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.
Hello and welcome to Moving Iron Podcast. This edition of the Moving Iron Podcast is brought to you by John Deere. Got Greg Machinery Pete Peterson on to talk about what's happening in the market. Greg, how you doing?
Doing well this morning, Casey. How about you?
Doing good, man. Doing good. You got to give a special shout out to all the veterans out there on Veterans Day. Thanks for all that you've done and especially the sacrifice that your families made while you guys were all out keeping America safe. So I appreciate everything you guys are doing and God bless you guys for being in the military, Army, Navy, Air Force, and Marines. Appreciate you guys for being out there doing what you're doing.
All right, Greg, let's talk a little bit about what's happening in the marketplace. I tell you, it's here we are, full-fledged auction season. Corn harvest, soybean harvest pretty much done. Most places you got a week or so to go. Maybe up your way, you got a little bit longer, further north you go, but we're within a few weeks of being done with harvest. Going to go talk to the accountant, sit back and take a look at what's going on in the old tax planning period of time here and going over there. You've watched a couple auctions here of late, Greg. Your synopsis a little bit on what you've seen happen so far and are you seeing stronger than expected numbers out there as we head into the last weeks of November here?
Yeah, early November has been very busy on the auction front, Casey, and some really interesting numbers coming in from around the US and Canada. I think top of mind for me as we're talking here on November 11th would be a sale last Thursday, I think it was the 6th, in Paris, Missouri by a great team at Wheeler Auctions and Real Estate. Kirby and Chaz and the folks down there had a dealer reduction auction. I think they pulled in equipment from a number of dealers around the country actually. And again, sale prices where I thought were very strong. Let's start off with a couple, actually two X9 8250 combines, 23 model, 319 set hours on it. So you know, really great machine, 346. And a 21 model, 541 set hours, go for 327.
And when I break down the average so far this year on an X9 8250, coming in at 261,938 bucks, which if you look at it is only down 4.5% versus last year's average auction price, which was just over 274,200.
So I found that pretty interesting. Also on the combine front on that sale Thursday, they had a 21 model S790, no tracks, 910 separator hours on it that brought 289.
And similarly, when you look at the average auction price this year on S790s, Casey, this one's very similar, down only 2.4% this year. Average right now is running just under 324,000. Last year it was just under 332. Now the thing with the S790s, and I think this would be common across, particularly with the green equipment, is the number sold at auction this year is so far down from last year. So if you take S790s through November 10th, we're down 54.8% compared to last year in terms of number sold at auction. So, of course, Econ 101 says when you've got, you know, fewer of something selling, the supply is lower, and that strengthens the price. So, on the tractor side, last Thursday, similar thing. They had three 9570 RXs, you know, tough to sell three of anything, but late model ones for sure.
All 21s. And they went from 349 up to 363. The 363 one had 778 hours on it. Now here again, if you do the average auction price on the 9570 RX, what you'll find here, actually it's up 11% this year versus last year. So so far this year just under 306,800. Last year it was 276,354, but exact same trend here. The number sold of 9570 RXs through November 10th is down 54.5% versus last year. So dealers last year were trying to get ahead of it and they did, and this is what we're seeing now that's solidifying we've been talking about basically since the end of February. It's holding here as we push towards mid-November.
Yeah. Okay. Well, that's what we've been talking about all year, right? We've been seeing now stabilizing of the marketplace, stabilizing the auction values, and we're starting to see a trend up, you know, as we start seeing things tick up and, you know, you start watching how things are coming into play. It's kind of like what we've been talking about, there's no big shockers here. I mean, what we've been talking about anyway, if you've been listening to the podcast, you should be kind of, this is just par for the course so far we've seen this year. We'll see what happens as we head into the 26th, but I don't see anything out there that's going to jump out and say, 'Hey, the sky's going to fall.' So...
Yeah. When you talk November 11th, of course, I've been saying for about 20 plus years now, November, December is go time for buying on the auction market. Number of sales cranks up, but of course tax-motivated buyers usually. Now, this year, there's not as much income unless you're on the livestock side. But when I've seen early November get off to a strong start like this, it's never dipped through the end of the year. It usually runs out the table. And that's, you know, there's all kinds of confirmation points coming in. Casey, you know me, I don't like to hang my hat on one sale or one item, but this past Saturday, so three days ago as we're talking, a nice farm auction in Inwood, Iowa by Zemer Company Auction and Real Estate. Some really eye-opening figures here. Now, these were low, low hour items, but a 2015 8345R with 823 hours brought 305.
How many hours did it have?
So, low hours, you expect a premium, but at 305, that's the highest hard cash auction price ever on a 15 model.
Yeah. That's crazy. They brought 305 and it's a 15. That's a big number, you know.
And we'll go down the list. Now, that's not pre-DEF either. That's just our magic 10-year-old mark like we talked about.
Yep. If you drift into pre-DEF...
...90s, and it's just increasingly hot again. Low hours, only 1,450 hours, so you know it's going to sell high, but it went for 99,000. That's the second highest hard cash auction ever on a two-wheel drive 7630. And the same thing applies on skid steers, even though there's a lot of late model ones out on the auction market. They had a 14 model, so 11 years old, a New Holland L230, only 255 hours. But it brought 45,000. That's the third highest auction price ever. So, when you have really good condition used equipment, and it doesn't have to be pre-DEF, it can be like that 10-year-old 8345R, you can see the dollars are together and the pricing is very, very solid.
Yeah. And you would expect that 8R you were talking about there that brought 305, that's, I mean, I would say that's above a premium price. And that would be, I know it had 823 hours to get all that, but man, for that to be 305, I don't know if it cost 305 when it was new in '15.
Well, that's, you know, 36 years, last week marked 36 years I've been tracking this stuff every day, Casey. So these patterns don't go away. They hold through the ups and downs of ag cycles. And that 10-year-old mark, particularly when times are challenging like they have been and are, the gap between what a new one costs is, I mean, even at 305, you go price that same horsepower new, you're going to see what you run into. And people just vote with their checkbook. We post this stuff on social media and a lot of people, it's almost like they get mad. They're like, 'Ah, two idiots met.' And it's like, no, no, no, no. Don't... I'll keep it clean here, but don't be a dumb... you know what I mean? The auction method is you put an asset up for sale, it brings what it brings. You don't have to like it, but it sells for what it sells for. Now, there was another sale actually the same day, just on Saturday, three days ago. Also, let's see. Now, this one was over in Nebraska, Pleasantdale, Nebraska. So it was kind of a little farmer... I can't remember if it was farm estate or farm retirement. Novak Auction Service had the sale and this one generated a bazillion sparks on our Facebook page, but they had a '91 model Deere 4455. Again, two-wheel drive. Those are hot.
6,349 hours. So, not crazy low. Just nice. Really nice.
Yep. Brought 81,000 bucks. And that's the seventh highest auction price ever on a two-wheel drive 4455. So I think we got like a thousand comments. People are like, 'Oh, I thought it was tough in farm country.' Farmers are business people and you know, if you're going to keep farming unless you're getting out. So you got to farm the ground. You need what you need horsepower-wise. So your choices are right in front of you. Do I want to go new and pay that number? Can I pay that number or drift into the used market? Now, this is obviously a very well-loved model series, the 55 series, just like a Magnum on the red side. And there were people on the ground or neighbors of this guy that had the auction and they were like, 'Pete, this tractor was just right.' And you know, people vote with the checkbook, 81,000. You don't have to like it, but that's what it brought.
Yep. Gotta quit paying attention to those bots, man, on your comments, Greg.
Yeah. Well, I used to say I love social media from a business standpoint. Now, I'm not even sure I love it just from the social cultural disease that those algorithms are. Ridiculous. But anyway, it is fun to get people together. And our goal here has just always been the same, just to inform you of what's happening out there. And we've been talking about it all year. I think for people that have maybe tapped out from following for a while and now you know, okay, we got the harvest in the bin and okay, well shoot, maybe I need a planter, a combine, and they're seeing, they're like, 'Oh my god, 305 on that 83? What the hell?' We've been talking about this since the end of November. The data has been flatlining.
Yep. But again, it's coming off of last year when dealers, particularly Deere dealers all over the place, but all dealers were just slamming excess late model used out to the auction market to try and get ahead of it. And like we said at the top, they did.
Yep. Yep, they did. So, let's have a little philosophical talk here. So, obviously with the way the market's been, new orders that were not flying off the shelf by any means at all. You saw a lot of different manufacturers that were pulling back, you had factory layoffs and everything else that were going on around that. There wasn't going to be a lot of new equipment built. So this time of year when you start watching a few things spike, right, because you know deals have been made waiting for the new piece to show up. So, you start seeing a lot of '25 model stuff or I guess what we would consider one-year-old stuff start showing up. Market may not be on the lot yet, but they're saying, 'Hey, we made this deal. We've got the machine out there advertised and so on and so forth.' And I thought, you know what, it'd be interesting just to kind of see what it looked like and what this meant. So, I went out and looked at 300-plus horsepower tractors, combines, and sprayers, right? And just got an idea. So, currently 300-plus horsepower tractors, there's 576 2025 model, all makes, all models, all manufacturers, right? Out there, there's 576 300-plus horsepower 2025 tractors listed on the market right now. 2024 model tractors, there's 2,570 just 2024s, right? Combines, there's 477 2025s and there's 4,499 2024s. Sprayers, a little bit of a different flip here, but there are 711 2025s and 620 2024s, right? So that little bit of different flip there, which kind of surprises me a little bit when I went back and looked at just because of what it was, but that's where we're at. The point I want to talk to you a little bit about is if you start looking at where the '24, '23, '22 model stuff kind of falls into the mix. The driving factor behind that is, yeah, you don't have a lot of one-year-old 2025s hitting the marketplace, but you got these '24s, '23s, '22s, and what does that mean for the marketplace as you start looking at this? I'm not saying it's going to prop up the value of a '24 or '23 or '22 or something like that, but it's going to make it be a little more desirable, right? Because if you're looking for a one-year-old machine, you have a pretty small window of equipment to go get after. But if you're looking for a late model, low-hour machine, which that means a lot of things with a lot of different people, you have about a three or four model years there that you can really take advantage of right now that are going to do that.
When I was thinking about this, what immediately popped in my head was the '12, '13, '14 model year stuff where there's so much of that stuff on the marketplace. Hell, even today, you can go look at it and still see a huge hump in there in the market where those machines are at. My thought process is, are the '24s, '25s, '23s and '22s, are they the new '12, '13, '14 model machines? And I think that's, what does that look like? And how do we work our way through that? The biggest difference is the significant change in price, number one. And number two is with there being a lack of new stuff being sold and that one-year-old stuff coming back in the marketplace, there will be more demand for these machines than there were the last time something like this happened.
100% correct. You've identified right there, Casey, with hard data, an important point that I've been trying to get across to the farm audience all year is that, I mean, open your eyes. This is different than we've ever seen before. So, when you said those 300-plus horse tractors and combines, the number of '25 models on the market now, that huge cliff drop-off in number, that's manufacturers just quit making them now. I've got 36 years doing this. There have been other downturns like you were saying, '13, '14, '15, and you go way back into the late '90s for me. Manufacturers were not able at that point, partly frankly, and people won't like this, but there were way more dealers. There aren't as many dealer owner groups now. So that's easier for the manufacturer and the dealers to collectively act and they just shut off production. So it 100% will work towards, you know, you could say propping up whatever, it just is what it is. Those good, you know, we just saw it. I mean, look at what that '23 model 8250 brought, 346,000 bucks. Now if there was a slew of '25 models sitting on dealer lots, it ain't bringing 346. So really this is a huge, the biggest change I've seen over my 36 years is the used farm equipment space technically is so much more efficient and faster and more responsive. Now, the bad part is if you're a farmer, you know, in the past coming out of these down cycles, there were deals significant and it was hard as a farmer to pay for them. But you can see what's happening. And so if you put a buoy in the water right now, what you just identified and what I'm talking about with these auction prices, you know, at some point down in the future when corn and beans go up and stay up, that's what I'm really concerned about on the farmer's side because you got to have the horsepower you need and they've been stretching, you know, extending the life of their used equipment right now. So I just see like a tsunami warning in the future. And again, this can seem really like far out. You're like, 'What the hell is Machinery Pete talking about?' You know, auction prices or demand or new sales are going to skyrocket. I'm not saying when it's going to happen, but it's going to happen because what you just said, they cut off production on the '25 models.
Yep. And so, in fact, it's not going to be any better in '26 either. And that's the other side of that. So...
Correct. Correct. New sales are going to be pinched. And in fact, if you went back to the last downturn, and I talk about often when we chat, how our auction data showed right at the very end of 2015, I could start to see that little whoop, it's kind of finding footing now into '16. But in 2015 on the dealer side, I mean, you were in the... How many new machines or one-year-olds? I mean, did you guys... I mean, every dealer just had a bazillion of them.
Yeah. And they were looking to lease these new machines that have been on the lot. Now, leasing has not been a thing this time because there's no one-year-old product sitting out there. You just said it's like...
500 versus 1,400 last year.
Yeah, that's one thing too about on the leasing side that people need to remember as well is that there was a huge section of used equipment that nobody knew about except for the dealer groups. Right. Because the captive marketplaces, whether you were John Deere Financial, whether you were CNH Capital, whether you were AgCO Finance, whether you were, you know, a direct, whoever it was, right? Ocean of stuff that really nobody knew about, right? So, you thought there was a lot of stuff on the market then. There's about 25 to 35, 40% more inventory that really was just not on the marketplace yet, right? And it wasn't on the marketplace because they were trying to keep it through their dealer channels and... right. And today that's not like that. The other day because of leasing, it's nothing. That wild west show is over with, man. That, it's a totally different animal now and as you watch how things play out. So, one of the things I will say, Greg, when I look at these numbers here, so I went, I just go back and look at '22 through '24 model stuff and there's, there's 5,600 300-plus horsepower tractors on the market, right? There are, combines, there's just a tick under 4,000 '22 through '24 model machines out there. If you take a look where '26 is going to fall in at, '26 will be a little better than '25 as far as new order, but it's not going to be much. It's not like we're going to, oh wow, you know, we're up 50%. They're flat at best. That's going to be a win in my opinion, '26.
So, as you start watching these things roll through on the back side of all this, '27, '28 rolls around, things get better, more money comes in on the farming side of it. I can't point to a vision of the future where I see a lot of new equipment coming back into the marketplace being sold because, you know, like Aaron Fennell, we had recorded with him a little bit earlier, we were talking about this, that we had a lot of conversations with folks early in my career that, hey, this is the last machine I'm going to buy, I'm going to retire in the next five years or whatever, that's my plan. And you know, so I'm finally going to buy that new tractor, new combine, new planter, whatever it is. I'm finally going to buy that and I'm going to go off into the sunset with this new combine. That was back when combines were 235,000 bucks, 250,000 bucks, those kind of things. And you could still do that. You could still swing that. I got a used tractor fleet and I buy new combines type of thing. Today's marketplace, you can't really do that. I mean, I'm not saying you can't. I'm just saying that it's not as easy to swing, I'm going to run used tractors and buy my one new combine every day. It's just getting harder and harder and harder for that to happen. Where I think some of this pins us to where we're at now is as you start looking where '27 comes into play and then stuff that comes in there, those, it's just going to be hard. I don't see that many people coming into play say, 'Hey, you know what? I'm going to buy a brand new 600,000, 700,000, 800,000 something and then hope that I can make it pencil out on my fleet where, you know, they can't afford to have, hey, I can buy a 500,000 used combine and, you know, which is crazy to say, and, you know, buy a 350 or 400,000 tractor, so on and so forth as you kind of roll down that line. I see more of that coming into play.' So, as bad as things are right now and as bad as used inventory feels right now, I think we're resetting the marketplace, open a bigger door that says, 'Hey, we're going to have a supply of new equipment that comes in every year.' And that one-year-old stuff that does get traded in, it's just not going to be in the grand supply that we're used to seeing it come into.
Exactly. We come out of downturns. And I think that changes the dynamic of not only how functionally things are getting sold at the dealer lot, but also like you've been talking about how things get sold at the auction block.
Yeah, 100% agree, Casey. To me, it's the old, you know, when these, whatever, the pandemic, you know, it's a hundred-year event and all kinds of things change in our culture coming out of that. And so for our farm equipment world, I mean, to me, I mean, the truth now is, hey, we've moved to a model where you buy it and then we'll build it for you.
Yeah. And that's just, if you now you got to pull back here, but if you think of it from the manufacturer angle, I mean, versus like even a decade ago when it's like they're smashing out and you said it, the farm audience didn't even see the ocean of new equipment that wasn't even available. I mean, it was just an ocean. Now, if you're a manufacturer, that's problematic. You don't, I mean, that's bad. If you're a dealer, that's bad. Now, it's not like that. Now, once you train the audience, right or wrong, you buy it and I'll build it for you. If you're a manufacturer, that's what you want and that's what we're moving towards now. It'll keep playing out, but I think for sure that's, you know, to me one of the big changes in the pandemic. Coming out of it kind of normalized that. Oh, my dealer only has eight planters to sell this year. Well, I better get my name on the list.
And even though you're not doing it last year, this year, or maybe in '26, what we're saying is whenever the farm income starts to go up for whatever reason, that's exactly, it's 2021. That's what you're going to have.
Yeah. And so the real opportunity now on the farm side is again, call your local dealer. Look, I mean, like that's why we compile these auction prices. The guy, it wasn't just two guys that wanted that 8345R 10 years old with 800 hours on it and it brought 305. So the other piece on this, I think, Casey, is, you know, this downturn has stretched out long enough now, guys, you know, maybe stepping away from new deals as their dealer was stepping away from them and then enough time has gone by to analyze, you know, even when the money starts flowing again, do we want to roll like that? That's an open question whether farmers will jump back in and buy five combines. I don't know. But what I hear as I travel the country is farmers are starting to say, hey, we're not going to do that again. Just like dealers a decade ago are saying, well, we won't put so much in on trade. We can't get stuck like we got stuck. Now, we'll see what happens. But while you're chewing on this, understand, especially on the farm side, like we're talking about, the world has changed. It's different than you've ever seen it before.
Yep. Yep. And I, you know, if you look at how farmers are taking a look at stuff they're doing and how those things are playing together, just like you said, the idea of, hey, I only got eight planters or something like that and you start looking at, hey, my normal trade cycle is going to be, you know, three years on a combine, five years in a tractor, and every fourth year I'm getting a planter or something. Whatever that mix looks like, right? Those conversations you start having with your dealership, they're a lot sooner and a lot further out, right? So, if you're going to have, if you want to have a used planter for the 2027 planting season, you kind of need to start having that conversation with your dealer in the 2026 order writing period. Hey, what do you have coming in on trade when that new planter hits? So, that's when you're going to get it. You're going to get that thing either whenever that planter comes in, you know, fourth quarter, first quarter of the year type of thing so that you can start having that conversation, right? And it's not you, everyone listening right now is saying, 'Casey, you're full of crap because I'm driving by my lot right now and it's filled to the gills.' And you're exactly right. But as this starts to chip away and things start to warm back up and your choice is what's sitting on the lot because there's not going to be a lot of new slots available. And if there is, there's a select group of people that are going to be able to go and get those new machines, right? Just because of what they cost. And even those guys are starting to pull back a little bit saying like, do I need five tractors or do I need three, right? What's it look like if I do have a one or two-year-old machine and not buy that new one? Right? Like what's that look like? So that conversation is broadening out quite a bit.
So which is that now, all that stuff, what I'm getting at is all that stuff's going to start eating into that inventory levels and as that stuff starts happening the competition for those used pieces starts to expand a little bit and it gets tighter and tighter and tighter to where your conversations you need to have or start, you know, one thing I've encouraged guys to do a lot, if you're a used buyer and you know you're going to be a used buyer, let me spec the machine that I'm going to send out to the new guy the way that you want it because typically the new guy that's buying it every year, they don't necessarily care about the specs, right? They do, but they really don't at the same time. Whatever gets them the best cost per hour trade difference, that's really what they're looking for. So, if I know that I can go to Greg, Greg, you come and say, 'Hey, Casey, I'd love to have a planter with X, Y, and Z. You think you can have me?' Actually, you know what? I think I can do this. Let me talk to this guy over here and I'll get it spec'd the way you want it. And it comes back, you'll have a used machine. Here's the price it's going to be. We already know the price. Everything's going to be the way it's going to be. And you can have that side in that conversation. And it really puts everybody in a good spot, right? The dealer's in a good spot. The new guy gets a good spot because of the position that they're in now and the ability for the new guy, and then you get a good position as a used buyer as well. And I think those are the things that if you can put those things together at the dealership level and at the farmer level, man, I tell you what, you have a recipe for a really good outcome on your used equipment space.
That is tremendous advice for the farm audience. I mean, to go back, folks, go back and just rewind what Casey just said because being proactive in your relationship and verbiage with your dealer and frankly also your lender. You know, the times and farmers are independent people just like you and I, Casey. And I myself am a procrastinator. It's a trait I've fought my whole life. It makes life more difficult. It's just don't be a procrastinator now. It's becoming more problematic if you sit back and wait and hold your cards close. You're missing opportunities. You just laid, you painted a picture right there, Casey, for a reason to sit down and be open and honest with your dealer. And as a dealer, I mean, how much would you appreciate that, your customer coming to you saying, 'Hey, here's what I'm thinking a year or two out.' I mean, it makes your job easier.
It's, and I'm the son of a third-generation dealer. And to me, the farm equipment business was never about moving iron, moving, you know, a tractor, a combine. It was the relationship with the farmer because a dealer, you need your farmer customers to be healthy even through these difficult, difficult, pressure-filled times. So all the more reason, you know, I like visiting with young sales guys on the dealer side, Casey, when, you know, there's a lot of ways to go about that, but I love the guys and gals that are going out to the farm. You know, you're not going to sell a '25 or '26 model, but hey, what are you thinking? Just, and look, for all the reasons you just said, that's tremendous, tremendous advice.
Yeah. And that's something we tried to do a lot when I was working at the dealership was we tried to piece those things together the best we could. And you know, the ones that we could do that with, it worked and it worked for everybody. So, but the long story short of it is there's also a ton of our... then the advantage of doing that was we just, now we know we got one, we don't have to worry about that piece anymore. Right. That now it's like, I'm still saying like, you have to worry about those pieces. But again, if you're really thinking about being a used buyer and being a used buyer of, hey, I'm going to work through these things and work through the cycles and this is, I'm going to try to grow my efficiencies during my operation with updating my equipment, you know, during these time frames, it's not going to necessarily look and feel like it always has. It's going to be a little bit different than what we've seen in the past.
Yeah. And again, that's why we go back to the auction prices and I mean, I just love compiling them and making them actionable for people whether you're looking to buy, sell, or trade or just appraise. What's my stuff worth? You know, eyes wide open. Don't deal off of the old gut level of, well, my gut's telling me I should... gut level instincts are super valuable. I'm not saying they're not, but you know, the information on a daily basis that's coming in. I mean, and we're talking here now today as we're talking, our friends at Merit Auctions, Zack Heiner, they've got a very large dealer auction with beautiful late model equipment from a number of dealers. So, we'll grab those numbers and flow them right into Machinery Pete so you can see what this thing sold for today like that S790 or an 8250 or whatever it is you're looking at. And we want, we, you know, put this so you can have it so you know, make better decisions. And that, you know, applies on the lender side, too. The lenders are trying to figure out, well, what's, you know, we want our lenders to dive into this stuff and be, you know, up to date on what it's bringing. Don't, I travel the country, Casey, auctions and ag events and stuff. And what I know, we're humans. I don't like general statements like, 'Ah, things are terrible.' Well, let's talk, let's get more specific, right? You know, yes, okay, there's financial stress. Now, let's try to measure it and then deal with it as such. If people that just hang up on the generalizations, they're going to lose, they're not going to make optimal buy, sell, trade decisions, in my opinion. So...
End of sermon, right? [laughter]
Exactly. If you're, I'm like you, you know, I procrastinate the last possible minute and I get what I get because of that, right? I don't necessarily get the best deals on the plan. I don't necessarily get the sale. I don't get the little things that pop up when you actually plan things out. But it's shocking when you do plan things out and you execute your plan. Doesn't work out well for you.
One more piece of Machinery Pete life advice. If you are a procrastinator, guy or gal, if you can in your life partner find someone who is not a fellow procrastinator, I think this can make your life one zillion percent better. Mrs. Machinery Pete, she ain't a procrastinator and that helps us immeasurably. So...
I couldn't imagine having two procrastinators trying to make a decision, get something done. That'd be rough.
Yeah, I don't even want to dream about that. Yeah, very much so.
All right, great. Good place to stop. Folks want to reach out to you, have you come to their auction or check out some speaking events you have available? Best place to do that, just go to the contact page over there, Machinery Pete.
Yeah, toll-free number's on there. And hey folks, if you're listening to this, if you're around Ohio, Indiana, Michigan, Saturday, I'll be out in Valparaiso at Craft Auction Service. It's day three of their collector auction. And man, you want to talk some vintage tractors and trucks on this sale? It's going to be so much fun. We're filming it for the TV show. So, hope to see you out there in Valpo on Saturday.
Right on. Well, Greg, appreciate you being on the podcast. We'll catch you again next week. Stay tuned for more Moving Iron Podcast after these messages.
Looking for more accuracy, more productivity from your current planter? Let's get Exact with precision upgrades from John Deere. Start with Exact Emerge and get accurate singulation and spacing at 10 miles per hour. Or choose Exact Shot 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/planterupgrades and see why nothing runs like a Deere.
All right, welcome back to Moving Iron Podcast. I'm here with Sean Hackett. Sean Hackett with Hackett Financial out of Boca Raton, Florida. And he's nice enough to come on and talk about what's happening in the marketplace. Sean, how you doing?
I'm doing really good from frigid South Florida.
Frigid South Florida. Yeah. This is when I say everything's relative, Sean. And we go from there.
Well, we broke the 50-degree mark to the downside for the first time this year with howling winds. So, we're all moving out of the states because this is not what we signed up for.
Not what you signed up for, right? So when it gets to 50 degrees, since water freezes at 49 degrees in Florida, you blow out your sprinkler system down there this time of the year.
All the pipes burst. Yeah. We have pipes that are only good for up to 50 degrees and then everything blows up.
So all the lizards fall out of the trees and, you know...
Oh yeah, you guys, I forgot about that. You guys got to watch...
I mean, it's a health hazard, you know. It's...
Yeah. It's just chaos down here right now.
Yeah. Get your state-issued hard hat out. You know what I mean? So you guys can walk around.
It's snowing. It's snowing lizards.
Yeah. Yep. That is, I forgot about that. When that gets cold like that, they tend to free fall out of trees like that.
Yeah. All you have to do is just like, they call it lizard tipping. You just touch them and out they fall. [laughter]
Lizard tipping. That's... There you go.
All right. It's like cow tipping, you know, with lizards. So...
Just a lot smaller. Totally different.
Yep. Right on. All right, Sean. So speaking of tipping, we've got the USDA report coming out here Friday on the 14th. Been a while since we had one out. A lot of things have changed since then. Any expectations of what you think the market might do or what this might look like or, you know...
First of all, I want to know how they're able to put this report out because supposedly they can't put any other reports out. Supposedly USDA doesn't work. They've never put a report out to my knowledge on any government shutdown in the past. They didn't put October's report out because nobody was working. So, who do they get to come in and do this? I'm really skeptical about how they're able to put a legitimate report out with actual facts and figures that we could trust. I'm really skeptical about what this is. I don't understand how they're doing it. Like, how did they pull this one off? I don't have high expectations on this because I don't think they've been able to do a formal analysis and I think, I don't really know what to make of it. I know what they should say, Casey. What they should say is corn yields under 180. And I think what they should say is that probably soybean yields are probably close to right, maybe a half a bushel below where they were in September. I think that's what they should say. But I don't really... I don't think this is a report that we can rely on. I don't think they're going to come down that much. I just don't think they have the manpower or the womanpower. I don't think they put the facts together. I almost feel like they were forced to rush and put a report out in the grains due to pressure or something. I still say I wouldn't hold my hat on this report giving us the truth, I guess what I'm getting at. I think the January report is still the report I'm hanging my hat on as a report that they're going to really make the big-time adjustments and try to get the crop production correct. I think this one, they'll make a few little changes, but I don't think it's going to be anything that's going to provide a wow factor. I could be wrong, but I still would like someone to actually give me a call and explain to me how this report's going out when they're unable to put any other reports out. And we were unable to put the October report out. What allows them to put an accurate November report out? I know the government's going to reopen now, but you know, it's too late for November. So, it's just interesting to me. I just don't know how I understand the process. You know, I wish I did.
So, yeah, I've been thinking about that, too. Like if it was impossible to do that in the past, why is it possible now? And you start looking your way through that. How much of this do you think the trade's got built in already? Like, do you think they're anticipating seeing something one way or the other? Do you think similar to what you're talking about now, they're kind of like, I don't know how this is going to...
Yeah, I think most people, if you look at most of the estimates that are being put out by some private firms, StoneX and others, they're up a little, they're down a little from September. They're not, no one's making any major adjustments. And I don't think, I just can't imagine the USDA is going to make big adjustments in this report when they really haven't been able to do the work. They haven't been able to do the work.
So, somehow, whatever happened inside politically, they've felt they needed to put something out and they're going to do that. But I don't have high expectations that this is going to be a market-moving report. I don't, and the private estimates are suggesting they don't see it either. And I think we're just going to have to wait till January to get it. In the meantime, you know, until January, I think we're subject to basically now that the government is going to open after the House votes on Wednesday. We should start getting some reports out, you know, like weekly export sales maybe later this month and we should start to get some flow of what's going on with trade and stuff. So, we'll have to go off what's going on with exports, how much is China buying, not buying. The Supreme Court is going to be making their decision here sometime between now and I think just after Thanksgiving. We need to pay attention to what they say and how that might impact market psychology. But I think that's kind of where we're at, you know. A lot of talk about the Federal Reserve governors backtracking on whether they want to reduce rates again in December. Some do, some don't. Obviously that'll have a lot to do with how the dollar is managed and what kind of inflation expectations. What I will say is this, Casey, one thing that the government shutdown prevented, it prevented government capital going into the private financial markets. So about a trillion dollars should have gone into the financial markets in the last 40 days that did not go in because the government was closed. When they reopen, that trillion dollars will get pushed into the economy at the end of the year. That usually means that risk assets, commodities, stocks tend to perform well when you're shoving short-term liquidity in. And then Trump is saying he's going to hand $2,000 out to everybody as a tariff dividend benefit. And he's proposing this. And you know, history says if you actually directly hand money to people, which is what's called...
Direct monetary monetization policy, you'll get some increased demand. Short term, you'll get some increased demand for people go out and they tend to spend it. So for all those reasons, I think we're probably going to have a good finish monetarily into the end of the year, and that means commodities should at least have the monetary winds at their back. And if we can get any kind of good news on China, China purchases here and there, you know, we might have a decent finish to the year to kind of continue what's been a nice little rally here, generally speaking, in grains since the trade truce, you know, was solidified here at the end of October. So.
Yeah, let's talk a little bit about natural gas. You've talked a lot for the past six months about this winter and what it looks like, and we got our first real shot of cold air over the past week or so. And you talked about there's a hard line in there between east and west. If you watch college football at all this weekend, you saw a lot of games in the snow on the eastern side, and you watched a lot of guys in t-shirts on the western side of that line, like you talked about. Sean, as you're looking at this, natural gas is going to play a big role in what you see if it is as cold as what you're talking about. You'll see a lot of draw on natural gas as you're looking at natural gas right now. What are your thoughts?
Well, I want everyone to understand why we've made this forecast for a while now that we were going to have an eastern-based cold winter, which is really where natural gas demand comes from. I mean, you know, no one lives in South Dakota. Doesn't mean I don't like South Dakotans, just means no one lives there, you know. No one lives in North Dakota. No one lives in Montana. So, it can be minus 50 degrees, natural gas is not going to be up much. Okay. Now, if it's zero degrees in Ohio, the natural gas demand is going to go up a lot. Okay? So, that's the difference between eastern-based cold versus western-based cold.
And the two reasons that are the backdrop for why this winter should be eastern-based cold is that we have a negative quasi-biennial oscillation, which is these upper stratospheric winds that's going from east to west. And we also have a near-record snowpack in Siberia. Both of those variables have tended to be very, very highly correlated with weakening the polar vortex on a very regular basis. And if you weaken the polar vortex and you distort the polar vortex, then that very, very bitterly cold Arctic air can find its way meandering down into the lower 48 states. So that's the backdrop. And by the way, we are already seeing a sudden stratospheric warming event developing in the Arctic right now as we speak.
Saw that on the news the other day. Yep.
Yeah, and it's going to reach full bloom around Thanksgiving. And the key is the way you look at it, you can have a sudden stratospheric warming in the upper atmosphere and it could stay there and it doesn't necessarily impact our temperatures on the ground. But if that cold, distorted polar vortex winds its way to the lower atmosphere, they call it reversing the winds. The winds get reversed and so it screws itself into the lower atmosphere, then that translates to cold on the ground. So what you do is you look at 10 millibar temperatures over the Arctic, which is your high level. Then you look at 30 millibar, which is the lower level. And it does look like we're going to get a translation from the 10 millibar to the 30 millibar, and we're going to get this connection from the top to the bottom and create a true polar vortex type of airflow pattern.
One way of representing that is something called the EPO, or the Eastern Pacific Oscillation. And when it's negative, it means it's an oscillation of cold air coming in from the Arctic from an EPO standpoint. So we're seeing already, it's very unusual to get this type of a scenario in November. Usually this is more like mid to late December into January you get this. So we're off to an early start already, which is suggesting what I've just mentioned. We're already seeing how this polar vortex is already struggling to keep itself together. Now, further things that emphasize eastern-based cold: the North Atlantic has a teleconnection with eastern-based cold, a weak La Niña to neutral-negative, that's eastern-based cold, warm sea surface temperatures off the southwest coast of California, which we have, eastern-based cold. So all these teleconnections are in place to drive cold and considerable snow.
By the way, just this past week, I think our snowfall was up 80% from last year on a national average because of all the snow that we're getting in the northern tier states, especially the eastern northern tier states. And that's going to be a common feature throughout the wintertime. So all this says that the heating degree days should be top 10 again like last year, but could be top five. And we have record all-time demand for LNG exports. That's a fact, not a forecast. Like, we already know we have that. And we know that the domestic demand for electrical power, as our electrical power grid is expanding to basically provide all the power for all these data centers that are power-hungry to develop this AI processing capacity, a high percentage of that power upgrade is from natural gas power plants being upgraded and expanded. So you have that domestic demand that has nothing to do with the weather, and that export demand that has nothing to do with the weather. If you add a top 10 or a top five heating demand, just to give an example, natural gas production year-over-year, I think last week, just as an aside, I think natural gas production was up 4.5%, I think it was, last week. Demand is up 14% year-over-year. So production up four and a half, but demand is... we're in a much tighter situation over a year ago because demand's outrunning the ability to produce. And then if you add above-normal heating demand in the wintertime on top of that, and if you get any kind of freeze-offs, you know, where the wellhead actually freezes and you lose production, but 100% for maybe three or four or five days depending on how long that barely cold air comes in and freezes it off, then your production actually could go negative for a while with demand. You know, this is how you get your drawdowns to just collapse.
So that's the setup. And I'm, how can I say, it's not that I'm looking forward to nasty weather, I'm just trying to make a forecast. But seeing a sudden stratospheric warming event already developing in mid-November, and based upon our forecast that we would have a very unstable polar vortex this year because of all the things we've just mentioned, and it's now verifying, I mean, I'm very optimistic that the forecast we've put out there months ago is going to happen, and that natural gas prices, you know, at where we are today, are not appropriately priced for that type of drawdown. And another thing is, last year at this time we were way above our five-year average in storage. Right now we're about at the five-year average. So our capacity to eat into big drawdowns is a lot less than it was a year ago. So I just think we could get in a lot of trouble and the market will have to ration.
The way what's going to happen, you're not going to ration demand for power. That's the AI guys got endless capital. You're not going to ration those guys. You're going to have to ration LNG exports, or, you know, Trump's going to say, you know, we're not going to allow any more exports. Remember, Biden did that a couple years back. He threatened that, you know, we're going to stop people from exporting LNG so we can get our prices down.
So that's to me, I think that's where we're heading. We're heading to some kind of a retest of those highs from a few years ago if my forecast is correct about the weather on top of these other drivers. And natural gas prices, you know, are starting to, if you look at the chart, they're starting to turn up here. We follow an ETF called UNL, U as in Nancy, L as in Larry. It's a 12-month strip price, meaning it looks at the forward 12 months of natural gas. And the ETF trades the average 12-month price. That's what the ETF trades. And so we just follow it because if we're going to have a bull market in natural gas, it should be not just a front month. It should be like all prices are rising. Like that's a true bull market is when everything's rising, right?
Right. Yep. And if you look, we're about to break through 820 on UNL, which is a significant overhead resistance level on the 12-month strip price. Any break on a daily or weekly basis of that ETF above 820 would say that natural gas prices as a whole, not just the spot, are starting to break out to the upside. So I think we're right at the point we're ready to chart-break this out. And once natural gas starts to move, you know, it's a fast one. It really moves. It's a wild one. When it moves, it moves incredibly fast. So I will reiterate one last time that if you're someone that's a physical buyer of natural gas or propane or any derivative off of that and you don't have all your physical needs taken care of, you know, I would strongly suggest that you take care of business and button it up because prices are still, although up a little, still pretty attractive from where I think we're going to be come, let's say, February or March.
What kind of, as you look at fertilizer prices, how do you think, is there enough time to really start affecting those fertilizer prices for the spring, or do you feel like there's enough lag there in supply and those kind of things out there that shows there could be some abatement of that in fertilizer prices?
I'll answer the question this way. I don't think there'd be a reason at this juncture for spring prices to go up much, but they probably won't go up anyways because...
Because the fertilizer companies can get away with it.
They can justify it. Hey, you know, see, you know, I mean, there's what should happen and what actually will happen. Yeah, I think for nitrogen-based fertilizer prices would go up in a scenario like that. I just don't think the fertilizer prices could contain themselves and they're going to see an ability to make extra money and they'll be able to get away with it. So the answer is I do think it'll impact price psychologically, it will do it, and the market will just, you know, it's just the way it is. Just the way it is.
Okay. All right, Sean, good place to stop. Folks want to reach out to you, get more information about what you're doing over at Hackett Financial. What's the best way to do that?
Our website is hackettadvisors.com, Twitter page, @hackett11. We have a LinkedIn page. We put some stuff out there from time to time about what we do, how we do it, why we do it, to see if our cycle statistics and correlations will be of value to those that watch your incredible show that I'm blessed to be on each and every week. So.
Sean, appreciate you being on, man. You make it pretty easy for me to talk about this stuff. So thanks for being here and we'll catch you again next time, man.
Sounds good, Casey. Look forward to it.
With that, stay tuned for more Moving Iron Podcast after these messages.
Well, there they are, mocking you. See you next year. [laughter] 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, is just one of the many precision upgrades you'll find at johndeere.com. Now, let's see who's laughing.
Get the latest markets, weather, and rural news whenever it works for you. Farm Journal TV is on Roku, Fire TV, and mobile. Try it for free for 14 days and take it with you everywhere.
All right, welcome back to the Moving Iron Podcast. Got Aaron Fintel back on to talk about what's happening in the marketplace. Aaron, how you doing today?
Well, hey everybody. I am just terrific today. We got a sunny, calm morning to start here on the high plains. So we'll see what happens. Supposed to be 60s and 70s all week.
And then crappy 40s all weekend. So here we go.
Yeah. Yeah. I'm sure the wind will blow and howl and everything else.
Yep. It's been a relatively uneventful fall, which is cool, right? I mean, we've got harvest, I think most corn's been picked about everywhere and probably a week, maybe two left and we'll put corn harvest in the books for the year. Sugar beets, obviously, they've been dug up and out for about a week because I can't pass a truck on the highway anymore without running into a beet hauler somewhere in the mix of that. And so that's all now instead of cages and live bottoms everywhere, it's all the end dump trucks.
