Paul Yeager: Welcome to the table for the Friday, December 27th, 2024 installment of Market Plus. Chad Hart, Jeff French, back with us. Chad, we've been trying to get you to do this for a number of years. So thank you for finally saying yes. We always, when we try to do this before you always book somewhere else. So I'm going to ask, what's the theme of the speech in ‘25 when you go out to talk to people?

Chad Hart: The theme is controlling what you can control. Figuring out how to bring costs down in line with what our revenues can be. But having an eye towards looking at, you know, again, it's not just cutting costs, it's controlling them, figuring out what adds to revenue, what doesn't. you could argue over the last couple of years when we had profits, well, then you could afford to experiment. Now's not the time to be doing that. Now's the time. Let's try and true what adds to my bottom line. That's what we need to do.

Paul Yeager: Jeff, what's your speech going to be in 25?

Jeff French: Well, it's going to be tough because, right now you look at future prices and they're both below the cost of production. But, you know, farmers will plant. there's some of the biggest gamblers around and, you know, it's going to be a tough year. but we all know that, you know, with weather and Mother Nature that things can change quickly. But, right now it's everybody's tighten their belt for 25, no question.

Paul Yeager: So there's been no weather scare in South America. And we always I think I hear people who sit in your chair always say, we need a weather scare to send this market higher. We cannot predict in late December, early January what that weather scare could or could not be. But we did get some rain before the end of the growing at the end of the growing season. In the fall season in the upper Midwest, that sets us up for better soils. Does that mean the market will respond to say, yeah, it's not so dry, and if it is dry, you still grow? Trendline yields?

Jeff French: Well, initially they will say that but the underlying factor right now is, you know, we have a flush pipeline. You know, we have some of the biggest carry outs that we've seen in 4 or 5 years. And we also have South American production as of right now that looks very big. I mean, there's private guys out there with 175 million metric tons. Only in Brazil alone. but you still got to get into January, February, March to see how that weather is down there. and it's just the nature we said it on the, the, first show that you know, these futures market tend to put in the worst case or the best case scenario when it comes to yield very quickly. So, we still got a lot of growing season down there, but right now, you know, the fundamentals are to the downside right now.

Paul Yeager: Well that's encouraging. No, but, Chad, let's keep going on this negative tone for a minute because it is a little bit of a reality check. I think you said sometimes they call you, a name that's not so popular. That's all positive. How gloomy could things get?

Chad Hart :All things could get really gloomy.

Paul Yeager: What would prompt it to get that way? Well, I.

Chad Hart: Want to frame it this way. When you look at our supplies. Yeah, they've been incredible. But when you look at our usage on the corn side right now, we're at record usage. Soybeans. We're not record, but it's within shouting distance. So when you think about that, our usage is as strong as it's ever been. And yet prices are down. That tells you it's probably a supply problem. Demand is doing everything it can for us right now, and that's what leads to problems here.

Paul Yeager: But who's going to plant less corn? Because, you know, I get that question a lot of times of, well, let's just plant less. Well, then, as I think you're about to tell me, will Brazil, we'll just plant more and take your place.

Chad Hart: Not only Brazil, plant more, but let's face it, that's the problem between looking at it from an individual perspective versus the industry's perspective, it always makes sense for the individual to plant something, even though the industry itself doesn't need more land in production. As a farmer, I have to plant to make money the industry. Maybe I need fewer people to do it, but that's why also you see the cycles that we go through it loud. So that's the ebb and flow. We're pulling folks in and out of the industry based upon what we can afford.

Paul Yeager: Jeff, if you could give me the individual names of farmers you know, that are going to plant less, I want to write them out right now, the corn, the corn. But you don't you never have that conversation with anybody. And what farmer is going to be part of the grander solution if I don't get a paid or assisted in some way by helping this greater problem, there isn't one. The list is small.

Jeff French: I mean, no, I mean, most guys will look at it as we're going to grow ourselves into profitability. you know, they're going to throw everything they can to increase those, yields and those bushels, which in the long run hurts, you know, the price which could be lower. So yeah I just don't see it. It's, it's going to be tough, you know, do we see some reduce acres up in some fringe areas? you know, when you look at bean prices, it it just it's hard to pencil a profit. So, you're trying to see, I think some less acres, do they come in to corn? we'll just have to see about.

Paul Yeager: That, depending on what? Oh, sorry. You had something.

Chad Hart: Well, I was going to say, when you look back at last year's acreage, in total, we did shrink acreage down compared to 2020 to 2023. Are we going to do that again here as we're looking forward in 2025? Usually farmers don't do that two years in a row.

Paul Yeager: But do you I mean either of you, do you ever hear I mean, there was that anecdote starting to float around in August of bankers were not going to be as crazy of lending to individual producers and operation alone in 25, because it wasn't going to be profitable. We rebounded a little bit in the fall, but is it going to be the banker that makes that decision?

Chad Hart: The banker will help assist that for sure. And, you know, can you find farmers that are willing? I've run into one farmer over my 15 year career as an extension economist that got up in a meeting and said, you know what? We all need to plant less. And I said, okay, let's have a vote on that right now. How many of you are in the room or willing to plant less next year in order to get better prices?

Paul Yeager: And everybody sat on their hands.

Chad Hart: And even the gentleman that mentioned it to me. Nope. He sat on his hands as well. So the idea is no. Again, as an individual, I'm going to bushel my way out of this problem.

Paul Yeager: Okay, so let's bushel our way out of corn because we're going to see likely an increase in corn. Are we going to be sitting here a year from now, Jeff, having the conversation. If we've got too much corn, maybe we should plant more beans.

Jeff French: Well, I mean, if you look at it right now and if we just grow trendline yield. Yeah. I mean you're going to probably have a carry out, north of 2 billion bushels. you know, does that say for corn? No it doesn't I mean, historically, you have a 2 billion bushel carryout. You're probably in that $3.75 to $4.25 on the board trading range. So, but again, there's a lot of factors that go into this. we have a new administration coming in. the world could look like a massively different place, this time next year. so I just, you know, the economics is one thing, but, you know, farmers, they're going to plant the corn, they're going to plant the beans.

Jeff French: And, you know, we'll let things shake out as they may here in the next 8 or 9 months.

Paul Yeager: Chad I made you be negative to start, now you can be positive. Is there a commodity that you like in ‘25.

Chad Hart: Relatively, I still like corn over beans because when you look at that demand base that we have, it is much more stable. Well, we see there, it is less reliant upon international trade. That's helpful as we look forward there. And so that's where you you're also seeing the concentration. The idea is as USDA looked forward, they said the same thing in their long term outlook. That corn right now is the place where we go to if you will heal our wounds first. And then when that gets out of balance, then we tend to be able to move towards other areas. That's when we do tend to see the swings back towards beans, towards cotton, towards wheat.

Paul Yeager: Oh, cotton. We won't even start with that Mark.

Chad Hart : No, no, no.

Paul Yeager: Jeff, is there one that you like in 25 more than the others? I mean.

Jeff French: Right now you're talking the wheat market. I mean, the wheat market has been under pressure here. We're down here at 4 to 5 year lows. you look at, you know, $5.50 wheat historically the last ten years. That's cheap. and we've seen some spread on one. It looks like some big, massive global traders were, along the US, Chicago wheat and short the Mataf. And they've been unwinding that. And that's why we've been down the last five six trading sessions. So I just look at these wheat prices and I, I would not want to be short wheat at these prices. And I think there's some upside. Also you look at world carryout on wheat. We're down here at 8 to 10 year lows. So from a pure fundamentals standpoint I like the wheat right now.

Paul Yeager: Is there a live stock that you like better than the other?

Jeff French: You know, I look at just the pure demand for protein. And I don't think that's going to be shrinking unless we get to a price that it really starts to cut in demand. so I just see with the numbers of the cattle that we have, it's not getting better. Meaning we are not growing this herd as of right now. And right now the demand is not shrinking. so if I had to pick between cattle and hogs for 25, I like the cattle. Definitely. For the first two quarters of 25.

Paul Yeager: What do you think, Jan? I'm going.

Chad Hart: To agree. I like cattle, and in fact, I'm going to put it this way. I like the cattle, I like the chickens. I think hogs are sort of in an interesting spot here, because if we think about if prices get too high, where do or where do consumers trade down? And I think you've seen more of a push to move directly from beef to chicken than you have to traditionally beef to pork. So that's why I worry a little bit on the pork side that it could get caught even though. Yeah, as you say, I think the protein gains that we're seeing will continue into the future.

Paul Yeager: I've been debating about asking this question, but I'm going to anyway. In the main program, we talked about the economy as a whole. And let's just say things prices keep falling, keep falling. The stock market keeps losing, keeps losing. We end up with an R, we end up with a recession of some sorts. Does all of this still hold up under those scenarios? I mean, we don't know what the scenario may or may not be, but do the commodities have their own individual plates spinning in the air that are keeping them higher or lower, depending on what happens to a greater economy as a whole?

Chad Hart: Yeah, they definitely do, because again, it goes back to are you more reliant upon international trade like a soybeans or a cotton, or are you more relying on domestic demand, like we're seeing with corn and wheat? And so that's where I think you'll see these differences. We're seeing them in our prices. Now, the reason corn looks better than beans is because of that strength that it's got, not only from international land, but specifically domestic through ethanol. And that's helping it hold prices better than what beans is experiencing. So yet each commodity reacts to a general downturn differently. And so it depends upon what that balance looks like.

Paul Yeager: Do you see stability in 25 for the commodities? Well.

Jeff French: I'm a little more favorable because we've had the downturn. I mean, you could say that the grains have been in their recession here the last six months. does that continue? I mean, we'll have to see. But, I just think that, you know, we've kind of put in the bottom here. I mean, obviously we can go lower at these prices but I think the degree of lower gets smaller and smaller at these prices. I just, I'm bullish, but, you know, that's in my DNA.

Paul Yeager: That's, that's the optimist coming out in here. All right. Jeff French, great to see you. Thank you so very much for the time.

Jeff French: Happy New Year. Happy New Year.

Paul Yeager: Thank you very much Chad Hart. Good to see you. Thank you so much for making time. Pleasure. Great to hear from Chad Hart. Jeff French reminder to get signed up for that market to Market Insider newsletter. It's free. Sign up at Markettomarket.org right now. Next week we will take a look back at the biggest stories of the year in rural America. And we'll have the commodity market analysis with Kristi Van Ahn-Kjeseth. Thanks for joining us. Have a great week.

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