Helping farmers become price makers, not takers - Jeremey Frost

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Paul Yeager: Hi, everybody. I'm Paul Yeager and welcome in to the MtoM Show podcast for another installment, New episodes come out each and every Tuesday, subscribe, follow, or just make a habit of going to our YouTube page or wherever you get your podcasts. And we'll get you filled up, as we give you background information about what's going on in rural America. So we love having conversations and today, we're having a conversation with Jeremey Frost, he buys and sells grain he writes a newsletter about grain, we're going to talk about corn, wheat, soybeans, sunflowers, I learned something about sunflowers today in a place that you could buy and sell them, that's way above what you might be getting at your local Co-Op or wherever it is that you sell your sunflowers. Why haven't I thought of that? That is what we're going to cover. And Jeremy pays attention to the Market to Market show, specifically comments made in 2020 about what could happen in 2023. We're very, very close to flipping the calendar to that year, and what can happen to grains. So we will see what he thinks will be the big winner both in acres and in price next year. And what factors are at play and what you should be doing to prepare yourself for these days ahead. That's this installment of the M to M Show podcast. 

Onida. I had to spell it, or I had to look at your signature tell me where Onida, South Dakota is?

Jeremey Frost: It's right in God's country. About 30 miles north of here. What's got more more bins than people. It's got two elevators. An ethanol plant, the newest ethanol plant in the US, I believe. And it's like say right in the middle of South Dakota, right in the central part of South Dakota about 30 miles north of the Capitol.

Paul Yeager: Is this home, just where you were born? 

Jeremey Frost: I was born in Hoven, which is about 50 miles north of Onida, kind of right in that and Gettysberg area. So it's it's been home for me for 20 plus years or so now, like I've lived here. My kids of all went from kindergarten through graduating in Onida. So it's been home for a long time.

Paul Yeager: When did you get the grain bug?

Jeremey Frost: Um, so I left, when I graduated college, I went to see CHS, I went to interview for a state job and I went at the local elevator at CHS and ended up taking that job instead of a state job. And I've been doing grain basically ever since then. So for 25 years or so.

Paul Yeager: But I guess I didn't ask specifically growing up. Were you on the farm in the city? 

Jeremey Frost: Well, I had divorced parents. My dad's a farmer. My grandpa's were both farmers and my mom owned a bar. So they're a little bit of both.

Paul Yeager: A little bit of both. Okay, yeah, so why why not jump into farming?

Jeremey Frost: Um, well, I didn't live with my dad. I lived with my mom and that was probably why my brother's still on the farm. And I mean, I basically had in my passion in my blood, but I didn't spend all my time on there. Right. I did other business ventures that my mom had did it's still

Paul Yeager: What would you consider what's a typical day for you?

Jeremey Frost: Well, it varies a lot I mean, depending on what I'm working on, but it's talking to farmers nonstop and working on buying and selling grain or writing articles or or doing audios I do a lot of audios that we send out to guys and and basically it's sometimes it starts at 630 in the morning and ends at 10 o'clock 11 o'clock at night. I mean sometimes I'm sitting on my iPad or my phone all night long or watching TV with the with the family and and working on stuff. I mean it's it varies every day. I would say that in the ag industry. In the grain market industry in particular there is no typical day I mean they're always unique and they're always very well to make a guy humble in a hurry. Pretty hard to outguess these markets.

Paul Yeager: It is and you have to be up on them all the time. You mentioned the whole you know work at night. Do you like the evening grain trade the or what we call the overnights is that good for the industry?

Jeremey Frost: Um, well, it's it's good for the industry, but it's also pretty challenging. I mean for farmers in general. I mean, when you see a farmer will look at it and we'll be up 10 or 15-20 cents at night. And then like you take a few weeks ago when this Russia news hit and we're up 10-20 cents and then And then at night, about five o'clock in the morning, he said, Well, we're not gonna, we're gonna let the export quota go on. And all sudden we're down 50-60 cents by the turn of the farmers wake up. So it can be challenging and mean. And it's I mean, the main thing is that it's, it's pretty thin at night, and it's not very liquid sometimes there's not a lot of news and it's pretty easy for a guy to get chopped around. I mean, if a guy was just trading it, or farmers watching it, I mean, it's a easy way to panic sells watching markets at night, sometimes

Paul Yeager: The old panic sale, what panics you about watching the commodities?

Jeremey Frost: Well, I just try not to let my emotion get involved. Otherwise, they'll be trading wheat and sleeping on the street, as they say. So I don't I try to like say, not not be involved emotionally. Because otherwise it's you don't do a good job. And we get your emotions involved in the markets. And it's very difficult, very difficult.

Paul Yeager: And it's hard for a producer. I mean, we talk about it on market, often with different analysts where I'll say, what is the best way to take emotion out of it? How do you answer that question?

Jeremey Frost: Well, by having a plan, I mean, the one of the big thing I think of is every farm, every operation is different. I mean, I really stressed and when somebody calls me up says Hey, should I sell or should I buy? I mean, I can give five different guys five different answers because their operations all different, their risk, management's different, their risk reward profiles different wouldn't when they need money, I mean, what they have to do with their operations different and that's the big thing about marketing is, every farmer kind of knows what they should do. Every farmer kind of knows that their gut, hey, I should be selling because I have this in my operation needs me to do this. And it's when they start listening to analysts that give the blanket recommendations. I mean, that's not a blanket recommendation not for farmers in general. I mean, it's good information. And it's something to take, take into account, but it's not going to drive a decision, I mean, to your decision from our farm needs to be based on your unique situation, which is going to be different than your neighbor, it's gonna be different than your family members, it's gonna be different than everybody else, it should be your unique marketing situation.

Paul Yeager: Do you, do you, subscribe to the theory that we're not a farmers not necessarily competing to the farmer across the road, because of what you just said, everybody's situation is different.

Jeremey Frost: Um, well, they're all kind of competing, but they're not. I mean, I would subscribe to the theory that they're not competing. I mean, my big theory that I've been focused on lately is farmers need to become price makers instead of price takers. And what I mean by that is, I mean, like big corn bases in my area, in three weeks, it's moved 45 cents. So you got it. I know from sitting in my shoes, being a green buyer for 20 years. I mean, there's a lot of pushing in basis sometimes. And if you're not becoming a price maker, you're being a price taker, you're gonna give up a lot. And I think a lot of farmers need to realize they've gained a lot of wealth over the years, they've gained a lot more advantage than they had five or 10 years ago, they have a lot more control these markets, they realize, especially some of the niche markets, I mean, especially grains and sunflowers, the millets of the world. I mean, the corn and the soybeans, I mean, you're not gonna get quite as much push there. But if you have Hi-PRO, spring wheat, and there's a lot of times that you're getting very big pushes versus the posted bid, you really need to walk in your elevator, and when they give you a bid, say, Hey, this is what I want for it. This is my offer. Don't Don't let them give you have been taken. That's my opinion. 

Paul Yeager: Does that work? 

Jeremey Frost: Yeah, it does. I mean, it historically is done. I mean, I know guys that have, historically, always, I mean, one thing we to keep track of is what we've got our farmers versus the average posted price. And a lot of times it's been 45 to 100 bucks an acre on different commodities. And we've done it for years and kept track of it for years. And it works. I mean, does it work for corn? When everybody's flush at it? And it's harvest? No. I mean, if they're piling on the ground, are they going to pay you more? Just because you want more? Probably not. But if they're looking to say, Well, my pile is not full? What do I need to do to get the skin first if you put it in your band? I mean, a lot of buyers are gonna pay up a little bit. I mean, it's just common supply and demand.

Paul Yeager: The old supply and demand rule reares it's, it's head again, where do you see understanding my cost of production in making a grain plan?

Jeremey Frost: Well, it's more of what's my goal? I mean, guys need to understand their cost of production, but it's more Hey, what are my profits I'm trying to make on this and then tying it together. I mean, the worst thing I can do is, is to come into marketing and be making sales one way and then the next year making sales a different way just because and then trying to try to get the market just tell guests that cost of production is big, but for a lot of guys in my area that are farming a year behind, I mean, most of my guys have, I mean 1,000,000, 2 million bushels of storage, and we just huge large farmers don't necessarily mean need to move the grain they're farming year behind. So if you're farming a year ahead of time, where you're making pre-harvest sales, and cost of production is pretty big. But if you're farming a year behind, it's not really that important. It's more I mean, what can I do with my money? What makes more sense? Not? What's my cost reduction? And I mean, can I break even? I mean, it's just kind of depends on the farmer situation.

Paul Yeager: The as the farmer makes their way to the end of the year of 2022, in the year that it has been, how do you suggest a producer positions themselves again, is it all about their own situation? Or are there some standard things that you like to tell people that they should be doing as the calendar ticks on November into December?

Jeremey Frost: Well, it is all about their own situation. But generically, I mean, guys should be probably patient on making sales this year. And there's a lot of upside, our balance sheets are all tighter than they were a year ago. And the USDA used their magic pencil here a few weeks ago and said, Well, you guys produced a billion bushels less corn, your demands a billion bushels less. Will it be a billion bushels less? I don't know. I mean, the exports are going to be down because we don't have corn export. But I mean, the ethanol plants are making plenty of money. And we have been crushed margins off the charts strong. You've got ethanol margins. Good. I mean, the cattle margins are good. I mean, they're just a lot of lot of good demand scenarios behind here. And then the fact that we have I mean, the reason China's been locked down is partially because there's they don't have waited they want their people to I mean, that demand to grow like will when they unlock them. They can't afford it. I mean, that grain is not there for them to have their countries open up. I mean, that's a big factor reconsidering.

Paul Yeager: So you subscribe. I'm sorry, I'm using that word again. I'm hearing you say that maybe the COVID lockdown isn't all about COVID. But tamping down demand for the grain and food?

Jeremey Frost: Yeah, I mean, I think I think that the real reason that this COVID happened is because the fact they need to be trimmed demand, mean, they need to control people, because there's not enough to feed everybody. I mean, there just isn't. I mean, so that's my theory. And there's a lot of other people that are in that camp. And there's some that think that that's bull crap, but I guess only time will tell.

Paul Yeager: What do you make of the American farmer? They don't have to necessarily be in South Dakota, but the one in Illinois or Indiana, Iowa? Who do they need to pay attention more right now? In the next we'll just say six months to a year? Is it the is it China? Is it South America? Is it the other farmers in the United States?

Jeremey Frost: Well, they need to watch what China's doing. And I don't think the Chinese are gonna come out and say we're opening back up. Because if second, they say they're opening back up, I mean, everybody's gonna run it up on them, they're gonna probably come out there and slowly reopen it. And so that if something happens, they don't have to look like idiots. And then, I mean, you have to pay attention to South America's weather. I mean, that's going to be important, obviously, do you have to pay attention to your farmers doing I mean, kinda, but that's more of a basis deal. I mean, if you're seeing your farmer haul corn off to mean, a good example, I had one of my relatives was hauling corn 50 miles, and they're making $1,000 a load and corn was all of a sudden two weeks later that that's not for that basis, where they're at locally is 45 cents better? Well, their neighbor should realize this, he's calling his corn is supposed to go here, that means I'm gonna get paid more for my corn. So I mean, that's, that's the thing to watch for your neighbors is, are they filling up these areas that are deficit corn, and that's going to mean that my corn, when I'm gonna have to spend all the extra freight is probably gonna, my basis is gonna get better. But I think you have a lot of factors. I mean, you have the China situation there COVID policies, I mean, that's going to be a big driving force. You have what's I mean, what's going to happen with the stock market? And these elections? I mean, how are those all going to shake out? I mean, there's, there's a lot of factors that are gonna drive these prices. And, and the bottom line is you have farmers that have a lot more wealth than they had a year ago, or five years ago, or 10 years ago. They've got high inputs, but you don't have to buy them today. And they don't necessarily have to lock in sales at the same time. So you have farmers that have a chance to control the market better than they've ever controlled it. There's a lot of factors why we could go a lot higher. I mean, I'm in the camp of when Sue Martin was on your show a few years ago and said we're gonna have all-time high prices. I think we're gonna see all time high new high prices and a lot of greens.

Paul Yeager: You You heard about that little that little exchange? Oh, yeah. I watched that's legendary right there on Market to Market. Jeremy right there that is that comment and Sue was talking about 2023. And that's coming up. We're facing that. As you look at the wheat market in 2023. Have we hit the high before we even on January 1?

Jeremey Frost: No. We're gonna make new all-time highs and Chicago wheat, KC wheat, Minneapolis, maybe not. But we're gonna I mean, the crops, the worst rated ever just start off. And I mean, we maybe we'll get some rain and it won't come and maybe we'll be a better crop than it looks today. But we're gonna have some weather scares. And I truly believe that, that these weather scares unless South America just gets everything perfect. Or some other Black Swan. I mean, the odds are much higher that we will make new all time highs, and then we won't. I mean, it doesn't have to shake out that way. But the odds? I mean, they're just a lot more. I mean, farmers once the bins are shut, the bins are shut. I mean, why why are they going to sell? They don't need the money? They don't? I mean, they don't need the room. I mean, there's there's not a lot of incentive for them.

Paul Yeager: Well, let's look at corn then. Yeah, well, that as 2023 rolls, what do you see? January one is the high watermark for corn?

Jeremey Frost: No, I think we'll see 850 $9 Corn come, May June. I mean, I think there'll be an opportunity to sell that time when this weather scare happens. Like it always does. I'm not in the camp, that whether it's going to be perfect up till then and, and we'll have this massive crop, we might have a massive crop, they released the baseline acres, I mean, they're coming up, and they're gonna be pretty high. But when they add those acres in there, they're coming from areas that can't produce 200 bushel corn. I mean, they just can't and they're gonna start off the wrong side. And I think the funds are going to look at it. I mean, if we do something where interest rates get cut, or stay flat in the next couple of months, the funds are going to roll over right back in and start buying the grains and these elevators are going to go broke. They're the shorts in the wrong positions.

Paul Yeager: Well, and I had an email about that earlier today asking me about looking at some elevator issues. And we might just be getting started, then if that would roll us I'll ask you the same question about soybeans. What do you see in '23?

Jeremey Frost: Well, I mean, South America has a big impact. But the biggest thing in soybeans is the margins. I mean, these crush plants of all time record margins. Why were they not process as many beans as possible? Why will it not build more like they are? And why will beans not go higher? I mean, they're they don't need I mean, they don't need to go lower. When you have all time record margins? I mean, so I think same thing. I mean, we'll see a weather scare in South America in the US and beans will make their highs sometime next spring, early summer on a weather scare. And I think they'll make new all time highs, I think they'll be north of 18 bucks. And I hope we're closer to Martin's type numbers, which could be could really happen.

Paul Yeager: But there's a downside to those high numbers. I mean, we're we heard about inflation. And what does high food input costs do to that in the equation?

Jeremey Frost: The farmers get so little bit of it. I don't think it really matters. There's my opinion. I mean, it yes, it makes a little difference. But I was looking at a sunflower deal the other day in my newsletter and, and the flowers were selling on Amazon for $399 per hundredweight. And these farmers here are getting 22 to $25 per hundredweight. And they have to bag them and clean them. And that's it. I mean, it's not a you don't have all this extra costs. And I mean, so the farmers getting 10%. So you can't tell me there's not a lot of room for these commodities to go up when the farmers have such little impact of what they're getting. And it's not like the bags cost that much. And I think the route I mean, that's a more simpler one, and then corn and ethanol and and soybeans and the soil and all that but the reality is ADM's earnings a few weeks ago, and they were double what they were a year before and it was soybean oil processing CHS made over a billion dollars again. I mean, these elevators are making money these unless somebody is on the wrong side of the market. I mean it's been pretty, pretty friendly to the to the elevators and the buyers.

Paul Yeager: Well speaking of friendly, How about livestock I mean, the packer margin has kind of evaporated at the end of the three quarter mark will say of 2022. What do you see for the live catalysts? We flipped the calendar at least well, maybe I'll put you back on point for the end of the year. What do you see here in the end of the year moving forward into '23?

Jeremey Frost: I'm friendly cattle but I'm not a big cattle guy to be 100% honest, it's fine. I don't do a lot A lot of cattle, I have worked with a lot of farmers. I mean, I have a lot, but I'm not a big cattle guy. But when I look at the charts, I mean, they look, they look positive to me. I think there's some risks that the grain markets go crazy higher. And that could be some pressure, and then the demand equation on the cattle, but overall, I mean, I'm friendly them, but I'm not going to make a bold prediction by numbers. I honestly don't know enough to make that prediction.

Paul Yeager: Anything with, I suppose if he's that way on cattle, probably the same on the feeders. And what about hogs?

Jeremey Frost: Same? Yeah, for pretty much the same thing. I don't have a lot of good input other than the charts, to me look friendly and viable. And the big risk is, I mean, the recession talk. And that's the risk is where's our demand going to come from and can hold up. But I'm not a big cattle livestock guy yet.

Paul Yeager: Let's, this is not where you're going to just use the word but it's not what we're going to talk about. There's a phrase out there about Chicken Little talking about this guy's falling, how long and it was, was written by one of the market analysts in their newsletter. And they said, at what point does all of this discussion of this recession that is supposed to come? hasn't come yet? How long before the the American says, I guess it's not going to come?

Jeremey Frost: Well, I wrote on my newsletter on October 13, that I thought the markets reverse and we made our lows that day. And I stick to that I think we had way too many people thinking the sky was falling. And it just ain't happening. I mean, now maybe I'll be wrong. And there could be things that happen that change that I mean, the election results and different, different things. But I don't I think guys are gonna start looking at Oh, man, I missed buying the stock market. Man, I missed that opportunity. And I think money will start flowing in there. I mean, the thing that's different is, there's returns on safer investments today. I mean, that's that's the difference. I mean, that's what might be keeps a lid on it. But I'm not so certain that the Fed is going to continue to hike interest rates as fast as they have been. I think that they could slow that down a little bit, maybe pause it and maybe take a step backward and a few months. And if that happens, then I think the economies are going to just go wrong. And I think that I mean, the reality is the only one that's been hurting has been China. And it's because they have to keep it hurting, don't have the stuff to feed their people.

Paul Yeager: In 2023, we're recording this. We don't know the outcome of the elections, we'll just say that. But when we look at '23, 2023, what do you see as the biggest economic story that the average consumer, and then the farmer needs to watch? In '23?

Jeremey Frost: Well, it's going to be the interest rates, and that's going to be China. I mean, if China makes a headline on then it's gonna be the I mean, Russia, too. I mean, the war in Ukraine, Russia is going to be a big one. I mean, what, what he does or doesn't do if they extend stuff? I mean, all that is gonna be a big impact. I mean, I mean, those are the big three things that I see. I mean, and then what are they going to do to fight this inflation? I mean, farmers aren't really not participating in this inflation, like, like you would think I mean, the price on indicate that.

Paul Yeager: And do you buy that inflation's happening in other countries besides the United States? It's not just an American isolated item?

Jeremey Frost: Well, I, I couldn't believe that. I mean, I by that, I mean, they say versus get 60% inflation or 40 to 60%. And, I mean, I buy that, but I don't know if that farmers, they're taking advantage of it, either. They're getting things just big money making money.

Paul Yeager: All right, let's, let's get close to the end with this. Jeremy. What's the biggest decision for a farmer deciding what to plant in 2023? And what crop Do you see is the big winner and acreage that either goes up? Or goes down the most?

Jeremey Frost: I think coming corn is probably the one that's gonna go up the most. The biggest decision to what to plant is, Hey, can I get my inputs locked in? And if I get my inputs locked in, will they actually deliver? I mean, there's, there's companies out there this last year that they didn't honor some of the previous stuff they had sold. So I mean, who you're doing business with, and making sure that you can get it. I mean, that's a big thing. And I would not recommend guys to to be making any sales for 2023 until you have something locked in. I mean, that just seems like suicide to me. I mean, that's that's the big risk, I think, but I think corn is probably going to be the winner. But I think we're going to be into an acre war because of this. And I think we're all being the winners. And that's why farmers should be patient. I mean, we're going to have everything kind of competing for the acres, and we don't have enough acres I mean, spring wheat is going to lose a lot of acres until its till it rallies mean right now there's not going to be many farmers in North Dakota, South Dakota who wanted to plant much spring wheat. And it's really going to struggle. So I think the winter is going to be all the prices will go higher. And we'll see. We'll see it but as far as acres go, I'm guessing corn acres will be up a little bit. And maybe from cotton. I mean, that's where it's probably gonna lose a little bit spring wheats gonna lose a little bit.

Paul Yeager: Yeah, cotton has been the that has been heading south for quite some time here. Does seem to be competitive and trying to retain any of its acres it for sure sounds like it's gonna lose.

Jeremey Frost: Definitely, without a doubt, it's gonna lose a lot of acres and what it's maybe going to need to I mean, that's going to can change by spring. I mean, I think we'll see these markets rally because of that, because there's not enough acres or every everything. I mean, the soybean complex, all of the additional plants are gonna be online in the next year. I mean, we can't afford to continue to export rain like we have them.

Paul Yeager: Do you buy? What do you you mentioned sunflowers already? I mean, the American producer of sunflowers is a little different from say, South Dakota to Kansas to different types. Do you see that some of that global demand gets filled by United States producers of sunflowers,

Jeremey Frost: I think there's a good chance that it does, I mean that these crushers get a little bit of business, and they keep in mind that we only, I mean, the US is about 10% of what both Russia and Ukraine are for some flowers, but it doesn't take much business at all. And all of a sudden, that market could get really hot in a hurry. And it's a market that three years in a row, our local market is doubled in price. And I expect this to be your number four. And the flowers are in really strong hands of farmers grow on. And I would think that the crush will come in I mean, they're making a lot of money on the sunflower oil, a lot of money from what my sources say. And you don't have a lot of competition here. But when they get on the wrong side of the market, or when ADM and Cargill have to start competing against each other, which they will eventually I mean, it's gonna run the thing up and hurry.

Paul Yeager: Well, once we get done here, I'm going on to Amazon to look at this sunflower crop that you're talking about.

Jeremey Frost: Yeah. Yeah. It's in my it's in my newsletter, and I point out the company that that sell them to

Paul Yeager: See, I have to admit, we don't cover sunflowers as much and I did miss that one in your newsletters. Sorry, Jeremy. That's okay. That was your quiz to see how much I've been reading, right? Yes, it was, sir. All right. I Jeremy, I appreciate your time. And oh, one more thing. Before we wrap. You mentioned USDA, how do you see the word of Gov? Does it trade too much? Does the market respect it? Fear it, disregard it?

Jeremey Frost: Well, it it kind of is all three in one. So when it comes out? It's like it's it's the Gov. It's what it is. And people trade it. About 10 minutes later, they don't like it. I mean, the market will start trading on its own. They don't believe it. I mean, they're just going to trade on trade on their own. I mean, what it's kind of garbage information. I mean, I know from working at CHS for 20 years, when they called me for my stocks report. I never, I never told them the truth of what I had wants. I mean, it's kind of not really good information sometimes. But it's the best that we have. The market is going to trade it I mean, they're going to they're not going to trade pro forma numbers are not going to trade FC stone or any of these other guys numbers, they're gonna trade the USDA numbers, but they're quickly going to move to what the cash markets are telling them what the spreads are telling them what basis is telling them what everything else is. So they're gonna they're gonna trade it for 5-10 minutes, unless it's materially changing. But if you're talking about some of these baseline stuff, or some of them, they don't really put much into it. It's just the I mean, the ones they report to the ones that they they put a lot into.

Paul Yeager: Alright, Jeremey Frost, I appreciate your time. Thank you so very much for sharing some insight.

Jeremey Frost: Yeah, thank you, sir.

Paul Yeager: My thanks to Jeremey Frost, always good to have a new friend to discuss, find out what's happening in his world and how He sees things. New episodes each and every Tuesday feedback for me email MarkettoMarket@IowaPBS.ORG. All the producers of the show, read that account so you can talk to us. We'll see you next time here in this production for Market to Market. An Iowa PBS

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