Crude Oil is $96 per Barrel - Corn Should Be $XXX per Bushel

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Transcript

SPEAKER_00 0:07

Morning guys, it's Friday, March 27, 526 a.m. Central Time. Green markets are high this morning. Mackenzie is off today, but Matt Bennett is here, and Matt, you were up late watching the alliance.

SPEAKER_01 0:17

Oh, I was watching the alliana. I tell you what, uh, it's gonna be interesting seeing the two big teams go at it. I know a lot of got a lot of good Iowa uh friends, you know. So I don't know, there'd be a lot of good John back and forth, but uh at least one of us is going to the big uh final four.

SPEAKER_00 0:30

So yeah, it's a big corn belt matchup. Illinois opened as a six and a half point favorite um in that game. We'll see what happens. I was in bed long before tip-off. What is with this nine, this nine p.m. central time tip is outrageous. All these people know that I go to bed at eight o'clock. Like, yeah, come on. Okay, let's get into the markets. Nobody cares what we think about basketball. Uh, we're gonna start off with this grain ETF story. Barron's printed this a couple days ago. These grain ETFs, ag ETFs are attracting outside money. Some people are arguing, hey, corn wheat, so I've been starting to wake up a little bit in uh amid the Iran situation. We're seeing some inflows, agricultural ETFs pulling in fresh capital in recent days, including$149 million into the Investgo ag Fund and about$48 million into the Tucrium Corn ETF over just a five-day stretch across the broader ag ETF category. Inflows have been steady, totaling more than$500 million over the past month, signaling renewed investor interest. So, Matt, we've got outside investors investing in things like this. This uh Tucrium, I think that's how you say it, corn fund is an ETF, and you can basically buy corn as if it were a stock. Um, is this something that we should be uh considering as a friendly item here?

SPEAKER_01 1:47

You know, it's kind of like the old adage of the funds. People hate the funds whenever the market's volatile on the way down, and they should love them on the way up. Uh, but a lot of people don't acknowledge that that's the reason why we inject so much volatility into the market. So, you know, in all honesty, uh at this stage of the game, uh, we've talked about this outside money uh flow. We've seen it coming out of the equities into the ag somewhat here over the last, oh, I don't know, four or five weeks. And uh no doubt that uh you could feel it. So uh at this stage of the game, I don't think anybody should be complaining about it, especially whenever we've got a little bit more positive price direction than I think a lot of people thought we'd see.

SPEAKER_00 2:24

These um these ETFs are probably, if I had to guess, probably more so used by retail money, meaning like individual investors, and they're not that big. This particular corn ETF, um, according to data I found this morning has$233 million in assets. That's like maybe 50 million bushels of corn. I guess that's that's fairly significant, but generally small overall. I think the the bigger players are probably buying futures. I had a premium video yesterday on what Goldman Sachs is telling its customers about grains. That's something you guys might want to check out. But you go back and you look at a couple of these charts that we've shown previously, and I updated them this morning. The um I think that the larger uh like institutional money, they're looking at this idea that grains are still pretty damn cheap relative to the broad commodity sector.

SPEAKER_01 3:10

Yeah, I mean, I think inflation adjusted uh absolutely. Whenever you look at the interest in owning commodities, which, you know, kind of an inflation hedge type thing over the last several months, eggs just really haven't participated to any great degree, but uh we're certainly seeming to catch some life here. It'd be very interesting to see, you know, how next week plays out, for instance. You know, what do the funds do? Uh, for instance, if we get some sort of a bearish number on acreage, uh obviously the if the war would die down, you know, uh, what's their staying power going to be? Because many times in the past they've defended those positions well uh because they're buying a story, and maybe it's just this really strong demand. They they don't want to be short going into the growing season, but regardless, I want to see what the resolve is.

SPEAKER_00 3:51

This is a question we've been asked a lot, you know. Joe, crude's at 96 bucks. Where should corn be? Typically, I mean that I guess typically you could say very often, if crude, which is the blue line on this chart, if you're at 96 bucks and I've got that white dotted line, that's 96 basically. Corn is typically, you know, you're talking above six dollars in a lot of instances, sometimes above five. You had that weird kind of deal out of 2012 where crude stayed strong and then eventually kind of moved down and followed corn lower. Uh 2008, corn was, you know, above seven dollars where while crude was up at 140 there for a second. So I think that this is probably another thing, just this correlation, especially given that corn is is an energy product to such a significant degree.

SPEAKER_01 4:34

Yeah, absolutely. I mean, uh I've we talked about this the other day uh on the premium content as well. But you know, basically you look at crude, if it stays strong in here, let's say that uh this situation lasts, you know, another couple months, for instance. If it does, uh in the straight or moves, there's no doubt in my mind that corn eventually is going to catch up to some degree. I mean, it I think it's been hesitant for a lot of reasons, but at the same time, uh, if you continue to keep uh crude, you know, above, oh, let's say$90, in my opinion, uh uh corn's gonna have uh one direction that uh it's probably gonna move. And I would say that that it should at least be supportive. I'm not saying it's going to six, but I certainly think that there would be some strength there.

SPEAKER_00 5:16

Okay, we've got an acreage report and also a grain stocks report on Tuesday. The average trade guess based on the Reuters poll for corn acres is 94.4, which would be down sharply from 98.8 last year. Soybean acreage expected to be up uh to 85 and a half, up sharply from 81.2 last year. The um the range of guesses, though, if you look at the Reuters poll, the range of guesses for corn was 92 up to 96. Um, we also had, we'll skip stocks for a second. We also had this yesterday. You were quoted in this article, as a matter of fact. Uh, farmers say they plan to plant a lot more soybeans in 2026. Farm futures has the corn acreage number at 96.4, and they've got soybeans at 86, which is like an increase in overall corn and soybean acres of more than more than a couple million, I think. Yeah. And they're basically talking reduced acres of cotton and rice in particular in the south. Uh, how do you feel about the farm futures numbers and just the acreage numbers in general?

SPEAKER_01 6:11

Yeah, I mean, uh, again, we talked about this a little the other day as well. Uh, our thought process is that the combined total acreage would be uh potentially a record, you know, uh or is it gonna be a record by a million half bushels? I mean, maybe farm futures is right there. Uh, I certainly think that uh they're seeing some of the same stuff we are uh whenever we surveyed all of our growers, is that you know, rice acres, cotton acres are going to be down somewhat. We know that. It's just gonna be are we still gonna have everyone and their brother uh going out there and planting all the corn that they possibly can, you know, with the kind of cost structure that we've got. I think that that's uh a little bit of a question mark. Whenever you look back at, for instance, the average trade guesses. I mean, Joe, I think there's a very real possibility that uh both corn and soybeans are above the average trade guess because I kind of feel like soybeans have a decent shot, you know, at this 86 type number or better. Uh corn, you know, do we get to 96? I think that'd be a stretch, uh, just given all things, but who knows? It's possible.

SPEAKER_00 7:09

Okay, so the one area of debate that we've had on the show and in the comment section and text messages and emails I've got it's it's all about the fertilizer situation. Who who got what locked up before this Iran situation and the price blow up and and does and and that's what's gonna influence the corn acreage numbers and the swing acres in particular. What what is your knowledge of the fertilizer situation? What percent Brooke Rollins said 80% of growers had their nitrogen needs locked up um before I ran. What do you think about that?

SPEAKER_01 7:38

I think that's I think that that's fair.

SPEAKER_00 7:39

You know, I think a lot of people you're gonna get some you're gonna catch some some hate about that one, man. Well, I just said the same thing, and people were angry.

SPEAKER_01 7:46

All I'm saying is, Joe, is that there's we don't know how many people have booked fertilizer and have and and haven't. Let's say nitrogen source. I mean, that's the main thing. If a Kai put on or gal put on nitrogen, uh anhydrous ammonia last fall, those are corn acres. We know that for a fact. In our part of the world, extremely good uh fall anhydrous run this last fall. Uh the weather was perfect for it, and it's big anhydrous company, uh, country. Now you get into other parts of the country and people are more on the liquid side or urea, then sometimes they will wait. You know, they'll be in a situation like last fall where prices are so high, uh, they're gonna bet on the cum. And before, you know, whatever, February 28th or whenever this thing really got kicked off, it looked like that that might have been a pretty good decision. Some of those may have uh went ahead and booked uh their needs. If they did not, clearly, then that's where you get into a uh a problem. And so let's say it's 20%. You know, if it's 20%, how many of those folks went ahead and booked something before the war started? I'd say some of them. But even Joey, even if it's 10%, uh 10% is a big number, you know. So a lot of those people have big decisions to make. Uh clearly the price direction of corn is is trying to help out somewhat, but is it enough to be able to offset, you know, a$200,$250 increase in the price of urea? Yeah, I'm not sure about that, you know. So I do think it's gonna impact acreage. And so last thing I'll say on the acres discussion for Tuesday, I think the numbers on Tuesday will be taken with a little a little bit with a grain of salt. And so I think it's a very large number, uh, a lot of people will be a little skeptical and just say, hey, uh, this uh situation that's come lately, is it all factored in? You know, are we gonna see all those acres show up? And I think there'll be a large contingency of people who say if it's a 96 number, that's not gonna happen. But that's just my opinion.

SPEAKER_00 9:35

Okay, given what we've seen the last couple of years from USDA, the uh the inaccuracies and drastic inaccuracies in this March acreage report, also what we know about USDA staffing, and now what we know about the fertilizer situation, which was changing in real time as the surveys went out. I mean, this these acreage numbers are are totally useless. That doesn't mean the trade's not gonna trade them though, because they are gonna trade them.

SPEAKER_01 9:56

I think they'll trade them, especially if it's out, like for instance, outside of the range of guesses. I mean, that's gonna be something that people are gonna pay close attention to. Now, if it's um, you know, in my opinion, if it's 95 or above, uh, it's probably gonna be a little is gonna hold the market back somewhat. I think if it's 94 or 95 or below, it's gonna be status quo. You know, you get below 94, I think it's a wildly bullish number, quite frankly. Uh, but I'm with you. Yeah, there's still a lot of people that are gonna say, you know, we're gonna trade this thing here for a little bit. Uh a lot of this, though, I think as you know, Joe, is what is the temper uh temperament gonna be or temperature, if you will, as far as the war is concerned? You know, are we raging on Tuesday? Because if we are, uh the number may not matter near as much.

SPEAKER_00 10:40

So yeah, yeah, for sure. That the Iran thing, I mean, if it goes one way or the other, could could trump anything that USDA says on Tuesday. Uh to talk about grain stocks, real quick. So you got, I mean, a drastic increase in corn stocks expected versus last year. That's almost a billion bushels more. Um, this is probably part of the reason that the corn market hasn't acted even better than it has.

SPEAKER_01 11:00

Yeah, absolutely. I mean, you just got a lot of corn sitting around, no doubt about it. I think that uh those that are questioning, for instance, the USDA's acreage number, uh, this is where you could start to see a little bit of movement if if you really think that they're uh wildly too high. You know, if if usage comes in better than what the market expects, and you know, let's face it, we can somewhat track usage. Uh uh obviously you look at uh feed usage isn't gonna be anything extraordinary, but exports have been fantastic, you know. And if it looks like usage was a little bit better, there's no doubt that uh you could maybe get a little bit of an upward uh uh movement, if you will. Now, the biggest thing, Joe, of course, is that uh the semi-quarterly stocks, these stocks, if they're all going to be running uh close to a billion uh bushels above a year ago, you know, I don't know. You got to understand that that's a headwind on this market. I mean, that changes not only this year's balance sheet, but you know, the carry-in. If the carry-in does come in well over 2 billion, uh then that gives you a lot of wiggle room uh to have some sort of uh issue, if you will, even with acres down somewhat. But uh no doubt this demand is is incredible, and we've got to hope that it shows that uh it's at least as good or better than expected.

SPEAKER_00 12:13

The old crop corn is out there in the Western Corn Belt, especially. And I know this because I get so many emails about Western Corn Belt basis and how bad it is. What are you telling guys in the Western Corn Belt to do with the uh old crop basis and marketing situation?

SPEAKER_01 12:26

Yeah, I mean, the problem that you run into is that uh let's say that we do get a friendly number and it takes the whole corn complex higher. You know, if it does, we know basis is going to be taken away in those parts of the uh of the world because quite frankly, they can't handle all the corn. You know, and so we've been telling guys, hey, leg into some of this. If you do get a little bit better price than what you had before, uh continue to reward this with increments, but also understand uh this is probably not a great year to hold corn uh really long into the marketing year, uh, just simply due to the fact that uh you're not gonna be in a shortage of corn. Uh maybe other than the Far Eastern corn belt, uh, you're not gonna be in a shortage of corn going into harvest. And so if you hold this stuff too long, it's certainly going to be problematic. So uh, you know, I've been telling you guys, hey, if you're 20 cents better than what you were before, yeah, you've lost some basis. Uh the market's right, maybe rallied 30 cents and you only got 20 of it. Maybe want to take some of that, you know. And so yeah, I just tell people not to expect too much here.

SPEAKER_00 13:25

It's tricky, and the the bean basis thing is is similar uh in those same areas. Okay, uh McKenzie's off because she is at Trump's celebration of agriculture. She's on her way there. Um, so this deal is today, and Trump is supposed to, he's gonna have a whole bunch of like hundreds of farmers and ranchers and ag executives at the White House for this celebration of agriculture. I don't know exactly what that means or uh what exactly it is that he's celebrating, but he says there's gonna be an announcement and there's gonna be actions to help farmers, is uh what he said. People think it's gonna be an RVO announcement, which uh the market, I think already knows what the numbers are for the most part. Could it be something other than that? Well, could it be nothing? I mean, what do you think? What do you think this is?

SPEAKER_01 14:05

Well, it's been nothing before. I mean, let's be let's be real about it. I mean, he does a lot of bloviating, there's that's for sure. And so I don't think anybody really knows. I think it's uh it's just one of these deals where he knows and his whole administration knows that the ag sector has been struggling mightily over the last uh couple, three years, especially uh years two and three of uh of this, you know, uh 23, four, and five. Uh the longer that you go drawing down liquidity, it's it's really been hard on agriculture. And so there's no doubt that they're trying to do something to say, hey, uh we're paying attention. I I mean that that's my thought here. As far as any big announcements, I'm with you. It's probably something on the RVO, uh, and it's gonna be like, hey, look at what we've done here. Uh but at the same time, I mean, it's absolutely uh imminent. Uh in my opinion, that if the grower is gonna thrive moving forward, that we have to continue to figure out ways to to consume our products domestically, uh, especially on the soybean side of things. I mean, we're gonna continue to lose world export share. There's no question about that, unless we just uh force people into buying, like we have uh, you know, and I'd say, hey, China's doing that on their own accord because they're they're saving some money on tariffs. But you know, if you get another uh administration in there that doesn't handle things the same way, I mean, I can't imagine what usage would look like without strong domestic usage. So I have no idea what they're gonna be doing. Uh I'm uh you know, I wouldn't have gone if I was invited, but regardless, uh, I think it's just gonna be a lot of uh people patting each other on the back, and who knows what's gonna happen.

SPEAKER_00 15:36

Yeah. Um, yeah, we'll see what happens. The uh so through other channels, we were told that there was gonna be an RVO announcement before the end of March, and we're at the end of March. So yeah, see what happens. Uh crude oil prices are up this morning. The May WTI contract gained$4 per barrel. Yesterday were up uh another two dollars this morning, just south of 97 in the May WTI. President Trump announced uh, I think yesterday at the world that the U.S. would delay attacks on Iranian infrastructure for 10 days. Claims that the U.S. and Iran are talking, but those claims are being being disputed a little bit. Uh there were drone attacks last night. Kuwait said that a drone attack on Friday damaged one of its ports. Israel says it identified additional missiles launched from Iran. The Saudis intercepted some missiles overnight. So the crude oil mat has been uh pretty sticky up here. I mean, it's not at the highs anymore, but it's holding together awfully well. So does the trade believe the the de-escalation talk? Because it doesn't appear so to me.

SPEAKER_01 16:31

No, I don't think it believes it at all. And then you see the list of demands that Iran came out with uh to have some sort of a ceasefire talk, you know, and it was like basically we're gonna admit defeat, you know, and uh we all know that's not gonna happen uh coming from our administration. So I think we're a long ways from de-escalation, uh unless there's something that we just don't know. I mean, but uh the Iranians in this situation, um, given just their mentality, I don't believe that they're gonna go down uh very easily whatsoever as far as what we're trying to achieve there. They want, you know, they want, I thought it was very interesting yesterday. Uh India basically came out and said we don't need Iran's uh, you know, permission to go through the Strait of Hormuz because they don't control it. Um, I thought that was pretty interesting. You know, I think there's some other people uh may not agree with what uh, for instance, Israel and the US is doing there, but at the same time, they don't necessarily agree with it uh with Iran either, you know. So it's a it's a pretty interesting situation at this point. But uh yeah, I think de-escalation is not necessarily something people believe. I mean, there's two different stories uh coming out there, and who knows who's running Iran? Nobody really knows.

SPEAKER_00 17:44

Seems like the um the weekends have been interesting. Like was it last Friday, right after crude close? Trump come out, came out and said something. I mean, there's there's you just have no idea what's gonna happen when the markets are closed for a couple days, you know. It's uh yeah, I mean it's makes for a lot of uncertainty.

SPEAKER_01 17:58

If you're a speculator, uh do you want to take a position home and you have no freaking clue uh what's gonna come out over the weekend? Because we've seen market uh moving events and and announcements made consistently every weekend, you know, and there's no doubt there's been a lot of people make money and there's been a lot of people lose money. And I got news for you. You don't you don't know the same information that the people that are making money know. So unless you're just super lucky, I would be very cautious here.

SPEAKER_00 18:23

Seems like somebody knows the announcements before Trump makes them, the way that uh markets trade and based on order flow and all that. We could talk about that for a long time. Uh, we had export sales out yesterday, corn sales were good at uh 1.2. Soybeans um for old crop, that's actually pretty good at uh 669,000. That's a good print. Wheat sales, okay, at 398. Uh looking at soybean sales, we're still not good. Do you think China's buying any more old crop beans from the US? I don't.

SPEAKER_01 18:47

That's a I don't either. That's that that's a tough call. I can't imagine. I mean, I hope they do, but I yeah, I mean, I it'd be great if they did, you know, but at the same time, uh, it sure doesn't seem like it. Uh the the size of uh sales, uh I don't know. It just doesn't look to me like they did. But as you suggested, for this week in the marketing year, that's a fantastic number, you know, especially this year. You know, we've been kind of out of the market uh from a price standpoint. So it's pretty nice to see a few sales come in here.

SPEAKER_00 19:13

Uh wheat sales have been okay-ish, not enough to move the needle. Um, I will say that with regard to the HRW wheat crop, we didn't do weather today, but um, there's gonna be some rain supposedly in the southern plains like next weekend, but it's gonna it's gonna be right on the border of HRW wheat country. Like it's gonna get into like maybe central Kansas from the from the east, but maybe not as far west as it needs to be. That could be a story coming into next week.

SPEAKER_01 19:38

Uh the that that's a sorely needed rain. You know, the if that if that event uh disappoints, you know, then it certainly would be a situation as far as the crop size. I'm not saying it's gonna wildly impact the market because we know that we're not uh necessarily the end all be all whenever it comes to world wheat uh production. But at the same time, I do think the market will pay attention. Uh as far as those guys are concerned, man, I hope they get the rain because if they don't, uh I think there's gonna be some wheat and some serious trouble.

SPEAKER_00 20:06

The weather models have done a lot of back and forth, like there's been some conflict between the Euro and the GFS, and we're you're still talking seven, eight days out. So we don't know. We'll know a little bit more, I guess, on Monday. Uh to go back to export sales, corn still fantastic. We're still competitive, we're still gonna garner a lot of export business.

SPEAKER_01 20:20

Yeah, I mean, corn sales uh just continue to roll along, shipments have been fantastic as well. And so, you know, at this stage, you've got to think that there's a very real chance that uh, you know, we're gonna be above this 3.3. I mean, people said last year we were front-loaded, they're saying this year we were front-loaded, but boy, it doesn't look like it right now, you know. And so I know a lot can change, uh, but at this stage of the game, it looks fantastic.

SPEAKER_00 20:43

No, I don't think we're I don't think it's a front load. I think it's I think it's the real deal. Uh stock market's off a little bit this morning, treasury's off a little bit, US dollars a little bit higher, crude oil is up two bucks, 96.54 in the May WTI. Uh have a great weekend, Matt. Thanks for joining us. Guys, we'll be back on Monday.