The Grain Feed – October 12, 2023

00:00:00:21 – 00:00:09:19
VOICEOVER
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00:00:09:21 – 00:00:35:06
JIM
Hello and welcome to another edition of the grain feed brought to you by every AG. This is your weekly news feed for all things grain and all things feed. Each week we bring you updates on the markets with unique perspectives from an amazing team of analysts with the intention of helping dairy and livestock producers manage their risk. I’m your host, Jim Mathews, reporting from the Chicago office on a cooler and rainy morning here in the Second City.

00:00:35:10 – 00:00:56:14
JIM
Joining me today with better weather all around. As always from Texas, direct your feed procurement Mr. Jake Kingsley. And making his first appearance on the grain feed from Illinois, Professor of agricultural economics at the University of Illinois, Dr. Scott Erwin. Team, how are we today?

00:00:56:16 – 00:00:58:09
JAKE
I’m well this morning, Jim. Very well.

00:00:58:09 – 00:00:59:26
SCOTT
Thank you for the invitation.

00:00:59:28 – 00:01:17:28
JIM
Excellent. Well, thank you for being here, Scott. It is a true pleasure. You’re a celebrity in the grain world. Always an avid reader of you of eyes publications, including Farm Docs. And we subscribe to all of your emails there. So great to have you on with this. Scott, if you have a moment, would you mind telling the viewers a bit about yourself?

00:01:17:28 – 00:01:38:05
SCOTT
Sure. I grew up on a grain and livestock farm out in Iowa, which I still help manage, so I have my feet firmly planted in the ground, literally in Iowa. And then here at the University of Illinois, I like to say I’m interested in anything that affects the price of corn and soybeans. So I’m really active on social media.

00:01:38:05 – 00:01:56:26
SCOTT
I have a Twitter account and then I have a website. If anyone is interested in getting into details of what I do, it’s just got a JR one dot com and I’ve recently published my first book called Back to the Futures, a funny and entertaining book about how the commodity futures markets operate.

00:01:56:28 – 00:02:16:16
JIM
Excellent. Good deal. Well, thank you very much for being here. We’re very excited to have you on the show. And we have a lot to run through with you today, especially with the big was the report coming up in less than an hour as we record here Thursday morning. So, Page, if you would kindly timestamp the broadcast. It is Thursday morning.

00:02:16:16 – 00:02:41:12
JIM
It’s about 1015 Chicago time. So that report will be out in about 45 minutes or so. So before the report, we do have markets somewhat under pressure on the grain side. We’ve got corn down about $0.04 or so. We’re trying to keep December futures pinned towards 480 at the moment. In March. Futures have made their way back below $5 by just a tick or two.

00:02:41:12 – 00:03:07:19
JIM
As we record. We’ve got no beans, very steady at the moment, around 1254 and December meal. That stubborn little byproduct is now up 670 on the day we’re back above 384 meal meals. We’re keeping a sharp eye on the numbers today and what it might do to some of our feed markets as we push through wise you and of course, the rest of harvest and a crucial time of the year.

00:03:07:20 – 00:03:16:26
JIM
So to discuss this crucial time of the year, we have some crucial analysis from Mr. Scott Irwin. Scott, what’s your take on the markets here this morning?

00:03:16:26 – 00:03:53:03
SCOTT
Well, the general tenor from a demand perspective in the grain markets is bearish. And so that’s the demand side. And that’s been going on for a little while. And of course, the immediate issue is the size of the U.S. corn and soybean crops. And boy, you can get conflicting reports on that. I know yields on our own farm in Iowa, where almost there our soybeans are soybeans are some of the worst we’ve had for many years, hearing lots of reports of disappointing soybean yields, especially in the western Corn Belt and some on corn.

00:03:53:05 – 00:04:17:21
SCOTT
But that’s down somewhat by probably on average, I’m hearing, better than expected yields for many parts of Illinois, Indiana, Ohio, Kentucky. So the question is, is how is all of this going to balance out? And we’ll probably have a lot better reading on that in 45 minutes. But right now, I lean towards the view from especially the really poor yield reports.

00:04:17:21 – 00:04:43:04
SCOTT
I’m hearing out West that the USDA is going to be on a path to lower their yield estimates as we complete this marketing year in their forecasting cycle. So I won’t be surprised if we end up around 50 bushels an acre on soybeans or a little bit lower for us. Average yield corn, probably 173 174. That’s that’s where I’m at personally.

00:04:43:06 – 00:04:51:13
SCOTT
That’s not going to have a big market impact. But that’s where I’m at. Until the USDA tells us something different in 45 minutes.

00:04:51:15 – 00:05:09:05
JIM
It sounds good. Scott Yeah. So you touched on the I think that divide over the Western corn belt versus the Eastern. And I think from some of the folks that Jake and our green team work with, we’ve had kind of a similar feeling that you start pushing west of the Mississippi and maybe things don’t look so hot for folks.

00:05:09:05 – 00:05:26:29
JIM
I think maybe across the other eyes, states, Illinois and Indiana, as you said, it’s still a bit of a mixed bag, but maybe just not as bad as what your home farm is looking like maybe in Iowa. I was in Madison last week for the World Dairy Expo. I mean, the Wisconsin farmers were mostly pretty happy the way things looked up there.

00:05:26:29 – 00:06:02:04
JIM
But I think the consensus here, at least from ever AG, is maybe that corn yield pushes a little closer to 170, maybe in the 171 170 twos, but that being yield absolutely that 50 bushel per acre number, that’s going to be a big one. So I really appreciate your insights on the home farm. You touched on the demand side too, of that bearish tone and any comments on current activity in terms of the export demand, because we have had a bit of an uptick lately, nothing necessarily to write home about, but it’s still good to see something versus nothing, I suppose.

00:06:02:04 – 00:06:04:00
JIM
Any updates there? Yeah, I.

00:06:04:00 – 00:06:34:12
SCOTT
Think basically the real story is U.S. corn exports especially and even to some degree soybeans are under pressure, basically corn. I don’t believe exports are going to really recover robustly until China really returns to the U.S. like it was basically one, two and three years ago. And that, to me is the the big wildcard on that export demand side.

00:06:34:12 – 00:07:03:09
SCOTT
You know, and overarching all of this is two things. You know, the size of this year’s Brazilian corn crop. The likelihood that they’re going to have another big bean crop and continued large supplies for corn exports. I’m just not real optimistic about a robust demand environment for U.S. corn and soybeans in the next couple of years. Brazil is just a fairly dominant position domestically.

00:07:03:09 – 00:07:17:21
SCOTT
I think we’re doing okay domestically in terms of the demand on both the corn and soybean side. And then, of course, you’ve got the whole biofuels renewable diesel issue on the soybean side, which I tried to talk about a little bit, if you’re interested as well.

00:07:17:21 – 00:07:27:07
JIM
Yeah, sure. Absolutely. I mean, the domestic side, we’re watching that very closely. If you don’t mind touching just a bit on the biofuels program and how that’s continuing to drive demand as well.

00:07:27:14 – 00:08:05:24
SCOTT
Right. Well, I’ve been a real contrarian on the whole renewable diesel, soybean oil, veg oils sector for really the last six months, written a lot about that. And I think this is one of them. Very unusual situation. I’m an economist classified as a free market economist market. You know, almost always gets things right. But this is a situation where the market didn’t get it right, missed the boat, basically forecasting, you know, huge increases in soybean oil use going into renewable diesel and that sector is literally in a nosedive right now.

00:08:05:25 – 00:08:37:00
SCOTT
You see it in what’s going on with soybean oil prices right now with all of this is actually good news for livestock producers that their competition in the soybean sector is really going off a bit of a cliff right now. And the reasons for that is the industry simply overbuilt. Renewable diesel capacity relative to the demand ceiling set by the renewable fuel standards.

00:08:37:00 – 00:08:54:25
SCOTT
It’s as simple as that. Will probably be talking for many years. On why the industry did that. I don’t know exactly why, but they did, and they’ve kind of faced planted into the windshield in recent months, and I don’t see that changing for a while yet.

00:08:54:26 – 00:09:18:14
JIM
And Scott, that’s something that Jake and the team here at ever I talk about week to week how these you know, renewable programs are impacting the grain and feed markets. And we’re continuing, I think, to get new reports of a new plant opening up. It feels like maybe once a month for, let’s say, 18 to 24 months out, that there will be increased capacity for X amount of bushels being able to process per year.

00:09:18:14 – 00:09:40:17
JIM
It’s it’s fascinating. But one of the things we keep telling our dairymen that we work with is that one would think or hope long term that the more we churn out this crush, demand and capacity, then the more protein would in theory be available for them to purchase. So perhaps you’ll get these swings basis run ups maybe on beans themselves to procure and be able to crush and process.

00:09:40:17 – 00:09:44:19
JIM
But hopefully ultimately we’d see those protein prices come under pressure.

00:09:44:20 – 00:10:13:27
SCOTT
The answer to that is if dairy producers were expecting a soybean meal windfall all in the future from the expansion of the capacity for crushing and basically crushing a lot of beans for the oil to go into renewable diesel, I think that will be pressure directionally consistent with that logic. But I don’t think we’re going to see any big windfalls because the entire renewable diesel boom is grinding to a crashing halt right now.

00:10:14:01 – 00:10:36:10
JIM
Okay. Interesting. Well, that’ll be very fascinating to continue to watch. We appreciate your insights there. And before I turn it to Jake, we touched on South America for a moment. We were talking about the demand side and the Chinese, of course, their pivot to Brazil, the ability for Brazil to produce such a massive crop. But something we’re watching closely is the planting of said crop and how the Argentines there.

00:10:36:10 – 00:10:58:05
JIM
Our friends have been very disappointed in the lack of rain in the third year now potentially of a drought in what was a promised El Nino weather pattern for them has been fairly disappointing and it’s now kind of spreading maybe to our friends in the central areas of Brazil as well. Sounds like the southern areas are getting maybe even too much rain.

00:10:58:05 – 00:11:08:14
JIM
So the weather situation there is not perfect. At what point should we be concerned for their planting and then production capacity if this weather pattern continues?

00:11:08:16 – 00:11:39:03
SCOTT
Certainly not yet. Something that you want to definitely keep on the radar screen. It’s a cover today in mid-October of killing the U.S. corn and soybean crops in May. It’s just too early. That weather can turn around dramatically, but certainly, like I said, should be on the radar screen and be paying attention to it. It’s just too early yet to forecast significant damage to South American crops yet understood.

00:11:39:03 – 00:11:56:08
JIM
Okay. So we’ll keep watching it. It’s still it’s still a little bit early, but where everyone likes to kill the crop a few times up here in the States, so we might as well do it a few times in South America as well. Jake, let’s turn it over to you. We’ve got this big report coming up here. Scott touched on a lot regarding our grain and feed markets.

00:11:56:08 – 00:12:00:01
JIM
What are you seeing from the physical perspective this week?

00:12:00:03 – 00:12:33:25
JAKE
Recently, we’ve seen some basis numbers kind of perk up, particularly in the West. I think that’s mostly a direct response to crude prices, rallying with some of the news headlines out of the Middle East over the last week here. So fuel and freight values perking up at the same time that we typically see freight demand kind of hit some of its peak, particularly I’m speaking on rail freight headed west and you get harvest going and all of a sudden you’ve got to get these bushels moved out of the Midwest to some of these destinations.

00:12:33:27 – 00:12:55:08
JAKE
And you see freight kind of pick up in that time slot and now fuel to move that is moving higher as well. So we’ve seen a little bit of a perk up in some destination basis. Proteins have been stronger in their move, higher than corn. Again, these are not huge blow out moves higher, but certainly a little bit of firmness in those marketplaces.

00:12:55:15 – 00:13:24:09
JAKE
I think the protein, again, is concern around the current US soybean crop, particularly in the Western corn belt, as we had just talked through a little bit there. But I think if we are able to see some harvest pressure here over the next couple of weeks as well as maybe a turn around in South American weather, maybe we catch a little bit of a lull in those values for some folks that haven’t gotten maybe the first half of their feed year.

00:13:24:09 – 00:14:03:00
JAKE
The October to March window cleaned up. I think over the longer term, we still got some time to work through maybe the April to September window on the protein front there and try to catch a little bit of a better value as some of this crush capacity does come online. If South America is able to put together a crop and cool off some of the demand we have for our soy crop, the corn side is a little bit less concerning just because of the huge balance sheet we are expecting and the potential for Brazil to again fill in most of the need of the Chinese demand this coming spring.

00:14:03:00 – 00:14:36:29
JAKE
So we can be a little bit patient there. General Lee, all eyes are on this report and how things shake out for harvest over the next few weeks. I think we’re anticipating potentially a slight cut to corn yields and very possibly taking this being yield under the 50 bushel mark. I don’t know that they get super dramatic today because they don’t want to spook this market into doing anything irrational as we really step towards our harvest peak in South America, tries to put something together.

00:14:37:01 – 00:15:00:28
JAKE
But I would guess that they do start maneuvering a little bit to trim us up. So I think we’ve done well and gotten folks out in front of this thing to a good degree. And now as long as you’re you’re well managed for the October through December window on the cash front and can get through harvest in some of these ups and downs of South American planting, we can be patient going into the 2024 crop year.

00:15:01:05 – 00:15:18:16
JIM
Okay, excellent. Thank you, Jake. We have to reflect back on a couple of weeks ago to right. We had that end of September stocks report. So that’s going to slightly alter maybe the carryover numbers that come into this report today. I think we remember that that core number was less than people had expected. Beans gave us a little more cushion than expected.

00:15:18:16 – 00:15:40:19
JIM
So perhaps the USDA could use some of that wiggle room on beans to lower yields slightly without really squeezing ending stocks too closely back to, let’s say, 200. And the flipside on corn, I think one could argue, especially with Scotts analysis earlier, is that there’s still some wiggle room to reduce the demand side on the corn balance sheet.

00:15:40:19 – 00:16:05:29
JIM
So, again, they could maybe lower yields a bit, but maintaining a pretty, let’s say, loose balance sheet on the corn side. So and Jake, I think you’ve been very diligent about working with our dairy men to say for maybe their account of this time period on corn, lock that up when we were at the lows of that for 72 for 80 range, just to secure that lower end of the range through harvest.

00:16:05:29 – 00:16:33:02
JIM
But you’ve been keeping that Jan forward window a little more open, a little more flexible, maybe manage that with some hedges, with the hopes that again, through this discussion that corn prices remain at least under pressure. I think there’s a lot of events happening globally that could ultimately maybe limit the downside. But I don’t think we have a whole lot of anxieties when it comes to the potential upside on any big price swings just yet.

00:16:33:02 – 00:16:57:22
JIM
So we’ll find out in about 30 minutes or so. So keep in mind, after the viewers are watching this, the report will have come out. But let’s just do a quick one. Bold prediction. So we’re going to borrow from the Dairy download podcast that our colleagues, Phil and Kathleen host. Just one bold prediction for today’s report. It can be about yield demand, it can be corn, it can be beans.

00:16:57:25 – 00:17:03:09
JIM
Just one bold prediction for today, Scott. Any bold predictions for today’s report?

00:17:03:15 – 00:17:07:27
SCOTT
The vignette goes below 50 bushels. Oh.

00:17:08:00 – 00:17:11:28
JIM
Which are you putting a number on it? You just were just gone below 50.

00:17:12:00 – 00:17:15:19
SCOTT
I wouldn’t go much below that. 49 849 nine.

00:17:15:21 – 00:17:33:26
JIM
Okay, that’s a bold prediction because that 50 has been a pretty strong threshold and very psychological number for the marketplace to see that five handle there. So bold prediction by Dr. Irwin. Excellent. Jake. Over eggs, Professor, all predictions for the the report.

00:17:34:02 – 00:17:45:27
JAKE
I think I agree with you on the been front there. So my bold prediction will be that they do not change corn yield at all. Oh, my.

00:17:45:29 – 00:17:47:05
JIM
I’m writing that down, Jake.

00:17:47:08 – 00:17:55:00
JAKE
I’ll put it on the recording page. I think they’re going to leave corn yield untouched for the moment.

00:17:55:03 – 00:18:13:13
JIM
That’s true. I suppose the show is recorded. I don’t need to write it down, but I did. So Jake’s bold prediction is we’re not going to touch corn yield after all this chatter. It’s just going to stay unchanged. And, Jake, one could argue if yields are actually as okay as we say they are, will they have to touch it at all?

00:18:13:15 – 00:18:14:12
JIM
Will final print.

00:18:14:12 – 00:18:26:20
JAKE
Be the current print? I don’t know. Last year, we saw an increase in yield from the lows. By the time this thing was all said and done. So maybe this is bottoming out. That curve, I don’t know.

00:18:26:22 – 00:18:50:14
JIM
Very interesting. Very bold. We appreciate these very bold predictions from you both. And excellent to have you both today. A huge thanks to Scott Irwin for joining the show. It is great to have you and your insights today. We would also like to thank Cory and the ever Insights crew for their support. Thank you. Do page for production magic and thank you to the viewers for watching the green feed.

00:18:50:14 – 00:19:09:14
JIM
On a personal note, today is my dad’s birthday. The farm kid from Dunlap, Illinois. He is 75 today. So, Dad, happy birthday. Contact information is on the screen. We greatly appreciate your feedback. That’s all for today. See you next time on the Green Feed.