Market Plus: Matt Bennett

Nov 15, 2019  | 13 min  | Ep4513 | Podcast

Podcast

Delaney Howell: This is the Friday, November 15, 2019,   version of the Market Plus segment. Joining us once again is Matthew Bennett. Matt, welcome back. 

Matthew Bennett: Yeah. Thanks for having me. 

Delaney Howell: Matt, I want to ask you a question. And it's not related to the commodity markets. But I think it's a very interesting thing to share with our viewers because I was also in a similar situation when I stepped into my role as host of Market to Market and that is what your dad has told you about you getting on the show of Market to Market. 

Matthew Bennett: Basically, as a kid I watched Market to Market every Sunday after church whether I wanted to or not, because we had country cable, you know, so we had four stations, the main three and PBS. And so, you know, my dad has always said, you know, one of these days if they ask you on Market to Market, then maybe I will consider you a little bit more of an analyst. As you know, and so, he told me after I told him, I was going to get a chance to come on here. He said, we'll just wait and see how you do.

Delaney Howell: You can never, you never can please them, right?

Matthew Bennett: He's proud, I'm sure. He's not of the of the generation that maybe is going to let you know that.

Delaney Howell: He's not going to call you randomly. 

Matthew Bennett: Absolutely not. 

Delaney Howell: Well, you'll have to send him a link to the Market Plus, yes.  Matt, we've got some great questions that came in on Facebook and Twitter. At Market to Market you can always send in your questions. I want to kick it off here with AJ in Iowa. He wants to know what what price level should we be looking to get some protection on January feeders. 

Matthew Bennett: On January feeders, you know, to me at this point, is I guess I'm wondering if he's wanting to buy them or sell them though. The I mean, that's a really good question. But quite frankly, if he was looking to sell them, I would be locking them in right here. If I was on the buy side, you know, in my opinion, I think you could be looking for just a little bit of weakness in here and so if you were to me, I would probably be putting in offers four to $5 under the market. If I'm looking to the buy side if I'm looking to the sell side, probably going to be looking to sell I'm right in here in anywhere.

Delaney Howell: Okay, and another quick question here about the cattle markets. This one specifically coming in about the feeders, from a folk in Oklahoma area,  has feeders topped out and will it be trading in a sideways trend now?

Matthew Bennett: Yeah, I would say path of least resistance right now is probably maybe just a shade lower. Have we topped out? That's a wonderful question. But by all means, it kind of looks like we have for the time being, you know, the the entire cattle complex, typically see some demand coming up here before too awful long. And like we talked about on the show, I think you're going to see a little more tightness than what we've had here in the last 12 months. So, you could maybe make a case that the cattle market could maybe scale a little bit higher, but at the same thing at the same time, if you look at the charts, we basically gone almost straight up for quite some time in here. And I would have a hard time believing that we're going to continue that trend at the present time.

Delaney Howell: Yeah, and I think the we've gone up really since that Tyson fire has happened. Did that change the pattern of seasonality of where we should be for this time of year for the...?

Matthew Bennett: Well, I think that it certainly had a very large influence. I mean, I think you know that there's that's a large discussion that we could spend quite some time on. So I don't know that I gotta go too much detail there. But there's no question that the market had a reaction that some people really enjoyed. I'll just leave it at that.

Delaney Howell: Some people as in maybe the Packers enjoyed it. 

Matthew Bennett: I'm not getting into that. 

Delaney Howell: No conspiracy theory from you know, all right. Well, Matt, I don't know if you are familiar with Tim in Cookston, Minnesota. He's pretty frequent there on Twitter as well. He's got a question for you about the hard red spring wheat. It's got a strong basis right now as well. But futures haven't moved much in this month. Should I sell it all now and reopen some of it with futures or options?

Matthew Bennett: You know, and I kind of liken it to the corn market situation, which is somewhat similar. I mean, actually, we've seen a fair amount of weakness, I guess, with the corn market, especially to close the week here. But yes, whenever the basis is good, what we have to do is we have to ask ourselves, What is the market trying to tell me to do? You know, in when the basis is good, it's saying we want your grain right now, whether we're talking wheat, whether we're talking corn, whatever it is. And so that's the way that I was brought up to, to analyze the markets, if you will. And the nice thing is I went to college I that was reinforced, you know, with my mentor, the University of Illinois, Darryl Good, you know, watch the basis watch the spreads. And at this stage of the game, I would have to tell him, that's exactly what I would do. If I was his in his shoes, I would go ahead and be marketing that wheat and reown it on the board. And just like with corn, like we talked previously, these options are just dead, the you know, in only one or two little things could happen to inflate them back to life again, and probably for no more than what he's going to have in and he could get a pretty good little return.

Delaney Howell: Since we're talking about basis here. I want to jump down to another question here from another pretty big Twitter follower of Market to Market and that's Phil from Dresden, Ontario. I'm sure you chat with him on Twitter somewhat as well. He wants to know with corn, December corn futures fluttering near $3.75 And much of the corn market sitting in the snow and under harvests do basis levels tell the real story in this market?

Matthew Bennett: You know? And that's a really good question. I saw that question earlier. And it's similar to what we just talked about. But you know, the thing about is you don't want to get to look out your back door all the time, we've got to be really careful there because there are some parts of the world that we have a fair amount of harvest completed, especially like where I'm from in Central Illinois, Central Illinois, though, I will tell you that we're pretty much finished up for the most part, there's no piles on the ground. And so why is the basis so strong? Well, there's no piles on the ground. And so, you know, there's regions that there's very much a shortage, okay. And so he's right, when the basis is really strong, it's going to tell a story. Now, we have to be very cautious, you know, to base it on what I just said, because, for instance, this crop is seven- 800 million bushels smaller than a year ago. So we're already significantly smaller. So how much smaller we expect the crop to get and 167 yield, you know, I think you could definitely scale down from that still, I think that test weights are going to end up rearing their head, you're not going to necessarily see it on yield. But I do think that you're going to be looking at field loss, I think that you're going to be looking at very challenging situation. And I pity the people that are going to have to let it sit in the field over the winter, I really hope that they are blessed with a December maybe that we're not looking for because a lot of your forecasters are talking for pretty rough weather here in December. So moving forward, I would have to think, for a producer with we close to actually just barely above 370. I've got to think that we're going to find some support in here. But if I was, again, if I was hauling my corn and I don't know that I would be paying commercial storage to find out I just don't know that that pays whenever basis is already this strong. Putting it in the bin at home. I think it's a wonderful thing to do. But most people at this stage of the game, their bin is probably already full.

Delaney Howell: And that that poses an interesting question to that we've been talking about a little bit and that's right now you can tell the commercial buyers want the corn because the basis levels are there with way over where they usually are for this time of year, but I think that poses the question as we continue to see this slow harvest, we see strong basis levels, is that just going to be a trickle effect throughout the whole year where maybe we don't see some huge rally because of this late harvest? We just see commercial buyers being able to get the supply right when they need it? 

Matthew Bennett: That's a wonderful point and question, I would say, that's part of the reason why I'm trying to kind of split up my risk a little bit, you know, that's why I want to have some corn in the bin, just in case we see this thing end up rallying the whole lot and who knows, my personal opinion when it gets right down to it is that flat cash values to the farmer are not going to go down much, if any, why? Because every time we've seen the market go back, we've seen the commercial come in and say, okay, we're going to bump the basis again, we're going to go out and we're going to go ahead and narrow another nickel. You know, whenever people are paying for people to dry corn, and still offering a basis is 40 to 50 cents above what normal is, to me that tells me there's something going on here. And so, you know, I guess from a producer standpoint, you've got to keep that in the back of your head. Yes, your tendency is to want to lock in that basis. And I think there's going to come a time where we're going to want to lock in basis and potentially see this market rally. But at the same time, I don't want all my eggs in that basket in the event that I'm wrong, because if I'm wrong basis is locked in the market slides even more, even though I don't feel like it will. I don't know. Let's just be honest about it. If the market slides what's basis going to do? It's gonna get better.

Delaney Howell: Matt, talking about putting all your eggs in one basket. We've got a good question here looking already to 2020 whether or not to lock in some of those prices. We've got a question from Gary in Wilton, Iowa. He said weather and poor yields supposedly are already figured into this market price. So if this is true, and if 2020 is normal for weather and yield, how much of the 2020 crop should I sell before 20 prices tank?

Matthew Bennett: Very good question and I'm really glad that that he's thinking that way. You know, quite frankly, we've been urging the people that we work with take a very close look at what your cost structure is, throw your cost structure in with, you know, a believable yield something that you're going to take to the bank, or if you're someone that has to borrow money for an operating note, and then you know, would that yield what your breakeven and so, you know, a lot of producers that we've looked at, when you get above $4 405 to 410 level, a lot of these guys and gals are saying, Hey, I can make money here. Okay. And so if you can, then by all means, that's something we need to be proactive on. Now, how proactive do you want to be to answer his question, you know, we're 20% currently, but we've been talking about if we get back into that 405 to 410 level with what we're seeing, we're probably going to be a little more aggressive. The same levels we sold out before. Okay, if we got to 50% I don't have any issue with that whatsoever. If a producer can make money at today's price, I wouldn't have any problems with 50%. Bottom line for me if you start plugging in numbers in the next year, so balance sheets, If we do plant 92 to 95 million acres, I know some people thrown around 100 million acres. Well, I'm just going to go on record and say, I don't think that's gonna happen. You know, unless the bean market completely tanks can be hard to see that, yes, you're going to get prevent plant acres come back in. But let's just be honest about it. Our liquidity ratios have fallen for about six straight years. I got to be able to put the corn crop out there, you know, and yes, most people are still going to be able to, but not everyone, and you have to be fairly healthy, in my opinion, to be able to put 100 million acres in the ground. And so, but let's just say 92-93. I mean, you start talking normal yields, you know, 167 yield this year, given what we threw at it, terrible weather conditions, we still raise the 167 national yield. What if it's a 182 nation yield next year with 94 million acres, he's going to be wishing he would have been a heck of a lot more than 50% sold going in. And so I want to manage my own risk man, and get myself covered in the event. This thing goes the other way because if we do go south, it could  be a pretty treacherous here.

Delaney Howell: And what about the soybean markets? I mean, that is such a wild card, because if we get a Chinese trade deal, we could see soybean prices go higher. If we don't, we could see soybean prices maybe trend back to where they have so...

Matthew Bennett: Much more volatility there. You're right, you know, and so anything 950 and above for most of the people that I work with works well. Okay. And so, for soybeans, I don't claim to know where the price is going to go. It's so hard to forecast that. Me personally, I've got to think the soybean prices at 950 are probably towards the high end of the range and the low end of the range unless we see, you know, unless we have some sort of a trade deal, I'm losing confidence in that by the day. I think we'll probably get something but is it going to be what we all thought it was going to be, probably not, so as a producer, I think I need to manage some of that risk. We've seen bean prices in the last 12 months that have scared the daylights out of most of us. If you got a 950 handle and above I think it's a really good place to be. We've sold 15 to 20% depending on the producer, I think it's a really good place to be. But I will probably going to get a little more aggressive yet if we get any bump whatsoever. Again, it all comes down to profitability. I mean, profit margins is what you've got to hang your hat on. That's what pays the bills. And anybody who gets skittish if we get to 975, because they want 10. I would take major issue with that because I need to know what 975 means to my farm because 975 to 99% of producers I work with makes them money.

Delaney Howell: Absolutely. Well, Matt, it's been a pleasure having you on the show. Thank you so much.

Matthew Bennett: Absolutely. Thank you.

Delaney Howell : Join us again next week when we'll explore how one cattle feeders attempt to resume business after prison takes a tragic turn. And Mark Gold will join us at the Market to Market table. Until then, thanks for watching, listening or reading. I'm Delaney Howell, have a great week.

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