Episode 8: Articles of Consideration El- nino bringing bad winter, and Grain Marketing Mistakes
Transcript
Speaker 1 (00:01):
Hey guys. Welcome to another episode of an earful, uh, podcast about farming and country life. Zach, talk to me about what’s going on today.
Speaker 2 (00:10):
Well, I think we’re gonna switch back to corn today. We finished up double crop beans last night. We’re still dry some corn. I think we’re coming out of our, uh, warm spell. A little bit chilly this morning, but, uh, weather still looks pretty dry, so hopefully we get in there and finish up some corn.
Speaker 1 (00:31):
Yeah, I think we get one more decent day. They’re talking, um, I think mid sixties today, where last time I looked, but then I think it just kinda slowly falls off from there and I would assume it will fall off until about March.
Speaker 2 (00:44):
Yeah. I assume so. At some point it’s gotta take the turn and never come back.
Speaker 1 (00:48):
Worst part is, is hot cold. Hot cold. If you guys can’t tell from our voices, we’ve both been sick, so it’s not, uh, not a fun time of year to have to deal with that kind of stuff.
Speaker 2 (00:59):
No, no, it’s not. But you know what? That’s just how it goes sometimes. But, uh, you know, I have these temperatures swinging a lot of dust. It’s been dry, uh, dry air. Yeah. Driving me crazy. But, uh, yeah, it’s just the nature of it this time of year. So,
Speaker 1 (01:16):
Um, we’re gonna do another articles of consideration episode here. We’ve both chosen an article. Um, neither one of us know what the other one chose and we’re just gonna kinda talk about ’em here and see what we think. So you wanna start us off, Zach?
Speaker 2 (01:30):
Yeah, sure. Actually, just coming off the talking of the weather there, uh, AG Daily, they put a little, uh, article on here saying that we’re gonna return to a traditional winter weather pattern for 23 and 24. And sounds like we may actually end up with some snow this winter, which is what they seem to say every year.
Speaker 1 (01:54):
Yeah. Uh, so is it a traditional winter of 77 and 78? ’cause that might not be fun. They had two blizzards that
Speaker 2 (02:01):
Winter, right? Yeah. I don’t know what they consider traditional, but they’re seeing Great Lakes area, Midwest, central New England. Get out your snow blowers. It’s gonna be a lot of precipitation.
Speaker 1 (02:16):
The bad news is our snowblower is from 78 when they had the second blizzard when we were still feeding hogs here. And, uh, I don’t know how reliable something is that hasn’t been used since 78.
Speaker 2 (02:29):
Yeah, I don’t know that either. I don’t wanna find out. I think if it snows enough, probably just gonna stay in the house. We don’t have to feed hogs anymore.
Speaker 1 (02:35):
That’s right. That’s right. We, uh, I, I think you’re right. We just stay in the house. Yeah. I don’t know. Um, before the traditional winter starts, I’m really hoping that we have all of the corn shelled and dried.
Speaker 2 (02:50):
Yeah, that’s what I’m thinking too. It’ll, uh, it’s no fun trying to dry corn while it’s, uh, blizzard conditions. I’ve seen that happen before. It’s not very, yeah. Not very effective. But, um, yeah, saying an El Nino, uh, kind of forming back through and, uh, big storms predicted mid-January saying some snow into the southwest snow and, uh, cop copious amounts of rain and snow in the southwest portion of the country.
Speaker 1 (03:22):
See, I don’t understand the whole El Nino thing because we talked about, we were in a strong El Nino in 2012 mm-Hmm. <affirmative>. And that’s when we had the really bad drought, hot and dry. And then again this year they’re talking about a strong El Nino. We were dry, but now they talk about El Nino and we’re gonna be wet.
Speaker 2 (03:44):
I guess. So
Speaker 1 (03:45):
Maybe it’s the time of year.
Speaker 2 (03:48):
Yeah, potentially that’s it. But I mean, realistically we’ve had nearly any precipitation in the winter for the past three years.
Speaker 1 (04:01):
We haven’t had, I would like to see our rainfall numbers for this year. I haven’t looked them up, but, uh, we have got to be way behind on moisture for the past 18 months.
Speaker 2 (04:14):
Yeah, I Oh yeah, we definitely do. I, you know, we turned off, we were wet or you know, I would say we were appropriately wet early spring. I don’t think it was right. Crazy.
Speaker 1 (04:28):
It delayed planting, you know, like it should have, it’s not like you could’ve started the 1st of March and rolled
Speaker 2 (04:32):
Right. This spring was more of what I maybe would consider a typical spring as far as a weather pattern goes.
Speaker 1 (04:39):
You mean like we didn’t get four inches of rain every
Speaker 2 (04:41):
Day, right. I mean, as compared anything was more normal than what we experienced at 22. Yeah. But 23 seemed pretty mellow. We still got in at a reasonable time. We still were, we still had a small early window and a lot of guys got a lot of corn in the ground. Excuse me. A lot of guys got a lot of corn in the ground. We got all, basically all the beads in the ground. Right. Some of the corn. And so, and then we turned off, you know, to more of a typical up and down pattern finished out. And then all of a sudden the rain just shut off in, uh, June.
Speaker 1 (05:14):
Yeah. Yeah. We had June, July was dry and then, uh, August, September were dry and we had two or three rains there in July that kept us going. But I mean, it was wild and everything was violent. I mean, if you remember when we were spray fungicide, um, we were stopping for tornado warnings.
Speaker 2 (05:35):
Yeah. That’s usually not super common. I mean, well, we normally get a couple of tornado scares every year or so.
Speaker 1 (05:43):
Yeah. We got a couple that week.
Speaker 2 (05:45):
Yeah. Yeah. That’s crazy that, that, that’s just it. That’s what’s, that’s what drives me crazy. The weather pattern. It’s so drastic. We’re so dry for so long. And then if you’re gonna experience any precipitation is gonna come in the form of a violent storm.
Speaker 1 (06:00):
Yeah. You gotta have a drought buster.
Speaker 2 (06:02):
Right. But we have one of those, that’s the only way we get rain.
Speaker 1 (06:05):
It’s weird. I don’t know. I don’t know. People talk climate change, people talk cycles. I don’t know what it is. The weather’s weird. Yeah. I, I don’t know how much bearing we have on it, but
Speaker 2 (06:17):
Yeah. And it’s crazy. And like, you know, this is this article that I have here. It references the Farmer’s Almanac, right? Oh yeah. I mean, a lot of people reference that. And that formula was originally developed, their weather prediction formula was originally developed in 1818.
Speaker 1 (06:34):
That’s interesting.
Speaker 2 (06:37):
Yeah.
Speaker 1 (06:37):
I wonder what they use as a formula. Like,
Speaker 2 (06:41):
Oh dude, I don’t know.
Speaker 1 (06:42):
I mean, do they look at the past a hundred years and okay, this is kind of what, what happens or what, how do they do that? Yeah,
Speaker 2 (06:48):
I mean, if you, I mean, you take, if you, you take anything that we’ve documented information on and we’ve done that for one to 200 years, somewhere, there’s gonna be consistencies
Speaker 1 (07:00):
Right there about has to be. But man, that’s, that’s pretty interesting. 18. 18. Yeah. It’s a long time
Speaker 2 (07:07):
Ago. Oh yeah. That is a long ways. Yeah. So the, oh, what’s it say here? The publications, having editor David Young, this formula incorporates many of the various techniques as well as Sun Spa activity, title, action of the moon, the position of the planets and more.
Speaker 1 (07:28):
Huh.
Speaker 2 (07:30):
So I guess all those things are considered, but it is crazy. I mean, people live, people live and die by the farmer’s own act as far as the weather’s
Speaker 1 (07:38):
Concerned. Well, I mean, those guys are more accurate than the guys that stand in front of us on TV and lie every morning.
Speaker 2 (07:43):
Yeah. And you know, growing up before we had more of an appreciation for the weather ram before we carried a computer in our pocket. Yeah. And, uh, I think that’s caused us more trouble probably than anything else is that I can pull up, look at the same models that
Speaker 1 (08:05):
Yeah, that’s
Speaker 2 (08:05):
True. He’s looking at, he’s looking, he can look at, you know, further out models and, you know, they have their education. Not sure what that all entails. Right. But, but it, I mean, you are, you have all that information in your pocket all times whenever you want it.
Speaker 1 (08:19):
Yeah. I mean, we grew up listening to Jim Gal and he, he’s just an Iowa farm boy. He was, he was good. He’s still good. Um, he’s more of a long-term forecaster, kind of like the almanac. Yeah. But, uh, he loves his snow. Will you ever watch him when a snow storm’s coming? He rolls up his sleeves and he’s ready to go.
Speaker 2 (08:40):
That dude gets jacked up,
Speaker 1 (08:41):
But uh, yeah. It just doesn’t seem like we were spraying earlier this summer. Yeah. 0% chance of rain. Yep. It is not raining where you are. Starts pouring down rain where we are.
Speaker 2 (08:55):
Yeah. It is crazy. Unpredictable. And, uh, I don’t know, you know, we have a lot of time to think about all these things. Just, you know, we live and die by the weather. That’s how this works. Right.
Speaker 1 (09:08):
So, yeah. I mean, if you’re a lawyer, it doesn’t really matter if it’s raining when you’re in the courtroom.
Speaker 2 (09:13):
No.
Speaker 1 (09:13):
But if you’re in our kind of work to where things have to be done so many hours before the weather starts, I mean, it’s not like we just can’t work in the rain. You know, when you’re spraying you gotta have, you know, 2, 3, 4 hours depending on the product and uh,
Speaker 2 (09:27):
Yeah. And
Speaker 1 (09:28):
It’s not a fun, not a fun guessing game. No.
Speaker 2 (09:31):
And, and the weather and just even in the last five years, I feel that the weather’s gotten more sporadic, a little less predictable. You know, these, these rain chances are wild. I mean, like you say, you have a 0% chance of rain and you look down, it’s like, oh God. It’s just, I mean, it’s just the, you know, maybe that summertime window is just so, so crazy. Especially coming outta like the drought what we had that, I mean, nobody really knew what was going to go down. Yeah.
Speaker 1 (10:04):
Yep. Yep. But that was the rain that we didn’t get here at home when we got down. Oh, it was 30 miles from home. Yeah. And those guys were getting the rains. Like they could just, they couldn’t miss ’em. Didn’t seem like.
Speaker 2 (10:15):
No. And, and it is crazy. You fall into a pattern. ’cause even you go about 10 miles south of here, got a customer down there, same thing every time there’s a 20% chance of rain, they somehow ended up getting a half an inch of rain. Oh, that’s
Speaker 1 (10:26):
For sure. But he’s in the cross of two interstates.
Speaker 2 (10:30):
Right. He was almost, he was almost at the point where he was getting too much rain while we were just whittle withering away here at home. Right, right. And I mean, up here 10 miles away.
Speaker 1 (10:39):
Yeah. And we’re just up the interstate from him. But he was right there where the two of ’em come together. Yep. And I don’t know how it happens, but if there was a rain either coming across there or a gray cloud, he would somehow get some rain and it just, it worked for him.
Speaker 2 (10:53):
Yeah. It is wild. I mean, the weather makes or breaks yet. That’s just something that’s never gonna go away. Something that we gripe about every day all the time. That’s one thing is for sure is that farmers will never be happy with the weather.
Speaker 1 (11:08):
There’s a hundred percent chance of that. Um, so you guys heard it here first. This is November of 2023. You guys need to purchase a new snow shovel if you were in the Midwest because it is going to snow.
Speaker 2 (11:20):
Yeah. I don’t know. That’s what they told me. And
Speaker 1 (11:23):
If we’re wrong, you can’t fire us because we’re not paid employees of or not paid a meteorologist.
Speaker 2 (11:29):
Yeah. And they don’t even fire the meteorologist for being around.
Speaker 1 (11:31):
Right, right. They Hmm. If you watch channel 10, they just kind of spontaneously quit.
Speaker 2 (11:36):
Probably gotta be stressful.
Speaker 1 (11:37):
It probably is
Speaker 2 (11:38):
A lot of hate now. Yeah. That’s what it’s a lot of hate now. Well, you got Evan.
Speaker 1 (11:43):
Well, um, so I’ve been watching the grain markets pretty close here lately. So I went out and found an article, um, it’s actually a US Farm report, round table discussion that Ty Morgan had with, uh, three of her grain consultants, um, last week. And it was pretty interesting. So it’s titled The Five Most Common Grain Marketing Mistakes
Speaker 2 (12:11):
<laugh>. There’s only five,
Speaker 1 (12:12):
Well, there’s five that are pretty common. So, uh, this was, uh, ed Usit, um, he was, let’s see, he’s from the University of Minnesota. This was who she was talking to first. And uh, his first one is pre-Harvest pricing. So I, I I thought it would kind of be fun to do this article too, because Zach is not in the grain marketing game.
Speaker 2 (12:38):
Absolutely
Speaker 1 (12:39):
Not. So he should actually have good questions.
Speaker 2 (12:43):
We’ll see. We’ll
Speaker 1 (12:44):
See. Sorry about that. Um, so pre-harvest pricing. So most of you guys understand that there’s a futures market in grains, so you can sell your corn that hasn’t been produced yet. Um, just to hedge. So basically protect yourself from future price fluctuations. So, so yesterday I sold some may beans. So those are beans that, um, have to be delivered by, uh, the end of April, I believe.
Speaker 2 (13:24):
Um, which really seems like they should just call ’em April beans,
Speaker 1 (13:28):
Right? Um, yeah. So there’s delivery date and then there’s your hedging month. So that’s what gets complicated. Um, but we sold Mabe, so that means they have to be delivered, you know, by a certain date. Uh, might be in May. Um, but what we do is we, we are capturing what they call the carry. Right. Which is another mistake that he has in here. So in order to build grain bins, they have to pay for themselves. Yeah. And they pay for themselves, not just by not sitting in line at Cargill or your elevator, your local elevator, specifically Cargill, that always has a line <laugh>. Um, but also if you look at the price now, uh, we’ll say it’s 1360 $13 and 60 cents for beans. Yep. If we look at may beans, they were, uh, $14 and three quarters of a cent yesterday. Yep. Was what their high was yesterday.
Speaker 1 (14:26):
So that gives you say 40 cents, that’s what pays to build your Benz. Right. Right. So farmers understand understanding the carry that, okay, if, if I don’t need the money right now, if, you know, you figure in your interest cost, if you’ve got a loan, uh, just the, just the simple cost of money, electric to put it in the bin, all those things, if those add up to less than 40 cents, then you’re better off to hold it in the bin and take it to the elevator later. Right. Also gives you the opportunity to set basis. So basis is the difference between the Chicago Board of Price or Chicago Board of Trade Price and what your local elevator’s paying.
Speaker 2 (15:16):
Yep.
Speaker 1 (15:16):
So it’s, it’s basically the cost of supply and demand.
Speaker 2 (15:20):
Yeah.
Speaker 1 (15:21):
So, so right now, obviously lots of beans, lots of corn coming off, Uhhuh, <affirmative>, guys that don’t have bins are delivering supply is high, demand is low negative basis.
Speaker 2 (15:33):
Makes sense. Okay. I mean, that makes sense.
Speaker 1 (15:35):
So like if, um, let’s say, let’s just, let’s just use $14 ’cause it’s easy. So say they’re paying $14 on the Chicago Board of Trade. Yep. Uh, your basis now may be negative 20 cents, so they’re only gonna pay you 1380 at your local elevator.
Speaker 2 (15:55):
Seems kind of crooked.
Speaker 1 (15:56):
Yeah. But that’s, that’s just how it works. Uh, so then if we get into May, obviously nobody’s gonna be harvesting beans in May. Hopefully they’re planting their beans by then. <laugh>, I
Speaker 2 (16:07):
Have seen some guys cutting some beans in April.
Speaker 1 (16:10):
Yeah. Well, hopefully there’s a guaranteed fact that we will not be cutting beans in May. Yeah. Because we finished yesterday. Amen. Um, so we get to May and it’s, they’re needing some beans to, to put on a train or whatever and say, we got a plus 20. Yeah. Well then they’re gonna pay you 1420. Yes. Okay. So you’ve already captured that 40 cents that we did in the carry. Now you’re capturing another 40 cents that you didn’t deliver. So you get, you know, there’s, there’s some benefits there.
Speaker 2 (16:41):
That’s money on top of money.
Speaker 1 (16:43):
Right. If you can play the, the basis and the carry game,
Speaker 2 (16:46):
I feel like a lot of people get burned.
Speaker 1 (16:49):
They do. They do. Um, it’s not that you don’t know what you’re doing, it’s that you don’t know what the market’s gonna do.
Speaker 2 (16:57):
Right. I feel, yeah. I feel like anybody’s selling grain, at least is going into it with an idea of what they’re doing, but making the best decision has gotta be hard with the fluctuation. ’cause I, as I know very little about grain markets and marketing except for whatever I overhear from Evan. But, um, it doesn’t sound like a game that you wanna lose at. Obviously that’s your livelihood as a grower. You know, whatever you put in the bin, that’s what’s paying the bills. So. Right. It’s, uh, that’s a rough game to play, but what’s, uh, what’s some of these mistakes?
Speaker 1 (17:33):
So that was the first mistake, not understanding, uh,
Speaker 2 (17:36):
Well, it’s always a mistake. It’s not understanding,
Speaker 1 (17:38):
Not understanding pre-harvest pricing. Right. But he says here, a lot of producers took advantage of the summer pricing. Mm-Hmm. <affirmative>, uh, this year was really high. Uh, okay. The second one we already got into is understanding basis and carry, um, and not using the basis to your advantage when to deliver.
Speaker 2 (17:58):
Right. Right.
Speaker 1 (17:58):
So a lot of times we’ll do a futures contract at the elevator Okay. To where we’ve just, so there’s two components to your cash price. You’ve got your futures price, which we talked about, and then your basis, which we also talked about. So you put those together, you either add or subtract however you set your basis and that gives you your cash price. That’s what you actually get the check cut for.
Speaker 2 (18:19):
Okay.
Speaker 1 (18:20):
So, so a lot of times we’ll set futures we, and then we’ll set our basis once things get to where we think they’re favorable and we’ll take delivery or do delivery. Right. Right. So that setting your basis locks you in. I mean, down here at Cargill, if the ethanol plant gets short, they may have a, you know, plus 50 cent basis Right. For the second half of the week just ’cause they need corn.
Speaker 2 (18:43):
Yeah.
Speaker 1 (18:44):
So that sets you up to where you have to deliver the corn the second half of that week. Right. Where a lot of elevators, you know, if you’re dealing with maybe Miller Grain over there or something that’s a smaller elevator they may have basis that’s good for a month.
Speaker 2 (18:58):
Yeah. Their basis is that makes sense. Their basis is gonna be more, uh, it’s gonna be more flat line
Speaker 1 (19:04):
Than what Right. ’cause they’re, they’ve probably got it figured out where they’re gonna ship those beans out on container Yeah. A month later. You know, they’ve already got their price established, they know what they’re willing to pay. Yep. That’s just how it is. Um, so they’re not in that fluctuation market to where Cargill needs to have corn to that elevator or to that ethanol plant. And if that ethanol plant shuts down, it’s a, uh, very, very expensive situation for Cargill.
Speaker 2 (19:29):
And I think I have a lot of strong feelings considering the, you know, the elevator, the local elevator with, you know, the ethanol plant attached to it. It’s that, you know, just like he just like you just said, so if, if there is a demand for corn, if the ethanol plant needs corn, they can’t let the ethanol plate run on corn. Right. And so they’re gonna, they’re gonna be willing to pay you the grower an additional 50 cents essentially on top of Right. Already established price and Right. And I know one thing about Cargill or any other major corporate account, they’re not gonna lose money. Right. That’s what kills them. That did that kill their margin on them? Those particular sets of, set of bushels, I would assume maybe that margin probably dwindled. Did it dwindle 20%? What did it dwindle? I don’t know.
Speaker 1 (20:17):
Now see, a true grain elevator should not make any money on the market. They should be able to buy $8 corn the same as they buy $3 corn. Yeah. Because as soon as you sell it to ’em, they sell it on the board of trade. It’s an instantaneous thing. There’s no, there’s no risk involved with that. Right. They make their money on basis and carry. Okay. Which is the same reason that farmers need to learn that. I mean, if you look, look at Cargill, Bunge, ADM, Lee Andersons all these huge poet Yeah. All these huge grain elevators they’re making their money on carry and basis. Right. So as a farmer, if you can figure out how to make money on carry and basis, which that’s the next two points. Understanding, carry understanding basis. Um, if you, if you’re able to, if you’re able to understand those things, you can, you know, you can put some of that money back in your pocket and not just have Cargill make the money.
Speaker 2 (21:14):
Right. And I mean, as a grower, I mean, you do, you have to manage your risk and that goes for everything you do as a grower. Right. When it comes to putting a crop in the ground, purchasing seeds, selling, uh, selling, uh, your commodities. It, I mean, you’re having to spread your risk. So, yeah. I mean, having a, having a great understanding of marketing is a huge advantage to a grower. Right. Um, I mean obviously you still have your, some, your smaller growers that don’t have the justification to have, you know, a lot of grain storage or something along those lines. ’cause that’s not a cheap venture anyway. But being able to spread your risk like that, that’s absolutely essential. Well,
Speaker 1 (21:56):
I think a lot of guys fall into the trap of, oh, I’ve got a bill coming up. I need to haul three loads of beans.
Speaker 2 (22:03):
Yeah.
Speaker 1 (22:04):
So they, they, they haul commodities as they need money.
Speaker 2 (22:09):
Right. Which
Speaker 1 (22:10):
Feel like rather than using it as a storage and supply demand tool
Speaker 2 (22:14):
Yeah. That, that, that has to vary so much person by person, grower by grow. It does. It does. But, but I mean Yeah. But I mean, look, Lord, this marketing, the marketing portion of farming is so insane to me. ’cause I, I can’t wrap my mind a hundred percent around it. I’m sure many can. That’s great. But I think a lot of folks just regular, you know, non-farmers don’t understand what farmers actually have to go through to get rid of their crop. Right. And be able to make a profitable decision to do so.
Speaker 1 (22:54):
Yeah. So I guess I should interject here. We are not, uh, marketing advisors, we’re not financial advisors. There’s risk involved with grain marketing and don’t listen to any of our recommendations. Uh, ’cause any of the podcasts that I listen to on this that are actually serious guys, they, they always put a disclaimer in there. Um,
Speaker 2 (23:11):
<laugh> put the gambling hotline number in there. Yeah.
Speaker 1 (23:13):
Yeah. Um, so if you have a problem, which is funny Yeah. Bringing that up. So we go to Columbus, went to the casino when we had the foreign exchange student here, you can literally pull out of a grain elevator and go into the casino. And I know in Dayton, same exact way That is true. You can pull out of the grain elevator and into the casino. Yeah. Like they’re just two opposite sides of the street.
Speaker 2 (23:35):
I’m just having that realization now that Yeah. I suppose I’ve been to both of those. That is very true.
Speaker 1 (23:40):
How interesting.
Speaker 2 (23:41):
I don’t know. I figured it was just the casinos built out there ’cause it was cheap, uh, cheap real estate. Yeah.
Speaker 1 (23:47):
I, I don’t know. I’m thinking you get your grain check, you go in the roulette table, put it all on black, you double it, and then you go home.
Speaker 2 (23:53):
It’s strategic.
Speaker 1 (23:54):
It is. I mean, that’s probably the best grain marketing advice I’m gonna give <laugh>.
Speaker 2 (23:58):
Yeah. So,
Speaker 1 (24:00):
No, uh, so, uh, we had pre-harvest price basis carry, and then his next mistake is do not hold your grain too long. So I guess there, there is a number that I believe the USDA comes out with, but there’s a specific number for your farm too that you have to figure out that, um, how much does it actually cost you per month to hold that grain?
Speaker 2 (24:29):
Well the longer you hold on the grain, the more risk it gets involved.
Speaker 1 (24:34):
Right. But so the Fed has helped us out with this number a lot here lately. Um, when you go from, you know, 2% interest to 8% interest, oh yeah. If you’ve got a loan, you just put 6% on what it costs, you carry it every month. Uh, just, I mean, if you’ve got money in the bank and you’ve got it in a just a mere savings account that’s added two or 3%. Yeah. So, um, you’ve gotta figure interest into that. No. Whether you’re on the side where you’re giving money to the bank or taking money from the bank. Right. You’ve gotta figure that in electric costs to run your fans, you know, run the auger to put it in, run the auger to put it take it out. Yep. Of course those are fixed costs in and out. But you know, if you’re running your fan every month, how much is that costing you? Oh yeah. You know, just putting on a truck twice rather than dumping it outta the field and going right to the elevator. Um, those are just costs that you need to understand as a grower, uh, before saying, oh man, I got a 40 cent carry rolling in the dough. Well, no, 20 cents of that may be eaten up by your, you know, by your cost of carrying the grain.
Speaker 2 (25:44):
Yeah. Right. And, and then I feel like too, there is a lot, there’s so many environmental factors go into go into that too, as far as holding grain late. I mean, your quality could go down, um, if not managed correctly. You get into that late summertime frame when guys are, you know, cleaning out bins. I mean, your grain does not hold quality that well.
Speaker 1 (26:06):
Right. Right. And if you don’t get a good cold winter where you can run those fans and keep the grain cold, or you get a quick switch in the spring where you go from cold to warm really quick and you can’t slowly warm that grain up.
Speaker 2 (26:18):
Oh yeah. That’s a
Speaker 1 (26:19):
Nightmare. That’s when you start hauling frozen grain that’s heating up on you. It’s just a whole, that’s a weird situation.
Speaker 2 (26:26):
That’s definitely an ordeal.
Speaker 1 (26:28):
So the last, um, last thing he talks about here is understanding the difference between carry and inverse.
Speaker 2 (26:35):
Oh, well, we’re,
Speaker 1 (26:36):
So when you, when you have a carry, that’s a normal market because the market is paying you to store that grain.
Speaker 3 (26:44):
Yep.
Speaker 1 (26:45):
So on the other side of things, say you’re a hog producer, things get short. You know, things are tight, bad crop in your area around the, around the country. And I mean, you have to have a truckload of corn every week to feed them hogs. Right. If there’s not a truckload of corn around, or you’re afraid that it’s gonna go away, what do you do? You pay more for it right now.
Speaker 3 (27:10):
Right. Right.
Speaker 1 (27:11):
So instead of a carry, you actually, the further out you go, the less your crop is worth. That’s a, that’s an inverse. It’s the same supply and demand principle that, you know, demand has stayed the same, but the supply is low. So they guys wanna get that in their bin, you know? Yeah. A hog producer, chicken producer, whatever, wants to get that in their bin to know that they have it for that later time so they’re willing to pay more. Now that’s when hauling directly to the elevator actually pays. It never hits your bin. You have no storage costs and you know, you’re capturing that inverse. You’re actually losing money to put it in the bin at that point. Right. It’s a very, very rare scenario.
Speaker 3 (27:53):
Yeah. I was gonna say, I’ve never really considered that, but it is a thing.
Speaker 1 (27:59):
Apparently it does. I mean, it is, um, sometimes you’ll get it in the summer months where things will inverse where, you know, there might not be enough corn to get you to November or to um, October. So they kind of flip the script and uh, you know, July gets to be higher or is lower than May because guys are wanting to get, get that corn in their bin.
Speaker 3 (28:25):
Right.
Speaker 1 (28:26):
So it’s the, it’s the end, end, uh, user that kind of makes that decision.
Speaker 3 (28:32):
Right. It kind of determines now price.
Speaker 1 (28:34):
Right. Right. Plus a whole nother thing we’ll have to get into sometime. It’s the guys that just trade on paper, the big hedge funds that are buying, buying and selling crops on paper and don’t actually ever take delivery.
Speaker 3 (28:47):
That’s sketchy.
Speaker 1 (28:48):
I don’t have that number. That’s one I’ll look up for my next article is how many contracts of grain are traded versus how many contracts of grain are actually produced. I’m thinking it’s like 10% is actually produced.
Speaker 3 (29:02):
Are you serious?
Speaker 1 (29:02):
Yeah. Like 90% of this corn never existed. They’re just trading it on paper.
Speaker 3 (29:07):
That seems crooked.
Speaker 1 (29:08):
Yeah. But it’s a quick way to make money for those guys. Quick way to lose money too, if you’re on the wrong side, but Oh
Speaker 3 (29:14):
My. Yeah. That sounds like some Wolf of Wall Street stuff.
Speaker 1 (29:17):
Yeah. But they’re, they’re doing it. See, we have to make, you know, we need that $4 corn. We may make, you know, 20 cents on the top of it. Yep. But we actually went through the whole motion of raising the crop. Right. Those guys are wanting to buy $4 corn and sell it when it’s four 20 and they make their 20 cents just
Speaker 3 (29:37):
Off of making <crosstalk>. Oh
Speaker 1 (29:38):
Yeah. In and out.
Speaker 3 (29:39):
I mean, that’s just, that’s just part
Speaker 2 (29:40):
Of playing the game.
Speaker 1 (29:41):
Right. Which is insane that they can do that, but it’s,
Speaker 2 (29:46):
They do
Speaker 1 (29:46):
It. That’s what keeps the market moving. Right. If it wasn’t for them, it’d just be a bunch of farmers that put it in their bins, never take it out until they have to. And there would be no market fluctuation. Right.
Speaker 2 (29:57):
I’m sure that exists somewhere.
Speaker 1 (29:59):
Yeah. It’s, uh, but I mean, it’s a, it’s turned into a world market now, so all these guys have to, uh, you know, they’re, they’re trading Europe has a bad crop, or Argentina looks like they’re dry, whatever. So these guys that are just trading on paper, they’re, you know, they’re making not false scares. They’re still scares that there could be a shortage of crop, but they’re kind of exaggerating these scares and turning them into profits for themselves and their buddies.
Speaker 2 (30:31):
Right. Which again, pretty crooked.
Speaker 1 (30:33):
Yeah, right. It is. But it’s a whole, it’s a whole game. It’s very interesting. The more I dig into it. Like I said, I’m just learning. Uh, I’ve, I’ve been involved in it my whole life, but I’m now just kind of learning to try to do it myself. And, uh, my wife’s a vet tech and she always says, see one, do one, teach one. So I’ve been seeing, I’m starting to do, and now I’m gonna try to teach some so I can learn it a little
Speaker 2 (30:59):
Better. I don’t know who you’re trying to teach <laugh>
Speaker 1 (31:02):
Between you and our listener, single listener.
Speaker 2 (31:06):
Right.
Speaker 1 (31:07):
<laugh>. But no, I just, uh, I thought that was a good article. I know. I always listen to listen to these US Farm Report guys at, uh, Louisville and Commodity Classic every year. They’re always kind of fun to listen to. And, um, he had some, had some good points in there. It’s pretty, pretty 10,000 foot view. Maybe one of these days. We’ll dig in a little bit deeper as we get, get more into it.
Speaker 2 (31:32):
Amen. Maybe, uh, maybe we’ll start trading on paper.
Speaker 1 (31:35):
Yeah. Maybe. Probably not. Probably not. We’re definitely not going to, because then you get taxed as a speculator. So whatever we do, we’ll do it as, do it as producers. We’ll be hedgers.
Speaker 2 (31:45):
Oh dude. We’ll be hedgers.
Speaker 1 (31:46):
Right. It’s taxed differently.
Speaker 2 (31:49):
Yep. One thing I don’t like is taxes.
Speaker 1 (31:51):
That’s right. We never have to worry about it ’cause we just lose money, so it’s not a big deal.
Speaker 2 (31:56):
Amen.
Speaker 1 (31:57):
We got our build up for so long that, you know, one of these days when we do start making money, they, uh, they don’t have to charge us for
Speaker 2 (32:03):
A while. Yeah. They might be excited for us. <laugh>.
Speaker 1 (32:07):
All right, well, uh, yeah, we’re about 30 minutes into this thing. You got anything else?
Speaker 2 (32:12):
No, I don’t think so. I think, uh, the sun’s shining. I think we’re probably gonna have to get things switched over and, uh, get back in the field here and try to buzz out some more corn to keep the dryer going.
Speaker 1 (32:24):
Yep. Well, uh, as always guys, please uh, rate and review us on your favorite pod catcher. Uh, hit us up on our social medias. We’ve got Facebook, Instagram, TikTok,
Speaker 2 (32:35):
Easy Custom Ag
Speaker 1 (32:37):
And uh, yeah, easy custom ag. Hit us on Google. Give us a rate and review on there too. We would really appreciate it. We’re just trying to get a foothold and, uh, appreciate anything you guys can do for us. So, amen. We’ll see you next time out in the field.