Market Plus: Matt Bennett

Nov 12, 2021  | 12 min  | Ep4713 | Podcast


Yeager: Welcome in to the Friday, November 12, 2021 Market Plus. Here is Matthew Bennett. I asked last week Ted this same question, I'll ask you. On the drive here you've got a couple of hours in the car to process things. What is it you really wanted to make sure the audience knew or what was on your mind, besides the greatest hair bands of the 1980s and '90s?

Bennett: I think a couple of things come to mind. The last time I came over I didn't see very many people running in the field and we talked about that. Since then there has been a lot that has gotten done. And fortunately, we were hoping back whenever we talked the last time that we were going to have a good run here towards the end of October, early November. That's exactly what we got. Thank goodness. But what was I thinking about? Just how interesting this is all going to be if we can't get, again, a good fall anhydrous run. And then what if we have a wet spring? I think you could be looking at a very interesting situation coming up that could put us in I guess a predicament that we haven't seen in quite a while, if ever.

Yeager: See, now you're going to make me get in trouble with the control room because I'm going to go out of order on the questions because you brought up a point that you should probably flush out right now. Let's do Todd in Rice Lake, Wisconsin. He asked us via our Facebook page -- and by the way, thank you everybody for all the questions. We can only get a few of them in and we combine a couple of them. Todd is asking, Matt, look into your crystal ball. What is in store for 2022 with weather and yields?

Bennett: Boy, that's a good question. You hear a little bit of people talking about La Nina, of course. And so would we have a similar year to what we saw this past year? That wouldn't be such a bad thing because we just posted what the USDA said was a 177 record yield, national record yield. So as far as weather is concerned I don't see anything outlandish. Forecasting the markets is hard enough for me let alone the weather. But as far as markets are concerned, one thing I would -- did you say it was Todd?

Yeager: Yeah.

Bennett: What I would say to Todd is that, what a beautiful thing we have going for us already given where prices are at versus a year ago when we were sitting here, yes we had already started rallying, but right now we're looking at $5.50 corn, we're looking at $12.40 beans and those are really good situations to start with. And so we can take some risk off the table. Yes, inputs are expensive, I totally understand that. But still, historically these are awfully good prices that we can still lock in really good revenue with. So do I think we could have $6 Dec corn in the cards? Yeah, I do think that is very possible probably by the time planters are done rolling next spring.

Yeager: Let's say you, me and Todd are sitting at a table talking here with our mugs. Advise him, me. How do I take advantage of what you're just talking about?

Bennett: I think that you've got to keep some flexibility, first of all. But if you're locking in all of your inputs be cautious as to not lock in much of your corn prices as well, at least with some sort of a risk management tool because you and I have both seen, we've all seen over the last couple of years a black swan event can change everything that we assume to be true moving forward. And so absolutely I would be looking at some risk management on enough bushels to cover my costs that I just locked in at a very high price, but keeping flexibility because I do think this corn market has got some work to do, especially given the fact that the USDA lowered our bean yield this last week and gave a little bit of a propping up of soybeans, I think that it's going to make for an interesting acreage battle.

Yeager: All right. Acreage is something that is going to impact this next question. Cul in South Dakota had a couple of good questions and conversations here on Twitter. What is going on with the wheat complex? Is that an acreage battle there? Or is it back to just weather?

Bennett: Well, we're past the winter wheat type seeding. We pretty much know what we've got. And I think, again, the soft red winter wheat I don't think we got enough planted or sewn. From people that I talk to that sell wheat, several of them have told me we've got lots of bags of wheat sitting around still and a lot of guys were excited, guys and gals were excited to plant wheat this year. Why wouldn't you be? At the time $7.50 wheat and then you're looking at double cropping in that part of the world, that has been extremely profitable. So what is going on with wheat? In my opinion, wheat was trying to buy the acres but Mother Nature didn't totally cooperate in all parts of the country. Now, hard red winter wheat seedings I think were pretty solid for the most part but spring wheat is going to be very interesting.

Yeager: Did cotton buy enough acres in that story?

Bennett: I think that cotton from what we hear, I'm not a cotton expert so to speak, I definitely talk to a lot of folks though in the Delta that are telling us they think cotton seedings could be up 10% to 20%. So that would be 1 to 2 million bushels, or acres. And so could we see a 1 to 2 million acre increase in cotton? Yeah, absolutely, you're looking at very good profit margins whenever you're talking about even $80 cotton, let alone $100 cotton, and obviously we've seen some awfully high prices here over the last several weeks. And I firmly believe that you're going to plant quite a bit of cotton this next year.

Yeager: All right. Scott in Barrington, Illinois had a couple of questions that came in. This is the first one. When inflation hits South America, the farmers are slow to even hold grain there. Did the U.S. farmer see the light?

Bennett: I think that if the U.S. farmer is going to be holding onto grain more so than in the past it's going to have less to do with inflation than what it is that they've got some money in their pocket and they're going to kind of sit around and wait. I think it's a good question, by all means. But I think the inflation, the type of inflation and the level of inflation in South America has been drastically more than what we're seeing here in the U.S. Now, inflation certainly has been obviously here. I don’t believe it's transitory, I think inflation is here and I think that there's the chance that you could see continued inflation. How is it going to impact commodities? Typically it's going to give us a bit of a bump. But you've got to be careful if you're in that situation that you're just expecting a rally based upon inflation not to let extremely profitable prices come and go due to some event that none of us are even thinking about right now.

Yeager: I was looking to see if I had another question about inflation that I ask. This one is as close as I can come here. Jared in Mattoon, Illinois, will unrealized corn rallies drive $1400 anhydrous or is it the other way around?

Bennett: Will it drive $1400 anhydrous? Natural gas prices being high have been a big driver of anhydrous prices, the hurricane that came through obviously shut down anhydrous production and then you've got major issues with logistics. And so most of these plants are designed to get full before their fall run and then as soon as they start being able to haul they're hauling like it's going out of style and they're probably going to fill up again and get rid of that obviously before the weather gets bad. So a couple of fill-ups in the fall. I don't know that very many of these places, especially in the eastern Corn Belt, are going to get empty period. And so we've got a major issue there. Now, are we going to magically see the price go down by spring just because -- that's not throwing shade at anybody or anything, I don't believe so. I think that most people are calling for a cold winter and if that's the case then energy prices, natural gas prices are not going to go down. And so my fear is that a lot of folks are going to be waiting on lower anhydrous ammonia prices and they're going to bypass, if they get a chance to put it on, $1200, $1300 anhydrous and maybe pay $1500 to $1800 anhydrous in the spring. You're hearing those numbers thrown around already, Paul. So I do know a couple of growers in Missouri who were offered the chance to book some spring but they had to pay $1800 for it and they had to pay for it this fall.

Yeager: Did they?

Bennett: No.

Yeager: That's a risk that you've got to take.

Bennett: I'm not saying that people haven't, but the ones that I talk to didn't do so yet because obviously there's some serious sticker shock there, totally understand it. But I don't think the high -- if the price of corn falls completely out of bed due to whatever, I don't know what that might be, will anhydrous prices come back lower? I've got to think that you'll see some deflation there. But I don't think that you do so whenever you've got $5.50 corn. I just don't see it happening.

Yeager: That's if you're buying the demand side of it for use for anhydrous, not the weather side of it. Okay, gotcha. All right, Scott in Barrington, one last question and that will end our Market Plus here. World is not running out of grain, in his eyes. Would you say this is a more technical rally by the funds or fundamental rally cause of supply/demand equals price?

Bennett: I don't know that you could say the world is running out of grain. I would agree with that. But at the same time, what do our stocks look like versus our usage? And that is one thing we all have to understand is that our usage continues to grow. And so it looks like we're actually going to assume a 144 crop out of Brazil and bean carry from one year to the next is going to go down just a little bit, which is interesting. It tells you that we're counting on Brazil to raise this monster crop and we're still going to drop world supply, world wheat supply and stocks drop over the last year and then we're assuming and we're being told China has a ton of corn sitting in China whereas over the last year they have shown their cards that maybe that's not the case. And so I think that it's more about fundamentals than what it is with technicals. I think that you've got to be very cognizant of the fact that we have become a just in time delivery type world whether we're talking fertilizer, whether we're talking commodities and whenever I look at this, for instance, this corn market in the U.S., again, I think that you could back yourself into a corner where things have always worked out in the past and if the weather doesn't cooperate on one fall followed by the next spring whenever you need big acres, I'll tell you what, this could be an extremely volatile situation.

Yeager: If you would have gotten out of the pickup truck at all in Iowa you would have noticed we had a big rain two weeks ago, got a big rain again this week in November. That has a long tail when it comes to spring work around here at least and I'm sure we're not alone.

Bennett: And getting anhydrous on in the fall because as you told me earlier, not a lot of that was able to get done.

Yeager: All right, Matt Bennett. Good to see you. Thank you so much.

Bennett: Absolutely, thank you.

Yeager: All right, Cinderella is the right answer for one of the best hair bands of the '90s. Next week we look at the challenges of food supplies at the holidays and Elaine Kub will join us to analyze the markets. Thank you so much for watching and have a great week.

Trading in futures and options involves substantial risk. No warranty is given or implied by Iowa PBS or the analysts who appear on Market to Market. Past performance is not necessarily indicative of future results.

Market to Market is a production of Iowa PBS which is solely responsible for its content.

More from this show

Grinnell Mutual Insurance