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Grains: Margin Protection, China, and Yield Reports · Professional Ag Marketing Podcast

• 0:01
  SPEAKER_01: Welcome to the Professional Ag Marketing Podcast.
• 0:04
  SPEAKER_01: If you want a deep dive into the ag markets and risk management strategies, your search is over.
• 0:10
  SPEAKER_01: Come here after every Friday to get your weekly commodity recap.
• 0:14
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_00: Well, welcome everybody.
• 0:23
  SPEAKER_00: It uh today is September 19th, and this is Lucas Peters filling in for Mike Minor on a Friday afternoon.
• 0:30
  SPEAKER_00: And I also got Jaden Houslog in the uh studio with me today.
• 0:34
  SPEAKER_00: How are we doing, Jaden?
• 0:35
  SPEAKER_02: I'm doing good pretty good, Lucas.
• 0:37
  SPEAKER_02: How about yourself?
• 0:38
  SPEAKER_00: Well, it's good.
• 0:38
  SPEAKER_00: It's good that uh we've reached a Friday on a fairly low-key week in the markets, and uh even harvest.
• 0:46
  SPEAKER_00: The last few days have been kind of dreary and raining a little bit again today.
• 0:50
  SPEAKER_00: But uh I know we did have a few customers get out and start uh harvest a little bit here, beginning of the week, midweek.
• 0:59
  SPEAKER_00: Um, Jaden, as you're talking to some of your guys, what are you hearing?
• 1:02
  SPEAKER_00: Well, let's start on the soybean side of the side of things.
• 1:05
  SPEAKER_00: What are soybean yield results or or field notes coming from uh some of your guys?
• 1:10
  SPEAKER_02: Yeah, Lucas, in the southwest Minnesota areas um around Pipestone, I was talking to some guys and they're very happy with the results so far.
• 1:19
  SPEAKER_02: They they got in the on the field Tuesday before some rain we had later in the week.
• 1:25
  SPEAKER_02: But um last year, I mean this these fields were on some lighter ground here.
• 1:29
  SPEAKER_02: I mean, obviously last year we we didn't receive the rain like we did this year in this part of the country, but this year, I mean they're 20 to 25 bushels above last year.
• 1:39
  SPEAKER_02: So it's pretty outstanding yield so far, but it's pretty early to say.
• 1:43
  SPEAKER_02: And I I think that's the story to tell.
• 1:45
  SPEAKER_02: The lighter ground will probably outperform um compared to normal this year.
• 1:51
  SPEAKER_00: Yeah, I think you're definitely right.
• 1:53
  SPEAKER_00: Like the some of those early swaving results have been uh in our area, local area, it's have been really good and definitely uh showing the timely rainfalls and the amount of rainfall we've had.
• 2:06
  SPEAKER_00: And I know talking to some guys is as they've gotten going on their fields, they're kind of getting started on the normal fields they start on, right?
• 2:12
  SPEAKER_00: Maybe they have a few more lighter spots, maybe they're close to the farm yard and they get planted a little early.
• 2:18
  SPEAKER_00: But a lot of times those end up being some of the oh, maybe the lower end yields for the farm usually.
• 2:23
  SPEAKER_00: Uh, and if that's the case this year, guys are gonna be really, really happy.
• 2:27
  SPEAKER_00: Uh on the corn side, I know a few uh customers dove into a little bit of corn this week.
• 2:32
  SPEAKER_00: Um, kind of surprised locally at the moisture, you know, running in the low 20s already.
• 2:38
  SPEAKER_00: I know some earliage got kicked off uh this week, and we still got guys wrapping up silage and uh silage appraisals coming in.
• 2:46
  SPEAKER_00: Similar story on the corn side, I guess, uh local story from what we talked about last week on the podcast of you know, really good yields out there locally anyway, quite a bit better than last year.
• 2:59
  SPEAKER_00: Uh as we get into kind of out of our local geography into other areas, as harvest has started, you know, talking to a few guys in southern Iowa, eastern Iowa, western Illinois, um, a little bit maybe lower than expected, uh definitely lower than last year.
• 3:16
  SPEAKER_00: Um I guess we probably saw that coming uh a little bit with the amount of disease and some of the reports we got coming in here late August.
• 3:26
  SPEAKER_00: We also have to remember some of those areas had record yields last year, too, right?
• 3:30
  SPEAKER_00: So uh 20-30 bushel less than last year is probably still a pretty average crop, but um it'll be something to watch as harvest progresses, uh how how well the yields keep up kind of in the west and north here, and how much they're affected by the disease and and things over east.
• 3:47
  SPEAKER_00: So uh definitely expect you know, kind of every week here now, well, probably from now forward, of depending on the weather, we'll get some uh pretty good harvest progress in and and give you a report of what we're hearing.
• 4:00
  SPEAKER_00: But uh let's turn our attention more to the markets and trade activity, Jaden.
• 4:04
  SPEAKER_00: I you know, on the grain side, not anything real exciting this week.
• 4:09
  SPEAKER_00: Um, but uh today I know we had on the Twitter and a few other messages we saw Trump and and uh China were talking a little bit, and uh I don't think we have anything set in stone, but what can you give us a little breakdown on the trade talks that were going on today?
• 4:24
  SPEAKER_02: Yeah, so Trump and uh President G met today um over the phone there, and this is their first talk since June.
• 4:32
  SPEAKER_02: And uh a lot of the trade was maybe hoping for a Chinese trade deal as we're getting late in the year, and um about all of October's needs for China are kind of booked already.
• 4:44
  SPEAKER_02: So uh that window is is narrowing for us to be able to get in there and supply them with some soybeans.
• 4:50
  SPEAKER_02: As last year, I mean, 40% of our exports went to China.
• 4:53
  SPEAKER_02: So they're they're a they're a big demand driver on the soybean balance sheet side of things, so it's very key for us to be able to make a deal with them.
• 5:02
  SPEAKER_02: And we kind of saw a vault today today on the soybean side of things.
• 5:06
  SPEAKER_02: I mean, um about when uh Trump's truth social post came out, we kind of we kind of sold off there on the soybean, and we went down to 1025 there.
• 5:16
  SPEAKER_02: So hopefully we can hold that support, but I think everyone's out there is kind of seeing we may maybe we're we're not gonna get a deal done, and people are starting to get worried and are are af are not afraid to sell this thing.
• 5:28
  SPEAKER_00: Yeah, that's one of those things of every day that goes by that we don't get a deal done that's puts more and more pressure of really trying to get something done.
• 5:37
  SPEAKER_00: Because as you said, Jaden, 40% of our exports, you know, like 22-25% of our total production ends up in China, or it did last year.
• 5:46
  SPEAKER_00: Uh I was reading something earlier this week.
• 5:48
  SPEAKER_00: It's like roughly$13 billion of economic uh sales of soybeans to China.
• 5:53
  SPEAKER_00: And right now, today for for this year's crop, it's zero.
• 5:57
  SPEAKER_00: And we got nowhere to go but up, I guess, is the positive news.
• 6:01
  SPEAKER_00: But uh, we need to get something done because as you said, there's a lot of sales, but a majority of those sales happen here kind of this time of year historically.
• 6:09
  SPEAKER_00: So uh really uh that'll be key going forward is watching that and um some of these future meetings on progress that come out.
• 6:18
  SPEAKER_00: Of course, all it takes is one big commitment, and they don't have to drag them in, they can make one big swath and get a lot of soybeans bought.
• 6:25
  SPEAKER_00: But uh the market, I I agree with you, Jaden.
• 6:28
  SPEAKER_00: It kind of responded of man, is maybe there actually isn't gonna be something done.
• 6:32
  SPEAKER_00: So uh definitely something something to watch going forward.
• 6:36
  SPEAKER_00: You know, another item this week, uh we got a little bit of news coming out.
• 6:41
  SPEAKER_00: Uh Secretary Rollins was talking.
• 6:44
  SPEAKER_00: I I guess this isn't a good sign when you look just get done talking about a trade deal, but maybe more economic aid coming to farmers in light of tariffs and trade deals.
• 6:54
  SPEAKER_00: And uh I know that's not what we want as as grain farmers.
• 6:57
  SPEAKER_00: We'd rather have a deal done and and do the markets, but uh it does seem like the administration does have some support there if a deal doesn't get done, markets uh keep going down.
• 7:07
  SPEAKER_00: But of course, one of the other things we we look to do to protect ourselves uh against uh lower markets and lower yields is we buy crop insurance, right, Jaden?
• 7:18
  SPEAKER_00: Right, Jaden?
• 7:19
  SPEAKER_00: We buy crop insurance.
• 7:21
  SPEAKER_00: Okay, so is G Jaden still with me.
• 7:24
  SPEAKER_00: The uh and so we you know this news has been out a little while.
• 7:27
  SPEAKER_00: I don't think we've talked about it on a podcast, but in the one big beautiful bill uh act that was uh signed into law there July 4th, uh there were a lot of positive changes to the Safety Net program, specifically crop insurance and the ARC PLC program.
• 7:44
  SPEAKER_00: Lots of other changes.
• 7:46
  SPEAKER_00: I mean, that's a a giant bill, and there's tax things in there, and you'll be hearing about uh uh all the different things here over the next few months as you kind of wrap up the year and get into tax planning.
• 7:57
  SPEAKER_00: But I want to talk just a little bit specifically around crop insurance and ARC PLC and some of those changes out of that uh one big beautiful bill.
• 8:07
  SPEAKER_00: So one of the awesome things that it did for farmers is it increased the subsidy uh or the government support uh on SEO coverage, on ECO coverage, and MCO coverage, which is a new coverage we'll talk about in a little bit, it increased the government support on those to 80%.
• 8:29
  SPEAKER_00: So that's up from 65% uh premium support in uh last year and up from 44% the year before that.
• 8:39
  SPEAKER_00: So almost doubling the amount of premium support on those top end coverages.
• 8:44
  SPEAKER_00: Remember, like ECO coverage is 95%, is where it starts triggering claims.
• 8:49
  SPEAKER_00: Um 80% premium support.
• 8:52
  SPEAKER_00: You know, what that's gonna do is you know, if markets stay pretty flat from now until February on like your ECO coverage, that'll be 40-50% cheaper per acre this year as it was last year for the same coverage.
• 9:06
  SPEAKER_00: I mean, that's really good.
• 9:08
  SPEAKER_00: Like it you don't you don't see that kind of support for a crop insurance product very often.
• 9:13
  SPEAKER_00: So that's awesome news.
• 9:15
  SPEAKER_00: Um, the other thing it did is it changed some of the reference prices uh that plc uses, which is positive, um, increased the uh trigger level for Arc County, you know, that was an 86% in in prior years and bumped that up to 90%.
• 9:32
  SPEAKER_00: Also increased the limit from 10% to 12% to the benchmark revenue.
• 9:36
  SPEAKER_00: But uh, I guess positive changes on ARC, positive changes on PLC, positive changes on crop insurance.
• 9:43
  SPEAKER_00: Um one of the other things on you know, in prior years we've talked about the SCO coverage, but of course that's not hasn't been a huge deal because you couldn't buy SEO crop insurance if I signed up for ARC County, which we recommend that five guys did last year.
• 10:01
  SPEAKER_00: Well, going forward, you're gonna be able to both sign up for ARC County and purchase SEO.
• 10:06
  SPEAKER_00: So with a combination of that, with SEO getting bumped up to 80%, I think we'll look at a lot of farmers using that protection uh here going forward, too.
• 10:14
  SPEAKER_00: So uh really positive stuff there.
• 10:16
  SPEAKER_00: Uh something to keep in mind as you start thinking about that 2026 crop and how we're gonna protect it.
• 10:22
  SPEAKER_00: Um, you know, that knowing that uh that extra coverage is there or extra premium support is there from the crop insurance products sure will help you out on designing those risk management plans and grain marketing plans.
• 10:36
  SPEAKER_00: But let's talk a little bit uh every year that we've been here this September time period, we talk about margin uh coverage for crop insurance.
• 10:45
  SPEAKER_00: And so I mentioned MCO coverage, that's a new one this year.
• 10:49
  SPEAKER_00: And so we have the traditional margin protection product that's been available since 2018.
• 10:55
  SPEAKER_00: You know, this is the product that takes uh corn and soybeans, and we set a price here uh from mid-August to mid-September, use county yields, and then we subtract off cost, uh fertilizer cost, diesel fuel, interest uh charges as well, and we ensure the margin between those two.
• 11:13
  SPEAKER_00: Um kind of picked up popularity a couple years ago and uh and still maybe lost a little bit of steam last year, but they also created this MCO coverage for this for starting in 2026.
• 11:26
  SPEAKER_00: And MCO is essentially margin ECO.
• 11:30
  SPEAKER_00: Okay, so it's uh a margin coverage option.
• 11:33
  SPEAKER_00: So they turned it into like ECO, so it's a band.
• 11:36
  SPEAKER_00: It's from starts at 95%, but it only covers to 86%.
• 11:41
  SPEAKER_00: But again, you're ensuring the margin, not just the revenue.
• 11:45
  SPEAKER_00: So we have some expenses that we set the price on, and we set the price for corn and beans on the revenue side uh as well.
• 11:52
  SPEAKER_00: So how does that look this year?
• 11:53
  SPEAKER_00: Well, we got done setting the prices earlier this week.
• 11:56
  SPEAKER_00: Our margin price, MCO price for corn uh for 26 is 456, and for soybeans is 1073.
• 12:05
  SPEAKER_00: Uh surprisingly enough, that's higher than last year.
• 12:08
  SPEAKER_00: So last year, when we set the price this time of year, we were at 440 corn and 1042 soybeans.
• 12:14
  SPEAKER_00: So um amazing to think of all the trade and tariff uh worries and going on, and plus the amount of acres and the yield projections.
• 12:24
  SPEAKER_00: Our actual prices for new crop this time of year are higher than they were uh a year ago.
• 12:29
  SPEAKER_00: And so that's maybe one reason to look at buying margin protection or locking some coverage in, is we do have a slightly higher price.
• 12:37
  SPEAKER_00: Um, but the other thing going kind of against our margin is our expenses, and our expenses are up quite a bit as well.
• 12:44
  SPEAKER_00: Urea is at 406, uh DAP is at 686 for uh the margin coverage product, those are each up over$100 a ton from last year.
• 12:56
  SPEAKER_00: And so I guess when I look at purchase the purchase decision for margin coverage, which needs to be done by September 30th, first off on the full blown margin protection coverage, uh that subsidy, that that premium support did not get increased on that product, so that's still at 44%.
• 13:17
  SPEAKER_00: Uh that just kind of prices itself out of the market, in my opinion.
• 13:20
  SPEAKER_00: I can get 95% county coverage a little more cost effective with ECO or MCO.
• 13:26
  SPEAKER_00: So I'm not really looking at margin coverage.
• 13:29
  SPEAKER_00: And MCO is 80% subsidized, it's got a band of coverage.
• 13:33
  SPEAKER_00: Um, but right now we're not protecting a lot of margin, so that's not giving me a lot of coverage there, but it would be a way to get started a little bit of a start on 2026 crop, uh protecting some of that price using 456 corn and 1073 soybeans.
• 13:50
  SPEAKER_00: Personally, I think we could probably do uh we could talk to you, Jaden, or Mike in the office or any of the guys, and maybe develop some strategies with some options to protect price for 26 that will be a little more cost effective and maintain a little more flexibility.
• 14:04
  SPEAKER_00: Uh, but uh I those are a couple of ideas there.
• 14:08
  SPEAKER_00: I'm not a huge fan of the margin coverage this year, but it is out there and it does uh need to be purchased by September 30th uh if you're interested.
• 14:18
  SPEAKER_00: So uh yeah, those are a few things on the crop insurance uh changes for this coming year.
• 14:23
  SPEAKER_00: Uh if you do have any questions on that or need to run quotes or want to talk about it, we'd be happy to entertain those.
• 14:28
  SPEAKER_00: Sure, contact our office.
• 14:30
  SPEAKER_00: Um, Jaden, anything you're looking forward to here uh coming up in the next week?
• 14:36
  SPEAKER_02: Yeah, Lucas.
• 14:37
  SPEAKER_02: Um what I'm kind of looking forward to in this next week is uh December corn.
• 14:41
  SPEAKER_02: Just look at that 430 price level.
• 14:43
  SPEAKER_02: There's gonna be a lot of harvest selling pressure around that area.
• 14:46
  SPEAKER_02: As a lot of guys from 430 to 440, they're locking in$4 cash.
• 14:50
  SPEAKER_02: So watch for resistance around that area.
• 14:53
  SPEAKER_02: And on the soybean side of things, just watch for yield reports and early yield reports and see what guys are getting themselves into in the field.
• 15:01
  SPEAKER_00: So Yep, that sounds good.
• 15:03
  SPEAKER_00: If everybody hits the field uh harder this coming week in the future weeks, uh please be safe.
• 15:09
  SPEAKER_00: And if you have any questions, sure call our office or uh let us know how we can help.
• 15:14
  SPEAKER_00: Have a good week.
• 15:16
  SPEAKER_01: Please reach out to us at professional eggmarketing.com.
• 15:20
  SPEAKER_01: Check out our other podcast as well, Professional Egg Marketing, that's released every Friday.
• 15:25
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 15:31
  SPEAKER_01: See ya next time.