AG Bull

Beans, Beef, And Budget Pressure

• Tommy Grisafi

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Soybeans break higher while China plays its options, fertilizer refuses to blink, and cattle prices remind us how fast demand can shift. We use charts to frame solar rent math, soybean sales windows, and acreage moves that protect margin into 2026.

• solar lease economics versus row crop revenue
• soybean stock flexibility in China and sourcing paths
• price pop creates disciplined selling windows for beans
• trade aid uncertainty and cash flow planning
• fertilizer share of revenue rising and sticky costs
• acreage tilt toward soybeans as ratios shift
• fall 2025 fertilizer expense outlook and procurement
• cattle volatility, imports, and beef demand strength
• practical risk management with spreads and scale-up sales


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Thank you, Tommy G


SPEAKER_01:

How are we doing everyone? Tommy Gersafi and Mr. David Whidmer. David, it's been a week, it's been a month. October's over. Happy Halloween. I do have this picture to kind of show folks what's going on with Halloween here. And this kind of sums up what's going on in DC. We have now become a this is what DC looks like. It is closed, but I do hope it's open here shortly. All right, let's get in the show. Sir, you brought in some charts. And let's get started. Well, Tommy chart number one.

SPEAKER_00:

Yeah. Well, thank you for having me back. We were talking this week, uh, AEI, and of course, solar is getting a lot of attention. Always some new solar projects going in somewhere in the corn belt, somewhere in the Midwest. And someone asked the other day, if they're paying a thousand dollars or so an acre, this is kind of the rule of thumb. We don't have a great survey value to tell you exactly what those rents are, way above prevailing cash rents. What kind of income are they generating? So we looked at retail energy prices, we looked at wholesale energy prices. There's a really big difference there. These are national averages. So I don't know what these plants are, but this is for two plants located in Ohio and Indiana. It's their 2024 output, and they're bringing in between$7,000 and$20,000 worth of revenue per year. The takeaway here is this is a very different economic model than corn and soybeans. And so we got to keep that in mind when you think about what they're paying for those rents. As a rule of thumb, we think about rents for corn and soybeans at about 30% of the revenue generated. These are much lower, so maybe 12 to 14% at that$7,000 an acre estimated revenue. You know, considerably smaller if you think about that estimated$20,000 an acre revenue, more like 4% there. So very different economics, very different investment. We just thought we'd take a look and see what those plants were generating on a revenue basis. Absolutely. All right.

SPEAKER_01:

This is the breaking news of the week, the month, the year. Can China avoid U.S. soybeans? Well, they say they're buying some. I haven't quite seen them ship out yet, but they say they're going to. They say there's going to be some commitments. A lot of they say, they say, they talk. What do you know?

SPEAKER_00:

Well, you know the word of the year this year, Tom, did you see that that come out the other day, what the word of the year was?

SPEAKER_01:

Mm-mm.

SPEAKER_00:

6-7, which is what my 11-year-old says to me all the time. There's a lot of debate as to what it means or what it even how you even spell 6-7. But I guess I think it means, you know, so-so. So the news was sort of so-so, sort of six, seven. What we wanted to do here at AEI last week is we said, can China avoid U.S. soybeans? The answer is theoretically, yes, they could dip into stocks, and that would take their stocks from you know, historically highs at about 35% stocks use on soybeans, all the way down to something like 12%. They're probably not going to see that happen. What we see is this alternative here, this path in green, which is they rely on non-US sources by about 20%. So they're buying 20% more from the rest of the world, and then they're dipping in the U.S. stocks, comes in about 25%. I think the really big takeaway from this chart here, Tommy, is that China has considerably more soybean stocks in the last couple of years today than they did during the last trade war. So that gives them a whole lot more flexibility. I think that's why we saw you know six months of basically this quiet embargo where they weren't out buying U.S. soybeans. They had more levers to pull because they had this ending stock situation built up.

unknown:

Yeah.

SPEAKER_01:

What do you think of this Kumbaya handshake here?

SPEAKER_00:

Yeah, if it was uh kind of like Thanksgiving in seeing those family members that you maybe not wanted to see. I think there's a lot of posturing there. I think it was, I think it was uncomfortable for both parties involved to work their way through that. So I think there's a whole lot of uncertainty here around this trade agreement. I think producers were wishing they could sell soybeans for 50 cents more a couple weeks ago. Opportunities knocking, uh, they should take advantage of that. I think we're a tweet away from the markets going considerably higher or considerably lower. It's like that proverb may your enemies live in interesting times. Well, I hope we both live in less interesting times when it comes to at least budgeting and cash flow perspectives.

SPEAKER_01:

Yeah, absolutely. Let's take a look at what uh soybeans did here recently. This is this is just a soybean chart here, five-minute chart, but they they're moving on up. They did close on the high. This was a little bit before the markets closed, but we're we're getting better. Gian soybeans with an 11 in front of them. And if you want to see what soybeans look like over time, this is look at that range here. Look at this price. Look how long, all the way back to July of 24. We were down to 980, up to 1060. We are breaking out. We have an 11 in front of soybeans. I wish I had a bell, I'd ring it.

SPEAKER_00:

Pretty good news, though, don't you think? The best, like I think that chart that you just showed summarizes that. There's a couple other ways you can look at it. It's the highest uh price that producers have been able to see for at least a year. And so I think this is an opportunity, it's one of the best budget conditions they might have expected here. So this might be that opportunity to be selling some soybeans. You know, I think if we think it's gone up, you know, uh what's we start thinking about turning that into dollars per acre. And these are considerable dollar per improvements when it comes to that. I think the one piece here, and I'm not sure if I'm getting ahead of myself here. So that's all right. I think one thing that we're looking at here when we think about this trade deal versus trade aid payment, producers might not be ahead on the net revenue side of things yet. The USDA was sort of vague about would we make a trade aid payment? And if so, how big would that be? But if you just look at those earlier MFP payments back in 2018 and 2019, 2019 soybeans were getting around$2 a bushel. So we haven't seen that level of a rally in the markets yet. And so I think the USDA is gonna go back to the drawing board if they ever went to the drawing board to begin with, because they've been, of course, out of work for quite a while here with this government shutdown. So I think producers have a lot of uncertainty on this cash flow side of things uh when it comes to what kind of trade aid could they expect, if any at all. Are you saying we may not get Trump bucks? I'm saying it seems like there's more uncertainty with this trade deal going on. There might still be a payment, but I think the the size of the payment has probably shrunk up a little bit given this trade deal. And especially if we get government reports coming out saying here's what China's buying, this is what the an updated WASD report, and the markets, if the markets continue to rally, it could show or hold this rally. I think that we're gonna see less trade aid.

SPEAKER_01:

Time will tell. Well, regardless of trade aid or prices or anything else, we have decisions to make, my friend. 2026 crop will get planted. Not everyone's gonna come back next year, but someone's gonna farm that ground corn, beans, fertilizer, do tell.

SPEAKER_00:

Fertilizer, this is the one that we're keeping a close eye on the last couple of weeks. It's just been a stubborn source of budget frustration for producers. If you think about it as a share of budgeted revenue, you can size up what kind of pain it's extracting out of our crop budgets. And you can see heading into 2026, the Purdue crop budget says 26% of budgeted revenue. And that's not as high as we saw, say, in 2006 or 2009. But look how stubborn it's been the last three or four years since 2022, it's averaged 24%. If you were to roll back the clock in time and you were to go back to that 2010-2022 era, fertilizer is only 19% of budgeted crop revenue. So it is a much different scenario here when it comes to crop budgets and fertilizer expenses. And I think you know, if producers start thinking about this, how many bushels that take to convert? So if they have a 200 bushel budget for their corn, how many bushels are we getting at 26%? It's it's a little more than 50 bushels. If we were to compare that to our budgets a few years ago, it'd have been like 38 bushels. And so a lot more bushels going to pay this fertilizer bill, 10 or 12 bushels more in this higher uh price environment. So that's gonna be on producers' minds. And I think, you know, we were talking about this as we were getting online. This acreage debate is starting to swing more towards soybeans. It's changed over the last few weeks because of the fertilizer situation. It's been stubborn, it's been relentless, but we also start to see this new crop, these new crops, that price ratio just keeps edging in soybeans' favor. And so I don't know where we're gonna go, but we're adding more soybeans over the last few weeks.

SPEAKER_01:

Let's keep an eye on that NOVE 26 DS26 spread. We'll be talking about that. Of course, you and I meet every few weeks, and it feels like uh it's been 24, 48 hours since I was last seen you. Time just flying by here in the old capsule here called life. All right, I think we got one more chart, and then we're gonna maybe two more charts. Let's see here, then we're gonna talk a little bit.

SPEAKER_00:

Well, going back to that fertilizer expense story we were talking about. If you were to plug in uh fall 2025 prices, you're gonna see that right now, I got a typo on that slide. I apologize. Fall 2025, that fertilizer expense is$170 per acre. That's up from last spring at$162 per acre. I think one of the takeaways here is that you can find a story to sort of fit however you want to fit. The one's first story is well, fertilizer prices are a lot lower than they were back in 2022. We're 100 bucks an acre less. But also look at the longer run here. If we were back in 2020, we would say, man, we're at$99 an acre, and the high might be 160. Well, now we're looking at 170, and it's like this feels like the bottom, but also the new high or the new low. So it's kind of this really odd setup for producers to think about this new price environment for fertilizer. Definitely lower, definitely the lowest that we've seen, lower than we saw in 22 and 23, but still higher than what we would have expected in the historic norms. So I think producers are going to wrap their minds around that. The other thing is that fertilizer expense is much higher than what we were compared to a year ago. So fall 2024, that fertilizer expense was around 145 to 150 dollars an acre. So it's much higher than it was year over year on a year-over-year basis, than it was compared to the spring.

SPEAKER_01:

Yeah. And we didn't bring a chart, but let's just talk for 30 seconds about the the old cattle market, you and I. Cattle have had a moment here. I don't know if this is the prettiest cattle picture ever, but I kind of like it. So cattle have been trading, they've gone up, they hit record prices, they've spent several days doing record limit down days, double limit down days. What do you know about the American economy, agricultural economy? You know, there's a lot of different economies. If you watch tech earnings come out, oh, you know, NVIDIA just hit five trillion dollar value. You talk about cattle prices, it's different. So a lot of ins and outs here in the economy, isn't there?

SPEAKER_00:

Right. And I think the first thing I like to remind producers when we think about livestock and cattle, cow cap producers, especially, is that we got fixated on this supply story, how long it was going to take to rebuild this U.S. cattle herd. And there's a lot of ways for this to resolve itself, maybe a lot of ways that this cycle of high prices could come to an end. A higher herd number could be one of those sources. We found out the last few weeks that beef imports could be another damper to this high domestic cattle price and situation. I think the other one that's overlooked a lot is the demand curve. And what we've seen, K-State has a really great data set that they do monitor and track this on a pretty regular basis, is they figure out how strong is demand from the consumer perspective. You know, one of the unique things about livestock products is they have a limited shelf life. And so we can't store those pork chops in the bin for you know months and months on end, waiting and hoping for a better price. And so one of the things that happens is they have to clear the market. And so demand is really important in that case because we got to figure out given this quantity of supply we have of eggs or beef or pork, what's that price that clears that market? You know, a year ago, Tommy, we were talking about really high egg prices, and one of the factors was supply, but demand was that other factor. The reason why we had to go to six dollar eggs instead of four or four fifty is because of consumer demand. When do consumers start to do the rationing? And this is a story in beef, beef demand is really, really high. And part of that's because consumers are willing and able to pay for that. So, wrapping this back up, let's not get too focused on the herd size numbers. Trade is another factor. I think demand is another factor. And when we look at the broad consumer economy, I think there's a lot of weight going on how long will this consumer's economy stay strong? How long will consumers continue to pay, you know, for beef prices given this strong demand coming out of the consumer?

SPEAKER_01:

Wow, I think we'll end it there. Tell people a little bit more, in case this is their first time watching, listening, AEI.ag, what do you all do down there in Lafayette, Indiana?

SPEAKER_00:

We break down what's happening in the farm economy, usually with data and charts, and we help ag decision makers. A lot of times it's people who work with producers, but it's also producers as well. We want to help them navigate what's all this chaos that's going on, and we do that with charts to help them say these are the three or four ideas that we're gonna really track and monitor in the months and weeks ahead. Sounds good. Happy Halloween, my friend.

SPEAKER_01:

It's spooky out there, but uh we'll do this again in two weeks, all right? Looking forward to it. Thank you. See ya, my friend.

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Tommy Grisafi

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Jim Wiesemeyer

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