Beans, beans, the magical fruit! Weekly market outlook: Feb. 9-13th

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Shay

Foulk: Welcome back everyone to the Sunday Market Outlook as we record here the first week in February. We have Garret Brown with Kodak Risk Advisory joining us. Garret, I think most of our discussion today is probably going to focus around soybeans. If you would, could you give just a little bit of a historical context when you think about the month of February on the grain side in general, but specifically soybeans and what we're seeing that's drastically different here this week?

Garret

Brown: You bet. I mean, one thing that we are used to in February is maybe a lack of volatility. Typically, you're not seeing price highs being made. A lot of us expected that to be the case last year, that didn't end up being the case, right. So, you know, talking to some of my crop insurance buddies here, they're basically saying this is great. This is, this is making crop insurance more affordable with a lack of volatility there. The Brazilians are typically taking off their crop depending on what's going on down south, you may have more or less volatility, it doesn't appear that there's a lot of issues in Brazil. And hasn't been for most of this season. Most of that's far southern Brazil and Argentina. And obviously this year, basically just the potential that China could be in the market for more soybeans out of the United States.

Shay

Foulk: Yeah. So this week was pretty crazy. You know, a Truth Social post or tweet or whatever it is came out and you just have massive market moves as a result of promising maybe some more deliveries there on the, on the China side. This is, this is a historical record of volume that occurred on the trade side this week. Is that accurate?

Garret

Brown: That would be accurate. I, you know, I'm just looking at— we tracked the last 10 days here. And so I had just pulled it up and, you know, somewhere between 150,000 and 300,000, which seems to be kind of your typical volume day, just depending here. And on February 3rd, if this is accurate, I think all contracts traded about 930,000.

Shay

Foulk: Yep, that's what I had heard as well. And it's kind of hard for maybe your farmer that's not on the trading side to comprehend that. I mean, truly unheard of. I mean, that's historical precedence there, correct? Yes. So volatility loves it though. Yeah, lots of moving pieces there. So as a result of that, you know, as of this morning, we were looking at March contracts, I think trading up into that $11.30 range, settled back down here. As we record on Friday, February 6th. When I think about the opportunities that growers have that are hanging on to bushels from 2025, maybe have cash flow needs and are looking at storage cost, interest and opportunity cost, why does a farmer not liquidate what they have on hand and then focus on '26 at this point?

Garret

Brown: I mean, maybe this isn't probably what a guy wants to hear who's trying to preach diligence and constructive risk management. But I think part of it might be just because profitability here with the expenses as high as they are isn't necessarily great. And I think, you know, I stand by my comments earlier in the season that said that we could be looking at prices that are above $12 at some point. The problem is, is, you know, we've now come past that January report. And so the yield component is locked now. So where if you had thought that yield could maybe slip even just a half a bushel, it drastically tightened up the S&D. D, right? So if you're looking at, say, $13 beans, that's a drastically different profit scenario.

And so if you're looking at, you know, maybe you're looking at $150 an acre profit in a certain, you know, in that situation versus you're just trying to scrape by just to break even here, how many years difference is that? I don't— I think a lot of times farmers get knocked because they hold too long, or they're too greedy, or they're just acting dumb. And I don't necessarily— I mean, certainly there are things like that. We'd all say we've done that. But there's probably a reason. It's because we got— somebody got burned and they had a chance to make up multi-years worth of losses or break-even years with, with a sizable profit. Yeah, I'd just probably leave it there.

Shay

Foulk: And we, you know, we have— or I conducted a survey here over the last week and had almost 500 respondents from across the country answer in and say that roughly 74% sold on 2025 soybeans That leads me to believe that there's not, you know, generally speaking, there's not a lot of soybeans to move. If we have this tightening from the S&D standpoint, where maybe a lot more projected demand out there, even with a significant supply, you know, maybe there is more upside potential there than we thought.

Garret

Brown: I think it's possible, you know, the market, there's a lot of talk and words printed early on in the season about, well, how things can't happen. We can't get a trade deal. Well, then we got a trade deal. And it's funny, we actually had a blog post, I think we talked about at one point, it's like, well, we got these different things that are kind of showing up suggesting that we're getting closer to where there could be a deal. And, uh, there ended up being a deal. Then we had— then, then there was like, well, how much? Well, it's 12 million tons. Well, that's not going to happen. And, uh, then, you know, we, we spent a lot of time arguing about Well, what— when is it? Is it by the end of this year? Is it February? Is it the end of the year? And the administration could have certainly been a lot more clear on that.

But at the end of the day, we got 12 million tons sold to China by the end of January, prior to the end of January, right. And so a lot of the naysayers are now 0-3 on the soybean market, similar to what happened last year. And so I don't think we can count out that China comes back to purchase. Maybe it's not 8 million tons, I can totally sympathize with all the reasons why it might not happen. You know, Brazilian beans are so much cheaper, they're in plentiful supply, it's not economical, like, you know, whatever. But last time I looked, I know I've been a little bit hit or miss on some of the stuff here this week, and there's been a flurry, so we're getting, getting beans marketed and that sort of thing. But Chinese corn and soybean prices are, you know, at the upper end of the spectrum, or shortly just off contract highs.

It certainly seems as though the economics maybe aren't matching up totally, and that there's reason to purchase beans from someone. So I guess, like I said, I guess I'm a little bit optimistic. And so I guess as I look at the S&D over the rest of the year, you know, I would probably agree, I think we got a lot of clients that are in a similar position. The biggest thing was just trying to avoid selling in those lows. And I think we've all got some handful of sales, at least here or there where we could wish we could have had them back. But When we look at the demand component of crush, for example, when I look at— one of the tools I have is CommodityView by Barchart. And I can go in there, and I can just chart out a historical seasonal chart for, say, the last 5 years for board crush.

And when I look between now and, say, July, we're either looking at the best crush for about this time of the year, or certainly somewhere around the second best of the last 5 years. So it's hard for me to look at this and say, well, we should be slowing or idling plants. You know, there might be little things here or there. But NOPA crush data seems to be a little bit more in line with that way of thinking than USDA's crush data. And we know that, you know, the first 2 months of crush data we got out of Brazil, not to get into, or excuse me, out of USDA, not to get into the weeds, but we're like, and keep in mind, they were closed. We're just so close in year-over-year gains, we're talking like point 0.5% or something difference in the year-over-year gains between I think September and October. It just made you wonder. NOPA was a little bit more variable.

And then it just kind of plummeted from like 9-ish percent with USDA data down to like 5.6% or 4.7% or something. It was just weird. Whereas they were kind of maintained. And while they've come down a little bit, not nearly as much as USDA has. And so my point in saying is, it would appear that if NOPA is maybe a little closer and crush, board crush margins seem positive, that perhaps USDA is underestimating crush and with you know, them having closed their doors this year, could USDA be underestimating crush yet by another 50 to 150 million bushels? Maybe. And then the export thing, I mean, I know we track that fairly close. And I was just to see if I could pull it up here. So this week sales really dipped, China basically didn't buy anymore, we needed to do 10.68 million bushels, we did about 16. Last week. The bar is not high to just maintain at this level.

And we only need a couple of weeks of, you know, relatively decent sales to come in here. And all of a sudden, that number that USDA has got penciled in really has to be ratcheted up. So I guess we thought before that, you know, the, the latest decline in USDA's export figure was a little premature. I still think that's a fair question to say, could it be premature? And Quite frankly, I mean, if it's just an additional 8 million metric tons, I don't think we got the beans for it, certainly not at this price. But I guess the real question comes back is how do you manage your risk knowing that you don't want to fool me once if you didn't get sold up above $11 the last time. I don't think you want to be fooled twice. But one thing about it, you know, you can look at call options, you can look at implied volatility, see if call options are really very expensive. Maybe look out to July.

This is just an idea. We're not recommending any trades, but just look for yourself and just say, based on what we gained here this week, you know, could I look at a certain amount of that premium being spent to basically lock in a minimum price? Doesn't mean you have to lock up all your basis. I think there's potential there yet, but at least then give yourself some upside through the, you know, almost the end of June.

Shay

Foulk: Yeah. And one thing, maybe a little bit too early too, as we look at 2026, but on the acreage side, A lot of guys down south looking at— certainly don't want to grow cotton, probably don't want to grow rice. A lot of those acres, even areas of southern Illinois, don't have the cash income or the cash ability to put in a corn crop even if they wanted to, or they're maybe being more conservative. I'm kind of on the opinion right now that we're going to probably have significant acreage of corn again, but we could also probably have a pretty significant acreage on soybeans with some of these other areas transitioning back. So that's kind of the last piece on the soybean outlook for 2026. That's top of my mind right now. Any thoughts around that?

Garret

Brown: I think that's fair. I mean, I would argue up and down that the acres look really wonky this year just due to the logic, we'll say, because I can't really math it out, but urban sprawl, solar panels, wind turbines, all that stuff. And then I think, what, 13-year high on CRP acres? I really struggle to see how that, you know, and then I really sympathize with our distant neighbors, you know, from, say, North Dakota into that central Minnesota area, not southern central, but truly central Minnesota. I've got a friend that's from there and just has so many relationships and friends of his that, you know, they're in a kind of a depressing state right now because there was a lot of water impact there. And at least from the data, like maybe I just didn't dig deep enough because I just really struggle with their data in general and putting a bunch of time into it.

So I just don't trust it right now. But it doesn't seem like they did anything with that, I guess, up to this point. So yeah, I don't know, I've heard kind of both sides of the spectrum. But I would guess, yeah, probably more corn. And it's hard not to see kind of an uptick in beans based on where bean futures are trending right now. I mean, today we trade up— it traded up over $11. You know, with, with ECL coverage on, you know, at these price levels, I guess I just feel like that might have some impact.

Shay

Foulk: Well, I don't have much to say about corn other than there's a possibility of things maybe staying ugly here with how we've been. Haven't seen a lot of movement there here recently. Any, any general thoughts on corn? We don't have to beat that one up here today.

Garret

Brown: Well, I've got a lot of emails here in the last 4 days about elevators being full of wet corn. Up in North Dakota, where, where a lot of folks are that we're talking to every day. So things are moving. But, but yeah, I mean, the price on the board has been pretty subdued. It was nice to see a new high today, $5.36. And, you know, after that report is like, well, okay, we're probably going to have to take USDA's information and just say, okay, it is what it is. You know, if we start to see this market, if we see this market basically give us half of what we lost that day back again, or within that, that capitulation and say, okay, we probably need to engage the market again. Um, but if we take that out, well then it's like, okay, if it goes back and trades to where we were pre-report, to me that's just about a repudiation of what USDA's data said in January.

And it's a complete repudiation if we were to make a new high, you know, above the highs in that January report.

Shay

Foulk: What, what time frame are you talking about when you say that?

Garret

Brown: I mean, I'm looking at the March. I'm just looking at nearby corn. I just, based on what they put out there, it's hard for me to say that we should make a new high. And I mean, like I said, obviously my bias is coming out. I'm not in agreeance. I'm not in alignment with the yield based on, you know, I hate to keep bringing up North Dakota, but the crop was pretty good up there. Like, don't get me wrong, but it seems like the data that we have trickling in and that the footprint we have, I just, I'm not seeing the 12-bushel better state average. I would say, I, you know, we work with some really talented farm operations up there, and even the crop, even if the crop was pretty darn good, it generally, it wasn't as good as last year from what I'm seeing. Maybe that comes as a surprise to some people.

There's definitely pockets that were really great, but then there was other pockets that were, you know, not, not as good as expected. So I just, I'd say that is You know, if that data maybe is less reliable than what is expected, where else might there be some holes? And so, yeah, I guess, you know, we haven't made a new high yet. So far, $4.35 is curtailing any future price momentum. And I think we just, I don't know, we're viewing that then as, you know, we got to respect that until something changes.

Shay

Foulk: Yeah, absolutely. Anything you want to leave the listeners with as we head into the rest of February 2026 here, Garret?

Garret

Brown: Um, you know, I guess February— or the February WASDE is out here early next week. You know, it's typically not something that you're getting a lot of fireworks out of. I think we just, you know, we're getting up against the deadline for basis contracts that have to be rolled a lot of these locations. So, you know, try not to put yourself into a position where you're up against the deadline, your hand is forced. Uh, you know, if you need to if you got a hedge account, you can always reown stuff. And again, not a recommendation, but just don't get backed into a corner here. Try to do things on your own, you know, on your own will, I guess, rather than the will of the market.

Shay

Foulk: Yeah, I think, I think that's a good and interesting perspective, Garret. I always appreciate your kind of your insight and we get lots of feedback from listeners. Just you're a straight shooter, not afraid to share your opinion there. And we always appreciate that. If people want to give you a shout or look up kind of what your group does, what's the best way to do that?

Garret

Brown: You know, our, uh, we got a website at kodakgroup.com. It's Kodak with a C. And, uh, you know, on our, on our brokerage piece, we're affiliated with Lakefront Futures and Options as individuals. And so it's just a good time to remind everybody, past performance, you know, all this stuff comes with, comes with risk. And so nothing today was necessarily a recommendation other than to just be very mindful of your position and, uh But the market can be volatile. So yeah.

Narrator: All right.

Shay

Foulk: Sounds great. Thank you so much, Garret. And thank you everyone for listening to another episode of the Ag View Pitch Sunday Market Outlook. We will catch you next time.