Welcome to Moving Iron with Casey Seymour and Greg Peterson, the podcast for anyone and everyone involved and interested in the business of 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.
Hello and welcome to Moving Iron Podcast. This edition of the Moving Iron Podcast is brought to you by John Deere. I've got Greg 'Machinery Pete' Peterson on to talk about what's happening in the marketplace. Greg, how you doing today?
I'm doing well. Casey, how about you?
Doing good, man. Doing good. Just trying to... got a little cold spell. Now we're right back to 55 degrees. So it's the... I guess we're in the new banana belt out here in the...
65. That is banana belt, man. I'm moving to Scottsbluff, man.
Don't hold your breath because it's bound to change before too long. So we're due for a blizzard yet. So I'm still waiting for that to happen. How are things up here next to the woods?
Just been cold. Good old-fashioned Minnesota winter. A little light on the snow. I think we're down 8 to 9 inches here in southeast Minnesota. But very cold. So it's... Yeah. And of course we feel for our friends down across the Midsouth. They're... I suppose, I don't know. You going to be down in Nashville for Top Producer?
Yeah, I'll be down there next week for that. I'm actually in Raleigh, North Carolina right now. And they were in between two storms. One dropped like 10 inches to the west and 12 to the east or something like that. It was just a mess. So down here that's like epic. You know what I mean? I don't know if they have snow shovels this far south, but it's...
Shuts it down. Are people moving around okay around there, Raleigh, or is that pretty much...
It's... They only had like three or four inches of snow and it had a pretty good melt. I guess it got pretty melted off, but it's definitely colder here than I've ever seen it when I've been in the North Carolina area. So, it's...
I read in Nashville that a lot of folks have been without power for over a week. So we feel for them down there. Hopefully they'll get straightened out here soon.
Yep. It's... when things like this happen in areas that you don't typically see that kind of weather come through, it's...
And it seems like it's more common now than it's been in the past. Like you see storms come through like this. So...
Wish we both should have gone into the weather business. Casey, you'd be right. Just like baseball, you'd be a .300 hitter or Hall of Fame, I guess.
Hall of Famer, baby. You know what I mean? You'll be right three out of seven times and you're good.
That's right. 60% of the time it works every time, Greg.
Oh man, we could go down... we could go down our friend Aaron the movie. What movie is that from? 60% of the time. That's...
What is that reference from? That's really bugging me now.
Oh, it's Anchorman. There you go. Will Ferrell. That's his buddy Brian Fantana, right? Yeah.
With the cologne. With the cologne. What was that? What was that cologne? Was it Panther?
That's funny. Has real chunks of...
Wonder if there's any DEF in that. That's Anchorman. That's San Diego. Yeah, that's a...
Folks, you never know where it's going to go with Casey and Pete when we're on the Moving Iron Podcast. We have fun.
This is just like going to an auction. You never know what you're going to wind up talking about.
You never know what's going to happen when you get there. Speaking of which, you got one coming up. You've been watching here. You got a Wheeler auction coming up. What do you see on there that's striking your attention?
Well, actually just had one this past Saturday. Kirby and Chaz down there on January 31st. Big sale, three rings. Big fan of Wheeler. They do a great job down there. Of course, a lot of late model equipment, so I was kind of interested in how stuff would sell. Just a couple of highlights. I mean, the highest priced item on the sale was a 25 model 8410. I believe it was pretty loaded, ILS, eVT transmission. Nice rig, 544 hours, and came in at 411,000, which when I was looking at that, that's actually... and certainly we'd expect it being a 25 model, we're not seeing a ton of those hit the auction market, but that's the highest auction price on an 8410 in 22 months, walking it back to March of '24, which was right about when we started to see dealers really get aggressive and pile stuff onto the auction market. And I also looked, Casey, the current average dealer ad price on a 25 model 8410, for what it's worth just as a frame of reference, is 500,000, just about 501,000 bucks. So again, 411 hard cash versus, you know, 501,000 retail on the dealer lot comes out with my Machinery Pete ratio math was like 82%, which has historically been a sign of a kind of a stable to kind of maybe even rising a little bit used market, which is...
What we've been talking about since November.
So that was one I watched. Kind of to that point real quick, Greg. I mean, from the same thing that I talked about here, my 120% rule, when auction value is... retail value is 120% of auction value, that falls into that range. So that's a stable market as far as I'm concerned.
Right. And I think like again because back in '24 into '25, we just saw such volume of late model stuff at auction and that's really pulled back. We talked about it a couple weeks ago, but our data has shown I think like a 50... it's either 51 or 55% drop in 0 to 3-year-old tractors sold at auction in '25 versus '24. So it's kind of bleeding into '26 here. But a couple other items, a combine, they had a 20 model 8250. Wasn't really low hours, 1663 engine hours. Went for 215. And as I was poking through our auction price data, I found it interesting, Casey. I went back again, 18... you know, a little over a year ago at the end of '24, and we saw at that point a 22 model 8250. These are both four-wheel drive. And that one had similar... it was about 1725 hours, went for 213 close to me in Grand Meadow, Minnesota. So you're 15 months later, you know, selling for just a hair more money hard cash at auction on a combine, a 5-year-old combine. And the last one that I really kind of found interesting was a 9RX 490. It was a 23 model, 709 hours, and it sold for 403,000 on Saturday with Wheeler. And if I looked back a year and a half ago, same auction company, Wheeler had a sale in Carthage, Illinois, pretty close to Paris, Missouri, same kind of general area. And that one at that time was a 23 model, 498 hours, went for 385. So when we talk about even on these late model ones a little stronger than they were, I think that's a pretty good example there. 18 months ago went for 385, last Saturday for 403.
Yeah. Yeah. Yeah, I mean I think it's just another place to look at on the chart where we're seeing stability come in and it's getting stronger and we're starting to see things kind of settle back down. And you know, you're going to see stability especially when you look at the amount of equipment on the space right now. I mean there's not a lot of one-year-old equipment. We talked about that several times on here, right?
Equipment. Last time I need to go pull those numbers and look through them again, but you know, there were less than 900 combines, one-year-old combines, all makes, all models. And you know, if you're not familiar with the market, you're probably thinking, well, that seems like a lot, but typically that's like 2500 or 3000 combines. Like that's a significant amount, right?
Right now, it's a bit of an inverted pyramid. Typically it starts at the top and works its way down. Now we're seeing at the bottom to the top is where... the middle of that is where you're seeing the biggest bulk of inventory. That's the three to five-year-old stuff. But that's also the fastest stuff coming off the market. And I think what you're talking about here, Greg, points to that, where those values are at. And I would throw this out there to anyone listening to this: if you're in the market to buy something right now and you're wanting to find something that's in that '23 to '20 range, and you found what you're looking for, better start making some moves on it because I think that stuff is going faster every month. We're seeing more and more stuff come off the marketplace, and especially what we saw come off the... especially after going through December, typically you see things slow up, and that specific band of machinery, that three to five-year-old stuff, hasn't really slowed down any. It's just other things have kind of slowed down a little bit, but that band is still pretty strong right now.
That'd be interesting too, Casey. You know, you've been doing it a long time, monitoring things. I've been monitoring, you know, 36-plus years, and you know, this '24 and '25 model stuff, especially the '25s, it'll be interesting to follow that through over time.
Because there weren't many of them sold. So if you typically are a five-year-old buyer...
This is where it's, you know, it's going to get interesting because that piece of the pipeline is pretty narrow. Like you say, there's only 900 now, and it was like double to triple plus. So, you know, farmers are very smart and I think they're starting to look at this and extrapolate forward and go, okay, this being the case, and times aren't great right now. So what really concerns me is that if we go forward, you know, we all hope corn and beans go up and stay up soon, but I'm starting to think that whenever that happens, we're again, we've talked about it, but I think we're going to have 2021 all over again where you've got a kind of a supply issue, both on getting your hands on a new model, which would take time to ramp up again, but then also on the used market, on like you said, it's so pinched on those one-year-old ones right now.
Mhm. Yeah. And you know, you look at this order writing period that's coming up here for the manufacturers, there's not going to be any real difference from what we saw last year as far as new sales go. And again, so I think you've got two years in there where you're going to have a bit of a dry spot in there that's going to be a little bit different than what people have been used to. And that being said, I think the longer that we keep going down this path, it changes the way things look. I feel like we're resetting the marketplace to an inventory level that is going to be digestible by the marketplace, right? I think there's going to be a lot of stuff coming through and those kind of things. And again, I think it's that we've talked about this too where I think we've transformed the market into more of a construction kind of a company model. When you look at that, when you look at you're selling new, there's a couple trades that kind of come in there and then they're kind of washing out. And you know, Ritchie Brothers plays a big part of that on the construction side as well on the ag side too. You start looking at some of the private sale stuff that you see on that... it's a bigger, broader space. And if you go out and look at what's on, like, you know, Facebook Marketplace for example, that's a good place to kind of judge what the overall marketplace looks like. A lot of stuff that's listed on there is that, you know, I would say not probably... I would go five to 10-year-old stuff really falls in there. There's obviously some older stuff out there too, but there's a lot of, you know, five to 10-year-old stuff that kind of falls into that mix. And I think that's... I kind of feel like that's going to be a new normal when you start looking at how things play out.
I think you're right. I think you're right. It's a new normal. In fact, over my career, Casey, I've often advised younger farmers to really, you know, again, God gave us two ears and one mouth, but you know, listen to your dad and your grandpa. This is the first time I've ever kind of hedged against that a little bit and say, in my anecdotal way, saying, yeah, value what your grandpa or your dad or uncle or your grandma said they went through in those past down cycles, but strictly equipment, used equipment-wise, this is different, like you said. And I think this is what the manufacturers collectively and dealers wanted through past down cycles to get this more efficient. And it doesn't matter if we like it or not, this, I think, like you said, this is the new model and you have to get your head around the realities of it. So what you said earlier, if you're thinking of buying again, and it doesn't make sense with everything you know in your past as a farmer, like if things are going to be slow this year, I'll probably have a better... you know, used values might drop a little bit. We've been seeing these auction prices hold. And I'm not trying to... I'm not blowing smoke. I'm just relaying what we're seeing. And auction prices fell like a rock throughout '24 and then they've just solidified and now they're kind of starting to inch up a little bit. So I think you're right. I think it's different now.
Yeah. And it's going to be interesting to watch what happens and how things play out. But I think at the end of the day ultimately, you as a buying public, you know, as you're looking at your next purchases and what that might look like for you on your operation, is what's your plan look like today? Because I think if you're looking to buy something at the end of the year and you're going to go start making those buying decisions in that last quarter of the year, you might need to adjust that a little bit and start having a, you know, maybe a plan A through B. I mean, a plan ABC kind of in place that's going to broaden that. Because I just... I'm just watching the stuff that's happened here. And Greg, you know, you've done this for a long time. The first stuff that gets taken off the marketplace is the stuff everybody wants, right? It's that cherry stuff. It's the good stuff. It's the low-hour stuff. It's the super clean stuff. And then you start working your way down to where you're at. And the problem that what I've... in my... when things like this happen in my career, what I've watched happen is when all this stuff, the cherry stuff's gone and it's priced at X, it's amazing that the stuff that would be considered average, it just kind of fills back into that same spot to that same price point. It's just you're not buying the cherry stuff anymore. You're buying the average stuff, which is the new cherry stuff, I guess, if you want to put it that way. But the prices don't really fluctuate. It just... the machinery just moves up to the next... kind of fills that void where that price point was. And then you start seeing that kind of work its way through.
I've seen that exact thing play out in the auction market, Casey, when you know on hour ranges, whether it's a seven-year-old tractor or a 15-year-old or older, what used to be like that's too high hour range to get the premium dollars. Exactly what you just said. If it's in good condition now, doesn't matter if it's got higher hours. It's just... it's shifting. Yeah, it's shifting and it will continue to shift. And it's going to be as these next couple years, I really think through the end of the decade, as these next years kind of come into play, just because of what we've seen happen and with the price of equipment the way it is, you know, you're locking people into a box, right? And it's going to be hard for people to move in and out of those boxes, especially when you start looking at a new piece and the things that come with that. So it's just going to be interesting to watch what happens. I think if we see this again, this order, the same kind of new sales up in '27 and '28, that really changes the landscape greatly as we work our way through what goes through the end of the decade here.
Yeah, I would say I think you're right. I mean, if, you know, sales in '25 were depressed, even '24 was down, '25 was down more, '26 is not looking rosy. If we went through '27, same depressed level of new sales, even drifting into '28. Boy, now that skinny patch we're just starting to identify in the '25 models...
You could have that skinny patch be '25 to '28 models into the used market. And now you're talking... over my 36 and a half years, I would not have seen that before. That length of just... nothing.
You know, and again, that's why middle of last... well, now I guess it was middle of December when we saw that AF11 25 model sell for 841 and change up in Saskatchewan. I was like, what? But you know, on the hard cash auction market, what are your other options? That was the first one. That's what it brought. So...
Yep. For sure. For sure. All right. Let's talk a little bit about yesterday. EPA came out with what the EPA guidelines might look like now on DEF. Basically, if the machine... long story short, the machine is having an issue that's a DEF-related issue, you can disconnect that. They painted the picture out... the EPA painted a picture out that this was something that was always been available, and I... you know, it's news to me. I didn't know that was available because we would have fixed a lot of problems that way at the dealership. But basically what it says, if the machine's broke due to a DEF problem, then you can unhook the DEF, but you just have to put it back to that original order. A little bigger issue than just unhooking it and going. Like there's quite a bit of stuff that goes into that to make that happen. But all that being said, they've opened the door up to, you know, how does DEF and how does the emission standards thing play into what we see in equipment. Hypothetically, next week they're supposed to come out and have some kind of a big form... a big announcement on DEF. I don't know what that means or what that looks like, but we'll see what that comes out looks like. But hypothetically they come out and say we're doing DEF all together. What's that look like? That changes the landscape of equipment in a lot of ways, especially on the used side. Again, there's the things associated with doing that. If we can just start deleting things and put things back, then that opens up a whole different look and feel because like we've talked about in here a lot, a lot of the stuff we're seeing some big dollars come from the auction side is that lower hour, you know, 5,000 hour, 3,000 hour or less, pre-DEF machines that are bringing some really big money, $150,000, $200,000 stuff we've talked about on here. And that's not an accident, right? That's what somebody's looking for. They're looking for that pre-DEF.
So what's that mean for a machine when it comes in that's got 750 hours or 1,000 hours or 2,000 hours, something like that, and it's a, you know, one to five-year-old machine? What's that do to that marketplace? And how's that start to make things look? It'll be interesting to watch that flow, especially as you start looking at where we're at on some of this two-year-old stuff. That's a fairly big marketplace right now of equipment out there. But if you can take all that stuff off, does that bring more buyers to the market? And I think it might. I think there could be some folks that kind of perk their ears up a little bit, but it comes back to dollars and cents just like everything else does. There could be some folks... there could be some guys out there buying that pre-DEF stuff that can afford a two-year-old something, but they just want the pre-DEF. So what's that look like when you start putting that into place? So I think it opens up the spectrum a little bit into an area of maybe an intense... a little bit of intensity when you start looking at maybe some of the stuff that we're seeing come off the dealership lots that go through the auction space. But I don't think... I think it's more short-lived than anything. I think it's not like it's going to be the new normal for the next five years, but maybe for the next, you know, six to 18 months, you see a real pickup in that marketplace.
Well, this will just be endlessly fascinating, Casey, because you're going to have farmers and dealers and manufacturers all pivoting and adjusting on the fly at the same time.
Yeah. So we just got done talking about, as weird as it sounds, in this time maybe tightening supply of used. So one of the things, of course, doing what I do all these years is, you know, cataloging the prices, but then also listening to the farmer when they buy something, you know, why did you buy that and not something else. So chatter-wise, one of the things you hear out there on the auction market is people definitely looking for the pre-DEF stuff. Right or wrong, you know, certainly lots of emotion involved and valid reasons and stuff, but now in theory, snap your fingers, you've taken that away. Now what you're opening up is, yes, it's still hard to come up... write that check for that two or three-row item for X, whatever, 400, 300, $400,000. But you're taking away one reason that a farmer would say that's why I'm not buying that, right?
And I've got pushing four decades and we talked about it a lot. The magic 10-year-old mark, because the price of new is so high that whenever it gets to be 10 years old, you know, that's what people really want down the chain is like a low-hour, you know, 8, 10-year-old, 12-year-old. And people... I remember people telling me, Pete, that won't hold once this... the Tier 4 engines and the DEF stuff comes in, when that's 10 years old they won't want it. And that was incorrect. I knew it was going to be... I knew that was wrong, that it would still be the fact that 10 years old is such a price gap between the price of new, they'll still want it. And now you're saying that can be... there's no... you're taking away what they don't like. And we're already starting to hint at maybe this used market's a little starting to get tight. Now imagine if you interjected money into the system, price in corn and beans went up, that... it's just going to be really, really interesting to see how this all plays out. Like I say, I've 36-plus years, I don't know... I've seen... well, there's nothing like it. And there's the beauty of the auction market again, right? Because it's like, okay, they did these... if they do all these changes, now here it is at auction. What are you going to pay for it? We've got it all documented what they paid for last week, last month, six months ago, last year. Now it's all different. Wow. It'll be interesting to find out.
Yeah. Yep. It will be. And it's... this whole... since this decade started, right? I mean, the COVID thing was unprecedented, never happened before. The backside of COVID when you saw two and a half to three years' worth of inventory hit the marketplace all at one time when supply chains caught up, unprecedented, never happened before. And then where we're at right now with how used equipment settled in after that three and a half years' worth of, you know, quote-unquote cleansing, I guess, lack of a better term, of the used equipment space, where we're at now. Again, unprecedented space where we've not seen these kind of things move into it. And it's also been interesting to see how the manufacturers have reacted to that, right? What they've done with... this is one of the first times where I've watched manufacturers actually kind of listen to what the dealerships are telling them as far as, hey, we're not doing these things and here's why. And the manufacturer being like, it makes sense. You know, we're going to back you here on this for a little bit. Yes...
It's not been like that in the past.
No, agree 100%. I think that that's a huge factor that's making the whole farm equipment space, again, like it or not, it's just more efficient than it's ever been.
And we still aren't caught up to the automobile space, but we're gaining. And again, if you're on the farmer side of this equation, again, you know, it doesn't matter if you don't like it. You just have to be aware of these new realities and how things are moving quicker. And maybe at some point, Casey, we'll have a patch of five years where we can just kind of go, nothing, no crisis.
Yeah. Good luck with that.
Seems like our whole world is like on fire all the time now.
Yeah. Well, yeah. It seems like that now more than ever. I don't ever remember a time where we got... I got... by the time I had stuff figured out, it just... a new thing happened that you had to throw into...
It is one thing... it is one thing is we all get tired of everything going on in the world and all this stuff. It's... I think we forget... we all... we see is what's in front of us, but there have been many tumultuous... I mean, obviously, and farmers know that better than anybody having lived through the '80s and, you know, whatever the condition. You know, we just do the best we can. And that's been fun on my side trying to help over the years through the ups and downs and just trying to listen to farmers and dealers. But whatever the future holds, you know, farmers will and dealers will take it on and, you know, make it the best they can to do what we got to do.
For sure. For sure. All right, Greg. Good place to stop. If folks want to reach out to... well, you guys, you got a couple things coming up. You're going to be at the National Farm Machinery Show here. What, next week, right?
Yeah, I'll be there one day on... I think one day on Thursday for sure, the 12th, maybe the 13th. I'm not sure yet. So I'll be poking around the show. Hopefully run into folks and it's kind of like a family reunion down there. So Top Producer, Monday the 9th in Nashville. Farm Journal is a great event. That'll be super fun. This Friday the 6th, I'll be in Western Kentucky at the... let's see, I believe it's called the 2026 Winter Ag Conference in Water Valley, Kentucky. I'm looking forward... I love Kentucky. Can't wait to get back down there.
Oh, and actually the day before that, Thursday, I'll be in Bushnell, Florida, covering I think day eight or nine of Lion Auctions' 12-day heavy equipment auction. So I'm curious to get a feel for that late model heavy stuff, how that's been selling.
Yeah. Yeah. That time of the year down in Florida, there's always a... there's a big run there about 30 days where they do...
Unbelievable time. Yeah. It's pretty impressive what they do.
That's a 12-day auction. Check it out, folks. Lion... lionauction.com. 12-day auction. So I just can't wait to get down there. And even if it's 40 degrees, hey, that's warmer than it is in Minnesota here. So what the heck?
You'll have your half shirt on by then.
Machinery Pete in a muscle shirt and cargo shorts. How about that?
There you go. That'll work out well.
That'll work out well. Well, Greg, appreciate you being on. We'll catch you again next week, man.
Sounds great, Casey. Have a good one.
All right. Stay tuned for more Moving Iron Podcasts after these messages.
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All right, welcome back to Moving Iron Podcast. I got Shawn Hackett from Hackett Financial to talk about what's happening in the world of commodities. Shawn, how you doing this morning?
I'm good. A little warmer today. Feeling better about things. My outlook on life is better.
And everyone, most of the country is going to see a little bit of a warmup next week as you typically get after an historic cold event. But I don't believe winter's over. I think we're going to have another big round of cold back half of the month into March. So I wouldn't put away my winter clothing just yet.
Well, we need some winter where I live at because we haven't had one yet. So...
Well, as you know, it's center east and center west was always going to be warm. That was the forecast was a very defined line of west is warm, east is cold. The majority of the people live east. So that's why the heating degree days have been record setting because if you have record cold to the west, the heating degree days are just nowhere near the same. So if you want a cold winter as defined by heating degree days and the demand for energy, it's got to be the center east, which is what we've had.
All right. So let's talk a little bit about that as you watch the storm scroll through. How are you seeing that and then what are you seeing happen with natural gas because of it?
Well, natural gas has been just crazy volatile. We had the big rise in December, in the first part of December when it was so cold, crashed. We had the brief warm-up in December, in late December, early January. Then the natural gas price doubled in three trading days when winter came back and we had this incredible cold that we're still kind of finishing up now. It crashed again because we're looking at a brief warm-up coming up. And I imagine it's going to have...
Another big surge. I'm not sure why the natural gas market is unable to be more persistently higher. It's just been this crazy volatile. I mean, we're drawing down the supplies. It really shouldn't be. We've had a top five cold December. We've had a top five cold January, and we're already having really, really cold weather the first, you know, 10 days of February. Even though there's going to be a little bit of warm up for one week, we're going to have a top five February. I mean, I just think the natural gas market is grossly mispricing itself again.
And I would think the next cold wave that goes into late February into March, I think maybe that's what finally keeps the natural gas price at a higher level when the market addresses how low these storage supplies are going to get. But it's been a wild market, Casey. It's been all over the place. The forecast has been correct. The natural gas price has been pretty wild.
Yeah, yeah, it's been all over the place for sure. And this weather that we're seeing is, you know, a lot of friends of mine I've talked to, especially on the east coast. We saw some epic snows on the east coast. South, you know, I'm in Raleigh, North Carolina right now, and they were in the middle of two different storms. East and west of them got anywhere between 12 to 20 inches depending on where you're at, and they got about three or four inches of snow where we're at. But when you're looking at areas like this that don't see snow like that, and it's a, it's a once, you know, once...
I don't think we're done. It looks to me like we're going to get another, at least one more major, potentially two major systems over the next 30 days that could dive deep into the deep south, you know, and make that turn up, you know, and then get the northeast, you know, depending on exactly where the low pressure system is. For sure there's one more. And I think there could be a second one. And so I don't think that the unusually snowy pattern for where they don't normally get snow, and just where they do get snow, it's been well above normal. I don't think that's over yet. I think we're going to see a lot more of that.
So if you have travel plans in the eastern half of the country, let's say after next week, you know, I'd just be mindful of the weather because I think we're going to have another set of delays and cancellations and airport closures and all the things that make travel a not mitigated disaster during those periods of time.
So I got a question. I was thinking about this. I think this is the second or third winter in a row where we've had something like this happen in the deep south, and you've talked a lot about Pacific oscillation and Atlantic oscillation, those kind of things, and where the water temperature is at. Talk a little bit about what you think is driving some of this weather pattern that we're seeing, especially this time of the year, because it typically comes in this time of the year. So I guess your thoughts on that.
We have been forecasting for a while in our presentations that we were expecting to see much colder deep south temperatures. One of the reasons for it was that we expected that the Atlantic Ocean, especially the North Atlantic, was going to see a cooling sea surface temperature regime below normal. There's gravity reasons for it, meaning how the planets are aligned and upwelling versus downwelling, and there's also the Beaufort Gyre, which we've mentioned on your show quite a few times, about clockwise versus counterclockwise and all that cold fresh water, you know, dumping into the north. Woods Hole Institute has in fact verified that that has now reversed, and we are seeing very, very, very, very cold sea surface temperatures in the North Pacific, and it's starting to work its way further south.
What I guess what I'm getting at is we're starting to develop what's called a negative AMO, Atlantic Multidecadal Oscillation. And if you run correlation studies, when you have a negative AMO, like we had from 1965 to 1985, that 20-year period, we had a very strong negative AMO. It tends to create deeper deep south troughing. And that's how you get your storms to come further south and then make the turn.
So that's a key reason why we're getting these deeper pushes. I mean, we haven't seen these kinds of cold and snowy weather. I mean, it's been a very, very long time that we've seen anything like this. You'd have to go back to the 70s really to see anything quite like that in the deep south. And it's going to be a more regular feature. Not every year. Not every year. I mean, you still have to have other factors in your favor like we had this year. But if this negative AMO is shifting, these are 30-year cycles, meaning you can tend to have a warm Atlantic for 30 years and a cold Atlantic for 30 years. So my view is we're just entering a 30-year period of colder Atlantic Ocean sea surface temperatures. That means that this center east and the deep south, they do need to buy some snow plows.
And I actually mean that like crazy seriously. Like they're going to need to buy some snow plows because if this is going to, let's say out of every 10 years, let's say six years are going to be like this, they need some snow plows. They need to buy a little salt, rock salt. I just don't think you're going to continue to shut everybody down for weeks and weeks, and these patterns are going to get deeper and longer. You know, we're in the early stages. This is by no means as bad as it's going to get for the Deep South. This is just the first few innings of this nine-inning game that I think has just started.
But the changing of the Atlantic Ocean, especially the North Atlantic, is a huge shift. And you have to think of it this way: when the Atlantic is warm, especially the North Atlantic, it produces high rising air and a high pressure system, which tends to find itself over the east, which tends to not allow deep dives of low pressure.
If it's cold, you have a low pressure system. You get sinking air, which is a low pressure system, which tends to hide out over the east, which means you get this deep, deep troughing.
Now if you have like the Quasi-Biennial Oscillation going from east to west like it is this year, disrupting the polar vortex, and you have other factors, you know, a warm North Pacific like we have this year, and you're in more of a neutral condition, like there's a lot of factors that came to create this weather event. But the point I'm trying to make is that the cold Atlantic is what's going to make these events much more severe for the deep south. And that's really what's changed, and it's a permanent change for a considerable period of time.
I don't ever want to say it's just one variable, but the big change as to why we're getting more consistent pushes of cold in the deep south is the cold North Atlantic. This shifting of the negative AMO, which is a 30-year cycle. And now that we have confirmation that the Beaufort Gyre has reversed and that record amount of cold fresh water is going to continue to dump in for the foreseeable future, it's just a big weather pattern change. It's just a big, big weather pattern change. And it just means, generally speaking, center east is going to get more consistently cold than it has since, like I said, since that mid-60s to mid-80s time frame. And the West is going to be on the warmer side.
That's what happens. It's going to be on the warmer side. Doesn't mean you won't have a cold winter every once in a while. Doesn't mean you're not going to have snow in the ski resorts. It just means we typically have had cold west, warm east. That's what we've had for winters for a long, long time, generally speaking. And now it's going to be like this year: warm out west, cold in the east. So maybe you need to go west to stay warm.
Maybe Nebraska is the place to go.
Well, I can tell you that we've had, I think the week before Thanksgiving, it's been at least, it's been in the 50s most of the time. I think Christmas Day was like 62 degrees.
We had a couple cold snaps come through this last week. You know, we had...
Yeah, you know, because you're on the edge, every once in a while you're going to get a little feel of it, but you're still too far away. If you go way west of me, there's like, you get into like Wyoming and Montana and western Colorado and all, there's no mountain snow right now. And it's just getting to be, and for where we're at, like from an irrigation perspective and how much water we rely upon snow melt in that part of the world for irrigation and farming, it's kind of getting a little scary to think about the complete lack of water that's out there.
Well, you know, I guess what you're saying and what I'm saying is that if we're going to have a generally speaking shift in the winter pattern to less cold out west, just because it's less cold doesn't mean you don't get snow. But if the low pressure systems are going to shift, then you know, you might have much more persistently lower snow melt runoff. That could create an issue for irrigation needs out west. Certainly something that one needs to monitor very closely here, you know.
Yep. Real quick, while we're talking on this subject, I would love to get your feedback on where you see the US drought monitor at right now. I'm going to share my screen so people can see what this looks like. Give me one second here and we'll get this up. But as you look at the drought monitor and where things are at, if you look at where some of the extreme drought starts to creep into in some areas, you're seeing some key growing areas in the corn belt. Now, obviously it's still early, right? A lot of things could change between now and when planting season starts. But as you look at this drought map, Shawn, what's your reaction to this right now?
I mean, you don't usually see a Palmer Drought Severity Index like that this time of the year. That's a worrisome sign. We've talked in our presentations this winter. We've been talking about this unusually dry. If you research, Casey, 1934, 1936, 1955, 1988, 2012, you know, these big major droughts, they all started early. Like the drought just didn't show up on May 30th. No, the drought had been developing for six months prior. Like you were seeing dry weather developing well before, and by the time you got to May, it was in full bloom. And then if you get hot, dry June and July, it's just over, you know.
And so that's why I've been mentioning this, because it's very interesting. We haven't really seen a Palmer Drought Severity Index. The key here is we've seen it out west before. What we haven't seen is this center east. It's very unusual for the center east to be this dry. The west has been dry before. Like you've seen this kind of dryness this time of the year before, but the center and the east to be this dry, I went back and I went back 30 years. I could have gone back more. I went back 30 years and tried to find when was the last time we had this kind of dry soil this time of the year in the center east of the country. You'd have to go back to 2012, Casey, the last time we had anything like this at this time of the year.
That doesn't mean we're going to have a major drought this summer. It just means that's a very, very worrisome sign. What it's saying is this is unusual. You always are looking for unusual things that are not normal, right?
And getting back to the cold Atlantic, the other manifestation of a cold Atlantic for the east is that the trend has been in the last 20 years we have all kinds of drought out west. The east is fine. I mean, that's generally speaking been the trend. The east is fine. The west is tons of drought. That's been our pattern, right? I mean, we've had, you know, Nebraska all kinds of drought. Out west all kinds of drought. The Dakotas, all kinds of drought. But the east, you know, the I-states, it's generally speaking had plenty of moisture. And we've had a warm Atlantic. But if you cool the Atlantic, you flip it now. And what happens is generally speaking, you're going to get a drier center east pattern than before.
And so given that we're just starting to see this sea surface temperature change in the Atlantic and now all of a sudden we're starting to see some unusual dryness in the east that we haven't really seen in a long time, you know, I think there's something to that. Like we're starting to see the atmosphere shift and change. And this is, like I said, this shifting of the Atlantic Ocean when it happens is a big weather pattern shift. Not just here, but everywhere in the world. Like it's a major, major change of the weather patterns that we've been accustomed to.
And so that has always been part of the weather volatility cycle that we've talked about. You know, when we always talk about the sun, but when we talk about the sea surface temperature shifts in the Atlantic Ocean is a big one in terms of what it means for moisture, what it means for temperature. So I think for this coming season, Casey, the key as to whether what you just showed is going to become a problem or not is whether El Nino arrives before the growing season or not. At the moment, all the weather models are saying El Nino is going to arrive by late spring.
If that's true, then we'll get some rains and we'll ease that back and it won't be a major issue. I went back to 1950 and I looked at, so we had an El Nino a few years back and it was a strong El Nino.
Okay. Strong El Nino, like you have weak, you have moderate, and then you have strong. You don't get a whole lot of strong ones. That was the first strong one we've had since 2015. Okay. I went back and looked at every time we had a very, very, very strong El Nino and I said, when was the next time that we had an El Nino after a strong one? And it was four years. You did not get another El Nino until four years later. Like when you get that kind of a strong one, it takes time to redevelop the energy to develop another El Nino.
Well, 2023 was your big El Nino. Okay. Well, if I put four years ahead, that means 2027 is your El Nino year, which should start late this year. Like that's what's always happened.
So, and then there's also a trend that the weather models are pretty good at predicting El Nino trajectory into March, but they have terrible accuracy on the other side of spring. Meaning, there's this, they call it the spring predictability barrier. They can actually do a search that these weather models just have no ability to predict El Nino trajectory on the other side of spring. Like there's this window of spring that they consistently either overestimate or underestimate what El Nino or La Nina are going to do in those sea surface temperatures of the central Pacific. So I am very, very skeptical of all these models telling everyone that we're going to have this El Nino, you know, in May, June, when their track record has been so, so bad.
And I have a 75-year track record that says, you know, we've never seen an El Nino come back after a strong one. We've never seen one come in before four years, which is 2027. So I'm very skeptical. Obviously it doesn't mean it can't happen. There can always be an outlier. Maybe this is a one-off shot, but we're going with the idea that El Nino is going to arrive later in the year. We're not going to have El Nino for the summer and that 27 is going to be your El Nino year.
And if that is what happens, then I think that Palmer Drought Severity Index could be looking much, much, much worse when we get into May and June, and then we just have to see if we can bring in the heat to really hurt the crop. So to me that's the issue here, whether El Nino is going to arrive or not. And we're really not going to know that for sure. I think mid to late April we're going to have a pretty good idea of the trajectory, and then we'll find out if the historical analogs of the four-year rule plays out yet again or the models happen to get it right this time.
You know, I give them being right very low probability, but it's possible. So to me that is the number one thing to watch. And there's really no way to determine anything more than that until we get to like mid-April because the models can't really predict it. I can only tell you what the history says. The history says we shouldn't expect El Nino to arrive until, let's say, the fall, you know, but we have to have confirmation of that.
Okay. All right. Good stuff, man. All right. Let's take a look at what's going on in the cattle market right now. You look at the cattle. There's no real sign of herd replenishment by any means. You're seeing supplies kind of where they're at. They've kind of been that way again, down year over year from the last report we saw on Friday. I guess Shawn, as you're looking at this, what incentives are you looking at right now as a cow producer to say, 'Hey, I'm going to start rebuilding my herd'?
Well, I mean, certainly the profit potential is there. I mean, they're making money.
