The Grain Feed – August 10, 2023

00:00:00:21 – 00:00:06:18
VOICEOVER
Future trading involves risk and it’s not suitable for all. Investor contact provided in the strike is meant for educational purposes and is not a.

00:00:06:18 – 00:00:09:15
VOICEOVER
Solicitation to buy or sell commodities.

00:00:09:18 – 00:00:29:23
PHIL
Hello Feed Fanatics and Grain Geeks. Welcome to another edition of the Grain Feed brought to you by Ever.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 Plourd, filling in for Jim MATTHEWS, who’s on assignment this week.

00:00:29:25 – 00:00:42:10
PHIL
That’s the bad news. The good news is that we have two exceptional panelists on board for the ride. First, from deep in the heart of Texas, Jake Kingsley, ever as director of feed procurement. Hey, Jake.

00:00:42:15 – 00:00:43:28
JAKE
Good morning, Phil. How are you?

00:00:43:28 – 00:00:54:18
PHIL
I’m well, thank you. And second sitting, 83.2 miles to my west in Platteville, Wisconsin. We welcome Britt O’Connell, director of Ever.Ag Grain Foundation Service. Hey, Britt.

00:00:54:24 – 00:00:56:06
BRITT
morning, Phil.

00:00:56:06 – 00:01:25:04
PHIL
Paige Let’s go ahead and timestamp this episode. It’s about 9 a.m. Central Time on Thursday, August ten. You know, markets have been a little choppy this week. Right now, this morning, we have nearby corn at $4.83 a bushel. So hanging out under five bucks, but that’s up $0.02 on the day, up $0.02 versus where we were last week. Not a lot of noise there nearby beans at 1438, up $0.06 this morning, up $0.09 from where we were a week ago.

00:01:25:11 – 00:01:48:17
PHIL
And our pesky little friend soy meal at $426 a ton. That’s unchanged on the day, down $25 from last week. Guys, I mean, the news cycle feels like we’re stuck, right? I mean, there’s weather there’s always weather in the summertime, but the peak weather issues may be in the rearview mirror. There’s the war in Russia with Russia and Ukraine.

00:01:48:19 – 00:02:07:15
PHIL
And that’s terrible. But I’m not sure that we’ve learned anything new this week. Export sales, you know, we’re just sort of grinding along tomorrow, Friday, August 11th, we get a new WASDEE report that promises perhaps to stir things up. Jake, what’s what’s what are you seeing from where you sit? What’s driving the bus?

00:02:07:21 – 00:02:25:19
JAKE
Yeah, I think we’ve kind of gotten into a little bit of a choppy range here on futures and and basis has also kind of stagnated here over the course of the last week. Just feels like it’s folks are kind of settling into a little bit of a range here and just waiting on these new numbers from the WASDEE to report tomorrow.

00:02:25:19 – 00:02:57:07
JAKE
Like you said, we don’t have much for new headlines out of the Black Sea. We really haven’t had anything chaotic happening with the weather. And every day that passes, we get closer and closer to finishing this crop off. And so really, folks have just kind of settled in. Thankfully, we’ve settled in values that look a attractive enough to get some ownership started if you hadn’t already, so that you’ve got something done ahead of this report and you can put some sort of protection on if you don’t have anything set there.

00:02:57:09 – 00:03:14:03
JAKE
But yeah, I mean, this market’s kind of stalled out here for the moment waiting on this report. I think the anticipation is that we’re going to see a little bit of a shake up potentially in yields. And the question is, do they do anything to exports at this point? So how does that all pan out tomorrow? What’s the net change to both corn and protein?

00:03:14:10 – 00:03:42:17
PHIL
Yeah. So, Britt, the consensus right now on corn is that USDA will come out at one 75.5 bushels per acre. They were at 177 and a half the last go round on soybeans. The consensus at 51.3 bushels per acre. That’s down from 52.0 in July. What would qualify as being a big surprise and and how do you see things shaking out in terms of this report?

00:03:42:24 – 00:04:07:09
BRITT
I think kind of doubling down on what you said about this choppy trade. I think a lot of it goes back to the uncertainty from the yield side of things. We had this early season drought and then weather across most of the Corn Belt got a lot more amicable to better production. And I think everybody’s asking themselves and wondering how much, if any, damage was done with this early season drought.

00:04:07:09 – 00:04:23:15
BRITT
Now, certainly there are some areas that didn’t get the reprieve, and it’s pretty clear that they saw some pretty significant yield damage. But there’s a lot of areas across the country where things have started to look a lot better the last few weeks. And and again, I think we’re all asking ourselves, is it real? Is it smoke and mirrors?

00:04:23:18 – 00:04:47:27
BRITT
And as I talk with producers around the country, I don’t think that I gain any more clarity on that front. I’ll talk to one guy who’s totally shocked and surprised. He’s finding 18, 20, 22 around by 38 and 40 long ears. And then, you know, we’ve talked to producers who’ve gone out and taken a battling mower and mowed off the corn or gotten out into some of these fields and found the pollination was terrible.

00:04:47:27 – 00:05:14:18
BRITT
So to me, I think from a production standpoint, the market has found a place where it’s comfortable because it’s so uncertain. It feels like they don’t want to make a drastic move. I think the USDA is right to come in here and trim yield by a couple of bushels on corn, in my opinion. I think you could see that trimmed even further, because even if they do come in north of 175, that’s still a really strong yield number.

00:05:14:24 – 00:05:34:04
BRITT
If you look at history, we haven’t had a lot of years where we’ve been over 175 and we certainly had some challenges this year. Now the soybeans, I’m a little less convicted that we could see a big trim there. I think they’re calling for a little over a half of a bushel that probably feels warranted, but that might hit it.

00:05:34:05 – 00:05:55:29
BRITT
That might hit it. We’ve had really nice weather for beans that I I remember back to 2012 where we had that really bad Midwest drought, very different than this year. Undoubtably. But the key there was we started to receive really timely rains as we got into the back half of July and August, much like we did now. And beans benefited greatly from that.

00:05:56:06 – 00:06:01:26
BRITT
And we saw beans well outperform acre for acre corn. And I think you could see that again this year.

00:06:01:26 – 00:06:20:03
PHIL
Yeah. One of the first things I learned when I started hanging around ag circles was that soybeans are a crop of August, right? I mean, things can can look poor and then but you know, if it rains in August they get you can get a lot of help on beans right away. Yeah I think you know we’ve been watching the 2012 versus 2013.

00:06:20:03 – 00:06:40:16
PHIL
Which path is this market on chart? It’s been fun to see the market say, Oh, it’s 2012 and corn, we go crazy and then wait, whoa, wait a second, it’s raining. It’s going to be 2013. We came down and now we’re kind of in the middle. But I do think that one of the things that we’re going to find out this year versus some of those previous experiences is just how good are these?

00:06:40:18 – 00:06:45:21
PHIL
Is the drought tolerance of some of the genetics of these crops? Right. That’s a bit of an unknown here, isn’t it?

00:06:45:23 – 00:07:16:17
BRITT
It is. And I think this is this is the biggest quote unquote, test plot that we’ve seen for all the genetic advancement that we’ve made in the last decade or so. You know, from an economic standpoint, 2012 and 2023 are very different years probably the biggest differentiating factor is the heat. In 2012, we saw tremendous heat. And so we accumulated a lot of stress units on this corn where 2023 has been really mild from a temperature standpoint.

00:07:16:23 – 00:07:36:25
BRITT
And so that’s one of the biggest differentiating factors. We also saw the 2012 drought come on later, but I think you’re spot on. This is going to be a great opportunity for us to test the mettle on all the genetic advancement, all the changes we’ve made, agronomically to see if we’ve got the same kind of yield potential as we hope we do.

00:07:36:25 – 00:07:57:06
PHIL
And from a I mean, from a crop condition perspective, you know, the ratings we’ve seen, I mean, we were, you know, multi, multi year lows and also we’ve kind of crawled back towards where we were a year ago and that was the rain in July that that, you know, the crop desperately needed. But as we know, it remains to be seen whether it was a total crop saver or a semi crop saver.

00:07:57:12 – 00:08:06:22
PHIL
Okay. Let’s talk about over under. So the consensus on corn 175 and a half bushels per acre are going to take the over or under on that. In tomorrow’s report.

00:08:06:25 – 00:08:16:14
BRITT
I’m going to go with the under because the report data was gathered almost four weeks ago and things have changed rather dramatically in those four weeks. So I’m taking the under and.

00:08:16:14 – 00:08:19:11
PHIL
what about on beans being is at 51.3 bushels per acre.

00:08:19:14 – 00:08:28:14
BRITT
Oh, so that one’s tough. I’m going to say I’m taking the over just by a little bit.

00:08:28:17 – 00:08:37:06
PHIL
Segway to you, Jake, on that 175 and a half bushels per acre on corn is the consensus for tomorrow. Are you over or under that? Where’s USDA going to land?

00:08:37:09 – 00:08:45:14
JAKE
Man? I think they’re going to land probably right on it. I’m going to go against you, Brett. I guess I’ll say the over, but they’re going to be pretty close to right on it.

00:08:45:18 – 00:08:50:03
PHIL
And beans at 51.3 below.

00:08:50:05 – 00:08:54:17
JAKE
I think they’re going to go just under. They’re going to cut it right to 51. They like ground numbers.

00:08:54:17 – 00:09:27:04
PHIL
So, no matter what the report says, Jake. I mean, and it’ll be interesting with the half life of whatever noise comes out of the report. Right. Does it last an hour, a day, a week? You know, sometimes these reports come out by Monday. were like what report, Right. Because something else has moved the needle from a feeding perspective, you know, stepping back from the noise, what are you working with in terms of our clients on how to approach the markets with corn kind of selling under $5 meal, stubbornly staying over 400 bucks, but down a little bit here and there.

00:09:27:10 – 00:09:30:04
PHIL
What’s what’s your posture with clients on feed right now?

00:09:30:05 – 00:09:59:18
JAKE
Yeah, I think if you start with corn, we’ve finally seen especially in a lot of the Western rail dependent markets, but even in good parts of the Midwest, we’ve seen basis kind of settle into some tolerable numbers. And so we’re going ahead and getting a little bit of basis bought up for the coming year, but also really encouraging folks to use some sort of strategy if they’re not going to own some physical corn here to manage their upside risk, be that call spreads or something to that effect.

00:09:59:18 – 00:10:19:23
JAKE
And then when we look at protein, we’ve been much more aggressive, I feel like, in the canola space than the soybean meal space just because of that Canadian crop been under a fair bit of heat stress and experiencing some drought again. So I think the top end of yields have come off as well as seeing some pretty healthy export sales out of Canada.

00:10:19:25 – 00:10:47:20
JAKE
So basis seems to have stabilized and actually perked up a little bit. We’ve been encouraging folks to get pretty aggressive in buying cash, canola, especially with December meal futures down. They’re closer to 390 working largely in the October to March timeframe for that and then working along a similar path in soybean meal. There’s some areas of the country we’ve been a little bit less aggressive because the basis just hasn’t cooled off quite as much as we think it should.

00:10:47:27 – 00:11:08:06
JAKE
But still getting a little something on there. I think it’s important. I mean, these values are just some of the better ones we’ve seen in the last 18 months or more for some people. So getting some of this on the books just in case these yields do really take a big hit in these balance sheets, stand out even more than we’re anticipating, but trying to remain flexible while also taking advantage of some of this opportunity.

00:11:08:06 – 00:11:30:24
PHIL
Britt the soybean balance sheet, has more intrigue in some ways than the corn one does I mean we have China coming back to the U.S. for more and more? You have big crop in Brazil. You have crushing activity, questions about crushing activity around the world. How do you see the soybean balance sheet? Is that do you think this is going to be of a stay geared towards and stay on the tight side?

00:11:30:27 – 00:11:33:12
PHIL
Or do you think there’s any relief?

00:11:33:14 – 00:11:53:24
BRITT
You know, it is it’s it is a very interesting balance sheet and it’s one I think can get tighter as we move forward. We’ve got really strong crush domestically demand. There’s great we’re going to see additional capacity come online, especially as we move into calendar year 2024. And exports is going to be the really interesting one. We have seen China start coming to the table.

00:11:53:27 – 00:12:10:00
BRITT
We’ve been a little bit behind what we where we would like to be given the time of year, but because they are coming to the table and if they are going to look at kind of building up some of their strategic reserves, U.S. beans are going to be how they do it. U.S. beans just store better than Brazilian or Argentinian beans.

00:12:10:00 – 00:12:32:04
BRITT
And so they will use US beans to do that. I think it’s noteworthy to if we’re going to talk demand for just a second to mention that it’s going to be interesting. While corn has been really lackluster on the demand front, I think this plays well into what Jake is saying and why we like owning some corn at sub $5 levels is there’s two things that I guess we’re watching right now to see how they play out.

00:12:32:04 – 00:12:54:10
BRITT
One, of course, is that Black Sea Region and how grain is going to be able to flow out of there, how reliable it’s going to be. I think there’s just a lot of question marks there. And anybody who’s going to be buying grain out of that region is probably not going to solely be depending on them because there could be some major hiccups in receiving product in a timely fashion and of of acceptable quality.

00:12:54:12 – 00:13:13:21
BRITT
But the other one is the northeast region of China has seen some tremendous rainfall as of late. And like everything out of China, there’s more questions than answers and we aren’t quite sure what to make of it. But I think that’s going to be interesting because the thing we know about the Chinese is don’t believe what they say, believe what they do.

00:13:13:26 – 00:13:32:17
BRITT
And if you start seeing China coming in and buying some U.S. corn, that could give indication that there was some damage done to that domestic crop. U.S. is on par now with the Brazilian crop. As far as from a price perspective. And like any good buyer, they’re going to diversify. They’re not going to put all their eggs in one basket.

00:13:32:17 – 00:13:48:02
BRITT
They bought a lot already from Brazil, and I could see them potentially coming back to the US and getting some coverage on now that we’re more cost competitive. So that’s something that we’re also watching and again, why we really like protecting the upside and owning some physical here on these pullbacks.

00:13:48:02 – 00:14:08:12
PHIL
All right, guys, great discussion this week. Sorry, I don’t have any Taylor Swift or Led Zeppelin or Van Halen trivia for the folks today. We’ll see what Mr. MATTHEWS has up his sleeve for the next time. That’s going to be a wrap for today’s show. Thanks to the stats grew ever.ag insights for the data and charts.

00:14:08:14 – 00:14:29:00
PHIL
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. Last but not least, thanks to you, our viewers, for tuning in. Be sure to like us on the YouTube channel and be sure to check us out at Insights. dot ever dot ag our new insights portal.

00:14:29:03 – 00:14:33:26
PHIL
And as Jim likes to say, we love your feedback. Contact information is on the screen. Thank you.

00:14:33:26 – 00:15:01:16
JIM
At Ever.Ag We partner with every corner of the agriculture industry from dairy to livestock crops and agribusiness, to deliver intelligent supply chain and risk management solutions. We are Ever.Ag everything agriculture. Learn more at WWW dot ever dot ag Slash everything.