Paul Yeager: Welcome into the Friday, February 16, 2024 this is Market Plus. And across the table from me, Jeff French. We're going to keep going. Should I yell some more? Go at it, man. I can get on a box about a couple of these questions, but I won't. Thank you for pinch hitting, by the way, this week. Best to Dan as he gets well. 

You've been traveling. You kind of talked a little bit about this and I'm sure you get this first question a lot. Paul in Minnesota wants to know, Jeff, the question a lot of us have with this sell off that's been in the weeks in the making and that dust finally settles, what kind of rally do you think we can get in? The second part of that question is for how long?

Jeff French: Well, it's a good question. Yes, I have gotten it a lot. And it's more than weeks. I mean, we're down since October, the end of October, we've been down. And the biggest thing that I'm watching is the 20 day moving average in corn march corn, that's $4.34 in March. Beans, that's $12 even. We have not closed above the 20 day moving average since the late October. That's just been a ceiling on this market. We've hit it multiple times in both corn beans, but we've never been able to close above it. So to me, that would be the first indicator. If we can get above those values $4.34 in corn, $12 in beans, then we could maybe start to trigger these funds to buy back their short positions. But, you know, when that happens, you know, I think we got to get into something really fundamental that would affect the supply side. Obviously, a weather market or planting delay. Does that come here in the next month with Brazil getting dry for the suffering of corn crop? We'll have to see. Right now, it doesn't look like it, but a lot can happen here in a month.

Paul Yeager: I'm going to ask Keith’s question in a minute. But first, I have a follow up about whether for you we had a question. I didn't put it on our list, talking about the dryness in corn country and to the east and to the north of Iowa. We had, I think, our lowest drought level since 2020 come out this week. It might not be moisture enough for you where you're at, but is there enough moisture in the corn belt for traders?

Jeff French: Yes. And the reason is we produced a national high corn 177 to the acre last year where many places were ten, 12 inches below normal rainfall. So it's the timing of the rainfall when it falls is the most important. That's what the trade will that will be their opinion moving forward. And they will believe that 181 national corn average because, you know, look what we did last year on a drier year and.

Paul Yeager: When that rain fell, it didn't and it didn't turn hot until after pollination, which probably made a huge difference in that crop. All right. Let's get to Keith's question now, because it's a follow up to what Jeff said there in a moment. This is from Twitter or X, as I'm supposed to call it. Now. What is the most likely to encourage producers to market remaining old crop production? Is there going to be time or price? And Jeff, of these two, what are the scenarios that you envision? And I need also specific dates and prices and if you could give hours and minutes of the day, that would be good too.

Jeff French: So to answer the real question, I think geographically will be where your farm is that, you know, if you're in wheat country, you're hauling corn right now to make room for wheat harvest. But, you know, talking to producers, I talked to an old boy here not too long ago. And, you know, his comment was, I'm not selling until it goes a heck of a lot lower or a heck of a lot higher. So they've held it this long. How low is low? You know, that's a question for him. But, you know, I think they they're going to hold this thing until the very end, until they need to move it. Getting ready for next year's corn harvest.

Paul Yeager: So that's scenario is space. That's scenario one is there a scenario or two.

Jeff French: With the price? I mean, I think if you get if you get a 50 or 60 cent rally in corn from here, I think you'd get a lot of bushels out of the bin.

Paul Yeager: Do you subscribe to the theory of there's got to be some selling happen to force some price action even at these low levels.

Jeff French: Well the yeah I mean just the problem is it's not the selling, it's the buying. You know, right now the buyers are very limited. There's plenty of sellers, especially from the fund side. I mean, they're it's estimated that they're short of 300,000 contracts. That's nearly record short. The record short they have it's 322,000 contracts. So they are betting on lower prices.

Now, everybody says, well, isn't that a bullish scenario because they got to buy back all their short positions? Well, you when you look at it at bushel wise, that's 1.6 billion bushels that they're short. You know what? You know, the farmer is probably long three, four, 5 billion bushels in the bin against that short. So you know, that's a tug of war that we're going to have to see. But the short sellers right now are real in the game right now.

Paul Yeager: Well, Mike in Iowa, we just kind of asked your question, but I guess technically, let's do it because I do want to put a nice little bow on it. Mike was wanting to know. I have been hearing that farmers are more net long than the funds with short positions. But the question in this is who's going to give in first?

Jeff French: Well, I think that goes to the last question. You know, where what does price do here in the next 60 to 90 days? Because the speculators in the funds, they know that corn has to be moved because they have to make room for the incoming harvest here next fall. So where that plays out. We'll have to see. But the trend right now is lower prices.

Paul Yeager: Okay. So there's a little bit of a whole, you know, simple economics. Let's talk about another option that's out there and crop insurance. This is William in Iowa. William has a question for you, Jeff, where he asks, Do you feel that buying up a higher percentage of crop insurance this year could be a valuable tool for grain marketing, thus allowing the producer to forward sell more bushels?

Jeff French: You know, I think that varies, depends on, you know, really farm to farm. I can just look at prices. I mean, right now we are setting the spring insurance price levels. December corn is probably, let's just call it right around $4.60. That's a full dollar thirty less than last year. The spring insurance price was $5.91 last year. So that's a that's a tremendous difference, obviously. I just think I feel like the price this year for the spring insurance price is not going to encourage additional acres. If you're looking at it from an insurance play. But yeah, I you know, I think each farm, each farmer will dictate what level of insurance they need to be buying.

Paul Yeager: Yes. Okay. I got a different follow up that I was. I'm going to be nice. Okay. Let's do Sam in Tennessee. This isn't nice. This question. But it's pretty real for some. Is $3.50 a bushel corn a chance at harvest.

Jeff French: For 24?

Paul Yeager: Yeah.

Jeff French: I mean, depending on your basis, it's probably not too far of a stretch. I mean, you know, in the Dakotas, you know, if they have a 60 or 70 cent basis, you know, that's not a stretch at all. And we talked about it in the main show. I mean, if you look at that contract low just on the board for that December contract, that's $3.95 a bushel from four years ago. So if this is a true bear market, the you know, I have the opinion that contract low has a big target on the back. So I mean yeah if you have $3.95 futures, there'll be many places throughout the country that have $3.50 corn. Again, I don't know if that's going to happen. I mean, we got to get through the entire growing season and I don't want to get too bearish down here at four year lows, but I mean, it's possible. Is it likely? I mean, we'll see.

Paul Yeager: There's always Jon Roach always talks about this. Everybody gets on one side of the boat. What happens? What's it going to take to move to some people to the other side?

Jeff French: Well, it can be something small, but I mean, when the funds are short, you know, 300 or 330,000 contracts, I mean, that that door is only so small for everybody to get out and they tend to travel together. I mean, you know, these funds, there's not too many of them. And they all think the same way. So when they do flip that switch, you know, it's going to be a while before they can get out of all those contracts, in my opinion. So what that is, you know, is it going to be weather? Is it going to be planting or is it going to be something across the world that affects us? It could be a multiple of things planting.

Paul Yeager: Maybe it's something about planting. Maybe it's corn in Illinois. Question for Jeff here about acreage. This is the one I didn't know if I'd get to, but here we go. Do you think we switch a lot of acres between corn and beans, or do you think we can actually pull enough acres out of production and into other small grains to stabilize the markets?

Jeff French: I don't think you're going to pull acres out of production. I think most guys are going to try to grow themselves out of this and grow themselves to profitability. I mean, that's just. Yeah. You want to talk about leaving some acres fallow or planting something else? You know, that sounds good, but that's just not the real world.

Paul Yeager:Does it even work that way?

Jeff French:I, I don't see how it does. And I just, you know, I just don't know if that's going to happen. I don't think it will.

Paul Yeager: Cotton, as we close, finally has been positive for a good amount of time, but are the warning lights flashing here in this one?

Jeff French: Yes. So the old crop cotton has moved last two months. It's moved $0.15, $0.16 higher because of the American producer mainly being out of their old crop cotton. They've sold it. The gin has it, and now the futures have moved higher. We've seen some very good export sales out of China the last couple of weeks. Hopefully that's come to stay. But you have that may contract at about above $0.90. The big number now is to $100. We'll see if we can get there. But if you look at new crop, new crop has not really done much on this rally, but good to see the cotton rally above $0.95. Now, the next target is that big, $100 mark. We'll see if we'll be able to do that next week.

Paul Yeager: Jeff French, good to see you again, Paul.

Jeff French: Great to be here. Thank you very much.

Paul Yeager: Thanks for the time. Appreciate it. Jeff French will be back in a couple of weeks, so get used to him, everybody. Next week, we are going to take a look at those who are experimenting in a different level and trying to take cover crops to that next plateau. We'll also have the commodity mark analysis with Naomi Blohm. Thank you for joining us. Have a great week.

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