Strong exports, record yields?

Shay

Foulk: Welcome back, everyone, to another episode of the Ag View Pitch. For today's Sunday Market Outlook, today we have Garret Brown with Kodak Risk Advisory. Garret, it's an interesting time of year. A lot of planters have been rolling, and when we have a market outlook of some reports ahead this week. What's kind of top of your mind?

Garret

Brown: Well, I guess top of my mind is the slide that we've seen in corn. You know, corn is king. Corn seems to direct a lot of the price movements that we see in these other grains. It's what we relate everything to. But we have a big report here on Monday that USDA is going to bless us with their opinions of what the next year is going to bring.

Shay

Foulk: I think I want to start there. I had seen a farmer post on X the other day. USDA's projections at the beginning of last year for carryout is somewhere around 2 billion and ended up way short of that, you know, 1.3, 1.4, kind of depending on the numbers. Let's talk a little bit on your feelings on accuracy and how much does that play into the crop year ahead when we start taking these reports maybe a little bit more at face value as we get the crop in the ground and start growing. You know, what are your feelings around that?

Garret

Brown: Yeah, well, very interesting, very huge change, obviously, within the marketing year. I just— just to provide a little bit of balance, if we look at soybeans for last year, their ending stocks figure, at least on my data set here, starts at 335, and their current estimate here Or maybe I need to— maybe I need to take a step back. Maybe I'm looking at '23 here. But anyway, it was very similar, right? So sometimes they're accurate, sometimes they're not. But one of the things that I noticed looking at some of these average trade guesses here, looking at, you know, 1.443. So basically the average trade guess is looking for a cut of domestic carry at around 20 million bushels. Now, I personally think that's really light. In terms of the cut. Exports have been really strong. I like to look at things that we can measure, but the focal point is that seems like a light cut.

And then if you look at 2025, '26, it looks like the average trade guess is being pretty aggressive in how friendly it could be, just given some of the knowns that we already have, such as, you know, over 95 million acres and likely something around 181 bushel yield.

Shay

Foulk: With those numbers, how competitive is old crop right now? You know, from a local basis standpoint, how much of a push is there? But also, how competitive are we on the world market as we look at wrapping up 2024 old crop and moving into, you know, a big 2025 crop here?

Garret

Brown: You know, I think we're, we're competitive. We're obviously competitive. We just had the largest weekly sales since December 19th, show up in Thursday's report. We're expecting that we could have decent sales kind of to push through the month of May. You know, we do have a pretty big crop coming, it looks like, out of Brazil. There are NDVI that are basically a record, if it isn't a record. So we probably need to expect some sort of revision higher. I've seen some estimates of maybe a couple million tons. But from an export perspective, I really like looking at exports because it's one thing that's measurable. I really question things like the stocks report that gets held up in high esteem because I don't know anybody who's ever filled out one of those surveys on the farmer side. So we might have the commercial side, but that's only, that's only half of it, right?

So I guess going to the export side, I just have some notes kind of taken here to give you some perspective. So I mentioned that weekly sales were the highest since December 19th, 64.5 million bushels. When, when you look and see, okay, well, what do we need to do to get our total commitments to USDA's guess? We needed to do like 13.2 million bushels. So figure out how many X that is. But that's on a, on a, you know, that's on a linear adjusted basis. And when I say adjusted, I say, okay, well, let's, let's look at what's actually been shipped. And that's going to be on census data that comes out you know, 2 months delayed, we just got the March data, which had some peculiar things in it actually.

I don't know if we'll get into it here, but when you go and you add in those discrepancies for what, you know, the Foreign Ag Service says was shipped versus what Census says was shipped, that actually falls down to like 7.5 million bushels. So I mentioned that my ending stocks carryout is significantly more aggressive in terms of a cut than the average trade guess. That's because if we do like two-thirds of the sales that we did a year ago from here forward through the balance of the year, assuming some of those discrepancies not continue, just what we've got up to this point, and typically they're very, very consistent throughout the year, you get just about a 2.7 export program. Now there's going to be some that's scoffed, but that's assuming we have two-thirds of the sales through the rest of the season. That we did a year ago.

And actually we haven't seen the pace of sales slow down versus last year. We've actually seen them speed up. So sales versus last year, so we're about 27% ahead and we're gaining on the record-breaking year of 2020-21.

Shay

Foulk: That's really interesting. And I want to interject here with a question around I don't want to beat the tariff situation to death, but there's a lot of optimism out there on the farmer side. I forget which poll I was listening to recently, but generally farmers are 70 to 72% in favor of the tariffs long-term. Let's say we get a deal struck with China. What kind of impact does that have on these numbers that you're talking about? And how does that influence what we might see here through the summer if if the United States can get something done there?

Garret

Brown: Well, you know, that's a really good question. I don't know if it's really a great answer for that. You know, looking at China's carryout, I don't think— I think it's pretty clear, assuming those estimates, that China doesn't really need to buy any corn, but they do anyways. So it just creates a lot of questions. I mean, any sort of trade deal— I mean, so many of these markets, it seems like, are just— it's kind of euphoria-based. It's just whatever the Wherever the wind blows, you know, at least that's the way it kind of feels here. It's— there's just so much sentiment in this thing because I don't think this year is tremendously different than last year. Your major exporter, major importer, basically bin level carryout estimates out of USDA. So you just— there's nothing nowhere else to get it.

Obviously Brazil is going to be a little better this year, but you know, you would expect demand to be higher too because we're just really not at price levels that would restrain demand at all. In fact, I would say demand should be continuing to grow. Look at the price of corn relative to cattle right now as an excellent example. But there's other, other trade deals that we're expecting here too. And it just feels like a lot of these grain buyers, whether they're looking for wheat or corn, have been kind of sitting back on their haunches a little bit here waiting to see what the new crop brings and Rick, you just mentioned last year, I mean, we were expecting, you know, or USDA was expecting a 2 billion bushel carryout here when we started this last season. And we, you know, we're probably going to end somewhere in the mid to low 3s is kind of where I think there's a very decent chance.

I guess I just— sorry, I got a child outside the door here. That's okay.

Shay

Foulk: Having some issues, but Anyways, with the supply piece, that's one thing that I thought would be pertinent to hit on too. You and I had touched base earlier on the, you know, planting progress and it's regional. We'll get slack from people saying, I'm in southern Illinois or I'm in, you know, middle of Ohio and we've been pounded with rain. We got no options here for planting and no prospects in sight in the next 4 to 5 days. And it's a, it's a tale of two sides of the coin this year. My area, northern and kind of west central Illinois, there's a pocket there that I would guess 85% to 95% of the crop is planted and took a drive here over to Chris's place yesterday and a lot of planters rolling, a lot of fields that are already up. We're looking at May 9th here. Planting progress in a lot of the Corn Belt has been pretty phenomenal.

And I know a lot of that has even started rolling in areas of the Dakotas and Minnesota have gotten a large chunk of field work done. So with that being said, supply side outlook, if we have a monster corn crop with good yields, at least anticipated at this point for what we know on the growing season, you know, it's kind of interesting because you talk about the carryout situation and we generally have good demand here, yet corn still sitting at $4.50. Do we have upside potential as we move into new crop, or is it like what you're saying, everybody's just kind of sitting back on their haunches to wait and see what happens?

Garret

Brown: It kind of feels that way. I mean, obviously, I agree. You know, it's the whole plant in the dust thing. I mean, there's definitely something to that, but we have to get rain here at some point. The extended outlook doesn't look very good. I'm not one to you know, bet on an extended outlook, but it's been pretty consistent and it looks like it gets worse, not better, as we go forward. And I know, like, Jay, where we're located, it's pretty extraordinarily dry considering the date. And for sure, you know, we kind of had some similar setup here back in 2023. The difference is we had 5 inches of rain, I think, right around the 6th of May that year, which washed out some nitrogen. So we don't have that aspect, but we also don't have the moisture either.

Yeah, but going back to the demand component, I was gonna say I had read something somewhere that they were talking like a benefit of $750 million just into this little trade deal into the UK for ethanol, right? So I'm just gonna pick a random number. Let's say the number is $4 a gallon. Just to— I think when you do the math at like a conversion rate of gallons to bushel, wouldn't that be like 62.5 million bushels of demand for corn?

Shay

Foulk: Yeah, it'd be pretty close.

Garret

Brown: So I guess just the general idea of, you know, if we start getting these great deals, I guess I view it as all of a sudden, you know, there's probably some better support here again. And when I was mentioning earlier too, that this year is setting up to be similar to last year, we have to produce a crop, right? You know, maybe, maybe we'll be surprised at what USDA comes out with here on Monday. But last year it was like major importer, major exporter, not a lot of, you know, carryout expectations at like decade lows, 25-year lows. You know, that was, you know, kind of wheat or corn. And, you know, we all have this idea if we have 181 bushel crop, you know, we're going to be well supplied, etc., etc. It was like, boy, if we're like a 178, which is basically a record, this thing tightens up dramatically.

And obviously prices went down, demand basically came in, soaked up a lot of those bushels. We had a, you know, greater than 178 crop and then we saw $5 corn. And I would just say like, I'm just, I don't know, almost adamant that we just take a step back and think about some of these other details rather than just what's talked about on all of the headlines for clicks. Because I just— I view this year as a very interesting setup. And let's talk about, you know, beans even for a second. The carryout expectation of where we are now versus last October— remember last October, Trump's potentially going to win, beans are going to go to $8, we got trade wars coming— and then we actually saw beans run to $11, you know, by the time he was inaugurated.

So the interesting thing about beans for this particular year is You know, sometimes people want to talk about the weakness in exports, and seasonality only matters when it helps define the narrative that's currently being played out, you know, in the market. Like, the 3-week, the 5-week, and the 10-week average sales for soybeans is somewhere between like 13.3 to 14.8 million bushels. Our sales that we need to hit USDA's projection is something like 4.5 million bushels. When you add in those census discrepancies, again, we need to do basically, call it 50 million bushels in the next 17 weeks and change to hit USDA's guess. Right.

If we don't see it, if we don't see a change right now, 4 to 5 weeks, if we just continue doing exactly what we have been doing in this seasonally weak time, we're going to, we're going to see that total commitment actually hit USDA's projection with 10 to 12 weeks left. So yeah, it's not impossible to see exports rise by 25 to 50 million bushels here from USDA's estimate. Not saying it will, I'm just saying if things don't change and the seasonal story has kind of lost its flavor, I think, on this. Mm-hmm.

Shay

Foulk: On soybeans, the trading range has been pretty tight there. If there were any surprises in the report related to soybeans, what would you be looking for?

Garret

Brown: I don't know if it's really a surprise or not. I think it's a— but I think we've also had a surprise in the strength of exports this year and how good it's actually been. I think what defines this is, I think our expectation going into this report should be USDA making, you know, 100 to 200 million bushel reduction in exports in this thing. I think it's probably more of a surprise if they don't. If they don't, it just doesn't take that much from a yield change this year to get the domestic balance sheet into a bullish scenario.

Shay

Foulk: I tend to agree there, and we gambled a little bit in our own farm operation, partially because of rotation, but partially, you know, partially agronomic decision making. But I just, I kind of have a feeling when everybody's running right that there might be an opportunity to go left. And personally, I feel that there could be a lot more of a swing in soybeans than we would see in the corn market due to the number of corn acres that are out there. Any sort of weather concerns, you know, soybeans are impacted maybe a little bit more quickly than corn is.

Garret

Brown: At least that's what we've seen in the last few dry years.

Shay

Foulk: And a lot of things added up in our farm operation to to put our cards there. And I can, I could be totally wrong, but I tend to agree that I think there's a lot of, a lot more upside potential or the ability to quickly change the outlook on soybeans and far outpace any movement that we would see in corn if we get any sort of weather scenarios. That's, you know, the next 12 weeks will tell that. But that's, that's my personal opinion there. Yeah.

Garret

Brown: Well, and not to just You know, I know that I'm sounding really bullish. I'm just very anti-narrative on a lot of things. So I like to try to provide a little bit of balance. You know, we had a record yield in 2016 at 52 bushels an acre. Since then, we've got 51.71. So that was in 2021. But the last 3 years, we haven't been over 50.7 bushels an acre. We'll probably see USDA use a 52 here on Monday. But the average, average yield since 2017 was 50.1. So for every bushel an acre, that's like, you know, 50 million bushels. So, right, if you want to say that we could see, you know, depending on where crush comes out, you know, obviously that's going to play a role here too. But if we raise— if USDA raises exports 25 to 50 million bushels, that's going to offset 500,000 to 1 million acres of production. Interesting.

So I just know something just to kind of sink in here as all of this, you know, and I'm not sure if bean acres will be this low. Shay, I'd be curious on your opinion. But, you know, a lot of beans went in early, especially in our area, you know, because we can get that yield response if we can get these beans in earlier. And over this short course of time, fertilizer has really gone up a lot. And there are areas that have been wet. So like, if the fertilizer wasn't down, and all of a sudden your ratio is, you know, really wonky as corn has come down, you know, do you continue to plant corn basically for insurance now that your ECO payment is basically, you know, theoretically kicked in unless we have a mega crop here? Mm-hmm.

Shay

Foulk: Yeah, I think from the soybean perspective or, you know, your comments there, the early soybeans that have gone in, in a good chunk of the area, I think have tremendous yield potential. So I think from a yield outlook standpoint, it's going to depend a little bit on some of these wet pockets and what the long-term outlook is. Will farm operations switch over to soybeans? Did they see significant nitrogen loss for anything that was down, or have they not got some of their fertility down that they would normally plan on in the spring? I think, you know, it's been kind of interesting. We haven't heard within the Ag View realm of too many people actually switching acres. You know, whatever plan they made was typically heavier corn from last fall into spring or early— I should say early part of the year planting decisions. Very few people have actually switched what their plan was.

They were generally more corn, which is, you know, why we saw the increase in acres. But man, you know, like you said, from a fertility outlook standpoint, just the cost and the extraordinary tight or negative margins that we see on corn, I wouldn't, I wouldn't hazard a guess that some of those people that are a little bit later, you know, you get into June 10th, June 15th, and you still got areas that are planting or waiting to plant or replanting, whatever it may be. I could see a lot of those acres going to soybeans. But will that have as, as much of an impact on the corn? I don't know, because You know, on the other hand, you have soybeans that went in early that have tremendous yield potential. There was a lot of corn that went in in really good soil conditions.

And as we've seen with the yield potential 2022-2023, when a lot of the, a lot of the country was dry early on and still had excellent potential for the crop, man, those soil conditions were beautiful. And we're going to start seeing the next 10 days most of the countryside is going to be, or at least I should say, in a large portion of Iowa and Illinois with these heat units that we have, most of the countryside is going to be up and growing. And, you know, May 10th, as we record here today before Mother's Day, Mother's Day weekend, that's, that's a big deal. You know, so I think there's still a lot of yield potential out there. I think the long-term weather play is going to have a pretty big impact on it. But, you Anxious to see what the report brings here this week. Garret, any final thoughts, anything that we didn't hit on as we wrap up this market outlook?

Garret

Brown: You know, I think you're right. I think there's— this isn't a slam dunk either way yet at this point. I think there's opportunity this year. I don't think it's something that anybody needs to lose hope on. I think we need to be diligent, and when we see opportunities, we need to be prepared to take advantage of those. I'm not at this point. I hate to see anybody, you know, throw in the towel, I guess, and just assume defeat this year. One thing to say that I kind of feel like I want to kind of talk about just for a brief second is when we talk about corn acres, you know, I'm starting to hear like, well, it's going to be 96, it's going to be 97. You know, in 2012, I think we had, what was it, 97? 97.2 million acres, 95.4 in 2013. We haven't been over 95 million acres since 2013. So that's, I don't know, 13 years ago. CRP, I just look at the CRP data.

As long as I'm looking at the right thing, it's pretty much like rated line with where we were back then. Just with the whole urban sprawl, the towers, solar panels, the whole thing. What happens here, just again as a flip of the coin, what happens if acres maybe aren't at 96 or 95 million? What happens if we're at 94, 94.5? You know, with a massive liquidation of the fund long. Funds basically sold 56,000 contracts last week, split evenly between liquidation and new shorts. So they're basically even. They're long just a little bit here. Yeah, I think it's, I think it's interesting. It's going to be a, you know, we say this every year, it's going to be an interesting summer, something to look forward to.

Shay

Foulk: The crops and guys are getting stuff sprayed. And, you know, after we get the second round of spray and some nitrogen placement, maybe a little bit of fungicide, time to watch the markets. But that's why we do this every week, just to give a pulse. And Garret, I appreciate your perspective. Again, Garret Brown with Kodak Risk Advisory. Garret, thank you so much for joining us here today on the Market Outlook.

Garret

Brown: Yeah, thanks, Jay. Appreciate the invite to come on and visit with you.

Shay

Foulk: Yeah. All right, everyone have a great Mother's Day weekend and we will catch you next time on the Ag View Pitch.