Wheat Futures Soar on Escalating Drought Concerns

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Futures and options trading involves risk of loss and is not suitable for everyone.

🌾📈 Wheat surges on drought: Prices jumped to multi-week highs as worsening dryness grips the Plains, with 70% of winter wheat in drought. Corn edged higher, while soybeans slipped.

🌦️➡️🌵 Mixed weather pattern: Rain improved parts of the Corn Belt, but drought worsened elsewhere—especially the High Plains and Kentucky. Nebraska conditions sharply deteriorated, with 56% in extreme drought.

🛢️⚠️ Oil spikes on tensions: Crude climbed over 3% near $96 as Iran keeps the Strait of Hormuz restricted, while fragile ceasefires keep geopolitical risk elevated.

🌱💰 Pulses gain favor: Farmers are shifting to peas and lentils as a rare profit opportunity, driven by strong protein demand and lower input costs.

🚢📊 Exports mixed but solid: Corn sales dipped week-over-week but remain strong overall; soybean and wheat sales showed mixed trends, with steady global demand.

Transcript

Wheat Rally, Corn/Soy Action

SPEAKER_01 0:08

Good morning, everybody. It is Friday, April 24th, about 5 30 a.m. Central Time as I speak. Joe is gone today, so I have Matt Bennett joining me. We are going to start off with the rally that we saw in the wheat market yesterday. The May 26th Chicago wheat contract rose nearly 12 cents to settle around 611 per bushel, while the May, Kansas City wheat contract jumped 29 cents to close near 667 per bushel. The rally was driven by deteriorating drought conditions across the U.S. plains, which has sparked concerns over crop losses. Corn futures also finished the day higher while soybeans moved lower. How much further upside do you see in this wheat market given the current drought conditions?

SPEAKER_00 0:54

Well, Kinsey, I mean, a couple of things come to mind when it comes to wheat. There's no doubt that crop is hurt. I mean, there's no doubt that much of wheat country is under massive stress, has been for quite a while, and the crop conditions are just awful. I mean, that's all there is to it. Um, the other side of that, which I know U.S. wheat grower doesn't want to hear, is that we don't grow nearly the biggest wheat crop in the world. And so uh sometimes it doesn't have quite the impact that you would like to see. Now, do I think there's more upside? Absolutely. I think this wheat market could take off and go uh quite a bit higher because clearly you could affect the U.S. balance sheet here uh to a degree, uh, which obviously uh could limit export so much somewhat, and it could you know affect the world balance sheet a little bit as well. So uh if this crop clearly doesn't get any more rain, I mean you're you're looking at some of the worst wheat yields we've had in a while uh in some places farther west you go. So yeah, I do think that there could be some more upside here. With that being said, if you're someone that's got a decent wheat crop, if you're not looking at this as a chance to maybe, you know, hedge off a little risk, I think uh you got to ask yourself why. Uh you don't want to get too bulled up just because the market's going higher.

SPEAKER_01 2:05

Right. And we're gonna talk about drought conditions a bit more bit more here in a minute. Um, what were your thoughts on the price action that we've seen in corn and soybeans this week?

Drought Monitor

SPEAKER_00 2:13

Yeah, I mean, as far as corn and beans go, corn seems like it wants to take off and run a little bit, but then it just kind of scales back, you know. So a couple days ago we were up uh three, four cents, you know, we closed up a penny. Uh yesterday, same type of thing. We we rally a little bit and then we close up. The thing is, is that uh with corn, you've got some headwinds. There's no question that there's a lot of old corn out there. Uh and so what that's done is it's just made a bit of a headwind as far as basis is gone. Uh now, right now is a great time uh because when people are in the field, typically that's when basis is good because you don't have the manpower to haul, you know, and plant. And so uh, you know, price action on corn is to be expected somewhat. I think it's very interesting to watch new crop, corn, and beans. New crop beans have actually been pretty strong, you know, and there's a fair amount of people that feel like maybe bean acres could go up, uh, more so than maybe corn acres would go up, especially given weather. Some of the areas that have been wet uh have stayed wet, you know. And so old crop beans, you know, in all honesty, it's range bound. As range bound as could possibly be over the last few weeks. And uh we got up towards the top end of that range. What do we do? We drop back a little bit. I'd say that was somewhat, you know, predictable move. But uh could beans go up to 12 and above, you know, I think it's certainly a possibility. They've shown more strength than what most people thought they'd show anyway.

SPEAKER_01 3:35

As I mentioned, we're gonna talk about drought here. We saw a new drought monitor uh come out yesterday. And thanks to rain, we saw a lot of drought conditions improve across the Corn Belt over the last week. Meanwhile, the high plains experienced dry weather coupled with above-normal temperatures, leading to worsening drought conditions from South Dakota all the way down to Oklahoma. When we look at the percentage of U.S. areas experiencing drought, corn country currently stands at 27%, soybeans 30%, winter wheat 70%, spring wheat 18%, and cattle country 63%. When it comes to drought, what are the conditions like in your area? It appears that according to the map, things have really gotten better in the last month.

SPEAKER_00 4:15

Yeah, I mean, absolutely. You know, the crazy thing, you know, we we didn't get a rain uh to speak of four months. I mean, we've just dry as a bone. The drought water show day, you know, you guys always go over that and cover it well. Uh, but from like last August all the way into the winter time frame, we didn't have a tile run, which I don't remember a six-month window in my career where we didn't see a tile at least run. And so what do we do? We come in this spring, we get all the rain in the spring, and then uh that's not the time that you want to get a lot of spring, uh, rain. It's it's spring rain because you're trying to get uh your crop in the ground and it stinks, fighting mud, yada yada yada. But right now, you know, we we planted last week and then we had uh eight tenths of rain on um let's see, Wednesday night, had another inch on Friday night into Saturday. Uh, but we're able to start planting again here uh Wednesday, Thursday this week. And again, it's partially because you know it was fairly dry to begin with. Uh, ground's working like a dream. Uh a lot of us were sitting here right now, kind of hoping we don't get a rain uh so we can get the rest of the corn planted. Well, there's a lot of people hoping for a rain because actually some of those beans that were planted earlier, you know, they could use a rain because the ground got a little hard after all that beaten rain we had over the weekend. So uh conditions are good right now.

SPEAKER_01 5:34

What have you heard about planning progress through other parts of the corn belt? I mean, are these rains disrupting planting in a lot of different areas?

SPEAKER_00 5:41

Yeah, I mean, there's parts of eastern Iowa that continue to get some rain here and there. Meanwhile, you talk to a grower that, you know, conditions got right, they were able to run for 48 hours and drop 700 acres in the ground, you know. Like uh uh we know that the equipment is out there to get this planted very rapidly. Uh, the problem that I see whenever it comes to an acreage discussion is those that continue to get the rain. Like, for instance, if they didn't have fertilizer bought, whether it's urea and hydris, uh, but their nitrogen source, if you will. I mean, that's the main thing. If they've already got a nitrogen on, they're gonna plant corn. Uh, but if they didn't and they stay wet, you've got to think that at some point, since fertilizer hasn't backed off any, uh, they're gonna go in there and maybe make a decision to switch a handful of acres. I don't think it's anything massive, but I do think that that uh possibility exists as long as they stay wet.

SPEAKER_01 6:29

Um, we're seeing some severe drought across US HRW wheat areas with little, little relief in sight. There is some chance for rainfall this weekend, uh, but again, those western areas, it doesn't look so great. What have you heard about that crop?

Crude Oil/Middle East Tensions

SPEAKER_00 6:43

Oh, I mean, you know, I've heard uh insurance adjusters going out and saying it's like a zero to 19 bushel type deal. You don't even have to harvest it. Uh, you know, there's no doubt that some of that that wheat is in massive trouble. Uh, I think you get like the western two-thirds of Kansas, and it's just uh, they just can't catch a rain. Yeah, can't catch a meaningful rain. Meanwhile, last week, I believe there were a couple isolated areas in the eastern third of Kansas, had like eight inches of rain. So it's definitely been a has and have nots type situation, but uh you you just you gotta get rain on this crop in short order. It's it's just not gonna make it much of anything.

SPEAKER_01 7:20

Right. On to the situation over in the Middle East. Uh, we saw crude oil prices spike yesterday as tensions intensified. U.S. crude rose just over 3% to settle at 95.85 per barrel, marking its highest level in nearly two weeks. Here this morning, crude is trading right around that$97 per barrel mark. Yesterday's rally was driven by Iran's continued closure of the Strait of Hormuz. Meanwhile, President Trump claims the U.S. controls access to the strait. Either way, ships are not passing through the waterway. Uh, the conflict is currently at a standstill since Trump extended the U.S.-Iran ceasefire earlier this week. It doesn't feel like we're going to get anywhere with any kind of peace deal negotiations. Um, what are your thoughts on this overall situation, how it relates to crude, and then also how it may impact the grain markets? It feels like the markets have almost kind of become desensitized to all these back and forth headlines.

SPEAKER_00 8:13

Yeah, I mean, they're they certainly do. I agree with you. And I think that's where it becomes problematic, Kinsey is that you know the the crude oil market is likely to cool off, if you will, if they finally come to some sort of resolution, you know, that these two sides can can agree on. Uh, we got to remember Iran supplies China a heck of a lot of oil. And so there's probably going to be a fair amount of pressure on the US at some point to say, look, dude, you made your point. Let's uh let's move on here, you know. And I think that's a possibility, whereas energy prices could cool off. I think where it really gets impactful for us as growers is what's fertilizer prices look like for the 27 crop. You know, it stinks if you didn't get them for 26. And I feel for you, uh, that's a tough game, you know. But 27 could impact literally every grower. You know, and right now you're looking at these corn still fluttering a little bit under$5. But I mean,$700,$750 urea,$11,$1,200 anhydrous, that doesn't work with$5 corn. And so uh I'm much more concerned if this goes on longer, you know, that we could have some uh serious issues with trying to figure out what we're gonna plant this next year. Just availability of fertilizer is gonna be an issue. Uh, we've wiped out several natural gas facilities over there. Anhydrous ammonia, in my opinion, could be very high priced. And so, yeah, this whole deal is not something uh to to to discount. It's not something to to think, oh, this just gonna be over with very quickly. I mean, clearly they've been fighting over there for thousands of years, you know. And so I think their side is is got their feet in the sand and they're just not gonna, they've got them dug in. They're not gonna they're not gonna back down quickly.

SPEAKER_01 9:54

Yeah. Um, on the topic of fertilizer, we've seen the administration come out over the last week and talk about possible uh assistance to help farmers with surging fertilizer costs. What do you think the probability of that is?

SPEAKER_00 10:08

How are you gonna do that? You know, how are you gonna do that on 26 crop, Francis Kinsey? Is everyone gonna get a check?

SPEAKER_01 10:14

Yeah, I know.

Pulses Gain in Popularity

SPEAKER_00 10:15

Um, even the guys and gals that um stepped out and took the risk, you know, of going ahead and locking in fertilizer. That was a gamble that paid off. Um, you know, if you're someone that waited till spring, I don't blame you. I mean, it prices were so high. Of course, you're gonna uh try to hedge your bets somewhat. But I mean, how do you decide who's gonna get um any money there, first of all? Second of all, I think you know how I feel about uh the government uh type programs. And so I think if you look at it for 27, uh you know, it's maybe you can make them a little more fair discussion, if you will. I think it's pretty early to make that distinction, uh, but I don't think that there's any way to throw money at the grower in what I would call a fair fashion. Um I think the market's gonna have to sort itself out. I know some people are gonna hate to hear that. I just don't I don't think it's a great idea. That's my opinion.

SPEAKER_01 11:08

Right. Yeah, it'll definitely be tough to do. Um, so farmers are turning to peas, lentils, and chickpeas amid the struggling farm economy, as they are offering a rare economic bright spot with better margins than traditional crops such as wheat. Uh, demand for these crops is rising due to a surge in high protein diets, driven mostly by the growing use of GLP1 weight loss drugs. Additionally, the crops require lower inputs, particularly fertilizer, uh, making them especially attractive as fertilizer costs are have risen due to the Iran war, as we were just talking about. Do you think we'll see the popularity of these alternative crops grow since input costs for traditional crops continue to uh surge?

Export Sales

SPEAKER_00 11:51

They should. I mean, we're creatures of habit. So, you know, let's be clear about it. Someone you tell them, hey, you want to grow peas this year, you just want to go corn like you always do. Uh, yeah, I mean, it's gonna be a tough transition for some people to say, hey, uh, you know, I'm gonna go ahead and do something totally different than what I've done before. Obviously, from an equipment standpoint, uh, you've got to make sure that you've got what you need for the particular crop you're gonna be harvesting. Uh, but do they think they're gonna grow in popularity? I do. I mean, if you're a grower who's sitting here trying to figure out how to make things work and you're in an area where you can make one of these crops work, you know, as far as your climate goes, your soil types, I think you should be looking at it very uh closely. Uh from a risk management, from a diversification standpoint, it makes a ton of sense. And let's face it, you can take uh just a few acres out of the corn bean mix. That that's something that needs to happen, is that we need to continue to see, you know, those acres at least back off somewhat because obviously we've been uh talking corn this year, overproduction last year. Uh what's that done for us from a price standpoint or from a profitability standpoint? It hasn't been good.

SPEAKER_01 12:59

Right. Um, on to our weekly export sales. U.S. corn export sales declined last week, but they remain strong for the weekending April 16th. Net corn sales were reported at 52 million bushels. The print was down 6% from the previous week, but up 3% from the prior four-week average. Net soybean sales were reported at 13 million bushels. The print was up 47% from the previous week, but down 7% from the prior four-week average. And then uh net wheat sales, they were reported at 5 million bushels. The print was up 29% from the previous week, but down 25% from the prior four-week average. What are your overall thoughts on uh export sales that we saw this week?

Cattle Market

SPEAKER_00 13:35

You know, kind of surprised we're selling any beans at all because we're still very expensive on the wheel uh world market, but it's nice to see. Uh corn sales, though. I mean, good Lord, Kenzie, they just keep on churning along. I think, you know, as far as shipments go, we're running like 34% ahead of a year ago. Uh USDA is forecasting around 15% ahead of a year ago, uh, is what the increase they thought that we'd see for this particular balance sheet um this marketing year. I don't know. I think they may have to adjust that thing higher again as far as exports go. I don't want to say, hey, we're gonna really chop the heck out of the balance sheet on the US side of things because I do think they're still high on feed and residual usage. But bottom line is exports have been nothing short of phenomenal. And so uh love seeing those export sales stay well above uh a million tons every every week.

SPEAKER_01 14:24

Uh cattle futures, they were slightly slightly higher yesterday. Live cattle were 22 cents to a buck oh five higher. Feeder saw gains ranging from 45 cents up to 90 cents, with the exception of the front month contract, which lost 17 cents. What are your overall thoughts on this cattle market?

SPEAKER_00 14:40

Well, yeah, I think Rollins canceling her her uh you know, her press conference for Friday uh definitely was something that the market paid attention to, in my opinion, and said, hey, you know, uh the market's kind of taking a breather here. You went up there, made a new high, uh, you know, and then kind of checked it again the next day there last week, and then we've just kind of fallen off a little bit. I just think you ran out of buying enthusiasm. I mean, this is a tough market to out guess, and one in which if if I'm sitting here on a few pins of fats, you know, that are that are ready to go to market, um, I'll tell you what, I'll take 250 all day long. I mean, that that's just incredible money. I mean, uh, when I was a kid feeding out fats, if I got a thousand bucks for for one fat steer, I thought, man, I'm in the chips, you know. So obviously things have changed. I know it's expensive to feed these things, but still, 250 is a winner for just about everybody I know. So uh, what do I think of the cattle market? Uh to be honest, it's really hard to outguess. We don't we don't know what's gonna happen. The screw worms close to the border again, so I don't think that the border's necessarily gonna open. So we're just gonna continue on down the same path. Super tight fundamentals and maybe a somewhat wary investor uh that's been long for quite a long time.

SPEAKER_01 15:54

Right. All right. Well, thank you for joining me here this morning, Matt. That is all we have for you guys today. Everyone, have a fantastic weekend, and we will be back on Monday.