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
Corn Belt Rain = Sad Grain Markets
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🌵 USDA's weekly Drought Monitor shows the worst conditions holding in Nebraska, South Dakota, Colorado, Oklahoma, and areas further west, with pockets also showing up in western Iowa, Minnesota, Wisconsin, and northern Illinois. 29% of US corn areas and 26% of soybean areas are now in drought, though overnight rain hit South Dakota/Nebraska and radar is active this morning over MN, IA, MO, and eastern KS. Maps below 👇
🌾 Grains were mixed Thursday as traders eye a wetter, cooler Corn Belt forecast for early August. Nov26 soybeans slid 4 cents to ~$11.89/bu, Dec26 corn dropped 3.25 cents to ~$4.69/bu, and wheat closed higher but gave back early gains tied to Black Sea military escalation. Charts below 📊
🇨🇳 China bought more US soybeans! USDA confirmed a flash sale of 132,000mt for the 26/27 marketing year, pushing China's new-crop purchases to 3.045mmt total against the White House's 25mmt/year target. Tracker below 📈
🏭 ADM is expanding its North American soy crush capacity at plants in Frankfort, IN, Deerfield, MO, Lincoln, NE, and Spiritwood, ND, mostly wrapping up by late 2028/early 2029. The upgrades add ~700,000 metric tons of annual crush capacity, translating to demand for well over 25 million bushels of US crops. 🌱
⛽ Senate Republicans are set to add permanent year-round E15 sales to the farm bill, with Ag Chair John Boozman scheduling markup for Aug. 6. It's a scaled-down version of the House's May bill built on a Fischer-Capito framework, but the overall farm bill still needs 60 votes with Democrats pushing back on SNAP cost-sharing changes. 🚜
Morning guys. Happy Friday. It's July 31st, 5 24 a.m. Central Time. Grain markets are mixed this morning. Matt Bennett is here. McKenzie is off. Matt, good morning. How you doing? Morning, Joe. Doing good. We're going to start off with weather and Corn Belt weather specifically, which I think has been the big driver of grain prices this week. USDA released weekly drought monitor data on Thursday. Drought conditions remain most severe in parts of Nebraska, South Dakota, Colorado, Oklahoma, and areas further west. Some drought also noted in western Iowa, Minnesota, Wisconsin, and northern Illinois. The data would indicate that 29% of U.S. corn areas and 26% of U.S. soybean areas are experiencing a drought. Matt, what are you hearing from farmers in the western corn belt in some of these drought areas on the map as it relates to yield prospects?
SPEAKER_01Yeah, I mean, between the Dakotas, Minnesota, Northwestern Iowa, I've heard several folks say, you know, we need rain, we need it quickly. I think the problem, like for instance, in North Dakota, South Dakota, Minnesota is the temps. Uh, they've been hotter than what we've been in central Illinois. I mean, which isn't as you know, it's not normal. I mean, I feel for them because not only were they excessively hot, but they had, you know, like 20, 30 mile-an-hour winds for a few days. And so that just saps the energy right out of a corn plant. It makes it tough. I mean, obviously, overnight lows have been way too warm, you know, and so they've probably taken some yield off in that part of the world. You know, I don't want to sensationalize, but I've been there. Uh, I've seen it happen, and and there's no doubt that uh taking a week of attempts like that, you you you lose a lot of yield.
SPEAKER_00Okay, so part of what's going on here this week is that we have rain on the radar this morning over a good chunk of southern Minnesota. It moved kind of through Iowa last night, across Missouri. I have some rainfall totals. This is only through 11 p.m. last night. Decent chunk of South Dakota caught some rain, not everywhere, and it was kind of spotty, decent chunk of Nebraska, North Dakota kind of missed out, I think, for the uh time being. But the idea that this that these rains are going to continue, and you look at the forecasts, pretty wet for most of the central corn belt. Um, I think that that's why corn swiping prices have dropped and dropped fair fairly severely this week. Yeah, no doubt about it.
SPEAKER_01I mean, the thing is, is yeah, you look at the grand scheme of things, and this corn story, I believe, is is far from over, but you still got a lot of corn, you know, you still got plenty of corn to get out to harvest. You know, if you're an originator and you see rain like this on the screen, you're like, man, you know, we don't need to push for anything right now. We're gonna be able to get to harvest and we're still gonna have enough corn this next year. But like I said, the corn story is far from over. So what are you dealing with? You're dealing with a right now and you're dealing with a later. And right now, there's just no incentive to see this corn market do a whole lot of anything. I do think later on um you'll have a story. But uh, you get rain on the screen in late July going into August, uh, you're gonna struggle to rally no matter what the conditions were going into it.
SPEAKER_00Let's look at some month to date July weather info. This is almost a full July data set. We got one more day to go. Our friends at Crop Profit, their data would indicate that U.S. corn areas have seen so far July month to date 85% of normal rainfall. So it hasn't been a uh wet or excessively wet July, although that statistic is is national, weighted by corn production, and it's and it's skewed because of drier conditions in the Western Corn belt. But also, you know, you look at some places of Illinois, look at Western Iowa, uh Indiana, uh drier than normal, also.
SPEAKER_01Yeah, for sure. I mean, right in where we're at, uh, I believe we've got one farm that's had over an inch of rain in the month of July. And uh most of our farms, I mean, like our average was pushing 10 inches in June. So, you know, the the issue, of course, for a lot of people is whenever you get that wet, you really need to continue to stay wet uh because roots are an issue. Um early establishment wasn't that great for a lot of folks, but uh no doubt where it seems like where the where you're getting rain, you've just gotten abundant rain at those times. And then once you get into that dry spell, I mean, it just you know, the the rain comes over you. I had guys text me last weekend saying, hey, how much rain do you get? Because the radar looked like coming through central Illinois, we had one heck of a nice system. I mean, uh, and there was yellow and red right on top of us for just a little bit. I had no rain at all. I mean, it just didn't fall. But um, you know, it's some areas are awful dry.
SPEAKER_00Here's a different way to look at it. U.S. corn areas on average saw 3.3 inches of rain uh during the month of July so far, and we got a day left of data to go. But um, it was hit or miss. I mean, there were areas that saw next to nothing in uh you look at some of those areas in North Dakota and northern South Dakota. I mean, it looks like everybody caught something, but uh very much regionalized. Temperatures looks like we're gonna end up with with overnight lows, 2.8 degrees above normal on average. I think if anything, it was probably most problematic and it sticks out like a sore thumb on the map in in North Dakota and South Dakota.
SPEAKER_01Yeah, uh, no doubt about it. And again, I think the problem for them, of course, is just how excessive the heat was. You know, wind uh combined with heat, uh no doubt about it. You look at stress degree days, you know, snodgrass has been showing that some here lately. And it's interesting because uh, you know, they've done work on this. When you get above like 140 on the stress degree days, uh it typically is going to start inhibiting yield. And uh that line has crept into Missouri and is basically just south of where I'm at. So, you know, but it goes on north, you know. I mean, uh, stress degree days, it's it's strange, you know, how far north you've seen that much stress so far this year, but uh been a very strange pattern.
SPEAKER_00Quick plug for the premium subscription uh this morning. Our friend and resident agronomist Lewis Stearns was on yesterday. Does pollination even matter anymore, Matt? Of course it does. But um, some of the thought process is changing as it relates to weather and uh when the rains are needed and when they're not needed. It was super interesting. I don't want to get too much more into it and give it away, but uh that was one you guys should absolutely check out. Okay, let's go to price action. Grain prices were mixed to lower on Thursday. The November soybean contract lost four cents to close near $11.89 per bushel. Traders continue um to worry about a corn belt weather forecast that includes a wetter and cooler pattern for the first week of August. Dece corn lost three and a quarter to close near 469 per bushel. Again, traders focused on the weather situation. Wheat futures closed higher, uh, but were unable to sustain early session price gains caused by further military escalation in the Black Sea. So you look at these this dece corn chart, we've now filled that chart gap at 468 and a quarter. We busted trend support. Um, this thing could find footing at any point in here, but the the chart itself doesn't look uh great to me following uh this week.
SPEAKER_01No, no doubt about it. I mean, that trend line that we had established out of that NAS report at the end of June was pretty uh that's a beautiful trend line if you're was if you're yeah, I mean if you're a corn bowl, but then now you that you've kind of broken that, you've got to ask where's this thing gonna go next? And and given the time of year, if you get enough moisture, let's say you come in next Monday and actually crop condition rating stabilize or even improve just a little bit, you know, asking for a rally heading into harvest in that scenario that you're gonna be asking for quite a bit.
SPEAKER_00To ask for a rally headed into harvest when we our understanding is that there's a lot of corn still in the western corn belt, especially at the northwest part of the corn belt, it's um it might be tough to do, even even if the crop ends up a little bit lighter than uh trend or than USDA has suggested.
SPEAKER_01No, I agree. I I think if you're looking for you know some sort of a uh pop in this corn market now, of course, it's tough. But I think on further down the road, Joe, you know, you gotta stop and think about hey, we dropped three and a half million acres of corn this year. Uh we know input costs are high. Uh you look at these 27 corn and what are we trading at right now for uh 487.5. So uh how does that work? You know, and you know what Chris will tell you. I mean, it's thin, and uh in some cases it's it's not in the black. And so, you know, uh I look at this and I say, what's gonna take to get the uh the producer this next year to plant in excess of 95 million acres? Because dropping to these acres this year, you know, is gonna drop your carry out to 300 million bushels. Uh you don't you you can't do that every year. We know that. So there's gonna have to be some sort of a change here, and I do think that will be supportive towards corn on down the road. It's just right now is not a great time to expect that.
SPEAKER_00I did uh side note, I taped uh U.S. farm report with Tyne and with Pete Meyer yesterday, and Pete was talking about um just USDA statistics and corn the corn acreage data in particular, and one thing that he mentioned was that some of the early uh RMA data is indicating that we planted more than 95.3 million acres of corn this year, and that it could be it could be closer to last year's total, is I believe one thing that he said, and I don't want to uh quote him here, but there's with regard to USDA data, it's it's as bad as it's ever been, and it's like it's tough to I I know that nobody, I don't I don't know that anybody's like dead set on this 183 number that they've got penciled in. That's an old number, but just as the data comes out, like we've got another report in August, I don't know how much we're supposed to, I don't know how much emphasis we're supposed to put on it.
SPEAKER_01Yeah, I mean, and you can't forget last year. I mean, that's the thing. Last year, obviously, you raised acres in August, I believe September, October, and January. And so I mean, that was uh that was salt in the wound for a lot of growers. They were super frustrated with the whole situation. Uh, there was something strange though that happened, obviously, whenever you look at those NAS numbers from June 30th. I mean, there was over 100 million bushels less than what we kind of thought. Yeah, you know, and and and yes, exports have been good, but you know, ethanol is probably gonna have to be adjusted a little bit lower even now, from what USDA said. Uh, not all your demand factors were in excess. And so you've got to ask, where'd that come from? Well, it's probably a little bit of an overestimation of the previous year's crop. That's just my opinion. And so it's pretty tough to get it right. Uh, but I'm with you. The the data is just pretty rough. And I think hanging your hat on it, uh, you got to be really careful.
SPEAKER_00Reason being, people think that USDA or NASA's out to get them, they are not out to get you. No, they're drastically underfunded, they've had a bunch of layoffs and cuts and relocations, they're operating on at like skeleton crew type levels. They just don't have the resources to issue uh accurate data. And and I don't know if the data was ever super accurate, but I think it was pretty close, and I think it's gotten worse and worse and worse. And then the other part of it is nobody responds to the surveys. The surveys are too complicated, and and I get why people want to maintain their privacy or whatever, but uh there's just a lot of lot of issues there. Let's look at the soybean chart. So this thing got beat up bad this week. Uh two two big down days, and uh, we're now what 60 cents off the highs that were posted uh just was that last week. So yeah, this is all I think it's all because of the forecast. I mean, soybeans are made in August, right? I mean, that's the deal. Oh, yeah.
SPEAKER_01No, absolutely. And the thing is, is that that kind of drier bias trend that we got into in July, you know, if you break that trend with a rain system that comes through, uh people understand a lot of times uh you start a new trend, if you will. Yeah, you get some moisture in the atmosphere and rain begets rain. You know, it's just kind of how the thing works. And so, you know, uh bean markets take it on the chin in a major way. Uh, you're still, I mean, November beans right now, uh 1188. I mean, good night. Um, a lot of folks um, you know, earlier this year would have loved to see 1188. Yes, I know we we raced a 1250 type level, but uh man, I'll tell you what, um, yeah, these these prices have been much worse the last couple three years as we've headed into harvest, you know. So we got to keep that in the back of our mind. If if you're sitting here this morning, you're aggravated that you didn't get that 1250, but hey, you just had a two-inch rain somewhere. Uh you know dang good and well that your bean prospects look way better this morning than what they did yesterday. So you got to at least run the math there. Hey, you know, uh what's a what's an accurate yield now, you know, and can I make this thing work?
SPEAKER_00Here is uh HRW wheat. And yesterday, early in the day, we had a sharp rally on some escalation in the Black Sea, and we gave back just about all of it, not the best performance in the world. It seems like the market is just now, I guess, comfortable with the idea that Black Sea exports are disrupted for a little while and probably maybe just working with the idea that they're gonna resume at some point, there's gonna be some sort of diplomatic solution because if the trade fully embraced the idea that Russia-Ukraine wheat exports drop by half or by more, I mean, we'd be higher than this. Oh, yeah.
SPEAKER_01I mean, this wheat market could take off like a rocket if that was the case. But you know, the last time we had the skirmish uh in a war, call it what you want, but uh whenever Russia and Ukraine were launching bombs at each other, you know, initially, you know, you you saw it up 40, 50 cents, you know. And as that thing went on, I mean, you could you could almost bomb the daylights out of them and it wouldn't move the market five cents. And so the more you you you're right, you're absolutely right, the more used to this story uh that the market gets, they start to kind of figure out that hey, that wheat is there, it's it's going to make it at some point to the destinations it needs to. Are we getting disrupt flow? Absolutely, uh, but it's not like that wheat banished.
SPEAKER_00And also, if you want to maintain like these high U.S. wheat prices, you need to eventually see the export demand like come to the United States. And I don't think anybody's there yet.
SPEAKER_01No, not at all. I mean, that's and that's the problem, is that you know, we we only have so much of the market. Uh, we know that. I mean, I I know that was aggravating for some of these uh hard-red guys, you know. I mean, terrible crop for a lot of those folks. Wonder why the market didn't rally. It's just it's not we don't produce enough in the world or export enough in the world to make that much of a difference in price all the time.
SPEAKER_00Yeah. Okay, let's go to China. U.S. exporters sold more soybeans to China. USDE reported a flash sale of 132,000 metric tons of U.S. soybeans to China for delivery during the 26-27 new crop marketing year. This is the first flash sale of soybeans to China since Monday of this week. China has now officially purchased, including recent flash sales, a total of 3.045 million metric tons of U.S. soybeans for new crop delivery. The White House, of course, has outlined a target of 25 million metric tons per year. So we're now at 12.2% of China's commitment. Uh retired North Dakota soybean farmer Scott Bessant was speaking yesterday. Uh, U.S. officials told Vice Premier Lee Hefang of China on Thursday that they expect Beijing to honor its commitments on rare earths and egg products. Does that make you feel any better? No, not necessarily.
SPEAKER_01What does make me feel better is that last winter they did honor their uh gentlemen's agreement, you want to call it whatever you want to uh call it. But you know, there's no doubt that uh there's a lot of skepticism here. Uh, but people do have to understand that uh this is a pretty uh big deal uh that we're talking. Last time around, whenever we put tariffs on China, it it hurt their economy. I mean, there's no way around it. I mean, you you talk, you you read anything and you can tell uh the Chinese don't really want that again. Now, they also know that uh in their mind, uh Trump's leg's been kind of cut out from under him just a little bit on just exactly what he can do from a tariff standpoint. And so that's gonna be interesting how that plays out. But I do believe they're gonna buy a lot of beans. If it's 25 million, who knows? But let's be honest, uh, our domestic consumption is so strong uh that we aren't as reliant as what we were two years ago, for instance. You know, I mean this thing just continues to grow, and that that's a place you need to get uh where you're using more of your beans domestically and you're not so reliant on getting someone's nose out of joint across the world. So uh it'll be interesting how it plays out, but I don't know about 25 million tons personally.
SPEAKER_00I do think they're gonna buy a lot of beans. Uh domestic crush has been fantastic. Our next story actually relates to that. One of the reasons that soybean prices are closer to 12 and not closer to say nine or 10 is because new crop soybean export sales are actually pretty good. We've got good relatively speaking. We got seven and a half million metric tons of beans on the books for um the next marketing year, and that's up 196% from the two and a half million we had on the books a year ago. So we're moving in the right direction. It's the best book of export sales uh for new crop at this time of year for since four years ago. So I mean it's it's not great, but it's a hell of a lot better than it was the last couple of years.
SPEAKER_01No, for for sure. I mean, and last year, of course, was just an absolute absence of China. You know, they they they didn't want to do anything. We were in uh uh we were in the standoff situation, and so they weren't buying anything. But you know, I go back to two years ago, Joe, and we were sitting here talking, they hadn't hardly bought anything at this time two years ago, uh, you know, and then they came in through the fall and bought copious amounts of soybeans every week. And so, you know, are they gonna get into that? Uh I mean, clearly Trump and G are supposed to meet. Uh, a lot of folks felt like they may buy like up to half of that commitment before that meeting. Uh, that's gonna be pretty tough to do at this point in the game. Uh, but by all means, I do expect them to continue. Uh, it's and I know people are gonna say, Oh, I can't believe you're trusting that this is gonna happen. Well, what I'm watching is what they're doing, and they're buying beans, you know. And so they took delivery of the beans they bought last winter. Uh, do I expect them to take delivery of these unless we get into uh even further escalation?
SPEAKER_00Yeah, I do. Here's new crop corn export sales, even better than last year. You got to remember last year is now the current marketing year. Current marketing, we've got the best book ever, and we're actually slightly ahead of where we were at this period at this point last year for new crop sales. It's it's very early, but it's it's a good start.
SPEAKER_01No, it's absolutely a good start. And if you look at where we're at as far as shipments are concerned, USDA is gonna have to take exports up again. You know, uh you're gonna you're gonna tighten down this balance sheet just a little bit. And I know a lot of people say, Oh, there's no way we're gonna export as much corn as what we did a year ago. Uh, don't be too certain on that. You know, if we export as much as what we're doing in this current marketing year, Joe, I mean, you know, you've looked at this, this balance sheet gets pretty thin because I want to remind people that you know USDA has cut demand from this marketing year to next marketing year by 325 million bushels. Why did they do that? Uh, they did that because they lowered production, you know, and they lowered production due to uh you know, obviously acres going down. Now, if Pete's right and acres go back up, what are you gonna see happen? They're gonna say, hey, maybe maybe this demand actually holds intact. And so uh, I don't think you have to worry about the balance sheet getting super uh burdensome uh because the the demand is there, and typically the only way that you can you know curb demand, if you will, is with some sort of a price reaction.
SPEAKER_00If you look at the you look at the new crop corn balance sheet, I mean, I don't know, they got a 1.79 billion bushel carry out penciled in from new crop US corn. Yeah, and it's it's very early, they're just guessing. But I mean, if if you take that yield number down and and today, I don't I don't do strong opinions on yields, but today I'm taking the under on 183. So, like that tightens it up in itself. I can't help but wonder if maybe some of the trade is is considering a higher acreage number, yeah. Given the prices, because I feel like they're looking at the balance sheet and all the unknowns and and the weather, like we price corn price could be higher.
SPEAKER_01Oh, yeah, I mean, absolutely. And in fairness, you know, uh price action wasn't too bad this spring. And so maybe you were able to encourage a few acres. We all know that input costs were were high, but how many guys and gals decided they weren't gonna put uh dry fertilizer on or backed way off of dry fertilizer? And I mean, I've heard a lot of stories like that, you know, you can get by with that for a year or two. You certainly don't want to get in the habit of it. Uh, but if you see price and you say, hey, I think I can make this thing work if I don't drop, you know, uh 150 bucks and in dry fertilizer. And so, you know, I it's a possibility. And again, I just point you back to last year. I mean, last year uh was it was a killer, you know, to come in here and say, hey, not only did your yield go up, but we found more acres, you know. And if they find more acres each year this year, I think the aggravation uh and and it's probably gonna get to a more fevered pitch than just an aggravation. People are gonna be serious. It's gonna be uh, yeah, it's gonna be unbelievable how mad people are gonna get if they take uh acreage from 95.3 to 98. In in this era, Joe, with the kind of technology that we have, we should be able to pinpoint that acreage number a heck of a lot quicker than what we've been doing. That that's my opinion. I don't want their job, though. I do not want their job. They got a tough job to do.
SPEAKER_00Let's go to ADM. ADM is planning to expand North American soybean crush capacity. The upgrades are happening in Frankfurt, Indiana, Deerfield, Missouri, Lincoln, Nebraska, and Spiritwood, North Dakota. Most of the work is going to finish by late 2028 or early 29. Together, these projects will add about 700,000 metric tons of crush capacity, which is ballpark, I think 25 million bushels. Um, that was the math in the article, anyways. Um, ADM says the upgrades build on facilities it already has so it can grow output while keeping cost and risk in check. Um, soybean crushers are printing money here. Cash crush margins are like four to six dollar positive per bushel across the corn belt. So this all makes sense, right? Oh, yeah, absolutely.
SPEAKER_01I mean, that's one thing that I've said, Joe, is uh, you know, the last couple of years you've seen this, but you know, guys have backed off on crushing heading into harvest whenever crush margins weren't as good. Uh this year, they're you know, yes, we've taken a little bit of hit on margins. Soybean oils kind of got worked over a little bit this is this week as well, but margins are still strong, and I don't see anybody backing off a crush. And whenever you see uh, you know, three to five plus dollars uh crush margins, uh everyone's trying to figure out how do we crush more beans. You know, if I if I'm a if I'm an originator, you know, and I and I and I run too thin and would happen to run out of soybeans, I better be looking for a new job whenever you're printing these kind of profit margins.
SPEAKER_00Yep, absolutely. And this trend, we've I've had this chart on here a million times, but this trend is going to continue. More crush, less exports as it relates to U.S. soybeans. Uh, one more today, Matt. Senate Republicans plan to add a measure to the farm bill that would permanently allow year-round E15 sales. They will mark up the bill next Thursday. Senate Ag Chair John Busman is expected to uh schedule that markup for August 6th, which is yeah, I think next Thursday. The verse this version is a smaller version of the bill the House already passed in May. It leans more on a plan from Senator uh Deb Fisher and Shelley Morcapito. Republicans spent weeks working out a plan that grows ethanol sales while easing concerns from the refining industry. They also settled a dispute over which Senate committee should handle the issue. Still, the Farm Bill faces a tough road to get 60 votes, and Senate Democrats wanted to delay new cost-sharing rules for SNAP benefits. Um, I think it's gonna happen eventually. Trump's behind it. Um, it's just they got to push this thing over the goal line.
SPEAKER_01No, I think it's gonna happen too. And and as you said though, you know, it's it's allow, you know, allow for sales. It's not like it's a mandate that everyone's gonna sell E15. It's gonna be allowed, and and I I certainly think it's gonna ramp up uh usage. Uh is it going to be a deal where we see the kind of margins and the kind of usage increase that we're seeing over on the soybean side with uh renewable? Not necessarily, but it it it's a lifeline for you know a very mature industry, if you will. So yeah, I think I'm I'm with you. I think E15 is gonna happen. It's just a matter of when. Guys, everybody have a wonderful weekend.
SPEAKER_00Matt, thanks for joining us uh back on Monday.