Grain Markets and Other Stuff
Joe Vaclavik and Mackenzie Johnston discuss the grain markets, the business of farming, news related to agriculture, and a variety of other topics.
Grain Markets and Other Stuff
MASSIVE PROFITS for Fertilizer Companies!! Farmers? Not So Much.
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🌱💰 Fertilizer companies are cashing in on the Iran conflict. CF Industries and Nutrien both reported roughly 20% increases in quarterly sales as nitrogen fertilizer prices surged. Both companies also posted substantial gains in adjusted EPS. Since the conflict began, urea prices in New Orleans have jumped about 36%. 📈 Meanwhile, US natural gas prices haven't risen as sharply as other regions, allowing fertilizer producers to capture stronger profit margins. Despite elevated prices, fertilizer demand is expected to stay strong as farmers still need nutrients to maintain crop yields.
☮️🛢️ The US and Iran may be nearing a peace agreement. Washington submitted a one-page memorandum of understanding outlining a plan to gradually reopen the Strait of Hormuz and lift the US blockade on Iranian ports. Iran has not yet accepted the proposal, with leadership indicating parts of the deal are unrealistic. 📉 The announcement sent stocks surging and oil prices tumbling—US crude fell roughly 7% to settle near $95/bbl. The nearby Jun26 WTI contract trades near $93/bbl this morning after peaking above $105/bbl earlier this week. That $12/bbl selloff in less than 24 hours weighed heavily on the grain complex.
🌽📉 Grain futures tumbled Wednesday on peace deal prospects. The Dec26 corn contract fell nearly 11 cents to settle at $4.90/bu. The Nov26 soybean contract declined 14 cents to close near $11.76/bu. Traders are watching next week's Trump-Xi meeting, though the likelihood of China returning to buy large volumes of US soybeans remains low. 🌾 Wheat also moved lower—Jul26 Chicago wheat fell ~11 cents to $6.17/bu, while Jul26 Kansas City wheat slipped 3 cents to $6.87/bu.
⛽ US ethanol production ticked up last week. Weekly output came in at 1.02 million barrels per day, up 1% vs. the prior week but down 2.2% vs. the same week last year. Ethanol stocks rose to 26.02 million barrels, +1% week-over-week and +2.5% year-over-year. Ethanol margins across the Corn Belt remain strong at 5 to 45 cents positive based on Reuters data.
🇧🇷🌱 Brazil's soybean acreage is projected to increase only slightly in 2026/2027. Rising fertilizer costs driven by the Middle East conflict are limiting expansion incentives. Additionally, the potential for a strong El Niño is weighing on acreage decisions — this weather pattern would raise drought risk in northern and west-central regions while increasing excessive rainfall risk in southern Brazil.
Fertilizer Companies
SPEAKER_01Morning guys. It's Thursday, May 7th, 524 a.m. second time. Grain market's mostly lower this morning. December corn futures down one and three quarters at 488 and a quarter. November soybeans down one and a half at 11.74. July Chicago wheat down two cents at 615 and a quarter. July Kansas City wheat down six and a half at 680 and a half. September spring wheat down three cents at 707 and three quarters. We're going to start off with fertilizer companies and earnings. These guys are absolutely killing it.
SPEAKER_00CF Industries and Nutrion both reported roughly 20% increases in quarterly sales as nitrogen fertilizer prices have surged amid the conflict over in the Middle East. Since the conflict began, urea prices in New Orleans have risen about 36%. Meanwhile, U.S. natural gas prices have not increased as sharply as prices in other regions, allowing fertilizer producers to capture stronger profit margins. Despite elevated prices, fertilizer demand is expected to remain strong as farmers still need nutrients to maintain crop yields.
Waiting on Iran
SPEAKER_01From an earnings or a stock market valuation standpoint, these guys, as I said, they're killing it. CF Industries, the stock is up almost 55% year to date. The broader stock market is up only 7.6% in the SP 500. Over the past one year, they're up 47%. The SP is up only 30%. Nutrient, very similar, but not as good as CF by comparison, up 19.6% year to date and up 35% over the last one year. So let's focus on CF in particular. Why are they making so much damn money? As McKenzie mentioned, U.S. natural gas is very cheap, whereas globally, it's not as cheap. A lot of um supply has been knocked offline, a lot of natural gas production has been knocked offline. The Iran war knocked out anywhere from 25 to 40% of the global fertilizer trade. Urea prices spiked globally, but CF's production cost barely moved at all. So CF is selling urea in the US that they produced in the U.S. at global prices. And that is why they are absolutely killing it. Um, this is like a Goldilocks scenario for these guys. It doesn't get any better for them than this. CF net earnings of$676 million were well above analyst estimates of$395 million for the first quarter. And CF basically told you all this. Their uh slide deck that was uh the SEC had on file from yesterday's earnings call was actually pretty interesting. They had a couple cool graphics. 50% of first quartile global urea capacity is exposed to geopolitical conflicts. And then this one, CF's North American network is insulated from recent geopolitical disruptions. And that's really like long story short, they're insulated and they're able to sell their product at global prices. Reading through this and reading through the slide deck uh led me to believe perhaps that maybe even more so than I had thought before, the fertilizer situation as it relates to global production of things like corn and wheat in particular. It's the real deal. And I think that, you know, we've started to see some lower production estimates from places like Europe and elsewhere trickle in. But I think that that's gonna be a theme that you see here over the next, I don't know if it's the next year or two years, but it's something we're gonna deal with. And I think it's gonna impact the U.S. producer, probably the least. I think producers elsewhere in the world, it's gonna impact um a hell of a lot more.
SPEAKER_00The U.S. and Iran may be nearing a potential peace agreement, as Washington has submitted a one-page memorandum outlying a phase plan to reopen the Strait of Hormuz and lift its blockade on Iranian ports. Negotiations over Iran's nuclear program would be addressed at a later date. Iran has not yet accepted the proposal, and its leadership has indicated that parts of the deal are unrealistic. The announcement sent stocks surging and oil prices tumbling yesterday, with U.S. crude falling roughly 7% to settle near$95 per barrel. Since the conflict began in late February, President Trump has repeatedly indicated that the war, uh, that the deal is that that a deal is near, though nothing has ever materialized.
Grain Selloff
SPEAKER_01So we're still waiting. The headline across the Bloomberg wire this morning on the front page is U.S. waits on Iran's peace deal response as Israel hits Lebanon. Here's Trump on Truth Social yesterday. Assuming Iran agrees to give what has been agreed to, which is perhaps a big assumption, the already legendary Epic Fury will be at an end, and the highly effective blockade will allow the Hormuz Strait to be open to all, including Iran. If they don't agree, the bombing starts and it will be sadly at a much higher level and intensity than it was before. Thank you for your attention to this matter, President Donald J. Why is he yelling at us all the time? I don't know. He's always yelling at us. Um, in any case, so yeah, we're we're waiting. The crude oil market, your June WTI contract, it peaked on, I believe, Tuesday, like above 105, and we traded down to 90 bucks and change, I think, like very quickly. So you saw a sell-off in less than 24 hours of what 12 to 14 dollars a barrel. That's a that's a big time sell-off. And that I think is why the grain markets uh got a little jittery.
SPEAKER_00Right. Grain futures tumbled yesterday amid news of the potential U.S. Iran deal. The December 26 corn contract fell nearly 11 cents to settle near 490 per bushel, while the November soybean contract declined 14 cents to close near 1176 per bushel. Wheat futures also moved lower with the July 26 Chicago wheat contract falling roughly 11 cents to settle near 617 per bushel, while the July Kansas City wheat contract uh slipped three cents to close at 687 per bushel.
SPEAKER_01Corn market has backed off. Here's D's corn. We peaked at 505 and three quarters on uh what would have been Tuesday morning, and we've sold off ever since. We've seen some farmer selling of both old crop and new crop bushels. I have anecdotal evidence suggesting that farmer sales of new crop corn bushels, forward sales, have been very aggressive, maybe maybe so much, much more aggressive than the last uh two or three years. And can you blame the farmer for being aggressive? This is the first time that any degree of profitability has really been offered in a long time. And of course, that's dependent on yield and other things. But uh the farmers taking advantage here. The funds uh were net long, more than 300,000 contracts at Monday's close. It's probably down to 250, 260. Premium subs, you guys have the uh daily fund tracker chart in your email this morning. Impact of fertilizer, I don't know. We talked about CF and Nutrient. I I think it is the real deal. I just I can't quantify the uh production losses that will be associated with this thing. I think there's gonna be losses. I can't quantify them though. As far as the technicals are concerned, it looks to me like there's some trend support around 477. You draw a line from that January low up through the April low, and that's about where that trend line comes in. Um, even if the siren thing is over and crude goes back lower, I want to remind you guys that the U.S. is the number one corn producer on the planet. The growing season in the United States is the most important growing season on the planet, and therefore the market could uh maintain some risk premium until we know more about the U.S. crop. We don't have a damn clue what the acres are. We have no idea what the yield's gonna be. Um, so the Iran thing's not the only story here. Yeah, we've got a big carryout. We're gonna get a new set of balance sheets for uh the new crop marketing year from USDA next week, but the the story ain't over because we we got a lot of uh growing season to get through here. Here's soybeans. You got your Trump G meeting next week, and I think that it could be of consequence. China could agree to some more soybean purchases, probably new crop. Um, could be old crop too, though. Who knows? I mean, the market's held together awfully well. The funds, uh, big net longs here, they've liquidated some, of course. Um, are there too many soybeans in Brazil? Yeah, absolutely there are. We've got a really good premium video with Ryan Moe coming up uh today. He's gonna go into a little bit deeper dive on the situation that the Brazilian commercial is dealing with, also the situation that the Brazilian farmer is dealing with, and it's it's not good. Uh, you guys in the U.S. are in much better shape than they are. Trend support here under no beans, probably about 1160 or so. Here's HRW wheat, uh, the July 26th contract. We've got more bad crop news coming next week. The Kansas crop tour is next week, right?
SPEAKER_00Mm-hmm.
SPEAKER_01Yeah, it's gonna be bad. It's gonna be bad. They're gonna have bad news, just like the Oklahoma tour did. Um, the drought story, is it already discounted? That remains to be seen because we don't know exactly how bad the crop's gonna be. We saw what they said in Oklahoma. I think Kansas is gonna be similar, probably a little bit better. U.S. wheat um is absolutely too expensive when you compare it to its global competition. That doesn't mean we have to move lower, though. Um, so there's there's a lot of different and conflicting dynamics here.
SPEAKER_00If you guys have not checked out our premium content, you sure need to do so. Joe, can you tell our viewers about some of our recent premium videos?
Brazil Soybean Acres
SPEAKER_01Matt Bennett was on yesterday and we did a 20 questions segment. And a number of our subscribers said, Hey, I'm already half sold with regard to uh new crop corn, new crop soybeans. Is that too much or is it not enough? I mean, only time will tell. Is that a decent place to be if you're uh near break-even or above production cost, given the uh multi-year farm economy recession that we're currently in the midst of? It's probably not crazy, but again, only time will tell. We had a bunch of uh really good grain marketing questions that came in, everything from uh just forward sales to basis to old crop to cash and spreads and all sorts of stuff. Matt does a great job on these. Um, I talked about the funds on uh Tuesday. The funds weren't that long as a Monday's close. I would estimate more than 300,000 contracts of corn. What happens historically when that's the case? It's pretty interesting. I had a whole bunch of charts and kind of explained it to you. If you guys want to see the premium stuff, go to standardgrain.com. You can sign up this morning. This is a$50 per month subscription. You can cancel it anytime. There's no other fee, no other obligation. Nobody will try to sell you anything else. I know you guys are busy. You're in the truck, you're in the tractor, it's a very busy time of year. You can sign up in about 30 seconds on your phone. I'll forward you a copy of this morning's email. You can be watching the videos as you plant, and um, it's it's some good, some good planting content. So give that deal a shot this morning, guys.
SPEAKER_00According to Argus, Brazil's soybean acreage is projected to rise only slightly during the 26-27 season due to elevated production costs. Due to the conflict over in the Middle East, Brazilian farmers are dealing with rising fertilizer prices, which has reduced the incentive to increase acres. On top of that, the potential for a strong El Nino is weighing on acreage decisions. This weather event would be more damaging to Brazil's soybean crop than a La Niña scenario, as it would increase drought risk in northern and west central regions while also raising the likelihood of excessive rainfall in southern Brazil.
Ethanol Production and Margins
SPEAKER_01Brazilian producer has a lot of problems right now. And again, in today's premium video with Ryan, we're gonna do a deeper dive into that. Brazilian farmers harvested 122 million acres of soybeans uh this year, and that number probably goes up a little bit. And you might ask yourself, if they're in so much damn trouble, how are they gonna expand soybean acreage at all? Ryan talks about it in today's video. The U.S. uh by comparison harvested what 42 million acres less than Brazil did uh this year at about 80 million. So Brazil is uh very clearly the global king as it relates to soybean production.
SPEAKER_00U.S. ethanol production increased last week. Weekly output was reported at 1.02 million barrels per day, up 1% compared to the prior week, but down 2.2% versus the same week last year. Ethanol stocks rose to 26.02 million barrels. The print was up 1% compared to the previous week and up 2.5% compared to the same week last year, according to Reuters data. U.S. ethanol margins range from 5 cents to 45 cents positive across the corn belt.
SPEAKER_01Yep, margins are good. Keep on grinding. Uh, the production number is good. We are still, as far as I my understanding goes, we're still not quite at the pace needed to hit this uh corn for ethanol number that USDA has punched in the balance sheet. But you could talk a lot about the um old crop balance sheet. Exports are probably too low, maybe ethanol's a little too high. Feed and residual, everybody thought was too high. And I don't know if that's still the narrative or not. We'll find out. Ethanol stocks are too high, but they should grind lower as the uh driving season, if you want to call it that, uh kicks up here in the United States. What did cattle do yesterday?
SPEAKER_00Cattle futures traded mostly higher yesterday. Live cattle were 20 cents lower to 257 higher. Feeder saw gains ranging from 67 cents up to 212. Box beef prices were lower. Choice was down 272 at 389.62, and select was down 261 at 389.63.
SPEAKER_01I'll call the outside markets quiet this morning. The stock market is mixed, treasuries are mixed, uh, US dollar is quiet. Crude oil is down$1.82 in the June WTI 93.29 last trade. Have a great day, guys. Back on Friday.