Emerging Evidence of Reduced Grain Production Amid Fertilizer and Inflation Issues

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🌾 Australia's wheat production is facing a major decline — dry conditions and soaring input costs from the Iran war could slash output by up to 41%, potentially dropping to just 21mmt. As the world's third-largest wheat exporter, this represents a serious global supply shock.

🌱 Brazilian soybean acreage growth is hitting a 20-year low — rising fertilizer costs tied to Middle East conflict are slowing expansion to under 1 million new acres for 2026/2027. Meanwhile, this season's crop is on track to be a record 180.1mmt.

🤝 China and the US agreed to cut agricultural tariffs — both nations confirmed a reciprocal tariff reduction framework, though specific products and dollar figures remain vague. As always with China, watch what they do, not what they say.

📉 Corn futures dipped while soybeans edged higher — the Dec26 corn contract settled near $4.98 as traders waited for more details on the China deal. Nov26 soybeans added 2 cents to close at $12.03.

🏭 The USDA is pushing to boost domestic fertilizer production—permitting is being fast-tracked, and tariffs on Moroccan phosphate imports may be removed to ease costs. An economist will also be hired specifically to monitor farm input prices.

📈 Treasury yields are surging to near 20-year highs — the 30-year yield broke above 5.18% as war-driven inflation fears and massive bond issuance rattle markets. Analysts warn the Fed may be forced to raise rates rather than cut them.

🌽 Lawmakers are calling for immediate farmer relief — Senator Boozman supports the USDA's long-term fertilizer plans but says near-term financial aid is urgently needed. He also renewed his push for a new farm bill and year-round E15 sales.

Transcript

SPEAKER_00 0:08

Good morning, everybody. It's Wednesday, May 20th, 5 24 a.m. Central Time. Grain markets are mixed this morning. December corn futures down one and three quarters at$4.96. November soybeans down two and three quarters at twelve dollars and a quarter cent. July Chicago wheat up three at 6.70 and a quarter. July Kansas City wheat up two and a quarter at 7.06. September spring wheat up three and a quarter at 721 and a quarter. We're not going to start with China today, although we do have a China story. Let's start with Australia.

SPEAKER_01 0:37

So Australia's wheat production is expected to decline significantly due to elevated input costs stemming from the Iran war and ongoing dry conditions. This season's wheat acreage is forecast to fall between 7 and 20% from last year, while production is expected to decline anywhere from 16% to 41%. Under the most pessimistic scenario, output could drop as low as 21 million metric tons. Australia typically imports more than half of its nitrogen fertilizers from the Middle East, leaving it particularly exposed to ongoing supply disruptions. Meanwhile, dry conditions across key growing regions are expected to impact both acreage and yield, further constraining supplies.

SPEAKER_00 1:18

We believe or know to some extent that global agricultural production will be affected by the Iran situation, by inflation, by the fertilizer situation, higher fuel costs, all of those things. To this point, however, and still it's very difficult to quantify to actually put numbers on this stuff. So we're starting to see some numbers and some estimates emerge. Um USDA is projecting the Australian wheat crop at 30 million metric tons. That's less than 4% of global production. Um this particular, I don't even know which group, which group was it in Reuters, did they say it was uh I don't I don't I don't have the article in front of me, anyways. So some of the groups down there are talking, okay, as low as 21 million. Now, if that was just Australia in a vacuum and you drop from a USDA estimate of 30 million down to 21 million, that's a big cut, but 9 million metric tons is the end of the world. But if you start to see that become a trend across global wheat producers where, hey, we're off 10%, we're off 20%, that turns into a big issue. And I'm not predicting that. I'm just saying, like, this is a fluid situation and a moving target, and we don't know exactly how it's going to turn out. Australia does matter, uh, more so in the context of global wheat exporters. They're the fourth largest wheat exporter accounting for or projected to account for ballpark 11% of all global exports. Global wheat production is expected to decline this year. This is the USDA numbers for the forthcoming marketing year. Um, expected to decline 3% in 26 or 27 from a record level uh this past year. So if if this is the case and you could see a decline of even 4%, 5%, you'd probably still be healthy or adequate in terms of global wheat supplies. But if you begin to run into a situation where, you know, these groups out of Australia who are talking, you know, big time production cuts, you know, 20, 30, 40% production cuts versus last year, and you start to see that reflected in other growing regions. And it's kind of like, oh, this isn't just one place, this is everywhere. Um, that's when this turns into a real problem. And there's just there's nobody out there right now that can quantify any of this. We're just we're very much in the beginning stages of trying to understand how how the fertilizer situation, how the fuel situation, how the inflation situation um it's gonna how it's gonna impact all of this. But we're getting started.

SPEAKER_01 3:40

Brazilian soybean acreage is expected to experience its slowest growth in two decades, according to Agricultural Consulting Group Veries. Soybean acres for the 26-27 season are projected to increase by roughly 988,000 acres. The slowdown is largely attributed to rising input costs, particularly elevated fertilizer prices linked to the ongoing conflict over in the Middle East. Meanwhile, according to Conab, the season soybean crop is slated to be record large at 180.1 million metric tons.

SPEAKER_00 4:12

Okay, so similar-ish story in Brazil with regard to the soybean crop. Um, they've got some problems down there. Profitability is not very good or non-existent, they've got high interest rates, they've got inflation. Um, USDA is projecting, and again, I USDA is not, these are early projections for the new crop marketing year. These are not this is not uh uh the Bible by any means. In any case, USDA is projecting a 3.1% increase in Brazilian harvested acreage. They're gonna be 123 million harvested acres um next year, up from uh about 120. So they're they're talking a 3.1% increase. That may not be reality according to this group. So again, it's it's a similar story, and we ask a similar question like what impact uh in the case of Brazil, more so inflation production cost, but also fertilizer. Same, it's it's it's all kind of the same related, you know, Iran story. Um, what effect does it have on production? We don't know, but we're getting started and we're gonna begin to understand a little bit more, but still very much a fluid situation.

SPEAKER_01 5:16

China and the U.S. have agreed to cut tariffs on agricultural trade, according to a statement released Wednesday by China's Commerce Ministry. The statement said that both countries in principle agreed to include relevant agricultural products in the reciprocal tariff reduction framework while also setting guiding goals to expand two-way trade in agricultural products. No details were included with regard to which products would be purchased. The$17 billion that the White House announced earlier this week was also not included.

SPEAKER_00 5:47

So China acknowledged some of this that there's going to be some tariff cuts with regard to ag products. They didn't say which products, they didn't even talk about the 17 billion. China has um not been very specific. They've been very vague about all of this, even the purchases that have actually occurred, and we've used this graphic every day this week so far, but this is the fact sheet that the White House released back in November. And it said China will purchase at least 12 million metro tons of U.S. soybeans during the last two months of 2025. Um, China never came in and acknowledged that officially. They never said the 12 million metro ton number. I don't think they actually signed anything, but they did buy the soybeans. They bought all of the 12 million metro tons of soybeans. Um, they were a little bit late on the purchases, but it it did happen. So just because China is not acknowledging the 17 billion number doesn't mean that it's not going to happen. It could very easily happen. In fact, recent evidence would say that, hey, the White House has been okay with this. Now you go back to the phase one trade deal, as I talked about yesterday, there's there's differing and contrasting evidence of how solid these trade deals are uh with Trump and China. Um I've also used this graphic every day this week. And basically what the White House is saying is that, hey, soybean purchases, you know, depending on how you value new crop soybeans, you're talking at ballpark$10,$11 billion, and that$17 billion could include anything. It could be corn, it could be sorghum, it could be, I think, beef products would qualify. Um, but it would it would be a big positive if realized. It would probably lift some of these markets. I think there are some people out there right now who believe that China is uh perhaps interested in buying some uh U.S. corn. We've got plenty of it and it's competitive. We'd love to see it, but um not any any tangible evidence of that just yet. So it looks like this is moving in the right direction, but China playing this thing uh very very tight lip. They're not they're not saying a ton about it, but they did acknowledge um some tariff cuts.

SPEAKER_01 7:43

Corn futures edged lower yesterday. The December 26th contract was down slightly to settle near 498 per bushel. Yesterday's pullback followed Monday's impressive rally that was driven by the White House announcing that China had agreed to purchase U.S. agricultural goods. Traders were looking for additional details surrounding the agreement. Soybean soybean futures posted modest gains with the November 26th contract rising two cents to close at 12.03 per bushel. Meanwhile, wheat futures were largely unchanged to slightly higher despite a decline in winter wheat conditions reported by the USDA on Monday.

SPEAKER_00 8:18

These charts all look still good and constructive to me. These look like bull trends, generally speaking. Um, dece corn, trend support near 480, resistance at 506. You you got a 26 cent trading range you're dealing with, and we're kind of toward the middle of it right now. Chinese purchase is possible. Uh, I've heard it discussed, I've heard it rumored, no concrete evidence of anything, but that chart looks good to me. Same thing with soybeans. This is a good looking chart. It's been trending higher. We've we're able to hold uh trend support last week. So support near 1171 resistance at that 1214 high from uh last week or two weeks ago. Chinese purchases of new crop U.S. soybeans incoming question mark, very possible. The White House fact sheet, of course, um, which they're they're sticking with, says that China will buy 25 million metric tons, I believe, of new crop soybeans. And typically, if they're gonna buy that amount, they would need to start buying pretty soon. So that's something that people are on the lookout for. Hey, are we gonna see some flash sales for uh of new crop soybeans to China? Haven't seen them yet. Uh HRW wheat is flirting with some trend support. The SRW chart looks a little bit different. We're a little bit further away from trend support. That is a pretty steep trend line. So if you were to break out below 690 and and flirt with some some lower levels, I don't think that would be the end of the world necessarily. So all these charts still look good to me. These are all still uh bold trends as far as I'm concerned.

SPEAKER_01 9:38

If 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?

SPEAKER_00 9:45

Lewis Stearns is our resident agronomist, and the thing that we love about Lewis is that he is an independent consultant. So he doesn't sell fertilizer products, he doesn't sell seed, he sells consulting services. So he's not really biased with regard to any of the uh information that he uh tells us. We did a quick intro to cover crops yesterday, talked about some of the finances, some of the agronomy. Um, this is something that I know very little about, but Lewis knows a lot about. So he was on and did like a quick intro. We may have to do a follow-up with some QA, and we may do a uh kind of like economics of cover crops type thing with Chris and Shay at some point down the road. We did a crop insurance update with Ryan Bennis on Monday. Wheat claims, rising grain prices, arc and plc. The winter wheat thing is interesting. A lot of guys in the Southern Plains are gonna have uh uh very much reduced production as a result of drought. And uh this forthcoming insurance pricing window is going to be very important. We talked about that. Uh, Ryan made a cool ARC PLC calculator uh available to our crowd. Matt Bennett is going to be on today for a 20 questions mailbag segment. In those segments, we take questions uh from our premium subscribers. They're usually about grain marketing, grain markets, uh storage, logistics, cash spreads, that sort of stuff. We've got some very good questions that'll be out uh later today. If you'd like 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 at any time. No other fee, no other obligation, nobody will try to sell you anything else. If you are a farmer and you want to be in the know and you are the decision maker in your farm operation, you do the marketing, you buy the crop insurance, you borrow the money. This is the stuff that you got to see. You know, our YouTube show, our podcast, it's a news show. It's kind of like here, here's the headlines of the day. But this stuff doesn't really help you to make decisions. The uh the premium stuff will help you to make decisions and uh is a great value at$50 a month. You can sign up on your phone, it takes about 30 seconds. Give that deal a shot this morning, guys.

SPEAKER_01 11:34

The USDA is prioritizing efforts to expand domestic fertilizer production and reduce farm input costs as part of its long-term strategy. The agency is accelerating and restarting multiple fertilizer plant projects under the fertilizer production expansion program. Federal permitting is also being fast-tracked. In the near term, the agency is considering measures to ease supply constraints, such as potentially removing tariffs on phosphate imports from Morocco and adjusting transportation rules to reduce logistics costs to further address rising input costs. The USDA is also, uh, excuse me, the USDA plans to hire an economist focused specifically on monitoring and analyzing farm input costs.

SPEAKER_00 12:17

I'm not a fertilizer expert, but our friend Josh Lynnville is a fertilizer expert, and I asked him about this. This is what he told me. He said, removing government roadblocks that allows increased domestic fertilizer production is a great thing and is sorely needed. However, we need to make sure that what is being built, produced is what is needed. American farmers need to see domestic nitrogen and phosphate fertilizer production increased, increasing products that are already well supplied or products that are not necessarily needed at the farm level do little to fix the problem at hand. So I think Josh is a little skeptical of all of this, and I am too. I'm glad to see that they're uh at least attempting to uh uh arrive at some sort of solution here. The solution is to get the Strait of Hormouths reopened because this is going to take a long time.

SPEAKER_01 13:04

Treasury yields surged yesterday amid renewed inflation concerns. The 30-year yield climbed above 5.18%, reaching its highest level since 2007. The 10-year and two-year yields also moved higher as markets reassessed the outlook for interest rates. Numerous economic reports released last week suggested inflationary pressure pressures are reaccelerating, driven in large part by rising oil prices linked to the Iran war. As a result, investors are increasingly pricing in the possibility that the Fed may raise rates rather than cut them. Higher borrowing costs would likely slow consumer spending, which in turn would slow economic growth and put pressure on the equity markets.

SPEAKER_00 13:45

Yeah, this is uh pretty crazy stuff. Long-end interest rates at their highest level in damn near 20 years. I asked our friend Jim Urio about this. Jim has been a professional interest rate in Chicago for 40 interest rate trader in Chicago for 40 years. And this is what he told me. The sharp rise in long-end yields seems to be caused by two factors. The first one is bad, and the second one is really bad. Many analysts believe it's because inflation expectations have shot higher. I think that's legitimate, particularly globally, but incomplete. I think the far more nefarious reason is that the market is starting to do the math on how many bonds need to be sold to finance a war that's cost a made costing an estimated$1.8 billion per day. Couple that with the$11 trillion of bonds that needed to be sold independent of the conflict, and the numbers became overwhelming. Don't buy what the government has to sell a ton of. Lastly, I believe that at some point the Fed will come in and begin buying treasuries. That's probably closer to 6% on the 30 and 5% on the 10. Um, that's information I should have charged you for because it's absolutely fantastic. But um, in any case, that's not necessarily a good thing.

SPEAKER_01 14:56

Uh lawmakers are advocating for fertilizer relief alongside immediate financial assistance for farmers. According to John Bozeman, recent USDA efforts and proposed legislation to expand domestic fertilizer production will provide long-term support, but near-term relief in the form of financial aid is needed. Bozeman called on the Senate to pass a new farm bill, which he said would support farmers and complement improvements made in last year's One Big Beautiful bill. He reiterated reiterated his support for year-round nationwide sales of E15, though the measure faces a challenging path forward in the Senate.

SPEAKER_00 15:31

I believe he said something about the bridge payment. Like, didn't he say like we had a bridge payment, but it wasn't enough?

SPEAKER_01 15:36

Yeah, that's basically what he said.

SPEAKER_00 15:37

I'm very much torn on this. We we've spent uh a lot of time discussing direct payments to farmers and the good things and and probably more so the bad things about it. This situation right now is very interesting because the farm economy, I think, as it relates to this fertilizer situation, it's kind of uh bifurcated, might be the word. Like your big operations in the central corn belt apparently did a very good job of getting nitrogen needs and other things locked up prior to the big the start of the Iran conflict. But outside of the Central Corn Belt and maybe smaller farm operations, I don't think we're in that same situation. And I think that they were kind of left uh hanging out to dry with a lot of this. So the financial situation of the farmer uh generally speaking in the United States is maybe not that uh dissimilar to like the general consumer. We've talked about how the consumer economy is K-shaped. Like if you're an asset owner and you're in the upper end of that K, you're actually doing really well with inflation. But if you're in the lower end of that K and you're not an asset owner, you're uh you're SOL, you know? And the farm economy, I don't think, is as bifurcated, but there is a group that did very well in terms of getting their needs covered prior to this Iran conflict, and there's a group that didn't do so well. And that group that didn't do so well is the group that I'd be a little worried about. What did cattle do yesterday?

SPEAKER_01 16:58

Cattle futures were higher, live cattle were 10 cents to a buck 20 higher, feeder saw gains ranging from 77 cents all the way up to 480. Box beef prices were also higher. Choice was up 361 at 395.75, and select was up 335 at 393.58.

SPEAKER_00 17:13

SP is up about four tenths of a percentage point. The Dow's up 100 points, Treasury's up just a little bit, crude oil is down 287 in the July WTI at 101.31. Have a great day, guys. Back on Thursday.