Latest / Professional Ag Marketing Podcast / Is $6 corn back on the table?

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Is $6 corn back on the table? · Professional Ag Marketing Podcast

• 0:03
  SPEAKER_01: You're locked in to the Grain Market Talk Podcast.
• 0:06
  SPEAKER_01: Fast updates, market movers, and the grain news you need right now.
• 0:12
  SPEAKER_01: Trading commodity futures and options involves substantial risk of loss and is not suitable for all investors.
• 0:21
  SPEAKER_02: Well, hello everybody, and welcome to the Grain Market Talk Podcast.
• 0:25
  SPEAKER_02: Uh, this is Lucas Peters filling in for Mike Minor again on the uh on the podcast this week.
• 0:32
  SPEAKER_02: Uh and it's August 28th.
• 0:34
  SPEAKER_02: Uh, and in the professional egg marketing studios today, I have my man Jaden.
• 0:39
  SPEAKER_02: How's Log?
• 0:40
  SPEAKER_02: Uh Jaden, how are we doing today?
• 0:42
  SPEAKER_00: We're doing good, Lucas.
• 0:43
  SPEAKER_00: Exciting week in the grain markets, a lot to talk about.
• 0:46
  SPEAKER_02: Well, that is very true.
• 0:48
  SPEAKER_02: Uh compared to some of the other markets we work in.
• 0:50
  SPEAKER_02: This is finally an exciting one.
• 0:53
  SPEAKER_02: Um, you know, as long as you are a grain farmer, I guess.
• 0:56
  SPEAKER_02: If you're uh trying to buy it, it's not so exciting.
• 0:58
  SPEAKER_02: So we're gonna take the spin from the uh grain uh guys because Jaden and I are both grain guys uh uh growing some crops on some corn and beans.
• 1:07
  SPEAKER_02: So let's start right uh right off the bat.
• 1:10
  SPEAKER_02: Uh we were talked last week how you know we had rallied 25 cents on corn and 50 cents on soybeans, and we kept on going uh here this week.
• 1:20
  SPEAKER_02: Uh when I look at the numbers, Jaden, I think we're up like 76 cents on December corn and a little over a buck on beans um for the new crop uh that we got in the field there.
• 1:31
  SPEAKER_02: Um just kind of really exciting price action.
• 1:35
  SPEAKER_02: Uh first take of the week on corn and bean markets is what, Jaden?
• 1:40
  SPEAKER_00: Yeah, Lucas.
• 1:40
  SPEAKER_00: I would say to start off the week, the you know, the kind of price action we had there.
• 1:44
  SPEAKER_00: So started off with a gap open on Sunday night after ProFarmer came out with their numbers there at a 173.7 bushels below the USDA.
• 1:53
  SPEAKER_00: Then we had a little higher yield on the beans at 53.3, um up from USD at 52.7.
• 1:58
  SPEAKER_00: So saw some pressure on the beans Sunday night and uh gap open higher on the corn, and we just kind of followed through through the week here, just continue to move higher on corn and soy.
• 2:08
  SPEAKER_00: And you know, soy kind of fought through that weakness as we as we led through the week there.
• 2:12
  SPEAKER_02: You know, so I know we have talked about this and we've talked about it in the office, but it's one thing to have a rally on corn and beans.
• 2:20
  SPEAKER_02: We've all seen that.
• 2:21
  SPEAKER_02: To rally the last half of August is is a little bit unheard of.
• 2:26
  SPEAKER_02: Uh, you know, when I look at um some of the crop insurance charts uh of when the highest price is set during the year on corn, I guess comes to the top of my head.
• 2:36
  SPEAKER_02: August isn't one of those months when corn sets its high price, and maybe it won't be this year either.
• 2:42
  SPEAKER_02: Uh, but the potential is there after this rally.
• 2:45
  SPEAKER_02: Um so like is this strictly a weather market that we're in?
• 2:51
  SPEAKER_02: The reason that we're rallying this thing last half of August, we had ProFarmer come out.
• 2:57
  SPEAKER_02: Um, is this only weather related, Jaden, or what's going on?
• 3:01
  SPEAKER_00: Well, Lucas, um, you know, I think it took weather to really, you know, ignite the funds and you know, give them confidence to buy up this market.
• 3:09
  SPEAKER_00: I think the funds were, you know, wanting to really get involved in these grain markets, but I think the pro farmer helped spark that rally and confirm the funds' belief in um kind of having uh not enough corner round in this world.
• 3:21
  SPEAKER_00: So if Cade pulls up that D's 26 to 27 spread here, I think this tells a story perfectly.
• 3:27
  SPEAKER_00: So if if it really was just the supply problem, I really think D's 26 would just rally and D's 27 would pretty stay pretty stagnant.
• 3:36
  SPEAKER_00: But actually, if you kind of look at this spread, um D'26 is only a nine cent premium to D's 27 by 9 cents.
• 3:43
  SPEAKER_00: And if if it really was just a supply rally, I mean that that that spread might be 50 cents or a dollar or something like that.
• 3:51
  SPEAKER_00: So I think the long-term outlook in these grains is pretty bullish, good demand.
• 3:56
  SPEAKER_00: We got um, you know, a short crop in the EU, um, maybe some type of fertilizer shortage or just a high cost of fertilizer with the war um overseas there, and also just the Ukraine-Russia situation there, bottlenecking um of some export grain flow there as well.
• 4:14
  SPEAKER_02: Yeah, so so we'll probably jump around a little bit, but I I agree on the observation of the 2027, right?
• 4:22
  SPEAKER_02: Like this is a typical weather market, you'll rally the old crop up or the or the new crop, uh, and the the deferred the next year's crop won't go with it.
• 4:30
  SPEAKER_02: And this has gone almost as close to with it cent for cent as as you can get, even though I know there's a little spread.
• 4:38
  SPEAKER_02: Um, you mentioned on fertilizer prices.
• 4:41
  SPEAKER_02: So, like that's interesting because we talked about this uh at the beginning of the Iran War, how a lot of infrastructure was was ruined.
• 4:50
  SPEAKER_02: Um some of that infrastructure uh is the area of the world where most of the urea is produced, and then of course it has to get exported out of there through the Strait of Rmuz, which is still isn't super stable, right?
• 5:04
  SPEAKER_02: Like, let's not kid ourselves.
• 5:06
  SPEAKER_02: Um but I know that's a worry, but right now in the fertilizer markets, like things are are higher, but it's not crazy high compared to last year yet, right?
• 5:17
  SPEAKER_02: Like uh just checking you know a few prices uh from different retailers, you know, our our our potassium is actually lower uh than last year, phosphorus is a little higher, nitr nitrogen is slightly higher, but it's not like double like it was in April, uh, or I should maybe March April time frame.
• 5:38
  SPEAKER_02: So interesting on that because if this would continue, if this price action rally continues or even just levels off here, and fertilizer would stay relatively flat, you start looking at these acres, Jaden.
• 5:51
  SPEAKER_02: Uh, I mean, next year profitability on corn, if prices would level off here, would be tremendous.
• 5:58
  SPEAKER_02: Uh, and the American farmer likes planting corn, right?
• 6:00
  SPEAKER_02: So uh that that would be something that I I agree with you on the fertilizer.
• 6:05
  SPEAKER_02: It's just I'm not exactly sure if if the story is matching what's going on in the countryside, or maybe one's just ahead of the other.
• 6:12
  SPEAKER_02: Um, and so that's probably a little bit more opinion than anything there.
• 6:16
  SPEAKER_02: Uh, I did want to hit a little bit though on uh on some of these price action movements.
• 6:21
  SPEAKER_02: Like we we went over five dollars here for the first time in 18 months for new crop corn, right?
• 6:26
  SPEAKER_02: Where it seems like we finally we had this range that we had been in since 2023, really, um, and and got kind of broke out of that.
• 6:37
  SPEAKER_02: Uh what significance or what uh what does that do?
• 6:41
  SPEAKER_00: Yeah, if Cade pulls up that long-term chart there, so like like you said, Lucas, kind of Monday or Sunday night, I should say, we kind of broke through that.
• 6:49
  SPEAKER_00: So that blue line there, like you said, since 23, we've just been banging our head up in the upper 490s, um, lower fives there, and just haven't been able to break through the last two years, just have had pretty good weather, you know, um, you know, just enough supplies.
• 7:03
  SPEAKER_00: But now we're kind of breaking into that 2020 through 2022 levels, you know, that kind of upper echelon of prices.
• 7:11
  SPEAKER_00: And if you kind of look over history and we break through that, you know, level, you kind of go straight to six bucks.
• 7:16
  SPEAKER_00: So there's not a lot of resistance up here.
• 7:18
  SPEAKER_00: And with the farmer, you know, kind of selling lower prices the last few years, I think the farmer's been more aggressive this year.
• 7:25
  SPEAKER_00: So I would argue there's you know less farmer selling um around right now to stop this market.
• 7:31
  SPEAKER_00: And I would say, you know, we could maybe have more of a stair step up now from from these prices.
• 7:36
  SPEAKER_02: Yeah, you bring up a good point, and especially locally, um, you know, some of this got pretty aggressive when we had those moves uh higher earlier and and kind of this one as we started going up.
• 7:47
  SPEAKER_02: And also we're in an area with uh a shorter crop than normal, and so guys get a little nervous and and pull back on that.
• 7:53
  SPEAKER_02: Um and so kind of seguing off uh of what you you just talked about uh of the potential of where this goes, what uh what are some of the next targets or what would cause uh corn to to shoot up over that six dollar level?
• 8:09
  SPEAKER_02: Or I mean soybeans were over 13 now.
• 8:12
  SPEAKER_02: Um, you know, what what are the next things we're looking at, or what what does the bull need to eat next week to keep this thing going?
• 8:20
  SPEAKER_00: Yeah, looks I don't think there's a lot of near-term news, but after Labor Day there, September 11th, we do have a September Wise report, so that'll be the first time the USDA does come out with um a yield using actual objective yield survey, so they actually go in the field, pull some samples, and kind of actually look at what we're seeing here.
• 8:38
  SPEAKER_00: But if you kind of look at our balance sheet there on the left, uh last wise report 1.6 carry out 10% stocks to use.
• 8:46
  SPEAKER_00: So I kind of ran the numbers.
• 8:47
  SPEAKER_00: Historically, you know, the US are the Pro Farmer 2 or 173, they're about four below the USDA's final number on average.
• 8:55
  SPEAKER_00: So if you add four to that, 177.5.
• 8:58
  SPEAKER_00: So if you don't mess with demand at all, I mean you're below a 10% stocks to use, and historically, that can mean$550 to$6 corn.
• 9:06
  SPEAKER_00: So I think if the USDA came out, um they probably will drop demand a little bit.
• 9:10
  SPEAKER_00: So on new crop exports, we are running behind pace compared to last year.
• 9:14
  SPEAKER_00: So that number probably does have to come down.
• 9:16
  SPEAKER_00: So maybe we lose, you know, three bushels on corn, but we get a bushel back on export.
• 9:21
  SPEAKER_00: So nonetheless, I think we're gonna be below that 10% stocks to use.
• 9:25
  SPEAKER_00: And also to note, old crop exports need to come up too.
• 9:28
  SPEAKER_00: So that beginning stocks number should come down as well.
• 9:31
  SPEAKER_00: So overall, I think if the USD just comes below a 10% stocks to use, I think that's gonna confirm the bullishness, uh, the tight supplies in the U.S.
• 9:40
  SPEAKER_00: here, and I think we can keep going in this corn market.
• 9:43
  SPEAKER_02: Yep, those are some excellent points.
• 9:44
  SPEAKER_02: As this thing goes higher, we are gonna have to start rationing demand a little bit at some point, but we just probably haven't hit that uh point yet.
• 9:52
  SPEAKER_02: Um, I agree on the the WASD, right?
• 9:54
  SPEAKER_02: Like that's gonna be a pretty important piece.
• 9:57
  SPEAKER_02: I know even in our office, we're kind of looking at that's the next next big news piece that comes out uh to kind of maybe solidify the direction uh of this this rally.
• 10:08
  SPEAKER_02: Um, you know, something that happened last year on a lot of these WAS days, I know, and uh you mentioned on how we'll get uh a little more accurate yield from the USDA uh on this WASDA.
• 10:18
  SPEAKER_02: We'll also get uh the potentials there for an acre adjustment.
• 10:22
  SPEAKER_02: I mean, that happened a lot last year, and it happened on the last WASD uh that came out here in August.
• 10:28
  SPEAKER_02: Um, they'll be they'll have a lot of the FSA and crop insurance data in the system in their hands.
• 10:34
  SPEAKER_02: So we'll see if there is much of a move uh on that side coming up here.
• 10:38
  SPEAKER_02: But we still got you know a week and a half to worry about that.
• 10:41
  SPEAKER_02: We got all next week uh that we can just let this thing run without any uh any hopefully any crazy news that pops up.
• 10:49
  SPEAKER_02: Um the uh I did want to mention a little bit on since uh the I am the the crop insurance guy in the office, Jaden.
• 10:57
  SPEAKER_02: So we mentioned 2027, the the prices on the corn and beans have moved higher here on the 27 crop as well as the 26 crop.
• 11:06
  SPEAKER_02: We talked about it a little bit last week about this MCO coverage, the margin coverage option.
• 11:11
  SPEAKER_02: It is a a 5% band from 90 to 95 percent county-based yields, but it is setting its price uh right now.
• 11:21
  SPEAKER_02: And so uh it's averaging the D 27 and NOVE 27 uh the markets uh from August 15th to September 15th.
• 11:30
  SPEAKER_02: And with the rally, those prices look pretty attractive, right?
• 11:33
  SPEAKER_02: We got corn uh after today, it's probably in the 516 range.
• 11:37
  SPEAKER_02: Uh beans are gonna be a little over 12 bucks uh for your crop insurance coverage.
• 11:42
  SPEAKER_02: That's not a bad place to get started for 2027.
• 11:46
  SPEAKER_02: Um, a couple of uh, and it's a margin product, so you'd have a little protection if the fertilizer prices do start creeping up, as we uh we know fertilizer companies tend to increase the price uh when the grain crops are going up as well.
• 12:01
  SPEAKER_02: Um, so there'd be a little bit of protection on that.
• 12:04
  SPEAKER_02: The the counterpoint to all those would be uh boy, it's really early to start looking out that far.
• 12:10
  SPEAKER_02: Um, it's also only 5% coverage.
• 12:13
  SPEAKER_02: If you are really concerned or really want to make a move out into that new crop protect price, which probably isn't a bad idea after this rally, uh, it might be better off going to the board and and putting some options on or doing something like that.
• 12:28
  SPEAKER_02: Or of course, you can do both.
• 12:30
  SPEAKER_02: And if you have questions on that, and as we get that price set, we'll be sure to talk about it more uh on the podcast coming up in the next few weeks.
• 12:38
  SPEAKER_02: So anything uh you want to close out the week on, Jaden?
• 12:40
  SPEAKER_00: Yeah, I will add on the funds.
• 12:42
  SPEAKER_00: You know, this is really important to look at here as we've moved higher in these grain markets.
• 12:47
  SPEAKER_00: You know, money flow is a huge thing.
• 12:48
  SPEAKER_00: So the commitment trader just came out as we're making this podcast.
• 12:52
  SPEAKER_00: So looking at this, corn managed money as of Tuesday, August 25th,$376,000 long on futures and option positions record is a$429.
• 13:02
  SPEAKER_00: So we have you know rallied a little more since Tuesday.
• 13:05
  SPEAKER_00: So they've probably added, you know,$25,000,$30,000 more just an estimate around that$400,000 level.
• 13:10
  SPEAKER_00: So the say the funds basically long right now.
• 13:13
  SPEAKER_00: So normally when that when that happened, it it is a pretty good selling opportunity as when they liquidate.
• 13:19
  SPEAKER_00: Um, when they think they push this thing far enough, we can really sell off pretty quick.
• 13:24
  SPEAKER_00: So uh keep that in mind as well as you're managing risk for your real crop operation.
• 13:28
  SPEAKER_02: Yeah, that is an excellent point.
• 13:29
  SPEAKER_02: Of when the funds are moving on your side, it's it's really fun, right?
• 13:34
  SPEAKER_02: Because the it's taking leaps and bounds higher, and you're like, man, this is really good.
• 13:38
  SPEAKER_02: But when it's going the other way, you can scratch your head of why is this thing going down when we have a a drought or or uh all those other things, and it can be frustrating.
• 13:48
  SPEAKER_02: So having a plan in place uh today can help whenever the funds decide to turn around, which it might not be for a while.
• 13:55
  SPEAKER_02: I don't want to say it's coming, but when that point happens, uh makes it a little easier on you.
• 14:00
  SPEAKER_02: So uh Jaden, thanks for uh joining us in the in the on the podcast here today.
• 14:05
  SPEAKER_02: I do want to shout out uh congratulations to Seth and Emily, uh my nephew Seth.
• 14:11
  SPEAKER_02: Uh they're getting married this weekend up in Brookings, South Dakota, and I know they're avid podcast listeners, so I will see you tomorrow.
• 14:18
  SPEAKER_02: And congratulations.
• 14:19
  SPEAKER_02: Jaden, thank you, and thanks for listening to the uh professional aid marking podcast.