Welcome into the Friday, January 26, 2024 installment Market Plus.

Shawn Hackett still with us.

Shawn I had a couple of references to songs and I didn't say them to keep us both from laughing, so I'm going to try not to do that during class.

Thank you, Paul.

I really appreciate.

That, because we need to start on an almost a sour note of sorts because let's be realist about that.

I think you were pretty optimistic on many, many things in the show.

Now, I want to take it down a notch and then start with Williams question How low will corn and soybean prices go?

And give me a couple of reasons why we could go lower.

Well, if we plant as many acres as are being contemplated and if we finally reach trend line yields, which we have not done in three or four years, and if, of course, these are all ifs, right?

And if the demand for U.S. grains export wise remains subdued, then you start running the numbers on carry outs.

You know, we'd be looking at 3 billion bushels plus corn, we'd be looking at 500 million bushels plus soybeans numbers we haven't seen, you know, pre-COVID.

And so, you know, one could argue what exactly that means for price, but that would be an argument for a considerably lower price level to match an oversupply of that magnitude.

But what then drives I mean, I have my ifs, but let's face it, we always hear about this acreage shift.

We're not really talking a lot.

That gets changed, does it?

Not late in the game?

Not, not not really.

Because when you already put the anhydrous down, you know, that is going to corn, you know, and and it's and it's not going to you have those acres that come over out.

You do, but it's not a dramatic you know, maybe it's a couple of million acres each way, depending on which price signal everybody's getting.

So once that first number comes out, we kind of all look at that as the North Star.

Well, you know, the planning intentions report says, you know, this is a pretty good number.

Now we can wiggle around a little bit.

Do we need to?

And if we do, where do we need to wiggle?

And then we go two or 3 million acres one way or the other.

But it's not what I call a game changer At the end of the day, Paul, we have not delivered trend line yields and in a long time, if we do with however we dance with the acres, you know, and we don't see a pickup in export demand like we spoke about the dollar and other things, you know, then those carrots are going to go up significantly in harvest time, which is when you really talking about what could prices be, they could be considerably lower.

My view is the weather that I see happening is not going to allow for trend line yields.

We can argue when exactly how low they could be.

And my view is if Brazils crops are assured, as I believe they are, for soybeans and eventually corn, the exports that we missed out on last year, we're going to gain significantly in the upcoming season.

And those balance sheets which look over burdensome, are going to be less so.

And that's how we're how I see the market balancing this out right now.

You mentioned a February storm.

So what does that do in the middle of the country that doesn't have anything planted at that point?

Does that even matter?

The February call is really not that much of an issue for the planting season.

What I'm more worried about is I think we're going have what's called a false spring where you get a really warm April, those planters get rocking and rolling and then we're going to I we think there's a really good chance for a hard freeze here in the first half of May.

You do that with a lot of corn and soybeans and, of course, winter wheat being harm's way, coming out of dormancy, trying to grow yield.

That could be a very, very big disruptive force.

Think about planting corn in late May with a line in your back half hot is starting to push pollination into the type of part of the season you don't really want to.

Then we really get going on some stories here.

So this is a question a little different to what I want to follow up with.

And this is Mitch in Iowa.

Sean, what will it take for the funds to exit their massive short positions in corn?

And how are you marketing with that in mind?

Well, the funds are going to get out when they think they are on the wrong side.

They may be on the wrong side because weather tripped them up.

They could get on the wrong side because the dollar caves in big numbers all of a sudden show up from China.

You know, flash sales, geopolitics, a number of things come up that tripped them up, that feel, oh, my gosh, I am on the wrong side to this degree.

We need to get off and weigh in because computers trade so much of our market, they all get off at the same time.

So I don't know what exactly those cows are.

We've speculated on on a few, but in any given year, even during the the 2012 to 2020 timeframe, only had perpetual 3 billion bushel carry out for corn.

We always had a couple of reasons for the market to find, at least for a brief while, reasons to rally the market.

I don't think this year is going to be any different.

Let's flip that script to the hog market because there's a there's some of that same strategy that wants to be known just about how to do this individually.

This is Matthew's question When it comes to the hog market, have we hit the highs for the summer months?

What should we be doing to help protect us this year?

We doing some puts and calls or or are the LRPs a better route?

I think the LRPs are a pretty good route this time around for protecting downside price risks.

I don't think the hog market can really, really trend higher until China gets back into the mix, as we spoke about earlier in the show.

I don't see that happening in the first half of the year.

I see that being a back up story.

What I see in the first half of the year are these temporary rallies we get when when the consumer bids up the pork price.

And you want to be looking for those rally upwards like we have seen.

We've seen a nice rally to put some LRP protection under the market.

I think that we are first half of the of the year strategy is the way I would handle it.

And then and then we look for some more significant upside in the back half of the year.

We need to feed those hogs something and that is soybeans for many.

Scott in Wisconsin wants to know, are there too many soybeans or not enough in the world right now?

Whenever the largest exporter in the world is harvesting a new crop, there's always too many soybeans right now.

Now, is it going to be too many soybeans six months from now?

The jury's out based on all the factors that we talked about.

But once that crop in Brazil is put away and those that have to sell, sell and that sort of thing, I think we're going to find out that we don't have enough soybeans, willing soybeans for sale at current prices.

Help me with the inside of the Brazilian farmer more than I know.

Do they lock their beans and not sell if the price isn't favorable like we seem to have time and time again here in the United States?

Sure they do.

Once, a week we handed farmer who didn't do what he was supposed to do, who has to sell or the or the storage doesn't have the storage.

It has to blow it out.

I mean, the basis is in the last two weeks blown out in Brazil for that exact reason.

But there's a solid good farmers that that are that are profitable, that don't have to sell.

And they're you know, they're going to look to try to you know, they know that the market goes up and down and around.

And so, yeah, they absolutely do that.

That's the point of the harvest lows.

And once that crop gets put away and we put away and then we start to look at how much lower that crop is compared to what it was supposed to be, I think there's not going to be as many soybeans available at current prices as the demand for that product would be, which means that's how the market goes up.

Maybe there'll be plenty of soybeans available.

A dollar or two higher.

But that's not where we are today.

So you've alluded to this, and I don't know if you've actually have I know I haven't exactly asked this question, but Kevin wanted to know, will Brazil rains prevent timely Safrina corn planting?

Will the monsoon rains stop early this year?

I don't really think Mato Grasso we're going to be looking at delays in corn planting due to rains.

I think if they're going to have delays for plantings because the soil is too dry.

Empty tank, I think.

Empty tank, there's the soil is too dry.

They're not going to just plant at all with poor economics.

So I think that's more of the issue for planting and how many acres we get planted in terms of the March April pollination season.

We're in what's called El Nino Modoki which means sea surface temperatures warm in the central Pacific.

When we get that, it tends to deprive Mato Grosso of moisture.

During March and April the last year we had that was 2015 2016 growing season and their corn crop had terrible conditions during pollination and that crop was down 22% year over year.

No two years of the same this year could be different, but I'm expecting a similar outcome in terms of poor production, poor yields and less acres planning because of dry soil that the tank is empty on right now.

You mentioned trends.

There's a couple of ways we could go, but this is actually perfect, John.

And Quebec's question is, is a good follow putting my 20 year December 31 corn inventory numbers on a graph.

There seems to be a 5 to 6 year cycle from low to high.

Do you foresee the same going forward?

I do not.

And the reason I do not is because the weather patterns have changed for the long term, meaning we're in a increasing weather volatility cycle that began in 2019 that the likes we did not see prior to this for decades upon decades.

So any pattern that you're looking at that this gentleman is looking at is based upon a prior, more docile weather pattern than the one we've gone into.

I think the cycles are going be much shorter in duration in terms of when you get bounces in supply and reductions in supply, then a five or six year window.

So I think for that reason, his interesting analysis is not going to hold water going forward over the next decade.

Because we'd had a discussion in the last 6 to 8 months here of were very similar to 2012 2013 And do you don't see that necessarily holding up?

Well, the first thing we have to do is we have to have a 2012 style drought.

Right.

Which we haven't had yet.

But you could argue we're in one right now for much of the country after August 1st.

I mean, we ended up in a lot of dry conditions.

Right.

But we need that to be July and August, like March 2012 was a June.

June was really dry.

Correct.

In July.

But we needed to go into the key pollination and key pot filling stage.

So if you want to start comparing apples to apples, give my give you give us a 2012 style drought in 88.

Drought in 83.

Drought, you know, a 55 drought.

And then we can talk about correlations to what happens the year after.

We haven't seen that yet.

Last thing, soybeans.

I didn't actually pin you down on a number we've been flirting with holding that $12 support that finally fall through next week.

The way markets normally work, in my experience, is that whatever price level, everybody doesn't want to see broken is broken.

It's just the way it is.

Everyone say, please don't break 12, please.

My suspicion is they're going to break 12.

Create a final liquidation during peak harvest in Brazil, and then the market's going to have done its job by getting everybody out at the low and then having a post-harvest rally.

That's my suspicion based upon my history of looking at markets like this.

We're only getting you out because we're out of time.

Shawn, good to see you.

Thanks, Paul.

Always a blast.

Shawn Hackett, thank you so much.

Next week, we will look at the expansion of no-till farming practices and we'll have the commodity mar Thank you so much for joining us.

Have a great week.