Welcome into the Friday, July 19th, 2024 Market Plus.

Arlan Suderman is still here and you know weather is it's it's not quite like basis where it's all local.

But so many times we get into this time of year and someone will tell you it looks terrible where I'm at.

How come the market doesn't respond?

We have lots of questions that are very similar to that, but why doesn't it matter?

What the market is looking at is was the size of the national crop.

That's all they care about.

That's the bottom line.

Ending stocks.

That's what they're trading.

And so we know we have serious problems in the northwestern Midwest and the flooding and ponding and from the hailstorms in Nebraska.

But right now the data and by data I mean the crop ratings as well as the satellite data is saying that the rest of the crop is good enough to offset the bad.

And so therefore the bottom line hasn't gone down.

That's what the market cares about.

And I think a lot of times farmers need to turn off social media because who posts on social media, everyone who's in those areas with problems.

So you think, oh, everybody must be having problems.

And the people looking for business from the farmer, so they want to give the story, oh, it's really bad so that you'll follow them and buy their services and ignore the social media.

And you probably make better decisions.

And many farmers to the point, don't always say I really have a good crop.

Exactly.

They don't publish that for a couple of reasons.

It's not that it happened before social media, right?

They didn't want to brag about whatever, and they also didn't want the neighbor to know how good it was.

Or the markets.

Those people like Arlan Suderman.

Let's let's go to Mike in Iowa to start here, Arlan.

Is there any chance we can rally new crop corn $0.50 plus, or are we doomed for $3?

Well, you can do it if we have a major weather problem develop.

And right now, we don't see that on the radar, it could still happen, but we're in pollination now with good weather.

That's our number one opportunity to get that kind of a scare.

Ordinarily, if the farmer wasn't the big long as short as the funds are, that chance would be there.

But with the farmer being the big long, it's going to be pretty difficult.

Again, I ask and I ask it every week because I'm very curious.

Everybody's take on this, and if it does change, what is going to be the final pry bar to open up the bin doors.

Harvest of the next crop.

They've got to make room for this next crop.

Obviously, if you're in northwestern Iowa, you don't have as big of a pressure on you to empty your bins because you're going to have a shorter crop.

Same thing with some other areas.

But the bulk of the Midwest has to empty those bins ahead of this next year's harvest.

And user knows that and manage money managers know it.

And which means we are going to be stuck in a lower trend easily for the next 2 to 3 months.

That, oh, we could actually put in the low early this year because of that.

And that may be what the market's anticipating as well.

Get all the bearishness out of the way even ahead of harvest possibly.

I guess I don't quite follow.

Why would it go.

Why would the low be put in early.

Because it the funds are pricing in all the bearishness ahead of time, plus the farmer trying to get rid of the old crop to make room for the new crop.

You get all that selling pressure early and the end users just going hand to mouth, because right now there's no reason for them to extend coverage.

And so and we get it early.

And we're back to the just in time delivery which was our issue pre 2020.

And in everything not just in grain.

So I guess that's a perfect next question here.

Josh in Illinois about some strategies.

What are your thoughts on storage versus reowning bushels on paper.

Well on old crop.

We've got some great basis opportunities, particularly in the West, to take advantage of right now.

And you could take that basis and reopen down the road if something were to develop, to change the market behavior on the new crop.

If this crop continues to be going well, we should be building some good carry in the market.

Looking at next July's, futures contract carry above premium to the nearby or even next December.

And if you have, very low debt, very low interest payments on farm storage, lower, storage costs, I said lower, not zero storage costs.

that gives you an opportunity to capture some of that.

This is a time for hitting singles and doubles in our marketing.

And that's one of the ways you can do it to help supplement your price, to help support and maintain the, what you've built in your farm, the equity you've built in your farm in recent years.

The chance for the home run is clearly in the rearview, right?

Yeah.

And until we turn the cycle around and that may take a few years.

Unless La Nina does it for us in South America.

Will politics do it?

Probably not.

I would say there's more risk to the downside from politics.

And there is the upside.

no matter which party is in the white House in the next term.

And I say which party, because we really don't know who the race is going to be between for sure.

Yet.

no matter which party, it pulls well to be tough on China with the American voters right now.

So we're going to have, tariffs against China.

They may look different.

They may be focused on different segments, but we're going to have tariffs.

We're going to have that battle.

We're going to have a strong dollar.

Brazil is going to have a weak currency.

And that's going to give Brazil an edge.

And so we're going to have problems with exports.

I think that the bigger question where politics plays in is around Taiwan.

President XI Jinping has said that he is going to reunite Taiwan to the mainland during his tenure in office.

He's coming up on 71 years old.

Does he do it before the elections?

Does he do it after the elections?

Depending on who he thinks is going to be in the white House, or does he wait another four years not knowing who might be, and he'll be 75 or 76 years old?

What we do know is he's been building up reserves of crude oil.

He's been building up reserves of soybeans, those essential commodities.

He's building up reserves of other essential commodities, preparing for the possibility.

He has already changed the leadership structure around him to support a move on Taiwan, and he changed the Constitution to make that possible.

We just don't know his timing.

We don't know how he interprets the elections.

We do know that if we wake up in the morning, he's made that move.

The market will assume financial sanctions that make it difficult for crushers to buy soybeans from the United States.

Thus heading lower rather quickly.

Yeah, that would be a game changer.

And it's always a story.

I guess, Robert, Minnesota's question is around that, but it's will China ever step in and buy our cheap pork and grains before the election?

You kind of answered that, on a much larger scale, but do you see anything happening again, regardless of who wins to to see more sales and what we've already seen.

We have seen some possible evidence of Sino grain, which buys for China as a reserve, perhaps being responsible for the 22 million bushels or so of soybeans, this last week.

Unknown destinations.

And that's possible.

They're doing that.

But the commercial buyers are saying they expect cheaper prices down the road.

They're not buying yet.

All right.

Let's look at again the size of this crop and how good things might look.

And the question from Shamus in Iowa.

68% good to excellent.

Rating in mid to late July usually means there's no record corn crop.

When do the traders start figuring this out?

And he had more stuff in that question.

But we got it there.

That's actually higher than average for this time of year.

When you look at the national crop, meaning we're still on pace for a trend or higher crop commodity weather group came out with their estimate this on Friday of this week, estimating the national crop at 182.2 bushels per acre, with ten of 16 states that they modeled coming in at above trend yields, Iowa at trend, Illinois well above trend.

And so right now that's what both the weather pattern, the crop readings and the satellite data tend to support.

Well, let's look at another factor in this.

And the acre size.

Doug in Missouri, does the U.S. need to have more acres enrolled in CRP?

It depends how many more acres we want to send to Brazil, because whenever we take acres out of production, the market moves those acres down to Brazil, where they have plenty of room to expand.

So that's what it does.

really, what the market's trying to do is find a price level that will discourage expansion in Brazil.

And so we don't want really from that standpoint, higher prices.

Now while Brazil farmers are making decisions about this upcoming growing season.

Well, our market certainly sending them a sign that we're lower, Phil in Ontario, Ontario's our last questions they fill getting in before the bell.

Usually crop prices take the escalator up in the elevator down.

However, in 24, prices have taken the escalator down at these price levels.

What evidence is there that we are building demand?

Will it mean at some point will take price back up through an elevator?

Well, we've seen exports overperform that's largely on corn especially.

It's largely been because of Mexico up 45% year on year.

Part of that was due to a drought last year.

That drought has carried into this year.

I think we'll see good performance next year on that.

We're seeing better than anticipated ethanol margins in ethanol production for corn, but I'd say we're at the front end to really building that demand base from these lower prices.

Final question Arlen, Kansas State Wildcats more or less than eight wins.

Oh, more.

Bullish on the cats.

All right.

Thanks Arlan, good to see you.

Appreciate it.

Next week we are going to extend the discussion on livestock and commodity markets.

We'll talk with Ross Baldwin and Jeff French.

Thank you so much for joining us and have a great week.