Moving Iron: Why Low-Hour John Deere Tractors Are Suddenly Worth a Fortune

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. We got Greg 'Machinery Pete' Peterson on to talk about what's happening in the market. But before we do that, this edition of Moving Iron Podcast is brought to you by John Deere. Greg, how you doing this morning?

Doing pretty good, man. Doing real good. Harvest started down here. Nice beer, by the way.

Yeah. When you told me that 4730 brought 210, I was like, man, that's just, that's a big number for that machine. Even though it's got low hours. I mean, it's got what you say, had 785 or something like that. I mean, so yeah, super low hours for what it is. But still though, it's 210 for that machine, that's a big number.

Yeah. Yeah. It's going to be interesting to watch what happens through the end of the year because, you know, there's still a lot of... I think the optimism's peaked up just a little bit from what it's been over the last three or four months as you watch things come out and you're seeing all the different yields that are coming out of the field and everyone's pretty happy about what they're seeing for yields and those kind of things. It'll be interesting to see how those yields play out towards the end of the year and if it... USDA did something pretty interesting. At the last WASDE report they had, they increased the acres but they didn't increase the yield, right? So it's the same number of bushels across more acres, right? So it'll be interesting to see what that does. You know, if that... that's what that's telling you is, and we kind of hit on a little earlier, is you know, maybe there was some lack of fertilizer put down just because of costs and everything associated with that could do some stuff when you start looking at yield. So, it feels like we're shaping up for a better year. By no means am I thinking it's going to be anything wild and crazy, but what I think it's pointing to is that we're going to get a chance to get October, November, December time frame, late October, early November, December, a good opportunity to get a lot of this equipment pushed off the lots and funneled back into the system to where recheck in '27, there could be a better opportunity for some of the stuff as we look and see what happens as far as supply and demand goes as you look there. No, I'm not talking about COVID here. I'm talking about reasonable expectations for supply and demand to where everything is elastic like it should be. So I think...

Yeah. Yeah. They've got a good opportunity to do some pretty cool stuff. By the way, was Shorty... was that an ironic Shorty or was that like because he's a short guy? I know a guy named...

Well, guys, good stuff. Looking forward to that episode of Machinery Pete TV when it comes out. So, folks want to reach out to you and get more information about coming and doing something like that at their auction or just showing up at their auction. What's the best way to do that?

Right on, Greg. Appreciate you being on. We'll catch you again next week.

All right, you too.

Well, there they are mocking you. See you next year.

That weedy area that's got you thinking, 'Man, I hate that spot. Wish I'd sprayed better.' Get the last laugh with a sprayer upgrade from John Deere. Precision upgrades that can increase your sprayer's performance like ExactApply advanced nozzles to give you more control at more speeds. It's just one of the many precision upgrades you'll find at johndeere.com. Now, let's see who's laughing. All right, welcome back to Moving Iron Podcast. Got Sean Hacketton from Hackett Financial out of Boca Raton, Florida. And he's always nice enough to come and talk about what's going on in the world of commodity. Sean, how you doing this morning?

Doing super good. Looking forward to being on the show again. A lot's been happening lately. Some excitement, great for the first time in three years. So, we haven't seen moves like this in quite a while. So, we're starting to shift the cycle up. And it's something we've been talking about in your show all year long that we would see this kind of past mid-August time frame start to shift the cycle back up. And certainly it has with a bang for sure. That's all.

Yeah, definitely. All right, let's dive into that. Let's talk a little bit about what's that situation. Okay, so we had the Pro Farmer Tour come out basically say, 'Hey, we're thinking it's going to be 10 bushels an acre less than trend line.' Which was a big shock to most people. USDA also came out in that same week that talked about, in the WASDE report, talked about, hey, we're going to expand the number of acres, corn acres that were planted, but we're not going to expand the number of bushels, which tells you that they're seeing something similar. Over the last couple of weeks, you've watched, of course, the price of corn move up. So, I mean, Sean, as you're looking at this, talk a little bit about some of the dynamics you see affecting this and where do you think this is headed and how long do you think this is going to go into 2027?

We've been low enough for long enough and we fired up the demand enough that we now need big crops in order to cover it. Meaning we needed trend line yields or more to cover it. And if we don't get trend line yields, even if it's a little off, then we get into a supply problem very, very quickly. And that's where we're at. I think the general concept is that farmers when they were in the springtime looking at the fertilizer price at that time which had skyrocketed, where the corn price was at that time which was very unattractive, everybody just cut back just a little bit on fertilizer applications throughout the growing season. I was in a high-level meeting over the weekend with a top fertilizer distributor and he confirmed that there was definitely across the board less fertilizer used this growing season versus last year. And on the margin, what we're seeing is the weather overall generally speaking has been okay, but the corn crop is not finishing strong. It's running out of gas. It's not able to finish out because it's lost the ability to... it's lost this fertilizer boost at the end to kind of put on that final bit of yield that the market's been anticipating. And so whether it was too wet, too dry, maybe it was just right, we're seeing corn yields underperforming across the board just a little bit. And just a little bit means, you know, mid-170s is just a little bit. And when you look at the demand that we've built into the marketplace, which I still think is underestimated, I think the demand's actually stronger than the USDA is currently suggesting. Our carryouts are going to get to 1.3-ish to 1.5-ish depending on where you want to wind up with all that. And that is barely above minimum pipeline level in a year that we're supposed to have, you know, a really good crop. We know that Europe had the worst crop in at least 50 years, probably 100 years, from a one-in-100-year drought. 100-degree-plus temperatures for 30 days. Just obliterated their corn crop. We know they're going to buy a lot of corn from us. They have to. We know Russia-Ukraine has no interest in selling anything to anybody. They just want to keep fighting each other and destroying each other's infrastructure. And we're going into a super El Nino and that's going to peak around the end of the year and carry over into spring, which means the soybean crop and the corn crop in Brazil is in grave risk. And we're going to flip to a La Nina next summer in our growing season, which is never good for grain production. So when you throw all of that in, you know, the prospects are that the grain markets have some work to do to correctly calibrate future supply and demand going forward. And you know, we've been just too low for too long and the market is quickly addressing and realizing that. And this move which has surprised most people, you know, seeing this corn market approaching mid-5s, is the early stage of that process and we think we have a long way to go. Yes, there'll be ebbs and flows. It's not a straight-off shot. It's going to be corrections along the way. That's without standing. But the quintessential question in my mind is if geopolitics are going to get worse in '27, which we believe they are, and fertilizer prices are going to surge again, like we think that they will, and we have 8 to $10 wheat, let's say, somewhere next year, and we have 13 to $15 soybeans next year. What price does December '27 futures have to be at to convince farmers to plant 100 million acres of corn? Because in our opinion, what the market's going to need to do is going to need to tell us farmers to plant 100 million acres of corn. Well, if fertilizer prices are near the spring highs next year, which we think they're going to be, what price are we going to need to convince them to not plant soybeans or cotton or wheat or other crops that require a lot less fertilizer and are a lot cheaper to put in the ground? What's the price level going to be? I mean, I can't say I know for sure.

Seven bucks.

Well, what I'm saying is it's not low to mid-5s. I know that for sure. And history says it's typically been, you know, in the last 25 years, we've needed $7-$8 corn in order to convince farmers to do that. Not the old crop, not the proper... now we're talking about December '27 futures need to be, you know, so that's not today or tomorrow. I'm not saying we're seeing that today or tomorrow. I'm talking about, you know, by spring. You got to tell the farmers by spring what they need to do, you know. Yeah, you know, that's the risk that I see. And so, unless there's a dramatic change in the geopolitical climate or, you know, we're going through another '08-'09 financial crisis and everything's falling a hell in the hand. I mean, there's always other reasons why markets could do something different, but outside of some extraordinarily unlikely scenarios, you know, that's kind of what we're seeing or what we think's going to happen here. And all year long, you know, we've been telling producers all year long, sell what you have to, sell what you can't store. Got to keep the fund going. Does no good to have $7-$8 corn if you're not farming when you have seven. You got to stay in business, but store the rest that you can't store. I mean, and whatever you can't store or you need to sell harvest time, please get it done during these periods where we had spring highs, we had July highs. But store the rest. This is a time to gear your future inventory to the upside because we think we're going through a re-rate. And there'll be a time to pull the trigger on getting aggressive on forward sales and getting aggressive and locking in multi-year worth of pricing. That's not now. The temptation like late 2020 was you want to sell on the very first rally you see because you've been starving for three years and you've been dying for it. You finally get it. So you sold your corn and then the market's two or three dollars higher later and you missed out on the real reason why you're a farmer is to make that kind of return. And we want to make sure anyone that's listening to us avoid the temptation to oversell on this first rally. We think that may feel good in the short run, but we think it'll be a huge mistake in the long run in bringing more home on the farm. And that's where we still see everything at. You know, obviously, if you still have bushels that you haven't sold that you need to or that you can't store, get it done. But, you know, we're not at all wanting to get aggressively forward sold at this point. Not at all. So, yeah.

Makes a ton of sense. Makes a ton of sense. And that was what you talked about there makes a ton of sense too when you start thinking about the big picture of what happens if these things start rolling through. So many moving parts right now to pay attention to when you start looking at the overall crop. So all right, let's jump over real quick, talk about what's going on in the cattle market. We've seen some big corrections there. It's been a long time since we've seen these kind of corrections come through. This Argentine beef thing, that's kind of stirring the market up a little bit as you're looking at the overall cattle marketplace. Sean, where's your head on that?

The biggest thing for me is two things, forgetting all the headlines. We could talk about it, but and we will, but forgetting all the headlines, the two things structurally have changed that are going to make '27 difficult for cattle is a, the demand clearly has backed off on high price beef. The demand has backed off. We lost the marginal buyer of beef. And so that caused a perpetual situation where the packers were losing money and bigger money and bigger money because they were paying too much for the cattle which were near all-time highs and the beef cutout price was falling. And they finally said that's enough. We're not in the business to lose money. So we're going to close plants until we can make money again. So, if we close a plant, we're not buying as much cattle. The cattle price falls. And it finally last week, for the first week since April, we only saw a few weeks, they made a positive margin for the week. Last week, for the first time. But just because, I mean, and it's not like a major margin, it's a small margin, okay? But once they start making money, they're going to want to make money for a while because they've been losing it for three years. So our view is that they're going to not have any interest in bidding up the cattle market unless there's a commensurate rise in the beef cutout price. Meaning, so here's the margin, right? Well, if they bid the cattle price but the beef cutout price does not go up, they're going to lose money again. So they're going to do everything to keep this margin. And so the cattle market running up and away because we don't have enough animals, in my opinion, that game is over. And those two structural things are going to keep the cattle market under wraps. Now all this news about importing more beef, majority of it is ground beef, Casey. It's not the higher cuts. From last time I checked, we don't actually have a shortage of ground beef. We actually look to me like we actually have a little surplus of ground beef supply and demand and all. Like that's not where the problem is. The problem is in the higher cuts and we're not bringing the higher cuts in. We could, but that's not what the announcement was. The announcement was bringing in the ground beef side of the equation, which is not where the problem is. Now, clearly bringing animals over from Mexico for the first time in a long time. That's a material change. The question is the Mexican ranchers haven't been just sitting around losing money looking to go out of business and decide they're just going to wait it out. I mean, they've been making investments in local infrastructure, local packing houses, local processing capacity, and they've been doing that. So, the question really becomes not are we going to bring animals over, we're starting to do that. What's the new normal? I don't think we will ever get back to bringing in the number of animals that we did prior to the closure of the border from the screw. We'll never see that throughput coming back over again. What is the number? Is it 50% of what it used to be? Is it 60% of what it used to be? I don't really know and I'm not sure anybody knows what we're about to find out. But nonetheless, bringing animals over of any quantity from zero will help stabilize the herd and allow it to potentially grow a little bit. Now so long as that continues, like we don't close the border again, which I don't know. I mean, you know, that's a big question, but as long as we keep bringing the animals over, that's a negative. That's a headwind that we haven't had and it's going to be there. It's not going to go away. And lastly, if we see six, seven, $8 corn next year at some point, last time I checked, that doesn't usually bode well for feeder cattle. It doesn't usually bode well for cattle. I mean, it means on the margin, the cattle rancher is going to say, 'I'm not fattening up this animal anymore. I'm getting rid of it. The more I feed this animal, the more I'm losing. So I'm getting them out, herd liquidation.' And so that to me for livestock as a whole and especially for cattle, that seems to me to be what we're looking at in '27 is kind of a herd liquidation cycle. If we have seven, six, seven, eight corn, we always get herd liquidation. And grains go up at a different time, it's always opposite. So, grains go up, livestock falls, livestock goes up, grains fall. They've been doing this for as long as I've been price forecasting markets. And '27 looks to me to be where grains are in, livestock is out. Now '28, I believe, will be a completely reverse story. Well, grains will reach some type of a crescendo. They'll overprice everything and they'll start to fall. And then the lack of animals, the thinning of the dairy herd, the thinning of the cattle herd, the thinning of the hog herd will then stop. And then you'll have the man chasing fewer animals, fewer production. And then the feed prices will become more attractive. And then the livestock guy says, 'Well, wait a minute. I'm making money again. I can fatten them up again.' And then the whole cycle turns. So if we're really thinking through this, '27 is the cycle grains are going to...

outperform substantially. 2028 will be when livestock outperforms substantially. So I think it's going to be a tough road ahead for livestock producers in 2027. What does that mean? When you get a rally, when you get a bounce, you need to quickly lock in. Even if you don't like the price that much, even if it's a borderline margin, even if you're breaking, even if you're losing just a little bit, it's better than losing a lot. And you're going to just have to manage unsatisfactory economic conditions for livestock in 2027. That's the name of the game because then you want to be in a position to make good margins in 2028. That's my opinion. Farming and ranching and grain production — it's all about trying not to lose too much when it's not good and trying to make a whole lot when it is good. You're just going to try to manage the bad times as good as you can and then really make it when the times are good. And livestock's had a good run and they're going to give some of it back here in 2027. And that's not to be feared. It's not to be angry about. It's the way the markets equilibrate the system. You're not going to be making money every single year for the rest of your life in livestock. It never has worked that way. It will never work that way and it's not going to work that way in 2027 in our opinion.

Okay. All right. One last question for you. As you look at the remainder of the year, what are the two things that you're really close to paying attention to that you could say could really accelerate the spark that you're talking about or decelerate the spark that you're talking about?

I think the two things that I'm looking at are these — these are the clear two for here at the end of the year. These are the two factors. Brazilian weather starting October 15th, like starting from mid-October onward — are we going to develop a super El Niño type of extreme drought that's being exacerbated by deforestation of the Amazon like we saw in 2023 for the soybean crop? To me, if that starts to develop and the market starts to dial back the largest exporter in the world, which is Brazil now, and the largest producer in the world, which is Brazil now, that China pretty much relies heavily on to buy most of their soybeans, even though they've been buying some from us lately. I mean, talk about a spark. That would be a huge spark. Secondly, Russia is going through their re-election or re-appointment phase on October 18th, 19th, and 20th. Z is meeting Trump on the 24th, and the US has midterm elections in early November. I believe those three events are going to shape geopolitics for the remaining part of this geopolitical instability cycle that we've talked about that crescendos in 2028. Not that we're geopolitical aficionados with doctorate degrees from Harvard or anything on geopolitics, but from what we gather, the hardliners in Russia are really unhappy that they believe Putin has been soft in this war against Ukraine. They've let this thing drag on, and they want to get much more nasty in this fight. And I think they're either going to tell Putin, either you're going to do it and we'll give you another run, or we're going to put somebody in who's going to do it. And so my feeling is once this 18th, 19th, 20th is over, either they appoint somebody new or they point in, I think Russia is going to get much more aggressive in their efforts against Ukraine, which will not be good for energy, and would not be good for fertilizer, and would not be good for corn and wheat flows which are already depressed to begin with. So that's the first thing to ask. Second thing was, given super El Niño risks to weather that's already happened — like we've already had a drought in India, we've already had a drought in Europe, China's already had floods and drought — like there's all kinds of problems. And if Russia-Ukraine is going to enter a more caustic phase, I would be looking for this meeting with Trump and Z to lead to expanding purchases of grains by China, meaning I think they're going to say, you know what, we need to hedge this risk that's coming. And in order for us to hedge a short Brazilian soybean crop, a short Brazilian corn crop for the back half of the growing season, problems not getting wheat and corn out of Russia, Ukraine, higher fertilizer prices, all these things — we need to become friendly with the United States and buy a bunch of grain while farmers are still willing to sell. And so we would be looking at verbiage and headlines showing an expansion of Chinese willingness to purchase US grain. And in the November elections, in my opinion, whichever way it goes — whether the Republicans keep the majority in the House and the Senate, whether it's split or they lose both — to my way of looking at it, which is whatever happens, once the elections are over, there's, in my opinion, zero political interest to calm geopolitics from that point forward, meaning no one's up for re-election anymore. And I believe that the powers that be are going to get much more aggressive in their geopolitical approach. I think everyone's been trying to keep the genie in the bottle — yeah, you know, we're going to obliterate Iran. All right, we almost have a deal. No, we're going to kill them. Now we're going to almost have a deal — like they're just trying to keep everything from getting out of hand before the elections. You know, you almost feel like they're every time. But I think once the elections are over, regardless of how it goes, there will be no reason to do that. And I think those that are in power that have certain agendas, they want to do certain things, and whether you agree with it or don't agree with it, I think geopolitics is going to become unbridled from a Western Hemisphere perspective. And so that leads into the final geopolitical instability cycle that, you know, historically has led to some of the more significant commodity, energy, and agricultural commodity inflationary cycles throughout a thousand years of us monitoring and analyzing the historical context of this. And so I think those three points on the map, and watching how things lead up to, through, and post that, on top of Brazilian weather turning south, turning negative — I think those two things are going to shape the trajectory of commodities overall, of energy overall, of fertilizer overall, and grains overall heading into and through, you know, next year.

Right on. Okay. All right, Sean. Good stuff. As usual, folks want to reach out to you and get more information about what's happening over at Hack Financial. What's the best way to do that?

Website, hackath.com. We have interviews with you and others on Real Vision that kind of discuss some of our weather cycles and statistics and correlations. Once in a while, we post stuff on Twitter and LinkedIn if people want to check that out. Once in a while, though, we're not habitual daily posters. We tend to spend most of our time researching for our customers, not giving free information out to everybody. But nonetheless, you know, there's from time to time they can kind of keep up with us there to see if what we do and how we look at the world and agriculture might be beneficial for their agricultural and their investment businesses in agriculture.

Well, Sean, appreciate you being on the podcast, man. It's been a great run. I appreciate all you've done. So take care of yourself and we'll catch you.

Sounds good. Casey, I really, really always appreciate the opportunity to share our views with you, and hopefully we'll find a way to continue to do that going forward. That's all.

Yep. Yes, sir. All right, Sean. Thanks, bud. Take care.

Looking for more accuracy, more productivity from your current planter? Let's get exact with precision upgrades from John Deere. Start with ExactEmerge and get accurate singulation and spacing at 10 mph. Or choose ExactShot to promote early root growth and cut fertilizer costs. And with FurrowVision, save time by verifying seed depth right from your cab. Visit johndeere.com/planter-upgrades and see why nothing runs like a Deere.

I am terrific, sir. And yourself?

Yeah. I would kind of pinpoint it this way. The phone is not ringing off the hook like you said, but what is out there is 1,000% legit. It seems if a guy reaches out on a piece of machinery, you know, we're in a point where if they're reaching out, they've done their research, they know what comparable units are priced at or how they're equipped if it's, you know, a specific order. So there is activity out there. It's a long way from a runaway like you said, but there is activity and good activity out there. Machines are starting to move. Starting to move a little better. Keeping the dollars together a little better. Maybe, just maybe. Here we go. Right.

Yeah. So the 23 is the 12, right? Just because of the oversupply, if you will.