Welcome to Moving Iron with Casey Seymour and Greg Peterson, the podcast for anyone and everyone involved and interested in the business of ag equipment. If you want to understand what trends and market forces are impacting the price of your iron, you've come to the right place. Buckle up, it's time to move some iron.
And welcome back to the Moving Iron podcast. Clint Griffiths here with Casey Seymour. And Casey, you're on the road this week at the Moving Iron event there in Louisville, Kentucky. How are things going? What are you hearing?
It's going pretty good, Clint. Glad to be with you this morning. A lot of optimism out there if you look at the situation where we're at. So, I mean, but it's also cautious optimism as well, right? You know, you get kicked so many times, when someone tells you something good's coming, you kind of take it with a grain of salt. But right now, I think everything's pointing towards a lot better movement. We had some good speakers yesterday on the commodity space talking about what was going on there. And, you know, there's a lot of optimism out there as far as where things are headed just because of this USDA report. You know, typically the September report's not a big deal. But all these reports now just seem like they're getting to be a bigger and bigger deal all the time. So it's interesting to watch how these play out.
Yeah. Well, and as we've been talking about, there seems to be kind of a renewed interest on the machinery side as those prices move. We've talked about it the last couple of weeks. Has that changed? Have you seen any follow through? What are you hearing from boots on the ground?
So, from a quoting perspective, there's a lot of quotes going out right now. A lot of guys are looking at stuff, revisiting some stuff from earlier in the year, those kind of things. So, you're starting to see a lot more stuff in there. I had a conversation with a guy here at the Moving Iron Summit, you know, where he was talking about the customer he's working with. They'd already prepaid, you know, their fertilizer and seed for the coming year and started looking at the diesel prices and those kind of things and started doing some stuff there. And now that they've done all that, they're starting to revisit what's going on in their equipment needs. And I think we're going to see more and more of that as we play out through the end of the year, for sure. You know, we said it last week, right? If you're looking to buy something, the cheapest time you're going to buy it is right now, right? Because the prices are going to continue to climb through the end of the year. So, yeah, we're seeing more and more people come to the table and more looking to do stuff. And I look at this like end of October, November, December time frame as a... by no means am I saying people are going to be kicking the door down trying to buy stuff. I'm not saying that at all. But what I am saying is there's a renewed vision out there like, hey, I can come out and update my stuff now, right? And you look at auction values and those kind of things too, that's all showing that, right? And I know you talked to Greg here about that same stuff a lot on here and we're seeing those same kind of things take place. And so the rule of thumb I've always had was once the auction market heats up coming out of a downturn, six months later the retail side picks up, right? And so if you go back and look at that June, July time frame, I would call that kind of the height of when the auction market truly got to a point where it wasn't going down anymore. It was kind of stabilizing and starting to go up. If you look where we're at now, we're about four months past that, so do the math, you know, so October, November time frame, that retail space is now everyone goes back and looks at those auction values compared to what the retail space is, and guys are saying that value makes sense comparatively to what I can buy it for at the auction. And we're going to start seeing that tick up, that speed up of customers coming to the table.
And Casey, you mentioned it there just a little bit and, you know, we're always watching, okay, what could change markets? What could send us the other direction? Obviously, harvest clicking along. We got a couple of delays out there with some of the rain but not anything that's insurmountable at this point. But one of the things that we're dealing with is this cost of diesel and I know you've been talking with folks. What are people telling you and do you feel like that has any chance to ripple into kind of what we see in the equipment space here in the next, I don't know, few months?
Yeah, you know, that's a good question, Clinton. I've talked to lots of people about that and some folks are like, it is what it is. You know, that's kind of their approach to it. I'm not busting out the horse tomorrow to go out and farm my ground, you know, so there's some of that. And then there's some of the, it's really cutting into my profits. I haven't really heard that yet. You know what I mean? Like I haven't really heard that, hey, we're shutting things down because of the price of diesel. What I have heard though on the trucking side, like the logistics side, that's where the pinch is at, right? Like we're seeing a lot of folks right now, like there's a trucking company here that's Valley Transportation that's been a part of Moving Iron stuff for a long time and they're talking like, you know, their surcharges right now are as much as, not more than, the actual mileage cost to get stuff going there, you know, so you're going from like, you know, whatever he told me, he said today, he goes like, "I spent $30,000 a day on fuel. Now I spend $60,000 a day on fuel." So, that logistics side of that is where the diesel pinch is what you're going to see. And I think that kind of goes back there and Chip Neligh talked about this yesterday in his, and you'll see it on US Farm Report, but, you know, when you're looking at what that does to the overall economy, I mean, everything moves on diesel, right? When you're talking trains or trucks or whatever it is, that diesel price is a big deal. So, I don't know if on the farming side it's absolutely a big deal, but it's not as big of a deal as it is on the logistics side of just moving freight in general.
Yeah, and you know it is one of those kind of inelastic demand things that we've got to deal with all the time. Like, you know, we still are going to have to produce food. We're still going to have to feed people. And the ag economy tends to run a little bit counter-cyclical or at least offset from the general economy. So, if we see, you know, our general economy take a pretty big hit, then that doesn't necessarily mean that the ag economy follows suit. Although, you know, over time I think those two things work in tandem, but, you know, just because we've got a blip on the radar here with this diesel price. And who knows how long it takes to get sorted. It could take a couple of months. It could take six months. It could take a couple of years, but, you know, there probably some bigger intrinsic issues that are built into the entire fuel supply chain that are kind of part of the problem here that maybe we can sort out long-term and be better off. So, nothing like a little bit of pricing pressure to force us to really take a hard look at some of these things, Casey.
Yeah. Money makes people do crazy things, doesn't it?
Yeah, it does. Well, so, talk a little bit more. What are you hearing from other folks there at the Moving Iron Summit? Any other big takeaways for you?
I think optimism is the biggest thing, you know, Clinton. I think that's what we're hearing, you know. And I think if you talked to a lot of producers too, like, you know, Alan Hoskins was a... again, you'll see him on US Farm Report this week, but, you know, Alan always does a good job when he's up there talking, but he was talking a lot about like, you know, what's that look like for next year and, you know, we're still going to be a lot of pressure on guys. There's no doubt about that. But it's not the same pressure, right? And I think that's the thing, my takeaway from this right now is that assuming something crazy doesn't happen and we don't revert back to some big dip in prices and those kind of things, but if everything kind of stays on the path that we're going on, you know, we should see some uptick. And I think that's, you know, it's been a long three years, you know what I mean? And so I think that the optimism that we see out there right now from the folks I've been talking with is refreshing for me, right? You know, so I can step back and say, "Hey, I feel good about where we're going in the 27, right?" And I think most people have that same kind of hope and feel of what's going on there. So, long story short, I'm looking out right now and saying that, you know, 27 by no means, like I said, no one's kicking the door down to come buy anything, but there's people coming in and they're at least revisiting what they've done in the past, what they've looked at in the past, and they're starting to kind of jump into that, "Hey, I've got to update this. Hey, I need to update that. And I got to spend a little bit of money on this, you know, as far as like shop work goes and those kind of things." So, like you're starting to see some of that churn, right? You know, of things, and which means that we've got probably two, three years before we see the backside of that come back down the other way. But it's just how that thing turns and I'm watching right now and I feel we're not out of the woods yet, but we can at least see the clearing in the forest out there somewhere, so.
Yeah. Casey, as you talk to folks and you kind of anticipate what maybe could be a swing here toward the end of the year and carry into next year. What are there any trends that you're seeing out there? Is it less horsepower? Is it more horsepower? Is it technology-driven decision making? What are you seeing from people out there that are showing some interest?
So, one thing, one of the biggest things I've noticed over the last probably five years, and this is a trend I think that will continue to go, is I've heard a couple guys say this, "My dad farmed the same number of acres with four tractors and I'm doing it with six or eight or whatever it is, right?" Paring back their fleet, right? So, more machines going over more acres. So, you're starting to see that average season of use on hours start to creep up, right? So, when I first started doing this, you know, in 2006, 2008 time frame, you know, 250 hours on a tractor was pretty, in my neck of the woods anyway, was pretty common for it. Now, that's about 500 to 700 hours now. So, it's almost tripled, right? And as you continue to watch that go through, more and more folks are starting back going like, "Do I really need this extra tractor?" And I think you're seeing some of that coming to play where it's going in there. Now, I will say this, one of the biggest trend lines that I'm following right now, and again it goes back to what I said earlier, like it's no cheaper time to buy something than right now, right? If you really step back and look at it, there's not enough new equipment being sold right now that will generate the used churn to actually have enough used equipment in the marketplace right now. I mean, I think a lot of dealerships are looking at going like, "Hey, I'm going to have a 10, 15, 20 million dollar gap, you know, in my used space because I just don't have enough new sales to generate the used I need." And I think that's something to pay close attention to, which is going to raise the floor on used equipment, which is good for everybody, right? Raises that floor up on used equipment to where it's a little bit higher than it's been in the past, but I'm not saying like it's COVID by any means, like where I'm like, "Oh my god, go out and..." you know, I'm not saying that. But I'm saying that there's going to be a point in time where there's not enough X to go out and supply the marketplace. And I think that's where we're getting close to that. And I think the trend line then to me kind of points towards, "Well, I can't get what I want, so I'm going to start going down this precision upgrade thing, Rick. I'm going to make my old planter new again or my sprayer, moldboard sprayer new again, like those kind of things." Like those conversations are going to start taking place more and more as we go down this because you and I both know, Clint, that there's only so many people that can afford a $900,000 combine or $250,000 loader tractor, like, you know, that's a small fraction of the population. And there's a bigger population out there that's looking for that same machine, but the price point that they want to operate it in is just not there, you know what I mean?
That upgrade and retrofit market seems to be like the, you know, for those buyers that seems to be the move, right? Buy a little less capable or a little older machine and then we're going to outfit it and make it do what we want it to do with the technology that's available to do that. And that's an option, that is definitely an option and there's a lot of companies out there ready to sell those parts including a lot of our OEM manufacturers. So, well, Casey, big takeaway from this week, give me one final thought here as you wrap up Moving Iron Summit today and tomorrow.
Optimism, that's about, that's what, that's the one word I throw at you. I mean, everyone's got some level of optimism, whether it's me where I'm very optimistic or it's some of my buddies that are like, "I don't know, man, I'm optimistic but I'm not your optimistic," you know what I mean? So it's like there's different levels out there but it's all optimism, so.
All right, good. Well, I like it. I like to be in that spot especially after the last few years where we've been fighting to get back to the other side. So, Casey, I'm going to leave it there. We're going to take a quick break and then we'll be right back with some more Moving Iron.
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Welcome back to Moving Iron. Clint Griffiths and I'm joined by Michelle Rook, who's been covering all things commodities here for us for quite a while. And Michelle, you know, you've been following along with harvest, we've been reporting about harvest, and as we look out there, you know, there's some wet weather. It slowed things down this week, but overall harvest is moving.
That's right. The national numbers that came out on Monday from USDA, 13% on corn, 12% on soybeans. Those are a little skewed because down in the south, states like Tennessee, Kentucky, those areas, they're 15 to 25% ahead while the western corn belt is actually starting to fall behind because of 2 to 6 inches of rain, guys can't get in the field. And so over here, what we're seeing is some soybean basis pushes over the board as much as a buck 50 over the board in some of those soybean processing areas where they can't get old crop soybeans. And so it's, you know, starting to be crunch time here in the western part of the corn belt and we're also seeing some concerns about standability issues on corn.
Yeah, all of those pressures for harvest here as we kind of work our way toward October. Everyone's kind of all of a sudden you see the pace quicken a little bit of like, man, we really need to get out there and get this going. And that basis, the eastern corn belt looks like they're probably going to have a little bit better window to get harvest done, whereas the western corn belt just looks like more rain in the forecast. And it is interesting. I mean, that basis pull is starting to pull some beans into the kind of those northern areas, right? Is what we're hearing?
Yeah, we are hearing anecdotally and actually more of it's getting confirmed all of the time, but that we are getting beans from the south like Delta put on either barges and moved up the river or being put on the rail and moved up to some of the soy plants up in western Iowa and some of those areas because these processing margins have been so good on the soybean side that they do not want to be down even one day. And when you take a plant, a soybean plant, and you shut down operations, it's more expensive than if you pay maybe $2 more to try to get some of those old crop soybeans to town.
Yeah, man. You know, one of the things that Casey was talking about just a little bit ago was, you know, that there's just this kind of renewed optimism with the better prices we're seeing out there in farm country. And of course, you know, all of that is dependent on a lot of other things, macro things that we've been following along. But we are seeing at least some of these prices holding somewhat, aren't we, from what we saw in August? But we do have another report coming out here in 10 days.
Yeah. Well, obviously, we're still about $13 on November soybean futures. We're above 525 on corn. Wheat has had a little bit of a setback here, but still some good prices. I'm hearing crop insurance guarantee for HRW $8.11. So, obviously, that's better than we've seen for quite some time. So, prices still holding in here, and it's going to be an expensive harvest, though, when you look at it. Some of these areas are now going to have to dry crops, dry some corn. We have diesel fuel prices, which are well above $6 in a lot of areas. And so, it's going to be an expensive harvest, and guys are optimistic about the prices that they're going to get, but again, we do have some areas where maybe yields are going to be down a bit from last year.
Yeah. Well, and that's true. We did find that when we were out on crop tour that there was, you know, some yield pressure there to go along with, but the price seems to be a little bit better. This diesel conversation, Michelle, is one that it continues to be a real hot button issue. This week, we've heard a lot of talk about maybe stopping exports of diesel, but that comes with its own complications. And boy, there's some pretty opinionated feelings about both of those scenarios of whether they do or don't.
Yeah, for sure. I mean, maybe it would provide some temporary relief, but temporary is the keyword here. And I know the administration's been toying with, hey, maybe we can do something voluntary. There was some false reports this week that maybe there'd be like a 90-day suspension of diesel exports. And we have a large amount of the diesel fuel supply that is exported at this time, and we have distillate refining capacity, which has been limited. And so, right now we have diesel inventories, which are some of the lowest that we've seen, distillate pool, which is heating oil and diesel. When you put those together, they're at like 40-year lows. And so, we just can't, you know, flip a switch and all of a sudden get all of the diesel fuel where it needs to be. So, the problems that they're citing, the administration, the energy secretary and whatnot, is that if you start limiting exports, then you're going to have some of these plants which are going to shut down or throttle back production. We're going to see higher prices for jet fuel, higher prices for other gasoline. And so, there's inherent and unintended consequences with all of it.
Yeah, it is one of those conversations that it feels like there aren't a lot of good answers. We just need a few things to shake out globally, and we also need a little bit of time maybe to rebuild some capacity and infrastructure here in order to kind of build these supplies back a little bit for now.
