Bloody June for grain markets - weekly market outlook: June 8-12

Shay: Welcome back to the Sunday Market Outlook on the Ag View Pitch. Today you have Shay Foulk with Daniel Elsner. And Daniel, I gotta tell you, we are going to name this one Bloody June. It has been a week here. How you doing?

Daniel

Elsner: I'm well. It has certainly been a week and bloody is right. I don't think we've seen any green hardly on, on the board here this whole month so far, unfortunately.

Shay: Did we peak in May? Is it too early to make that call?

Daniel

Elsner: I think it's too late to make that call. I would, I would say so, very, very high certainty at this point.

Shay: What's, um, it's kind of interesting, it seems like, um, this departure from energies has been maybe in contrast with what some people would have expected, but time for funds to liquidate and here we are. Is that, is that what's driving this, or what's painting the picture, do you think?

Daniel

Elsner: Yeah, I don't know when the actual switch was, but I think the funds were trading this Iran story for 2 or 3 months. And then it feels like 2 weeks ago, the story switched to more that the crop is in the ground. We had some moisture coming, it's coming up good. And then I think the real turning point was last Wednesday, we broke below trendline support. And the 200-day moving average on July corn. And since then, it's just been an avalanche of selling. And beans, I think it was 2 or 3 days ago, we broke below trendline support and in our support range that we've seen. And it's the same thing. So I think the funds were kind of ready for a switch. They were, they're tired of grains in relation to what's going on in Iran. I think the story more switched to seasonals and and the fact that the crop is in the ground and it's growing and looks good so far.

And once we broke below some of these technical levels, it just snowballed and it's continuing. We're down 4, 5, 6, 7 cents every day on the corn side. And I mean, beans really started to fall apart here as well, down another 10 today, I think. And the funds were just very long, close to record longs on both corn and beans. Going into this. So it was just, um, a setup that, that could have resulted in, in what we're seeing now, where the funds are just liquidating and running through the door. And I just don't think it stops until they're, they're out of their long position, unfortunately.

Shay: So I gotta ask, and, and I always go back to this, is, are they right? You know, is the weather outlook, um, the departure from the Iranian situation, energy crisis association. Are they right? And, you know, there's a lot of dollars that are moving. What does right look like? But we do have crop in the ground. We do have rain in the forecast. Planting conditions were pretty good across the majority of, majority of the Corn Belt. And there's people I know, I understand areas of Indiana and Ohio and Michigan that, you know, had some troubles, but crop's there, it's growing, we got moisture. So what are your thoughts?

Daniel

Elsner: Yeah, no, I, I think this energy issue will continue to be a problem. You're still at $90 a barrel oil, just, just took a peek here. And a lot of people are telling me they're very concerned about the next crop, the '27 crop when it comes to fertilizer prices. So I think that if this persists, um, that's going to be a bullish input in terms of commodity prices, um, because high energy just means high inflation in the long run. But right now, that's not what they care about right now. It's just more of a momentum liquidation event that's happening here. And, uh, we were recording on Friday here, just post-close, so we don't have an updated Commitment of Traders report out yet, but likely they're, they're still quite long on corn and beans, probably 80,000 contracts or something like that on corn and 100 or so on beans would be my guess.

And it might take another week or so for them to fully get out of that. So I think that's what they're trading in the short term. And that's all that they're thinking about in the long term, if they're right or not, I don't think is, is top of mind right now.

Shay: Well, and, and the market's going to move when the market's going to move. I think there's a lot of people that, uh, watch this thing kind of grip and rip up and thought that it needed to continue to go, and then we've wiped out several months of gains in 2 weeks, you know, 10 days really. Um, for operations that sat there and have watched this thing go down, maybe it doesn't feel like we're at, at our bottom yet. Are we at any sort of retracement level that would cause a pause, or is that kind of out the window when it comes to a they're going to exit these positions one way or another.

Daniel

Elsner: I think it's out the window. I mean, we've broken past our, our January lows. I think we're below our August lows now on corn too. So it, it's just really open air there. Um, it's going to stop when it stops. There's no real support here on the chart, I don't think. I think it's just a matter of, of when the funds get closer to a neutral position. Um, I do think, you know, we have these reports at the end of the month acres in stock. So I, I would imagine they wouldn't be carrying, uh, quite a large position one way or the other, um, going into that. But I think in the next, you know, week or two, it's probably going to be continued selling pressure.

And my hope would be by the end of the month, things kind of mellow out and we can, um, you know, see what these reports say at the end of the month and, and hopefully have more of a normal, you know, market environment where we're not just down 7 cents every day. Mm-hmm.

Shay: On the— you mentioned acreage report here coming up in the month of June. When we look back at that, you know, I had kind of joked somewhat last year and even into this year of 100 million acres of corn, you know, 190 yield. And it does seem like there's a significant amount of corn out there because when those decisions were being made, a lot of it was based on just the profitability outlook. And soybeans didn't have the profitability until we had the run-up, you know, throughout the spring here. And I think there was a lot of fertility and nitrogen that was prepaid, and it just went down as corn. Any early pulse on that or thoughts on your end, just based on talking to the customers that you work with, or even looking around the countryside in your area of Iowa?

Daniel

Elsner: There's a lot of corn. This is corn country for sure. And corn looks great. I was, I was out on a farm here yesterday. And just from what I'm hearing from the farmers I work with, the crop looks really good so far. So I don't think that a lot of people switched to beans. It was maybe marginal around here, 1 or 2%. So there was some switching, I know, but it wasn't anything too crazy. But you'll also have people that argue that there's a bigger switch to beans than we think. But then people will also say it wasn't profitable to plant beans, so everyone planted corn. I don't know. I'm just looking out here in eastern Iowa. I don't know, you know, countrywide what that's going to look like. We'll find out at the end of the month. But I still think people are going to be sticking to their corn rotation this year.

Now next year is totally different question because you don't have your fertilizer locked in yet. But for this year, a lot of people did lock it in in the fall that I, that I talked with. So I think, I think we're still heavy corn around here. But We'll see what this report says.

Shay: And I mean, if we're heavy 2025 carryout and have a good crop in 2026, your comment there about maybe concern for 2027 growing season in relation to fertility, energies, some of the other input issues that farm operations are looking at right now, that's not exactly a recipe for success when I look at all those ingredients right there. Mm-hmm.

Daniel

Elsner: Yeah, no, for sure. And we'll find out more, you know, once fertilizer prices come out late summer and into the fall, what that looks like. But with oil where it's at right now, and this Iran conflict continuing in June, I don't think that winds down too quickly. So I would think prices remain elevated through the end of the year.

Shay: So I sold some wheat today. That's something that I don't say very often, but I sold some wheat for 2027. We're gonna put some into our rotation. We've had elevated wheat prices. Any comments on the wheat side of things that you've either found interesting, or it just seems like we were kind of in tandem there for a while with the nasty dry situation in the western Corn Belt, or as you get further west into wheat country and into the south, they were super dry. Wheat's been an interesting one to watch, but it seems like it's kind of following everything else down now that maybe that's— that story's built in.

Daniel

Elsner: Yeah, wheat isn't really in my wheelhouse. But I have seen that it's been following corn and beans pretty closely here, especially corn, and kind of seeing that same trend. So I mean, if the price works for you, take advantage of it, because it doesn't seem like wheat likes to stay high for too long.

Shay: So you're a farmer that is maybe 40% to 50% sold on 2026 crop. You watched corn nosedive from, you know, $5 down to $4.50, $4.35, lower in some areas of basis here. What are you doing? How are you talking to customers? How are you talking them off like the marketing ledge from the cliff that we just jumped off on the commodity side? How should people be thinking about that, Daniel?

Daniel

Elsner: If you're 40 to 50% sold on new crop, you're probably in a pretty good position right now and feeling good about those sales. What I would look at, and I was looking at this 2 or 3 days ago when we were 15 or 20 cents higher was some of these spring prices. You were in $4.60s, brushing $4.70 cash locally. I didn't think that was too bad. You know, for springtime of next year, if you just wanted to sell another 5 or 10% just to lay off some risk. But if you have your harvest bushels covered, I think you're in a good spot and you have some staying power to see what happens here later in the summer. And then post-harvest, you typically start to see markets rally. So you have the option to wait here. I wouldn't get too panicky on that if you're, if you're well sold here for at least what you need to move in the fall.

Shay: So from the end of '25 until, you know, 3, 4 months ago, probably 3 months ago, there was a lot of talk again resurfacing around accumulator contracts. And there's 47 different types of programs that are out there. I don't know all the ones that Cargill runs, but how should people be thinking about those accumulators today based off of we're halfway through 2025, depending on when they set it? We've now seen this drop-off. Just talk through those products or some of the different products a little bit and maybe how they're being affected by what we're seeing in the marketplace.

Daniel

Elsner: Yeah, well, now they all look great. But, you know, at the time people were definitely nervous. I mean, I think they're good to use on 5 or 10% of production. And, and use it when the market's telling you to, when there's good carry in the market. I mean, even on Dec '27, I think you're able to get some $5.20s or better there, um, you know, locked in on some of those, um, you know, guaranteed bushels there. Um, and even on, uh, Dec '26, you could get, I think, maybe $5.30. We got up to, or $5.25, in that range. Um, I know I got $5.35 with the guy on, on March '27. So, um, those are just good opportunities when the market's telling you, when good carry. Um, you don't want to get too crazy on it because, yeah, what if we ran up another dollar? Um, you never know. But with any accumulator contracts, uh, I would only do it if you like the double-up price.

If you're comfortable with, with that price that those bushels are doubling up, that makes sense to do. But if you're not comfortable with that, then, then probably don't do it because you don't want to hate yourself for doing it if it does end up doubling up. I think it just comes down to knowing your numbers. And if the double up number makes sense for you, and you're locking in a margin there, then, you know, do it if it makes sense.

Shay: It'd be pretty tough to not want to double up at $5.20 or $5.37 though. I mean, at least in the environment where we're at today, for most operations, I say that, you know, somewhere in that $4.65 to $4.80 range cost of production, depending on when some of the fertility was bought there, you're looking at a pretty decent margin there for, you know, a lot of our client base. Maybe I'm thinking of that wrong. But that double up seems okay.

Daniel

Elsner: Yeah, I would agree.

Shay: Okay. Um, anything on the soybean side? That's kind of the only thing that we haven't really hit on. I mean, from my perspective, again, timely planting. We've had decent outlook as far as weather goes here. Uh, I think soybeans are just kind of along for the ride with everything else. If we don't have any, um, solid foundation of communication out of anything with China deal related or any additional purchases there Nothing excites me on soybeans right now.

Daniel

Elsner: Yeah, I agree. I was nervous about them a couple weeks ago because you're in kind of a wedge pattern. You had a nice long-term uptrend, but you were in a short-term downtrend over the last month or so. And then we kind of broke some support lines, I think earlier this week or late last week, and then it's just, you know, really, really started to go downhill this week. And funds still have a long position there. So same kind of story with corn. If they're going to run for the door, it's just not going to stop until they're done. I feel like you could sell off another 50 cents pretty easily here on beans. You could go another 20 lower here on corn. I hope I'm wrong, but, um, that seems like the trajectory of where things are going, you know, short term in the next couple weeks.

Um, but yeah, beans are now in the same situation corn's in, and I feel like it's just going to keep snowballing. But on the cash side, I mean, crush margins are still phenomenal, so And it does feel like the farmers running low on beans will get a better picture of that here at the end of the month, um, on the quarterly stocks report. But, um, that's a little bit of a better story than corn. But yeah, crush margins are, are really good. Um, so I think you're gonna have, um, have bean processors, um, they're gonna need to work their basis to get, get the beans bought. So, um, you know, tighter supply there on the bean side than corn for sure, but In the short term, I think they're caught up in the same story.

Shay: Well, I got 5 loads of beans sitting in a bin yet. I'll call those my gambling bushels for now. So if you need some, just let me know, Daniel. I can send them over in bags or semis or whatever. But anything else top of mind that you have as we get Bloody June started off here and as we head into the next couple of weeks here?

Daniel

Elsner: Mm-hmm. I think one of the lessons here, it is to stay one step ahead on the marketing plan, get ahead and stay ahead. I think when people are busy in the field, and I've had farmers talk with me and they're frustrated because they were in the field for 2 weeks and they come back and corn's down 60 cents, what happened? I think before you get into those busy times, whether it's planting or harvest or other busy times of the year, I think it'd be good to just review your marketing plan, see what your percent sold is, see where you want to make that next sale and work some offers or price targets or just get some kind of plan in place. Because the market does tend to move when farmers are busy. So I think just having some kind of plan in place prior to a busy part of the year is just a good practice to execute on some things.

Shay: That's fantastic advice. You know, if you're staying one step ahead right now, you're thinking about, okay, we're getting the spring done. Side dressing, or, you know, be getting things kind of cleaned up, put back in the shed, doing some preventative maintenance and headed into summertime. What's the one step ahead right now? I mean, maybe it's, maybe it's building out that marketing plan for when you get busy again in fall or looking strategically at 2027. That would maybe be my advice is when I look out to these '27 right now, Corn futures sitting at $4.78. We got soybeans on Nov '27 sitting at $11.19. Again, that probably doesn't excite me that much, but, you know, corn, there's still opportunities there and there's still gonna be bushels that you need to move in Dec '27.

Over the past few years, it seems that 16 to 18 months in advance is some of the best sales that have occurred, or at least on par with where you get back up to this peak. Maybe that's the one step ahead. Is that fair?

Daniel

Elsner: Yeah, I'd say so. Yeah, either bushels you're going to be binning for this upcoming harvest, or you're looking out at the DS27 if you haven't gotten a start out there yet.

Shay: Awesome. Well, Daniel, thank you so much for the time. I always appreciate your insight.

Daniel

Elsner: Yeah, thanks you too, Shay.

Shay: And as we head into Bloody June here, I hope you all are doing well. If you need anything from the Ag View Solutions team, don't hesitate to reach out to us. Appreciate the time, and we will catch you on the next Ag View Pitch.