When will the grain market hit the bottom? Will high cattle prices continue? A conversation with Randy Martinson.

In this episode, Straight Talk with NDFB hosts Emmery Mehlhoff and Alisha Nord visit with Randy Martinson, founder of Martinson Ag Risk Management. Martinson Ag offers a variety of crop marketing and crop insurance packages to its customers.

Randy grew up on a family grain and livestock farm near Milnor, N.D., where he farmed for ten years. Randy is well-known for introducing complex marketing strategies in a simple, straightforward manner.

In this episode we talk about:

• Grain prices: Where the market is going and what to plant this spring
• Cattle Prices: When is the cattle market going to crash?
• And three strategies every producer should implement for a successful marketing year: 1) Know your cost of production; 2) Write your plan out and look at different levels you want to sell at; and 3) Have the discipline to stay with the plan (don't chase the highs!).

Join us for this insightful marketing episode. 

Contact Martinson Ag Risk Management at https://martinsonag.com/contact-us/ or give them a call at (701)205-4200.

Download their app https://martinsonag.com/contact-us/

 Contact Emmery and Alisha at emmery@ndfb.org

Transcript

[Straight Talk theme song]

[00:09] Emmery: Welcome to Straight Talk with NDFB. This is your host, Emmery Mehlhoff...

[00:14] Alisha: And Alisha Nord.

[00:15] Emmery: We are your Farm Bureau duo bringing you your competitive edge.

[00:19] Alisha: Today we visit with Randy Martinson of Martinson Ag Risk Management. Randy grew up on family, grain and livestock farm in rural Milnor, North Dakota, where he farmed for ten years following his graduation. In 2016, Randy became one of the founders of Martinson Ag Risk Management. Randy became well-known for his introductory marketing education series for marketing clubs, where he introduces complex marketing strategies in a simple, straightforward manner.

[00:48] Emmery: In today's episode, Randy visits with us about all things marketing. We talk about whether the crop market has hit its bottom and what this next year is going to look like. We talk about the cattle market and building U. S. cattle herds, and we talk about marketing strategies that you can bring to your operation to make it its most profitable. Join us for this episode.

[Straight Talk stinger]

[01:14] Emmery: Welcome to Straight Talk with NDFB. Today, Alicia and I are visiting with Randy Martinson of Martinson Egg. Hi, Randy.

[01:21] Randy: Hey, how's it going?

[01:22] Emmery: We're doing good. We're looking outside and questioning whether it's February or whether we should be planting right.

[01:28] Randy: Oh, isn't that the truth. Certainly. We're certainly gaining back some of the heartache that we've had the last two winters. This winter certainly has been a very good one and one that has everybody thinking we could be looking at an early spring.

[01:43] Emmery: Yeah, it's interesting, like when you think about the moisture situation as farmers, we just can't be happy because on one hand it's like, "Oh, it's nice outside. On the other hand, drought."

[01:58] Randy: Droughts in the wintertime are always good, though, because that means we're not moving snow. Once you get into May is when you don't want the drought situation to continue. But right now it looks like we are going to be set up for possibly an early spring. Getting in the fields. Hopefully we get some good, timely rains, because what we picked up in December for most of the state, I don't think is going to be enough to be able to make a full crop. But if we can get some timely rains, I think we can -- last year proved it -- we can produce a pretty good crop.

[02:27] Emmery: Randy, before we jump into details of marketing and making decisions for the spring, why don't you just tell us a little bit about your company, Martinson Ag, when you started it and the services that you offer?

[02:43] Randy: Sure, we started Martinson Ag, I believe it was about eight years ago. What we do is risk management for farmers. We do the futures and options trading. We do the advisory for helping the market grain throughout the year. And then we do crop insurance as well. So we do the risk management items that impact the farmers decisions on what to sell, how to protect themselves, and basically to be able to make enough or generate enough revenue to get the bills paid. So that's kind of what our focus is. We do it on all the major grains. We also work with the cattle side where we do the LRP and the PRF insurance. So we kind of deem ourselves as the risk management specialist for farmers.

[03:26] Emmery: Yeah. And my family's worked with you throughout the years and been a valuable tool on our operation. So appreciate what you're doing.

[03:33] Randy: Well, thank you. Actually be now, this will be the 30th year that I'll be entering into doing the crop marketing side, and it'll be 25 years for doing crop insurance. So I've been doing it a lot longer than I thought I'd ever do anything in my life.

[03:51] Emmery: Wow. Let's talk a little bit about that crop marketing side you see on the headlines and different marketing reports, people asking the question, when are the crop markets going to hit their bottom? I looked today and I saw some green on the chart. Do you think that bottom has been hit and we're on our way up?

[04:10] Randy: Well, I think we're close. I think we've got a lot less downward left in this market. But I'd like to think that we've done it. Now that we put the bottom in, we've got some signals that show that we possibly could have. Especially when you look at one, the volatility in the market has increased, and that's usually the sign of a change in the trend. You also are looking at some more news starting to come in that's a little bit more friendlier, especially when you look at South America. The average estimates that we're getting from CONAB and from boots on the ground in South America are a lot different than the estimates that we're getting from USDA. And that leads us know the trade is trading USDA numbers while everybody else is looking at CONAB. So I think there's going to be a true upper some evening up of those numbers. And right now, it does look like from what I'm hearing from guys in South America, the crop is a lot less than anticipated. So I think that could help bring some demand around. Our trouble, it falls in also in line that everybody's in a little bit of a recession or a little bit of economic trouble in a lot of the other countries. So their buying power is lost a little bit, especially with the strength of our dollar. So I do think we've got some signs that are showing that we're looking at a bottom. I definitely think that we normally don't bottom markets in the spring. We normally see the highs and at least some risk premium put into them. And I think we're waiting for that to happen now..

[05:29] Emmery: I'm a little bit lost because usually it's this time of year where I'm calling all the elevators up and putting orders in. And so it's a little bit like, what are we supposed to do right now? So what is your advice for people that are looking at spring planting decisions?

[05:49] Randy: Patience. And I know that's hard sometimes to have, especially after seeing what we've seen. But I do think that we've got 35 to 50 cents that can come in the wheat and in the corn market. I'll look at wheat first. Wheat is actually showing us in the cash market that things are starting to turn a little bit because we've lost our carry in the market. Wheat actually has turned to be even months. Each month is close to the same price, or it's inverted, where the front month is higher. And that tells us that they need cash now, or they're trying to encourage farmers to sell cash. The price isn't there to encourage it, but it's giving us a signal that we could start to see a little turn in that market. 

Corn is a little bit different. We've got plentiful stocks. Corn does not have to push. Corn acres are going to drop this year. But I think with the lower potential in the safrinha corn crop, we are going to see a little more demand come into play for us corn. And I think that will help chew through some of our bushels and help get our stock testament down a little bit. And I do think that market needs to put in a little bit of a premium. Over in the soybean side, I think that's going to come a little slower. Brazil is harvesting. Their yields are poor. They look like they're going to be 15% to 20% less than last year. But China's demand is also off a little bit. Now, they've been on holiday for the last week, so I would expect they'll come in and start buying, especially with our little bit lower prices. So I do think that beans really won't see any big movement until April or May, but I do think that corn and soybeans should see something move sooner.

[07:22] Emmery: Yeah, it's interesting just taking a step back and thinking about marketing in general, growing up on a farm, obviously, and then coming in and being a partner on the farm and helping make decisions and selling my own crop, you know, that the global picture affects the markets, but maybe it's just because I'm in my '30s now. But it's interesting. You start thinking about it. You're like, oh, yeah, China's been off partying with the new year, and Brazil is what combining right now, you said, or Argentina is, and all of these different factors, and you start looking at that and really thinking about, okay, what are the factors that affect the markets and how do we make good decisions when our occupation really is determined by forces that we can't control, et cetera? Definitely puts you in a different spot thinking head-wise.

[08:19] Randy: Exactly. I mean, yeah, we no longer can look in our backyard and engage what's going to happen with the markets or what's going to happen with each crop. We have to look at South America. South America now is the world's largest exporter of corn. They're the largest exporter of soybeans. They're the largest producer of soybeans right now. Russia is the largest exporter of wheat. So right now we need to watch those areas to kind of gauge what direction our markets could possibly go. And then we have to look at who our biggest buyers are and what their economy is doing. Like China, which like you said, has been out partying for the last week, and now they'll come back to town and they'll realize that they're short of supply and need to start getting some things booked and brought in. That's going to make an impact. We have to look you know Mexico is another big demand of ours. What's going on there, especially with their drought and their need to import and then now with Japan now going into, officially into a recession, that also has an impact on what could possibly happen with our markets as well.

[09:23] Emmery: Yeah, that's a lot different than looking across the fence at my neighbor's corn and what he's planting being like, "Oh, yeah, looks like a bad crop, so I should be doing good." But that just shows why it's so important to have somebody you can trust in the marketing world and know who your people are that can kind of keep an eye out on that because I sure don't have time to research China's partying and buying habits on the daily. So that's why people like yourselves are so valuable to have.

[09:50] Randy: Yeah, that's what we look at every day, is just who's making what sales, what's going where, whose economy is doing what and a lot of geopolitical things that you wouldn't think would make any difference do make an influence in the market. Surprising that the war with Ukraine and Russia has kind of faded away. But we have to look at logistics. That's another problem with the Houthis and with them attacking the boats in the Red Sea area. That also is impacting our shipments, which is causing our product to be more expensive to ship to other countries. So that's another aspect that we have to watch and see when that can kind of subside or get better so that we can then be competitive on the shipping routes.

[10:35] Emmery: So, touching on the grains just a little bit more before we switch over to the cows. So, booking seed, et cetera. Is it obvious to you that we should plant more of corn, more of wheat, or should we just plant, I don't know, small beans or something? I know you touched on that a little bit, but what are you.....

[10:59] Randy: That's a good question. And normally, what happens when producers get in the field and they start planting and once things are going good, when they start, and that's usually with wheat, barley, corn, you always plant more of the crop you start with than... because things are going so good. You just don't stop. You just keep going. So, right now, I would expect that as far as the northern plains are concerned, we're going to look at probably less wheat because of the price and because of guys being frustrated. I think we'll see more corn, especially in the southern regions of North Dakota, the southern third. But I think beans and canola will kind of grab their attention. North and I mean, by north, anything above Interstate 94, we'll see more canola and more soybeans planted. I think sunflowers will see a little bit of a suffering because of where their price is at. They're trying to get some good contracts out there. Same with edible beans. Edible beans could see a little bit of an increase because of some good contracts offered. So right now, I would say I would lean my rotation maybe towards putting in a little more corn. I'm a little more optimistic with that market. And then beans, I think, are being your next choice.

[12:14] Alisha: And should we be thinking about if we don't get those timely rainfalls come May with the amount of snowfall that we currently have on the ground? Is that something that we should be keeping in mind of what we're planting this spring?

[12:27] Randy: Oh, I think so. I mean, if we stay in this dry pattern, normally, we can see the weather break in the second part of our growing season, which that would lean maybe the beans could do a little bit better and some of the early season crops might suffer a little bit more. So that's one thing to look at as far as looking at planting. I do think if we get a couple of decent rains, we're going to be sitting pretty good. With crops getting started, July and August could be a little bit tougher for us, and that's really what's going to decide, I think, where production is going to fall this year.

[12:58] Alisha: I just got thinking about marketing and just what you do, Randy, and working with farming and ranching families. And so a question that came to mind is paying the bills versus making money. And that's something that's always kind of bothered me, is people are always like, "Oh, I just make enough to pay the bills." I don't know what's your outlook on that? Because I don't think we should be in this operation to just pay the bills. That statement kind of frustrates me. So what do you tell people when that's maybe their outlook when it comes to marketing?

[13:37] Randy: I guess I have always a standard answer, and that is that the market's job is to find the least cost producer for any product that's out there. Whether it's corn, beans, widgets, whatever it is, the market's job is to find who will produce it at the least cost. The producer's job is to try to sell it at maximum price. So we try to maximize the price by looking at forward sales, carries different things in the market to be able to maximize the price we get, because costs are something that are also a little bit variable that we don't always know. And we could get hit with an extra spray that we have to do on beans that we didn't anticipate in our budget, but we still have to be able to sell the crop to be able to pay for that. So what we try to do is try to maximize the profits as much as we can by using carries in the market and different strategies that are available.

[14:29] Emmery: Talking about those different strategies, then looking at the cattle side, they've almost had the opposite story of the grains, which I guess that is kind of how it goes. But we've been looking at, I think, historically high prices, or at least pretty close to that. Are we going to see a year here full of high prices still? We still going to be looking at that in the fall? Or are we going to have that inevitable crash that people always talk about?

[14:55] Randy: Well, the thing is, if you're up at a high level a crash is probably not a bad word to be saying because we kind of saw that September to December when we sold off, it was a crash, and the market has worked its way back nicely. And I do think cattle are going to continue to have decent prices going forward. We saw the cattle inventory report continues to show tight supplies. We're not expanding the herd, we're actually retracting. So I think all that is still building into this market and helping to support it. One of the other aspects, though, that we have to keep an eye on is what's going on with the economy. We dropped in September because we started to see a little pushback in the economy, higher interest rates, the packers not seeing a return, and consumers pushing back at the grocery stores and the restaurants for beef. So we started to see demand start to dribble or drop a little bit. That's my fear right now, is that we get too high priced, it's going to be easier for that consumer to buy pork or poultry instead of beef. So we have to stay competitive on price. 

The nice thing is pork has been going up along with the beef here this time. So we're starting to see them kind of compete with each other on going higher. So that's one supportive thing. But I do think that cattle will continue to be strong for another three years until we start building the herd. Once we start seeing heifer retention, then I think the feeder cattle market could come under some pressure the next year. But the fat cattle market will continue to see strength one more year because we're going to be taking those heifers out of the feed lots and keeping them for the breeding herd, and that will support the fat cattle market. So at this point, I would say we probably have three to five years of good prices. Right now I do think the market is hoppy and is tired. So I wouldn't be surprised to see a little bit of a retracement in the market. I do think that by the time we get into probably that late March, early April time, we'll start to see some strength come back in again. I think it will be tough, though, to go much higher than the highs we've already seen.

[17:03] Emmery: That's a much less global market. I mean, we obviously import cattle or beef, depending on which way you look at it from south of us there, but do some exporting, et cetera. But do we not look quite as much at what's happening in other countries when we're looking at trends in the cattle market?

[17:22] Randy: Know a lot of them have trimmed their cattle herds. New Zealand, because of the carbon situation they've actually cut back on their cattle herds a little. Know, we've seen some of that, like Australia has also cut back their herd a little bit. Brazil has started to tear up their pasture and put it into cultivation, so they've trimmed back on their cattle herds a little bit. Now, with the poorer economics in Brazil, they're starting to plant some of their land back to pasture. So we might see a little bit of an increase in their cattle herds again in the short term. But for the most part, we export quite a bit of our beef. A lot of it's going to Japan, a lot of it's going to China. But we import a lot of feeder cattle from Mexico and Canada that goes into our feed lots. And that's kind of what's kept the feed lots full, or at that, above last year's levels, is because of the calves we've been importing and putting into the feed lots.

[18:17] Alisha: How far down is the U.S. herd population and approximately how many years do you think it's going to take to grow that back up?

[18:26] Randy: When you look at all cattle and calves, we're at the lowest numbers that we've seen since 1951. When you look at it for just the beef cow side of things, we're at the lowest numbers for cattle since 1961. It's going to take years. Part of the trouble is that our cattle herd is aging. It's like the cattle men, the rancher is aging. That means that we're not replacing the cows at a fast enough rate to take out some of the older horror producers. She had a good calf. She did okay. I'm going to keep her next year type thing. There's a lot of that that's going on. So the cattle herd is getting older, and at some point we're going to age it out and we're going to be able to have a lot of replacements just for that point. So I think it's going to take at least three and more likely five years to actually get to, I think, a level or a spot that the cattle markets are comfortable with numbers again.

[19:24] Emmery: You mentioned some of the overseas regulatory burdens that they're putting on livestock operations just to fit whatever carbon agenda, quote unquote, they're trying to reach. And just a side thing here, but I just watched a video of French farmers parading on their capitol with their tractors and spraying manure all over their courthouse with their manure spreader because they weren't happy with the regulations they were facing. That's an interesting international outlook, and I'm glad that we haven't had to bring our tractor down to Bismarck and spread manure on the front, although I'm sure we'd be willing to if we needed to.

[20:05] Randy: It might come to that knowledge. But that's the one nice thing is that our cattle markets have held up pretty good. So for the most part, the cattle guy is happy here right now.

[20:14] Emmery: Just thinking about what are the top words of advice that you would have for getting a solid marketing plan in place that can withstand the different years, withstand the ups and downs of the market. What are some of the steps? Part of having a really solid marketing plan for your operation.

[20:32] Randy: Whether it be grain or whether it be cattle. I think the big thing is know your cost of production, know where you need to be at to start making that profit or sell at a profitable level, kind of like what Alisha said, you want to sell where you're making money, not just to cover the bills because you want to be around the next year. The second thing is writing a plan out and look at different levels that you want to sell at and the time frame that you want to sell that at and use the seasonals of the market to kind of help you with that. And then third is just have the discipline to stay with the plan. If the market's rallying, I know it's easy to say, "Oh, I'm going to cancel that order and wait till it goes higher." Well, maybe we shouldn't cancel the order, but maybe we should just maybe lower the percentage that we're selling but still keep that order in there and make that sale in advance for the product. So I think that's the three big things that producers should watch.

[21:28] Alisha: It's very important, especially for the generation like Emmery and I's coming in just to know how important it is nowadays, like, you can't just... My dad always jokes, back in the day when he started farming, you could just farm and you just did it and there wasn't much thought into it. And now marketing is so, so important and very vital, a very vital part of the operation. And it's almost as important as knowing how to plant your crop because like you said, if you can't make money, then you won't exist the next year. So I think that's something really important, especially for young adults getting into farming or ranching or even businesses on their own, is how to financially plan and how to prepare your taxes and just all the things that go into making a business run successfully.

[22:22] Randy: Correct. And don't look to hit the home run because very few people hit the home run. Base, hits and doubles keep you in the game and keep you playing. And sometimes that's more important.

[22:33] Emmery: Yeah.

[22:34] Alisha: Right. And it can just be small steps as well. It doesn't have to be. I have to have this whole list and this huge marketing plan to make my operation successful. It can be a few things each year, and every year you're changing a little bit. Something different or tweaking something on your operation to make it a little more viable for you or whatever it may be. And so, yeah, that's a really good way to look at it, is just making small tweaks every year to make your operation more successful.

[23:03] Emmery: That's the number one thing we hear from young producers out there is the number one thing I can add value to my parents operation or any operation is to get some marketing skills. And it seems like the number one thing from parents even or the generation is, "Hey, I wish somebody would come along and help me improve my marketing strategy." or I wish somebody would go.

[23:25] Alisha: "Or I wish somebody would go gack to school and get a degree in marketing and then come back."

[23:30] Emmery: So on that note, Randy, you're up in Grand Forks today doing a session on marketing and strategies for the next year. And you were just telling me that you're doing one close to me here on the 29th. So can you tell our listeners a little bit about what you have to offer and how people can find you and get some of these skills and decisions nailed down for the year and then hopefully years to come?

[23:56] Randy: Yeah, I think like you mentioned, we'll do a marketing and a crop insurance presentation at Jamestown on the 29th. We basically cover what we're looking at in the marketplace right now and what we see could be happening. Kind of give an idea of what potentials are for selling and pricing some more of your old crop and where to start pricing new crop. That's kind of the things we'll touch on in any crop insurance changes or anything to look at. As far as probably the most important risk management tool you have, and that is the crop insurance side. You know, we look at the markets like you said, every day we're studying them, watching what's going on. I have contacts in South America where I talk to and get their idea of what's going on with production and different things. So we kind of have a broad base of contacts that we can use to give us an idea of just not what's going on in the U.S., but everywhere else. And it helps us to then put together our research and form our ideas of what we're going to look at doing for setting targets for pricing.

[25:01] Emmery: All right. Well, and then if you want to reach out to Randy Martinson and his team, I'll go ahead and put his phone number and email other information in the show notes here. Well, thanks so much, Randy, for taking time with us. And. Yeah, we'll see you in Jamestown in a week or so.

[25:16] Randy: All right, sounds good. Thank you.

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[25:20] Emmery: Thanks for listening to straight talk with NDFB. To learn more about Randy and Randy Martinson Ag Risk Management, check out the show notes and give him a call or visit his website. To contact Alisha and I visit ndfb.org or email myself at emmery@ndfb.org.

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