Webinar: Marketing Corn and Soybeans After the August WASDE Report
With Jessica Groskopf, Cory Walters and Robert Tigner, Agricultural Economics Farm and Ranch Management.
The monthly USDA World Agriculture Supply and Demand Estimate (WASDE) Report summarizes current USDA information for several major commodities into a supply and demand balance sheet. The August WASDE report is the first report of the year to show crop production data collected from farm operations and field observations. In this webinar, we will take an in-depth look at the August WASDE and discuss strategies for grain marketing for the remainder of 2020.
icon search Searchable Transcript
Toggle between list and paragraph view.
[00:00:07.710]Jessica Groskopf: Well, good afternoon, everybody. I'm Jessica gross cough and extension educator and panhandle economist in the Department of Agricultural Economics at the University of Nebraska, Lincoln.
[00:00:19.320]Jessica Groskopf: I want to welcome you to today's webinar. This is a part of a weekly series of webinars produced by our farm.
[00:00:26.670]Jessica Groskopf: Extension team farm and ranch management team and you can find the recordings for these sessions and a schedule of upcoming webinars and other resources at farm W and l.edu
[00:00:37.920]Jessica Groskopf: One of those resources that we would like to quickly highlight is the Nebraska rule response hotline in times of stress, knowing when to reach out
[00:00:47.460]Jessica Groskopf: Is a central the Nebraska rule response hotline can provide mental health counseling information regarding legal assistance financial clinics mediation and more
[00:00:57.270]Jessica Groskopf: The hotlines toll free number is 1-800-464-0258. In addition, a wealth of resources related to stress and wellness can be found at rule wellness dot you and our.edu
[00:01:11.010]Jessica Groskopf: During today's webinar, you're welcome to ask questions in the chat box located at the bottom of your screen. We will address those questions during a question and answer period at the end of the presentation.
[00:01:23.700]Jessica Groskopf: Part of today's presentation will focus on USDA as world agriculture supply and demand demand estimates for August the Waze report summarizes the current information for major commodities.
[00:01:35.190]Jessica Groskopf: Into a supply and demand balance sheet. This month marks the first report of the year that uses crop production data collected from farm operations and farm observations will take a look at the report and how it can be used to inform grain marketing strategies for the rest of 2020
[00:01:53.970]Jessica Groskopf: Joining me today are my extension colleagues in the Department of Agricultural Economics Robert tickner is the agricultural systems economist based out of North Platte and Corey Walters is an associate professor and green marketing economist, so
[00:02:11.940]Jessica Groskopf: We are going to share
[00:02:15.330]Jessica Groskopf: Your slide set here.
[00:02:19.890]Jessica Groskopf: So da jump off on our discussion today we're going to start out
[00:02:27.420]Jessica Groskopf: By talking about the fact that there's a lot going on within the markets right now. And if you've been following the headlines. There's a lot of news out there about China.
[00:02:36.330]Jessica Groskopf: But we also seen a lot of news come out recently about the United States, specifically the storm damage that occurred on Monday. So there's still a lot of uncertainty in this market.
[00:02:48.960]Jessica Groskopf: We could also add headlines here about Kobe it, and what's going to happen as we come into fall and winter.
[00:02:56.190]Jessica Groskopf: Of this year. So as we look at this, there's, there's a lot of information that producers are trying to process. So as we look at the August 12 was the report that was released yesterday. We're going to summarize this
[00:03:11.640]Jessica Groskopf: Fairly fairly quickly. And what we're really interested in, and the big point of the August report is that it is the first report that uses that USDA Nast survey data to look at the
[00:03:30.480]Jessica Groskopf: Uses the survey data to estimate that yield estimate. Now this year is is kind of interesting because they did not use the objective yield survey, which is where they
[00:03:41.910]Jessica Groskopf: Said numerator is out to actually complete a separate analysis. They're just using the USDA NASA producer surveys, as well as some satellite imagery
[00:03:52.620]Jessica Groskopf: It says we look at those yields. You can see that it was up from the July report for both corn and soybeans and in the previous reports they were using a trend line yield.
[00:04:05.700]Jessica Groskopf: As we go down the balance sheet. And you can see that we dropped beginning stocks on both corn and soybeans and increased production and we were steady on imports for for both corn and soybeans.
[00:04:18.090]Jessica Groskopf: Total supply use for both sides was up and as well as domestic use and exports and overall what we're looking at the bottom line is that we have ending stocks that are up for both corn and soybeans.
[00:04:32.370]Jessica Groskopf: When we look at that in terms of bushels. Again, we're looking at basically for corn, we're looking at 2.7 billion bushels of corn on ending stocks for the United States.
[00:04:44.970]Jessica Groskopf: And then 610 million bushels ON THE SOYBEAN SIDE lots of questions about this report in terms of, you know, what's going to happen as we as we look to the future.
[00:04:58.950]Jessica Groskopf: This report was put together as of August 1 again. We know that there was some weather damage, especially through that Iowa region.
[00:05:09.660]Jessica Groskopf: Just on Monday. So how will that affect those yield estimates. And again, we also had a report.
[00:05:16.410]Jessica Groskopf: Yesterday from the Farm Service Agency, which looks at prevented planting and so that's also going to be added into future reports as we move forward.
[00:05:28.290]Jessica Groskopf: So the bottom line is that the average farm price, which is essentially cash price for both corn and soybeans is estimated to be down the average farm price for corn ends up at 310 that's down from 335 which was the July estimate. And then as we look at soybeans.
[00:05:48.180]Jessica Groskopf: We're looking at 835 so
[00:05:52.770]Jessica Groskopf: Just a couple of things. This market, especially on the corn side is is fighting against the picture you see on the screen. And that's growing global ending stocks and you can see that
[00:06:05.700]Jessica Groskopf: Even though us in the stocks are on the rise. We can see that worldwide. We're saying ending stocks pile up as well. Looking at soybeans.
[00:06:17.820]Jessica Groskopf: All zoom into this, but I think it's fun to look at the fact that soybeans in terms of total volume.
[00:06:25.530]Jessica Groskopf: This scale. Here's the same as it was on the corn slide to just to show you that we actually hold over fewer soybeans globally from year to year. But if we blow up this chart. You can see again, we're seeing some
[00:06:41.280]Jessica Groskopf: Slight growth here estimated growth here in the United States, but we're also seeing total global growth of those soybean index docs growing year over year.
[00:06:53.130]Jessica Groskopf: I'm going to toss it over to Robert on the next couple of slides.
[00:06:59.070]Robert Tigner: The questions that we know comes to mind for this year.
[00:07:04.770]Robert Tigner: And many other years when these reports come out, is whether or not these yield estimations are fairly reliable.
[00:07:14.340]Robert Tigner: Of course, in, in August. We have a lot of growing season left this month soybean yields are are more likely to be affected by weather.
[00:07:28.650]Robert Tigner: Lack of precipitation, etc. Damage to corn, as has happened in in Iowa. There's reports of 10 million acres that have been damaged out of the 25 million of cropland in Iowa. So a few years ago, University of Illinois took a look at how accurate final
[00:07:55.530]Robert Tigner: Yield estimates proved to be when they were released in August, September, October and November prior to that those yield estimates are simply a trend line following they follow the trend line and you USDA uses that trend line as the expected deal, up until August
[00:08:18.780]Robert Tigner: One of the criticisms for these estimates has been the changes changing
[00:08:28.680]Robert Tigner: methodology for yield estimates, one of the misunderstandings was that USDA
[00:08:37.830]Robert Tigner: For the first few yield reports or US minutes released dude does not have an object or it does not have a survey or
[00:08:51.510]Robert Tigner: A card.
[00:08:53.640]Robert Tigner: Data does not do a sense census or survey of the planet acres until August
[00:09:04.170]Robert Tigner: This chart.
[00:09:06.420]Robert Tigner: needs a little bit of interpretation.
[00:09:10.440]Robert Tigner: Those numbers are quite variable when it comes to bushels per acre. The average across all those years 2002 2013 the average is about 2% of
[00:09:29.880]Robert Tigner: Final yield the variation is about 2% so those negative numbers are the numbers that
[00:09:42.480]Robert Tigner: The bushels that yield was over estimated by the August forecast the final estimate was actually less than that, by whatever you're you're thinking about, for instance, last year, the August estimate underestimated by 2.1 bushels in 2017 the August estimate estimate
[00:10:09.900]Robert Tigner: Over estimated by 7.1 bushels per acre.
[00:10:16.890]Robert Tigner: So it means next Jessica.
[00:10:21.990]Robert Tigner: So it means have been a little bit more consistent, but the consistency has been that USDA has a tendency to underestimate Appetit at more consistently.
[00:10:34.800]Robert Tigner: What, in at least in August, what those yields are likely to be last year they under excuse me, they overestimated by 1.1 bushels. But for the past nearly 20 years, there are many more instances where they have underestimated those yields.
[00:11:02.040]Robert Tigner: If we were going to show you the
[00:11:06.630]Robert Tigner: Following months September, October, November yield estimates those yield estimates get closer and closer to the final as you would expect more and more information about weather.
[00:11:20.010]Robert Tigner: More consistency in crop progress, especially in September, we will have matured. So most of the United States will have completed maturity and they will know pretty close to what those yields are likely to be and that estimate becomes very consistent and very close to the final yield.
[00:11:45.120]Robert Tigner: Under Corey now.
[00:11:51.990]Jessica Groskopf: Or you're muted.
[00:12:00.150]Cory Walters: I both muted myself and minimize the screen.
[00:12:07.860]Cory Walters: All right. Hi, everyone. My name is Corey Walters, I'm a faculty member here in the Department of Ag econ
[00:12:15.930]Cory Walters: And with this was the report. I'm going to kind of step back and take a little bit of a bigger picture of what what has happened or what this means.
[00:12:24.630]Cory Walters: For the growing season. And to do that, it's essentially the was you just one the August was one one report that comes out every year. And so as we go forward will receive these things every year. But there's there's maybe a bigger picture behind here. So that's what I will focus on
[00:12:42.450]Cory Walters: Like this quote by Charles Munger to achieve wisdom, we need to learn the big ideas that underlie reality. And what I see out of that for farmers is a
[00:12:52.770]Cory Walters: This yield and price and certainly faces our reality and in the next couple of slides I'll motivate what I what I see wrong with that and how we approach that and how we can can improve that. And essentially what we're trying to get after is not to be right or wrong in a in a financial
[00:13:10.710]Cory Walters: forecast of any type, is can we can we survive bad bad potential states of reality which essentially would be low yields.
[00:13:22.590]Cory Walters: And or low prices. So, and this, this approach here is going to exist at the intersection of science and experience. And as we're always trying to improve on.
[00:13:33.390]Cory Walters: Oftentimes, at the beginning of the year when we go talk with the banker, we're thinking about what we're going to do. We rely on the expectation operator.
[00:13:43.260]Cory Walters: I E, the expected yield and the expected price and decision making on whether or not we're going to do something in this actually can get beat up on pretty pretty
[00:13:55.740]Cory Walters: Badly. Now I need to get over to the other. There we go.
[00:14:00.780]Cory Walters: And beat up pretty badly in the sense of we oftentimes can use the expectation operator incorrectly and
[00:14:08.400]Cory Walters: Right here. Over on the right hand side you have, we have December price. This would be the December price in the spring.
[00:14:15.810]Cory Walters: Coming from crop insurance essentially be the $3 and 88 cents. And that's the blue line right here.
[00:14:22.200]Cory Walters: But what we have underlying that thing is a distribution of prices, where they can end up and the part that that influences that then is the volatility factor.
[00:14:31.830]Cory Walters: For for a crop and their expectation operator here is actually correct. You can use it because there's a mass centered around the expectation
[00:14:40.710]Cory Walters: Where you you should quickly get annoyed is when I read these reports. When you read these reports about co bit
[00:14:48.000]Cory Walters: Deaths and they take an expectation operator of a distribution that has a big huge fat tail with a whole bunch of mass on one side and they take an average or the average comes out to somewhere where there's hardly any
[00:15:01.080]Cory Walters: Any mass. And then of course people pick on him and say, well, that that was never right that never happened.
[00:15:07.080]Cory Walters: Well, it shouldn't happen. That's the idea that that's why the expectations and can be dangerous. And so I would, I would recommend looking further into the distribution to see what's going on at the bottom down here we have
[00:15:21.060]Cory Walters: Saunders County. Sorry, Scott's bluff county corn yield non irrigated corneal that and I have the cumin of distribution here, which is just adding up everything that's in
[00:15:30.720]Cory Walters: The regular probability distribution that we had above here for corn or for the price and again risk is down here in this low area.
[00:15:38.550]Cory Walters: Where we have low low outcomes. This is at the county level. So we underestimate the farm level because definitely hail events and things like that show up out there.
[00:15:47.490]Cory Walters: All right, next one. Let's go over to the corn side. So what we're, we're starting to trigger now as as this corn price keeps moving down
[00:15:56.730]Cory Walters: Is a couple, a couple of thoughts one we get we get people saying this is a black swan that is fundamentally wrong. This is not a black swan black swans are something inherently different
[00:16:09.900]Cory Walters: black swans are not something that you as a person doesn't don't haven't seen it's something that essentially no one has seen and it's thought that it can never happen by a large amount of people and of course it has to be rare.
[00:16:22.320]Cory Walters: We are well this this this red line here is well within we're corn prices are currently at this is taken back in the spring.
[00:16:32.280]Cory Walters: So there's there's definitely has been we already knew there was a chance of corn going down below. Even $3 back in the spring. So this is nothing new.
[00:16:41.790]Cory Walters: All I did was overlay the 388 to this is the spring price. And then I took 85% coverage level. I'm leaving a pH yields equal to
[00:16:51.570]Cory Walters: Your yield equal to h EY pH yield and so that puts you at a, at a protected put price your implied put that around. I didn't put the price in here. I think that was like $3 and 29 cents somewhere in there.
[00:17:04.110]Cory Walters: If you have a 75% coverage level you're down here at 291. So what's the point here. The point is that if if you're thinking as we go forward into the next year, next number of years.
[00:17:18.210]Cory Walters: You're putting more weight on low yields are low prices. Sorry, then maybe it's it's prudent then to buy up on coverage level and at the same time engaging more hedging.
[00:17:30.810]Cory Walters: We know that the the traditional amount of hedging in the spring has been relatively low. This is one year that's that's really showing those benefits.
[00:17:40.920]Cory Walters: Big time. And, of course, that can come at a cost of, you know, prices up here. But hey, that's the pay taxes area and the hedging protects you from former ruin.
[00:17:53.250]Cory Walters: But you also draw yield out of this thing. And so here we have the expected yield. And what I have here, three different counties and how this
[00:18:03.000]Cory Walters: This yield exposure moves across counties and and how we have to be cognizant of where we're at. Generalizations are
[00:18:11.310]Cory Walters: Problematic here so Saunders county their worst yield going back to the early 70s was 54% off a trend and you can think of this red line is your trend, they would go over 54% that's the Saunders county yield.
[00:18:26.310]Cory Walters: Of course you know there's variability around that for the farmers in Saunders County. It happens to be that the worst yield off a trend for Simon Saunders.
[00:18:35.760]Cory Walters: Wasn't even the fifth worst yield for Custer County, the worst yielding Custer County was 70% off a trend and things get a little worse as you go out to Scotts bluff where the, the worst yield.
[00:18:49.620]Cory Walters: Was I think was 87 but I haven't backwards here. But there's another point here to be made it in 1993 or 32% off a trend, but the plot data that you're holding plots was 100% off a trend mean there's no yield.
[00:19:03.690]Cory Walters: They were, they were hailed out so we get down to the farm and there's a there's a lot of variability around that. And over here on the right hand side, you can actually see that the good years between Saunders and Custer we're actually about the same on the increase.
[00:19:20.880]Cory Walters: Let's take a look at the implied volatility across time. This is the component that kind of gives you that variability, where
[00:19:28.140]Cory Walters: The commodity prices can end up between let's say spring and fall or whenever you calculate that that implied volatility and while I have just 2020 December corn.
[00:19:41.130]Cory Walters: Here this is this is actually this increase in implied volatility. As we go into the growing season is actually fairly common occurrence. Note that implied volatility comes from market participants who are buying
[00:19:54.540]Cory Walters: Options buying and selling options so it's it's a market driven driven indicator
[00:20:00.960]Cory Walters: It can get somewhat difficult to interpret. Because it, it says where things can end up. It doesn't mean
[00:20:07.950]Cory Walters: Where things will end up so all it's really telling you is a higher implied volatility. Think of a bigger range that is that number grows your range where December corn can end up on December 1 can grow. Okay, can grow.
[00:20:22.080]Cory Walters: We go down to soybeans over here and this thing is
[00:20:27.180]Cory Walters: Doing the same sort of thing comes up in the spring, but recently it's been it's been dropping off. So those option prices have been, I've been declining
[00:20:37.200]Cory Walters: Another another picture here.
[00:20:41.250]Cory Walters: Some somewhere.
[00:20:43.380]Cory Walters: spending some time up here in Montana.
[00:20:45.930]Cory Walters: Some of the neighbors have been complaining that
[00:20:49.470]Cory Walters: Well they. Well, there were some government assistance at these, these numbers were people were being paid more than they actually took in in their, their income. So the idea here is, is I find I find that kind of an interesting
[00:21:04.020]Cory Walters: Policy, I think the policymakers know that, but I think they're going after one thing and if I will be reading their tea leaves his savings and and so what do you do when you get you get laid off to you. Do you
[00:21:18.480]Cory Walters: Get some income and then put that into savings or or do you go, you go spend it. And so you want to incentivize someone to spend them will give them more money, they'll, they'll spend money help keep the economy going.
[00:21:30.660]Cory Walters: I'm breaking the consumers as we go into the fall here to three broad camps. This is no means correct, but he kind of gives you a good way to think about it.
[00:21:40.290]Cory Walters: We're going to have the ones that are going to save. We're going to have the ones that are going to engage in low risk activities and then
[00:21:46.230]Cory Walters: We're going to have other ones are engaged in high risk activities and I don't know what the low and high risk activities are
[00:21:51.600]Cory Walters: But you can imagine maybe those have more spending than others. Okay, and what we have in the graph. Here is his personal savings and how that shot up in the early
[00:22:02.280]Cory Walters: Part of 2020 and you can see just over there and the right and that thing's been coming back down and it'll be interesting to watch where that thing goes into the fall. So we can eat through
[00:22:14.490]Cory Walters: These, these, these stocks and commodities that we have, because they're they're definitely big and to be it'd be great to have more restaurants open and stuff like that and people feel comfortable going to those things.
[00:22:26.280]Cory Walters: So what will we do as consumers, I'm kind of in the camp personally have a mix of savings and I'd say low risk activities. I don't know what the high risk activities quite are
[00:22:38.220]Cory Walters: You get you run into a lot of people at one time.
[00:22:42.120]Cory Walters: Or another
[00:22:46.740]Cory Walters: Conundrum my face with talking to farmers. This is how do they interpret thing. So, so I want to, I want to bring this up as as part of a long strategy going into next year and bring a little clarity to just something because I see people think about this many different ways.
[00:23:03.210]Cory Walters: Government payments PLC see fab. How do we interpret those things I see two two camps on this thing is one is, this is, the less likely one
[00:23:13.200]Cory Walters: We add it to the current commodity prices that we receive. So if we if we sell our corn it at $3 and 10 cents a bushel. And we got a
[00:23:21.480]Cory Walters: C fat payment that is so many cents per bushel, we would add that together and then that would really be my my my commodity price.
[00:23:30.960]Cory Walters: Or do we not think about that and just say, Well, I got my government price over there, my corn prices over here and you know that's that's just a corn prices are just still bad. I mean, you don't you don't equate those things.
[00:23:43.620]Cory Walters: I prefer number one. But you need to have a little more information to get into this thing.
[00:23:49.050]Cory Walters: Because to identify the dollars per bushel, you need you need to get into your farm numbers because they're different base acres every different payment yields.
[00:23:55.980]Cory Walters: And some people have these things nailed down where they know exactly what that is. But what number one gives you then is
[00:24:03.870]Cory Walters: Do we can we then interpret these government payments as essentially a price floor and does this help us sleep at night, then, because we see two things here. One, one is PLC. We know in the spring that existed.
[00:24:16.950]Cory Walters: And now we know we'll get a payment. I'll be at its DEFERRED. OKAY. It'll take a while to get it but but something's coming the CIF app is it is a different one. And that's a that one's been exposed now through the government that of things. If we shake the tree enough
[00:24:32.850]Cory Walters: It's more likely than that something will come out of it.
[00:24:36.840]Cory Walters: And that's, that's what makes you fat interesting because it showed up and I would ask you guys to think about what other programs trigger if prices continue to fall. And of course, can we survive this thing as as with our own individual production costs.
[00:24:55.350]Cory Walters: The big picture is my final slide is every one of you or is on your own financial path.
[00:25:02.250]Cory Walters: And this is due to just different different yearly financial outcomes and this, this could come from yield hedging level, the value of the hedging when you do it.
[00:25:13.260]Cory Walters: Your crop insurance contract production costs a few things that kind of come to mind.
[00:25:17.790]Cory Walters: But the idea here is, is that, well, let's say you know hundred years ago, we all started out at some point over here together.
[00:25:24.930]Cory Walters: We built wealth and that's caused us or loss wealth go along, or we go flat, but things can happen.
[00:25:32.550]Cory Walters: And and we want to stay out from one particular event event here and that would be this blue bar is when the banker no longer becomes our friend, and we're forced to liquidate so we want to stay from stay away from that guy. And we need these financial tools.
[00:25:52.440]Cory Walters: When used correctly to help that and and this this year in particular is really showing the value of that hedging and I would
[00:26:03.090]Cory Walters: strongly urge everyone to, you know, rethink your hedging strategy. After this sort of year when
[00:26:11.280]Cory Walters: A number of rare events are lining up that that are
[00:26:18.270]Cory Walters: Lowering those those commodity prices. However, they will
[00:26:25.140]Cory Walters: That's all I have.
[00:26:33.090]Jessica Groskopf: So Corey, do you want to stop sharing
[00:26:36.630]Jessica Groskopf: And that I'll put all of our faces on the screen. So the first question is an toss up for both Corey and Robert is. So what are some some things I should be watching as we move here into the next reports. What are some things you guys are are keeping tabs on
[00:26:58.320]Robert Tigner: Well, one of the things that we're going to know
[00:27:02.130]Robert Tigner: Start to get more information about is that damage in Ireland.
[00:27:09.690]Robert Tigner: It's just occurred. We don't know yet how much that
[00:27:16.050]Robert Tigner: Corn will
[00:27:18.630]Robert Tigner: produce something
[00:27:22.050]Robert Tigner: The location of the damage in Iowa is
[00:27:31.710]Robert Tigner: It's probably not South salvageable as a corn silage for the most part, so it might be some of those acres are going to be abandoned. We don't know that yet.
[00:27:43.950]Robert Tigner: It's going to take some time before we we do get that kind of certainty about the damage.
[00:27:53.910]Robert Tigner: I have to be from Iowa and in kind of grew up in kind of that location. Those that general location and
[00:28:05.610]Robert Tigner: There have been instances where
[00:28:11.910]Robert Tigner: We've they've been able to salvage some of the production green production, but the pictures I've seen so far. Doesn't look like it is.
[00:28:24.810]Robert Tigner: Mostly salvageable and of course the problem with that making that assumption is that we have a good picture of what has actually happened right now. Okay.
[00:28:41.190]Robert Tigner: The news media has a tendency to pick the most dramatic of the of the things that that might have occurred. And so we may have a skewed.
[00:28:52.740]Robert Tigner: Image of what has happened right now.
[00:28:56.880]Robert Tigner: We will get a better a better impression better picture as time moves on. And of course,
[00:29:06.720]Robert Tigner: USDA will
[00:29:10.230]Robert Tigner: Go out to fields and actually assess yield prospects in those fields. And so the sep tember report that comes out in about a month will give us a much better idea of whether or not that that those 10 million acres of corn, soybeans are
[00:29:35.880]Robert Tigner: Lost or somewhat salvageable and to what extent they might be salvageable will get in, you know, crop insurance reports.
[00:29:47.550]Robert Tigner: Over time, and that will help us figure it out as well.
[00:29:52.860]Cory Walters: Can we take it a little different perspective. I'm going to get into the human psyche of it.
[00:29:58.290]Cory Walters: So we're we're naturally we want corn prices to go up and man we would really like, you know, to, to see that sucker go a buck that would make our days.
[00:30:09.780]Cory Walters: However, with the the event in Iowa and how the human psyche works. We're, we're logically going to place a large weight on a bigger negative impact to the corn production, then they're likely is and and because of that.
[00:30:26.700]Cory Walters: You have to, you have to have a clarity of mind or as much clarity as you can have when you're you're faced with not knowing what it is we naturally want to place a bigger weight on, boy, that's just going to mess everything up and this corn is going to rock.
[00:30:41.160]Cory Walters: To the reality that it's it's a
[00:30:44.970]Cory Walters: Speculators and commercial farmers and commercial businesses trading corn and that corn price is what we have and we have to watch that thing.
[00:30:54.540]Cory Walters: And and temporary ourselves on where we think that's going and take advantage of rallies as they happen if we haven't already, you know, been contracting or much earlier in the year.
[00:31:07.470]Cory Walters: And
[00:31:08.880]Cory Walters: Don't, don't get too too far ahead that there's still a lot of ending stocks around
[00:31:15.300]Cory Walters: And it's
[00:31:17.430]Cory Walters: Let price be your barometer but but be respectable with with where that can go
[00:31:23.430]Cory Walters: Hey,
[00:31:23.730]Robert Tigner: I agree with was Corey about the psychological aspect of this in large part because one of the things that I see as challenging for that is, and getting a more clear psychological view of what's happening is that
[00:31:44.490]Robert Tigner: We will frequently see
[00:31:49.980]Robert Tigner: Twitter and social media and talk radio, etc.
[00:31:55.830]Robert Tigner: Bring out those
[00:31:59.160]Robert Tigner: worst case scenarios and that becomes the narrative that people buy into
[00:32:07.860]Robert Tigner: You in many ways, I think.
[00:32:11.010]Robert Tigner: We should turn off that kind of discussion and look at the data rather than and price as Corey said price is the data because it is a it is a better aggregator of information expectations and information than
[00:32:32.970]Robert Tigner: Then social media and and talk radio is price.
[00:32:39.780]Robert Tigner: Is that guide.
[00:32:43.290]Jessica Groskopf: I'm going to take yet another perspective and and so you know we're coming from a point of that everyone has their they're at a different place. And I think Korea illustrated that well.
[00:32:55.860]Jessica Groskopf: A couple things that I'm watching. I agree. You know, we, we've got to be realistic about what that price ranges and when and when we're talking about an estimated price.
[00:33:07.020]Jessica Groskopf: In that 310 range for corn or through 830 5% I mean we have to ask ourselves, what is our cash flow look like and what is our balance sheet look like. And can I survive at these price levels and what can I do
[00:33:24.420]Jessica Groskopf: To make sure that I'm taking advantage of those rallies. So if you don't have a green marketing plan in place. Maybe you didn't get some pre harvest done earlier this year, or maybe you even still have 19 in the bin.
[00:33:40.140]Jessica Groskopf: You really need to sit down and take that strategy seriously and and and decide what you're going to do with that grain. And the other thing that I'm watching
[00:33:50.850]Jessica Groskopf: Is the carrying charge. So the difference between prices for different delivery periods and seeing if I can, especially if I have on farm storage.
[00:34:01.380]Jessica Groskopf: For the 20 crop. Can I take advantage of that and that would require me maybe to do some some for contracting and locking in those differences we actually see that there
[00:34:13.950]Jessica Groskopf: Is a caring charging corn, as well as in soybeans a positive carry so that means that those future or deferred contracts are higher.
[00:34:23.490]Jessica Groskopf: Than the current new crop contract. And so as I look between like December and march on corn, we do see that there is a positive difference there. And that might be something to watch for
[00:34:37.410]Jessica Groskopf: So the. Another question that came in the chat was will the PLC payments be deposited electronically in October 2020 as they have been in the past and. Yes, that is correct, that we are expecting those Farm Bill program payments to arrive in October, like they normally would. And again,
[00:34:59.100]Jessica Groskopf: You have the option to enroll in the Price Loss Coverage Program or the Agricultural Risk Coverage Program at the individual level.
[00:35:07.410]Jessica Groskopf: Or at the county level. And so you're facing different values depending on the structure of your farm.
[00:35:16.140]Jessica Groskopf: In terms of its base acres, and it's a yield and then your program selection. So when we start talking about payments, remember that that that is not on actual production. It's based off of
[00:35:34.620]Jessica Groskopf: Your firm structure, according to the FSA office. So you need to be aware of your base acres and your yield in order to determine what that payment would be, and again they they pay on 85% of the base acres. On top of that, or lower. If you're in arc individual program so
[00:35:57.840]Jessica Groskopf: You can utilize tools Texas a&m has a tool and Illinois has a tool out there where you can enter the expected foreign price that we showed you earlier. At the end of the on the was the balance sheet to estimate what your individual payment would be
[00:36:23.220]Jessica Groskopf: There was another question in the chat that says, Robert mentioned there was an average 2% variation that final yo on corn on the August report. What's that similar analysis for soybeans, you want to take that
[00:36:37.740]Robert Tigner: Sure, let's expand a little bit on that. OK, so
[00:36:43.920]Robert Tigner: The USDA air becomes smaller and smaller as we move from August to November the error in November for corn has has a range of about 2% above or below.
[00:37:01.650]Robert Tigner: Final yield when we talk about the August report the August report has a range of as much as about 18% over estimation to about a 10% under estimation
[00:37:25.080]Robert Tigner: However, that range averages over the past 40 years at about 2% okay but there, there, there can be a wide variation of error in corn now for soybeans that error is very similar.
[00:37:48.330]Robert Tigner: But it tends to be
[00:37:52.230]Robert Tigner: That they underestimate yield more consistently than overestimate yield in the past 40 years
[00:38:02.760]Robert Tigner: The overestimation range.
[00:38:07.200]Robert Tigner: Has been as high as 16% and a underestimation for August as a as high as 11% and again about an average 2%
[00:38:25.680]Robert Tigner: Error for yield estimations
[00:38:30.450]Robert Tigner: If we look at the September, October and November data November. We've we were very close, but the the range of estimations is wider.
[00:38:42.660]Robert Tigner: Than for corn for. So in the soybean complex, it tends to be a little bit more of an overestimation the range.
[00:38:55.530]Robert Tigner: Than
[00:38:57.870]Robert Tigner: Then in corn, however, again, if you take averages it washes out that range of variation. And so the November report tends to be very close or spot on.
[00:39:13.410]Robert Tigner: Well as the previous report in October tends to be about a 1% underestimation September, we still see about a 2% underestimation along and and as I said about the same in in August report.
[00:39:36.960]Jessica Groskopf: So question. The, the average projected price for the
[00:39:42.810]Jessica Groskopf: Year for corn was a farm price or cash price of 310 so as we're thinking about cash flows and and management. We really need to make sure that our mind is is really evaluating that price range, you know, is the price, the market is offering today at your local elevator.
[00:40:06.120]Jessica Groskopf: in that range. And are you feeding whatever your bank projected for your cash flow at the beginning of the year. I think those are the two factors I utilize the us a number that they estimate
[00:40:20.100]Jessica Groskopf: Really to bring me into a reasonable rate when we start talking about making sales and those kinds of things. So yes, that's correct.
[00:40:29.340]Jessica Groskopf: So for 21. It was at 310 and actually for 19 it's going to end up around 335 is where they're estimating the final price of last year's corn that that so that old popcorn.
[00:40:53.070]Jessica Groskopf: Core you're on mute.
[00:40:54.360]Cory Walters: Yeah, I think you meant to say 360 for last year.
[00:40:58.530]Jessica Groskopf: Oh, I'm sorry.
[00:41:00.030]Cory Walters: That's okay it you that July. It was 336 the the 2021 for July.
[00:41:07.380]Cory Walters: Was 335 and then we dropped down to three 310 now for the August
[00:41:17.010]Cory Walters: 364 last year.
[00:41:21.630]Jessica Groskopf: Any final questions.
[00:41:33.660]Jessica Groskopf: Or any wrap up thoughts from Corey and Robert
[00:41:38.430]Cory Walters: If anyone has any questions about anything I discussed, feel free to contact me. My email is on the department or website.
[00:41:46.020]Cory Walters: Phone also works. Be happy to visit with you.
[00:41:57.120]Jessica Groskopf: Alright. Seeing no further questions. Thank you, Robert. And Korean everybody for joining us today. A recording of this webinar will be posted at farm that you and l.edu
[00:42:08.610]Jessica Groskopf: Or you can also register for other upcoming webinars as a reminder, check farm that you know that edu for a schedule of more webinars.
[00:42:17.760]Jessica Groskopf: Centered around farm and ranch management. The series continues next Thursday at noon with a session on business and care powers of attorney.
[00:42:27.360]Jessica Groskopf: We are also hosting our land management quarterly webinar Monday at noon, which will cover the latest Nebraska land values terminating verbal lease agreements by September 1 deadline and considerations for fall harvest
[00:42:43.560]Jessica Groskopf: Also, you will be receiving a short 32nd survey in your email, and we would really appreciate your feedback on today's webinar and your input on future sessions. Thanks again for joining us.
[00:42:55.020]Cory Walters: Oh, we got one, Jerry.
[00:42:56.610]Cory Walters: That is a good that is a good number to use for the PLC payment for right now.
[00:43:07.050]Cory Walters: Okay. Sorry to interrupt. I just want to catch gets Jerry's question for, for we took off.
[00:43:19.470]Jessica Groskopf: Alright thanks everybody.
Log in to post comments