Market Plus with Matt Bennett

Paul Yeager:  Welcome into the Friday, November three, 2023 Market plus. Hi, everybody. Paul Yeager along with Matthew Bennett.

I guess I don't have to say who I am and you don't have to say who you are. We put it up on the screen. You drove this week. You just got done with Harvest. You're in that area where I think this summer, a couple of times I asked how rain was coming. So the question I guess we'll start with is, William, are yields better than we expected?

Matthew Bennett:  You know, I think the question right now is the folks that are still going, which obviously the Eastern Corn Belt was a little bit behind some of the northern tier areas. I really feel for some of these folks in northern Indiana, Michigan, that are picking 25 to 28% corn and trying to mud it out. Good luck to you guys.

That's a tough go. But in the eastern Corn Belt, you know, in Indiana and Ohio, I'm hearing some awfully good yields in our part of the world. We were expecting a pretty good crop, and I wouldn't say it was better than expected because we were expecting a pretty good crop. I got to think that corn versus beans, I kind of feel like corn may have a chance that January could be a little bigger number than what the 173 that we've got right now.

As far as beans, I don't know that I've got a great feel for it. You hear a lot of people say, oh, my being yields are pretty good. And then someone else says, you know, they they laugh really rough beans, you know, And I know some of these double beans this year that are getting cut right now are not worth a darn.

They're just not very good. We had such a dry end of the summer. It makes sense. Double beans. The last several years, Paul, have been fantastic. Not this year, though.

Paul Yeager:  I've heard from multiple people Tell me, Yes, we're really good here. We set a record ten miles in each direction. Terrible. Yeah, and that's multiple spots just in Iowa where they have said that's the case. So I guess the question then becomes and I think we've asked this before, what if you're in the terrible area? What if you're in the good area? Do you approach this market differently?

Matthew Bennett:  Yeah, that's a really tough question, because if if you're in the terrible area, there's a whole host of things that can come in to play well with markets as What was your insurance program? You know, because I'll tell you what, you're over a dollar under the spring price. So if you're 85%, you're I think the price was like 83% of.

So that means APH in a little higher. Yet you still could collect, let alone if someone bought up their insurance. So. Do you approach it differently? Of course. You're going to have to approach it differently. But I think one thing it's going to tell you, especially in the West, especially in Iowa, you've moved farther west in those areas that you're a little light.

High usage areas. Basis is going to hold together pretty good. And it has actually, because you're going to have to pull those bushels from those really good areas to the areas that didn't get them.

Paul Yeager:  Let's go west into wheat. I have another wheat question. In fact, I kind of used a little bit of Brandon's question. My apologies, Brandon, for the show and what I did there. But Brandon says I'm worn out watching Kansas City Wheat this week and other weeks with low ending stocks and not a spectacular winter wheat harvest from Texas to Montana. Why are we off $3 a bushel from the highs at harvest back in August?

Matthew Bennett:  Like I said earlier in the main show, wheat is more of a follow right now. First of all. Second of all, planting has gone fairly well for most people. I mean, you're looking at basically a normal pace with you having a normal pace and weather being as it has been, plus getting some rain and wheat country here over the last ten days.

It's probably not a good time that you're going to get much of a rally, first of all. Second of all, there are some folks out there saying maybe we pick up a few wheat acres actually based on how well it's gone over wheat planning period. So in all honesty, it's tough to get super friendly. I totally feel your pain whenever it comes to this the stocks.

But you got to remember stocks versus wheat stocks of normal or tight, right. But wheat stocks versus corn and beans, stocks are just multiples. Right. And so it's different. And I think there's probably people in the ag sector that would like to continue to see wheat stocks dwindle more towards this just in time delivery, like corn and beans.

Paul Yeager:  That gets a little bit about kind of what you said during the main program about how one is a follower, One is actually neutral. If you have all things equal with nobody has a really good stock, then you'll all move independently. All right. No question there. Just a comment from me. This is Mitch in Iowa. A little bit of a follow up.

I probably should ask this one before Matt. Do you expect the current carries and soybean futures to hang on through the marketing year?

Matthew Bennett:  Yeah, at the time, you know, we're going to need beans throughout the year. We know that. I mean, it's pretty tight, but we know that the U.S. is going to have a very tight situation. But, you know, you better hope that those kind of hold on, because it seems to me like most of time what happens? Producers like selling beans at fall and storing corn.

It's just pretty much the way it works if you don't talk to a lot of guys or gals that store beans on the farm, it happens. It's just not near as prevalent as it is with corn. So I do think you're going to kind of keep that carry into this bean market. I don't think that they're going to have to push excessively whenever you're already looking at $13 plus beans, depending on where you're at.

Crush has been good with more crushed plans popping up. Basis overall continues to stay strong. And it's going to I do think that you'll be able to keep carrying in this bean market.

Paul Yeager:  Well, how about prying the grain from your cold dead hands, Kelly, in Iowa, when harvest is done and it is in the bin, how much will the basis have to improve? Let's talk corn here since you kind of just talk beans to get it out of farmer's hands.

Matthew Bennett:  Yeah, I mean, that's a that's a really good question. So, you know, you've got a couple of things going on. The producer in 21 and 22 made a heck of a lot of money. All right. A lot of folks are saying, well, you know what? I didn't get $86 corn sold. So now what do I do? You know, when's the market going to rally?

And so that question when people say that, it makes me cringe a little because it's assuming the market's going to rally. I'm not saying it won't. Typically, we get some sort of a post-harvest rally. We know that. But you've got to also think about what's going on today, what's coming. Okay. If you plant 90 plus million acres and you plug that in with a 2.1 carry that the USDA is forecasting right now, and that's assuming 500 million plus additional demand year on year.

Through all those things together. Paul, And what kind of carry out do you come up with with a normal sized crop, you know, And so so what kind of a rally is it going to take to pry it out of the farmer's hands? Well, you know, when you're Kelley’s in Iowa, overall, your basis is better than my basis in Illinois.

Very interesting. This week basis levels in Illinois was prying some corn out of Indiana with folks that were trying to keep elevators going, shipping it over to Decatur type area, which is pretty close to where I'm at. I heard about some places pushing to $0.20 over already. I think that they're going to get basis levels that are going to be conducive to be able to make sales.

It's just if you get a rally like you've seen with soybeans, if you get that sort of a rally with corn, maybe it's not what you wanted, but if it's 20, $0.30 and you get a little push for some corn, you can't really call it a rally unless you reward it.

Paul Yeager:  Okay. So that's that side of the ledger which we talk about all the time. The new discussion that has really come up on this show a lot in the last 6 to 9 weeks has been Paul in Minnesota's question, with sub $4 corn and 10 to 12% interest. If that's the new norm to come for the next 12 to 16 months, is that going to be the new I'm sorry? Is that going to be the norm? And then how do you handle it?

Matthew Bennett:  We had ground sell in our area yesterday and it averaged over 20,000, you know, and if his question If the first part of its correct, how how's that going to work? I don't know. I mean, obviously there's a lot of cash out there still. We know that. But, you know, the question is a really good one. It's going to be a challenge, in my opinion.

Right now, as a producer, producer, you have to understand what it boils down to is profit margins. Okay, we were spoiled in 21 and 22. You're not typically going to see three, four or $500 an acre net profit. That's not normal. You know, it's fun, you know, but the problem is, is that you pay for it on the back side of it.

And so if if Paul wants to know what is on the back side, you know, of high prices and we do a little bit of a study about what happened after 2012, it's not pretty. And we had cheap, cheap rates, relatively speaking. So if we have what we had happened then, which high prices, what do they do? Everyone in the world was making money with corn, not just us.

So everyone wants to plant corn. Right now you've got this glut of corn, not only us, but globally. If you tack on high interest rates to that, you better understand you're going to have to be pretty darn good producer. You got to be a good business person. A lot of the fun stuff we've done the last couple of three years maybe we won't get to do for a while once again.

And I'm talking not just on the farm, but family living expense, for instance. I mean, we're going to have to be careful.

Paul Yeager:  Let's hindsight's 20/20 and I guess if you're Joe in Illinois wants to know, Matt, what if you missed the boat on this corn market, What are you going to do?

Matthew Bennett:  You know, if you missed out on the corn market, if you've got bins I definitely want to handle my my bushels in the bin similar to grain elevator. What's a grain elevator do? They want to get to hold as many bushels as they possibly can and then they hedge those bushels on farther out. There's not a lot of carry in the corn market.

I'd like to see more carry in the corn market for sure, but they'll hedge the carry in the corn market. And then what do they wait on? They wait on the basis to come to them. Now, a producer might say, you know, I really don't want to hedge. I typically a lot of producers will tell me they don't want to handle like the elevator does.

The elevator has to handle it that way. Paul, the producer doesn't have to. The producer can just bet on the can. They can gamble if they want to. Personally, I think they need to hedge their risk in some capacity, though his base is going to improve. Typically it does. We know that. Basis is going to improve to get bushels to move and I think basis is only really going to improve.

Paul, if you see futures move lower and that's not something that we really want to see. So if you missed the boat on the market, don't get disillusioned into the into the hope strategy. You know that I have to have a rally to make this thing work. Sometimes the best thing to do is to maybe say 23 wasn't the best year, but I can make money in 24.

You know, if you booked your inputs, when most people book their inputs and you sell corn today 515 to 520 minus whatever your basis is, that's a winner in most people's handbook. So let's not let 23 ride too long without at least protecting ourselves.

Paul Yeager:  Matthew Bennett It sounds like you're saying we should maybe know some fundamentals before we start trading the market. It sounds like we should know some costs. You are a frequent person to discuss about understanding your cost of production.

Matthew Bennett:  Absolutely. Why? Absolutely. Because the thing is, is that, you know, whenever we're trying to figure these markets out, I’ll have people call me, inevitably after we do Market to Market and say well you, do you think you know everything you're trying to predict the markets. If Paul asked me a question, I'm going to try to answer to the best of my ability.

But the simple fact of the matter is, I'll tell you, Naomi, Ted, whoever we don't know, okay, we can give you our best educated guess. But what is better than an educated guess, knowing your cost of production and knowing, Hey, I can lock in whatever it is. Lock in a worst case scenario, whenever you read my newsletter, I talk about it enough that people probably get tired of hearing it.

But if I lock in a worst case scenario, what does that mean? That I know the worst thing that can happen to me and I can still participate in an upward market if it should occur, I may not be able to participate as much as everyone else, but if we're always trying to hit home runs, Paul, you know as well as I do, we strike out a lot to go to the sports reference because I know we both share that affinity, but you've got to know your cost of production.

And I'll tell you some of the questions we've talked about here, the challenges we're going to have probably over the next year or two or three, we're going to have to know those costs of production because it's going to assist us and being able to weather weather the storm.

Paul Yeager:  You bullish on the Illini men's basketball team this year?

Matthew Bennett:  You know I was very much uncertain going into Sunday's scrimmage with the Jayhawks. I know it was an exhibition game but you know they played it as they would play a normal game had the referees there, had the TV timeouts there and Illinois controlled that game start to finish. And I was very impressed.

Paul Yeager:  We'll play this tape back in March to see how you feel about it.

Matthew Bennett:  All right. We can do that.

Paul Yeager:  All right. Matthew Bennett, good to see you. Thank you so much. Thank you. Appreciate it. Here on Market Plus. Next week, we are going to have a firsthand report from an emerging market. And we're going to sit down and chat and have market analysis with Ted Seifried. Thanks for joining us. Have a great week.

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