Grain Markets and Other Stuff
Joe Vaclavik and Mackenzie Johnston discuss the grain markets, the business of farming, news related to agriculture, and a variety of other topics.
Grain Markets and Other Stuff
E32 vs. E10: Why Brazil is Lapping the US on Ethanol
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🌽 Corn is drifting lower despite a strong crude oil market, with funds trimming their net long position from recent highs. Ample old crop stocks and sufficient 2026 acreage estimates are keeping the bears in control.
🌾 Wheat tumbled to its lowest level since early March after a bearish USDA report showed surging US and world ending stocks. Drought remains a concern in HRW wheat areas, but the market is struggling to find bullish footing.
🫘 Soybeans are holding up better, with large money managers defending a hefty net long position near 190k contracts. US balance sheets could get tight with current acreage estimates — any weather hiccup could be a game changer.
🇧🇷 Brazil is eyeing a jump in its ethanol blend from 30% to 32% to ease consumer fuel costs amid rising global oil prices. The move would boost sugarcane demand and help mills struggling with oversupply and tight margins.
📊 USDA WASDE kept US corn and soybean ending stocks steady while raising wheat stocks to their highest since 2020. World corn stocks were revised higher but remain at an 11-year low, while world soybean stocks were trimmed below expectations.
Allow Me to Reintroduce Myself
SPEAKER_02Morning guys. It's Friday, April 10th, 5 26 a.m. Central Time. Grain Markets are mixed this morning. Welcome back to Grain Markets and Other Stuff. This is the best grain market show on the planet. Guys, we're going to do something different today. We're going to do introductions. We don't ever talk about ourselves. Uh Mackenzie Johnston, who are you? Where are you? What do you do?
SPEAKER_00Uh I'm McKenzie Johnston. I'm in central Nebraska. Um I create create content for this show. And I also uh ranch here in central Nebraska on the side.
SPEAKER_02Yes, you do. And you are the co-host of the show. You have been for what three years now?
SPEAKER_00Yeah, three years. It was just my three-year anniversary like a week ago.
SPEAKER_02Oh, okay. Matt Bennett, who are you? Where are you? What do you do?
SPEAKER_01Uh predominantly grain farmer from uh central Illinois. Uh, grew up in a family with grain elevators, so I've been doing risk management pretty much since I got out of the University of Illinois a long time ago. But uh wife and five kids.
Brazil vs. US Ethanol
SPEAKER_02Yeah. Uh my name's Joe. I'm a city boy. I got involved in ag in my first year in college at the University of Illinois 24 years ago. And uh here I am. I'm not exciting or smart or well spoken or good looking, but I am here for you guys every single damn morning. So uh that's the best thing I can say for myself. Uh, we've got an ethanol story to start off today, guys. Uh, let's go.
SPEAKER_00So Brazil is considering boosting its ethanol blend in gasoline from 30% to 32% during the first half of this year. The potential increase is aimed at lowering fuel costs for consumers as global oil prices surge due to the Iran war. The move would support ethanol demand, providing relief to sugarcane mills facing oversupply and weak margins. Increased competition from corn-based ethanol has also put strain on the sector. Ample supplies of both sugarcane and corn will make the increased the increased blending requirement easily doable.
SPEAKER_02Matt, I'm gonna read you something that I wrote this morning about Brazil's ethanol program and the differences between it and the U.S. And then we can discuss a little bit the um, we'll call them failures of the U.S. ethanol and biofuel lobbies. The Brazilian alcohol program, created in the 1970s in response to the oil crisis, aimed to increase ethanol blending and gasoline to 25%. This is in the 70s, and introduced pure ethanol vehicles. Flex fuel vehicles accounted for 94% of all new vehicles as far back as 2013. Brazilian ethanol is made mostly from sugarcane, although corn usage is increasing. USDA estimated that 78% of Brazilian ethanol was made from sugarcane in 2024 versus 22% from corn. Most or many people would argue that sugarcane usage is far more efficient than corn usage for ethanol production. This makes Brazilian ethanol cheaper and arguably greener. Powerful oil lobbies in the US, of course, have resisted any sort of higher mandated ethanol blend. They've even opposed optional year-round E-15 sales. So this looks like a bad headline for um for the U.S. corn grower, I think. Like Brazil's pushing a 32% ethanol mandate, and we can't even get optional year-round E15. Like, um, this is this a what do you think about this?
SPEAKER_01Yeah, and I think we've talked about this before, Joe. Like, what better year than this last year? Whenever we had this continuing resolution uh put in front of uh the president, uh, you know, nobody added uh year-round E-15 to it. What better year could there have been to say, hey, we're gonna go E-15? It's time to go there. Uh, we're in a situation where we've got plenty of corn. Uh no, let's just uh go ahead and please uh the oil lobby, if you will, and then we'll throw a little money at the farmer to keep the farmer happy. But long term, that provides no resolution whatsoever. And so the way that I view it is that uh Brazil's leadership, uh, as you alluded to, they're not dealing with the kind of lobby situation that uh we continually uh accept money from, if you will, in the U.S. uh they are an ag-based country, they know where the uh they know what butter is their bread, and they've continued to not only do something that takes care of their growers, but as you said, uh keeps them in a greener situation. I mean, they're burning cleaner fuel, uh, and there's no doubt that uh all the way around, it looks like they're handling things significantly better. And and the U.S. grower, you know, is sitting here left holding the bag uh due to the way that this is being handled.
SPEAKER_02Hey, we were all at uh Commodity Classic a couple months ago. And you remember the guys walking around, they had the E-15 stickers on, and they're all like, you know, they're pushing for this E15 thing. The unfortunate reality, I think, I think the simplest way to explain it is that the oil lobbies just got more power than those guys do. They got more power, they got more money, and that's all they're doing.
SPEAKER_01Clearly, clearly, oil lobby is as powerful as it gets, you know. And so the frustrating thing is uh if everyone knew, you know, how much money lawmakers had been put in their pockets from the energy lobby uh over the last uh 50 years, uh it'd make them sick to their stomach.
SPEAKER_02But just to be clear, we we do have we're gonna allow year-round E-15 this year. It's optional, but it's not it's not a permanent deal. It's like we've been doing it on a year-by-year basis, and they'll call it emergency usage or whatever. But what we really need is like a permanent year-round E15. And we're not even calling for a mandate, we're just saying we need it to be optional, but permanent year-round, right?
USDA Report, Corn Fundamentals
SPEAKER_01Absolutely, you know, with the thoughts that uh what would be wrong with uh, you know, doing something like Brazil and saying our eventual goal is to can continue increasing this. Yeah, I mean, domestic consumption of what we're growing here uh in in an effort to support an agriculture industry that we're just throwing cash at uh makes a heck of a lot more sense. Yeah, I know.
SPEAKER_02All right, we had a USDE report yesterday.
SPEAKER_00Yep, and the agency pegged the 25-26 US corn ending stocks at 2.13 billion bushels unchanged from March and slightly below expectations. Soybean ending stocks were also unchanged at 350 million bushels and were marginally higher than anticipated. World corn stocks were revised higher from March and exceeded expectations at 294.8 million metric tons. And then in contrast, world soybean stocks were lowered to 124.8 million metric tons down from March and also below expectations.
SPEAKER_02Very unexciting report. The the big change on the US balance sheets, if anything, would be USDA increasing the soybean crush estimate, reducing the export estimate. I think that's all fair. I wanted to show you this stuff, Matt. Here is U.S. corn ending stocks to use ratio for the current marketing year projected at 12.9%, which is it's bear market territory. It's similar to what you saw in like 20 uh 15, 2016, those sort of years. So I guess my question to you is based based purely on this is the corn market fairly priced?
SPEAKER_01Yeah, that's a loaded question. Um, I would say it's fairly priced for the time being. Joe, the thing about this, uh, you know, stocks to use ratio is is, you know, one thing I've talked about uh a lot is demand is so strong. I mean, you've got record world demand, you got record demand. But stocks to use ratio kind of brings us into back into perspective for us. Yeah, we've got a ton of corn. Uh it's just that we're chewing through it rather rapidly. I think where this becomes interesting, you know, is that uh, for instance, if you plant no more uh than the acreage that we came out in March, you know, 95 and change 95.3, whatever it was. Um, let's say we pair that back a little bit. You know, let's say that the uh kind of wet start or cold and wet start, especially farther north you get, you know, if if that would manifest itself into what I would call a more of a normal uh prevent plant type year, because we've had a couple of years with virtually no prevent plant, um, you could start to get into a different situation because clearly you're planting three and a half million acres less already. Uh and with record demand, you can see a stocks use ratio uh significantly different a year from now. But as of right now, for old crop, yeah, there's no question. It's bear market territory. The market is probably fairly priced, inflation adjusted. Uh, it still feels awful cheap to me, but regardless, uh, you know, the market doesn't seem to care a whole lot um about this inflation-adjusted type conversation.
SPEAKER_02Now, there is a contrast. It it would appear to me as if we're trading U.S. fundamentals because world fundamentals, world corn ending stocks to use ratio, projected to be the tightest in more than 10 years. Yep. And the market is not really reflecting this, it appears to be reflecting the US fundamentals.
SPEAKER_01Absolutely. You know, I've I've actually had this uh type of slide, not this exact one, but I've had this type of slide in my presentation the last couple, three years. So uh if you look at world stocks overall, uh, they look ample, but at the same time, your stocks use just continues to dwindle, you know, and and as we sit here and talk today, Joe. I mean, yes, who we don't know what's gonna happen with the Strait Hormuz and with Iran, but clearly you're gonna have some headwinds for the world grower, if you will, uh, with fertilizer. You're gonna have some problems as far as uh being able to etch out any sort of profitability moving forward. And so, you know, if you if you pull war world acreage back at a time whenever stocks uses continue to dwindle for 10 over 10 years, uh, I think it's back at the lowest since 2013, 2014. Uh, here's the thing. I mean, we could again, you could see a dynamic situation uh develop here if this fertilizer situation doesn't get worked out.
SPEAKER_02Yeah, and you know, our markets, our grain markets, we we've got a lot going on with with the geopolitical stuff, but they're still there's still weather derivatives to a very significant degree. You run into some sort of weather issue where we have you don't even need a crop disaster, Matt. You just need you need a national corn yield that's you know five, six bushels below trend. And you got yourself a real story here because of the demand you talked about.
Wheat, HRW Weather and Rain, Charts
SPEAKER_01Oh, for for sure. You know, if if you would just uh you know post, for instance, 95 at um, you know, 179, the old high for yield, uh, that right there would definitely be uh a friendly situation, probably explosive for a time, uh, because to get to that yield, you're gonna need some tough weather. Uh and so there's no doubt that that's when you're gonna get your high, you know, is whenever the weather's the toughest. And then whenever you kind of verify uh that the yield is a little lower. I mean, the simple fact of the matter is once you've uh verified that, you probably already have the high end. But I do think to get there, you know, if the acre or if the uh weather situation is problematic, no doubt in my mind, you're gonna see a weather premium coming into this market that could be impressive.
SPEAKER_02We're gonna talk about Corn Belt weather here in a second, but first let's do wheat and yesterday's price action.
SPEAKER_00Yep. So wheat futures tumbled yesterday following a bearish outlook from the USDA. The agency increased its estimate for U.S. wheat ending stocks to 938 million bushels, the highest level since 2020 and above analysts' expectations. World wheat stocks also came in above expectations at 283.1 million metric tons, supported by increased production in the European Union and Russia. The May 26 Chicago wheat contract fell nearly six cents to close around 575 per bushel, its lowest level since early March. And then similarly, the May Kansas City wheat contract declined roughly five cents to settle near 591 per bushel, also reaching its lowest level since early March.
SPEAKER_02We're gonna look at some wheat weather and then we'll look at some price charts. There's a little bit of rain on the radar this morning over some uh HRW wheat areas in Kansas. If you guys are in uh anywhere in Kansas and you caught rains overnight and into this morning, drop your totals in the YouTube comments. Um, there's a lot of winter wheat drought, and we're gonna get to the drought monitor, but this is this is a pretty hefty number for winter wheat drought. We'll get to the exact percentages here in a second. Um, I still feel like Matt, I'm looking at these forecasts this morning. A lot of these rains over the next week, that the way that both the GFS and the Euro look, they're gonna they're gonna cover, you know, maybe a third or half of HRW wheat country.
SPEAKER_01Yeah, yeah, and you've already got uh excessively low, you know, I hate good to excellent, but it's definitely a reflection of what uh what's going on out there. I mean, I don't know what the exact number is. You you're the same way, but no doubt. I mean, this wheat crop is uh in trouble, and it's kind of make or break time. I mean, you don't catch rain through the system that's coming through here next week. You know, I think some of this wheat um you can kind of put a fork in it. And so uh man, I hope these guys and gals get some uh some rainfall here quickly, but I don't know that um yeah, I mean, we've got enough wheat in the in the US, there's no doubt, wheat in the world right now. Uh, but at the same time, I don't know that the USDA is being um uh I guess clear or or fair in their assessment of what this crop looks like because I don't think it's gonna come out anywhere like they're saying.
SPEAKER_02Extended forecast, there's a little bit of variability, euro versus GFS. The GFS has some reins uh further west where I think they're they're needed, and the Euro not so much. And this extended stuff, of course, not super reliable. Here's Age LI Kansas City wheat chart. It doesn't, it doesn't look great to me. Like we're uh we're at the lowest we've been in in a month or so. Uh maybe you go down and test out some of this trend support. It's uh even though they're dry, the the price action has been poor here for the last uh week and a half or so.
SPEAKER_01Yeah, I mean uh the here and now doesn't look good either. I I think uh to go back to my comments just a little bit ago, you know, this urea situation is a very real one. And if any crop's gonna be impacted uh as much as any other, it's gonna be wheat uh over the next several months. And I think it'd be very interesting to see what world wheat production looks like a year from now, for instance. So um, you know, playing the long game, it's I mean, not on the board, but just uh time-wise, playing the long game uh to me is probably gonna be interesting uh over the course of the next several months. But for right now, uh the wheat market doesn't look very healthy. Uh, do we go precipitously lower from here? I I don't know that you go down and test that support just yet. I think this wheat crop here in the U.S. is in enough trouble. Uh, you've got uh dryness talks in uh like Australia, for instance. There's parts of the world that just can't catch rain right now that I think are going to be talked about moving forward.
SPEAKER_02So I think you find some support in here. I'd say the SRW chart and the um spring wheat charts don't look great either. Um, you'd really like to find some footing here if you'd like to see higher prices. So we've been market is holding held together very, very well. It looks to me like large money managers are defending this big net long position. And I think from a fundamental standpoint, you look at uh ideas about new crop and you take USDA's fake acreage number at face value, and this thing could get really tight really fast, you know. It it could if if if that stuff is reality.
SPEAKER_01Yeah, I mean, there's no doubt that I would call the bean market uh quite resilient. I mean, or you could call it impressive if you want. I mean, you know, you look up here uh this week a couple of times, you know, a couple days ago, of course, uh crude oil market just absolutely getting walloped, you know, and you look over and beans just clawed their way back into positive territory. I mean, what what a heck of an impressive run they've had this week in the face of the outside circumstances. And so uh I'm with you, you know, if you get into a position here where you plant whatever, let's say you plant 85 million acres of wheat, you know, but then you can't end up uh finishing this crop well, uh, we could get very tight domestic consumption is is going to be quite strong. We already know that. But um, you know, no doubt in my mind, of the of all three of the markets uh that we've talked about here, soybeans have by far been the most impressive.
SPEAKER_02If you look at that bar from Wednesday where we uh went down, made some lows, and then spiked back. If if you're a speculator and you're short the soybean market, this has got to be incredibly frustrating for you. I think there's been a lot of aggravated people with the bean market.
SPEAKER_01I mean, you look for months, yeah. From world fundamental standpoint, you know, uh people keep telling me, well, Matt, uh Brazil's got 180 million metric ton crop, you know, it's just a mammoth crop. I'm like, yeah, I know. You know, and they're also talking about doing what, B100 on diesel fuel. I mean, we didn't even talk about that. It's just incredible what kind of domestic consumption they've got there. Uh, but bottom line is it's been aggravating for the bears because uh there's things they can point to for sure, uh, that would lead you to believe this market could move lower, but it's just not doing it.
SPEAKER_02And you know, people I I think have short memories because 1150 beans, even though we've rallied back, 1150 is still cheap, it's especially this day and age. Uh, here's De's corn. I'm gonna call it not so good. This this it could be acting a hell of a lot better.
Drought, Planting "Disruptions"
SPEAKER_01Oh, we had such a beautiful uh you know upward trend there going, you know, and then bottom line is we've just kind of fallen out here. Uh yeah, the corn market, in my opinion, I've talked to guys all winter, guys would have given anything for 480, 485, 490, 495 corn, you know, and then uh the unfortunate reality is that most people get bulled up whenever the market goes higher, you know, and and I think that the last two months, uh regardless of what happens the rest of the summer, let's say we could let's say we go out and we blow this thing, blow the top off this thing because we have weather, you know, people want to point back to what I'm about to say and say, hey, you were wrong. What I'm gonna say though is if you if you know that you can make money at levels you haven't seen in two years, uh, you've got to take a reality check of why you're not at least managing some level of risk on your operation. Because the the other side of that thing, you know, is that if this skirmish does get over with, then fund managers just decide, hey, there's not a story here. I'm not saying that's what they're gonna say, but if the high's in for the year, you're gonna be kicking yourself for not taking advantage of 490 D's corn. But you know, that's part of the reason why I want to kind of spread my risk out a little bit and uh on my own operation. I'm not talking about trading brokering or anything, I'm talking about my own operation. Yeah, I want to spread my risk out and take and say, hey, you know what? You offered me a gift, I'm gonna take it. Yeah.
SPEAKER_02Let's go to the drought monitor.
SPEAKER_00So widespread rainfall across the corn belt over the last week led to significant improvements in drought conditions across most of the region. Currently, only 15% of the area is experiencing some level of drought, the lowest level since early September. In the high plains, recent rainfall resulted in improved drought conditions across parts of Kansas, eastern Nebraska, and central Oklahoma. Despite these improvements, drought conditions remain a significant concern across HRW wheat areas. When we look at the percentage of U.S. areas experiencing drought, corn country currently stands at 29%, soybeans 31%, winter wheat 68%, spring wheat 18%, and cattle country 63%.
SPEAKER_02Matt, did you catch some rain in your neighborhood the last week?
SPEAKER_01Yeah, we definitely caught rain here over the last weekend. I mean, to be honest, awfully close of being able to go. Uh the heat coming in over the last couple of days has uh started to get us uh primed and ready. We're talking uh maybe some rainfall here today, though. And if that's the case, I don't think anybody runs till Monday. But uh bottom line is we're awfully close. I think a lot of beans are gonna go in the ground in Illinois in the next week. Uh forecast just keeps kind of backing off some of these rain chances. Uh whereas earlier in the week they were talking Thursday, Friday, Saturday, and now they're talking chance here this morning. And then after that, our next chance is until midweek.
SPEAKER_02Yeah, the rain uh over the next seven days, the way it's expected. I think a lot of it's gonna be you're gonna be right on the line of like where it could be heavier or or not so heavy. But um, like the the eastern section of Iowa, northern Illinois, uh, southern Wisconsin into northern Indiana, all of Michigan, and then like northern Ohio. Should see some rain. Uh, look at these maps. I think that I'm gonna call this GFS uh a little bit too aggressive in the extended with the with the uh seven to eight inches of rain for northern Illinois and southern Wisconsin. I doubt that that happens. The Euro is a little bit more uh moderate here. So I don't know, is it it's too early to even call these things delays, isn't it? It's just it's called a disruption, maybe.
SPEAKER_01Yeah, I mean I had a guy from Iowa yesterday text me and say, Hey, when's the market gonna start paying attention to uh this rainfall situation? Yeah, I said, not yet. I said give it a month. And if we're still we're still in this type of situation where the forecast is still wet a month from today, you might start paying some attention to it for sure. I know that's aggravating to hear. It's just that with everyone running uh 16 and 24 row high speed planners, the market's very well aware that this crop can go in the ground in a matter of a week. So um, yeah, I mean, there's no question in my mind that it's too early and I don't think anybody's gonna get amped up anytime soon.
SPEAKER_02I don't use the word delay, not because it's like I mean, definitionally it's correct, but there's a whole set of connotations that comes with that word, and people think like oh, planting delays, that means that means grain rally, and that's that's why I don't want to use the word delay. I'll call it maybe a disruption for the time being.
Export Sales
SPEAKER_01Yeah, I mean, you talk to the vast majority of growers, you know, in the ice states, for instance, and if you tell them, hey, you know what, you are going to be delayed till May 1st, May 6th, May 8th, uh, but you're gonna be able to put the corn in the ground, it's gonna pop up uh uniformly in seven days. Some guys would rather have that in the first place because a lot of times when you plant in April with this inclement weather, it if it doesn't come up even, uh, if you end up with any sort of half into replant, spot stuff in, that's aggravating. And typically it's not very good for yield. So yeah, it's delayed from when you would like to get out and go. Uh, but at the same time, um, there's two sides of that thing. Export sales.
SPEAKER_00U.S. corn export sales increased last week for the week ending April 2nd. Net corn sales were reported at 54 million bushels. The print was up 18% from the previous week and up 8% from the prior four-week average. Japan was the largest buyer for the week. Net soybean sales were near the lower end of pre-report expectations at 11 million bushels. The print was down 16% from the previous week and down 34% from the prior four-week average. China was the largest buyer. Net wheat sales exceeded expectations at 6 million bushels. The print was up substantially from the previous week, but down 39% from the prior four-week average. Venezuela was the largest buyer.
SPEAKER_02Um, this new USDA export sales website sucks, but I think we're it just sucks because I don't understand it yet. Um, I think we're done selling old crop beans to China. Are we Matt?
SPEAKER_01Yeah, I mean, I believe so. Unless there's something that we don't know, you know, if there's some sort of surprise in the works, but it sure seems like it would be problematic for them to step in. We're still very expensive versus Brazil. Yeah, I thought um, you know, as far as the export sales report goes, uh corn just continues to impress. I mean, it it's just uh super impressive. I think the USDA is probably on track there. And I thought it was really good that the USDA dropped exports on soybeans uh in this month. I mean, it it makes more sense and they could probably go down even more.
SPEAKER_02That was necessary on soybeans and corn, I wouldn't be surprised if the export number came. Up a little bit, and maybe they take it out of feeding residual, and that's how you uh rectify that whole situation. What did cattle do yesterday?
SPEAKER_00Uh cattle futures were higher yesterday. Live cattle were 32 cents to a buck 27 higher, and feeders saw gains ranging from a buck eighty five up to two sixty.
SPEAKER_01What are your thoughts on the cattle market, Matthew? Yeah, I mean, I've been impressed with the strength here. There's no question that you've seen as the corn market has moved lower, cattle have kind of inched back higher. I mean, the correlation we've seen there before is kind of held true. Uh, going up on June and making new highs. I mean, uh, to me, uh, that that tells you that uh some of these guys actually aren't uh afraid of the risk, if you will. You know, there's whispers of going ahead and opening up the border. Uh it doesn't seem to bother the market. So, yeah, I mean, this is a sign of a very strong market right now.
SPEAKER_02Hey, Mackenzie, you mentioned it's dry in your neighborhood. And the statistic that you rattled off 63% of U.S. cattle areas experiencing drought. This uh doesn't help our fundamental cause, does it?
SPEAKER_00Absolutely not. And then also to add uh gasoline to the flame, whatever you want to say out in western Nebraska. You know, we had 400,000 acres burned. Even here in central Nebraska, we had thousands of acre acres burn. And there's an estimate that 30,000 head of cattle are going to be displaced because of that. So I mean, like, there's not a lot of grass to be had to start with. So it's it's a tough situation.
SPEAKER_02Outside markets, pretty quiet this morning. Matt, thanks for joining us, guys. Have a wonderful weekend. We will be back on Monday.