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
Drought DESTROYS Southern Plains Wheat Crop - Why Aren't Prices Higher??
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🌾 US winter wheat is in crisis — only 28% of the crop is rated good-to-excellent, the worst rating since 1996 (excluding 2022), while 40% sits in poor-to-very-poor condition. The top 5 hard red winter wheat states are averaging a devastating 59% poor-to-very-poor rating as drought grips the Plains.
📈 Grain futures surged Monday ahead of the USDA's big WASDE report and the highly anticipated Trump-Xi summit. Corn, soybeans, and wheat all pushed higher as traders bet on revived Chinese purchases and monitored worsening crop conditions.
⛽ E15 ethanol could go year-round nationwide if a House vote passes this week, backed by bipartisan support — but the oil industry is pushing back hard. With wholesale ethanol at its widest discount to gasoline in 20 years, the economic case for E15 has never been stronger.
🌽 The USDA dropped its first look at 2026/27 crop balance sheets today — and with ample supply and bearish headwinds, prices could face downward pressure. Initial corn and soy yield estimates are pegged at 183 bpa and 53 bpa, respectively.
💊 Mosaic is slashing phosphate production by ~10% due to sulfur supply disruptions tied to the Iran conflict squeezing margins from both sides. Additional cuts could be coming if Middle East tensions don't ease soon.
🐄 Trump pumped the brakes on beef import quota removal after fierce backlash from ranchers and lawmakers—cattle futures whipsawed on the news. A similar policy last fall failed to lower beef prices and cratered the cattle market instead.
🚢 US corn and soybean export inspections remain robust, with corn up 30% year-over-year and soybeans up a stunning 49% vs. last year. China alone accounted for 52% of soybean inspections, and flash sales of corn to Mexico and South Korea were confirmed Monday.
Wheat Conditions Are Terrible
SPEAKER_01Morning guys. It's Tuesday, May 12th, 5 23 a.m. Central Time. Grain markets are mostly higher this morning. December corn features up one at 498 and three quarters. November soybeans up one and three quarters at 11.96 and a half. July Chicago wheat up nine and three quarters at 643 and three quarters. July Kansas City wheat up 13.5 cents at 699 and three quarters. September spring wheat up nine and a half cents at 717 and a half. Welcome back to grain markets and other stuff. Um, a lot of you guys join us every morning, but you're not subscribed to the channel. Can you believe that, McKenzie?
SPEAKER_00That is absolutely wild.
SPEAKER_01Guys, if you have not hit the subscribe button on YouTube, do us a favor, hit subscribe. If you're listening on Apple Podcasts, uh, leave us a review. There would be very much appreciated. It'll take you two seconds, but it will very much help us out. All right, we've got a winter wheat disaster in the United States. Why don't we start there?
SPEAKER_00So as of Sunday, 28% of the crop was rated good to excellent, down from 31% the previous week. The rating was the lowest since 2022. However, if if you exclude that year, the rating was the lowest since 1996. It's also important to note that 40% of the crop was rated poor to very poor, up three percentage points from the prior week and well above the five-year average of 28%. U.S. corn planting was 57% complete through Sunday, up from 38% the prior week. Soybean planting continued to progress rapidly, reaching 49% complete, up from 33%. And then the U.S. spring wheat crop was 53% planted compared to 32% the previous week.
Price Action
SPEAKER_01Okay. Winter wheat ratings, 28% good to excellent. Um, doesn't look good on a chart. And the situation in HRW wheat country is much worse than that. Here are a few statistics. Kansas, Oklahoma, Texas, Colorado, and Nebraska are the top five HRW wheat producers in the U.S. On average, these states are rated just 9.8% good to excellent and a whopping 59.2% poor to very poor. Um if you look at the individual breakdown of the poor to very poor category, Kansas is 51% poor to very poor, Oklahoma is 51% poor to very poor, Texas is 60% poor to very poor, Colorado 52% poor to very poor, and McKenzie, Nebraska is 82% poor to very poor. Um these are terrible, terrible, terrible ratings. The HRW wheat crop is just it's just dying or dead. Um as it relates to U.S. wheat production, we grow a lot of different types of wheat. HRW wheat uh last year accounted for 41% ballpark of all U.S. wheat production. So it's the biggest wheat crop that we grow, and it's in a lot of trouble. Uh Kansas is gonna run the Kansas uh Wheat Commission, I believe, is gonna run their crop tour this week. It probably starts today or tomorrow, and uh they're gonna give us some very bad news about that crop, I would imagine. So, you know, the wheat market's rallied, but it hasn't rallied perhaps as much as uh maybe some people believe that it should. And part of the reason for that is wheat is very much a global market and we are really not a big player. We used to be, but we're not anymore. The U.S. accounted last year for only six and a half percent of global wheat production. So when we have a crop problem, especially when it's only one of the several crops that we grow, I mean it it matters and it will help to rally prices, but there's so much global competition out there. Um, one little problem, and and this is a little problem globally speaking, is just not enough, hasn't been enough at this point to just really shoot the market to the moon. I mean, it's it's helped, and you've got the crude oil trade and the Iran thing. That's all helped the wheat market also, but it's not it's not like an end-all be-all in terms of of the wheat market, which is very much a global market. Corn planting is pretty much, I mean, we're are we ahead of schedule? I think we are. There are only a handful of states that are behind their respective five-year averages. Kansas is a little bit behind, Missouri's behind, Michigan is behind, North Carolina's behind, Pennsylvania is behind, every other state is ahead of schedule. So I've been planting um really okay. There are some pockets, of course, that have been uh too wet. A lot of the corn belts have been too cold, and maybe that's something to come back to bite us. Spring wheat planting moving along uh just fine.
SPEAKER_00Green futures rallied yesterday ahead of today's USDA report and the upcoming Trump X summit. The December 26th corn contract gained roughly four cents to settle near 498 per bushel, while the November soybean contract rose about five cents to close near 11.95 per bushel. Traders are optimistic that Trump's meeting with J later this week could revive Chinese purchases of U.S. soybeans. Wheat futures also moved higher as traders continued to monitor severe drought conditions across the U.S. plains. The July 26 Chicago wheat contract gained 15 cents to settle at 634 per bushel, while the July Kansas City wheat contract increased roughly 10 cents to settle at 686 per bushel.
E15 Vote This Week
SPEAKER_01Let's start off with the wheat chart. Here's July Kansas City wheat, and this thing gapped higher last night. So you've now got an open gap, another open gap at 687 and three quarters. I mentioned the crop rating earlier, those top five HRW states were 9.8% good to excellent. That number was down from 14% the prior week. So that was a big drop in ratings in HRW country, and the market is taking notice, uh jumping overnight. So you got two open gaps on the on the chart recently, 609 and three quarters would be the other one. Uh the question is U.S. wheat too expensive versus global competition. Yeah, we're gonna price ourselves out of the export market, and we probably already have uh Kansas Crop Tour this week, and we'll see what they have to say. Uh corn, got a big USDA report today that we'll talk to, talk about in a second. Is it a big report? Depends on how you look at it. Uh the Trump G meeting is, I think, Thursday, Friday, maybe begins as early as Wednesday. I'm not quite sure. Um, are Chinese corn purchases possible? I've heard that discussed. I don't know that China needs the corn, but who knows what's going on in China? And um, if that were to be in one of the headlines, if there's a grain headline at all, that would be extraordinarily positive. Soybeans uh USD report today and and the Trump G meeting, probably a bigger deal for the soybean market. I I would expect that the word soybean is at least mentioned in something that comes out of the meeting. Is it going to be any sort of purchase agreement or or signed purchase agreement? I don't know, but the trade seems to be fairly optimistic about that idea.
SPEAKER_00The U.S. House of Representatives is expected to vote this week on legislation to allow year-round nationwide sales of E-15. While the measure has bipartisan support, its passage remains uncertain. Previous efforts to authorize permanent E-15 sales have largely failed due to opposition from the oil industry. The latest proposal, however, links E-15 expansion to limits on exemptions from uh biofuel blending requirements for small refineries, creating a divide within the refining sector. Meanwhile, the conflict over in the Middle East has pushed oil prices higher and increased fuel costs, while ethanol's deep discount to gasoline, its widest in 20 years, has strengthened the economic case for expanding E15 sales.
USDA Report Today
SPEAKER_01I believe the vote's going to be tomorrow, Wednesday. And the biofuel lobby is not sure if they have the votes. They don't know if they have the votes in Congress to do this or not. As we mentioned previously, ethanol is trading at a massive, massive discount to gasoline. And if you can't push this thing through now, I don't know that you ever push it through. But um, we'll see. We'll see. We'll have some news to discuss uh perhaps Wednesday or Thursday morning.
SPEAKER_00As you just mentioned, we have a USDA report coming out here this morning. It's going to be released at 11 Central Time. The report will include our first look at the new crop balance sheets for both the US and the world. The USDA will use the March acreage numbers and trend yields and its initial look at the new crop corn and soybean situation with ample supply projections for both US and world ending stocks and several bearish factors in play. The outlook for corn, soybeans, and wheat leans to the downside.
SPEAKER_01All right. So yeah, there's there's going to be like some negative. The report's not going to be a bullish report, I don't think, because the these numbers, 26, 27 ending stocks. This is USDA trying to estimate how much corn, soybeans, wheat will be uh in case of corn and soybeans, the date would be August 31st of 2027. That's what they're trying to guess with this projection here. How much corn is going to be left in the United States on August 31st of 2027? They can't predict that. You just you can't. It can't be predicted. You're talking uh trying to guess what the U.S. crop's going to be this year. That's impossible. And then you're trying to guess what other crops around the world are going to be this year, and that's impossible. So it's just a starting point. I wouldn't read too much into it. The stuff that will be maybe of a little bit more interest to me will be um the U.S. winter wheat production estimates, the uh old crop balance sheets for the United States, some of the demand stuff I think will be of interest. Uh where are they gonna start on some of the global stuff? I don't know, just like trend-ish type numbers. I mean, it's a it's a it's it's kind of like Christmas morning for some analysts because you know you get a whole new set of balance sheets that you get to start to play with. I just don't know that anything big or or significant is gonna be uh revealed in this report. Premium subs. I will have a post-report snapshot video out within. There's a lot of data here. Maybe there'll be 20 minutes within the release or within 20 minutes of the release uh later this morning.
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 videos?
Mosaic Earnings
SPEAKER_01We've had a lot of uh premium subscribers who are either younger guys or maybe newer farmers or maybe more experienced guys, but they haven't used futures in their hedging. They've always done HTAs or cash sales. And uh we've done several videos on this topic, but yesterday we went into specifics about margin calls and how it all works. And I made a very useful calculator available. So if it's something that you're considering, like, hey, I'm thinking about hedging with futures rather than doing HTAs or cash sales because I want the flexibility, I want, I want delivery location flexibility, I want to uh ratchet my fees down and do everything a little bit cheaper. I want to do things how the elevator does it. You know, I want to use futures, enrollment, take advantage of carries. We talked about all of that, and I made available a previous video that I did with Chris Baron, which was called uh futures versus HTAs, and we talked about the pros and cons of both. Um, this is was very helpful to a lot of our subscribers, I think. Uh Shay was on Friday last week, talked about an equipment cost survey that he ran, hundreds and hundreds of responses, all sorts of different topics. Uh the funds are long, 300,000 contracts of corn. It's actually closer to 400,000 as of this morning, is uh what we believe. But what's next? I ran through some history about what happens when we get to this uh kind of benchmark here. Big soybean problems in Brazil with Ryan Moe. Uh talked about that on, I believe, Thursday last week. MetNet Bennett was on for 20 questions, 50% sold. New crop corn and soybeans. Is that too much or not enough? Uh we made that or did that discussion on Wednesday last week. Guys, uh the premium stuff is blasted out every day. We do two emails per day, 5 a.m. Central Time, uh 10 a.m. Central Time, new premium video every day. That the morning email is jam-packed full of stuff. Uh, when you sign up, you'll see the six most recent premium videos in the uh first morning email that you get. I know you guys are busy, but it takes 30 seconds to sign up. And this is some good uh planting uh content if you're looking to uh have something to watch or listen to. So uh give that deal a shot this morning, guys.
SPEAKER_00Mosaic is temporarily reducing phosphate production due to the Iran War. The fertilizer company is operating its plants in Bartow, Florida and Louisiana at roughly 50% capacity, removing nearly 2 million tons of U.S. phosphate production or about 10% of total domestic output. The move comes as sulfur prices have surged due to supply disruptions through the Strait of Hormuz. Just last month, Mosaic idled two Brazilian for two Brazilian fertilizer facilities for the same reason, taking about 1 million tons of phosphate production offline. Mosaic's margins are being squeezed by both higher input costs and weaker fertilizer demand as farmer affordability is becoming an issue due to rising fertilizer prices.
Beef Imports
SPEAKER_01Not all fertilizer companies are the same. It was last week, I think we talked about CF Industries and Nutrient, and both of those companies are doing very well. Mosaic, not so much. Their stock is off 9.6% year to date, whereas the broader stock market is up more than 8%. Their stock is off 36.3% over the last year. The SP is up almost 27%. They're not doing well. They're making the wrong nutrients at the at the wrong moment. They make phosphate and potash. CF is is a nitrogen story, and um, their inputs are expensive, demand has backed off a little bit, and uh they've got some significant problems the way that it would look. So, yeah, some fertilizer companies are killing it. Mosaic is not one of them.
SPEAKER_00President Trump has postponed plans to temporarily remove all import quotas for beef entering the U.S. Earlier on Monday, reports indicated that Trump intended to sign an executive order allowing increased beef imports in an effort to lower prices. Cattle futures declined uh sharply following the news, as one would expect. Uh later recovering some losses, but still closing lower on the day. The decision to delay the plan followed backlash from lawmakers and cattle industry groups who argued that increased imports would harm domestic producers. Last fall, as we can all remember, the administration implemented a similar policy, increasing imports from Argentina and Brazil. However, the move failed to reduce beef, uh failed to reduce beef prices and instead triggered a substantial downturn in the cattle market.
SPEAKER_01All right. So is this a good idea or a bad idea?
SPEAKER_00I I I don't think flooding our markets with input with uh imports is the right way to go.
SPEAKER_01Um flooding is is flooding a correct is it's gonna be that much that you can say we're flooding.
SPEAKER_00No, because I don't think there's that much beef out there to import. I still don't believe I mean, there's a place for imports and there's a place not for imports. If I know those imports are gonna end, I mean, because we can't continue to let these imports in when the tables turn when we do increase uh beef production here in the US. I am glad to see that President Trump pulled back in this moment because it does definitely mess with uh market psychology.
SPEAKER_01The market did not act that poorly yesterday. I mean, fat cattle were off a buck and a half, feeders were off like two to three bucks. That's that's not a big move these days at all. Right. Right after the somebody knew this was coming, I guess.
Export Inspections
SPEAKER_00I don't yeah. Right after the announcement, they fell hard, but then they clawed their way back. And hopefully the traders just understand like last fall the announcement came out and it really had no impact on fundamentals. Of course it didn't. So this would be the same situation. It's not going to impact our fundamentals.
SPEAKER_01Okay. Export inspections.
SPEAKER_00Yes, U.S. corn shipments declined last week but remained strong. USDA reported that 67 million bushels of corn were inspected for export during the weekending May 7th. The print was down 17% compared to the prior week, but up 30% versus the same week last year. Soybean shipments were near the upper end of pre-report expectations at 24 million bushels. The print was up 30% compared to the previous week and up 49% versus the same week last year. Wheat shipments surpassed expectations at 19 million bushels. The print was up 1.8% from the previous week and up 26% versus the same week last year.
Flash Sales
SPEAKER_01It's a good wheat shipment number. And Joe, you told us wheat's too expensive. It is. Um, these are bushels in all likelihood that were purchased weeks, if not months ago, that are being shipped. We're gonna see a dip in U.S. wheat export sales, and it's probably not gonna be very good. Um, corn shipments and sales have been strong. We're doing fantastic. I wouldn't be surprised to see USDA uh raise their estimate for current marketing or corn export sales a little bit. Soybeans just kind of doing their normal seasonal thing. They just grind to a halt basically during the summer, and this is Brazil's uh time to shine, generally speaking.
SPEAKER_00USDA reported multiple flash sales of corn yesterday. U.S. exporters sold 15 million bushels of corn to Mexico. Of the total, 9 million bushels is for delivery during the current marketing year, and the remaining 6 million bushels is for delivery during the next marketing year. Exporters also sold 5 million bushels of corn to South Korea for delivery during the current marketing year.
SPEAKER_01Got a lot of cheap corn floating around the United States, especially in the Western corn belt, and uh we need to see it shipped out to uh help to improve basis and improve the markets. It's uh it's been a tough deal with regard to bases for those guys out west. Uh, we talked about cattle outside markets this morning. The SP is off 27 points. It's about four tenths of a percentage point. Treasury's off a little bit. Uh, crude oil is up$3.55 at$101.62 in the June WTI. Still not really any uh resolution with regard to the Iran situation. Everybody have a great day today back on um Wednesday.