Market Plus: John Roach

Sep 10, 2021  | 10 min  | Ep4704 | Podcast

Podcast

Colleen Krantz:

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Paul Yeager:

Welcome to the Friday, September 10th, 2021 Market Plus. Here's our Senior Market Analyst, John Roach. And John, I had somebody at the Iowa State Fair. You remember the Iowa State Fair when everybody has an opinion you do.

John Roach:

I love the Iowa State Fair.

Paul Yeager:

And you know, and I like it too. I had a couple people come up to me and says, Paul, why on earth do you cut everybody off and say very quickly in 30 seconds, tell me your life story. John, I had to do that at the end of the show. So we were talking politics, specifically food. We finished with the cattle market, the hog market. You started to discuss some food issues at the end. I want you to recap a little bit and continue.

John Roach:

I think we have to, uh, uh, we have to have sometimes take a bigger picture. You know a 40,000 foot view if you will, of what's going on out here. And, uh, and we can't ignore, uh, the unrest that's going on in the world. Uh, and the, uh, supply chain issues that we've experienced, the supply chain issues we are experiencing and how that impacts everybody around the world. And, and what we've seen so far is that, uh, it has helped the demand on food, uh, and, and that's a normal thing. And we think it's going to continue. We think that that the right way to look at this market is to just look at some of the obvious situations. The first obvious situation is what did the last farm in your area sell for and how, and what kind of, uh, what kind of price does it take for commodities to be dealing in that kind of farm value?

John Roach:

And then what's the inflation picture look like? And I experienced, uh, a couple of different times in my career when markets took off and went to price levels, we have not seen before. And, and, uh, it started early, was it in the seventies in 1972, when the Russians took all the wheat, uh, and the markets, uh, in 73 and 74 went to all new high price levels that we had never seen before doubled the price or more actually w dollar corn went to $4 corn. And so here, we're in one of those same kind of situations. And we have a market that just came up from very low price levels and we were, and now we're, we're acting as if they're going to disappear and go right back down again. And they may, but they're not going to do that until we have bigger surpluses of grain, or we have more stability in the world. And, uh, we won't get bigger surpluses of grain until we know the South and South American crops are good Brazilian crops, et cetera. Uh, and we're not going to settle down the, the uncertainties in the world. Well, I'd like to think we're going to do it tomorrow, but my suspicion is it'll still be pretty uncertain for a few more months and maybe a couple more years. So

Paul Yeager:

We're going,

John Roach:

Farmers have to adjust farmers have to adjust to that.

Paul Yeager:

I mean, tomorrow is as we sit here tonight, it's the 10th, tomorrow's the 11th, September 11th, that's 20 years ago. And we, we, the world has changed forever. I mean, the world's been unstable for, for quite some time. We always think that it's, you know, it goes in cycles and let's hope that maybe we get on that down cycle. I want to answer your question about land price. I don't know if you've heard, I'm sure you did. Last week. There was a farm in Grundy County, Iowa that went for 22,600 an acre. I just got this bit of information last night, a farm in Jasper County, east of Des Moines went for 22,500 acres. So those two big prices, Grundy County. I can, I can see that that's considered very good farm land in Iowa. Do high land prices frighten you John?

John Roach:

Uh, no, I don't know because they were cheap. I mean, not so much cheap, but they were steady at the same price for several years and people paid land off and people have accumulated income and the stock market's bright in incumbent. And so as a consequence, most of these farms are being sold for cash. I mean, there, it's not a, it's not a leverage situate leverage scares me, but if it's a cash sale, I mean, how could you be scared of that, that farm, that farm is paid for. And, and so smart people in the world, some of the smartest people in the world are buying farm land because they think prices of food. It's going to go higher. Uh, we've got a growing population in the world and, um, uh, and now we're headed into rampant inflation, and maybe that's going to change. Maybe, maybe they'll have policies, take us out of inflation, but I haven't seen one in print yet. So, uh, my guess is you better bet on that side. So what that says is that if you're, if you're not, if you haven't figured out how to sell high priced markets, when you don't know for sure what your crops are out in the country, you're going to have to figure it out because that's the thing you'll need to be doing here, uh, in this kind of environment, when you don't know what you have, you have to make some business decisions anyway,

Paul Yeager:

All right. Uh, this is a little off script, but close. Um, say you're somebody new trying to get into farming, say you're 19, 25 under 30, trying to get in right now. And you're facing these, these high prices. John, what do you do? If, if you're someone trying to start

John Roach:

Find somebody who needs a person, your age to help work their farm, and they'll do some sort of a deal that over time, you start to accumulate some sort of some assets and some land and so forth, so that you'll be able to, to, to, uh, continue the farming career. Uh, you're going to have to find somebody who's willing to help you, uh, do that. And the interesting thing is there's a, there's quite a few people out there that are in that position. I talk to farmers all the time that their biggest situation or worry, or problem is I have no one to come farm my farm, and they want to keep it in a, they'd like to stay involved until they die, but they're, they're old. And, and so, um, there's opportunities for young people, but if you're going to get into a multi-million dollar business and you're going, and you're trying to start doing that, and you're in your twenties, you're going to have to be really good to do that. I don't care what industry you go into. If you go into agriculture, that's one with high capital requirements. And most 20 year olds, I know don't have high capital situation. So you have to find somebody who's who needs your labor and who needs your, your strength and your youth. And that's what you have to offer.

Paul Yeager:

All right, John, I've got a couple of social questions I need to get to because you and I could have this discussion all day. I really appreciate always your insight, but, uh, I'm going to ask Zach and Lawrence, Nebraska, a simple one here for you, John off Facebook, corn, and soybeans, hold one, sell one. Which?

John Roach:

What was the first one?

Paul Yeager:

All right. So he's saying corn and soybeans, which one do you hold? And which ones do you sell?

John Roach:

Uh, you saw it. You, you, you, uh, you try to hold inventory, uh, of whatever is easiest for you to hang on to, uh, and, uh, beans are the ones with the tightest supply beans are what China seems to be interested in right now. That'd be probably the commodity that, uh, that I would favor the most in here. But I think both corn and beans and wheat, I think all three commodities deserve to be held by farmers from harvest into the fall and winter months.

Paul Yeager:

All right. So Kurt in North Dakota then is asking, are we done trading the forecast yet?

John Roach:

Hmm, we're going to shift. That's good. Real good question. Oh, we still have a little bit more of that in, for amounts to the Northern hemisphere, except for wheat. Now we're just starting, but the Southern hemisphere weather has now moved into the front burner place on the stove. So whether it's just as important, but it's not the U.S. weather, it's South America.

Paul Yeager:

All right, John, I'd like to thank, uh, Tim and Justin for your questions. And Phil, I know you asked a very specific question about selling off the combine. I guess I'll just, well, let's leave it at this right now, John, let's go back to the corn and soybean conversation A that you had in the show B that you just answered in the previous question, I'm combining, I'm sitting here thinking about selling. What's my percent that I should sell off the combine and take advantage of great prices, relatively speaking, or store some. Is there a percentage breakdown you want to go out on?

John Roach:

You know, we've, we've, we've kind of the problem with percentages is that you, you, you give me four different farmers situations, there'll be four different percentages. So I don't know how to do that, but, but we all can get down to money. Okay. So what we've started to do with people, when we think the market's going to trend higher, and we're not in a sell signal, we know we just try not to sell it all. But when we hit itself signal at this time of the year, we sell enough to generate 30 to 60 days cashflow. In other words, I'm going to try to hang on to as much as I can pass that, but what I need for cash in the next 30 to 60 days, okay, well, I've got it. I've got to generate that. And so when we get our sell signals that the, what we say the wrong time of the year, we do 30 to 60 days cashflow. When we get our sell signals that are, that have got three and four boxes, we do a fourth to a half of the crop.

Paul Yeager:

Makes sense. That is again, while you are a senior market analyst. And when we have you back on the show, who knows what the market's going to do, right? John, alright, John Roach.

John Roach:

Thanks Paul, appreciate it.

Paul Yeager:

That will do it for market. Plus next week, we will look at advancements and tracking insects and diseases that threatened crops and Sue Martin will join us to analyze the commodities. Thank you so very much for watching. Have a great week.

 

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