The Grain Feed – March 25, 2024

(Transcript auto-generated)

00:00:00:21 – 00:00:10:13

Future trading involves risk and is not suitable for all investors. Content provided in this site for educational purposes and is not a solicitation to buy or sell commodities.

00:00:10:15 – 00:00:38:07

Hello and welcome to another edition of the Green Feed, brought to you by Ever 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. An amazing team of analysts with the intention of helping dairy and livestock producers measure risk. I’m your host, Jim Matthews, reporting from the Chicago office on a still a little cool, but otherwise a very delightful Thursday afternoon.

00:00:38:07 – 00:01:05:07

It is Thursday afternoon because we decided to record after the USDA reports today, Thursday afternoon. Joining me this afternoon, as always from Texas Director of Feed Procurement, Mr. Jake Kingsley, and from Platteville, the Paris of southwest Wisconsin. All things grain, feed, dairy, you name it. Miss Jenny Wacker shows her team. How are we today?

00:01:05:09 – 00:01:07:21

Doing just fine in Texas this afternoon. Jim.

00:01:07:21 – 00:01:10:01

Jenny, how are things in southwest Wisconsin?

00:01:10:02 – 00:01:14:00

Trying to decide if it’s spring, summer or winter? Still, but otherwise good.

00:01:14:03 – 00:01:38:02

Yeah, I think we are. I think we are seasoned Midwesterners. We know that we’ve had a pretty easy go here. We have a chance to get burned right. And not in a fun way on the beach. I mean, with like a blizzard. But since we know that we can move forward, we had a big day today with the USDA reports two of them hitting us back to back and 11 a.m. Chicago time.

00:01:38:02 – 00:02:05:07

So we should run through that. So page, if you would kindly timestamp the broadcast again. It’s Thursday afternoon and it’s about 3:00 Chicago time. We’re going to assume that folks are going to be watching and or listening to this on Monday. So we hope everyone had a delightful Easter and that they thoroughly enjoyed the USDA reports and some of the market reactions that happened on Thursday morning.

00:02:05:07 – 00:02:41:25

As we look at the screens here, we had a really interesting week because we took the grain markets, which had been fairly steady, especially in the corn side of things. We then sold off that corn market on, let’s say, Tuesday and Wednesday, kind of leading up to this report and then three day weekend, a little bit of a surprise that we decided to break out of our little sideways trade to the downside and maybe somewhat aggressively over Tuesday in Wednesday’s trade, to then get this report today and have the markets kind of run back up a little bit.

00:02:41:25 – 00:03:09:29

So we’re going to run through the numbers here with Jake and Jenny. But just to give the perspective from the planting report, the market went into this report expecting somewhere around let’s say round number 92 million acres of corn. Because Jake and Jenny, we saw that USDA outlook for a number from February. The USDA had projected at the time that we would probably or maybe plant 91 million acres of corn.

00:03:10:00 – 00:03:35:22

Then they survey the U.S. farmer for the first two weeks of March, and then released this report today to give us merely 90 million acres of corn. Again, this is what we are projecting to plant as of the first two weeks of March. So this is by no means a final number. There’s a lot going on right now in the Midwest in terms of it’s been a mild winter.

00:03:35:24 – 00:04:05:15

Folks are starting to prep fields early. What feels like we could start planting early if guys already are at this stage, I think in certain parts of the Midwest. So not necessarily an indication of what we will absolutely plant. But this is the projected figure. It was 90 million. And I think guys, it was enough to at least look at the corn market and again, say over the past two days we sold this thing off a bit, got out of that sideways range, and to give us a notably lower than expected acreage number, we rallied this thing up right.

00:04:05:15 – 00:04:26:08

So we had a pretty nice bounce. We’ll take a look at where futures ultimately settled on the day. We’re usually recording during the trading session, but we took May own crop corn futures up a little over $0.15. Settle at 442 we took December. That new crop settled just under 478. Even flirted with for 80 territory there for a minute.

00:04:26:08 – 00:04:54:19

So a pretty nice run for our friends in the corn market. Beans were able to trade fairly unchanged. They were lower to start the session. Ultimately in May, down $0.01, no beans, up about two and three quarters to trade the day at 11 86.25 on settle and then soybean meal. Stubborn little byproduct. We took May at three 3770, down a buck or so and December at three 4630, which was just slightly lower on the day.

00:04:54:19 – 00:05:23:15

And then we’ll give you those soybean acreage numbers we took. The bean number was almost exactly what the markets had expected, right. We were expecting somewhere around 86.5 million acres on beans. The government gave us 86.5 million acres on beans. So despite corn having this pretty large discrepancy, I think the USDA put beans exactly where the market thought, and therefore beans really kind of went into this three day weekend trading virtually unchanged.

00:05:23:15 – 00:05:42:29

So in terms of the excitement, it happened on the green side and then Jake and Jenny, you guys were able to take a little bit of a deeper dive, you know, into this report here. It’s only been out for a few hours. We haven’t had a whole lot of time to run through the nitty gritty, but it does feel like we maybe sacrificed some corn acres.

00:05:43:01 – 00:05:50:21

For whom? Guys, it was it for cotton, perhaps in certain areas. Or was it for beans? Because, Jake, what were you seeing as you ran through this report with Jenny?

00:05:50:21 – 00:06:14:24

Yeah, just a quick glance at the state by state numbers. It looks like in the Midwest, the eye states they did give a few corn acres over to beans. Not a tremendous move, you know, a percent or two here and there, but it looks like the bigger change is probably in the cotton crop. The southeast, a lot of states are expecting 110% of what they had last year.

00:06:14:24 – 00:06:36:12

Acreage wise, you’re seeing a huge increase in Texas and New Mexico. Of course, Arizona and California also seeing some significant increases in acreage. I think that was more so due to a large cut to acres last year due to particularly flooding conditions in California. Cotton looks like it’s the one that’s coming in and gaining a few acres here, which is not what we were anticipating.

00:06:36:14 – 00:06:52:14

So much so in the southeast. I think we were planning on that kind of in Texas. And west of there, but it was a bit of a surprise to see such an improvement in the southeast. There had been a lot of chatter that folks were going to trim Cotton Acres back a little bit in the southeastern U.S. in lieu of maybe some corn.

00:06:52:21 – 00:07:15:19

So, yeah. And in terms of, I guess, Jenny, what you have been seeing the last week or two, first of all, Jenny, we were in Sioux Falls last week. We were at the Central Plains Dairy Expo. You did an amazing job representing every egg. As always. We had a great crew out there, and I think part of the excitement of being able to go out there each March is that we get to talk to, you know, some really wonderful people.

00:07:15:24 – 00:07:35:02

You talked to a lot of farmers who in that part of the country, they are concerned about their cows, of course, but they’re also concerned about what they themselves are going to be planting crop wise and of course, their neighbors then perhaps or even buying directly from some of them, they’re always kind of, you know, comparing and contrasting conditions at least this time of year.

00:07:35:09 – 00:07:52:29

Usually we fly out there, snow cover, things are cold, ground is frozen. Not the case this year. What were your thoughts on that, Jenny? Because then to have that report, followed by a planning report that I think surprised a lot of us in terms of how low the corn acreage numbers were. What was your kind of take between the last two weeks?

00:07:53:06 – 00:08:15:00

I think we saw this. Reports come out probably low on the corn side, and I think Jake hit it on the head that that seems to be a lot more to cotton than it probably is a loss to beans. Our soybean to corn ratio continues to be sub 250 to 1. So we continue to see that beans aren’t necessarily buying acres.

00:08:15:02 – 00:08:39:02

I think we’re losing those fringe acres back out of corn that I think we saw some corn silage needs in some of our dairy areas in Texas, New Mexico, Arizona, California. They were willing to pay up because they needed the corn silage acres. This year. They all got incredibly good crops off last fall of corn silage specific. They did not need to bid up neighbors to get them to put in corn this year.

00:08:39:02 – 00:09:07:00

I think that showed up in that cotton versus corn number down and in the South, as we talk to Midwestern guys, as we talk to our friends in the agronomy side, we continue to see them say that the fields have been prepped for corn. We had a lot of anhydrous go on last fall. We’ve had a friendly winter to getting tillage and manure done and all of the things to prep I still think we are seeing.

00:09:07:06 – 00:09:29:15

Not a big switch out of corn soybeans for the heart of the Midwest. The ice states, they’re sticking to their rotation. They’re sticking to that idea. So I think for our Midwestern dairies, they are going to see very normal corn. We’re not losing a ton of corn. We also always like to remind everyone, this is the USDA’s first throw down of numbers.

00:09:29:17 – 00:09:58:03

It can change a lot in the next 30 to 60 days. So it’s trading off this. The other thing they came out today was our quarterly stocks. And it reinforces that our balance sheet on corn also still very abundant. There was no surprises in that report as far as corn, soybeans and wheat goes for our quarterly stocks. In fact, when I was looking back on the quarterly stocks for corn specific, there’s only three years that have had a higher stocks number and that was 17 through 19.

00:09:58:08 – 00:10:29:02

So you’re talking about still a very abundant stockpile of corn. We’re not seeing a big rush of exports coming in on the corn side right now, especially seasonally as we look at South America coming in with harvest, probably not going to see a dramatic run to 550 corn again. It’s going to be and I think today, the fact that we stumbled to get through 480 again shows there’s a pile of corn lined up to be sold in the US market here between 480 and $5.

00:10:29:09 – 00:10:30:03

If we get there.

00:10:30:03 – 00:10:47:22

And we see that’s a very good point. If we get there, if we see it and like you said, Jenny, I mean, there’s, there’s a big old pile of corn out there in the U.S. and I’m glad that you brought up these stocks report, because it’s often overlooked on this day because everybody’s so concerned with the acreage number.

00:10:47:22 – 00:11:13:15

But yeah, I think the stocks report is a gentle reminder that even though we are our potential only going to plant 90 million acres of corn, guess what? There’s a lot of corn around still. And you pointed out the numbers from 20 1718 and 19. We look back under those years, we had big stockpiles. Ultimately, I think phase one of the trade deal with China had kicked in.

00:11:13:23 – 00:11:34:16

At that point. You see exports start to ramp up their way into 2020. We see stocks here in the US and that balance sheet start to tighten, over a couple of years. And then of course, you know, 2022 three so much volatility with what was happening in other areas of the world. We haven’t had this type of cushion on stock.

00:11:34:16 – 00:11:59:10

So I think it’s important to remember that even if you have only 90 million acres, if you have average yields, you still have some pretty big boy production numbers on top of what is already some very large stocks figures. And again, we talk about the estimates versus what the government gave us. Also fairly in line, I think you could maybe argue the stocks number came in just a hair under the market consensus for corn.

00:11:59:12 – 00:12:20:00

Beans was pretty much right there. These are very large figures. And yes, the export program in the US is fairly strong. it’s just that China itself is the one that’s really not participating in that program anymore. And it’s, you know, you have our neighbors to the south in Mexico that are really helping carry the weight of that export burden, if you will.

00:12:20:00 – 00:13:01:15

So it’s still humming along, but not that the key player that we’ve had the last 3 or 4 years, the ethanol program, I think, continues to grind along at a very strong pace. But is it enough to really eat into last year’s record production so far, no. So we’ll there’s 90 million acreage threshold change. Things too early to tell Jake, in terms of what you’ve seen on, let’s say, farmers selling in the Midwest, maybe after this futures bump again, we could maybe get another strong round of it, but is that really impacted basis enough for you to change your views on old crop and or new crop purchases for corn?

00:13:01:17 – 00:13:02:15

not just yet.

00:13:02:16 – 00:13:29:00

Not really. I think we’ve been talking for a while now about being patient, getting into the summer months, allowing the corn grower the opportunity to start push some of this stuff into the commercial pipelines and allow basis to start to slide lower as we move into the growing season and get another crop on the way. While we’ve already got these very healthy inventories on the books, I’m still of that opinion.

00:13:29:00 – 00:13:55:06

I think the change and we’ve mentioned that over the last week or two here. I think the change has been that we saw some increased farmer selling with these corn futures rallies. And then of course, we had our highest number on the contract in several weeks here just today that anybody that had working orders and already with their elevator might have gotten filled on more corn than we’d seen move in the last couple of weeks.

00:13:55:13 – 00:14:16:08

And now we’ve got even more stuff due to hit the pipeline. That might be what it takes to start to really push basis lower. We’ll probably naturally see a slowdown in that corn movement as planting gets underway. But you know, that’s a 2 or 3 week window there that a lot of end users are already anticipating and maybe already coping for, before it happens.

00:14:16:10 – 00:14:37:26

One interesting thing that I kind of just thought about here, as far as these acres go, is that, yes, that 90 million ish acres of corn is a fair bit lower than I think a lot of the industry was anticipating. But I do wonder. I mean, we saw we saw a pretty good spike in futures today, and then we kind of returned right back to that channel we had been in for a couple of weeks.

00:14:38:03 – 00:14:59:12

I wonder if the market isn’t thinking about, first of all, how big these balance sheets are. But then second of all, we may see a slight increase in percentage as far as harvested acres this year because a lot of dairymen last year had very good quality silage, and they put up significantly more than a year’s worth of product.

00:14:59:12 – 00:15:22:27

So a lot of times when we cut it down, like last year, from 94.5 million to 86 million acres of actually harvested corn, a lot of those missing acres go into silage. So I wonder if we maybe harvest a few less acres of silage this year. And so we have something more equivalent to what would have been if we did normal 90% harvested acres on a 92 million acre crop.

00:15:23:00 – 00:15:25:14

I think that’s something to think about as a feed buyer here.

00:15:25:15 – 00:15:50:27

Yeah, I think that’s an excellent point, Jake. We talk about what goes into that final acreage number for corn. Corn, right. I mean, I know that sounds silly, but those final acreage numbers, if you end up chopping that for silage, right, it’s not being baked into that number specifically that we see. And speaking of the silage side, right, Jenny night being out in South Dakota last week talking for folks, it kind of goes back into the overall cost conversation.

00:15:50:27 – 00:16:13:26

And are folks super happy with their balance sheets just right this second in terms of their feed costs? Yes. They are happy you’re they’re not quite there yet because we have so many guys still feeding from, you know, last year’s silage pile, when corn was well north of $5 on the December contract, depending on when and where they were priced on that silage.

00:16:13:26 – 00:16:33:23

So it’s really good to keep that conversation in mind in terms of what they’ll have to feed out through that year and decisions they’ll make. Well, let’s say potentially by, you know, mid August, if not earlier, if this is indeed an earlier than normal planting window for the US based on what we’ve had this winter, Jenny, I don’t want to overlook beans.

00:16:33:23 – 00:17:01:01

Right. And you talked about that soy corn ratio. And just for everyone out there, when we look at the bean corn ratio, we’re talking about new crop pricing. So November soybean futures dividing that figure by new crop corn. So December corn futures I think on today’s settlements dividing November beans by December corn you get just under 250. So that’s when we’re hearing when we discuss that ratio that’s what we’re referring to.

00:17:01:08 – 00:17:30:19

And I think the threshold of the industry. Jenney, is somewhere in that 240 ish, maybe upwards to 250. It feels like 250, still, from a pure pricing perspective, might favor soybean planting over corn. But once you start pushing further south and you get to that 240 number, it’s not as lucrative, right, to plant that soybean crop necessarily. Just from a pure pricing and revenue perspective at the board.

00:17:30:21 – 00:17:47:02

I guess what we’re seeing right now in beans, we didn’t really see the big pop in soybean meal, did we, Jenny? It’s been kind of still stuck in this little bit of a rut. We established some of these lows, you know, let’s say a month ago or so when we were also establishing the lows for beans and corn.

00:17:47:02 – 00:17:54:15

But overall meal has been on a sideways trend. But what are your thoughts on handling protein for old and new crop? As we move forward.

00:17:54:16 – 00:18:22:27

As we look at these prices, we’ve got right now at, we’ll call it 335 to 340 on the front end, and our back side of the curve seems to just sit between 445 and or. Sorry. 345 and got so used to that 400 to $500, we really had to readjust our talking point on the 345 to 350 a ton for December, which when we look at the large scope of the last three years, that’s inexpensive soybean meal.

00:18:23:00 – 00:18:43:04

When we look at the historic price over like the last ten years, that is middle of the range for what we want to spend on soybean meal. So as we’re looking closer up, we’ve been watching basis numbers for producers and helping them manage any needs they still have for summer, probably a little bit hand-to-mouth and making sure they’ve got product.

00:18:43:04 – 00:19:06:10

As we look farther out into fall, we’re being patient on really buying in our needs and part of that is we’re not seeing a really normal basis yet in those cash markets for fall. And I think that goes back to our conversations that the US farmer is under sold. And so the processors do not have enough yet bought to be aggressive sellers to end users.

00:19:06:18 – 00:19:28:07

So as we look at those numbers, we are looking more at protective hedges for new crop. Again, what do we see coming in the next few months? We are getting into our more volatile time of year for the US market as we start to plant, as we start to get into that critical June early July weather patterns, that’s going to dictate a lot more for producers what that fall price looks like for them.

00:19:28:07 – 00:19:51:17

So it’s good not to lose sight and sit on our hands. But I don’t think yet we’re at a point to be an aggressive buyer for fall of 24 into all of 20 fives feed. When we look at dairy margins that, especially for those class three cheese heavy markets, our upper Midwest producers, they have a tight margin still coming on this very choppy cheese trade.

00:19:51:17 – 00:19:56:20

So it gives them less and less of a profitable window to lock in here as we look ahead.

00:19:56:20 – 00:20:18:28

Okay. All excellent points. Thank you for that Jenny. And we’ve covered a ton today right with the two reports. But I think before I let you guys go, I think it’s important that everyone knows what your respective bold predictions are. So we’re going to borrow once again from the dairy download from Phil and Kathleen. We’re going to do some bold predictions today.

00:20:18:28 – 00:20:47:09

Following this USDA report we’re going to look at December corn pricing. We’re going to look at December corn pricing. And knowing that we settled let’s just round back down to 475 around that number back down to 475. Just a little smidge rounding back down. What number are we going to trade first for December corn futures. Will we trade $5 or $455 or 450?

00:20:47:09 – 00:20:52:02

Jake, we’re going to start with you. Bold prediction these corn.

00:20:52:05 – 00:20:59:00

Well, I’m going to stick with my I’m going to stick with my usual here on the bear side of this thing. We’re going to 450 again.

00:20:59:00 – 00:21:17:28

Going down to 450. The highs perhaps are in for Jake Kingsley. Perhaps this is what we’re going to trade first for 50 or $5. Jenny Wacker shorter, Wacker shorter, of course, being German for green guru. Bold prediction for 50 or $5.

00:21:18:03 – 00:21:32:24

I’m usually in the bear camp with Jake, so I my gut is to say 450. However, my last bold prediction against Burl Jim always picks the other person first and I get stuck with the leftovers. But I won, so I guess I’m going in $5.

00:21:32:24 – 00:21:56:12

One could argue I’m giving you the advantage that you can see, but yeah, they’re right. But I hear you. Okay, so we’ve got we’ve got Jacob for 50 trading December corn first we’ve got Jenny at $5 trading December corn first. Okay. Now we’re getting real bold. Really bold. Final print for December corn. We’re talking months down the road.

00:21:56:12 – 00:22:07:22

Months. Final print December corn. Is it above or below for 50? Final print. December. Corn. We’re months away. Eight months. The honor.

00:22:07:22 – 00:22:10:03

Is yours. Jenny. Leading the way.

00:22:10:06 – 00:22:16:03

Any above or below for 50th December. Corn. Final print. Hello below.

00:22:16:03 – 00:22:17:28

Immediate final print below.

00:22:17:28 – 00:22:18:12

Jake.

00:22:18:12 – 00:22:21:03

I mean, I got to stick with below as well.

00:22:21:05 – 00:22:23:13

Oh, you didn’t think about it.

00:22:23:15 – 00:22:35:03

And if you said $4, I know that’s a different conversation. Oh, is it, is it different for 50 I think is going to be a hard hurdle on this year with the balance sheet to be over.

00:22:35:09 – 00:22:51:07

Sounds like before we wrap up folks, there’s a new bold prediction is December corn futures settle go off the board. That final price for December. Corn futures above or below $4 Jenny above. Ooh. Jake.

00:22:51:08 – 00:22:53:20

How go below again.

00:22:53:22 – 00:23:05:14

Jake is on the bear train. My goodness, the bear train. Okay, I respect it. So, Jenny, you’re envisioning a trade between 450 and $4 here, right? Essentially.

00:23:05:14 – 00:23:08:11

Well, you said settlement. You said I did.

00:23:08:11 – 00:23:25:03

A final settle. Final settle, and you even called from here. What would trade first 5 or 450. We’d have five. And then we’re going to make our way down. We’re going to ride that seasonal trend, and we’re going to trade higher up through planting big sell off into the early summer. Push this thing down.

00:23:25:06 – 00:23:32:16

Harvest vinyl come in August. September. Yeah. And then usually we rally a bit in through high.

00:23:32:16 – 00:23:53:11

That’s fantastic I love it. These are some super bold predictions okay everyone Super Bowl Super Bowl that’s right. That’s right. So we appreciate everyone being with us today Jenny a huge thanks for returning to the show. Great being with you in person last week in Sioux Falls. And now you’re back here on the grain feed once again to represent.

00:23:53:11 – 00:24:12:11

So thank you very much. We would also like to thank the Ever Insights Crew for their support. Thank you to Paige for production magic. And thank you to the viewers for watching the grain feed. Contact information is on the screen. We greatly appreciate your feedback. That’s all for today. We’ll see you next time on the grain feed.