Weekly market outlook Oct. 17th-21st: the heart of a harvest market

Chris: 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. Welcome everybody to another episode of the Ag View Pitch. We are heading into the heart of harvest, and it's the 17th through the 21st Market Outlook. We've got Jared Creed with us. Jared, how's it going?

Jarod

Creed: Going good, Chris, as always. I appreciate the invitation.

Chris: Yeah, it's great having you on. It's been a couple of weeks here, a lot of action going on. We were just talking offline, I'm not the only one tired on this podcast, right?

Jarod

Creed: Then they, uh, you know, we wrapped up beans this week and dove right into corn, so we're Little, little tired here this morning, but that's all right. I'm, uh, certainly not crying about that because I know plenty of your listeners put in a heck of a lot more hours.

Chris: Yeah, I feel like I have been too. I think I've been— I've got one of those Oura Rings, been watching my sleep, and it's like I didn't realize that, you know, I thought I was always— always used to think I was sleeping like 6 hours or whatever, and you realize you're only sleeping like 4 or 5. It's like almost makes you more tired. But I think, uh, I think, uh, harvest is underway, there's a ton going on, hearing some really good reports in some areas, like, like record upon record, and some other areas not so good. Any, um, anything you're hearing that's notable production-wise on that side of the equation?

Jarod

Creed: I think I could actually echo what you just said there, but I'm going to emphasize that the areas that are good are really good. The areas that are bad are much less than expected. And a lot of those less than expected yields in the first place were already, you know, had already cut those expectations down quite a bit. So I feel like bean harvest for the most part is going to be wrapped up by at least end of next week for the overwhelming majority of the Midwest. I think the bean yields, I don't think they have the variability per se that the corn crop is having, but I'm not too excited really about most bean yields. The top end for anybody and everybody is kind of, I'll call it a percent or two above APH, at least from the group of producers that I work with. But then if the floor dropped out, I mean, they completely bombed out. From Kansas, Nebraska, parts of Missouri.

Missouri, just a little quick comment on that. I mean, talk about have and have-nots. Individuals that are going to grow 250 bushels of corn and 75 to 80 bushels of beans, that they never ever gotten close to that in their life. And you go 30 miles away and there's going to be individuals growing 100 bushels of corn and 20 bushels of beans. Well, I think that's kind of the story in the have and have-nots throughout the Western Corn Belt. I can't really speak that much for the Eastern Corn Belt beyond hearsay. But I would say that from all of the yield reports that continue to start floating through at this time of year, it seems like they kind of do align pretty well with the recent USDA estimates. Near and dear to Iowa here, I would tell you that the yield reports that have been flowing in looks to be that Iowa should be a 195 to 197 corn yielding state. USDA has them at 200 right now.

You wouldn't think that that's that big of a deal. Well, if it's 196, 4 bushel off, uh, across 13 million acres, uh, that's darn near a bushel an acre nationally that we have further to cut.

Chris: Where's— so where's the market at in relation to that?

Jarod

Creed: Uh, well, USDA is at 200 right now, right? But as far as expectations of continued cuts to production, uh, I think it's important to remember again the process that USDA uses, how those numbers are published over time. It does seem to open the door to some rather sizable changes out in the January Crop Production Report for both corn and soybeans. Specifically with USDA NASS stating that they will not make any acreage abandonment revisions until the January report. That's, you know, what's at the end of January, beginning of February, the Super Bowl. And oftentimes it's why you consider January the Super Bowl of USDA reports, from both an updated production and stocks report alongside a projected acreage report for 2023. 3, also in the month of January.

Chris: Interesting. Hey, one thing I forgot to do— we're going to take a commercial break right now. No, I'm just kidding. But I forgot to mention, Alyssa's like, you're in big trouble if you don't mention the Ag View Executive Business Conference. And we'll get right back to the markets here in a second, but since I forgot that, I'm gonna bring it up right now. Jared, you're going to be one of the presenters at the conference talking risk management, you know, and marketing and just managing your business for profitability. Um, really excited to have you there. Um, what's your thoughts? You were at it last year. What do you think?

Jarod

Creed: You get a very, very good group of producers together, Chris. So I applaud you guys for that effort. Um, and it's pretty, it's pretty amazing the conversations that can come out of a group of progressive producers that are willing to raise their hand and talk. I've given countless amount of meetings across the US in the ag space. And maybe one out of 10 meetings, you actually get to converse back and forth with individuals. Most of the time, people are too afraid to raise the hand, ask a question, whatever it may be. I like that, that it's your meetings. It's always an open dialogue.

Chris: Yeah, it's pretty cool. I mean, it is, it is for the executive-minded producer, for sure. It's not a, it's not a typical quote-unquote conference. It's more of a, a business mindset for, you know, a number of producers that can really dive into their business. And, and there's going to be quite a few workshops and just hands-on things and stuff. And, and really looking forward to everybody. Just again, that's January 25th through the 27th in St. Petersburg, Florida. So if you aren't booked, please get it, get, get on there if you're planning on it, or at least get a hold of Alyssa and tell her to hold your spot. I know guys are busy as heck, and, and, uh, and we are getting— we had a ton of people register last week after we talked with Joe Vaklovic, and so we will get full.

But just want to make sure, if those that keep listening all the time and haven't yet done that, we will get full. So please get that done if you can. So back to regular scheduled programming here. Jared, I was going to ask you too, you know, after the stocks report and in this last week market movements, talk a little bit about, you know, what the market's looking at and what we need to be paying attention to from the farm side of things.

Jarod

Creed: We've, we talked about this before on your podcast, and I think it's time to reiterate it again. And I don't know if we could have as picture perfect as an example— that we just had this week on the Swazilazi. Our carryouts are going to be incredibly hard to get any lower. We cut corn production, we cut bean production, we cut demand, and we're still floating right around the 200 million bushel carryout in beans and 1.2 billion bushel corn carryout. And I don't feel that we're going to be able to take those any lower especially on— that was on the heels of a stock cut in corn and a small increase in soybeans earlier this month. Or excuse me, I should say the very end of September. Given that we continue to see demand get cut as production and supply drops, that's your Econ 101, right? You can't use what you don't have.

And they are forecasting what our demand looks like throughout the end of the marketing year, which will end August 31st, 2023. The market seems to be content with the idea that our stocks or our carryouts are just not going to move much and it's going to bring all the onus back to the cash market. And I specifically remember we did talk about this conversation here probably 2 months ago of believing that we do have some upside in the market, but it is limited to an extent. That limited, uh, upside move from the board is, is probably the, the realistic example that our outside money and our outside money willing participation is just diminishing day by day, or it's just not coming back anytime soon. Markets are too volatile. The price to play is too expensive. Your big legacy traders that used to be trading 1,000 contracts are maybe now trading 100.

The guys that used to be trading 10,000 contracts may be now trading 1,000. Without that big volume in the marketplace, it's going to it's going to put a little bit of a wet blanket on big moves higher or lower. On one hand, I think it would be completely asinine for anybody to go out there and build a huge short in the commodity market based upon a very, very short fundamental supply and demand picture. But on the other hand, I got a very hard time thinking of how anybody's going to get paid being long a significant amount of $7 corn or $14 soybeans, you still have to get paid on that position. So that brings us right back to cash. We've seen the board move. I'm not suggesting that it can't still continue to go higher. Maybe in corn we can go up and close that gap somewhere in that $7.24 to $7.26 December contract area, but after that it's all back to basis.

And basis is probably the story right now, Chris. We've seen bean basis have a little bit of a swoon through the three-quarter mark of harvest, I would say locally, and it's come roaring back. Plenty of Nebraska processors have jumped their basis by 50 cents in the last 48 hours. Uh, Western Iowa to the tune of 25 to 30 cents, Minnesota 15, 20 cents, South Dakota 10, 15, 20 cents. You got to get west of the Mississippi and you're seeing all these interior basis value jump on soybeans. Corn is out. I mean, it's just, it's out in outer space by itself. There is real chatter of the potential ability of taking— I'm working on this with producers that we work with, that there is a real possibility, Chris, that we're going to be able to ship corn from eastern Nebraska and western Iowa all the way down to southwest Kansas to Garden City, get picked up.

Somebody's gonna haul wheat back to a Lincoln, Omaha market potentially, and take corn back. That does not happen. You do not see trains leave Illinois and go past Decatur, Illinois and make their way to feed yards in southwest Kansas. That's not supposed to happen. Yeah, the market has ways of figuring it out. So it's all driven on the cash market right now. Cash basis is still on fire in corn. Yeah, you have a few weaker places, probably just pinpointed around the areas that have a little bit of a larger crop. You've got the ones who are a little bit more willing to be patient to start upping their basis. And then you've got the majority that are paying big time over values just to get ownership of corn. And it's only going to get tougher to get ownership of corn over the next 30 to 60 days, in my opinion.

Chris: Won't that same thing happen? I'm going to come back to corn. I'm going to hit beans for a second on this basis topic. I think this is important. So, you know, you talked about, okay, generally speaking, soybean harvest kind of wrap up in a couple weeks here. You know, you give it another week and the bin doors kind of close. Is that gonna, you know, because there are the have and the have-nots, and those have-nots, it's like a big sucking sound, you know, in some, in, in some areas. And so that just give strength to those areas even where the yields were good because that stuff's got to be distributed around. What's your thought— soybeans first, and I want to ask a specific question on corn— but what's your thought on the soybean basis?

Jarod

Creed: The one trick to the soybean basis— I shouldn't say one, probably two— obviously we have the river issue, but secondly, you still have some of the rumblings around a potential railroad strike in November. We obviously need to avoid that for multiple reasons. But the Ben Doorlock comment is very true. I think that the average US producer is sitting in one of the best cash positions that they potentially ever have. If not number one, they're probably number two, number three. Bins were empty going into the end of the year.

Given the river situation and what happened in the last couple weeks— I'm going to get into the weeds here a little bit— but your commercial elevator that is typically buying soybeans from the farmer, straight delivery to town, stuff that's not going to a processor, those beans bought by the commercial elevator got a really good chance to roll their book out into a carry out into January, February, March, April, May. Yeah, because the spread collapsed when the river became a problem. There is a real potential that some of these commercial beans, if a commercial has space, that they're off limits. They are actually able to acquire a soybean and put it in the elevator and get it rolled at a carry and have a good cash carry and make money for beans in a carry market instead of the inverted market they've had to fight for several years.

Chris: Yeah, for the first time in a long time.

Jarod

Creed: So that potentially— I'm not willing to say that that's a slam dunk possibility, but it ain't gonna hurt anything. That is going to put all the more pressure again on basis in the nearby to be high enough, whatever that value needs to be, to get grain to move. And quite frankly, your crush margin for the next 60 days— there's a, there's a contract on the board called your board crush. I'm not exactly sure where it closed on Friday. I know on Thursday when I looked, it was still over $2. That's a big, big number.

So do not be surprised that I, I mean, I'm maybe going up a little bit of interest, but I think that before the end of the year there's a real possibility we could be talking about closer, maybe not as high as, but closer to a dollar over bean basis, uh, in the interior processor market of Iowa, Nebraska, and Illinois, Indiana, maybe to a certain extent parts of Minnesota and South Dakota as well.

Chris: Interesting. A lot of stuff to keep an eye on, and I think there's a lot of farmers that put some more beans in the bin than normal as well. And I think rolled, you know, rolled to January, May, whatever, thinking kind of what you're talking. Let's go to corn for a minute. That's going to extend out further, but kind of a similar story, or it sort of rhymes, I guess, a little bit with soybeans because you've got those, you know, you talked about those areas where the corn's got to move to. What's the strategy for the typical producer that you think is things to think about? Because it is a little different for everybody, but on the same token, it's kind of the same too because you got, you know, the farmers that have— they're sitting on a lot.

They got probably more production than they got space for right now, so they got to make some fairly recent, you know, fairly make this good decisions here soon. And then you got some of these other guys that are sitting there, they got plenty of space and they can deliver, they can roll. What are some strategies that on the corn side?

Jarod

Creed: Well, let's start with the individual that is not going to have enough space, and let's make the assumption that that's on the heels of an average to above average crop. If you haven't started corn harvest yet. I guess this isn't pointed at you, but to keep in mind, if you have started corn harvest and you are in an inverted cash market area and you are choosing to put that corn in the bin and take corn to town later, shame on you. Just why? There has been so many good deals in the last couple weeks to provide the producers the ability to get a jump start on corn harvest. Basis strong enough, uh, in an inverted market, maybe even some drying discount schedules to get that first chunk of corn moved.

3 weeks ago, I was a little concerned, Chris, with the producers we work with that we were not going to be able to move the same amount of volume early harvest as what we've been accustomed to the last couple years. Whether it be the corn not drying down as fast or some other issues, that opportunity presented itself again. And in the last 7 days, it became a really, really good win being able to move a significant chunk of grain again, sometimes right out of the field at big elevated premiums, knowing that we're not going to have to fight a poor basis or long lines, whatever it may be. We're going to be able to harvest and do what the market tells us to do instead of being forced to do what we have to do. So again, if you put bushels in the bin and you don't, um, and you're not going to have space towards the end of harvest and you have an inverted cash market, again, just, just why?

You got to think about that. And you can still move it. For the individuals with the shorter crop, here's where you get into a little bit of a crop insurance conversation. Pretty easy. Crop insurance only covers you on the board price. If you are in a positive basis area, even if it's not for out of the field right now but for post-harvest, you have to keep in mind that your overall revenue— the government's looking at your yield and board price. Your own dollars is the combination of what the government, government's looking at and positive basis. Especially considering where we started the year versus where we are now on basis. So I think the guy with a shorter crop, Chris, it's almost as simple as making sure you're looking at what that revenue is today as we make our way through the October insurance averaging period. I apologize, I do not know what that average is.

I'm going to take a wild guess that it ain't very far off from $6.95.

Chris: I think it was like $6.89 or something like that.

Jarod

Creed: I don't know either. Or the average of October so far?

Chris: I think so. I don't know.

Jarod

Creed: That might be the case. I mean, $6.90 to $6.95, I just have not looked at that. But just making sure you're taking a glance at what the overall revenue is looking to pencil out to be at the end of the month. I don't know if the big premium basis conversation is as much of a risk or a need for urgency for the farmer with the shorter crop. Sounds like I'm contradicting myself there a little bit, Chris, but I think that those producers have the ability of being patient for a moment. And that's kind of based upon my belief that we will see really, really good basis opportunities in December and January. So maybe it's a deal with a shorter crop that Thanksgiving timeframe or a week before Thanksgiving, basically a month from now, producer at that point needs to have a plan for a chunk of corn to move.

Chris: Yeah.

Jarod

Creed: And like I've said with you multiple times, the plan with the producers I work with is we will have the overwhelming majority of all crop moved before we ever get on a planter. And the entire purpose there is, A, we know it's profitable, B, I want to cut down as much interest exposure for 2023 as I possibly can, right? It's gonna happen for every farm, probably not. But from a 30,000-foot view, I view it as, can I get through first half rents without having to have any operating money borrowed? Yeah, and that's, that's a tremendous cost saver for next year.

Chris: Yeah, that's an important piece. I, I I have a tool inside Profit Manager where we look at— everybody always talks about the carry in the market. I always look at the cost of carry in the market. In other words, how many dollars do you have tucked away in the bin? And if you could see that in terms of dollars and cents in front of you, it gives you a completely different perspective. If you've got anything borrowed, and then in the last few years, it's kind of been poo-pooed a little bit because rates were so low. But now that rates get higher, it's— you start looking at that thing up around, you know, 5, 6, 7% on a line of credit, the cost of carrying that grain starts to get pretty darn expensive.

Jarod

Creed: Absolutely.

Chris: So interesting. So, um, talk a little bit— let's, you know, we've kind of, you know, hit basis and some strategies for '22 and some things that people need to be thinking about. And I think we'll expand on this. I might grab you back here again here in a couple of weeks, you know, maybe we'll skip a week and then get you back here and we'll talk about some more strategies on basis as we get toward the latter part of corn harvest. But, but for right now, as we wrap up, let's hit '23 for a minute. What are you doing with '23? What's your thoughts there? There's still some pretty good opportunities out there. A lot of people are starting to apply fertilizer, they're paying for some stuff. Um, what, what's the strategy there? What are you thinking?

Jarod

Creed: It would be awfully nice to be closer to $6.50 on the board price pertinent to corn. I mean, this— let me just preface it this way. I'm not even gonna waste my breath talking about beans for 2023 because that's very case by case, and at the end of the day, they still have to yield, right? And it's happening again this year. If you don't have yields, you ain't making money, right? If you have yields you're making money. And I don't care if beans are 13, 14, 15, 16, 17, doesn't matter. You got to have yield. And right now the ratio for next year's corn and beans, I'm going to make an assumption that I would, I would love to know a listener of yours, acquaintance of yours, Chris, across the heart of the Corn Belt, Nebraska, Iowa, Minnesota, Illinois, Indiana, Ohio.

I would love to have one single producer be able to show me how a projected yield or APHs on their soybeans for 2023 actually provide a better return than corn for 2023.

Chris: The only ones I see there— I'll jump in there— are because I, I'm the same way, but I have a few in Illinois and a couple other areas where, you know, they're growing seed beans, they're growing, you know, Hyolake or whatever, and they yield. It's what you said is 100% right. If you don't yield, you're screwed on the soybean side of the equation because the corn just generates revenue. And some of these high rents are going to almost dictate you're going to have to go to corn just for the volume of dollars you're going to need to, you know, to, to manage that. I'll shut up for a minute. Sorry to interrupt, but—

Jarod

Creed: No, you're— I'm glad you bring that up because last spring when we were talking, it was the— a guaranteed insurance corn crop at the spring price that we had in February of $5.90. So APH times your coverage level times $5.90 provided the same return on cost that an APH bean crop would. Hmm. That's how whacked out that ratio was. Yeah. And I think that that's the direction we're moving towards again, because you got a lot of dependency on South America, Brazil growing a big bean crop, and that dependency is going to stick around here for a while. If you have a weather scare there, watch out. Beans could go a couple of bucks in a hurry. There's no doubt about that. You don't have an issue there. Maybe it's just a slow, steady grind lower. But what you have is still a strong demand for corn and wheat, especially corn. And we're gonna have to grow enough acres in the US next year.

I thought that after the Ukraine-Russia situation started, you know, or before, I should say, I thought there was a chance that the US could produce enough corn specifically to get us out of a hole that we were in, but the belief that, you know, it's going to probably take 2 years of production. Now, I think that conversation is coming back around again. Can we produce enough corn in 2023 to dig ourselves out of the hole that we're in right now? My first gut reaction is no, we can't. But if we're honest with ourselves, there is real potential again that acres could be high. You have to have weather straighten up. I'm not diminishing the fact that you have a significant shortfall of moisture throughout a lot of the US Corn Belt. You have to fix that. But the combination of price, the need for the product, I don't like the old phrase, Chris, that US farmers love to plant corn.

Chris: I hate that too.

Jarod

Creed: Truth to it. It is. I just— all I want to point out is you always run the risk of planting just a little too much. I don't know what that little too much is. Too many acres with a good yield and something else changes in the background, whether it be a demand situation, whether it be China, Ukraine, Russia, recession. It's, it's getting to that time of the year again where we have to take a glance 12, 14, 16 months out and say, what risk am I willing to take and what risk should I not take, right? And if I've got my fertilizer locked up and I'm putting fertilizer on and I've got some land prices, uh, established, you know, quite frankly, 75, 80%, maybe even a little bit more than that, of next year's expenses are somewhat known now, not going to have a lot of wiggle room. Mm-hmm.

So with all that said, back to the producers we work with, you know, we were scale-up sellers during the entire debacle of— at the beginning of the debacle between Russia and Ukraine. And we had sales starting at $5.50 and had some fill all the way up at $6.70, a heck of a range all in a 30-day period. Next year's corn right now is $6.20 to $6.30. I think from a 30,000-foot view, most farms should be— I think there's a realistic scenario to be 25 to 30% forward sold on next year's production, probably in just like some type of an ACA or a hedge, maybe a little bit of cash bushels. But then on the back side also having some type of an old-fashioned risk reversal. This is where— obviously I'm not a broker, Chris, unfortunately, in the legal world that we live in, gotta tell everybody that this is not a suggestion, right? But explaining what a strategy can do, right?

If you would go buy a put at a $6 floor and sell a call at a $7 ceiling, and you could maybe look at throwing in, if you're a producer carrying margin protection, selling a put down below $6. What I'm getting at is you have an option strategy at your fingertips that still costs you a little bit of money. Yeah, you got a margin position unless you can do it with the grain company, but all of a sudden you got 25% of your crop price, you got 25% of your crop with a floor and a feeling almost, uh, 70-some cents higher, 70 cents higher, 200 bushel corn, $140 an acre. Hard to complain about that and still having the other half of the crop to market. I don't know if it needs to get that much more difficult than that, Chris.

Uh, I have the intent of putting, uh, that strategy in place, um, for sure before Thanksgiving, um, but ideally it would be nice to be closer to 6.5 before pull the trigger on those moves. And I think if we get— if we're going to get the 6.5 December '23 corn anytime soon, that's going to require December '22 corn going up and filling that gap at $7.24, $7.26. But again, pertinent comment of all that, not to get lost in the weeds, is a strategy. I have a set price on chunk of my crop. I can put a floor in on a chunk of my crop with a max price, and I can stop there. And if you have margin protection in place as well, you really can put that on and focus on going farming and revisit your marketing in the spring and the summer and then after harvest next year.

Chris: Yeah, that's all really good advice. I want to, as we wrap up here, I want to say, um, something about '23 and get your take on this. But you know, one thing I think that as farmers we do, especially when we're busy is we're thinking, thinking, thinking, and a lot of that stuff's in our head. And I think it's important that we kind of— I'm a list maker, but if you sit down and literally when you start thinking about '23, I have like a kind of a to-do list in my own operation where it's like, okay, um, you know, grab a piece of paper, literally write out 1, 2, 3, 4, 5, 6. My number 1 is determine the crop plan for next year. And it's amazing how many people think they have it in their mind, but they haven't sat down and said, by farm, this is what's going to get planted there and why. So sit down and determine the crop plan.

Number 2 is, is to calculate and estimate the production on each of those farms so that you can get to a real production level. Because if you're going to switch to more corn acres or more bean acres or whatever direction, or more wheat, whatever it is, how do you sell 10% of something you don't know what the percent is? You know, that drives me nuts when people are like, well, I'm sold. Well, of what production, you know? And so get— that's number 2. Number 3 is estimate your cost of production.

Jarod

Creed: Hey, hey, Chris, let me add one piece in there real quick. Yeah, if you plan on farming next year, that means you're gonna have insurance too, and you already know what the APHs of that crop are.

Chris: Yeah, exactly.

Jarod

Creed: And you can find that out now, right?

Chris: Yeah. And, and that's—

Jarod

Creed: sorry, I interrupted. No, I, I love it.

Chris: That's great. And then number 3 is estimate the, the cost of production. You know, we have about 70% of expenses that are known, and there's some land rents that are not settled yet, and there's some equipment trades and some stuff going on, but it's a high percentage of known. You know, as we look at the '23 cost of production on some of our guys right now that are really good at sending us, here's where we're at, that's You can get that calculated pretty darn close. Number 4 is determine the margin that you want. What makes you happy? What is going to be a sufficient margin for your business to make you profitable? Just determine that, you know. I'm not saying make sales or whatever, I'm just saying what margin would you— could you live with that you're going to make money, build working capital, have a successful 2023? Number 5 is pay attention to the macroeconomics.

So in other words, don't just look at yourself, but, you know, look around, pay attention. And then the last one, number 6, is put some targets in. Because whatever happens, it's like you said, you know, if we get to that $6.50, well then put some targets in because a lot of times that you got about 10 seconds to make that sale. That happened last week here. There was a basis push that, that went up to 50 cents and it lasted about 10 minutes. And if you weren't on the phone or you weren't there, or you didn't have a target and say, hey, if you get to 50 cents over, I'll do it. Or, you know, or have, have those targets because they don't last long. And so I guess all I'm saying is, is list that 1 through 6, write that stuff out, and then have the answers to those, those questions. Any other things I'm missing or that I should have added to that list?

Jarod

Creed: No, I, I can't agree more, Chris. I think those are all very, very pertinent. The only piece I would add to one of your comments of what margin do I want. I'm always kind of like Dr. Phil, and I apologize, I joke with my clients all the time. I'm not trying to Dr. Phil here, but I want to just paint a reality, a picture. Your average listener has a great cash position today, has built a lot of working capital, a lot of equity over the last 5 years from numerous different pieces, from big crop, from government programs, and from high prices and maybe again, big crops. End of the day though, things are going in a good direction. Can you ever remember, Chris, on your farm, let alone anybody before that you would have worked with, how many guys could you tell me 100% confidence that made money 10 years in a row on the farm?

Actually made money at the end of the year, not the old tax game. It doesn't happen, right? And I, I just look right now at what if our, our methodology for 2023 has a dose of defense, a prevent defense football term. I've, I've built the lead. What can I do to protect that lead and keep some of it? Because right now I do look at the next 2 years and seeing projected income statements and balance sheets going into the beginning of next year. It's almost like that's, that's the mindset that we ought to have at the moment. Right. Just playing enough defense to keep that going in the right direction, but knowing that you still have a lot of opportunity to capitalize if things get bigger and better. I think it is just as simple as that. And I maybe said this before, but I'm going to say it again. You think about the dollars that the average farmer are spending.

Imagine they are the CEO of a company, which they are, but they have a board of investors to report to. And if they're looking in the environment and volatility that we have seen in the last 18 months in agriculture, and they're looking at it for most individuals, a very, very good 2022 year. And they're looking at projections in 2023, if they had the ability to take off half of their risk at, say, a 20% return on margin at the big expenses that we have today, I'm pretty sure that CEO would get fired if they didn't do something. Yeah, that's not— that's, that's simple business management.

Chris: Yeah.

Jarod

Creed: Well, being aware of my surroundings, of how crazy things are, and when is enough enough for the moment. If I've put myself in a really good position, and right now what I need to do is make sure I'm keeping that.

Chris: Well, and that's where—

Jarod

Creed: last thing I want to see, last thing you want to see, the last conversation you want to have in the next 24 months is, now what do I do? Because I spent all this money, I didn't keep money that I earned. And I'm going backwards now. How do I stop the bleeding? I don't want to have that conversation anytime soon. I know it's going to come. I joke with my wife that maybe this little run will stick around long enough that— wishful thinking here— but 10, 15 years down the road, maybe I never have to have that conversation about how do you mitigate your loss, right? Yeah, it's a pretty special conversation that would have right now in 2023.

Chris: Yeah, yeah. It's just being proactive, right? I like your analogy of the defense and protect the position, protect that lead.

Jarod

Creed: All you wanted was the W. Yeah.

Chris: And, you know, and I think there'd be some counterargument to that from some that are, you know, it's that, you know, well, let's run the score up, you know, let's leave the game, you know, as big a winner as we can be or whatever. But on the same token, You know, you can lose the game too, really fast by exposing yourself and putting yourself out there too far. And so I think those are really good analogies.

Jarod

Creed: Here you go. One more football analogy then, Chris. If an individual wants to think about it that way, I'll just have fun with the comment of, all right, let's try to build a lead in the first half. And then in quarter 3 and quarter 4, you can be as aggressive as you want, but you know that you have protected yourself enough that if you make a mistake on the aggression, that it's not going to take you reeling backwards, right? Yeah. And that's kind of back to all those margin protection conversations. I'm pumped about 2023, Chris. The more and more I've talked about margin protection, and again, it's never too late to understand a program even if you didn't use it this year. Um, the floor that we have in place for next year is something that I've never experienced, and I don't know if we'll ever get to experience again.

And when I talk a floor, I'm talking about margin opportunity.

Chris: Yeah, well, it's—

Jarod

Creed: no one that— if I have— if I become a $5 cash corn next year and I got half my crop protected above $6, those producers are likely to be several, several hundred dollars an acre better than the producers without margin protection. I don't want to wish ill will on anybody that we know. There is still a competitive landscape to agriculture. And if I got producers that want to grow and that's in their growth plans and goals, you know, one can be a little wishful in the silo of a single year. I'm not rooting for lower prices, don't get me wrong. But when I'm looking for that competitive advantage, no secret that guys with margin protection on the '22 crop, some of them, it's going to save their bacon. And you're going to have $500, $600 an acre swings from a farm on the east side of the road versus the farm on the west side of the road.

Oh yeah, not from yield volatility, but I'm talking the actual farmer, right? Right.

Chris: Yep, it's, it's, uh, we, we're in a, in kind of a boom time, just to steal some words from Joe Vaklovic, but you know, there's boom and bust and, you know, it might not be '23, it might not be '24, it might not be '25, you know, but it will happen. You know, it's not a matter of if when things change. And I, back to, I really like that defense comment. And I also think those 6 things that we talked about, I mean, literally, I'm imploring people, if you haven't sat down and really you know, calculated some of those things and, you know, ask yourself those questions and make sure you get all that stuff out in front of you, then you can make some decent decisions. So, um, that's all I got. Um, anything, anything else to wrap up?

Jarod

Creed: No, I'd just say most important thing is everybody please be safe. Yep. Yeah, there's some very bad accidents out there. Unfortunately, a lot of combine fires with how dry it is.

Chris: Yeah.

Jarod

Creed: I, uh, last night, uh, brought a piece of equipment in the shop late and spent a couple hours washing it just because that's the last thing I knew was gonna be around a bunch of CRP today. Last thing we want to do is, uh, start a fire that burns up 1,000 acres of county.

Chris: Yeah. And your point of being safe, I think, is huge. I know there's already been some, some farm losses and it just, it, it's just super tough. I mean, everybody just needs to really be safe, need to get your rest. You know, it's like you said, you had a late night. I had a late night the last several nights myself too. And it's like, you know, at some point you just gotta shut stuff off. The weather's been so good that, you know, just turn stuff off and go sleep for a few extra hours. It's well worth it.

Jarod

Creed: Chris, maybe your listeners have tuned out to us by now, but I got one question for you. Just kind of something I think people might find a little interesting. Are you seeing or hearing from anybody that the dry down in corn is, for lack of better words, odd this year? Yeah, it's really variable.

Chris: Yeah, I— if, if I didn't know better, if I hadn't been a combine operator for a lot of years, and now I pretty much primarily am at the dryer all the time, and I get a load in that's 27%, and then I get one that's 23%, and then I get one that's 25%, then I get one that's 22%, then I get one that's 29%. Yeah, it's been kind of really variable, at least in our area. And then a lot of the people that have the really good yields, I'm hearing really, you know, kind of wet corn. Crops are wet, slow to dry down. In the areas where the have-not areas, stuff's really dry. So it's, you know, you take the good with the bad. You know, if you're in the area where you got really good yields, you're probably dealing with higher moistures and stuff, and And that's kind of the case we're in right now.

Jarod

Creed: I'm a little concerned that some of these higher moisture areas, it's gonna be a slow harvest.

Chris: It is.

Jarod

Creed: There's gonna be some January corn pick. Yep. And could not— January, excuse me, not— hopefully not January, December corn pick.

Chris: Well, and there could be January. Depends on the weather, you know, depends on the weather.

Jarod

Creed: And I think that's one more piece to add fuel to the fire in the cash corn market.

Chris: Yeah, exactly, exactly. Hey, I think we probably went long enough. Again, everybody, remember, if you haven't signed up for the Ag View Executive Business Conference, Jared will be there in person. Opportunities to talk to a lot of the presenters and stuff. And Jared, this is a great conversation. Really appreciate your time.

Jarod

Creed: Absolutely. As always, thanks for the invitation, Chris.

Chris: You bet. Great conversation. We'll get you back here in a couple weeks and we'll hammer on this basis thing thing on corn a little more too. So thanks a lot, Jared, and thanks to everybody for listening, and we will catch you again next time on the Ag View Pitch.