeled some of it and it's been a, it's been a process. And like everyone keeps telling me, it's going to be fantastic once we get it done. But I'll tell you what, if, uh, um, you know, if we can ever get this done, I'm not doing this again. I can tell you that right now. It will not happen.

Chris

Barron: Building and remodeling, neither one of them are very, very fun in the grand scheme of things. But hey, if people want to get a hold of you, what's the best way? If somebody wants to give you a little break from your house remodel and ask you a couple questions, what's the best way to get a hold of you?

Matt

Bennett: Yep, just agmarket.net. They can find us on the web there, or they can, uh, agmarket.app's another good place. But, or they can just Google Ag Market and they can find me and Brian, some of the other guys on the team. So A lot of good information on that website.

Chris

Barron: Awesome. Hey, again, really appreciate it. Thanks a lot, Matt.

Matt

Bennett: Absolutely. Thanks for having me.

Chris

Barron: You bet. Thanks everybody for listening. We'll catch you again next time on the Ag View Pitch.