Weekly market outlook: April 17-21, planting progress and market movers

Peter

Meyer: Thank you for listening to the Weekly Market Outlook.

Chris: It is our pleasure to bring an industry-leading market analyst to provide you with the most value possible in your farm business. Please reach out anytime by emailing cbarron@agviewsolutions.com. Welcome everybody to another episode of the Ag View Pitch. We are heading into a new marketing week. The 17th through the 21st of April, kind of in that heat of the planting timeframe for most everybody listening. And we have with us Pete Meyer. Pete, how's it going?

Peter

Meyer: It's going well, Chris. Thanks. Good to see you again. Even though I know that the listeners can't see us, but it's good to see you, my friend.

Chris: Yeah, that's good. Good to have you on again. We're excited to have this conversation. You always have some good wisdom and some interesting insight getting to see the market from some different perspective than what maybe we do on the farm side of the equation. So as we get started here, I guess what I'd like to do is have you talk a little bit about what you're hearing on planting progress. And I'll give you my two cents after you kind of tell me. I know you talk to a lot of farmers. What are you hearing?

Peter

Meyer: Well, it's kind of a mixed bag, certainly Central Illinois and some guys in the east and the southern part of Indiana and, and even in Western Ohio. You know, they're starting to go pretty good. I'd be interested to hear what you have to say around what's going on in Iowa. Further west, Nebraska is going just gangbusters. You know, we understand that the field conditions are, are very good there. When you get further south from there into Kansas, Kansas, you have a real problem with— and I think a lot of people don't pay enough attention to Kansas, but Kansas has become a fairly large producer both in the corn and the for corn and soybeans. Kansas is dealing with a winter wheat crop that has just— some areas of that state have not seen rain for, I believe the statistic I saw was they have not seen a tenth of an inch of rain for 200 days in the southwest corner.

So we've already cut our winter wheat production in Kansas, and Kansas is the largest state as far as winter wheat is concerned. We've cut that by a third from 300 million bushels to 200 million bushels. A big abandonment rate. So the reason I bring this up, Chris, is because when we talk about acreage and stuff like that, and, you know, we could argue about the USDA's 92 million corn and 87.5 in beans, we're a little bit lower on corn and a little bit higher in beans. But, you know, we hear this story about Kansas farmers kind of questioning, do they take the lower insurance price and plant another insured crop behind it? Or given what the weather looks like for them or where they've been the last 200 days, do they even bother wasting their time?

We also hear this stuff in southern South Dakota, especially in the southeast corner, where, you know, farmers are just tearing up thousands of acres of winter wheat after they've got them zeroed out by their crop insurance guy. And we would think that they would come back and plant either corn or beans on it. But it doesn't sound like they're going to do that. It sounds like they're going to plant forage instead. And just kind of roll the dice with that. So, you know, on the progress, I think we're going to see some progress. Certainly there was some backyarditis on social media this week. As far as with the Nebraska guys, I saw one guy said, I'll go out on a limb and say it's going to be a record planting progress in the US this week. Well, I just don't see it. We still have snowpack in the Red River Valley. There's weather coming. There's also cold weather coming behind this.

We hear some guys in Missouri that stopped because there wasn't enough moisture in the ground. So it's kind of a mixed bag. I mean, certainly they're going to go. But, you know, it'll be interesting to see. I'm also more— not more, but I'm also very interested to see, you know, every year we seem to plant the soybeans a little bit, a little bit earlier. And, you know, your operation, a lot of almost every operation now has 2 planters, many of them high-speed planters. And, you know, the, the edge to planting beans early is undisputable. I saw that Corteva put out something a while ago that said that when they surveyed their producers that produced 100-bushel beans, by and large, everybody had them in by May 1st. And by and large, it was interesting that most of them planted them that last week of April. So we're going to be watching that very closely.

But, you know, the planting progress You know, I would expect a blip up, but I certainly don't think I'm going to see— we're going to see any sort of one-week record because as Nick Ehlers always says, records are only broken when you're planting 24 hours a day. And I've not heard anybody planting 24 hours a day.

Chris: No. And we've done that in the past a lot. And this year we've decided that it's important to sleep at night. Right. We've, you know, and it's early. I mean, it's not very often you can, you know, in northeast Iowa where we're located, You know, a typical start date is probably the 15th to the 20th of April. And, you know, so that's kind of this week and that we're heading through now. And, you know, last week, so we planted probably 25% of our corn and the majority of our soybeans. We are planting a lot more corn though than soybeans. So it didn't take long to hammer the soybeans in because we're, you know, our margins are way better on corn in our operation. And so that's partially why we're going that route. But I was interested though, I had to get kind of go cross country a little bit yesterday.

And, and I know we were not going super hard, but we're running and I did see like one field that was planted, but I didn't see anybody in the field. So I think you're right. I think there's a lot of people looking at the calendar yet. And I just did a podcast earlier this week., with an agronomist on, you know, how to manage a week where, you know, it's in the 80s, it's a little early on the calendar, and then there's potentially some cold weather coming. You know, his message was go ahead and plant some, but be, be ready to turn the key off and not be planting, you know, into the cold weather. You know, get some in and, and, and chill out a little bit, little, little bit of both. But, um, I think a lot of people, um, like you are saying, I think a lot of people were holding off until this next, this cold front here that, that we're in now, we're going through.

It's going to start warming back up. I think planters will roll pretty hot and heavy then.

Peter

Meyer: Yeah, there's a lot of discussion. We do a lot of work at S&P, uh, with Drew Lerner from World Weather, and he's been talking. I saw an article actually today on AgWeb that Tyne Morgan did. Tyne must have interviewed him, and he He's been— we talk to him every day in our morning meeting, and he's been talking about this 62-day cycle, um, where we had it, uh, the last few times. 62— 60, uh, 60— I'm sorry, 62-day cycle, not 62-week cycle. And, uh, and, you know, that's, that's coming the end of, the end of next week. And, um, you know, there is some— the models are not in agreement, but I would, I would not be surprised if guys kind of slow it down if it does come to fruition. He's not talking about it being super, super cold, but he is talking about a cold snap coming in the next week for a vast majority, even, even down to northern Texas. So we'll have to see what happens.

Chris: Yeah, and I think it's frustrating for some of the guys in the Dakotas too that we're setting in a lot of snow and it's going to take time and whether or not there is prevent plant up there is yet to be seen just because people can plant stuff pretty fast and if it does get things melted.

Peter

Meyer: Well, Yeah, you know, the Red River Valley is a tough place on a good year, right? And there's plenty of snow still sitting there. There's rain coming on top of it. Then there's this cold coming on top of that. You know, I mean, the problem you have in the Red River Valley, I mean, it's called a valley or basin, I guess. I guess Red River Basin is a better, better term to use. I mean, it's so flat there, as you know. I mean, you just don't get any runoff at all. So unless they get a week or two of 80-degree temperatures with 40-mile-an-hour winds, it's, it's, it's going to take a while for that to, for that to dry out. So yeah, we'll see. And you know, when you look at— we started talking a little bit about acreage earlier with Prospective Plantings. You talk about that.

I mean, a lot of the, a lot of the increase in corn and also the increase in beans, um, in the Prospective Plantings report came out of the Dakotas and Minnesota for that matter. So yeah, I think we have to be a little bit a little bit cautious about, about some of the acreage numbers.

Chris: So let's shift gears a little bit here on the demand side of things. China has come in here in the last few weeks and been in the mood to buy corn. Talk a little bit about that and maybe what that means going into the next few weeks.

Peter

Meyer: Well, I think, you know, what we really saw was that China is a value buyer, right? They really started to come into the market mid-March when we were making the lows as far as, uh, you know, uh, May corn is concerned. We traded down there to $6.10 or $6.20, something like that. And all of a sudden they start coming in, so they are a value buyer. Um, this week's, uh, buying was not, um, as heavy as it was earlier. I mean, they did buy a fair amount of new crop as well today. Today's Friday. Um, so, you know, it's just It's interesting that the USDA really hasn't done much with their import number. They're still at 18 million tons for them. So I, you know, I'm not going to argue with that. Um, you know, certainly the safrinha crop in Brazil seems to have had some challenges.

It's not going to be, you know, the soybean crop in Brazil is all of 153, if not maybe 155 million metric tons in our opinion. So You know, I think that they will continue to, to, to buy value. You know, did they buy value maybe, you know, a week ago or whenever that was, Monday, when we kind of spiked down to that $640 level? I just don't expect them to continue to, to buy it, you know, hand over fist at these higher levels. I will say, Chris, that it's been our opinion that had they not stepped in when they stepped in,, you know, things would have been— we could have easily been hovering around that $6.25 level still. So we could have been 40 cents lower in old crop. So I mean, they are— there's no question they are the main driver. Now when we look at what they bought, we look at some of our other export sales.

Believe it or not, we are cautiously bearish on the export number that the USDA has, which is a fairly low number, 1.85. We're not talking about 100 million bushels or 200 million bushels, but we think that they're kind of onto it. And I was a little bit surprised a few weeks ago when we had the quarterly stocks numbers that, you know, we didn't rally more because the quarterly stocks for corn showed a larger disappearance than people would have thought. And I just had— and the USDA did nothing, you know, with the WASDE this week, really just left the corn carryout exactly the same. So I wonder if they're kind of telegraphing to the market that they think the second half of the year the second half of the marketing year won't see much robust demand. I don't know. I don't know. I mean, I think that, you know, yeah, it was great today.

We, today we closed to what, $6.65 or something like that, or $6.66 or something like that. We had another nice rally in the corn market. China, people buying on the back of China. But, um, I, you know, I think that there's some shortness in the front as well, as far as the May contract or July contract. I mean, Sooner or later, you know, all these contracts have to merge by the time we get to, by the time we get the new crop, right? And December corn is having a hell of a time, uh, getting away from $5.50. It just kind of hangs there. So, you know, I'm not saying that, that, that May, May or July, certainly not May because we're almost in May, believe it or not, we only have 2 weeks to go, we'll be in May. I'm not saying the May contract's going down to $5.50, but we're or the July contract for that matter.

But I do see how the two can kind of get together maybe around, depending on planning progress and what the weather looks like, around that $6 level. But, you know, certainly China has put a floor under the corn market. I also think that corn, especially today, Friday, benefited from the big wheat rally. And the wheat rally has a lot to do with the fact that there's still a lot of rumblings about the safe card or deal with Ukraine or Russia. You know, the announcement in the previous couple weeks about the multinationals, ADM, Cargill, you name them, pulling out of Russia. Russia is just nationalizing their wheat production. And I think there are some concerns about transparency there.

We certainly would expect that moving forward, you probably see some, if, If Russia does keep moving forward with this nationalization of their wheat crop or of their grains production, I should say, we're going to see more government-to-government deals. They're going to be selling to China. They'll be selling to Egypt. They're just trying to reduce the middleman out of the deal. And this really is, Chris, a page out of the OPEC+ handbook. Just a few weeks ago, OPEC+ made an unexpected cut and Russia was part of that. Crude oil went up 10%, right, from $75 to $82. It traded today at $82, or closed today around $82. So, you know, I don't think it's surprising, but I also think it's something that we, you know, that really kind of has helped the corn market a bit as well. Because when we look at it globally, we see a lot of feed wheat being put out there.

And if we lose Russia as a trade partner, some of your countries that need feed wheat are going to be looking for somebody else, or looking to corn, I should say. Excuse me.

Chris: Another area of question that I have for you with your wisdom in this area is that is just money flow and the funds in commodities versus— and I was talking to a couple people about this last week, last couple of weeks, but just to get your take on what the funds are thinking and what is it going to take to, you know, are they watching energy? Are they watching the whole complex? You know, what's it going to take to have them interested in corn and soybeans again and wheat for that matter?

Peter

Meyer: Yeah, they're licking their wounds, right? I mean, we had this whole thing, we had this whole thing back in late February where there was a cyberattack on the, on the Commitment of Traders report. We didn't know what the funds were. Little did we know the funds were long a billion bushels or more than a billion bushels, 1.1 billion bushels or something. And then all of a sudden the market sells off 4 or 5 days, and then 10 days later we make that low, and now we're back almost to where we were before this happened. So there's no question that the money flow influenced that trade down to $6.20. And China was glad to see the money flow influence that trade, as we all know now, because they stepped in to buy it. You hear stuff about the great grain robbery and this and that. That's not what happened there, right? The funds just got over their skis.

Why they were long that much stuff in February, I have no idea. But they trade— most of these guys, as you know, Chris, have momentum algorithms and they're just trading the way the market's moving. And we saw a similar situation in meal. But I don't really know. The funds that we talked to have just been sitting on the sidelines, trying to assess things. They would not be interested in old crop at this point at all. Um, if they're going to be interested at all, they're going to be interested in new crop. And given the fact that new crop's down to $5.50, I certainly don't see them getting short, but I don't see them necessarily getting long either. You're going to have to have a momentum push to, let's say, $5.75 in Dec corn, if you get it, for them to kind of jump on the wagon and maybe push it to $6 or maybe even, maybe even a little bit higher than that.

I don't really know, but, um, So the funds that we talked to are just kind of sitting on the sidelines and watching it at this point, but that's very typical behavior for them. What was atypical for the funds was the amount of length they had on in February. And maybe they saw Argentina implode. Argentina is just, you know, it's historically low production, historic low yields there. You know, and maybe that has something to do with this rally as well. Everybody's been cutting Argentina as low as they can get it. We came out a few weeks ago, or I guess a week before the WASDE, a million metric tons below where the USDA was. I think the USDA was at 37 and 27 corn and beans, and we were at 36 and 26. We'll probably cut it again. I really thought that that was kind of a story that had played its way through the market. I don't see the funds playing that story now. In July corn, let's say.

But, you know, it just— the funds are just kind of— the funds are just going to wait and see what's going to happen here. You know, that's all. Yeah.

Chris: So as we get closer to wrapping up, the last thing I want to hit you up on is farmer decision-making from your perspective, outside looking in. As we head into planting season, a lot of times I mean, on old crop, that's usually basis opportunity. On new crop, it's, you know, still the unknown, which sometimes creates some volatility and creates opportunity. With that said, you know, in the next couple of weeks, aside from putting some offers in for sales, what do you think guys should be watching for? Because I think there's a lot of people out there that are in hope mode, In other words, they saw where the market was. They made— maybe a lot of people made some sales. Making any sales now would be lower than the last sale they made. So people are hesitant. However, I think, you know, a person has to put some targets in. And for some people, it's catching up on sales.

Some people, it's just, you know, their average is still going to be pretty darn good if they had a bunch already sold, you know. So what's your take? In the next couple of weeks that farmers maybe, maybe need to be thinking about or doing it at their level?

Peter

Meyer: I think that there's some psychological targets. It's much easier in corn than it is in beans, and we just mentioned that about the funds. If we get back to— I mean, where did we close these corn today, Friday? 5— let's call it $5.60. We get back over $5.75 and you start to see some momentum moving to the upside, you know, the funds are going to come. So I would be— I would— I think you have to be a seller, you know, above $5.75, maybe $5.85, $6. Beans, it's very, very difficult. You're down to $13. As I mentioned earlier, Brazil is, is, it's all of, it's all of 153 million tons, which is a record by far. So, you know, I don't really have a lot of hope for any sort of bean rally. I have a little bit more hope for, for, for, for maybe a corn rally, just because of what's happened in Argentina and that sort of stuff.

But I mean, I think that in corn you'd probably be, yeah, I'd be a seller at $5.75 to $6 or something like that. But you ask me a good question, Chris, and the, and I'm, you know, I'm not here to really talk about price. We don't, we do some price forecasting and, uh, but you know, the question is what should farmers be aware of? And further down the line, I think what your farmers need to be aware of, Chris, is that there are companies out there including Global Clean Energy, and I know they're traveling around Iowa trying to talk farmers into planting camelina as a cover crop for this renewable diesel. Let me tell you something, Chris, and I'll tell your listeners as well. This is real. So I think that, you know, there's a, there's a lot of this going on. We talk to energy companies all the time.

We talk to energy companies that basically have conducted farmer roundtables with energy companies from farmers all over the Midwest and the Northern Plains to grow camelina for these guys. The problem is seed seed availability. There is one company out there I mentioned, Global Clean Energy. They have some seed availability. But what I, what I would stress, Chris, is that no matter where you are, if you hear about one of these meetings or something like that, where somebody is talking about you planting camelina as a cover crop or whatever, I would urge you to pay attention and spend some time. Maybe I realize it's planting season. Maybe they're out there now. I knew they were out there a few weeks ago. Just listen to what they have to say, because this is, this is real.

This is— we are going to run out of feedstocks for stuff like sustainable aviation fuel and renewable diesel, no matter how many acres of soybeans we plant. So I would just urge your listeners to educate themselves around this, around this stuff. And if they have any questions, I can be easily contacted at Pete, Pete.Meyer@SPGlobal.com. I'm glad to share some slides with your listeners. We have no investment in this. We have nothing. We're not proprietary traders. There's no way we're talking a book here. I'm just telling you, Chris, and you know me for a long time, that this is the feedback we're getting from some of these energy companies. I have two meetings next week with major energy companies and the biggest shipping company in the world, and they want to know where they can get how they can grow camelina. We heard this a few weeks ago.

Corteva announced this deal where they're going to grow winter rapeseed in Kentucky and Tennessee for Marathon and Bunge. That's the same company that's involved with Pennycress on the covercrest side. Chevron, Chevron's in here. So, you know, these seed companies now when you talk to 'em, whether it's Corteva or Bayer, you know, they understand it as well. And I mean, you and I both have good friends at Corteva and what we hear from Corteva is that, or what I'm between the lines with Corteva, but this deal makes me think that they're going to try to position themselves as energy seed producers. And that could be any oil seed, um, that's out there because that's really what's going to be in demand. So there's a lot of questions that have to be asked if somebody approaches you. How do I ensure this second crop? How much risk are you willing to take? How can I hedge it?

Are you contracting it by acre? But I would just urge your listeners, Chris, to just— if you see something in your neighborhood don't just shrug it off, just go listen and see what they have to say. And if you have any questions, just call me or just send me an email and I'm, I'm happy to talk to you.

Chris: Mm-hmm. This whole energy thing is gonna be a big deal in the next couple of years as things change and as seed becomes available. I think that's the, probably the biggest challenge. And then figuring out, you know, there's some agronomic things and stuff along the way, but I think you're right, getting educated on some of this stuff. I'm not familiar with it at all myself either. So I think, you know, it's, it's something that as, as producers, we need to be responsible for. What are the next steps? What are the next things that we can do?

Peter

Meyer: We had a great, great call a few weeks ago with some farmers and Dr. Johnson, who's from Montana State University. And if you, if you Google him, he's written articles about the agronomic, you know, what you need to do agronomically to grow this. He made it sound very easy, which, which made me a little bit wary, but he's kind of known as the godfather of camelina. He himself has developed, I believe he said, 8 strains of camelina. And what, and you say, you say, wow, Pete, what's so, what's so cool about camelina? Camelina has an oil content of 40%. Soybeans have an oil content of 19%. That's what's cool about it. And here's the second thing. The camelina, they also ran a study there where they, where they used camelina, camelina meal as feed for cattle. Now of course everybody knows when you crush any, any oil seed, you're gonna get the meal, you're gonna get husks as well.

You're gonna get the meal, you're gonna get the oil. So the question was, what do we do with the meal? They did a, a survey with a, I'm sorry, a study with a, with a small herd. And according to him, when they slaughtered the herd, the beef looked like Wagyu beef that was fed on camelina meal. So once the beef industry catches wind of this, if this is true, there's gonna be plenty of demand for camelina meal as well. The issue, Chris, is seed, and the issue is also crush capacity, cuz you cannot just crush it somewhere, right? But I have oil companies that I talked to that are actually speaking with other, with a company that's developing modular crush facilities. So they would literally come to your field in the spring and crush it there and take away the meal and the oil. This is how serious this stuff is Interesting.

Chris: Well, it's something to, stay tuned, to be continued, part 2, all that kind of stuff will, come up in, in further discussions. You, you're, you're on top of it too. So we'll lean on you to keep us updated and we'll kind of keep our antennas up watching for that. One last thing as we wrap up here, just 'cause you piqued my interest, but you said, you know, kind of watch that corn and that $5.75 to, $585 range. Maybe, you know, if guys need to be plugging some sales in there, you know, the hard part, like I said, is if guys have sales way above that, it's hard to do that. But a person really has to look at your average sale. Not— this isn't recommendations, but, you know, you, you need to be looking at that average, not what one individual sale is, and plugging these things in. On soybeans, well, I didn't get to catch your numbers on soybeans. What are you looking at there?

Peter

Meyer: It's so hard for us on soybeans because, because of this monster Brazil crop. I think if soybeans rally, rally with corn, you can let them, you know, just kind of pay attention where beans are. If corn gets to $5.75 or $5.85 or $6, just pay attention where beans are. But it's hard. I mean, the beans are also trading a very, very low acreage number. You mentioned earlier you planted a lot less beans than corn this year, but there are places that You know, when you look at some of these Iowa State numbers and University of Illinois numbers, they say that, you know, the corn on corn acres could be reduced this year, just because the economics weren't there. I understand certainly given the economics a while ago that everybody in the world should be planting corn, or everybody in the US should be planting corn. I totally get that.

But you know, what we struggle— what I struggle with personally is how far is this 155 million metric tons going to go? Right. I mean, can it, can it last through, you know, can it have an impact on prices for the next 6 months? You know, that's very possible. I mean, it's, it's, it's all, it's all of 155. It's all of 155. It's a big number. So I don't mean to, you know, evade your question, but I just really don't have a, don't have a strong, strong opinion on it. You know, we're so used to psychologically seeing beans at $15 right now. All of a sudden we have new crop beans at $13 or even even $12 handle, everybody's saying, wow, I'm not going to sell them here. I, I, yeah, I don't have any— I apologize. I don't really have any words of wisdom.

Chris: You don't have a crystal ball.

Peter

Meyer: No, I don't.

Chris: I don't.

Peter

Meyer: I don't.

Chris: I don't think any of us do. I think we do, though, know what our cost of production is. And we can identify a margin target and kind of be responsible for our own decisions. And I think You know, I, I still am a firm believer of putting some targets in play when we're busy, cuz it seems like sometimes when an opportunity presents itself, it's there for about 10 seconds and then a person's like, well gee, I wish I would've taken advantage of that. Well, you had 10 seconds throughout the night when the opportunity was there and, and sometimes it'll bounce up there and catch you if you, if you have, have something working for you. But other than that, that's all I have.

Peter

Meyer: What do you want to leave it with? No, it's going to be a struggle though. I mean, you know, today, I mean, you had, you had May corn up $15.50 in the back end and Dec was up $6.50. So, you know, maybe we're being a little bit overzealous with those numbers. You know, I mean, certainly old crop corn would have to get to $7 probably before you get to $6 in new crop. So I'm not, I'm not so sure we're seeing that.

Chris: Get over $7 with, with strong basis, local basis levels in certain areas right now because, and we're, and we're going to see that in the next couple of weeks, I think when planters are rolling, that's the time some of this old crop stuff, if you know, the problem is, is the reason the basis is so good, nobody has anybody to drive the trucks.

Peter

Meyer: But, you know, if you figure that out, you know, words of wisdom to leave, I think I got it. Kind of gave you there. Please pay attention or just, you know, try to educate yourself if you have the time regarding some of these new oilseed cover crops that everybody's talking about. Yeah, that's about it. I don't, you know, I don't really know. I just hope everybody is safe and has a good planting season. And hopefully Chris will talk, you know, a month down the line or something like that and see what the what the weather looks like and planting progress, and then I'll probably have a better idea about what we think, what we think on the demand side as well. At the moment, at the moment, it's hard to really put your finger on new crop demand.

Chris: Yeah, yeah. So no, hey, really appreciate it. Um, really appreciate being on here. Uh, Pete Meyer with S&P Global, and, uh, as usual, brought a lot of good information, a lot of things for us to think about. That camelina thing is a something I think Everybody gets a couple minutes to Google that and kind of look at it a little bit and see there's some stuff out there. And with that said, Peter, thank you.

Peter

Meyer: Thank you, Chris. It was a pleasure.

Chris: You bet. Thanks. And thanks everybody for listening. And we will catch you again next time on the Ag View Pitch.