Market Plus with Sue Martin

Paul Yeager: Welcome to the table for the Friday, February 28th, 2025 installment of Market Plus. Joining us now is Sue Martin. I always have to interrupt her and I apologize, but we just covered like 3 or 4 things. This plus is going to be loaded. So I have to just start with the question. We can't even say hello to each other. Oh, I'll say hello. All right. Let's start with Gary in Wisconsin please. AG forum’s 94 million acre corn crop number seem to be what many thought it would be. Was the price reaction more about tariffs announcements or the AG Forum's numbers?

Sue Martin: I think it was more about the Ag Forum that started it. Everybody knew he was, you know, President Trump had given them until March 4th. And then we did this little dance where first we were hearing out of Reuters and Politico that it was going to be April and extended, and then, on Truth Social, he made a comment. No, the terrorists were going to stand. You know, this is kind of similar to what we did in January, before they started in February and got extended. So nothing shocks me here.

Paul Yeager: So how does a producer at home navigate? Not necessarily the news, but the volatility.

Sue Martin: Well and that's a good question because this volatility is a good thing for a producer that wants to sell. Not so great when I don't take the elevator shaft. But when you want to sell you're getting that volatility which gives you those nice reaches for prices and you need to take advantage of it. But I have to say if you're okay first off a livestock producer and you're feeding cattle or hogs, my suggestion is using this break that we're into. And it could last all the way into April if it wanted to. use this break and get some call spreads done. And I'm saying call spreads to cheapen the expense because of the volatility in the market that's making options more expensive. So do call spreads, but you have to manage the one you're selling, which would be buying a call selling out of the money call. And then that puts a floor. Or how do I want to say this. It puts a floor under how much you're going to, if prices turn and take off, you're going to have as an end user, you're going to have your floor in place to protect you. If the prices continue to drop, you get the win that you can buy cheaper. Now, if you're a producer of grain, then you want to be doing the opposite. And as the market goes higher, if you haven't made sales, then you want to take and do put spreads. But on the same token, if you have made sales or if you and I'm hearing this quite a bit this year, that there's accumulator contracts that people are doing well, take advantage of call spreads then and protect yourself on the upside because this year's volatile this year is very similar to 1994 95 and 95 to 96 crop year, very similar. It's also the only year ending in a five since 1915 that we had a bull market.

Paul Yeager: Go back to accumulator contract. Tell me what that is.

Sue Martin: Well, it's where you get a price level and you sell so much. And then as it continues up, if it hits a certain price level, you have to come in with like say maybe just as an example of explanation, maybe 2 or 3 times more grain than what you at the original selling price than what you have.

Paul Yeager: You have just laid out in the last three minutes some very complicated moves and things that are available that are out there. Is this one of the more? I won't say risky, but rocky times the farmers, not necessarily with prices and policy and things like that, but just trying to navigate this, you have to be very careful.

Sue Martin: Well, they have to be very careful. And that's why I recommend the options because it protects them. Okay. But yet they're not putting out an awful lot of money because they're selling calls now, make no mistake. As if the market starts to rally and say you buy, I don't know, a, say in DEC corn, or Sept corn, a 460 call and you sold a 520 or a 530, and the market takes off and runs because while July, May and July corn made new highs on those contracts for the year and also for a lead contract, we have made new highs for the year, which is very positive in a way. We have to understand that last year the low was 360.5 on a lead contract. Well, in all of us now, we're probably not going through that. So that puts a floor under that. The these contracts low was 380.5. Therefore there is nothing saying December corn can't go right on down to 380.5 out because it has not made new highs for the year on its contract. However. The thing that I want to stress is farmers last year we all know didn't sell, and it wasn't just 1 or 2 or whatever. Misery loves company. They all did the same thing. So they didn't make sales until late and into harvest, which is a horrible time to have to make sales. Then the market comes out of that and looking better than they expected, so they were willing to take advantage of that and sell grain. So 80% of the crop is sold. I would say a bigger chunk of it was sold before the government report came out and surprised everybody. Okay. Now the next thing is, is that in 94, 1994, farmers did very similar, the same thing in 95, they had that crop, sold the old crop. And by the 4th of July or right around there, farmers had already priced probably most all the grain they were going to sell off the combine. And the lot at the time had still arrived for very sexy. And so then that puts a large short position, which means there's not going to be any hedge pressure in the fall. Then comes to plan, steps in and starts buying hook, line and sinker.

Paul Yeager: Which we could see another buyer come in? The world has changed, but let's talk about buying. You mentioned, money, currency. I need to discuss because of this trade discussions, the peso, in Canada, in China, what is going on with currencies that we need to be aware of?

Sue Martin: Well, see, this is one thing that I think, Paul, that you don't hardly hear anyone in the trade talking about, but the dollar is very strong. And when you look at the peso, it's been on its face. You look at the Canadian dollar, it's on its face. So when we turn around and bring cattle in from Mexico to the U.S., if we're bringing them in, there's a 25% tariff that's gonna probably go into effect on those. But if you. And so that, if it's a U.S. buyer, bring in a man. Well, they're spending less dollars to bring those cattle in. And in the meantime, if it's someone who's buying something from Mexico out of the U.S., like corn, they're our biggest corn buyer. Well, they're going to have to pay a whole lot more for that corn because of the 25% tariff on top of their currency exchange. More pesos versus a high dollar, and nobody's paying attention to that. And so therefore, just because and I think that's why feeders have rallied is because of this, on and off situation with the tariffs.

Paul Yeager: All right. Let's do one last question. you can take a drink if you need to. I think that's okay. let's do Kevin's question because this is the last thing I want to cover here. Sue. And this is Kevin is asking, can farmers borrow the money for the extra corn acres? Bankers might say, no more money, though.

Sue Martin: Well, I think if they're in good enough standing with their banks, they'll be able to do so. But also, it just says if you're going to plant more acres. And of course, the input costs on corn is higher than it is for beans. And then I go into that spring weather, I'm not sure we're going to get as many acres as we think we are this year, but what's going to be interesting is and if that was be the case, then that means more Bean Acres shift over. But what happens is that crop insurance being able to utilize the options and protect yourself. Yeah. Then I'd say go ahead, because I think that this corn market has already set itself. But just realize there's still a downside here because we're up here and all these lows from last year of 20, 2024 is quite a bit below us. So I do think, to think that we won't see a move back. And if you're catching a cold, wet spring, granted it delays the planting, but more importantly as a delay. So planting it could shove that crop into, pollination of the hottest time of the year and look at our weather patterns vacillating, but like the market is these days, vacillating, you know, 2 or 3 weeks of bitterly cold weather, wet weather. Then it's above normal temperatures. It's one extreme to the other. We may see that all summer.

Paul Yeager: Have those ridiculously cold, wet spring followed by a really hot pollination up to the end. Yeah, yeah. Well, I guess we'll have you back. We'll just. We'll see how this all plays out.

Sue Martin: Yes.

Paul Yeager: All right. So good to see you. Thank you so much. 

Sue Martin: Thank you. 

All right Sue Martin everyone. I do want to remind everybody to get signed up for that Market to Market Insider newsletter. That's how you knew that Sue was going to be here it is free. Sign up at markettomarket.org. Next week. We are going to talk about a school that won't let agriculture be secondary, even at the primary level. And we'll have the commodity market analysis. Shawn Hackett, thank you for joining us and have a great week.

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