Market Plus with Matt Bennett

Paul Yeager: Welcome into the Friday, March 15, 2024 Market Plus. Matthew Bennett is still with us. And yes, Matthew, you were not crazy. You've been on the show enough to know it flies when you sit here. Ross Last week, again, it went faster than last time. You know, he was so amazed. Yeah, we did have just a little less time. So we have a lot of questions I want to get to. But first I need to hear -you've been speaking. We've been talking about your engagements. You're in Iowa, Illinois. You're looking at Kansas. What's the big question? Everybody's asking you.

Matthew Bennett: You know, what do you think this corn market's going to do, obviously, first of all. And second of all, I think there's a lot of angst. You're up here in this $4.70 area, 85% of $4.66, which was your spring price, gets you in about $3.96. And people are saying, how do I protect that $4.70 to $3.96 area? And obviously anything that you do, you know, is going to have pros and cons, but we definitely have ways that we want to attack that. A simple put spread makes sense for people who are buying crop insurance. I don't mind actually selling a call on a portion of those bushels. $5.50, $5.60, $5.70. Why wouldn't I do that if my cost of production is $4.50 to $5, you know? And so it just depends on where you're breakeven lies. But certainly that area, that 70, 75 cent window, that's a very important window. I think we could go up from here and maybe not. Here's the thing. $4.86 is last year's spring low. It's where the down long term downtrend is. And it also would be a 50% retracement of the whole rally.

Paul Yeager: I'm not trying to throw cold water on things, but that's a pretty optimistic view. Are people wanting the optimism right now or do they have a beaten look of, my gosh, this turned quickly lower? Maybe I should listen to you now?

Matthew Bennett: And they don't call me Doctor Doom for nothing. I typically am not super bullish. Okay. What I'm saying is, let's say that this hot and dry period in Brazil lingers. Maybe you get a bullish number on acreage. I don't think it happens. I really don't. You probably need something under 91 for it to be labeled friendly. But if those things would happen, there's no doubt dryness in the West, especially right here in Iowa, is a big concern. Subsoil moisture is not there, but most farmers are going to tell you, I want a plant when it's dry, right. I want to get a good even emergence and hope for rain later rather than trying to plant in the mud and get me a little bit of subsoil moisture. And so, you know, how optimistic am I? To me, I don't feel great about a move over $5. Personally, I don't think that that should be our marketing plan. What I'm saying is that I want to get some stuff locked in and marketed probably now through a move into the four eighties, which I think we'll see. I just think that getting through that 4.86 might be tough.

Paul Yeager: Ben in Iowa, he was the guest on the MTOM podcast this week and he's in a very dry area and he sent me this message. What's your best estimate for '24 corn acres? And with what we know now and how much might corn acres change if we have an early open spring? Kind of add on to what you said in the show?

Matthew Bennett: Okay. So basically, we had a great fall. We all know that most people had the ability to do everything they wanted to do from anhydrous to cleaning fence, froze out and all the dirt work they wanted to do. And so I think we were able to quantify a lot of corn acres. But here's the thing. When you have an early spring in the past, it was always, hey, once these corn planters get to rolling, they may just keep going. But Paul, a lot of the growers that I know start with beans now. And so I don't know that you can say that an early spring means more corn acres necessarily anymore. I think that in some areas it might, but overall I think we have to be cautious in that assumption, especially when right now beans, pencil better than corn for a vast majority of growers. And so last fall, corn pencil, better than beans. That's the reason why we put so much anhydrous on. That's the reason we had so many acres quantified. And so, yeah, I'm 91.5 on corn acres. Our group is 86.1 on soybean.

Paul Yeager: Okay, that's the one I didn't get a chance to ask you.

Matthew Bennett: This year, but I mean, last year, you know, you're in that 178 and a half type situation, right? Last year, prices were a lot higher than they are this year. Do you get more acres? I mean, wheat acres are going to be down. We know winter wheat acres are down over 2 million. Spring wheat acres are probably going to be lower as well. I mean, when we talk to growers, they're saying, hey, I don't really like this price structure. We're thinking we could be down overall well over 3 million acres on total wheat acres. And so who's going to get a few acres? Cotton cotton's going to pick up a few acres, but are we going to see total acreage go down just a shade? It would make sense if it does because prices are lower.

Paul Yeager: Do you see the acreage change coming the majority of wheat acreage territory not so much in the middle of corn and soybean.

Matthew Bennett: I would say your fringe acres are where you could see some of these quote unquote swing acres go over to soybeans. There's no doubt if I'm looking at anhydrous still, you know, with nat gas at a $1.65 to $1.70, in anhydrous run in seven, $700- $800, I think some people are saying, I don't know about this. You know, I do think anhydrous gets cheaper once planters roll in, the spring runs over. And so if I'm someone that's got the flexibility to side dress, for instance, and I know nobody likes to side grass, but if I'm someone that has that flexibility, I think this would be the year that you do a few things you don't necessarily want to do.

Paul Yeager: You might have corn that's, you know, hip high by May 1 at the rate we're going. But that's what I want to get into now, because I want to follow up, Luke in Iowa. Let's go to his question. The question is how much downside would an early plant '24 put on the grains Initially?

Matthew Bennett: You know, a couple of things come to mind. You're always going to hear talk of 2012 with an early spring because it was so phenomenal early on when my corn was knee high, I would say is the best corn crop I'd ever seen. Uniform, beautiful, lush. But here's the thing. How much long term downside could you see if you get an early spring. Paul, the problem I've got is that we're carrying out a lot of corn. Okay? If we end up with 92, 92 and a half. I know the Farm Futures survey based estimate was 92.8 A lot of times they're fairly close there. 92.8 Using a 178 yield gives me a 2.7 billion carry. Now if you get to a 182 yield. And the reason why I picked that is because that's about 3 billion. Okay? People say, well, I don't know about a one way deal to hey trends over 180. Okay. Mother Nature is going to get her. She won't have her nose out of joint every year. One of these days we're going to get a 2014 weather pattern. If we do. And I'm a grower that doesn't have some sort of a marketing plan for a 2.7-3 billion carry talk. Boy, I think I could be very frustrated myself.

Paul Yeager: But cross out the word corn, put it, put beans in that discussion.

Matthew Bennett: To answer his question, what's the downside risk? I think you see sub $4 corn with that scenario that I just tested.

Paul Yeager: So now again, cross out corn and put beans on location. Going back to what you just said, let's plant early and we plant beans. 10th of April? Seriously? Yeah, 10th of April. You could see beans planted.

Matthew Bennett: There were beans plant in Shelby County, Illinois this week.

Paul Yeager: I heard that already.

Matthew Bennett: Yeah, there was a few beans planted and there's a few folks that are scratching around. Here's the thing. If you plant 86, 87 million acres of beans, it's kind of like Brazil plant in 18 straight years of more beans, 3% more beans this year. And you're asking for a huge cut in Brazilian production. But there's a buffer there because they planted more beans. Right? So I got to know as a grower, if I'm bringing in 300 plus on carry and I think that the carry could grow from what the USDA is already forecasting because exports, I don't think are going to be too good for the remainder of this marketing year if I do 86 or 87 on top of that, Paul, all of a sudden I'm probably talking 4 to 500 million type carries.

Now, no crush was phenomenal today, higher than every estimate at 186 8 million above the average trade estimate crush is going to remain strong. We have to hope that we continue with really strong crush here. But what price structure might we look at? If you get 87 million acres of beans on the carry out we currently look at? You know, I think that you will certainly see below 11 in that scenario. And I don't know that you get to single digits. I sure hope we don't. But typically the market goes farther in whatever direction it's going and what it really needs to. We know how that works. When the funds get to moving in the same direction.

Paul Yeager: We're going to get to that in a moment. I want to thank William. William in Iowa, Matthew in Illinois, Dillon in Iowa, Mats already kind of answered your question throughout this show and the analysis. So, Ken, in Michigan is where I want to go next year. Matt, we've had so much counter seasonal market moves in the past 12 months. Is this move in corn and beans any different?

Matthew Bennett: Here's the thing about counter seasonals and seasonals. In the past before Brazil became such a powerhouse. Here's the thing, Paul. I mean, they're the number one exporter of corn and soybeans, second year in a row on corn. And I am afraid that that's a trend that's going to continue. So whenever we're talking about South American production as much as we are, whether it's planning, getting a plant in time, you know, you can get the safrina crop planted in a timely manner. Some of your seasonals are not what they used to be. Okay. And so the move that we're currently seeing, a lot of times in February, you get a little pop here, right, because you're looking at the crop insurance price. We've got nothing of any sort this year. Obviously, this market just kept on whittling this way lower. And then you get into March and all of a sudden you get start getting a rally.

The moves are hard to predict. And so what I always tell people is, you know, if you want to look at seasonals, if you want to look at what you did last year, I think you're missing the point. What we got to look at is what is my break even cost of production? What can I lock in today and how can I keep the upside open and keep some flexibility in my marketing plan? Why would I want so much flexibility? Because some of these forecasters are already talking about a rapid dissension of El Nino could mean major dryness in the Western Corn Belt this year. So if I get all excited and sell a whole bunch of corn, if you move to $5 like you're throwing cold water on, if we get excited, sell too much there and then we don't raise it, that's bad news Bears right there.

Paul Yeager: I'm not trying to throw all the cold water. Just a little bit of it.

Matthew Bennett: Well, I'm just having fun.

Paul Yeager: And that's okay. But let's look further down the line because there's a question here Justin in Iowa. Should we be selling December '25 and December '26, corn and beans already?

Matthew Bennett: You know, I think that it warrants consideration for sure. Obviously, if you end up raising a crop, there's no doubt in my mind that you're going to be wishing that you had sold more. Now, obviously, we don't know what the weather's going to do. We fully expect, given everything we know, that we could step in here and hedge some Dec 24 and eventually roll it out to 25 because we feel like that spread could be $0.35 $0.40 or more.

Whenever it gets that time. It's really hard to do anything other than maybe an HTA to you could do an HTA if they're not going to charge you an arm and a leg, but you can't do anything in the options market that far out. It's just going to cost you way too much money. But should we be thinking about starting to make some sales? Absolutely. I also don't like cash prices. You know, that far out on the purchase contract because the basis has to be so wide because the elevator has to carry that long. So I think you're thinking correctly, we're going to have to get creative in how we do it.

Paul Yeager: There's been discussion online that that's really bad advice to look at 25 and 26. They just feel so much that they're going to be selling a crop at a discount and they don't want to do it.

Matthew Bennett: Well, the thing about they is that they have lots of opinions. I here's right and here's what I would say is that I know my operation better than anyone else. What I need to do is lock in profit margins and return on investment for myself and try to tune out all the noise. And I'm including me on this show. I don't know your farm if you're watching this, most likely several of you. I do. But if I don't know your farm then taken my advice as the gospel is probably not the wisest thing to do. I've got to do what's best for me. Everyone's got a different operation. Not all I get hog wild on '25 or '26 this far out? Absolutely not, but getting started makes sense.

Paul Yeager: You know, one thing we went hog wild on?

Matthew Bennett: What’s that?

Paul Yeager: The time. Yeah, we went pretty long.

Matthew Bennett: Hey, it's good, though.

Paul Yeager: Good to see you.

Matthew Bennett: Yeah, good to see you.

Paul Yeager: Matt Bennett everybody. Thank you so very much. That'll do it for Market Plus. And next week we are going to look at the efforts to connect that last mile of the digital divide. And we'll also have the commodity market analysis of Mark Gold, Thanks for joining us. Have a great week.

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