An industry where being almost perfectly correct loses money.
An industry where a strong risk management plan leads you into hot water with the bosses.
An industry where a better rate of return comes from the derivative products offered, but is mostly ignored and sometimes vilified.
An industry where 80% of planning and execution is calculated for only the next few days, not quarters or years.
The lumber industry is not designed as a growth model. There will never be maturing companies. There will never be “cash cows.” At every turn, you must reinvent. That isn’t a complete overhaul of the company, but more of a “what did we do last time under these circumstances?” Today, the only way you grow is through acquisition. You don’t see internal growth. A commodity-based industry doesn’t allow it. A commodity-based industry offers long, slow periods of trade followed by the short-lived, but very profitable periods. The job is to balance them out. If you acquire when the profits are good, your losses multiply when times are bad. It turns into a wash. Now, as always, I am simplifying the economics. The point is that a commodity-driven industry needs a much stronger process than, say, the fashion industry. There needs to be a plan in place that is derivative-driven. This is a risk-management industry, and that is where the focus should be. If you are a fan of fashion and want the next hot item, well, here it is. All you have to do is look at the spreads between the items. The last great one was buying pine vs. spruce. The data is there; the execution isn’t.
I don’t want to date this, but after the 2008 meltdown, the housing industry never fully recovered. It is a commodity and offered some quick profit opportunities, but never stabilized. Quick profits aren’t stability. 2019 was a good indication that the market had nowhere to go, then Covid turned us into Bitcoin. Now we are back to pre-COVID. From 2017 to 2019, starts were hovering around 1.2. Today they are 1.3 with a lag in data. The 1.3 area puts us back to flat. 2026 plans can’t be based on the 2021 to 2023 period. It isn’t the market. Today this market has an X amount of dollars available while the industry continues to expand. It is a WWI battle of attrition in the trenches. 2026 will bring an environment of less supply. It should help prices but will have little effect on demand. A slow trade at a higher price is the real risk.
The lumber industry has transitioned from a decade of underbuilding and a major labor crisis to one now marked by unaffordable home prices and high mortgage rates. That cured the underbuilt and labor issues. Economists claim that an affordability issue is by far the biggest threat to industry today. Housing has drifted in and out of affordability problems in the past. This is the first time the affordability issue has arisen due to a spike in home prices. In the past, it was related to employment and/or the economy. The good news is that the math to owning a home will eventually come around. It just takes time. A momentum shift in buyers’ attitudes is based on years, not months. The bad news is, “Affordability is the blunt force that keeps knocking Millennial buyers back. Millennials are confronting a housing market defined by high prices, elevated borrowing costs, and stagnant wages, and many are quietly recalibrating their expectations about ever owning a home. The dream has not disappeared, but it is colliding with a reality that makes giving up feel rational rather than defeatist.” That is from an article written by Elias Broderick. I had to quote her because I obviously didn’t write it….. I think we spend too much time analyzing the data when it is that simple. The new home buyer has been priced out of the market again. Producers aren’t closing mills because of overcapacity. This is a real industry-changing event.
What changes in 2026? It is the difficulty of the timing of the buy. For three years, the buyers have been able to pay the low almost every time. Breaking even or losing money on a job was impossible. With higher prices and less supply that freebee will be gone. The buyer’s patterns will cause spikes. Bad timing will equal overpaying. The distribution side had a few tough years. That won’t change in 2026, but they now have the buy-side traders to drink with. Derivatives are a must. Plan the plan and go with it.
Best advice for 2026. Talk to the old guy in the back of the trading floor room who has lived through this type of market a few times…. The reset is back to the 80’s and 90’s. Everyone made money, but it took work.
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.
Bear down, baby! I’ll leave it at that. The futures market last week looked a lot like the Packers on Saturday, good early and then falling apart. What remains is a market that lacks follow-through in either direction. I think the reason is the abundance of data coming our way. A firm conviction can’t develop with this type of trade. Real production cuts are going on, but prices aren’t showing any signs of anxiety. There are starts and stops, but again, no real conviction. What we are seeing is the industry embracing the futures market in a big way. The last report, dated Dec 9th, has 7600 industry longs. That is a big number given such a consistent steep premium. Those who don’t own cash own futures. There are only 2500 commercial shorts, so the basis trade continues to be ignored. And that leaves us with 5500 fund shorts. They are rolling. This has been the makeup of futures all year. What happens is the longs overstay their welcome going into expiration, killing the front month. It is all liquidation, but very disheartening.
Things to watch for:
• A drop in January open interest indicates the longs are exiting early.
• Funds actually exiting their positions.
• Rates getting back down to 6%.
Any of these small, discrete changes could spark a significant rally in the market.
Technical:
The expected breakout from 563 petered out at 571 last week. There is still no resistance in January up to the 580 area, but there is also no follow-through. It could set back and take another short during the slow holiday trade, but we are seeing almost record volume daily. The funds like to be done by Christmas, so the race is on. There is less wood available. Prices should tighten going into January 1. Tell the longs to clean up early.
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.
It’s a Christmas rally. January futures rose for every session last week, totaling a $20 gain. The cash market saw the deals dry up, and actual tightness forming. It has been heading in that direction for about two weeks, but it only caught the buy late last week. Two opposing forces dominate today’s market. First is the large premium futures hold over the cash market, keeping most buyers on the sidelines. The second is the expectation that there will be less wood available on January 1st than there is today. Maybe that won’t turn out to be true, but it makes those needing a few things uneasy. These are the factors in play today. For now, last week’s trade served more as relief for an oversold market. This week, the focus shifts to decreasing supply and a sizable commercial fund short position.
Looking at a broader picture, the housing market has been slowing since mid-2023. The first half of 2023 was strong, but demand has gradually cooled since then. The raw data doesn’t show a huge slowdown, but there has been a noticeable shift away from typical purchasing patterns. As one trader said, “Everyone just bought a house.” The slowdown is partly due to the uptick in the ‘lost generation’ finally buying homes, and partly because many are married to the 3% mortgage they hold. The industry is influenced by psychological and financial factors. We’re likely to see more of the same moving into 2026. Those are the factors today. For now, last week’s trade was more of a relief value for an oversold market. This week, the focus will be on the decrease in supply and a rather large commercial fund short position.
Technical:
The tech read continues to be a close over the 563.50 could set up for an easy push to the 582.00 area. All the resistance sits in the low 560’s. Close over that area, and there is little to slow the market until the last highs and an 80% RSI. It currently sits at 60.30% in January. It will be nice to talk about an overbought market. but let’s get there first.
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 has been trading sideways since the end of October and nothing from today’s USDA Report gives it reason to change course. The main news for corn has been the lack of news. Corn did dip 20 cents in late November but bounced back to the middle of the range it has been in around $4.45. In today’s USDA report they kept US production the same while raising the export forecast by 125 million bushels, lowering US ending stocks to 2.029 billion bushels. The global stocks number was also revised lower with production cuts to other countries, including Ukraine. While the report was modestly bullish corn will need some more news to leg up to the $4.60 range as South America is off to a great start.
Beans have tumbled off their recent highs as the rocket higher ran out of fuel and has been giving back those gains. The USDA left US production the same with an overall neutral report with no major surprises. Global stocks were slightly raised as Brazil, India and Russia offset tighter supplies elsewhere. With no news to turn this recent downtrend around the market needs positive China trade news desperately as that was the initial “news” to drive markets higher.
Equity markets have rallied from the November dip and are within a couple % of new all time highs. The markets are expecting another rate cut this week and would be surprised if there is not.
The wheat numbers were mostly unchanged and did not have any major news to change the direction of trade but could turn around on global trade news.
Drought Monitor
Here is the most recent drought monitor.
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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.
Light at the end of the tunnel. After 14 sessions in the same range, the bleeding may have slowed for now. The longer the market goes without a buy, the closer it gets to one. This year, each buy was triggered by some type of announcement. For the remainder, the buy side picked off deals. Last week, January futures were only down $4.50 after experiencing a $27.50 range for the week. During that period, open interest increased to 10,500. Interestingly, the CFTC report is gradually catching up, showing a rise in fund shorts on October 28. My belief all along is that the funds are holding many more shorts on this one than in most past years. This indicates that the funds are aggressive on the downside and will roll, staying short. They have been correct for several years. That roll should become evident soon, especially as the holidays shorten trading this month. Low volume could lead to rallies off the roll.
This year, the market never had a sustained rally. So why is that? Why has the marketplace held sufficient inventories all year long? We are underbuilt, correct? Supply is getting reduced monthly, and demand remains steady. That has led to spikes, followed by selloffs of a greater magnitude. The market is acting as if the normal factors leading the market are changing. I have touched upon “outside factors,” maybe generating a different-looking housing market. I like the term “great reset.” It isn’t a new development in the industry but rather a reset or return to a former norm. So, what is the new norm? Extremely low rates allowed many to buy up relative to their earnings. Then you had COVID, which chased many, including me, to a safer environment. Today, it appears more like the older market, where the buyer’s reasoning or budget doesn’t prompt them to move. Have the newer factors changed, dynamics? Or maybe resetting. If true, the market will see A. more inventories show up as rates lower. Those sellers are not necessarily buyers of new homes under these circumstances. The buyers will start to see a normal 3-5% return on their homes, slowing their ability to trade up. And finally, more families will be choosing a forever home and not the “next step up” home.
There is a real demand issue in our market. Less supply will help prices, but the overall business is down and just may stay there. We have the BBB coming on Jan 1 to help some, but there could just be a shift in buying a home back to the norm.
Technical:
Last week’s points were 554.20, 556.70, and 562.50. Those are still in play. The chart pattern is a bottoming formation. The roll and year-end could help create a buy push. This has been a year of scaled-in selling. Always being early has been a good thing. It looks as if the $70 basis could now be a $50 basis. Again, reverting back to the norm…. It has been about 2 months since the market pushed through the 13-day EMA. It sits at 544.40. Last Thursday’s spike traded through it but then closed lower. Let’s see if the January futures will test it this week.
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.
The cash market remains weak. There’s no arguing that most items hold little to no value. It’s a tough environment, but for the first time this year, the issue is more about logistics than demand. Demand is currently steady for this time of year, but mills are in a phase where they need to clear out wood. Historically, the trade would step in, buy their first quarter needs, and store it outside to freeze. This year, the problem is that the trade has been very proactive in maintaining high inventories due to macroeconomic risks. Futures led the decline lower. Last week, there were attempts to bottom out futures, with a few bounces, but with a liquidating cash market, these are short-lived. We can’t determine when the mills are finished liquidating versus when futures have reached their bottom. All signs suggest that the market will experience a few more weeks of this condition. So what are the issues?
The mills cannot add value to their product. We have spiked a few times this year based on a reduction in supply fear. If reduced supply is the only way to add value, it will be a long, cold winter.
The industry is not responsible for maintaining the mill’s profits.
Underbuilt isn’t a real number in an uncertain economy.
It’s the economy, stupid. Lower rates mean higher unemployment.
2026 planning should weigh less on the current, an underbuilt, and less inventory story. The macro is so much greater. In 2025, there were numerous great hedging opportunities and numerous great cash buying opportunities. Stick with the small ball.
Technical:
The RSI has been back and forth from 35% to 15% for 5 weeks now. The slow stochastics are flatlined. We are sitting in the middle of a micro flat market, which sits in the middle of a micro flat market. Maybe a better way to define it is that today’s market holds few opportunities, which has been the case for 3 years now. I’ll save you a few therapy dollars. It isn’t you or your trading. It is really a very difficult market for the entire industry.
There is a lot of support in the 520’s. We will see if the holiday week turns the market.
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 market remains challenging. Last week, futures hit new lows almost every day, with all focus on the daily EFP deals. Most of the cash trades occurred at one mill, forcing the others to work hard to find value. This type of trade signals a bear market that is likely to continue. Throughout the year, the market has rallied because of the duties and tariffs, but without an increase in demand. Supply is tightening, but not at a pace to boost prices. We are waiting for signs of that scarcity. While we wait, there’s a large gap between the November expiration price and the January contract. These gaps are filled, but recent history shows it usually happens near expiration. The market typically gets a relief bounce before setting the lows. The issue today is the timing. We’re heading into a quiet period through Thanksgiving. We’ll see if the trade hibernates until then.
Technical:
Not that my writing isn’t confusing enough, I’ll try to beat it this time. There is a gap left from the September 2024 expiration from 499.50 to 493.00. Last week’s low was 496.00. That gap is finally getting closed. The elephant in the room is that now we have the Nov expiration gap and the older gap hanging over the market. The January contract settled on Friday at 560.50 with an RSI of 19.97%. Two takeaways: you can’t sell the January here, but your inventory is at a substantial risk over time. Macro: Hedge at $60, $80, and $100. Micro: When demand catches up, buyers will have PTSD thinking it is 2021 again. Buy cash or hedge.
This is the first time in many years that the risk is so evenly matched. There is a possibility of a $100 move in either direction. Hedge your risk! Your hedging dollars, if wrong, will be pennies per truck. If you don’t hedge and you are wrong, it will be bitcoins per truck. Hedging is a cost of doing business. Hedging is a medical insurance policy. Hedging is a production builder. For the mills, hedging is a paying customer who pays the next day. Hedge your risk and sleep better.
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.
It was another tough week as futures continue to decline. January futures are down $88 in just two weeks. This decline is scaring away all buyers from the cash market. Last week, the only activity was EFP’s layups. The market is showing signs of a shrinking business environment, even as reports still indicate steady sales. The main issue worsening the trade is inventories, which remain the key focus. Things have returned to a new normal pace. The slowdown occurred months ago, and the market is now settling into a slow rhythm. Once pipeline inventories decrease further, conditions will tighten again. Meanwhile, we are heading into a season of heavy holiday shutdowns, just as shipments from outside the US are slowing down. This situation resembles last year, when the market struggled most of November and December before turning up. Last year, we feared a reduction in supply caused by duties and tariffs. This year, we must be concerned about their actual effects. On Friday, I saw a 5.65% rate for a 15-year loan. Additionally, shipments from Canada and Europe are dropping. While these factors alone don’t resolve the housing market slump, they are moving in the right direction to help reduce producers’ losses.
Open interest was growing as the week came to an end. We are back in an area where the short funds add to their big winning position while the industry adds to their long position. We don’t get a CFTC report, but it would be the norm. Watch the open interest in November. It is holding over 2169 contracts with 10 sessions left. There is always a lag with the funds offsetting trades, so I’m not looking at it as important just yet. We also had the same open interest dynamics building last year at this time. There is a lot of deja vu on this one.
Technical:
January ended the week with a 19.40% RSI. It came into the week with a 34.60% RSI. It was off 1 to 1. Technically, the market is oversold. While not a perfect science, it usually isn’t off by more than a few days.
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.
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.
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
If you want to 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 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
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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
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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,
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