In The Grain Feed, guest host Phil Plourd is joined by a rotating cast of analysts to discuss what dairy and livestock producers can be doing to manage their risk.
Questions or comments? Topics you’d like to see discussed? Contact us at Insights@Ever.Ag or give us a call at (312) 492-4200.
00:00:00:21 – 00:00:09:11
VOICEOVER
Future trading involves risk and it’s not suitable for all investors. Content provided in the s is meant for educational purposes and is not a solicitation to buy or sell commodities through.
00:00:09:13 – 00:00:30:27
PHIL
Hello Feed Fanatics and Grain Geeks. Welcome to another edition of the grain feed brought to you by Air AG. Each week we bring you updates on the markets with unique perspectives from an amazing team of analysts with the intention of helping livestock feeders and dairy farmers manage risk. I’m Phil Plourde, filling in for Jim MATTHEWS, who is on assignment this week.
00:00:30:29 – 00:00:43:03
PHIL
That’s the bad news. The good news is that we have two exceptional panelists on board for the ride today. First, from deep in the heart of Texas, Jake Kingsley ever, director of feed procurement. Hey, Jake.
00:00:43:06 – 00:00:44:06
JAKE
Good morning, Phil.
00:00:44:07 – 00:00:59:00
PHIL
How are you? And I’m well. I’m well. And I’m really excited because secondly, from Lafayette, Indiana, where it’s actually drier than in Texas, we welcome Shelby Meyer’s ever ex grain market intelligence director. Hello, Shelby.
00:00:59:03 – 00:01:00:20
SHELBY
Hi, Bill. Good morning.
00:01:00:22 – 00:01:32:29
PHIL
Paige, let’s go ahead and timestamp this episode. It is about 8 a.m. Central Time on Thursday, June 22nd. Markets are kind of been going crazy, sharply higher yesterday, sharply lower this morning. But as of just a few minutes ago, we saw July corn trading at 665 per bushel. That’s up 7% over last week, but down overnight. Similarly, these corn, $6.18 per bushel, up $0.40 more than $0.40 from a week ago, but down overnight.
00:01:33:01 – 00:02:00:21
PHIL
Soybeans at 1489, up 4% in the week. And our old French soybean meal, $433 per tonne, up 10% from a week ago. Shelby, we are in full on weather market mayhem here and, you know, we’re in that mode where the forecast runs out over the course of the morning and people change their opinions and the precipitation percentages go up and down and we see lots of volatility.
00:02:00:23 – 00:02:10:17
PHIL
But generally the direction is higher here over the past week and I presume it’s 99.95%, about the fact that it hasn’t rained in a lot of key areas, right?
00:02:10:19 – 00:02:27:18
SHELBY
Yeah, I think so. Maybe maybe a little bit lower, maybe 98%. I think there’s a few people paying attention to some of the news that’s going on. I think the ironic part about grain markets right now is that there is a lot of news that could be influencing the overall balance sheet. But these markets still want a trade.
00:02:27:18 – 00:02:57:24
SHELBY
Whether and I would say buckle up again today because the drought monitor comes out later today on Thursday, and it’s not going to look much better from last week and will likely be showing more crop production areas under drought. And what that means for markets going forward is reacting to a reduction in supply that we expect. This is quite a time for key growing stages, for maturing stages on both corn and soybeans.
00:02:57:27 – 00:03:10:07
SHELBY
Less on soybeans. But we’ll get to that point and really seeing an opportunity for the weather to take shape on these stages and lower yield is what the market’s going to react to.
00:03:10:10 – 00:03:29:21
PHIL
So let’s talk about a couple of things, right, because when that drought monitor comes out, it’s going to show that Nebraska, strangely, and Kansas, oddly enough, are in much better shape than they were for a while. It’s rained over there on the western side of the corn belt, the far western side of the Corn Belt. Iowa did get a little bit of rain over the weekend.
00:03:29:21 – 00:03:43:16
PHIL
It wasn’t necessarily a healing rain, but rain is right. Parts of southern Indiana and Illinois got a little bit, but really northern Illinois, northern Indiana, Ohio, Michigan, Wisconsin- super, super dry, right?
00:03:43:18 – 00:04:08:14
SHELBY
Absolutely. And it’s really that heart. There’s a circle that you can kind of draw on the drought map. You can draw on multiple weather forecasts that the way that many of these storm systems have been trending through, they have literally circled around a portion of the of the U.S. that’s a key corn and soybean production areas and have just missed rains.
00:04:08:16 – 00:04:37:19
SHELBY
And it has a lot to do with the way the pressure systems are moving and and progressing as they move eastward. We also see NOAA declaring that El Nino has arrived a little bit sooner than they expected. So you do have some of those residual effects. But what that really means is that rain may come more in July, but the question will remain, did the damage that occurred in June really make up for those rains coming into July?
00:04:37:21 – 00:04:55:10
PHIL
It’s like, watching the radar over the weekend, it was like there’s a curtain up, like, you know, somewhere on the Wisconsin border. I mean, it was raining to the west of here. But Madison, we were just it just sort of in that circle, as you mentioned. I don’t know. I’m pretty sure you and I both enjoyed this week’s episode of From the Furrow with Britt O’Connell.
00:04:55:13 – 00:05:15:21
PHIL
We had Eric Snodgrass from Nutrien, Weather Guy, on and it is just a fascinating conversation. I encourage our viewers to go listen to that because all kinds of talk about medium term forces and how things have changed historically at times and where this could be going. Jake, how are these higher grain prices impacting the world of feed?
00:05:15:23 – 00:05:37:11
JAKE
Well, I mean, from the basis side, we remain stagnant. But with this run up in futures, maybe there’s a little encouragement to get just a splash of these guys that didn’t have anything sold. Maybe they get a little bit sold and maybe that brings basis a touch lower. But I don’t expect much in the way of big moves lower for the feed basis here.
00:05:37:24 – 00:06:17:06
JAKE
So I’m within patient on corn here for a while. We’re starting to feel like maybe now’s the time to dip in and get some of that October to March portion purchase. Like we had been talking with soybean meal and canola for a while, maybe get the basis set on some of that corn because if we do in fact see some severe damage to this crop and significant cuts to yield in the heart of the growing region, then there’s potential that we could see some of the product from the Plains states that really struggled last year and seem to be faring better than most this year start to move east,
00:06:17:06 – 00:06:35:16
JAKE
if we see some sort of a real export program hit. So starting to think about that, maybe dip in and get a little bit bought there. I think for the most part, numbers have been stagnant though. So if you can come in and get some protein basis set and then then try to manage the futures, we got a little time to work there.
00:06:35:17 – 00:07:04:21
JAKE
One other thing we’ve been looking at is we’d also been talking cotton seed and being patient there. We got some good rains of almost too much rain in certain parts of the Texas panhandle where a lot of cotton is produced and it sounds like a handful of acres will be put to prevent plant on that. And so now with futures having really jumped here over the last week, there’s not a whole lot of reason for cotton seed prices to drop much lower than they had been.
00:07:04:28 – 00:07:11:14
JAKE
So been encouraging folks to step in and get a chunk of that bought for this next crop year as well. And there’s a couple of things we’re thinking about.
00:07:11:19 – 00:07:13:22
PHIL
Starting to think about playing a little bit of defense, huh.
00:07:13:22 – 00:07:16:04
JAKE
Yeah, a little bit of a defensive strategy now.
00:07:16:07 – 00:07:43:22
PHIL
And the reality is that, you know, $6.20 ish December corn is $0.45 cheaper than the nearby and below the highs we saw earlier this year. Right. So, I mean, you know, no one’s going to think that 620 is a bargain. And I think people when we touched under $5 in the middle of May, you know, people are starting to have $4 dreams, if you will, but 620 isn’t seven or $8, right?
00:07:43:24 – 00:07:44:05
JAKE
Yeah.
00:07:44:06 – 00:08:04:11
JAKE
It’s still a difficult number to pin up against current milk prices, but I think we had a lot of folks do a pretty good job of taking advantage of that dip down to five and 370 ish type of soybean meal numbers. I think they’re wishing probably they had done quite a bit more at this point, but we’re not encouraging going and owning the outright futures at this point.
00:08:04:11 – 00:08:22:06
JAKE
Certainly leave the bottom side open there. So that is this. Like Shelby was talking, the export market stays very quiet going into the next crop year or the genetics of these current crops allow. So pretty good bounce back in July that we’re open to that opportunity.
00:08:22:06 – 00:08:34:17
PHIL
So Shelby almost lost in the all the weather noise has been some pretty important news on the biofuels front. Tell us what the EPA did this week.
00:08:34:19 – 00:09:06:10
SHELBY
The EPA, after being granted a week extension, came out with their renewable volume obligations to meet the renewable fuel standard numbers. And what that means is that they set target minimum blending levels for ethanol blending, as well as what’s considered biomass based diesel, which is that renewable diesel product that we’ve seen a lot of popularity for from soybean oil and so they set those minimum floors for blending and say this is what the expectation is for the next three years.
00:09:06:10 – 00:09:47:06
SHELBY
They set the 2023, 24, 25 numbers. And I think overall, the corn and soybean producer side of that debate, we’re really disappointed with the numbers, didn’t find them to be as exciting and boisterous as they had hoped. What that really meant was that we thought we would get more of a bearish reaction on the market. But it really seemed like on Wednesday the numbers came out and you have a lot more political reactions to them, whether you were pro blending or want to stay on the feed side or the oil side or however it may be, we’ll see a lot more of those debates.
00:09:47:06 – 00:10:14:18
SHELBY
The market took the numbers, looked at them and said, okay, EPA did what they did. Let’s move on. I think what’s really important about these numbers is that these regulators operated in a world as is rather than a world as it could be. So you have soybean growers that are looking at production capacity for crushing and saying all of these plans to expand US crushing capacity are in the works.
00:10:14:21 – 00:10:36:00
SHELBY
Why didn’t those targets go higher to say the 6 billion gallons per year that we expect crushing capacity to take on by 2025 when the numbers that EPA put out are less than three and those numbers can always go back and be amended through a special process. But keep in mind too, these are just the minimum blending requirements.
00:10:36:00 – 00:11:02:11
SHELBY
So as that world progresses, you could see higher blending rates just naturally through the markets. Throughout the soybean oil markets and soybean meal markets, you certainly saw the reactions. Soybean oil had a collapse nearly overnight with rumors about what the numbers would be. Soybean meal had kind of the pickup that it really needed as a reaction to this.
00:11:02:11 – 00:11:19:09
SHELBY
And you did see a bullish turn so that the soybean meal can get the crushing capacity that that is demanded there as we start to compete for soybeans throughout the U.S. and the demand sector that we have for the soybeans going forward.
00:11:19:11 – 00:11:38:12
PHIL
So I know just enough about this to be dangerous, but my sense of things is that, all right, so we have these government targets. There is a sense that on the soybean oil or on the biodiesel or that side of the street, that there may be market viability that extends beyond the government mandates, right?
00:11:38:18 – 00:11:50:07
SHELBY
Absolutely. Yeah. And that’s that’s the way it’s trending. But again, I think these regulators operated in a what does exist currently model as opposed to what is on deck model.
00:11:50:09 – 00:11:52:10
PHIL
But that’s not their job to fill the capacity is it.
00:11:52:11 – 00:12:19:20
SHELBY
No, it’s not. It certainly helps and we’ve seen how in the ethanol market it has helped create that that minimum demand. And so we do have a lot more market factors playing into this and how these expanded crushers react to these numbers. Do they continue with their plans or do they not? I think there’s a lot more market incentives for them to continue with the plans and kind of push beyond the standard that EPA has set.
00:12:19:23 – 00:12:25:21
PHIL
Okay. So we touched on the soy side of things. What about on ethanol? What happened there?
00:12:25:24 – 00:13:02:02
SHELBY
On ethanol numbers, you know, the EPA really kept the ethanol supporters not excited, really. There was a slight decrease from the proposed numbers that were set up in December. That news was bearish to neutral for corn, primarily because it could potentially decrease long term demand. But it’s not a significant change to the short term demand that we see for ethanol. There’s no change in the 2023 renewable volume obligation from 22, which keeps in line with the WASDE target and expectations of neutral ethanol core use from 22 to 23.
00:13:02:02 – 00:13:25:15
SHELBY
So short term, not as big of a deal. Long term, I think a lot of ethanol supporters would have liked to see this EPA go higher with their minimum blending and start play on some of the opportunities that ethanol blending could provide, especially with a lot of state mandates going into place where they’re doing state year round E15 blending as opposed to the national model of E10 blending.
00:13:25:17 – 00:13:37:28
PHIL
Jake. I mean, soybean meal certainly becomes the star of the show in the feed world with all with all these moving pieces. Did you have any first impressions to what we saw yesterday?
00:13:38:01 – 00:14:00:09
JAKE
You know, I think the thing that was nice is that it didn’t run or it hasn’t yet run all the way back to the $500 mark. And we’ve got some fairly decent protection on to kind of limit out where we are now. Like you said, Shelby, I think these are minimums and there’s still quite a bit of investment going into this sector.
00:14:00:11 – 00:14:21:12
JAKE
I know there are a handful of crushed plants that are expected to come online next year or early 2025 that have already broken ground. So I guess I wasn’t super surprised that they didn’t come in and revise it all the way back up to the initial numbers we were hoping to see prior to that November draft release.
00:14:21:14 – 00:14:45:21
PHIL
Shelby Before we go, Secretary of State Anthony Blinken is in China, I believe, meeting with officials there, trying to mend some fences. Over the past couple of days, President Biden said some things that said talked about the President Xi being a dictator which may have put a little fuel on the fire or cooled the mood of the room. I’m not sure which.
00:14:45:24 – 00:14:48:14
PHIL
Are we watching this China thing closely? And if so, why?
00:14:48:18 – 00:15:19:28
SHELBY
I think grain markets really have to watch the US-China relations closely. Primarily the corn market, because the corn market has really benefited from exports going to China in 2020- 2021. And while they haven’t as stellar 22, we have seen higher number than the preceding eight years before that Phase one trade agreement. So relations with China are particularly important in the core market to keep those happy and keep those corn purchases coming.
00:15:20:01 – 00:15:39:22
SHELBY
Some things playing against the US core market right now are that is that Brazil has to offload their corn as quickly as possible. They don’t have the infrastructure or climate to store corn, so their prices are a lot cheaper right now on the global market, which China certainly has a warmer relations with Brazil and could see that prices much friendlier price as well.
00:15:39:22 – 00:16:02:03
SHELBY
On the soybean side, I would say we’ve been here before a little bit in 2017, 2018, where soybean demand to China, the US soybean demand to China is a bit more inelastic. They really need our soybeans for a number of uses that they have for that. And even when we were in a trade war with them, they were still buying our soybeans.
00:16:02:03 – 00:16:07:23
SHELBY
So we could see relations heat up a little bit more in the soybean market, but not in the corn market.
00:16:08:00 – 00:16:27:14
PHIL
All right. One last thing, guys. USDA was at 181 and a half bushels for corn. Right. Expected yield. The latest was the report is dry and crispy out there. Let’s make some bold predictions, Shelby, if you had to guess right now, where’s USDA going up? Where’s the yield going? What’s the number?
00:16:27:17 – 00:16:51:18
SHELBY
I have a lot of interest in seeing how our corn genetics have evolved since the 2012 drought and how we respond in that agricultural sector for for a situation just like that. So I’m going to be a little optimistic on corn yields and say we’ve come a long way in over a decade and our core yields come in at 168.
00:16:51:20 – 00:16:55:04
PHIL
168. Jake, what about you?
00:16:55:09 – 00:17:04:12
JAKE
Well, I. I thought I was being brave, but I’m a little more optimistic than than Shelby here. I think I’m I’m still I’d say it’s probably a 170.
00:17:04:15 – 00:17:21:12
PHIL
All right. We’ll see what happens with the rain in the days ahead. That’s going to be a wrap for this week show, thanks to the staff crew at Ever.Ag insight for the data and charts. Kudos to Korri, our coordinating producer, for making the trains run on time. And thanks especially to Paige, our media magician, for making us look good.
00:17:21:15 – 00:17:40:04
PHIL
Last but not least, thanks to our viewers for tuning in. I encourage you to check out Insights.Ever.Ag where you can find this show, all of our shows, including the From the Furrow episode I mentioned earlier and our publications. Check it out Insights.Ever.Ag. As and as Jim likes to say, we love your FEEDback.
00:17:40:06 – 00:17:41:22
PHIL
Contact information is on the screen.
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