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
RUMOR MILL - China To Buy US Corn!! Fair or Foul??
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🌧️☔ Excessive rainfall across major agricultural regions in China is raising concerns about potential crop damage, with heavy precipitation expected to persist through the end of May and into early June. Prolonged wet conditions have delayed wheat development, flattened fields, and are creating favorable conditions for pests and disease. 🌾📉
🤫🌽 Unconfirmed rumors suggest China may reduce tariffs on grain imports, potentially increasing the likelihood of US purchases. A White House fact sheet from May 17th indicated China could buy $17 billion in US non-soybean ag products annually, and Bloomberg previously reported discussions around possible corn purchases. 💵🤝
📈🫘 Soybean futures rallied Thursday, with the Nov26 contract gaining nearly 13 cents to settle at $11.94/bu, while the Dec26 corn contract rose roughly 5 cents to settle near $4.82/bu. Wheat futures were narrowly mixed, as traders appear to have largely priced in poor US winter wheat conditions and are shifting focus toward ample global supplies. 🌍⚖️
🕊️💣 The US and Iran have reached a preliminary agreement to extend their ceasefire by 60 days, though President Trump has yet to approve the deal. Key US demands include reopening the Strait of Hormuz and a halt to Iran's nuclear program, while Iran seeks sanctions relief and access to frozen assets. 🛢️📜
🛢️📊 Crude oil prices edged higher early Thursday following overnight clashes but faded during the session, with WTI rising just 0.3% to around $89/barrel. Ongoing military exchanges between the US and Iran continue to highlight the fragility of the ceasefire. ⚔️😬
🌵🗺️ The USDA's weekly drought monitor showed improvements in Kentucky, southern Ohio, and southern Indiana following heavy Ohio Valley rainfall, while conditions worsened across northern Indiana, Illinois, Wisconsin, Minnesota, and northern Iowa. Severe drought continues to grip much of the High Plains, with roughly 90% of Nebraska experiencing some level of drought. 🌾😰
⛽📉 US ethanol production dipped last week but remained at a seasonal high, with weekly output at 1.09 million barrels per day — up 5.1% vs. the same week last year. Ethanol stocks climbed to 24.97 million barrels, and margins across the Corn Belt remain robust at 10 to 45 cents positive. 💪🌽
Joe is Tired / China Corn
SPEAKER_01Morning guys. It's Friday, May 29, 527 a.m. Central Time. Grain markets are mixed this morning. Welcome back to Grain Markets and Other Stuff. This is the grain greatest. This is the greatest, Brian, grain market show of all time. I think it's the grainest market show. Well, yeah, it is that also. Mackenzie's here. Mackenzie, good morning.
SPEAKER_00Good morning, everybody.
SPEAKER_01All right, start off with China.
SPEAKER_00So excessive rainfall across China is raising concerns about potential crop damage. Major agricultural regions are experiencing unusually early and intense rainfall, with heavy precipitation expected to persist through the end of the month and into early June. Prolonged wet conditions and limited sunshine have already delayed wheat development in some areas. Additionally, strong winds and heavy rain have flattened some fields, which of course will complicate harvest and also increases the risk of mold. Elevated moisture levels are also expected to create favorable conditions for the spread of pests and crop diseases.
SPEAKER_01I didn't sleep good last night. I need more coffee. Never happened to you guys. You still don't sleep good?
SPEAKER_00Yes.
SPEAKER_01I can't talk. Maybe you had too much coffee. No, not enough yet. Okay. Um, okay, so weather is is apparently a story. Too much rain in these areas of China that represent 20 or 30 percent percent of production. I'm not seeing it in the forecast. Maybe this is past rain, or maybe this is just some fear-mongering. But um, in any case, China is expected to be again the second largest corn producer on the planet. This, however, is not really the story, Brian. The story as it relates to China were rumors yesterday that China would reduce tariffs on grain imports. And some people thought that this could lead to additional Chinese purchases, or not additional, any Chinese purchases of U.S. corn. Is that what you've heard and do you believe it's possible?
SPEAKER_02Yeah, that was kind of the rumor, Mill. And uh I think the story and narrative about the weather in China spurs the idea that, hey, uh, they might need the grain more so than uh have their weather been normal and they'd have good crops, obviously. So uh ideas that uh they're gonna uh take away those import restrictions or reduce the tariffs uh to further accommodate the idea that they're gonna buy U.S. agricultural products. That was definitely part of this story yesterday. Um I don't know. I I think China will eventually buy. Uh I think the timing of their purchases is key. And if if history is a guide, um they're unlikely to show up in the U.S. marketplace until mid to late July to early August.
SPEAKER_01I was pulling this data this morning. Chinese corn ending stocks, according to USDA, are projected to drop for what the third consecutive year. Um they're gonna drop almost 7% from last year and almost 13% from two years ago. I don't know that this data is accurate necessarily, and I don't, and they're still sitting on a ton of corn. I mean, they're sitting on almost 60% of all projected global ending stocks, if you're to believe the U.S. data. We did have this fact sheet and put the word fact in quotes from the White House uh a couple weeks ago. And they said, hey, China's gonna buy $17 billion per year in ag products, and it's it's non-soybean ag products. It's in addition to the soybean commitments that China has already made. And when China buys $17 billion in non-soybean ag products, it tends to be corn. Like a good chunk of it tends to be corn. So is are are we supposed to go with this assumption that the White House is is uh telling us the truth on this, or is it more of a wait and see?
SPEAKER_02Based on previous history, we've got uh a little bit of mixed signals. Um the original 12 million tons that was discussed in in fall, that happened. Absolutely a little bit longer timeline than what was on their original fact sheet, but it occurred. Um that second round of of buying that uh was discussed on social media by President Trump a few months ago, that did not. Um, never in a fact sheet, though. Correct. Fact sheet. It was never in the right. So so the fact that this is in a fact sheet uh puts it more in line with the original deal of the 12 million tons, which I think gives it more credence if the White House is willing to put it on a fact sheet. Yep. So again, now timing is the issue, but uh we're gonna have a lot of old crop corn that is going to be dealt with in the next couple of months as we get into harvest. And that would be a perfect time for China to swoop in
Corn/Soybean/Wheat Charts
SPEAKER_02and take some corn if they need it.
SPEAKER_01Okay, so the corn market bounced a little bit yesterday, I think, on these rumors or chatter. Let's go to price action.
SPEAKER_00Soybean futures also rallied yesterday with the November 26th contract gaining nearly 13 cents to settle at 1194 per bushel. The move higher coincided with strength in crude oil prices. As you said, corn futures also advanced with the December contract rising roughly five cents to settle near 482 per bushel. Wheat futures were narrowly mixed as traders appear to have largely priced in poor conditions across the U.S. winter wheat crop and are now shifting their focus towards ample global supplies.
SPEAKER_01All right, we will take this opportunity to let Brian explain the charts to us. Um Dees Corn, we kind of busted this trend line, Brian. Does the trend line still matter? First question.
SPEAKER_02Um, it's uh one component. Um, I think really ultimately, when I look back at how um a similar year, price point wise and and timing-wise for a seasonal high, uh, the kind of the gateway to the aggressive bear market type seasonal selling was breaking through the April lows. Um, and so I don't doubt that maybe in the short term we could uh take out this trend line support, uh, revisit that April low. I do think the April low is likely to hold in early June until we get to the June Wazdi report. Uh I think we should likely bounce from that area. Uh, but to me, uh in my mindset right now, that bounces my next opportunity to uh do any additional marketing for new crop uh that I want to get done before the month of June is over. Why are you such a doomsday? Um, because I'm gonna just assume kind of normal tendencies until proven otherwise. And uh when we have the highs uh that have occurred uh from a timing standpoint and a price standpoint, um and again the similarities to uh how we're we're moving price-wise uh compared to other seasonal times of highs in May, uh, unless something changes, meaning uh something you know develops in the weather that makes the funds concerned about uh production losses, um, we have a major resurgence in the Middle East instead of an off-ramp, and we see crude oil you know run back to 100 plus. Unless those two one of those two things happens, um we should and and and seasonally would have a high made in in spring and break down in values through July into August. And then in August you get your first uh yield adjustment from the USDA because they don't adjust yield in June or in July unless there's a weather event that says, hey, you need to take yield down. Uh otherwise they wait till August and then they'll raise yield in August if weather uh suggests that we have an above trend crop, and then we'll we'll put a low in that time frame. So I'm assuming normal uh from a uh weather standpoint and that we're on track as far as the off-ramp in the Middle East, and those would portend to me to believe that we're gonna see a reduction in the fund position over the next few months.
SPEAKER_01To those of you who say trend lines don't matter, they obviously do matter in the soybean market. The trend line held perfectly on Wednesday, and now we're back up. Uh, part of the strength here yesterday was soybean oil, which was up a couple percentage points. It's kind of led the charge here. Crush margins in the United States are the best they've ever been, which is going to continue to inspire massive domestic demand. Uh, but this looks like a very good looking, it's a good looking chart.
SPEAKER_02Uh, we still held the uptrend, absolutely. And um, and there was an uptrend in corn that we had held yesterday as well, that we had bounced off of on a on a continuous basis. So uh uptrend support is here. Um, we also went back and revisited those early March highs, which we had a mid-April high at that same level, about that 1174. So yesterday's low is 75, kind of rechecked that old shelf. Um, I think if we had the short-term downtrend on the chart too, from one peak to the next, that's about where we went overnight. Yeah, uh, that kind of matches up with a little bit of a high in late April horizontally at $12. So um this might be building a bit of a head and shoulder structure if we can't really break back up through 12 on the bean oil strength. Um, and then uh we we've really identified over and over that below that 1165 to 70 area, then uh we've got some negative chart development. So it hasn't happened yet. We're thinking about how things could evolve over the next couple of weeks. Generally, the bean market will wait a little bit longer than the corn market to break. So I think corn's kind of the short-term priority. Um, and and soybeans may meander around or start to grind lower in the month of June, but uh more often than not, they wait a little bit longer than corn for their major downtrend to develop.
SPEAKER_01HRW wheat, um the Southern Plains drought story has obviously run out of gas for the time being. Um, we took out that low from earlier this month, here yesterday and overnight. Uh, where do we go from here?
SPEAKER_02So absolutely critical that we hold those old highs that we had uh when the war started. So you think about back in early March and then in kind of mid to late March, and then we broke through that in late April. And uh that short old shelf is the upper end of a trading range. So unfortunately, if we were to really start to close this particular contract uh below about the 660-ish area, um, then you've got your trend line support. But I think uh really ultimately, if we're below 660, we're gonna want to go take a look at the low end of the range. We still have that gap on the chart that is gonna be an open target. And um, one of the things that we took a look at in the premium video on Wednesday was uh the comparisons of this year's corn, soybeans, and wheat to another previous year. And the one that really scares me the most is actually the July hard red wheat. Um we had made some highs in May in that particular year. Uh we had come off of the highs really at the same cadence that we're doing now. There really wasn't any type of a bounce, and it just continued to grind lower into June, and it went all the way down. Um, and we had made a high in May on that on that particular year at 746 and a quarter. So we've got a 750 high on this contract. We broke all the way down to about the 570 level uh by late June. It was just a consistent downtrend. So I'm concerned that as we get into harvest, uh, we've already priced in the uh lack of supply, uh, the the supply reduction due to the drought. Um, and now we're working
Iran/Oil/Manipulation
SPEAKER_02towards harvest and harvest pressure and still the idea that globally we have uh plenty of wheat.
SPEAKER_01Let us venture to the Middle East.
SPEAKER_00So the U.S. and Iran have reached a preliminary agreement to extend their ceasefire by 60 days. President Trump, however, has yet to approve the deal and is expected to take a couple of days to review the terms. Key U.S. demands include the reopening of the Strait of Hormuz, the surrender of Iran's highly enriched uranium, and a complete halt to its nuclear program. Iran, meanwhile, is seeking uh sanctions, relief, and access to frozen assets. Despite ongoing negotiations, both sides continued to exchange military strikes, highlighting the fragility of the ceasefire. Crude oil prices rose early on Thursday, but later gave up most of those gains, with WTI crude finishing up just 0.3% at around $89 per barrel.
SPEAKER_01I'm told, Brian, that crude should be $150. But guess what? At Cushing, Oklahoma, it's worth $87. That's about it.
SPEAKER_02Uh, we've had a wild uh uh trading range, obviously, with the onset of the war in the Middle East and then the on again, off again over the last uh couple of months. And I think it's pretty plain as day that uh in order to return to you know normality, uh we we're gonna have to see the market willing to put crude oil back below $80 a barrel. Um once we're back below 80, then we're likely to go back and uh see 60 to 65. Uh but uh until the market is is below 80 a barrel, to me, it still suggests that there's um not a definitive idea that things are done yet. Uh, but we get President Trump to agree to this, and it really looks like this is coming to an end. I think we'll be back below $80 a barrel pretty quickly. And then that's another layer of of uh you know, what does that mean for grain markets if we're back to uh you know uh $65, $70 crude oil?
SPEAKER_01Sidebar, Brian. Uh there's been a lot of discussion in the comments about manipulation of crude oil prices. And people pointed to uh some of the big trades that were made ahead of the Trump uh social media posts, ahead of some of the things out of the White House. And my point uh yesterday, maybe I didn't make it clear enough, um, is that it's pretty hard to manipulate the global physical oil market or even WTI futures. I think there is a difference between insider trading, which happens every single day, and the full-blown manipulation of a massive contract like WTI crude futures, or even more so the physical oil market. Uh agree.
SPEAKER_02I think we've definitely seen some insider trading. Absolutely. I think that's occurred in the SP. I think that's occurred in in uh in crude oil. Undoubtedly, there's been, I think, some insider trading in soybeans.
SPEAKER_01Um, but is that anything new to you?
SPEAKER_02No. Um I I think that's a story as old as time. Uh of course it is. Who who's doing it when? Um, but uh as far as yeah, can you truly manipulate the value of a global product like that? Um, I think you can use policy and certain things to to shape direction. Uh sure, the SPR, good example. But um to be able to truly
Drought Monitor
SPEAKER_02control the the price of it, um, I I don't there's a lot of other cogs in the wheel that uh have their say as well. Yeah. Okay, drought monitor.
SPEAKER_00Uh the corn belt was mostly dry last week, with the exception of heavy rainfall across the Ohio Valley. The precipitation led to improvements in drought conditions in Kentucky, southern Ohio, and southern Indiana. In contrast, limited precipitation caused conditions to worsen in northern Indiana, northern Illinois, southeastern, and northwestern Wisconsin, much of Minnesota and northern Iowa. Portions of the high plains received rainfall last week, but unfortunately, it did not lead to improved drought conditions when we look at the percentage of U.S. areas experiencing drought. Corn country currently stands at 25%, soybeans 27%, winter wheat 69%, spring wheat 23%, and cattle country 60%.
SPEAKER_01We've had a ton of rain down here in the southeast part of the country. In Middle Tennessee, it's supposed to rain every day for the next five days. I'm going fishing in Alabama this weekend, and we're going to get rained on all weekend. Um Central Cornwelt, Brian, has been uh a little bit drier. And for some areas, that's good, like the state of Ohio, as an example, has seen a ton of rain and they kind of need to dry out. What are you hearing about current conditions, planting, all that stuff?
SPEAKER_02Um, I will say that uh in the big picture, when we think about planting and planting pace, all of that, uh from a 50,000 foot view, it's fine. Um, every year there's going to be pockets where people are behind, people are replanting. Uh, it's dry. I mean, if you're a producer in in uh Nebraska right now or it's super dry, you're concerned. If you're a producer in western Kansas that watched your wheat crop burn up, and now you're thinking about what does this mean for my corn and soybean crop if I don't get rain for that, uh, you know, that's a really bad growing season for them. Um, so there's always going to be pockets, not gonna be perfect everywhere, but thus far, um, it's the end of May. Um, it's gonna be dry for the next two weeks. And I think the market's dealt with that idea. Um, and and it's still gonna be mid-June by that time. If we fast forward to mid-June and the forecast is still dry for the next two weeks after that, um, then maybe you're gonna see uh the market start to react. But um I I think uh we we're gonna see um you know the the forecast become uh very important day to day. This is like that's my least favorite way to trade the market is watching weather forecasts, our you know, every model run and the American and the GFS. It's like I hate trading uh to that uh with with that as the major input, but that's the time of year that we're in.
SPEAKER_01It is the major input though. I mean, this you know, we're we're coming up on it. So the way the forecast reads, a lot of the central and eastern corn belt will be dry over the next uh seven days, which is welcome in some areas, not welcome in in others. And then you've got a bunch of rain kind of in the extended, which you know, that's a coin flip. To look at this through a different lens, our friends at Crop Profit estimate based on Euromodel data over the next seven days, U.S. corn areas will see 93% of the normal rainfall. But I think that's because some of the areas in the west are going to see above normal and then drastically below normal or zero in the east. And then eight to fourteen, it's
Ethanol / E15
SPEAKER_01a little more even kind of across the board, 116% of uh normal rainfall for U.S. corn areas. Let's go to ethanol.
SPEAKER_00U.S. ethanol production declined last week, but remained at a seasonal high. Weekly output was reported at 1.09 million barrels per day, down 2% compared to the prior week, but up 5.1% versus the same week last year. Ethanol stocks climbed to 24.97 million barrels. The print was up marginally compared to both the previous week and the same week last year. According to Reuters data, U.S. ethanol margins range from 10 cents to 45 cents positive across the corn belt.
SPEAKER_01Ethanol is a bright spot for demand. Uh Brian, do you have any uh takes, hot takes on the E-15 situation and what uh it could mean or won't mean for corn prices?
SPEAKER_02Um, you know, E-15, uh, I think it's one of those things where it's a headline and and um, you know, uh you get E-15 year-round, positive short-term headline. I don't know what the long-term dynamics of it are gonna be. If we're gonna use more E-15 domestically, then there's gonna be an impact on the global export uh program and and who gets what. Uh, so there might be a benefactor somewhere else that's gonna export more uh uh ethanol to other parts of the globe. But um that's not my my main focus right now um by any means. It's it's the the growing season in front of us, and and I'm really set on the idea that normal market tendencies um mean downward trends for the next two months. Such a doomsday. I mean, this is just where I'm at right now, Joe.
SPEAKER_01Sorry. It's I'm just trying to be honest. That's why that's why you're here. We appreciate it. Uh cattle got beat up a little bit yesterday.
SPEAKER_00They did. Live cattle were 53 cents to a buck 68 lower, and feeders saw losses ranging from 83 cents down to a buck 60.
SPEAKER_01Uh, Brian, quick cattle market thoughts.
SPEAKER_02Um, so we had a you know bearish report for the first time in a while, and I think that is uh something that you can argue about why it was bearish and why did the numbers get to how they are. But um uh that is uh maybe the first kind of chink in the armor that uh we might see for the cattle market. Um I think we should recover a little bit here more short term in the August live cattle and the feeder cattle. Uh, but I am at a uh standpoint there as well where uh I feel pretty strongly that if we see another few bucks added to live cattle here in the short term, we absolutely need to get uh some floors under this market. There's a very large uh put spread that was put on. I think it was like a 230 uh uh 238, 222 put spread, which if you look at an August cattle chart, um, makes a lot of sense as far as the structure of the chart. And uh I think we might be uh putting in a uh right shoulder for head and shoulder pattern, um, we which we discussed on the uh the premium video on Wednesday.
SPEAKER_01Brian, thank you for joining us, guys. Have a wonderful weekend. Be sure to drink your coffee earlier than I did. Um we'll be back on Monday. Thanks, Brian. Thanks.