What the hail?!

Chris: Hey everybody, welcome to another episode of the Ag View Pitch. You've got Chris Barron and Duane Lowry here on a Sunday afternoon. How's it going, Duane?

Duane

Lowry: Good, Chris. Glad to be here.

Chris: Good, good. I did a little drive here with the family today across Iowa, and it was pretty— that was pretty interesting. You know, some of the cornfields are starting to look really good, and I was starting to get nervous that, man, maybe this stuff looks better better than what people thought. And then we drove a little further and saw a lot, lot of stuff and a mess. A lot of variability with the corn, some really nice looking fields, but also some really poor looking, just planted, just emerged. They'd had a lot of rain in some of the areas that we drove through. And but the big story for me was the soybeans, man, are they behind. It's I mean, tons and tons of fields that were just, you know, emerging now. So I got to think that might be something that's of consideration as we move forward. But just kind of some comments for me on kind of what I saw here today.

What's your thoughts as we move into a new week here on the markets and any observations from your end?

Duane

Lowry: Well, kind of picking up on the theme that you talked about with your drive. There's quite a few different storylines and thought processes in the marketplace. And, and I guess the price discovery system has to kind of sort that all out to determine, you know, what the price trend is going to be. But I guess in no particular order, if you look at weather, we had some more excessive rains, some storms, we had some hail over the weekend. The last week I don't think was very conducive to in the areas that need to do planning to get planning done. The calendar is moving forward here. And I still think there's— we're set up for a situation where we probably got at least 3 million acres of prevent plant beans. And unless the tomorrow afternoon's Weekly Crop Progress Report surprises, it's probably going to show us at least 10 million acres of soybeans that are not planted.

So to say that we could have 3 million acres of prevent plant, I think, is still conservative but yet reasonable. And by most historical standards, it'd still be a record. It'd still be a large number of acres. And so you got the weather aspect from, from the planting part of it, and the moisture But I think the bigger, uh, story here is probably the temperatures, the growing degrees, the, uh, lack of, of, uh, weather that really helps to facilitate some sort of a catch-up or a maximum growth period here. And I think there's a lot of people starting to talk about it, but they don't really know exactly how that unfolds in the price discovery process. In the forecast, there's probably a period of some warmer temperatures ahead, probably during the 6 to 10 day period. But I would say today's weather forecast has that window probably briefer than, than what the last couple days forecast has.

And the overall theme is probably still one of cooler than normal temperatures and still generally wetter than normal precip. And that's probably not the prescription that we want if we want to see crops, you know, pick up a little momentum in terms of development and maybe try to gain some ground. And instead, it feels like we're going to, you know, stay at a very delayed pace of normal. And it maybe feels like we're going backwards a little bit on that pace. So I don't— I have a hard time looking at weather and seeing weather as anything but some degree of bullish. But in the same token, the— in the grain trade world, you know, they really subscribe to the theory that rain makes grain. And as the crops mature, there's just this natural process of the roots reaching nutrients and developing a greener color and starting to look better than where they would have been a week or two.

And some of the unevenness is probably still there, but it becomes less visible from the road. And so there is a certain amount of a knee-jerk reaction to feel that the crop's looking better than it did a week or two ago. So you know, you have that with the marketplace is trying to digest. The market performed poorly on Friday and finished low range. So a lot of people come into the new week kind of with a default setting of expecting the market to be lower just based on how the final few minutes of trade occurred on Friday. And along with that, they take a kind of a default bearish look at weather. And so I think a lot of people are expecting the market to start out weaker this week. I certainly wouldn't rule it out. It probably or certainly, probably will or certainly could.

But to be honest with you, I think any weakness this week early on seems hard for me to try to explain or to justify. I find the weather concerning, I find the development stage of the crop concerning. I find it's still likely that we're probably dealing with around 9 million acres of corn. That will go prevent plant. I think we probably got the 3 million acres of beans will be prevent plant. And equally, and may actually probably a bigger story in terms of actual impact on supply. I just think the planting date alone has already impacted corn. And I think it's going to impact beans in a very sizable way. And I don't think the marketplace has dealt with that yet. I don't think the marketplace has given a lot of credibility to that. And I'm not sure what it takes for the marketplace to do that. So I look at things as being kind of supportive here.

And I think the markets ought to have minimal amount of weakness from the levels that we're at now. And we still have some strength ahead. And then of course, we got Friday's USDA data with the acreage report, and who knows what that's going to say. So we got a lot of different things to try to digest this week.

Chris: Gotcha. I had a question from Levi in North Dakota. He sent me an email last week, and I thought it was kind of a good question, basically on the idea of, you know, for some of the growers out there, you know, and it's, it's a large percent of those, and I never thought of asking this question, but, you know, if growers felt like they had some stuff sold a little too soon, and then we went into that rally, and maybe they sold some more, but it's like 'Geez, I started way too soon on that thing.' Is there any corrective action or anything that people should be watching for, for opportunities or ways to maybe increase the— what they have in the bucket already, I guess, for price, or any thoughts or ideas or perspective on that question?

Duane

Lowry: Well, I think— correct me if I'm wrong here— I think you're asking me and Levi's asking whether or not he should maybe put something on paper to reestablish ownership or try to participate in any further price advances. Is that what we're talking about here?

Chris: I think so. Yeah. I mean, you know what, you know, and I do the same thing, my own farm operation. I mean, I always— I'm— I tend to have told you that in the past, you know, I tend to sell a little too quick, you know, and you've got growers out there, some that sell too soon, some that wait too long. And they probably both average each other out. So the person that sells too quick feels bad when the market goes up and the person that sells too late feels bad after the market's come back down. So, you know, I guess I'm just asking, is there, is there any strategy or anything that, you know, some of those guys like me and Levi and some others probably that maybe sold a little too soon on some of this stuff on the front end of that rally that we should be doing or— or not. And I suppose it depends on how much a person sold at those levels too.

Duane

Lowry: Well, I think in response to Levi's question, I would probably say it this way. The first thing that needs to be said, that when you go in and you do something like this, there's no guarantee that what you do will be right. And there's, there's, there's always that chance that if you were to, say, lose 20 cents a bushel on whatever position you put on and, and you didn't make money, but you actually lost on paper, then all of a sudden the price that you weren't happy with before has now become 20 cents less when you kind of net it out. So that's the first thing that needs to be said. Having said that, that just because that risk is there doesn't necessarily mean that one, you shouldn't do it, or that it's wrong to do it.

I just think everybody needs to understand what you're dealing with and I will also say that in markets like this where we're dealing with an underlying fundamental that we think is real and legitimate, and especially since we don't really think it's been fully manifested yet, we, we're still dealing with an unknown. Generally speaking, it is right and proves to be correct to buy weakness. So right now, you know, Friday's levels you know, you're 20-some cents off the high in corn, and you're probably something similar to that in beans. And so, you know, I, I think there's probably some merit in what Levi is talking about. And I think there's— it's certainly understandable and justifiable.

It's just very important that if somebody decides to do that, that they're doing it in an equal type of quantity that can be offset or seen as a hedge against transaction they've already got on the books. And in other words, if you have 10,000 bushels sold, you don't want to buy 50,000 bushels back because all of a sudden, you know, 10 cents, uh, loss on, on 50,000 bushels is $5,000, which on, on a 10,000 bushel cash sale equates to 50 cents worth of loss. So you got to make sure that your paper leverage doesn't get out of whack with what you're really trying to do, uh, with your underlying cash position.

So the, the, uh, short answer to this long answer I'm really giving— the short answer is if you can manage it properly and you can accept the risk on it, it's very possible that, you know, you might be able to enhance yourself some, and it certainly could be justified but it's just very important that you look at it from the standpoint that, okay, if I do this and it's wrong, how do— how does that impact me? Because there are no guarantees in this, in this business.

Chris: Yeah, there's both financial risk and also mental risk too. So when it goes against you for a little bit, you got to be able to tolerate that side of it as well.

Duane

Lowry: And right, and everything in this business doesn't make logical sense. So yeah, at any snapshot in time, price action can be completely illogical, but in the end, it may prove to be exactly how you anticipated it. So a guy has to be able to mentally and financially handle those points of adversity. And then, of course, you always run the risk of, of, uh, anticipating the market to do a certain thing only to find out it does exactly the opposite. You know, that's always the possibility. We don't think that's where we're at right now. We don't feel that the market is— at least I don't feel like the market is saturated with bullish thinking. I think there's still a lot of spillover negativity in the marketplace and, and even in the Commitment of Traders report that we had on Friday, the funds are still short beans, you know, they short beans by a sizable amount.

So they have not at all bought into the storyline that we're talking about, whether that's late plantings, yield loss potential, slow crop development, loss of acreage, any of that, they're not really buying into that, otherwise they'd be long as well. So there's a, there's a lot of things left here that at least in my mind does not make me think that the market is top-heavy and saturated with bullish thinking. You know, it's interesting, just from a— if we just look at the farmer community, if you're in an area that, you know, you didn't— you were later, but you're not prevent plant late, acreage late. And, you know, you were wet, but you're not super wet, uh, your crops, you, you probably have some level of optimism. And you're, you're, you look at the marketplace and you've seen so many times where the market didn't follow through and materialize on these kind of things.

You've got a certain amount of skepticism. Then if you're a farmer in the East and they're driving by these fields and they're living this experience and it's very, very real to them and they see it, see the historic nature of it, and they see the scope of it, the vastness of the problem, they themselves are probably pretty bullish. But even that, even that crowd is somewhat distrustful of the Chicago futures market to know whether or not they're really going to respond to it, you know. So after 4 years of seeing prices kind of beat down and have limited ability to rally under almost any storyline, there's just an awful lot of, uh, uh, I don't know, skepticism here. And I think that has kept the marketplace from getting too bullish.

And I think that it makes it for a situation that we probably have quite a bit of time in front of us where the marketplace still has to digest all these factors and might still end up seeing higher highs. And I'm not saying any of this is a, a crutch to give somebody to not make a profitable sale if that works for their operation. I'm just trying to put it in from a, a trader type perspective. I don't think the marketplace is, is, is top heavy or saturated with length or vulnerable to liquidation pressures at all.

Chris: So wouldn't you say, Dwayne, though, like the— we've had like a healthy price increase because we have had the volatility along the way. We haven't gone up super fast. We've corrected along the way. Doesn't that make the market a little stronger and more stable?

Duane

Lowry: Yes, that, that, that's a legitimate argument, and I think that's probably a correct conclusion that it probably makes it a little bit stronger. But even more significant in my mind is the fact that the marketplace has gone up as much as it has, and it's done it without a lot of participation from the public. I mean, a large chunk of the trade missed out on this rally. And, you know, a lot of people didn't even start to get bullish until we were well underway. So I think a lot of people have been caught on the sidelines here, which is another reason that I don't think the market is saturated with length and vulnerable to liquidation pressure. So I look at the makeup of the market. And I think it's constructive and probably signals the market stays well supported for a while.

And that seems to match what a logical assessment of the fundamental situation would be is that the marketplace has got to be very respectful of what could happen between now and pollination or between now and August in the case of beans and, and in terms of crop development being late. It's probably something we're going to worry about all the way until we start talking about our frost date potential.

Chris: Yeah, and that volatility is probably a good thing. It's going to give, give some of us some opportunities to probably capture a little additional on the way up if we did have a subtle back. But any other things you're seeing as we head into the week that, you know, we should be watching for thinking about?

Duane

Lowry: I think there's a couple of things. First of all, you got the acreage report at the end of the week. And no matter what we get, there's going to be asterisks attached to those figures, and they're going to have to get— offer greater explanations in future reports. And so we're not going to know exactly, we're not going to officially know what the prevent plant acreages are for probably several weeks. So that's going to remain kind of a moving target that we're not sure about. But I think it's important to look at what— how USDA has handled a lot of things associated with the problems we've had here in the spring of '19. They've been quick to deal with trade-related issues. They've been quick to come up with program payments for farmers. They have been quick to address the prevent plant issue and try to get out in front of that.

And they've been quick to adjust the grazing and the haying of those acres to, try and compensate. And I think all of those things in my mind tells me that USDA sees the historic nature of what we're dealing with. And I think that they're, they are trying to get out in front of it and not be guilty of being behind the curve on this. And I think that when in June when they lowered the production estimate on corn by 10 bushels an acre, I think that caught most people by a significant surprise. And to me, it's another sign, a very telling sign that USDA sees something out here that's very significant. So my general thought is that USDA is probably going to be fairly quick to adjust and fairly aggressive to adjust this acreage in this acreage report at the end of the week. So I think it's going to be more difficult for the trade to get a quote unquote bearish report.

Now the stocks data, probably some level of bearish reminder. But I think, you know, whatever amount of bearishness you want to associate with stocks, all you got to do is look at cash basis and see what it's done, both old and new crop. And then all of a sudden, that whatever negative storyline might come out of the stocks report, I think is going to be quickly forgotten.

Chris: Gotcha.

Duane

Lowry: Well, one other, one other thing too, you know, you got President Trump and President Xi meeting, later this week and the marketplace has gotten to the point where they don't even care and they don't have any level of optimism at all. And who knows, that might be just exactly the type of environment it takes to get a deal. You know, it's difficult for China to agree to a deal if they're under pressure domestically to be seen as giving up too much or giving up anything, really. And if the expectations are pretty low, then all of a sudden Neither side looks like they're giving in too much to the other. It looks like both sides are giving in and compromising to reach a deal. And it might be this is exactly the environment we need to actually get a deal. So maybe there's a little opportunity for, you know, something to feel good about coming there as well.

And I wouldn't underestimate that. I think that both sides need a deal. Both sides should want a deal. And let's just hope that they're able to find that pathway forward, that both sides are able to feel that they've, they've accomplished something and, and seen something that works good for, for everybody.

Chris: Sounds good. I think one of the things we'll be talking about, you know, probably midweek or whatever too, and over the next couple of weeks, back to your soybean side of things too. And back to what I said at the very beginning of the podcast, just shocked at how far behind and, and, you know, the day length is going to start going the other way now, you know, when you look at where we're at with soybeans, it's, it's just amazing to me the market hasn't really even dealt with that yet. So, so that could be kind of an exciting thing to watch over the next couple of weeks too.

Duane

Lowry: The other thing I'd point out is in this 2019 season, there have been a couple of names that have kind of stood out in the— grain circles and the farm circles kind of people they're looking to for, for guidance and, and leadership. And one was— has been Scott Irwin from Illinois, and the other one has been Eric Snodgrass, who does weather forecasting for one of the agronomy companies. And both of them have picked up a lot of following. And I think it's very interesting that both of them have been on the forefront of what has turned out to be correct storylines, and certainly at minimum correct areas for the marketplace and for the farmer to focus on. And both of them are talking about— right now they're talking about the problems of crops reaching maturity in a timely fashion, and being able to maximize during that fill period to maximize yield.

And all farmers know from a couple of years ago, just how significant that fill period can be in terms of maximizing yield. And it's just the same on the reverse. If you don't get maximum fill time and maximum conditions to maximize that fill period, you know, it can be pretty detrimental yield. And both of those guys are talking about that and talking about the slow development. And, and so I think these are, are very real things that are not, you know, fleeting. I think there's something that's going to continue to be talked about here in the weeks ahead.

Chris: Gotcha. Yeah, it sounds like those are just things that are going to keep the market stable, like we've been talking along the way. And hopefully, as time goes on, the reality starts to sink into some of the trade and what's really going on out there, because on the farm side of things, we feel it firsthand.

Duane

Lowry: So yeah, the last thing I'd want to say here is everything I've talked about today has been, you know, pretty friendly and pretty slanted towards that type of a viewpoint. But again, I'd go back to what we've said a couple times over the last couple weeks. It is about profit, and it is about finding opportunities and evaluating what, what is an opportunity based on your own farm's production potential and the condition of the crop and the prices, etc. If we were to happen to get a scenario where all of a sudden the marketplace had to stand up and take notice, and they took a— suddenly found a new level of embrace to all these problems that we've been talking about for some time. And that happened to lead to a spike up in prices, either following a report or following something with President Trump and President Xi or whatever.

But we just suddenly got that spike in emotion You know, we are, we have had the corn market rally a dollar, we have had beans rally fairly notably. You start adding another chunk of emotion where all of a sudden the rest of the world starts to embrace it more. And suddenly then you could very quickly become top heavy with some latecomers adding to length at what would end up being at the, you know, maybe a little bit too late to the party type of thing. So despite the fact that, you know, I'm saying things that could easily be construed as fairly bullish and fairly confident that maybe we don't see a whole lot of a break here. But if you happen to get a spike up, and my definition of spike from current levels would be, you know, 20 to 40 cents in corn and, you know, 50 cents in beans from where you're at right now.

If you got something like that going into the end of the week due to these reports, you know, that all of a sudden becomes a selling opportunity. And the opinion about what might be ahead becomes less important than the impact of the profit that might— would be offered at that moment in time. So the guy's got to make sure he's looking at things from multiple perspectives here and not just get focused only on the idea that, you know, prices can go higher.

Chris: What you're telling me, there's short-term strategy, and there's long-term strategy. The short-term strategy is over the next, you know, a week at a time versus pollination timeframe. And, you know, talking frost is, you know, way out there and the market's not going to deal with any of that kind of stuff until the time comes is what you're saying.

Duane

Lowry: Yes. And if we're all honest, we've probably all been guilty of looking at something long-term like that, and then having— getting too wrapped up into that storyline. And then all of a sudden, we miss the opportunities that are right here and now. And whether that's a farmer or trader, it's— we've all done it. And it is a trap. And so I am— that is kind of what I'm addressing. I'm kind of trying to make sure that we don't get caught up and talk about like frost and crop development concerns. And then, then allow that to so engulf our thinking process that we're unwilling to take advantage of opportunities that might happen in the next week or so, you know what I mean?

Chris: Yeah, definitely. And that's, that's really what we want to do. Like we said in the last podcast, we really want to just have a conversation for perspective, helping to think through things with growers. And we appreciate the questions, you know, appreciate Levi, you sending that question, and anybody else that's got topics and things that you'd like us to, to discuss, please do that. Any last comment, any final comment, and we can kind of wrap things up here, Dwayne?

Duane

Lowry: No, I don't think so. I think we've kind of covered everything. We have a lot of interesting times ahead and a lot of things that we got to navigate through, and most of what we're looking at here, none of it's really certain. A lot of us— there's a lot of moving targets here, and it's going to create for opportunities, and it's also going to create for anxiety.

Chris: You bet. Well, I guess what I want to do real quick too is just mention to everybody that we have this podcast now is on, on Apple iTunes, and we'd like to encourage everybody to go ahead and subscribe because if you do that, then you'll get a notice right away every time we send one of these out. Also on Spotify and stuff, so feel free to put some comments in there and/or email either Dwayne or myself or call us or text us or something with questions, and then that way we can have conversations. Or if anybody wants to participate in a conversation along with us, we're always happy to accommodate something along those lines as well. So, but I guess for Dwayne and I for today, that's really all we have, and we'll probably be talking, I think, either tomorrow afternoon, Monday afternoon, or midweek if there's nothing crazy that's happening.

Monday we may skip it and wait till midweek when we got more news or when there's something going on. And then obviously, Dwayne, I think we'll, we'll hit it Friday afternoon, maybe after that report. Does that sound good too?

Duane

Lowry: Yeah, we'll do something Friday after that report, and the report will come out at 11, and we might, we might consider doing something pretty much right away after that too.

Chris: Yeah, that'd be a good idea. So, all right, well, thanks, Dwayne, and thanks to all of our listeners, and we, we will see you next time on the Ag View Pitch.