Welcome to our Friday, July 12th, 2024 broadcast. This is Markets Plus. I’m Matt Bennett here. We’ve talked about this on our television show, which is the show that I’ve been asked the most questions about in recent times. I’m not saying that negative news mobilizes everybody, but there’s certainly a lot of concern in rural America for a variety of reasons. And it starts with the size of the crop.
Paul Yeager: Let’s move on to the first question. Glenn from Ohio, who was going to ask you a question? I’ll answer Glenn’s question quickly on corn genetics today. In the large corn producing states, how big would this crop get if it weren’t for the stress of drought? If you have a high yield, it tends to get even bigger after harvest.
Matt Bennett: It’s a sensitive issue. As we go further northwest, we’ve got people that have obviously been affected by flooding. We’ve heard that just south of I-80 in Nebraska was devastated by the hail storm last weekend. So when I talk about this harvest being pretty big, people are sad. I get it. But Paul, I’ve been talking a lot lately, is that the Eastern Corn Belt could support the corn market, because the drought index continues to grow in Illinois, Indiana, Ohio. And then Beryl comes along and dumps two to four, five inches of rain. Basically, all the areas that have been dry, we can no longer say that that dryness could support the market. In fact, Paul, I think we’re going to have a very big harvest in the Eastern Corn Belt, and we could have record harvests in Indiana and Illinois. And I’m probably willing to bet somebody that the bottles of water that we’re going to make are going to be record sales in both states. I think that’s quite possible. So, obviously there will be offsets here and there. What kind of yield do we need to get to the answer? As of today, I think we have a potential yield above the trend line. I know nobody wants to hear this, but I think we have to make it through. I mean, it’s going to take a long time. Right now, things are looking good. Things are looking good. What if we get a hot, dry pattern and we can’t make it through? Maybe a potential yield of 182 goes down to 178 or 9. Either way, Paul, this is looking like a very big yield.
Paul Yeager: Wow, 179 points. It’s a big loss after a very good start for us.
Matt Bennett: Well, I don’t think that’s going to happen unless it ends up really bad. I would say it’s not about the vents. We have to be careful.
Paul Yeager: Well, this time last year, the Fourth of July, the last rain we had in Iowa after the Fourth. And in the corners, too. Yeah. For weeks. Yeah, it got hot. It got dry. But we still had a really good crop.
Matt Bennett: Genetics are great, for sure. But the bottom line is, it’s not necessarily the heat of the day that I’m worried about. It’s the hot nights that come in when you’re harvesting the crop and trying to get the air to fill up. Hot nights are what you want to avoid. So, Paul, if we can avoid that, I think we have a very good chance of getting a 180+ yield. I don’t want to promise anything above trend right now because I don’t know how we’re going to finish it.
Paul Yeager: But we’re going to find out a lot in the next couple of weeks. So let’s turn it over to Billy from Quebec. Two Canadians on the topic today. Thanks. Billy. “I’ve heard rumors that Brazil is still stockpiling a ton of soybeans to pressure the government into lowering export taxes. Is that true? And if Brazil does eventually sell off all of its soybeans, will that have a big impact on prices?”
Matt Bennett: We’re certainly hearing the same thing. They haven’t completely gotten out of the export business, but in terms of competitiveness, we’re pretty competitive. If you look at agricultural prices in the Gulf, we’re pretty competitive right now. China is buying a new crop for the first time this week. That’s great news. We’re happy about that. But overall, do they want to buy from us or do they want to buy from Brazil? I think they’ve told us and the rest of the world how they feel. Absolutely. If Brazilian producers were to abandon all of their soybean production, they’d be in big trouble. So we see quite a bit of headwind. We’re building a global stockpile of soybeans. That’s it. The Brazilians produce more soybeans than Brazil, which is the number one exporter in the world of both corn and soybeans. And as U.S. producers, you have to understand that the tables have turned here.
Paul Yeager: Yeah, that’s bearish. How about this question? “It looks like bearish sentiment is winning, and so is it in the grain market. Will we see a 2020 like 2024 with these low prices brightening the outlook going forward? Is demand picking up or do we need to fall further?” asks Phil from Canada.
Matt Bennett: Phil always asks a good question. This is a good question. But are there any years that are similar? Of course there are. My team has covered this subject in great detail. 2014. If you look at the charts, they’ve been matching each other for the last few weeks. Last year we were talking about ’13 and ’23, but what about ’14 and ’24? Quite frankly, they’re matching each other. They’re not neck and neck, but they’ve been neck and neck lately, Paul. Up until Friday’s report, I was telling you this market could continue to fall through September. I think this report has bought us some time. We’ve got a little lifeline, so to speak, so funds may not make a run for it. We didn’t talk about this in the main segment, but just before we got here, trader commitments were shown. This is the biggest short ever in this corn market. So will funds push it up? Do they have the money to push it up? Yes they do. When will they decide to push it up? We’ve got a bullish report. Time will tell. But we haven’t seen the reaction that I would have expected. The 200 million bushels missed in Friday’s trade tells us that funds are committing to positions. Are they building up, I don’t know, but they are committed. If you follow 2014, it went all the way down to $3 all the way through September 18th. I don’t think that’s going to happen. I don’t think that’s going to happen. But it’s been building up from there. My personal opinion is, if we crash in September, I don’t think we’re going to average $4 in October at this point. I have a hard time believing that’s going to happen. But I think we’re seeing less than $4 on the board between here and there.
Paul Yeager: Okay, Justin and Iowa, so I guess it’s a common question, “Do you think there’s as much old grain as they say and the case is getting stronger?” The reason I ask this question now is because from what you’re saying it sounds like there’s still corn to sell, because as you said on the main show, nobody wants to win, nobody wants to lose, nobody wants to sell something that’s going to lose money. But you said, sure, but there’s the potential to lose more.
Matt Bennett: Just this week in north-central Iowa, there was a guy who got like 450 bids. A couple of my coworkers called him and said, “Hey, can you give us another 10 cents?” and he said, “Sure. Sure. I need the corn today.” He called me and he was super pissed because he’d been in line all day. We’ve got a ton of corn loose, and that’s it. We’re going to break this base and loose some bushels. It’s an interesting situation this year. When you loose a bushel, of course, the processors pull out. I understand how this works. And the next week it’s a ghost town. So is there still that much corn left? Paul. Yeah, there’s a ton of corn left. I’ve talked to a lot of growers. It feels like farmers are just stuck with a ton of old corn, especially for this time of year. It’s tough. It’s frustrating. I understand their anxiety. But at the end of the day, they have to make a decision. They have to make decisions too quickly. I think there is a lot of corn, for sure.
Paul Yeager: Let’s look out to 25 years.
Matt Bennett: Right?
Paul Yeager: Because Roger from Minnesota asked a question. I asked this question because you love talking about fertilizer. Here’s his question. Apologies to Brent, Kevin and Julie because this is out of sequence. Here’s the last question. “My retailer told me this week that prices for P&K fertilizer applied in fall ’24 have gone up. Will we see a decline in corn acreage in ’25?”
Matt Bennett: Probably right now. Paul, if you compare fertilizer prices to corn prices, it’s not a very good situation. ’23 wasn’t profitable for a lot of farmers unless they hedged a ton of grain in advance. ’24 is going to be less profitable overall for farmers. I did the math the other day for ’24. If you haven’t sold any corn yet and you use Uvi’s numbers, you just add $300 to your cash rate. It takes 285 bushels of corn to break even. That’s tough. I did the math and I’m at 450 bushels of DS for ’25 and fertilizer is not coming down. It doesn’t make sense. If the current situation continues, two things are going to happen. In my opinion, we’re going to fly a lot less fertilizer than we’ve been doing in recent years. Unfortunately, that’s a possibility. Okay. The other thing is I don’t see a path to plant more corn acres in ’25 than we have in ’24. I don’t see that happening.
Paul Yeager: Looking at the ’25 written on the board, do you think sales will pick up at the current price point and, I know the next two years could be pretty tough, do you feel the same about ’26?
Matt Bennett: We’re looking at some worst case scenarios. For example, if you use a November short bond, you’re protected until about the 25th of October. So what we’re doing here is, if you’re buying all of the fertilizer that you would normally prepay or reserve, you can have peace of mind knowing that you have an amount that you’re going to reserve. I don’t want to say miss $450. We might see a little bit of a bounce here after Friday’s report. I’m sure if we had had a bearish report on Friday, we would have seen a big drop across the board. So, thankfully, we’ve got a helping hand again.
Paul Yeager: But you have to remember that you have to keep things in perspective.
Matt Bennett: That’s correct.
Paul Yeager: Well, life is, we’re in the middle of summer and we’ve had a rough week. Well, we can talk about that if you want, or we can wrap it up here.
Matt Bennett: Yeah. I mean, you guys are so frustrated with the market, but last week in my community, three kids died. It’s hard to explain. You know how devastating it is. But, Paul, sometimes perspective is really important. And I don’t think anybody in my community cared about Friday’s report. I don’t think anybody cared about the price of corn. So perspective is really interesting. Sometimes you have to realize that you’ve been so frustrated lately, but there’s more to life than that.
Paul Yeager: I wish those families the best. All three of those situations are very difficult. Matt, your family and I appreciate what you’re doing.
Matt Bennett: Yeah, that’s right.
Paul Yeager: Thank you, Matt Bennett, and everyone for being here for our market. We’ll be celebrating the tradition of cheese making again next week. We’ll also be hearing from Arlen Superman, who will be in the economic analysis section of the show. Thank you for tuning in. Have a great week.
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