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
SHOCK Report: US to Lose 30 MILLION Corn Acres
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🌽📉 A new report warns the US could lose around 30 million corn acres by 2050. Weak feed demand and an ethanol blend rate stuck at 10% are largely to blame.
⛽🚗 If the ethanol blend rate doesn't increase, the US stands to lose 6.6 billion gallons of ethanol demand by 2050 as overall gasoline use declines. The Senate is now preparing to vote on E15 legislation after the House narrowly passed a similar bill in May.
📊🌾 S&P Global Energy completed the study, and one US farmer summed it up simply: too much supply chasing too little demand. See graphics from the report below, and click the link to view the full report.
🌪️⚠️ Severe weather moved through parts of the Midwest last night, with tornadoes confirmed near Harpers Ferry, IA and Charleston, IL. Surrounding areas also experienced heavy winds and hail.
🌧️🗺️ A band stretching from central Iowa through central Illinois and into Indiana picked up 1"–3" of rain in the 24 hours ended at midnight. See rain maps below.
🫘🦠 Excessive rainfall across the Midwest and Delta has led to soybean disease pressure, including Rhizoctonia and Pythium. Parts of Missouri, Arkansas, Indiana, Tennessee, and other states have seen over 8" of rain in the last 30 days.
📈🌾 Grain markets finished higher on Wednesday, with wheat futures leading the charge. The Jul26 HRW contract gained nearly 19 cents to close near $6.53/bu, while Dec26 corn gained more than 6 cents to close near $4.49/bu.
🇨🇳🫘 Rumors of Chinese interest in US grains helped support Wednesday's rally. USDA confirmed a flash sale of 372,000 metric tons of soybeans to unknown destinations, which many see as a possible confirmation of that Chinese demand.
Good morning, guys. It's Thursday, June 18th, 5 26 a.m. Central Time. Grain markets are mixed this morning. Matt Bennett is here. He's in a dark parking lot. Are you waiting on a drug deal or what's going on this morning?
SPEAKER_01No, I'm on vacation, but uh I knew you were gone this week, so I was helping out a little bit. And uh there's a house full of people, and the only place I can go is the garage. So we're in a rental place out here in Utah.
SPEAKER_00Appreciate you being here this morning. Let's start off with a fun story. A new report warrants that the U.S. could lose about 30 million corn acres by the year 2050. This report, which was published last week when I was gone, um, it was it was published by SP Global Energy, and they point essentially to weak feed demand and an ethanol blend rate that is stuck at 10%. The report essentially goes on to say, hey, if this rate doesn't rise, the U.S. will lose 6.6 billion gallons of ethanol demand by 2050 as gasoline use declines due to increased efficiency, electric vehicles, that sort of thing. One farmer said this we're producing more grain than ever thanks to higher yields and better technology, but demand hasn't kept pace. This means too much supply, chasing too little demand. The report comes out, of course, as the Senate is preparing to vote on E-15 legislation. Uh, Matt, this was kind of a doomsday report. They had all sorts of graphics in here that were interesting. Uh global population growth is decelerating. Is that a big concern to you?
SPEAKER_01Well, I mean, the bottom line with uh whenever we're looking at population, I mean, shoot, I mean, people aren't having big families in a lot of cases, for sure. I mean, if population is not going to grow, you know, uh you're gonna have a tough time whenever you've got increasing production uh in different parts of the world. I mean, we know everyone's chasing yield. Uh, and so bottom line, if you don't end up using our our what we're growing for some sort of biofuel program, uh there's no doubt that you could be looking at an overproduction deal. Now, I one thing that I thought is very interesting, you know, I've had some growers reach out to me who are around, like for instance, you know, one of the major aquifers, Ogalala, if you will. I mean, there's a lot of question marks moving forward about what water availability is going to be. You know, we may lose a few acres in certain parts of the U.S. just simply due to environment and uh the way these things are getting backfilled. And so uh biofuels is huge though, Joe. You know I've talked about it.
SPEAKER_00We got we got more to talk about here. Don't go to biofuels yet. Um on population growth, have you seen just a side note? Have you seen the graphic about like when the iPhone was introduced versus like fertility rates? And basically like people stopped, people stopped having kids when the iPhone came out because everyone's just doom scrolling and the kids don't go out and drink beer and meet girls. Like it's uh it's pretty it's bad, man.
SPEAKER_01Oh, I know. I mean it it it it's super bad, and it people aren't doing life. I mean, that's all it boils down to. Uh okay.
SPEAKER_00I know it's it's terrible. Uh so look at this one. Global meat consumption growth is decelerating. Uh that in in the current economy, it probably has a lot, something to do with pricing, but in general, uh this is not helpful either.
SPEAKER_01Yeah, but I I do think that in a lot of cases per capita consumption is fairly strong, especially with the onslaught of you know these protein-rich diets. But uh, if you lose if you're not taking population in the right direction, you know, you're not growing precipitously like a lot of folks thought we would by 2050, if you will. Uh you're probably not going to take meat consumption up. There's a lot of people that feel like, hey, meat consumption is not a great thing. Uh then on the other hand, there's a lot of us that have found that a protein-rich diet actually is a very good thing. So, yeah, I don't know.
SPEAKER_00Do you have any good news yet, Joe? Um, no, we got more bad news. Agricultural yields are outpacing food and fuel demand. And um, they kind of go through this. There's this whole graphic. I'll include the link to the report in the YouTube uh description, guys. U.S. corn yield as an example of technology is a growth driver. They think yields are just corn yields are going to explode um in terms of of of like the national yield. We're gonna be in the 230 to 275 range um nationally in the next 25 years. Is that reasonable to you?
SPEAKER_01Yeah, I I don't want to rule anything out, Joe, but I mean, you know, it getting to the point where you have established yields, for instance, you know, in a lot of areas that are, you know, uh over 200 is a big deal, over 250, of course, a big deal in our part of the world, just getting to where you're averaging that. But you know, you've got to ask what what kind of resources is it gonna take to do something like this? Uh are we gonna have enough uh water in a lot of cases to do something like this? For instance, if you're irrigating, you know, are you gonna be on restrictions? I mean, if you can get the heat to the plant, energy to the plant, uh, but you can't get enough water to it, uh, raising 300 bushel corn and it'll in some cases isn't gonna work. So, you know, I think that might be a bit steep, but that's just my opinion. I don't know what the genetics are that are gonna be out uh, you know, around the corner.
SPEAKER_00Okay, the most fun graphic is this one U.S. corn area needed based on road ethanol demand. And it essentially says that even if you went to E15, and I don't know if that's a mandated E15 or just um optional E15 as is being proposed, that uh we're only gonna need 70 million acres of corn by 2050 versus 95 currently.
SPEAKER_01Yeah, I mean your acre is gonna be.
SPEAKER_00No, I kind of think no, but yeah, I'm the same way. Okay, so that that I threw in this at the end, which I understand they're trying to predict the future here, but the the supply and demand situation as it relates to corn globally is the tightest, the tightest that it's been in 13 years. So like the trend right now is not at all that we're producing too much. Now, maybe in the United States where we're supplied, but globally, this situation is as tight as it's ever been. The way to read this chart, guys, this is ending stocks to use ratio, that white line, the white bar on the far right, 21.39, that implies this is USDA's projection. There's going to be 21.39 bushels of corn left over globally at the end of the marketing year for every 100 that we've used. It's it's the tightest number, if realized, that we've seen in in 13 years. So, like they're making a lot of assumptions here. You know what happens when you assume, but this is the actual reality of what's going on right now.
SPEAKER_01Right. I mean, this is something I've talked about this whole last winter. Uh you know, demand on uh US front, world front uh is phenomenal. I mean, it's the biggest demand we've ever seen. If you look at stocks use for uh US, of course it's not real friendly, but you look at the world, and like you said, I mean it's essentially coming out of the drought of 2012 into that 2013 time frame. Uh, ever since then, what have you done? I mean, uh you're getting back down to those types of levels. I mean, that's pretty snug. And so, yeah, I don't know that I want to buy into what they're seeing just yet. Uh, there's no question that yields could go higher. There's no question that if you don't see big-time ethanol use, yeah, you you're probably gonna have a supply situation, but um, I don't see it right now.
SPEAKER_00I just had to throw this in to put kind of a uh a positive spin on this. It was such a negative, I read through the whole thing. It was a very negative report. They did propose like solutions. I mean, they said, hey, we need higher blend rates. They talked about SAF, they talked about uh using biofuels for uh marine use, um, global expansion, you know, into countries like Africa and India and Brazil, all that stuff. But uh this is as far as I'm concerned in the markets, like the only thing I care about is kind of like, hey, what's happening right now? What's gonna happen the next couple months, the what's the weather look like? This is like a big picture, you know, trying to predict the future type report. And they they could be right, but for right now, they're not.
SPEAKER_01Yeah, absolutely. And I mean, that's one thing I've been thinking about a lot lately is that, you know, some for like for instance, urea has come down somewhat, but some of the other fertilizer, like manhiters, ammonia, phosphate, has not. As we look forward, um, I don't know what acres are going to be this year, but I don't think we're gonna build uh as far as our ending stocks are uh concerned here in the U.S. And next year might be very interesting on what V-grain production looks like worldwide, as expensive as what it is to put corn out, if we don't see you know for a fairly sharp rally. So um, yeah, I do think moving forward there's some question marks as to whether we're gonna get this thing even more snug.
SPEAKER_00Okay, let's switch gears to something slightly more current. Severe weather moved through parts of the Midwest last night. There were a couple of tornadoes, one near Harper's Ferry, Iowa, which I think is Iowa, Wisconsin border area. That was at 5.10 p.m. Central Time Wednesday. There was another tornado near uh Charleston, Illinois, which is not super far from you, Matt, 6.40 p.m. uh central time last night. Many surrounding areas saw heavy winds in addition to hail. There was a band that runs through, you can kind of see it here. This is is 24-hour precipitation through 11 p.m. last night. Uh banned through central Iowa, into central Illinois, into Indiana. Some of those areas caught an inch, two inches, up to three inches of rain, maybe a little bit more locally. Uh, what have you heard about this, Matt? Any crop damage, any anything that's noteworthy?
SPEAKER_01Yeah, not too far from uh, yeah, we're you know, we're gone, obviously, but we were getting updates. Uh, not too far from home. Like I'm talking 15, 20 miles. Uh, they had a lot of two-inch hail. Uh, you know, the the tornado in Charleston, actually, I mean, that's uh 30 miles from from where we're at. There was actually one down around Effingham as well. That's around 30 miles away from where we're at. So uh one thing I'll say, Joe, is that I was on with Kinsey yesterday and I said, you know, it's hard to rally the market uh with too much rain. I mean, we've seen it before. It's it's very hard to see that happen. And I did have several people reach out to me and say, hey, we're getting way too much rain. Uh, we're seeing some yellowing, we're seeing some issues uh that we don't think we're gonna be able to recover from. Uh you know, you go north and be at home, and some of those guys had three and a half, four inches of rain, and they didn't need to get three and a half, four inches of rain. Some of that corn is probably and beans uh probably going to uh be limited as far as yield goes. How widespread that's gonna be is gonna be the the the big story moving forward. I do think that crop condition drainings may not necessarily improve here over the next week or two if you keep getting the just the absolute deluge of rain in a lot of the same areas.
SPEAKER_00Okay, good segue to our next story. Some reports indicate that wet conditions have resulted in soybean disease pressure. One service representative from BASF told Brownfield this week that excessive rains in part of the Midwest and the Delta have resulted in diseases like uh risoconia and pythium. Pythium, you know what those things are? Pythium. Sure, you know what they are. I don't. Yeah, parts parts of Missouri, eastern Kansas, eastern Oklahoma, Arkansas, southern Iowa, Kentucky, Tennessee, Indiana, and Ohio, as well as areas of the southeast, have seen in excess of eight inches of rain over the last 30 days. Any of those red areas is like eight inches or more over the last 30 days. So it's I'm gonna say it's wide, it's kind of widespread. I don't know. You tell me.
SPEAKER_01Yeah, I mean, the interesting thing, Joe, is obviously there's still a fair amount of um, you know, the landmass in the U.S. is under some sort of drought situation. But then when you get away from that, it's it's the complete opposite. I mean, you've had just a massive amount of rainfall, you know, in parts of the corn belt. And there's no doubt that whenever you get off to a wet start, I mean, beans typically don't like wet feet uh corn. You either one of these, once you plant them, what do you want to see happen? You want to see some dry conditions to be able to go ahead and root down, and then of course you want to get rain on the backside of that. But getting too much rain uh does a couple three different things from a disease standpoint. You know, we went in and replanted some ponds. And what did we see after the ponds got replanted into three and a half inch rain the next Monday? That's super aggravating. And we're not the only ones going through it. We haven't had as much as some folks, but I mean we're we're towards the top end right in where we're at as well. So uh it's problematic. And I don't think that you're set up right now uh to be looking at the type of yield uh you know that some people are calling for already, or even last year's type of yield.
SPEAKER_00As you mentioned, the market is rarely going to rally on a wet forecast this time of year. Like if it's if it's it's June 18th, Matt, we're not looking at forecasts that take you out toward the end of June into like 4th of July, if you want to look at the extended stuff. You're just you're not gonna rally when there's this much rain in the forecast. It's not just for the corn belt, it's for the planes. That doesn't mean, however, that you couldn't get into, you know, call it crop tour season or late later in this in the season and figure out, oh man, these rains really hurt the crop. It's just it's not something that I think that I think is gonna induce any sort of buying right now.
SPEAKER_01Agree. Yeah, and that that's one of my points there yesterday. And uh, you know, again, a lot of folks wanted to question me on it, but I agree with them from an agrimonic agronomic standpoint.
SPEAKER_00Not the same as the markets, they're two different things.
SPEAKER_01Right. So from a farm level standpoint, yes, it's very aggravating. You know what it could do to your yield long term. We always have to be cautious on looking out our back door, but as you suggested, there's a lot of areas with a significant amount of rain, but I'm with you. It's gonna just take a little bit longer for the market to want to trade something like this because when you get rain, nine times out of ten, the rain makes grain monitor, is what the market wants to assume.
SPEAKER_00Yep, yeah. The market takes a very simple view of it this time of year. And and once you get more details later in the season, that's when maybe you'll start to trade any sort of like too wet, you know, that sort of yield problem. Uh, to quantify the weather forecast, there's some stuff from our friends at Crop Profit. U.S. corn areas will continue to see above normal rainfall, 148% of normal expected uh on average across U.S. corn areas over the next seven days. And a lot of that that rain is going to be in those same areas that have been too wet. It continues into the eight to 14 day period, 138% of rainfall expected. Uh, tell me about these cooler temperatures. Like there were some overnight lows in the 30s, I think, up in the uh northern plains and and up in Minnesota, places like that uh this week. Is is that a big problem?
SPEAKER_01I mean, if you would get much cooler than that, could be that could be a major issue. You know, uh one thing is interesting whenever you obviously we were we were super warm there for a while, uh turned off a little bit cooler. Uh, you know, one question I've got, you know, whenever I talk to these weather guys is could you turn yourself into the El Nino? Yes, I mean there's there are some correlations that you know sometimes you could have a cooler, wetter summer, actually, uh depending on which analog years you look at. Uh, that's one thing I don't want to see uh personally. I mean, I remember years like uh, oh, for instance, like uh 2009. I mean, that's going back a ways, but you know, we ended up drying every bushel that year, you know. And so uh the cooler temps are very interesting to me. But Joe, I'll tell you what, you get much cooler than that. You could be doing some damage to your crop. And so uh, yeah, I don't know. It's an interesting trend we've seen the last few days.
SPEAKER_00Matt, I haven't been here for a week, so I do have to run an ad this morning. Uh, guys, the premium stuff is where we provide you with information on how to make decisions. You know, the podcast, me and Matt are just sitting here BSing today. But if you want to, if you want to really understand like, you know, some of the farm decision making type stuff, this is what you got to check out. Shea was on last week. Hold and rent or sell and invest. This was a video about land decisions, and uh he included a free calculator. This was super interesting. And uh, we had some subscribers that chimed in and said, like, this actually really helped me to make a decision that I was kind of sitting on. Dave Woodcomb was on earlier this week, and Dave has been absolutely fantastic with his information regarding the funds. We saw a record funds selling uh last week. What happens next? Dave runs through uh some very detailed history on that. It's extremely interesting and useful. Uh McKenzie did a monthly cattle outlook with Ross, and this stuff is fantastic. They're long form videos. If you guys are in the cattle business, this is worth the uh subscription fee. Um, Matt, you were on with McKenzie and did 20 questions. We always have fantastic questions that come in from the premium subscribers. What were the key things you guys talked about?
SPEAKER_01Yeah, I mean, of course, what do you do with some of your old corn? I mean, as far as new corn goes, they've got HTAs in some cases. We want to step in and do something uh locking in bases because bases have improved a little bit on this downturn. You know, it's just a lot of farm profitability, farm planning type stuff. You know, I had a really good question from a person that's just getting started farming uh in their early 30s. And it's very interesting just to hear from people on what their specific questions are. So we just go in and try to answer those.
SPEAKER_00Premium subs, as far as we are concerned, you guys walk on water. And for the rest of you, we would love for you to walk on water also. So give the uh premium deal a shot. It's 50 bucks a month. You can cancel at any time. No other fee, no other obligation, nobody will try to sell you anything else. Give that deal a shot this morning. Uh, grain markets rebounded just a little bit yesterday, Matt. Weak futures led the way. July, Kansas City contract gained almost 19 cents, closing near 653. Corn was also up, soybeans were a little bit higher. You got rumors regarding Chinese purchases of soybeans. There was a flash sale earlier this week to unknown that people thought maybe it was China. I don't know. So you got a little bit of a recovery here. Um, what are you thinking?
SPEAKER_01Yeah, I mean, a little bit of a recovery. Uh, we talked a little bit um yesterday, a couple of the guys I work with about you know how much to expect. I mean, obviously all the charts looked like crap coming into this week. Um, it's pretty tough to get super friendly in here. If conditions, for instance, would stay the same. I'm gonna talk corn real quick. I mean, as far as corn's concerned, I think if you get a 20, 25 cent rally, you probably ought to respect that. If you're in an area, of course, where you feel really good about production. Now, if you're uh sitting in a spot where you don't know what things look like whatsoever, getting scared into making additional sales uh on a 25 cent rally doesn't make sense. So I think it's got to be highly catered uh to the particular grower at this time. I'm not looking for a rally back to five just yet without some sort of massive uh swing in what they're looking at, this crop condition uh situation, like maybe uh you know, or you take acres down, or obviously the third thing would be some maybe some Chinese demand.
SPEAKER_00Corn still, I don't know, Matt. I I'm thinking about like the market, just the dynamic. So the the funds got flat basically. They they cleared out 300,000 plus contracts worth of land. Farmer selling is gonna absolutely just start just totally grind to a halt here if it hasn't already, as as it relates to new crop. Old crop bushels, yeah. Some guys are gonna have to puke them, right? But new crop, nobody's gonna sell anything here.
SPEAKER_01Well, you know, you know, and I wouldn't recommend it. You know, I think as far as old crop goes, though, you're gonna run out of time, you know. I mean, you don't want to hold that stuff uh later in December whenever you've got a huge carry on. You know, I mean, obviously two billion bushels, I mean, they know there's good they're gonna be able to get through to a harvest time frame. And so I'd be very cautious on old crop. But as far as I agree with you on new crop, I I see no reason to get uh aggressive here. Yeah, our group, we've sold a fair amount of corn. You've done the same thing, Joe. Um, I think you gotta you gotta sit on your hands a little bit here. Uh, I do think there's a chance for a rally. I'm just talking a massive rally back to the levels we were. It's gonna take a little bit of work to see that happen to get the funds excited about buying again.
SPEAKER_00I just feel like I feel like the worst is behind us, and I hope I'm right about that and not wrong. Um, there have been cases where the funds, you know, are long and then they build the big net short. I just I struggle to see that in this environment, and I'm trying to be an optimist here. Uh, here's beans. So we did help we did hold above that uh March low in the no bean contract. We've got some uh China chatter. We're gonna get to this flash sale uh business here in a second. The funds are still long beans. Um, why is the bean market acting better than the corn market, relatively speaking?
SPEAKER_01I mean, that's a great question. I mean, from a global standpoint, you know, Joe, I don't see you know any tightness, so to speak. I mean, obviously, Brazil had a pretty decent sized crop last year. Argentina, uh, I mean, this this year, Argentina as well. I think U.S. acres are are thought to to go be growing, you know, a little bit. I mean, that's what most people are thinking is that bean acres are going to be up a little bit this year, you know. And so I do think one of the big things that's been super encouraging, we know that May was gonna be a little bit of a slow month on crush just due to maintenance, uh, but at the same time, it was still fairly strong, and crush just continues to uh impress everyone. I mean, we've got great domestic demand. If if China does step in and buy as many beans is what they said, I know people are gonna say, Oh, why would you believe that? Because that's what they did this last go-round. I mean, they did exactly what they said they were gonna do. So if they do that, this thing could stay fairly snug, even with big acres.
SPEAKER_00Okay, that brings us to yesterday's flash sale. Uh 372,000 tons of soybeans to unknown destinations, 60,000 for old crop, the vast majority for new crop. The rumor earlier this week was that China was coming in for soybeans, and that's why soybeans rallied sharply on, I don't know, I was at the beach. Too was a Tuesday, uh, Monday or Tuesday. Is this Chinese business?
SPEAKER_01I mean, you've got to make an assumption there. I mean, unknown gets switched to China a lot. You you've seen it, I've seen it. Um nobody knows, though. I mean, there's no way to know for sure, but uh there's certainly been some whispers that that's what was gonna happen. Last week they talked like, oh, it might be September before we start buying beans. Uh, the market went down hard. Uh, when do they like to buy beans after they've gone down hard? And so my guess is that it's China.
SPEAKER_00Um, as far as China and soybean purchases out of the U.S. go, China has essentially fulfilled the commitment that the White House laid out uh with regard to old crop purchases. They bought almost all of the 12 million metric tons, and none of it, China never like really acknowledged it. They didn't sign anything as everybody was uh talking about, but they did buy all the beans basically. New crop, we still have nothing officially confirmed. Although, again, there's the unknown destination business, and there may very well be some sales to unknown, so we'll see. Um, Matt, the markets are closed tomorrow, so I'm taking the day off. Are you taking the day off? Yeah, I'm gonna be traveling back home and trying to get my bearings, so yeah, I'm gonna take the day off. Guys, it's uh tomorrow's the Juneteenth holiday, which uh markets have been closed uh for that day for years now. So um we'll be off. Uh no show tomorrow. Everyone have a wonderful weekend. We will be back on Monday. Thanks, Matt. Yep, thanks.