The extreme sideways trade continued last week. Futures dropped a quick $20 then recovered half by Friday. That is nowhere near what the industry experienced a few years ago, but it’s notable when margins are laser thin. The best way to summarize last week’s move was that prices fell to close the gap and then rebounded. The market was actually heading $40 lower, but was saved by another rumor. Today we’re holding a higher trading level based on business, and that must be respected. Is it better for a week or a month? For now, we hope it lasts a week. Hedging becomes even more important in these markets. Selling a $60 premium is simple. Buying a $60 premium for a forward sale is not. This wide gap in the trade indicates a market turning. Prices will move higher with many reversals attached. With $20 swings, it won’t upset the market but will affect profits. That’s likely what we saw last week with homebuilders’ stocks being hit hard. The facts are that more building will squeeze margins, while less building will reduce overall sales; it is not a reason to buy.
We come into the week looking for a push back up through $620 in November. The fact that a mill is getting a few cars done with the 10% added is a positive, but it will not be enough to change this pattern of trade. The roll could add a positive to the upside.
Technical:
That was a perfect correction last week. The futures fell, closed the gap, and rested the oscillators. It isn’t a buy signal. The market has to establish a higher trading level before that happens. Right now, every dollar up is a battle, while the downside has some room. Scaled up selling the last three years has paid off. Tell me this one is different….. Again.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
In this episode of The Hedged Edge podcast, hosts Jeff Eizenberg and Ben Hetzel discuss the current harvest season with guests Lacy Schatz from LJS Insurance Agency and Dwayne Bowman from Dakota Western Bank. They provide insights into harvest conditions across different regions, highlighting challenges like frost and dry weather. Lacey shares updates on crop insurance, including new program benefits for beginning farmers. Dwayne discusses the current interest rate environment and its minimal impact on agricultural operations. The team focuses on marketing strategies, emphasizing the importance of forward pricing, storing grain strategically, and having a comprehensive plan to manage market risks. They also address the mental health challenges farmers may face during difficult economic times and encourage producers to seek support and collaborate with their professional team. The episode offers practical advice for farmers navigating the complex agricultural marketplace, with a strong message of proactive planning and teamwork.
Check out the complete Transcript from our latest podcast below:
Grain Marketing Survival Guide: Insights from the Field
Jeff Eizenberg 00:52
Welcome to the next episode of The hedged edge. I’m your host, Jeff Eisenberg, and I’m here with my co host, Ben Hetzel. Ben, last week, we couldn’t record I apologize. That’s that’s on me. I lost my voice.
Ben Hetzel 01:06
Yeah, it was a bummer not to get to see you last week. Jeff, so glad we’re able to do this, and looking forward to our discussion today. I think it’ll be really educational. We got two great guests with us. We brought Dwayne Bowman back. He’s president of Dakota western bank and Bowman, well, he sits in Bowman, but he oversees numerous branches. And then we’ve got another guest that joined us today from the crop insurance side, so we’ll intro her in moment. Perfect.
Jeff Eizenberg 01:34
Yeah, excited to have the group back and Dwayne, thanks for again, for jumping back on today. Really what we want to do a quick update. We’re well into harvest here, so check in on harvest, but also talk a little bit about the fact that the crop insurance guarantees out there are likely not to pay off big payments, and that’s a reality that farmers have to think about, and everyone has to discuss. And so what are the real decisions that need to be made? What harvest marketing plan do you have and do the farmers in our area have that we can help advise on? Are they going to sell off the combines store until March or July? These are the million dollar questions that we’re going to jump into today. One extra thing we wanted to add here today is so when we’re talking about harvest and updates, we want to hear from you. We’ve talked about hitting us up on Twitter and Facebook let us know what’s happening in your area. So with that, Ben, let’s get a quick update on harvest. How’s things looking from your side?
Ben Hetzel 02:29
Now we come out of the small grains harvest here at drug into September, further than normal. It was a long Spring this year due to the moisture in our geography, so it seemed like it took a little longer to get this get this wheat harvest and the canola harvest done, plus some additional rains and and stuff going on during harvest, kind of delayed things for a lot of producers. So that’s pretty well wrapped up seeing some quality concerns in some areas on some of that. But now we’re kind of into the beans. Not as many bean acres out in this geography on the fringe out west here, but they’re rolling through that pretty fast. Quality is up and down as we talked, we froze, so we’ve got areas that definitely seeing some issues there. So it’ll be good to have that discussion with in regards to crop insurance as well. I think some guys have actually started rolling on some corn this this week, some drier regions where it’s a little lighter soil, and guys plant short maturity corn. So there’s a few guys going on corn, and it won’t be long, and we’ll see some sunflowers. They’re getting pretty black. So that’s kind of where we’re at with what’s going on out west here.
Jeff Eizenberg 03:46
I gotta mention you, you brought canola up. You dropped a little tidbit the other day when we were talking that you are one of the largest exporters of canola out of North America. Do you want to care to comment on that?
Ben Hetzel 04:03
We, as far as we can tell, we are the largest shipper of canola in the US, and that would put us at the top of the export category as well out of the US. So not a lot of us doing that, but it’s pretty cool to be on top.
Jeff Eizenberg 04:16
Oh yeah, everybody loves to be on top. That’s great. Well, congratulations.
Ben Hetzel 04:20
Thank you. My comment to you was, we’re going after the North American number. That’s a big number because there’s a lot of canola in Canada. So I think it’s here. I think I think we could make our mark.
Jeff Eizenberg 04:31
So love it. Well, I’ll give you a quick update. I think most listeners know by now I live in Ohio. Harvest update out here is, it is dry. Everything you hear on the news in the radio, which you read, it is super dry out here, and it’s been that way for for months. Actually, it was the driest August on record. And as I drove around and saw the fields from mid August all the way through Labor Day on through here in October. Um, not much has changed. Dust is in the air, and I expect the yields to be down significantly. So want to be sure to share that from boots on the ground out this way.
Ben Hetzel 05:11
Thanks for the update. We’re kind of hearing some of that same stuff that yields maybe are not what people thought in some spots, and just don’t always know boots on the ground, what’s really going on out there. So it’s good to hear.
Speaker 1 05:23
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Jeff Eizenberg 05:39
Yeah, let’s change gears here a bit and bring in our additional guest. We have Lacey Schatz from LJ Insurance Agency. Lacey, are you? Are you with us? I am. Hi. How are you? Thanks for coming on. Yep, you bet. Well, we’re we’re jumping in. We just went over the harvest update, and want to check in on insurance. So we’re setting price right now for for corn in October, and you’ve already set the price for wheat, you’ve had quite a bit of volatile weather, which is pretty customary. You’ve got hail, tornadoes, freeze. Ben already mentioned, where all these things, where insurance comes into play. So my guess is, you’ve been pretty
Lacy Schatz 06:17
busy. We have, yep, that frost created quite a bit of work. But we’re really in kind of a wait and see situation to see what that corn comes in after test weight and things like that
Jeff Eizenberg 06:27
got it so the freeze mostly affected the corn, and that’s, that’s what your thoughts are.
Lacy Schatz 06:31
Yeah, some beans, the flowers, seem to fare pretty well. You know, the bean crop, I think overall, is going to be better than expected from the frost. But the corn, you know, it’s so variable. So from an insurance standpoint, we just kind of have to wait and see what it looks like when they get in
Jeff Eizenberg 06:45
there. Got it and the hail really hits those beans pretty hard as well.
Lacy Schatz 06:51
Yes, yes, we’ve had 14 pages of claims, so you know, from the hail and from the frost. So a lot of damage out there. Crop insurance really did a good job of taking care of the guys with with the hail in particular, just because commodity prices are so low, and crop insurance prices are, as you know, based on futures, so they were actually covered very well for those situations.
Jeff Eizenberg 07:13
Got it and your your read on the prices here the Fall Harvest prices versus the yield is that we’re really not looking at a claim for most other other than these acts of God, right?
Lacy Schatz 07:28
Yeah, you know, if you’re harvesting, you know, 30 to 35 bushel wheat, for whatever reason, you know those lower harvest prices are kicking in that revenue part of their insurance. But for the most part, yeah, we’re not seeing any claims with a bigger harvest. And we just need some commodity prices to go with it.
Jeff Eizenberg 07:45
That’s why we’ve got, we got Ben here to will the markets for us. But in the meantime, you know, there’s, there’s been quite a bit of discussion about the marketing plans that people are needed to think about here moving forward. And you know, insurance is always a part of everyone’s plan. Is there anything new that’s happening insurance wise? You mentioned when we talked offline, the big, beautiful Bill had had some elements to it that ultimately impact insurance. Anything you’d like to share with the listeners?
Lacy Schatz 08:19
Yeah, so if you’re a big SCO eco supplemental coverage. You know, if you like to buy those options, that subsidy has increased from 65 to 80% I have coded that for our Montana and South Dakota winter wheat guys. That is very, very inexpensive now. So those farmers will be happy to see that. The other big thing is the beginning farmer rancher program has been went from five to 10 years. So basically, if you’ve been farming less than 10 years, you want to make sure that you get re enrolled in that program. Agents should kind of be doing that automatically, but I would definitely make sure that you’re checking with your agent to make sure you’re getting re enrolled in that program. The other thing would be, there’s more premium support that came out of that bill for optional and enterprise units, it’s not, I don’t think when we quote in March, you’re going to be like, Oh my gosh, my crop insurance is way cheaper, but it is there nonetheless. So so positive things moving forward. You know, crop insurance isn’t perfect, but a lot of these things were steps in the right direction.
Ben Hetzel 09:18
So Lacey with the Beginning Farmer program. Did it outline the parameters? Are they extending the 100% of T yield? Or do you know any of that this juncture?
Lacy Schatz 09:31
Basically they just extended premium subsidy support. It varies by how many years you’ve been farming. The best is one to five, and then it tapers off the last through 10 So, but you really do notice those savings on, on, you know, on your quotes and your premium, there’s a little bit of a how it calculates in last year’s how it kind of preserves your Eph a little bit better than a farmer who’s not in the BFR program. But that’s getting in the weeds a little bit. But it’s mostly just that premium support, and 10 years is a long. Time I feel like for a guy to be in that program.
Ben Hetzel 10:02
So I just had one other thing. There’s been some talk about base acres and stuff. Was there much to that?
Lacy Schatz 10:13
You know, that, quite honestly, that is not quite as clear yet. You know, that’s not so much an RMA as a USDA situation, and there’s not a whole lot of clarity how that’s going to work, yet. There is some material I could send out if needed, but I’m not very versed on that, just because it’s more the USDA. One other thing I will mention for 2026 is there may be a program. It’s briefly come out. The details are now, but it’s called clip, and that could be basically characterized as like a blanket for your crop insurance, like an overall coverage situation. So as we get more information on that, we can certainly get that out, you know, to everyone, but it’s just, it’s just something that’s briefly been mentioned at
Ben Hetzel 10:56
this point. So you don’t have an opinion on on that at this stage. It’s still, too early.
Lacy Schatz 11:02
I guess for me, it would really need to be quoted, and then I would have a pretty strong opinion on whether it was something a person should do or not. You know, our agency, we’re big into the whole farm revenue protection program. We really like the coverage that that provides. I feel that it’s this very strong program above and beyond typical multi payroll insurance. So I guess we’re just gonna have to see the mechanics and the pricing of it first.
Ben Hetzel 11:25
Yeah, I’m glad you mentioned that, because I think that’s kind of your mantra, saving producers money, protecting their investment, you know, all the way through. And that’s something that that I know that you’ve been actively involved in your career at the federal level and some boards in different committees or whatever that you’ve sat on, bring a wealth of knowledge in this crop insurance arena back to the producers in southwest North Dakota, Montana and Northwest South Dakota. So really appreciate those insights Absolutely. Last
Jeff Eizenberg 11:57
question I have for you, Lacey cattle price is still at all time highs here. How about the LRP insurance? You are you seeing a lot of renewed interest in that, with markets trending this way?
Lacy Schatz 12:11
Yeah, yep, there’s a lot of interest in LRP. One thing I would encourage ranchers to have a look at is insuring at like a 92.5% level instead of 100% level, you’re still getting really, really good coverage there, but you’re getting a higher subsidy, and it’s much more affordable. So that would be my very important thing. I would tell ranchers when they’re looking at LRP, but it is a strong program, and it’s, it’s nice to have that option. I mean, ranchers, I feel like ranchers don’t have the protections that farmers often do, so it’s nice to see LRP working really well for them right now.
Jeff Eizenberg 12:43
That’s great advice. Thank you so much for that.
Speaker 1 12:47
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Jeff Eizenberg 13:02
Shifting gears a bit over into the macro side of things, big picture. We’ve got Dwayne, you’re at the bank. We’ve got interest rates have been cut. They’re forecasted cut a bit even further. How are you how are things shaking out at the bank? People thinking easy money is going to be better move forward.
Dwayne Bowman 13:21
Good question. Thanks again for having me on and up and Jeff, you know, the Fed is definitely in a difficult position right now. It’s going to depend on the strength of the economy going forward. There’s definitely a push and pull effect in place right now, and it’s going to be interesting to see wins. Obviously, we know the direction Trump wants to see interest rates go and Powell doesn’t seem to necessarily agree and and the economy ultimately probably be what decides that makes that decision. Right now, the biggest concern is probably stagflation. So it will be interesting to see how between unemployment numbers, inflation, the impact on tariffs, all that shakes out. But the expectation, you know, we just did see the Fed dropped interest rates quarter percent. The expectation is still probably at least another quarter percent before year end, possibly two rate cuts. We might see a half percent cut before year end, and then another drop is expected in 2026 but you know, really, when you look at it, Jeff, it’s, it’s a pretty minimal impact on the overall impact on a on the farmer, rancher. Right now, you know if, if your input costs are $200 an acre, and last year, you know, for instance, if you were paying 9% this year, you’re paying 7% you know you’re talking maybe about a $4 an acre savings. So it is not, it’s not substantial enough to have a huge
Jeff Eizenberg 14:36
impact. And then the other element comes, as we’re in the harvest season, is cash versus carry. Obviously, you just mentioned paying down an operating line. That might be nine that’s ideal. But at the same time, there’s carry on the board and there’s potential opportunities ahead. What is your position or thoughts from the from the bank side, you prefer farmers to kind of true up? And get back to square one with you here by the end of the year, or you like to see him carry and hold on into next year? Yeah.
Dwayne Bowman 15:06
You know, the anticipation that I have is that they’re gonna hang on to it, but they’re gonna carry it for a while. So, you know. And there is a cost, obviously, to doing that, you know, Ben, what is what storage cost? It’s grand equity
Ben Hetzel 15:17
now, six cents, which is too cheap for the carry in the market for sure, yeah.
Dwayne Bowman 15:22
So six cents, you know, you look at the course, if they hold on to that for 12 months, then you’re talking 72 cents. So, you know, almost, almost a buck a bushel to hang on to it for a year. You know, we talked, I talked to a lot of my producers last year on interest rates, on the cost of hanging on to it because of, you know, it’s sitting on an inventory loan, if it’s sitting on their operating loan. And last year, you know, when one grain was say, let’s use wheat and say, $6 a bushel, they’re hanging on to that, and they’re paying 9% interest. You’re talking 54 cents to hang on to it for years. So between storage and between the cost of of interest, of hanging on to that you’re looking at, you know, $1.30 or more a bushel, they certainly didn’t see $1.30 rally. They saw it go the other way, about $1.30 so a tremendous cost to hang on to it, but yet, as low as it is this year, so now we’re talking, say, $5 wheat and 7% interest rates. So now you’re looking at maybe 35 cents a year to hold, so a little less cost to hold. So I think you’re definitely going to see that gamble, that they’re going to hang on to it, that they’re going to see this market rally. You know, I’m not saying that’s the right thing, or what banks want to see, but that’s certainly the expectation. I think. What we saw, and could probably attest to this as well, that the sell, the selling that was taking place at harvest was probably because they didn’t have the storage, the only reason it was coming to town.
Ben Hetzel 16:39
And even post harvest, we’re seeing that push, like, I need 40,000 room for this. And, you know, whatever, the guys that bag, obviously, they have endless storage for a time. But, yeah, it’s, it’s kind of interesting. One of the things that I want to throw out there, too is we’ve seen a lot of bugs in the new harvested grain coming in this year, grain weevils in the field. I’ve seen it before. Actually was on a grain bin during harvest when my dad was cutting wheat years back, and that was the first time I’d ever seen it. I did not realize those burgers were in there, but the bin top was covered. And I was talking to a farmer the other day, and I said, you know, be on the lookout, because these bugs are in there. And if guys just throw it in these bins and don’t don’t condition it, and don’t pay attention to it. Come back in December, January, February, we’re gonna have bugs. And so anyway, we’re seeing some problems already with old stored grain because of the moisture. So we’ve had some bug issues, and guys got to be aware of that. And the reason I bring that up is, you talk about interest costs? Well, there’s other costs to carrying grain. You’ve got insurance. It’s on on that grain that you should be carrying insurance anyway, and of those inventories, and then also the quality concern, you got to keep, keep it in condition. So you’re likely running fans. Electric costs are, are not cheap to run those things, and so there’s additional cost to it. And in a year where guys are trying to figure out, especially on weed, how much am I going to lose per acre, these costs can start adding up pretty fast.
Jeff Eizenberg 18:16
That’s a great point. Then you’ve got shrink in there as well. That’s important to think about. And one thing that you mentioned in one of our last episodes, Ben, and I’d love to get Dwayne’s perspective on this or position, is that the reality is people are going to store grain. Dwayne, you just said it, they are. But my question, and what we really would need to drive towards is helping people to realize that they should be thinking about marketing the grain that they’re going to store in advance, because you mentioned Ben the last time that every year, no matter what people are thinking, I’m not going to market my grain until I harvest it. Well, they have grain left over already, and they’re going to plan to refill their bins at least, at least partially. So what I’d like to hear from Dwayne, do people constantly have grain in their bins that is unmarketed and should be forward priced?
Dwayne Bowman 19:12
Yeah, I guess I can start on that, you know? And, and, yes, we would love to see that grain move a little quicker, because then we know where we’re at. You know, Lacey talked about this as well. We’re still in this wait and see pattern, you know, see how that corn comes in, see the condition, the quality of the wheat that they’re going to sell. So at this point, we really have no idea what their loss is going to be. We expect there’s going to be a loss. We know that. You know, even with with record, record, I guess, but you know, above, well above average yields this year, with the price that we’re having and the discounts that are going to be there between, you know, like corn or or quality issues on the on the wheat side, we know there’s going to be some losses. So we would love to see that going to town a little bit earlier, just so we could, as a bank, that we could see where these producers are at start making some plans. You know, we know we’re going to have to be capitalizing some losses. Unfortunately. It’s never a good position to be in. But the earlier we can make those decisions, the earlier we can sit down with customers and start putting together plans, the better off we are. So yes, that’s the encouragement we’re going to have. Is them meeting with talking to van, talking to brokers, and seeing, okay, what can we do if we need to sell this, if we start moving this now, avoid some interest cost, avoid some storage costs, but we still want to have some upside on that market. You know what the market does rally. How can we leave that open? So that’s the decisions we want them to be talking to somebody on making some plans if
Speaker 1 20:29
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Jeff Eizenberg 20:42
Yeah. And Ben in terms of opportunities at the elevator for HTAs and forward pricing and forward contracting. What are some of the solutions that you’re suggesting and talking to people about and brainstorming ideas on right now? Well, we’ve talked
Ben Hetzel 20:59
about it before, Jeff, and and this isn’t anything new to Dwayne, either. You know, it’s the basic to arrive contracts selling the carries. You know, we’re getting to a time in the year where you start to see that Jan, Feb, March, bid out there. Basis is historically pretty wide right now. We’ve seen this basis in these, this kind of territory we’re trading in right now, for the last few years, it’s, it’s not uncommon for us to be 7080, even, unfortunately, 90 under. It used to be crazy, crazy, wide years ago, but it seems like it’s more the norm now, to be, you know, above 60 under, for for wheat anyway, and and we haven’t seen it as much in corn. Corn is still maintaining more of a traditional baseline basis that 50 to 70 under out our way. It does narrow up at times, but it seems like that’s year in and year out. It’s it’s right in there. So that one is a little bit probably more palatable to the grower to see that basis that we’re experiencing today. But it’s really the wheat one that’s, I think it’s got all of the producers kind of perplexed, a little bit like, am I going to get a basis break here and post harvest? And is this, you know, maybe we catch a rally on the board, we can pick up 40 cents somewhere in this market, you know. And my my suggestions have been to quite a few producers, you know, you got to start planning out, you know, your logistics and when you want to get into the elevator, because with big crops come congestion, and not everybody. It seems like when, when basis does move, everybody wants to sell, and then it forces basis back out. Or if there’s a big futures rally, everybody piles on, and then, you know, you got basis just in shambles then. And so we really need to be watching these individually, like you said last episode, Jeff, we have to, we have to segregate them out and start working on them individually. If futures are what looks like the opportunity to take advantage of, let’s be doing that with hedge to arrives or or in in our own account with our brokerage firm. You know, we can, we can help with all of that and get things set up for a producer. So outside of that, you know, basis, there’s, there’s carries in the futures, and there’s, there’s a narrower basis out on the horizon. So maybe just have that conversation. But can I lock in flat price basis, or flat price, you know, just to be done with marketing some grain, because most guys are sitting there with almost all of it unprotected, you know, whether it’s corn, wheat, you know, we have moved a tremendous amount of canola, and I think we’re going to be way ahead of last year’s pace by the turn of the calendar. So guys have really taken advantage of a market that is profitable, which is good, experiencing a lot of congestion on that, but that’s, it’s at least a positive sign that guys are taking advantage of certain commodities that are crops are growing and hitting those markets that that are paying them a premium, you know, to what some of the other ones are, and they can, they can lock in some profits.
Jeff Eizenberg 24:25
That’s good, good advice. And then the other thing that we’ve talked about before, and I think it’s worth repeating here, is that we can’t just look what’s right in front of us. We have to look ahead. We got to look, possibly even looking at the 26 crop already. There’s some decent prices on the board due to the carry that it’s built in. And it’s going to be important as we move through this harvest and then get to the beginning of the year to see if we can identify some of those profitable levels that are looking attractive, at least, you know, break even now, if you forward sell and it’s at a break even price, if. Course you’re not happy that it’s break even, but is break even better than losing money, and if your worst sale is a break even price, because the market rallies, so be it. That’s, that’s where averages come in and come into play. So always reminder, keep ahead.
Ben Hetzel 25:18
Yeah, that’s perfect, Jeff, because that’s, that’s really what they have to do is work on an average. It’s, it’s not swinging for the home run. It’s, as we’ve referenced baseball terms in the past, on marketing, it’s singles and doubles and and just chipping away at it. You know, even in in our business, in the Co Op, we don’t always just take the full chunk right off, off the map, you know, we we layer into things, whether it’s inputs or or even our marketing strategy for what we anticipate growers to do, which we got to be careful, obviously, because we are expected to deliver on that, that contract, because we’re not just out there, you know, gambling In the market. So, but you do have to forecast some things, and you have to forecast freight. So there is risk in this deal for for everybody. And so layering in and having a position is is the ticket. Well, it’s no different for a producer, they should have a position other than just all cash, you know, throughout the year. And to your point, we need to be looking out further and further. And one tool that we’ve used a lot, and this feeds into what Dwayne mentioned, is selling some grain with some upside opportunity. Obviously, the changes in the Minneapolis market, as you’re familiar with, Jeff, and we’ve talked about it in our marketing meetings that we’ve had, the options kind of went away, and that was a nice tool when it worked for the producers to re own grain or take some premiums out of the market for selling grain. The quotes I’ve been running on some OTC stuff aren’t real great, but it does give you something. You know, if you are selling grain anyway and you’ve got a lot to market, that tool is a pretty good, pretty good tool. We’ve used it a ton. They do have double up features on a lot of those where you might potentially market twice the amount of grain on that contract is what you originally put up face face value. But if you’re sitting on tons of inventories, and you’ve got time to market it, and that’s what your plan is. Anyway, it works really well.
Jeff Eizenberg 27:29
Oh yeah, there’s there’s plenty of tools out there. The question is, are producers willing to have the tough conversation about getting ahead? And that’s what we’re talking about here today, is getting ahead and realizing that there’s strong yields out there this year, you’re going to carry a lot of grain from this season into next at least, you’re going to be storing it. You’ll be looking for new basis opportunities, of course, but at the end of the day, there’s always going to be grain in the bin that needs a home and needs a price, and that’s the piece that Ben myself, our team, we’re happy to talk with with you about it at any time, is, you know what price is right and what is your I would price, what Ben’s talking about, about the OTC and some of the structures that are done through cash contracts. By coming up with an I would sell price. Ben and the team can reverse engineer a price for you to say, Okay, here’s the risk of taking on that type of a trade. So a lot to a lot of education goes into learning about these products and learning about these these sale opportunities, and other people also interested in re owning the board. You know, you hear that a lot. And if you are going to sell off the combine this year, and you feel that there’s going to be a rally, or we think the markets are going to trend higher, maybe China comes in and buys from us, we don’t know. There’s always ways that you can re own the board in order to participate in the upside.
Ben Hetzel 29:00
Yeah, and one comment on that, you brought up China. I was listening to a webinar analyst, and they made the reference to the tariffs, and we didn’t really talk about it yet. But you know, the conversation around Trump saying, use tariff money to pay, you know, just send some of that back to the farmers. He wants to use some of it for for some help there. And China. China and Japan are the two that have been hit the hardest by the tariffs with the US. And so here we are on one side. We’re hoping that China wants to eagerly come buy our goods all the while we’re hitting them the hardest with our tariffs, I don’t that should not be back to the marketing strategy is not built on hope. There would be a lot of hope in that statement, you know, and so having a plan and looking out it’s tough to do, especially when they’re in the field, doing the work they don’t. Want to be thinking about this stuff. It’s the prices are flat, pressing, and that’s causing a lot of problems as well, mental mental health issues for people, and thankfully, these rural communities have a ton of help on that front as well. We haven’t touched on that topic, but there’s help out there. And definitely encourage people. If you feel like you’re you’re struggling, reach out and people listening that see it or see changes in behaviors, speak up, because it’s real. And aside from that, there’s tools out there. We’ve referenced them, but in addition, we’ve also talked about the team, your team, well, that includes Dwayne for DWB and their customers, or whatever the bank is, there’s crop insurance. You know, we’ll sit down together, all of us, and have conversations around, how can we help? Or what? What should this look like in a situation where that customer wants to engage that conversation with all of us in the room and try to try to make a plan together how we how we pull through it, especially if we’re leveraging losses and trying to, you know, provide some gap financing for guys and and in their operations. And so that team is super critical in tough times, and I think we’re going to have to see more of that joint conversation going forward.
Dwayne Bowman 31:24
That’s a really good point, man, you know, it’s, I see this as a so much different time than the 80s, you know, right now, I think we have so much better resources. We are partners. We’re in this together, you know, between the equity the banks, you know, we nobody wants to see anybody failing. So we’re everything’s going to be done possible to help people get through these difficult times. And, you know, we can’t sit here and, have you said, and have the expectation or have the hope, you know, we have to start putting together a plan. I do hope there’s going to be some government payments, some disaster payments coming out, but right now, with the government shutdown, you know, that’s probably going to be delayed, most likely going to be a new Farm Bill put in place in the next, you know, hopefully few months, but that’s really on hold right now too. And hopefully the timing of, you know, as low as commodity prices are will actually be a good time for a new farm bill to be issued. But although that’s kind of on hold right now,
Jeff Eizenberg 32:13
no, thank you guys both, and it’s been a great episode. You know, the reality is that you’ve both just said it this fall is not about waiting or hoping for insurance or hoping for the market to rally or hoping for a government payment. It’s about making real decisions. It’s about whether you should haul a green to town put it in the bin. Either way, you have to have a plan. And the reality is, the most expensive thing moving forward, other than storage, is indecision. So let’s, let’s make this fall a great fall. Let’s get excited about the great crop that you guys have just harvested. Bring it. Bring it to town. Get it on the board, get it sold, and let’s look the next year to hope for some good prices, but realize that we need to have a plan and use your team, as Ben said, to team around you to help help make those decisions become a reality. So thank you guys both, again. Reminder to our listeners that we want to hear from you. Tell us what you’re doing this fall. Let us know what you have going on with your harvest. How do things look? How do the crops look? And what is your strategy? You can reach us at 888752110, and we’ll tackle all that in our next episodes. Thanks again,
Ben Hetzel 33:25
guys. Thank you, Jeff and thank you. Thanks again, Dwayne for jumping on with us and really appreciate Lacy Schatz and LJS Insurance for stepping in with us today. That was super cool to have her on.
The higher trend continued last week after a tariff announcement. The announcement cleaned up the tariff-free wood. The next batch has the tariff increase on it. It is hard to project the anxiety of the next push. Unless you were hiding under a rock or a really bad lumber trader, you had already been “good dealed” to death and have a fair amount of inventory. It looks as if industry has wood. Now if we continue to see decent mill outtake, we can surmise that demand has picked up, and our long-term dynamics have changed. There will be a time when outtake cleans up the excesses. It’s early. Today, it is an assumption. Tomorrow it may be reality. We are going into the week with a look at whether the market is better or not. Futures will see a roll or buying from the funds in November. My guess is that they are over 5000 short now with the bulk sitting in November. There was no report last week. The government shutdown is another in a long line of psychological negatives (headwinds) we have lived with this year. This housing market will rally when a “normal” reappears. That could be a long way off.
The market will never change its stripes. Selling a premium in futures is the business way to trade. If it is $200 OSB, $300 SYP or $420 spruce, you should sell the board. Now, if you think you own it at a level that can’t lose, then hang in there. The fact is attaching a hedge every time the spread is wide is how this business works.
Technical:
The technical oscillators are aging. They are running out of upside. With a gap from 597 to 604 in November we have the perfect correction setup. Again, this is not bullish or bearish, but pure natural. If the futures market doesn’t start to correct and fill the gap, the takeaway is a pending breakout up. This type of chart pattern in lumber generally gives off good trend analysis so we’re watching close.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Corn had been trading in a range north of $4.20 the last couple weeks but dropped below there on the heels of the Sept 30th USDA Report. The USDA raised US ending stocks for corn from 1.325 billion bushels to 1.532 billion which pushed December corn prices to new 1-month lows. With plenty of supply and massive crops in both the US and South America the last 2 years, balance sheets have ample supply while demand for US corn remains strong outside of demand from China. With funds holding bearish positions, it will take a combination of them changing their tone and China showing up with purchases to give prices some news to rally on unless we get in the fields and the yield just isn’t there.
Beans were lower post USDA report as well despite the report being neutral continuing their recent downtrend. The biggest hit to beans in the past couple weeks came when President Trump and President Xi had a call and no announcement of Ag purchases were made around it. Without China buying US beans there is no major upside currently, except for potentially lower yields. South America’s crop has been able to satisfy China’s needs as that trend will continue moving forward until they run out of supply.
Equity markets continue to trade at or near all time highs as a slowing job market could lead to more rate cuts after the Fed cut by 25 basis points this month. While GDP growth had a strong bounce back quarter and the stock market is still doing well, fueled by AI stocks, the overall economy is showing some warning signs but remains strong.
Wheat continues to make new lows with a slightly bearish USDA report with larger US production.
Corn harvest is 18% complete and soybean harvest is 19% complete.
It seems more and more likely that there will be some extra government assistance to farmers this year with the depressed prices.
Drought Monitor
Here is the most recent drought monitor as harvest begins.
Contact an Ag Specialist Today
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or blawrence@rcmam.com.
The market has a firmer tone to it. Both cash and futures found support last week. Cash still struggles to find support for all items. That keeps the marketplace on edge. History tells us that distressed items like OSB or SYP will limit any spruce move. The difference this time is the fact that the market is firming on its own. Rumors help the futures market, but actual business supports cash. Bringing it back to futures, November was up $26 for the week with a Friday spike to $600. We spent the last 5 months looking for the catalyst to push prices higher. We go into next week looking for data to push it lower. That’s a good thing. It feels like a few years ago when the conversation centered on the price of production, with 1.3 starts and closures. It added up to the $620 futures number. Unforeseen was the drastic drop in all Chinese imports and the oversupply of OSB. All that has now been factored in. The question now becomes whether $620 futures and $508 cash are the magic numbers? We are not out of the woods, but the industry has become permabears. We saw that at the beginning of the summer, only to see November futures hit $712 on August 1st. “Hedge the premium and hope you lose money.”
The futures dynamics are returning to normal as the fund’s short positions start to dominate the open interest. The industry remains heavily long. This year, the industry has stayed in sync, while the funds have not. Spreaders are eager on this one, but history shows the industry often rolls longs to match the funds rolling shorts. This one isn’t an easy win.
Technical:
The outlook for the upcoming week is based on an if/then projection strategy. The 21-day moving average crossed above the 13-day on Friday. If that trend holds, the next target is the 38% retracement of 617.20. From there, we’ll consider 635.00 and beyond. The same pattern played out during the last two rallies. Positive fundamental data over the next few weeks will gradually develop; for now, it’s all about the technicals.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Join Jeff Eizenberg and Ben Hetzel as they dive deep into the complex world of agricultural markets, consumer spending, and the surprising economics of convenience. In this eye-opening episode, they challenge the narrative of high food prices by exploring the booming delivery service industry and questioning whether consumers are truly feeling the pinch. From DoorDash delivery fees to wheat market strategies, the hosts break down the nuances of agricultural economics with their signature blend of humor and expertise. Learn why “hope is not a strategy” and discover insights into market risk management, harvest expectations, and the evolving landscape of food production and consumption. Whether you’re a farmer, agribusiness professional, or simply curious about the economics of food, this episode offers valuable perspectives that will change how you think about pricing, convenience, and market dynamics.
Check out the complete Transcript from our latest podcast below:
Convenience vs. Cost: Navigating Agricultural Markets, Convenience, and Consumer Spending
Jeff Eizenberg 00:58
Welcome back to the hedged edge. I’m your host, Jeff Eisenberg, with my co host here. Ben Hetzel, it’s week three, Ben, and it’s Friday afternoon. You’ve got a football game to go to. What’s been going on?
Ben Hetzel 01:12
Yeah, thanks, Jeff. Glad to be here today. Got a lot of exciting things to talk about, and that the markets they just they never cease to stop. Amazing me how far down we can go. It’s all red again today, pretty much. But speaking of football, super excited. I’m a sports guy. You’re a sports guy. Little different sports the way we use a ball, but we’re still sports guys. We got the big homecoming this week in lemon, where, where I live, and taking on a neighboring rival team, which is actually a closer here at work to that town than I am my where I live, so a neighboring rival in Buffalo, South Dakota. So it’s been a it’s been a really good rivalry over the years.
Jeff Eizenberg 01:58
There we go. Well, could call FanDuel and see if they can put you guys on there for tonight’s game.
Ben Hetzel 02:03
Hope he has a great game, and battling some injuries mid season here for some of our guys, but it’s fun. And over here in Scranton, they get the football game in Richardson tonight. So the heading or Scranton Nighthawk boys are headed over to Richardson, North Dakota, to take the Raiders on. So good games should be games that the teams that I’m cheering for can win, but hopefully it’s just a good night of football and everybody goes home safe.
Jeff Eizenberg 02:35
Yeah, that’s good. Well, we’ll check in next week and find out the score here and see if you guys came out on top getting into the show. This is week three. It’s taking a life of its own. You know, we’ve had on some great guests so far, and as we talk more, and it’s just spurring all sorts of conversations and discussion and really new ideas for the farmers, the farming community and everyone in the local area to want to tune in and share ideas with themselves as well. Today’s topic, I think everyone’s going to think we’re probably crazy as we start to think about how this this plays out. But what we’re going to be talking about is how expensive is our food and the reality that people are paying 10, $12 delivery fees for a $10 cheese burger, and that they’re still complaining that the cost of food is too high. So let’s call this what this is. I’m going to call it out. This is going to be our dash barometer discussion, and I’m excited to hear what you think about it. I’m excited to hear what others have. What others have to say. You can check in with us by tweeting us at AG underscore, RCM, or you can find us on Facebook or YouTube by searching RCM, ag services. I want to find out what people are paying for their Door Dash, how much they’re paying, and in the end, how is it effective price? So we’ll talk more on that. But before we do let’s do a couple of things. First, let’s check in on this week’s market. It was, it was what it was post week report, pretty quiet. Expectations were that we were going to have this big meeting today with President Xi from China, and it was going to be a scenario where the markets were going to rally, because if Trump is going to cut the best deal ever, where are we been? We’re 12 hours after the meeting.
Ben Hetzel 04:34
Yeah, great meeting on both sides is what we’re hearing based on what I see, but nothing for egg, nothing
Jeff Eizenberg 04:44
tricketts, nothing for AG, you know, there is a little bit out there, some thought that. Well, yeah, we’ve got this 20% tariff on fentanyl, which is raising 80, 90 billion of dollars worth of income and rent. Revenue, and that they’re going to take that money and pick it right back into the farmers. We’ve been hearing 10, 11 billion and Farm Aid, if that’s what they have to do, that’s what they have to do. But I don’t know about you, I just much rather see us selling our grain.
Ben Hetzel 05:17
Yeah, absolutely. That’s the best thing that we can have going on. Is is just fair trade. And you know, there’s a lot of talk that if the Supreme Court rules it’s unconstitutional what Trump’s done with tariffs that could have a devastating impact on these markets. And I think farmers and ranchers just need to be prudent with marketing decisions and mitigate risk where they can and in hopes that all that’s just hooey and goes away. But the risk is there. You know, however they plan to utilize money to rob Peter, to pay Paul, so to speak, is just nonsense. We need fair markets, and we need a market that’s profitable for our producers, and I don’t think any government form of bailout has ever been good for the ag sector long term, right?
Jeff Eizenberg 06:11
You’re right, and it might be a short term band aid. And you know, there’s talk and hope that ultimately we get a deal done. Doesn’t seem like this crop year, but let’s say for next and maybe that’s the reality, and we were facing these current prices, or possibly lower, because everyone’s got a great crop coming, and we’ll have to take in the aid, do what we have to do to get on to next year. And then, you know, hope that we have a new strategy. And you and I have talked about the word hope, and that’s one thing that I’ve been training my entire career, 25 years. And whether it’s a hedge fund or agriculture side of the business, that I’ve been on, hope is not a strategy. And that’s one thing that I feel like this show, is we’ve pulled it together and talked and communicated that our goal is to help people understand that there are opportunities in the marketplace. It doesn’t have to be because you love the price. It doesn’t have to be because you have to sell. It has to be because you have a plan and a strategy.
Ben Hetzel 07:19
Well, that’s a great topic, because, you know, the last two years, at least, even longer now, but the last two years, particularly, we’re in wheat country, so that that’s a huge concern for all the producers that I talked to. Hopefully they’ve got other grains as well, because it’s, it seems, or, you know, hopefully they like to grow other grains, because it seems like we’re moving away from wheat or trying to. But as you look at the wheat market, the last two years, there’s been 20 cent carries between the contract months, pretty steadily. You know, there’s some that come in tighter, you know, 1315, cents. But you know, by expiration, a lot of times they widen back out to 20 plus cents. We’ve seen them as wide as 30 at expiration. But you know, at one point in time, there was 60 cent carry out through three months. And that’s given you a great opportunity, even if you don’t like to your point the price up front, you can maybe look out there and find a spot where it works logistically to market some grain that traditionally would have a good basis, you know, a traditionally good basis. And I’ve been talking to growers lately about that very, very topic, you know, we need to be calling into the elevator merchandisers and saying, Hey, if I deliver in Jan, Feb, March, what kind of basis could I lock in today against this carry, you know, and they can go to work on that, you know, you make, make those offers, put that drain out there for them to Go, try to market. Because by time we get there, oftentimes, Jeff, you’ve been in the market a long time, these carries converge to the front end, and we just see this same flat price all the way through the marketing year, or a range of that. You know, last year, at harvest, we on 14 pro spring wheat particularly, just as an example, we dipped down into the high $4 range, which everybody was just their minds were blown that we’d have a four in front of the price of wheat locally. But it happened. And then we got back to five and a quarter. And I’m like, Guys, we might have to be happy with this price. You know, not saying this is it, but it’s going to take something non traditional to break out of this. While we didn’t get it on the futures, we got that steady yo yo effect. But as it went, it went out, the only reason we seen $6 cash or high $5 cash was all basis. You. And in a lot of ways, it was non traditional situations that don’t always present themselves. It wasn’t seasonal demand that created that opportunity. It was a shortened market somebody needed to cover and advantages for the farmers that are near that you can’t count on that hope that that’s going to happen again. To your point, hope is not a strategy. So you got to look out there and say, Okay, what can I get for a basis to take the carry out of the market, whether it’s corn, corn got nice carries out into the new crop, wheat, wheat has a nice carry there’s, there’s usually an opportunity out there, if, if you’re looking for it, and you know, if you, if your facility that you’re marketing with, or your your buyer is willing to to roll positions, you can take some risk off that way as well. And I don’t want to get too far in the weeds on some of that, but you know, as you know, I do a lot of stuff with over the counter, using swaps. Do a lot of non traditional contracts for growers, where they’re making offers, getting premiums, and maybe the market spikes. And being an independent Co Op is Scranton equity is in the way I operate it, which is kind of nice that I’m the guy that’s choosing how much risk we take. Because I, you know, I’m reporting to a board, and they’re all in the loop of what I’m doing. You know, if you’re a bigger company, maybe you don’t have the flexibility to do some of this stuff. But you know, if, if that market were to rally and you want to blow out all that offering, we can potentially roll that into a new crop position if it were to hit. And if you’re offering grain, it’s usually above the market on those deals, so it’s a premium to where we’re at today. And if that hits, that means the market did, did respond. It did what we were hoping it would do we wanted it to do, and we’re being rewarded. And, okay, we got rid of all our grains, so now we gotta roll that position to a new crop. That means that new crop values better than it was when you put this position on. Also, I don’t find a hole in that strategy.
Jeff Eizenberg 12:18
Yeah, you’re right in thinking along those lines. And sometimes people think about price and all they see is the flat price. And the difference between a flat price and the pricing you’re talking about is that you need to break it apart into two. And so we’re taking a little bit of time here in this episode to speak about the difference between futures and basis and challenge people to think a little bit more outside the box and having those types of conversations with their buyers. Right now, we are seeing offers on the future side, with some of the cash contracts that you’re talking about that include OTC and others that could be as over $5 in 2026 for the futures portion now, basis is the other side. Are you as an elevator going to put out basis offers for 2026 crop? Probably not right now, but coming up into the middle of next year, you will so people will have the opportunity today to think about pricing a portion of their grain for next year, even though they don’t love the price of this year’s grain. And I do want to make make a note here we’ve talked and you’ve said, well, people traditionally don’t like to do that, because they don’t know if they’re going to actually grow the crop. Have you ever gotten to a point talking with guys that they don’t have anything to sell?
Ben Hetzel 13:50
Good point, you know, generally, there’s something left year to year. You know, most farmers that I’ve ever worked with, there’s a few that’ll sell out of certain drops, but generally, there’s one or or maybe two that gets stashed away and kept as a reserve, you know. And the old, the old mentality that I heard a lot of times growing up from my dad was, well, that’s my bank account. If I don’t raise a crop, I got something to sell. I don’t know that. He was always thinking that that would mean the market would rally and he could sell it for more other than it’s just he had it to sell. And I’m not going to speak for him, obviously, but as I’ve been around and heard those conversations, that’s what it appears in it, for certain people, is it’s, it’s kind of a little nest egg, but generally producers will have, especially in wheat country, it seems like we always carry about 25% or more. Seems like the reporting coming out always around 30% stocks on farm. So that means we’re carrying a chunk of grain all the time. Yeah. And I would challenge growers, why is that not forward contracted in a carry market all the time? Why are you not taking premiums out of this market all the time? You don’t have to get way out into the future with that. You can be three, four contract months out, and all six, nine months if you want to get aggressive and and take that carry out. You know you have the grain. There’s virtually no risk to you if you weren’t going to market it anyway, other than you might actually market it. And if that’s a crime at that price, then don’t do it. Please don’t do it. But if it’s a good price, it’s way above the market, and you’re going to be disappointed in that. That’d be the only reason not to do it.
Speaker 1 15:47
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Jeff Eizenberg 16:04
shifting gears a little bit to harvest, since we’re heading into that timeframe, it’s almost fall. Next week be the first week of fall, and probably by time this show airs, it will be the numbers are big. We’re looking at a huge crop nationwide. You’ve shared with me that you’ve got some great crop coming in, maybe some quality concerns about the freeze that you had last week. Love to kind of hear from you where you are there. It’s grant equity and talking to the farmers in that area. How’s the quality look? How does the how’s the crop look? And more importantly, where are you going to put all the grain?
Ben Hetzel 16:47
A few challenges there in that statement, the quality from what I’m seeing and talking to people, we’re optimistic is the word to use there. Don’t really know how it’s going to pan out, but I was in some fields with some guys and pick some ears. I got to get them checked. Still what we’re dealing with there, but it was really encouraged by what I was seeing, been hearing it. So I had to see it for myself, to believe it, so to speak, because it’s just a kind of unchartered territory. And to be honest, the last experience I had was not good. We ended up with super light corn that stayed at, you know, close to 20 moisture and there’s limited places to go with stuff like that. So really encouraged. I think our overall quality is going to be better than what a lot of us anticipated in in most of the areas, obviously, there’s going to be the entire spectrum of really bad stuff to stuff that wasn’t even hurt. I talked to a farmer near the rain country this morning, and he got up in the middle of the night to check the weather, and his son’s got a field that, for whatever reason, when he checked the weather, there was a cloud on the radar right over that spot where his son’s field is, his corn field, and he refreshed it because he couldn’t believe there’d even be a cloud in the sky, but he refreshed it, and I’ll be darn that was the only place in the southwest corner in North Dakota that had a cloud, and that field did not freeze. The only thing he could attribute it to is his son’s been going to church a lot.
Jeff Eizenberg 18:20
Hey, sometimes it pays.
Ben Hetzel 18:22
So, yeah, it’s better than we thought. And and we’re cautiously optimistic that it’s going to be it’s going to be okay. We’re going to have something to market. I don’t know where we’re going to put it. I think the baggers will be working overtime to put it in the big white peg zone in the field. You know, if it’s, if it’s quality, that can be exported or blended, we’ll find some homes. There’s a good export program for corn, and on the P and W, there’s, there’s other homes as well. And this grain will those grain will navigate through the pipe, and, you know, you get quality issues. Basically, the best thing you can do is stash it away and get through harvest, and then bring those samples, bag samples, Bin samples, whatever it is, bring them in, get them checked, figure out what, what grade flow it needs to go through and and get it, get steel wheels rolling.
Jeff Eizenberg 19:19
Sounds a good plan. Well, let’s take a minute here. Ben, since we’re staying on topic of quality and bagging and bringing in samples, would you mind give us a quick update on what’s going on with the co op? I know you’ve had a huge project you’ve been working on and some new storage facilities, as well as a revamped track rail line. Tell us what’s been going on out there, what’s the status of the project, and when can people start to expect to start bringing hauling in more grain?
Ben Hetzel 19:49
Yeah, so we started this project, ultimately, over a year ago, we changed the traffic flow and put up a new scale and grading house. And. Main Office got the trucks navigating through the facility a little bit cleaner and smoother. It’s been well received. It’s not ideal, because the way the the community is laid out here with the railroad track, and there’s a creek that runs through so kind of limited, or what, what options we really had there to fix the traffic flow with all the infrastructure that’s already in place, but we think we got a pretty good plan going forward. That was phase one, and now phase two is well underway. As you referenced, we’re putting up another slip elevator. It’s a big investment for the Co Op, big investment into the community. It’s going to have far reaching effects. I’m anticipating with speed at which we can dump today, we have two, basically two concrete work houses that we use to handle the multiple commodities that we’re doing, and each one of them has a dump pit inside those work houses. So it’s, basically two, two dump pits, and it’s going to be going to four. And the two new ones are high speed. Each one of those dump pits is faster than the two pits we have today. Quite an increase in velocity of receiving. And you know, as we looked at it, the age of the workhouse and the load out facility for the amount of grain that the equity is has handled over the years, it was time to really look at investing in another load out. It’s high speed, so we don’t have to spend 1215, hours loading these trains. We can get them loaded in six, seven hours because of the track layout, it just makes it kind of a non event, if you will. But that’s the idea. Is there’s less and less people in the rural communities that they’re wanting to live here, and we got to speed this stuff up and take care of our people that do work for us, and it’s going to be a huge advantage. And with the changes the railroads made to their policies on how they handle these big timed out trains. It’s, it’s going to be a really nice addition. So if it comes in the middle of the night, I don’t, don’t necessarily have to get up super early and and go get that train loaded. We can kind of pick our time slot, get it loaded and move on about the day. So huge, huge advantage for the producers in this area. It’s going to be a facility, a legacy facility, as you know, these concrete houses stand for many, many years, and super excited about that, but we are back out of the ground. Yes, we’re on the surface of the ground and getting ready to go up in the air. So the crew is working diligently to pour the last slab before they build the form. And once that forms built, we’ll be we’ll be slipping. Wow. So super fun
Jeff Eizenberg 22:55
next year, next year’s the next year’s crap. We up and going, hopefully,
Ben Hetzel 23:01
if they the weather holds and they get the slip done here late October, which is kind of the anticipated, optimistic timeline, maybe early November, and then all winter and next spring they’ll spend putting the equipment in place, and hopefully we’ll be able to fill it harvest The next year. But it could be September,
Jeff Eizenberg 23:21
September, right? Well, if we get another crop like this one, you’re gonna be pretty busy out there.
Ben Hetzel 23:28
Yeah, lots of bushels. And takes a lot, a lot of effort on our people. And I’m super excited to see see this change for not only our producers, but our employees and and it’ll it’s going to be fun. Just need the bushels next year as well.
Jeff Eizenberg 23:48
Hey, from your mouth to God’s ears, right? That’s right. Well, good luck, and yeah, keep us posted. We’ll be checking in with you on that as we talk more.
Speaker 1 23:58
Want more agricultural market expertise. Listen to full episodes of the hedge edge podcast wherever you get your podcasts, or visit RCM, ag services.com, get the complete market analysis and strategies you need to succeed. All right,
Jeff Eizenberg 24:15
we’re going to shift over to this week’s main topic, which not that we didn’t already cover a lot, but we we’ve been talking over the last couple of weeks to different people. We’ve talked to the banks, we’ve talked to Dwayne over at Dakota western bank. We’ve we talked with David Munoz, with Bartlett, and the same topic keeps coming up. We’ve got higher priced beef, we’ve got higher priced cattle, and we got the fact that people are spending more and more at the grocery store, they’re spending more and more for a normal meal. And there’s a consensus out there that the consumer is feeling pressure in a pinch. So I really want to throw it out today that I don’t really think that the consumer is in that much a pain, if you think about it, Dwayne brought this up to us the other. Day that people are buying their fast food or their convenience food, let’s call it that they’re buying it on a credit card, and they’re buying it through DoorDash. They’re buying it through, you know, some of these convenient solutions. Well, if they’re doing that, how much are they actually paying for the food versus how much they’re spending, and it’s actually impacting their pocketbook, that’s the question. And then we can ask, Is food really that much more expensive, or can people afford even higher prices?
Ben Hetzel 25:35
I don’t know if I even want to touch that topic, because, you know, to each his own. But no, I think, I think it’s an interesting scenario that’s unfolding. You know, we’re not, I don’t think any of us are naive to the credit card game. You know, if you don’t pay that credit card off every month, then you are financing whatever it is you’re putting on there. And if that’s fast food or whatever it is, I would just about bet there’s a whole lot of convenience purchasing in there, where we’ve become a convenience and instant gratification society. Take care of what I want right now. And I mean, I’m a victim. I’m I’m in it, and so, you know it. I don’t think people in general. Now, of course, we live in rural America. You’re, you’re in closer to Big City Life. I mean, you live it. So it’s, it’s hard for me to even comprehend what’s going on in that realm. But out here, I don’t see a lot of adjustments being made. I still drive by a few C stores in the mornings, and people are in there getting their breakfast or their coffees, or maybe they’re packing a lunch for the day, whatever it is that’s the most expensive place to buy that. And I don’t see a change in the flow of traffic in and out of those places so and I haven’t changed my habits, but I know that when you go buy a steak, it’s, it’s 20 bucks, you know, expensive, some dollar steak, and fortunately for myself and my family, we raise our own. But there that’s opportunity cost too. You know, I could sell that and not not eat that steak, but, you know. So the prices have gone up. I don’t think it’s hit the retail stores, you know, the big bot stores, like it’s going to that. We’ll see that starting to develop here in the fall months, probably more and more as these prices, you know, there was a stockpile of product in the system that maybe didn’t have prices ratcheted up on yet, but it’s coming, you know. And so what does it take to start breaking that habit? I honestly think that, you know, I think my dad might have said this years ago to me, or a few years back, that the only time you’ll really change people’s habits is, it is when they get hungry.
Jeff Eizenberg 28:04
Literally, we don’t see that in our country right now. I mean, to be honest, I I was like, you don’t change the habits too much. But I the other day, I was last weekend, went to Ohio State football game, and we just tailgated. So we were down. We’re waiting. And we got late to the tailgate, so we missed all the good food. And I said to my wife, let’s order Chipotle. I bet you I can get it delivered to me standing here on the corner. And she said, No way. I don’t know what you’re talking about. I go, No, watch this. Pulled up my Chipotle app, hit the num, hit the button, ordered three different Chipotle burritos for us, for her and I, and in a friend. And all I had to do was type in my location, and next thing you know, 30 minutes later, I was standing at a corner waving down a guy in a in a in a yellow minivan, and he dropped off my food. Now I cost me $10 but that was the best $10 ever spent. I almost even bought the steak Chipotle to spend a few more dollars just, just so I could feel like I got it
Ben Hetzel 29:08
all. Oh, man, that’s that’s an amazing story, because if you’d have bought a nacho in the store or in the stadium, it cost you what that whole meal cost you guys. Yes, exactly, right.
Jeff Eizenberg 29:21
So I think the point in all this is that employment is strong. There’s people utilizing these middlemen services and these tools that are have been created. And I looked up the data, and in a five year span, Door Dash and these different types of companies have increased their revenue from about a billion dollars to 12 billion. So 12 times the amount of money is being spent on these services again, post covid. Covid accelerated this middleman business, and now you think about people, Instacart shopping, having people go shopping. Before that, what are they paying? Three. I have 10 more dollars on top of their grocery bill. People are complaining about the fact that prices are too high, but the reality is, they’re spending more on these service conveniences that they don’t need to spend. So to your dad’s point, to your point that you made that your dad said, I don’t think that there’s actually a problem with the cost of food. It’s likely that people have become a little bit lazy.
Ben Hetzel 30:24
Yeah, hard to believe that, like Walmart delivers groceries, or, you know, you can send it, call your order in, and they’ll deliver it like DoorDash out here in rural America, they’ll drive 25 miles. I I’m not even making that up. I didn’t know that was a thing. It’ll literally deliver it to a neighboring town 25 miles away, if you’re willing to pay for it. I have no idea. I I have no idea, but that just blows my mind. For then the gas to go home and go to Walmart and pick that up and spend the extra 1520 minutes other than the drive time, just because you’re driving through town and traffic and go in the store, out of the store, I mean, they I don’t know if you could charge enough for that.
Jeff Eizenberg 31:12
I think you should at the game tonight. You should try the chipotle game that I just played. I don’t know how close the closest one is to you in lemon, but put it in if you can, and text me how much it would the delivery fee is, if it’s not Chipotle, I’m sure Chick fil A or something else around you has it. Text me the picture. I have to know the listeners. Oh, my God. I have to know. I should
Ben Hetzel 31:37
try to do that. I’ll try to remember. You might have to text me later to remind me my mind might not be on Chick fil A or Chipotle. I don’t even know where there’s a Chipotle. I I’m guessing Bismarck two hours
Jeff Eizenberg 31:49
might be a little cold by the time it gets
Ben Hetzel 31:52
to you. I hear you though, you know it’s I don’t think the price of that stuff has gone up to a point where people are going to change their habits. And, you know, it’s too easy to get get extended credit on your credit cards or whatever it is. And you know, we’ve seen an increase in pay scale in rural America. I’m sure it’s happening everywhere. So as people have earned more, even though their dollar doesn’t go as far. You know, this perceived idea that I’ve got, oh, I’ve got three 5% more to spend on convenience or or entertainment or whatever it is, and beyond the food, and we won’t even touch this, because this would be a whole nother rabbit hole. But how many apps and TV channels subscriptions do Americans have that are just hitting their credit cards and they don’t even know anymore? I look at mine, and I’m just like, my dumb kids, every time I turn around, there’s something on there. I’m like, Stop doing that. We’re not doing this, you know. And so if you don’t monitor that, pretty soon, you’re just getting gobbled up with these $10 $2 whatever they are, fees for these subscriptions. It’s crazy. Now there’s service companies out there, these middlemen, as you call them. They’re they’re out there helping you figure out how to manage that, right? So making a business off of your bad decision making, you know, I blows my mind.
Jeff Eizenberg 33:21
Yeah, well, we’re gonna keep track of that. We’re gonna call that the dash barometer. I think we keep track of it. I think we put a challenge out to listeners to text us or send us a picture of cost of a convenient drop off at your home. I’d love to see that. I’d love to hear from people, if they can do it, it’s just, you’re going to need to take a picture and drop it in on Facebook or the YouTube channel, or even even email it into us, if you like. But I’m going to, we’re going to report on this one. So more to come. On that front,
Speaker 1 33:57
if you’re enjoying today’s show, check us out on Facebook. Just search RCM, ag services for market updates and tips. Find us on Facebook.
Ben Hetzel 34:05
Today, you talked about the cattle prices being high, and we’ve talked off, off there, and conversations and whatnot about the government. You know, I’ve seen the video, and I don’t know if you’ve seen it, I’ve talked about it with people that Trump stood in front of an audio a group on at a podium and said, we got the price of eggs down. We’re going to get the price of beef down. You know, for the ag community, that’s that should infuriate us, but yet, you know, the American people are concerned about it. We don’t want the price of beef to go down because we raise it. You don’t raise beef, so you want the price to beef to go down. So when you order that Chipotle steak sand steak burrito, it doesn’t cost you 30 bucks next time, right? And so there’s, there’s conflicting opinions on what’s in the best interest, but it comes down. Each individual, just like the rest of this stuff. But again, mitigating risk is so important for the Ag producer on that front and hope is not a strategy. You said it, and I think that we should stand on the hill with the flag all day long, preaching that. But one thing that every producer is realizing, and I think our next episode down the road, should we should bring in a guy, and I’ve got an idea for an agronomy input speaker. He would shed some light on what’s going on in the input world. But what we’re seeing is, after an adjustment for inflation, some of the highest price inputs compared to the lowest price for production, that disparity has gotten so wide our producers are are really in a pickle. And so I think to call out one of our goals with this podcast is to help navigate that that space and educate producers on opportunities in the market and tools that are out there. And I encourage growers that are listening and people that know producers that are listening that might hear this point I’m at this, and tell them, hey, there’s there’s somebody out there that might be able to help you, and I think the partnership that we have, Scranton equity, RCM egg services yourself, me and the team that we have around us can do a phenomenal job to lead people to the right solutions for their challenges. And I just want to call that out.
Jeff Eizenberg 36:41
That’s right, and it’s a great way to wrap up today’s episode and segment is to repeat the theme, the team is everything. It’s it’s what we all need in order to be successful. Not one of us knows everything, but not one of us is going to have the right answer every time. But if you share your ideas and you’re willing to talk about the good and the bad, not just the wins, but also the losses and the risk that you face day to day, there’s going to be a solution for you. And unfortunately, it can’t come at the end, when you’re faced with harvest and you haven’t made a sale, it has to be along the way, throughout the year in advance, like we talked about earlier in this episode, even as far as six, nine, even 12, months in advance. So definitely plan on checking in with Ben, getting involved with with your local buyer on a more intimate basis, your bankers, your agronomists and your brokerage firms, and talk with them about how they can help give you some good ideas. Share with them your ideas as well. And what we hope in the end is that these episodes, these shows, yes, we’re having a lot of fun today talking football and DoorDash, but we’re hoping that in the end, people are taking a minute to reflect and think about how their farm and their operation is managing and mitigating risk
38:13
absolutely well. Thank
Jeff Eizenberg 38:14
you again for the great week on this show. We’ll be back back on the mic next week and next few weeks after that. So good luck in football this weekend. We’ll talk early next week.
Ben Hetzel 38:27
Yeah, enjoy your weekend. Can’t wait to catch up next week. Thanks, Jeff,
The market sold off over $30 last week on very light volume. The futures market is being pulled toward the cash price with help from the funds and algorithms. The low volume could signal a bottom forming. Bottoms take time, and new lows are often made before it happens. The industry is searching for reasons for improvement, which is slowing any selling when hedging should be in place. This keeps focus on their cash and not futures for help.
The funds added another 538, totaling 3, 3847. When the funds go short, the spread becomes defined, and that excites speculators. The chatter from now until October 15th will revolve around the spread. Usually, at this time of year, I expect the spread to move $10 while futures rally $50. But as they say, ” when in Rome….
“We heard from builder Lennar last week and will get more updates soon. I’m not revealing anything new; builders are pulling back, waiting for a shift in the rate environment. This is somewhat positive. Less building means less supply. I included a mortgage chart below. We saw a 6.19% rate last week before it climbed again on Friday. I’ve mentioned the yield curve dynamics before. The rate increase on Friday is concerning, but the trend has shifted. Will this change manifest at the desired pace? Probably not, but you can’t expect more lows if the trend has shifted. Rates are key. It might be time to break below 6%. You can cut production, but that might only lead to new lows. Conversely, a slight demand increase could generate momentum.
The biggest hurdle in our industry is the potential rise in unemployment. The latest claims figures and revisions from the previous week show a stable unemployment rate, which is a relief. Two reasons support steady employment: first, the substantial amount of capital injected into the system, which has not yet been spent; and second, the BBB, which will add capital. Both factors will keep corporate profits high and employment steady. While this isn’t positive for housing, it does ease one major headwind.
The funds added another 538 to 3847. When the funds get short, the spread has a definition, and that gets the specs fired up. The chatter from now until Oct 15th will be about the spread. At this time of year, I would bet that the spread moves $10 while the futures rally $50. But when in Rome….
We saw builder Lennar’s earnings last week and will hear more in the next few weeks. I’m not telling you anything you have not been told already. The builders are pulling back, waiting for the rate dynamic to change. That is mildly friendly. Build less and you see less. I included a mortgage chart below. We did see a 6.19% number last week before it turned back up on Friday. I have mentioned the yield curve dynamics in the past. The turn up of rates on Friday is troubling, but the worm has changed. Will that change show up at the pace we want? No, but you can’t look for more lows if things have changed. Rates are the key. It could be a time for a break of 6%. You can cut all the production you want, only to see new lows. On the other hand, only a slight demand increase will create momentum.
The biggest headwind in our industry is a possible bump in unemployment. The last claims number and the revision of the previous week show a flat unemployment environment. That was a relief. There are two reasons for steady employment. The first is the extraordinary amount of capital that was pushed into the system. It hasn’t all been spent yet. The other is the BBB. It will add capital to the system. Both will keep corporate profits higher and employment flat. That’s not a positive for housing, but eases one headwind.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
This episode of “The Hedged Edge” explores the critical challenges facing US grain exports, focusing on wheat quality and Mexico’s market dynamics. Hosts Jeff Eizenberg and Ben Hetzel, joined by David Munoz from Bartlett Grain, discuss the USDA report, global grain trade complexities, and the potential risks of losing Mexico as a key buyer due to inconsistent wheat quality. The episode provides insights into transportation logistics, international competition, and strategies for maintaining competitive grain exports in a challenging global market.
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Check out the complete Transcript from our latest podcast below:
Quality or Quantity: Keeping Mexico as a Key US Grain Buyer
Jeff Eizenberg 00:54
Welcome to the next episode of The hedged edge. I’m your host, Jeff Eisenberg, and I’m here with my co host, Ben Hetzel. First of all, we can’t thank everyone enough for being a part of last week’s inaugural episode. The feedback from the community and everyone around was fantastic. And again, can’t thank enough to kbjm and kndc for hosting us. These episodes are designed to be here for the community, to be able to participate and engage and learn a little bit of something exciting today that Ben and I are on the air again here with you. It’s shortly after the September was the report. But here’s the shock. What people really need to know is that Mexico’s mills are asking for wheat from the United States that hasn’t consistently delivered. If we don’t raise the quality, we could lose our cornerstone buyer.
Ben Hetzel 01:42
Yeah, thanks, Jeff. Exciting to be on again today. Thank the listeners for tuning in to us here on the radio, and the people that download our podcast. We did have the USDA report out, kind of some minor tweaks, really honestly, Jeff, not a lot of news for the wheat side. Little bit of news on the corn side, and not much of anything for soybeans as well. So I guess on the wheat us ending stocks at 840, 4 million bushels supportive versus the estimates that were the trade kind of thought 865, global ending stocks at 264 point 1 million metric ton, a little heavier than expected, which keeps a little pressure on, but overall, not a big shock.
Jeff Eizenberg 02:30
And I agree with you, there Ben on the wheat. The biggest shock to me was two things, one in corn, 1.4 million additional acres planted acres. That’s 98 point 7 million planted acres, the largest ever. And then number two, you look at that number, most people will be running for the hills, thinking the market’s going to sell off, but no, we were able to rally the market about six cents. Now, you know, I don’t know how you feel, but that, to me, is about as shocking as we could expect,
Ben Hetzel 03:02
yeah, yeah, it is always interesting when you get these reports of what’s actually going to happen and what’s moving. The market. Did not expect the rally today in corn off of that it looked like beans rallied a little bit at the close as well. Or we had oil up pretty good today. But wheat, wheat stagnant, fell a little bit at the end.
Jeff Eizenberg 03:25
There we go. And then ultimately, on the beans side, the reality is we don’t have any buyers, and China is still absent and unavailable for purchases of beans. So we’ll see how that shakes out into the into the quarters ahead. But you had a comment then that you and I, you and I, you and I are talking about storage. It was kind of interesting.
Ben Hetzel 03:44
Yeah, I happened to run across the little article on the available farm storage versus the production. And production outpacing farm storage quite significantly. You got states like North Dakota at 131% versus storage. You’ve got Kansas at 133 versus storage, Missouri at 129 South Dakota, 128 pretty much all the states, until you get into the deeper south, well into the 15 to 30% more production than storage available. So it’s going to be interesting in what appears to be some challenging marketing conditions. We talked a little bit last week. One interesting thing, we talked about the potential for a nice crop of corn out in these fringe areas like western North Dakota and South Dakota. We did end up freezing quite a bit of our corn, so and soybeans. So it’ll be interesting to see how that all pans out, what what corn was far enough along, or what beans were mature enough to handle that frost. But we definitely will see a reduction,
Jeff Eizenberg 04:50
and you guys are now the you’re the wettest and the coldest, yeah.
Ben Hetzel 04:55
So it’ll be, it’ll be a challenging harvest for most producers. That have row crops and a lot of questions unanswered yet, you know what to do with this, this stuff, if it does end up having significant issues and so lot to unpack there down the road, but significant production all the way around. We talked a little bit about that last week too, Jeff, that there’s so much wheat, so much corn going to get harvested. Beans going to have a really big yield on beans, comparative even with acres down, we had a big canola harvest in the US. We’re expecting a big harvest in Canada. So one thing we are seeing in Canada is some quality issues, similar to what we’re kind of experiencing in western North Dakota in general, on the wheat side, but again, just big bushels, even with acres being down on some of these particular crops, not all of them, of course, we just learned on the corn. But the market is not really the same status quo as what we’ve seen, especially on soybeans, so stuff’s gonna have to find a home, and we’re seeing challenges on the wheat for sure, already.
Speaker 1 06:08
If you wanna listen back to this episode or find past episodes of The hedged edge, visit kbjm.com or kndc radio.com under Listen Live and podcast options, or either stations, free mobile app under podcasts,
Jeff Eizenberg 06:23
okay, flipping over to today’s topic, quality or quantity. Why the US risks losing Mexico. Ben, we’ve got our guests here with us. He’s online. Would you mind a quick intro?
Ben Hetzel 06:34
Yeah, thanks, Jeff. It’s my pleasure to introduce David Munoz. David is our guest today. He’s he was born and raised in Mexico. David spent the past 15 years in ag commodity trading stints in Mexico, China, Singapore, Thailand and now the US. He spent nearly a decade with serious global Ag in Minneapolis, focused on spring wheat and global supply and demand. He’s now helping integrate with Bartlett grain, who they just teamed up with out of Kansas City. David brings truly international perspective of grain markets, and he still finds time to spend with his wife and two young daughters. Welcome, David, glad to have you on here. It’s it’s a pleasure to have you join the podcast today. I’m excited to see where the discussion goes today with wheat in general, but global supply and some of the trade partners we have around the globe.
David Munoz 07:32
Excellent. Hi friends. Jeff, thanks very much for inviting me. Happy to be here. Absolutely.
Jeff Eizenberg 07:38
And David, your company is just merging. Could you give us a quick background there? It’s pretty
David Munoz 07:43
exciting. Yeah. So series global, AG, also known as Riverland. AG, here in the US, it’s been in operation for 15 plus years. Not that long, we operate a series of assets, physical assets, warehouses, elevators in Minnesota, North Dakota, and then across the border in Saskatchewan and Manitoba. It’s headquarter in Minneapolis, where I am based. And I personally been with the company for, like you said, for almost it’s gonna be eight, nine years soon. And just a couple of months ago, Bartlett grain was based in media in Kansas City. I’m sorry they decided to acquire our company. So at the moment, we’re in that period, that transition and merging with them. And I think it’s going to be exciting, as they have. They have some strengths, and we have some, and there’s some. Was no overlap, and the whole thing made a lot of sense, was probably going to make us stronger as one
Jeff Eizenberg 08:32
company. That sounds great, exciting. I gotta, I just gotta jump right in and ask you, you grew up in Mexico. Right now, Mexico is the quasi Savior to our American grain crop. And so can you help us all understand just a bit more? Is this truth or fallacy? Is the Mexico the great Savior?
David Munoz 08:53
Well, I mean, it’s truly just, I mean, it’s a neighbor. It’s there’s a lot of compliment each other, both countries. The infrastructure has grown expanded, and it’s much better than it used to be. And obviously, since the free trade agreement in the 90s, Mexico is is one of the top buyers of us, grain, bulk grain commodities. And then obviously Mexico sense what Mexico is good at in exchange towards north of the border. So there’s a lot of compliments, like I say, the population has grown the animal protein, the animal sector has grown as well. So that demands more and more corn meal, all types of protein. So it’s been, it’s been, it’s been a good market for the US in general.
Jeff Eizenberg 09:37
It’s good and, well, we can’t forget about the tortillas, right? So exactly.
David Munoz 09:41
So those are white corn. So Mexico self sufficient in white corn. But all the yellow corn then comes goes to the feed sector and the industrial sector like starches, but also as the population changes its diet, basically eating little bit less of tortilla, less corn, more wheat based products that require flour, that. That’s where the wheat consumption has has also grown over the years. And there’s some wheat production down there, including including a Derm, for instance. But there’s, it’s just clearly not enough, and the geography doesn’t lend itself. The US produces much better and cheaper, cheaper levels. So that that’s, well, it all makes sense. So that’s good market.
Ben Hetzel 10:18
So David, help our listeners understand, how does most this grain get to Mexico? You know, those of us in the trade understand, and that’s how I got to know you, obviously, through trade. But for the average listener or the producer out there, shed a little light on how we how we transport most of the screen. Obviously, we’re a border nation, but there’s more to it, right?
David Munoz 10:42
So I think that it’s pretty interesting, because it really comes flows across the border in all modes of transportation, primarily by rail, so the so called shuttle trains, so 110 car trains that carry 400 plus 1000 bushels of whatever, soybeans, corn, wheat, that’s the main transportation. Probably around 60% of the trade happens through that mode. But then, obviously, through the coasts, you have a bunch of it. So it goes through the river, gets loaded at the Gulf, both Louisiana or the Texas Gulf, and then goes through the main, the primary port, which is Veracruz. And that’s how probably 35 40% of all the exports from the US to Mexico happen. There’s some that also happens through the Pacific Northwest, where, let’s say, soybean crushers are based near the Pacific in the Guadalajara area. And then they bring the vessels through there. But then we also even have trucks, right? All what Texas produces, for instance, that’s, there’s a lot of trucking that happens just just by truck from Texas, so you get it all. So like I say, it’s just wheat, roughly what Mexico brings in from the US is primarily wheat, corn. Yellow corn is by far the biggest. Then you have soybeans. You have some meal, more and more with a with a crushing industry growing in the US, there’s a lot of meal. There’s going to be a excess supply of soybean meal, so that a lot of them is now making its way down there as well, although there’s some US based companies that have and domestic companies that have crushing facilities there. So that’s, that’s, that’s that also happens quite a bit.
Speaker 1 12:13
Want more agricultural market expertise. Listen to full episodes of the hedge edge podcast, wherever you get your podcasts, or visit RCM, ag services.com, get the complete market analysis and strategies you need to succeed.
Jeff Eizenberg 12:28
Viv, you had mentioned in our early conversation that we’re ultimately going to that we need to work to maintain our quality so that Mexico can consistently buy from us. Can you shed some light? Where are we in the quality discussion specifically related to wheat, North Dakota, South
David Munoz 12:44
Dakota region, yeah, when it comes to wheat. So the good thing is, Mexico is a consistent buyer of all classes of wheat when it comes to soft with winter, for instance, or HR, W, it’s all grown in the south the problem with that is that you have Russia, which has become a major, major grower of wheat in the world, and exporter to the point where it makes it cheaper to substitute HR w. So the HR W area is in trouble. But then you get with a high protein wheat, which is grown hrs, North Dakota, for instance, and Canada. That’s, that’s, that’s a wheat, prime wheat around the world that has no other substitute. That’s the good news. But the bad news is, or the other news, in a way, is that you’re competing against Canadians. What we’ve seen, I think, in the past few years, is that Canada has invested a lot of time and effort and money on on on its seed technology, and getting very close to the to the flower millers, just in general, what do they need? What milling characteristics? Characteristics are they looking for and trying to plant those seeds that feed their needs? So between that and also the weather, which we’ve had bit of an erratic weather here past couple of years in in the northern plains, that has made that the quality between both weeds, it’s they’re just not quite the same, or at least that’s what the feedback we’re getting from some of the farm bills down there. We’ve also heard that from some European based customers, because our company also seeps by vessel through Duluth to the European market, primarily Italy. So we’re getting more of this feedback that they feel that the quality is just not exactly the same with Canada. And obviously, if this keeps, if this keeps going into the future, probably what you’ll see is that then they’ll they won’t be as willing to pay the same amount of money for for for either or variety. And that’s where there’s a risk that you can, you can the farmer might see that reflected on on the bits. So something to keep an eye on.
Ben Hetzel 14:38
David, would you say that the US mill, because of the supply being so close, doesn’t have to deal with it the same way that the Mexico market does, in the sense that it just is reflected in price all the time. They want a specific quality or specific baking characteristics, they know roughly where to go find. That I know years ago, we used to run a program that we had some IP wheat. It was a very, very high quality in terms of baking and milling, and so we had growers that would grow that specific variety, and we would ship it in dedicated freight to those mills that needed that product. And the real world example. And I like to share this with kids that come through the facility on field trips. When you’re making a hot dog bun, it’s a lot different than when you’re making a hamburger bun or a loaf of bread. When you’re at a ballpark, you want that hot dog bun to hinge, and to get that hinge effect, you have to have really strong baking characteristics in that that dough. And so if you’re just making a loaf of bread or hamburger buns, it can be split and cut, and there’s no issue, but a hot dog bun has to be a little bit higher grade so that you can get it to flex. Do you think there’s that’s part of the issue, the US doesn’t have to deal with that same quality concern on a direct level versus Mexico, and that’s why our farmers are growing these varieties, particularly focused on yield, maybe not quality.
David Munoz 16:18
I would say there’s some of that. I would agree. I think the other aspect of it is that the US meal also brings some, some Canadian Wheat, for instance. So they also have, they have, I think, a better access to blend if needed. While the Mexican flour mills Also, due to space, it’s more constrained to try to bring two different varieties of the same wheat to then get what they need. So at some point, it’s just easier for them to buy one or the other. Now, I guess important to mention to to our listeners, that this year, the harvest we’re just is coming out of the ground looks much better. And I think it’s going to be very interesting we follow up here in six months or whatever, and see what the feedback we get from the end users. I expect them to say, well, at least that the spread between both both wheats is not as wide, which is what has happened almost for two years in a row, to the point where some of the millers, they’re like, I don’t want to take my chances. Just ship me Canadian if you can. Now, obviously you have other markets, like the Asian market, especially Taiwan, which they just buy really high quality wheat, but that’s what’s grown in Montana, and it costs more. There’s a premium for that. So the one thing now that you mentioned that segregation with some of the customers, they’ve asked for it like it’s possible. Now the problem, and I know a lot of the farmers are going to say, are they willing to pay for it? And that’s where it sometimes comes to not really, because it just costs more segregation, IP, the logistics, you just can do it at the same price. And that’s where the quality guy will tell you, that’s my dream. But then obviously the procurement and the purchasing department says, like, not really interesting.
Jeff Eizenberg 18:01
It’s a wild thing to think about, that the purchasing department is really in control, right? But, but in the reality, quality is something that has transpired over time to be the leading factor, particularly for higher end markets, higher end products. And just this week, I was passed an article because we we actually do some export ourselves out of the US into South America. And then in reverse, we have some customers in Mexico and in Dominican Republic that are buying corn out of South America. And the question when I actually went down to a facility, I was in facility in San Pedro, Dominican Republic, and I asked him, I believe I get you cheaper corn out of the United States. And his response was, I’m sorry, we don’t buy from the US corn. We only buy, yeah, from Santa rim and the I wanted to understand that more and literally, this week, we did the research. And it goes back to a 2008 2009 period when the local buyers were complaining about the quality of the US corn. It was too dusty. It was cracking. The myotoxins were out of control. They didn’t have the same color. The milling yield, to your point, wasn’t the same, and so they left the US market, Dominican Republic, and they have never come back, even though we can get them cheaper corn today. So if I think about that, then I asked the question you just mentioned, two years in a row of underperforming quality, is that a wake up call for the farmers and producers in the areas in the north that we’ve got to focus on quality and not just this quantity.
David Munoz 19:48
Yeah, I also, and it’s a good question. I mean, I’m not an agronomist, but I think it has to do with the seed technology, so something to be probably further invest. Get it. Why is this happening? I’m sure some of it has been weathered like I say. I’m sure the farmers, they do a great job planting the the seed, the seeds, and then doing whatever they they do best. But I feel that there’s something related to the tight connection between the farms, the millers, and what it’s needed to get that has seems to have been a little bit more put more emphasis on north of the border. I think in the US, I do see Association like the US wheat associates, or these organizations that help open the markets abroad, they do an excellent job of marketing us grains, or, in the case of soybeans, usig, or the US greens Council on the in the case of corn, they do an excellent job opening the markets. But there’s an element more on the wheat side that has to do with quality, right? It’s in a ways, corn, not necessarily, but corn is corn. There’s less, less differences between origins, but with, with, with wheat. Now wheat is created equal. And what we’re finding is that even between high protein wheats US and Canada, they’re not necessarily the same. So that’s something that definitely we want to we market heart of the of the wheat out of North Dakota. So we were very interesting that that doesn’t change right to the point where we have to almost sell at a discount to Canadians, just because of that, that aspect of the of the quality that we’re the feed that we’re getting,
Ben Hetzel 21:27
yeah, it’s it is a tough challenge for the wheat industry, because nitrogen fertilizer has such an impact on on that quality and the timing of getting it in there. And, you know, the agronomists obviously know a lot more about this particular topic, and work closely with our producers in this area, in the wheat growing region. But you know, as I think about what we’re talking about, and the price of nitrogen right now being so high relative to what the grains have done, and you touched on it, David, you said exactly what we see, you know, corn. You can raise corn East River in the I states, and then you can raise it out west here, and it’s still the same corn. It might be lighter test weight or or, you know, smaller kernel, whatever it is, but it’s still corn. And wheat is not that way. But you bring up a very good point that there are lots of different varieties of wheat out there, some that focus heavily on yield, some that focus heavily on characteristics, milling characteristics. So it’s just a good thing for our listeners, our growers in the region, to know that this does matter, and we’ve seen it. Two years ago, you and I traded some grain directly into Mexico, because our quality made sense to go there, versus where we traditionally trade to and and that particular year, we had a lot of grain grown for yield, and we had to get rid of it. So we were finding all kinds of homes for it, and that compounded the issue. We fertilized, we did everything we could, but it just out yielded and outperformed what, what it had available to it. And so we didn’t have that good, rich milling characteristics built into it that we needed.
David Munoz 23:13
Yeah, no, agree. And again, it’s, I think it’s a tough one, because the farmer needs to do what, whatever he can to so the operation works, and a lot of it, especially with prices, how low they are, one of the ways is to just out yield their way out of it. So I think it’s a it’s a tough one, and I understand, because we’ve had the conversation with growers in the past, and obviously the some of the feedback, they immediately say, Okay, well, but who’s going to pay for growing? Less yield and more with the protein or whatever other quality. So it’s a tough one. And then there’s an element of north of the border. Often they have a even on the fixed advantage, or they have a they have a competitive rails, just because how the system works in Canada, where there’s there’s the rates are capped by the government, so there’s certain amount of money that the rail railroad companies can make, and if they do, once they hit that, well, the rates have to be reduced so they don’t make more, more than, more money, than than the cap, which doesn’t happen in the US, right? It’s free market. And they’ll, they’ll raise them, or they’re lower them, if the market need, needs it like, like it’s happening recently with on the soybean cycle, there’s no there’s China side on the picture. So then the rates have just come down to incentivize. Yeah, it gets pretty
Ben Hetzel 24:29
complicated, the whole global trade. And we see even again, in the last week, some changes with India and Canada and some things going on there. The US had their round of that here, what, 10 days, two weeks ago, with India, as we increase tariffs due to them buying Russian oil. Now there’s some talk that India might hold some imports from Canada. So it’s going to be a challenge this marketing year with depressed prices, like you said, and then all these other issues. Is popping up between these nations?
David Munoz 25:03
Exactly. Yeah. And I think at a macro level, what we’ve seen is that as other countries have become more competitive. So in the case of we, we say Russia keeps growing at a cheaper, cheaper level, to the point where it can export into into Mexico cheaper than from Kansas or for the East Coast flour mills, it’s just cheaper to bring in vessels from from Europe or Russia than rail it across the Midwest, in the case of Soviets and corn is Brazil is now obviously a powerhouse, and it just feels that they can keep growing and growing and growing the area. So for the US is becoming harder and harder to compete. Obviously, that’s why at all levels of of government. They, they, I think they’ve understand that they, they need to create domestic demand as much as they can, and not rely on on the especially a single buyer, like in the case of soybeans, right at least for wheat is a bit more more diversified. It’s just a matter of competing. In the case of spring wheat, competing against Canada in this in this case,
Speaker 1 26:01
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Jeff Eizenberg 26:11
Shifting directions a little bit. We are talking here with David Munoz, with Bartlett grain, David, we’re shifting over to talk a bit on logistics. Right now. We’re hearing rumors about the Mississippi River going to be dropping eight feet. Are we going to get barges down the river? So what’s what’s going to happen with the export side of things? Are we going to have to shift over to rail, or is basis going to widen even further, because there’s going to be nowhere for our grain to go this fall? What are your thoughts on logistics?
David Munoz 26:39
I mean, so far, what we’re seeing is that there’s a very healthy book of business on the corn, on the wheat side. So for instance, corn, it’s, we’ll get a record export number. It’s been very competitive. It’s been even up until now. It’s competing against Brazil and Argentina into a lot of destinations. That window will close, and should have closed by now, but it hasn’t. There’s also one of the other big producers, which is Ukraine. They’ve, they’ve had, they didn’t have a very good crop last year. So there was an opportunity there. Now it will rebound. And the crops are seem to be rebounding in many areas of the world. So I think for next year, that’s where I think is going to get tough with a very large crop we’re getting. And then also export number on the estimates, that is really high and won’t be easy to to hit. On the soybean side, obviously it’s just bad. There’s no, no, no way around it. Without China, they’ve already covered October and probably part of November, with their needs out of Brazil. And then we know that the new crop, the Brazilian new crop, comes in in January, February. So the window is getting really, really narrow for the US to export. And spring wheat is relatively stable compared to last year. So that’s exports are going well. Mexico is taking quite a bit. Logistics are tight, but they’re not they could be worse if we had a Soviet program. But given that we don’t have a soybean program, that’s allowing, I think there’s capacity on the on the rail side, on the bar side, for the other grains. So I don’t foresee big issues at the moment, just because probably with like, like I said, we don’t have a soybean program, otherwise things probably they’ll be pretty tight. But by now,
Jeff Eizenberg 28:21
in terms of the buying from China, people also are hanging on to the fact that they’re going to buy our soybeans. And if I look at markets and the way that I track if we see both corn and beans trend higher because of our export program, and then a chance of China that would only probably drag wheat up with it, which could ultimately be good for all, all grains. But let’s, let’s be real. Do we think that China is coming?
David Munoz 28:47
In my opinion, I see, I mean, there might be some deal that gets done, but I think they’re, at least they’re getting ready not to. They haven’t bought a single bushel for, as we know, for this new crop, they have inventories in the country, which is something they do with all all the, all the grains that probably they don’t have to and then Brazil is coming up with a massive, massive harvest, probably for next year as well. Well, they had one this year, and now they’re, they’re about to plant their new crop, and they, I think it’s just a need. I mean, Brazil, by its own, feels that they can, they can, they can serve all China. And then obviously there’s some, some shuffling the US takes other markets. But it’s just not enough. There’s no one country that can substitute what what China buys. And at the end of the day, China consumption, just in general, it’s starting to decrease. Right as their, as their, their population is not growing that much anymore. It’s more more stable. So it just, I think that’s what we’re seeing here in the US, kind of the acreage, especially in the weed side of it’s just the charts are dramatic, right from 20 or 30 years ago. There’s just less, less needs to be planted, perhaps. And what it’s planted, they have to find uses, domestic and in other, in other ways. So no, in my opinion, I believe China is not gonna, it’s not gonna save us this time. But. Hope I’m wrong for the for the sake of the farmers well,
Ben Hetzel 30:04
and I think Jeff and David, one of the interesting little side notes that I’d like to add is, when you if you’re producing grain to market to the world, you need to target the places that are long term sustainable partners. You need to really build them up and and nurture those relationships, so to speak. And China has been on the decline, as you stated. But you look at India and what’s going on population there Mexico, which we have a we have good trade relations today, but India is a huge, huge player. And unfortunately, we don’t, we don’t really have a good relationship today in there. And so it would be interesting to see where this all goes. But it would be, it would be exciting to see some of these markets open up for the US, and hopefully we can get these trade deals, these this trade war, kind of put to the side a little bit and help these commodity prices come back for the producer, because that’s a challenging situation we’re in right now at the farm level. So but I one thing I want to say, Jeff, too, is when we talked about our mission on this show, it was to provide farmers, ranchers and users, or the Ag professionals, the tools and resources to navigate the market and maximize margin. And I think for today, this episode with David, it, it did all that. And I I’m super excited to bring this to the listeners and have David on here. I hope we can have him again sometime because of his insights and knowledge in the global market. So really appreciate that.
Jeff Eizenberg 31:42
Yeah, that’s right. And David, it’s been, it’s been amazing having you on here today, and the excitement that the listeners should hear that Ben is working with somebody like yourself to understand all these challenges. You know, where Ben sits at the Scranton equity Co Op, there’s an opportunity for him and his team to listen to you which you are working with the buyers. And so the ultimate thing is know your customer and understand who’s on your team. Like Ben just said, working again with the with the co ops to find out what is coming next. What the end users need and want is more important now than ever in this global market, we’re not just selling to your neighbor, we’re selling to the world. And we should, all the producers on here should, should be very proud of that. And also need to stay stay educated. Can reach out to Ben at the Co Op, pop over and see him in Scranton. Over at Scranton equity exchange. Give him a call. Check out our website, RCM, Max services.com, and David, if somebody wanted to get and get a hold of Bartlett, where’s the where’s the website for them to go to?
David Munoz 32:49
Yeah, probably in their browser. They can just put on bartlett.com they’ll find it. Our series global like website was just recently integrated into them. So if you go to the Bartlett website, they’ll see now the locations that are also the ones that the series global ag River Land ag business uses currently, absolutely. Thank you very much for the invitation. Happy to be here and
“If you got long each time a rumor was sent out, you would have been buying the highs and exiting on a new low.” What a great observation. The news that a mill would operate for 4 days and curtail production sent the futures market sharply higher on Friday. To put things in perspective, considering all the positive spins last week, the November futures closed down $1.50. Today, closing or curbing production is an extreme move. It comes after the mills fill up the K-Mart parking lots, expand the vendor management programs, and establish unorthodox reload programs. In other words, when they have too much wood. This process is a slow chipping away of the excesses. I’ll be the first one to claim being way too early in the call for par. I’m worried demand is slipping, making the decreases a wash.
Another silent market killer is the fact that JIT has changed dramatically. There isn’t a day that the cash guys aren’t in the market. They continue to build long-term inventories, which is the opposite of JIT. The disciplined cash buyer has been the employee of the year for the last two years. When they buy it is at lower levels. That needs to change for the market to shift.
The rate cut will help the psychology of the market. It will be positive at some point in the months to come. For today, the industry wants a rally to hedge. The funds adding shorts can help with a pop.
The Technical Read:
The biggest takeaway and risk I see today via the technical read is that November futures were at $712.00 on August 1st. We talked about how futures were at $418 in July of 2024. Well, August 1st. was only 30 sessions ago. That is a $200 swing in a flat market. There is no clever way to project the market. The simple answer is buying the discounts or selling premiums in futures, and then you turn off the emails. Today, the technical read is trying to indicate a slow bottom forming. We have been here before, only to see a sharp spike followed by new lows.
Under a 200-plus swing environment, there is no reason not to buy the cash items you need that are hitting new lows. There is no reason not to hedge at a significant premium. This is no longer a blocking and tackling drill. It is full pads, two-a-days. It’s all about discipline. It’s all about market parameters. It’s all about the plan.
Note: We were looking for a catastrophic September close. What if it spikes?
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Corn continued to move higher off last month’s lows following the September USDA Report. Most of the numbers came in along estimates but they increased planted acreage 1.4 million acres. This brings the US corn crop to 98.7 million acres, a new record. With about 90 million acres expected to be harvested, we will harvest 7 million more acres this year than in 2024, which equates to about 2 billion bushels larger crop than last year. Despite the added acreage corn bounced post report as weather issues, a dry finish, and disease pressure have caused speculation on the real size of this crop. As harvest gets rolling we will learn more about this crop.
The USDA Report did not have any surprises for beans as most numbers were close to estimates, but the report could be viewed as slightly bearish. To get beans moving higher, China needs to show up as a buyer and trade talks with China need to make progress. China and the US are reportedly close to a deal over Tik Tok which can hopefully build some momentum for progress between the two countries. The size of the soybean crop, like corn, has been hurt by lack of rains down the home stretch but with the solid start the end result is still in question as harvest rolls.
Equity markets continue to make new highs with the Federal Reserve expected to start cuts this month. With the downward revision of 911,000 jobs from March ‘24 to March ’25 the labor market weakness gives the Fed some ammunition to lower rates with unemployment being one of their mandates.
Secretary Rollins is in the process of looking into payments to farmers for this year with the low prices.
The wheat numbers were actually a bit supportive but lower world cash prices (Black Sea mainly) continue to plague prices. Wheat will remain an anchor for any potential corn rally as more wheat will be swapped in for corn in feed. Prices are back testing the 5 ½ year Covid lows.
Drought Monitor
Here is the most recent drought monitor as harvest begins.
Contact an Ag Specialist Today
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or blawrence@rcmam.com.
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Beans were lower post USDA report as well despite the report being neutral continuing their recent downtrend. The biggest hit to beans in the past couple weeks came when President Trump and President Xi had a call and no announcement of Ag purchases were made around it. Without China buying US beans there is no major upside currently, except for potentially lower yields. South America’s crop has been able to satisfy China’s needs as that trend will continue moving forward until they run out of supply.
