In our weekly series From the Furrow, host Mike McGinnis and fellow grain geeks shed light on current market conditions and how grain producers can take action to manage their risk.

This week, Mike is joined Britt O’Connell, Director of Grain Foundations; Verl Prather, Director of Buyer Relations; and Brandon Weigel, Grain Market Advisor with Ever.Ag. What headwinds and tailwinds are facing grain markets? What are Ever.Ag advisors discussing with clients? Mike, Britt, Verl and Brandon discuss those topics and a whole lot more.

Questions or comments? Topics you’d like to hear us discuss? Contact us at [email protected].

(Transcript auto-generated)

Future trading involves risk and is not suitable for all investors. Content provided in this segment is meant for educational purposes and is not a solicitation to buy or sell commodities.

00;00;08;18 – 00;00;26;24

Hello and welcome to From the Furrowed, brought to you by Ever AG Insights. Each week we talk with subject matter experts on news and topics affecting the grain markets. I’m your host, Mike McGinnis, and we get started with a review of the markets right now on this Wednesday, September 11th, 2024. Corn is unchanged at midday at 404 for the new crop contract.

00;00;26;24 – 00;00;48;20

Meanwhile, November soybeans up a nickel at 1002 and wheat is up $0.06. We are joined today with a panel of guests, and we are thankful that the director of Grain Foundations Forever AG is with us, Brett O’Connell. Also, the former host of this very prized program, Brandon Wiggle, the grain market advisor for AG and also for buyer relations director for Agora Prather.

00;00;48;20 – 00;01;06;11

So Brett, Brandon and Vernal and I are around the microphone, and we’re going to visit a little bit about some of the headwinds and tailwinds of this current grain market. We’ll start with you as you sit and think about the market today, where we’re trading and where we could be going for the fall as harvest gets ready to start.

00;01;06;18 – 00;01;10;03

What are some of the headwinds first off that you see the market facing?

00;01;10;05 – 00;01;30;01

Yeah, producers are looking at current price availability that are being offered by their local buyers. And the reality is that there’s not many offerings out there that are above the cost of production. And this 2024 crop year. Then additionally, right looking forward towards 2025, it doesn’t seem like a lot of these numbers or input costs are going to come down much.

00;01;30;02 – 00;01;36;18

And so there’s a lot of concern in the industry that guys balance sheets are going to look a little bit tighter than they have over the last couple of years.

00;01;36;22 – 00;01;37;12

You concur.

00;01;37;13 – 00;01;53;16

Brett. Yeah I think that’s true. I think we are going to just be continuing to struggle with a glut of supply. And when we look at the demand side of the balance sheet, you know, most of those are what I call well, in check. You know, we’re brining a good amount of ethanol. We are exporting a good amount of corn.

00;01;53;18 – 00;02;12;27

And on the livestock side, we’re feeding a lot of corn, which makes sense. You’ve got near record high fat cattle prices with low corn prices. Pounds are cheap to put on. So it’s not really a demand issue. It’s a supply issue. We have been and continue to produce a really good crop here in this country and abroad. And so that’s going to continue to be a bit of a headwind here.

00;02;12;27 – 00;02;20;25

But I think there’s a few things that are maybe a tailwind to this market. I think there’s some things that maybe give us a little bit of opportunity for some hope as well.

00;02;20;26 – 00;02;23;26

Brandon, where is the blue sky for the markets you think going forward?

00;02;23;26 – 00;02;44;10

So where we really have some potential opportunity is as we work into the back end of 2024, if we do see South America run into any issues with their planting season, their growing season. Right. There is still some risk premium that gets built into the market until there is more certainty knowing around that crop. Then, like Britt said as well, you know, our corn and beans have been the cheapest in the world.

00;02;44;10 – 00;03;01;15

If you look at fiber export prices. So, so long as we remain below our global competitors, we will continue to see export purchases and commitments. You know, that’s one of those things we’re going to probably have to see it pick up a little bit to be meaningful enough late against the big supply, but it certainly, you know, price supportive underneath this market.

00;03;01;15 – 00;03;16;05

Farmer customer and client conversation. We’ll start with you. The AG barometer that was just released by Purdue University. And the CME showed a decline in farmer sentiment. I don’t think it’s any surprise to a lot of folks, but what are you hearing from your farmer customers as they get ready for harvest?

00;03;16;10 – 00;03;36;18

You know, I think there’s some general concerns about moving back into a downward trending market or even a choppy sideways market. I think one of the greatest concerns that I hear from producers is input costs and fertilizer costs. Specifically, one of the ways we like to look at fertilizer costs and track that is, you know, against how many bushels of corn it takes to buy a ton of specific fertilizer.

00;03;36;19 – 00;03;56;10

And when we look at those numbers, they’re still on the really high end of things. When we think about input costs as it relates to seed or rent, those are things that are pretty stubborn to come back down. And so producers are really looking at negative margins, incredibly tight margins, and really asking questions around the input side of their business and how they’re going to manage that.

00;03;56;11 – 00;04;10;03

And verbal, you speak on a day to day basis with a lot of buyers, a lot of your clients, you know, on the other side of the coin and so to speak, as far as farmers go, what are they saying? Right. With a lower market, maybe it’s at some point perhaps going to have to come down. Right. So what sentiment do you get from them.

00;04;10;06 – 00;04;28;21

That’s right. Yeah. And it’s been kind of an ongoing theme all year long. It seems like they’ve continued to struggle to kind of convince that producer and their neck of the woods to bring those bushels to town or to make the sale commitments to them, obviously, over the course of the last three weeks or so, a lot of the 2023 crop did start moving.

00;04;28;23 – 00;04;43;27

It does sound like there was some 2024 sales as well that took place. As we saw a little bit of a pop in this market over the last couple of weeks. But there is still a broad concern that, hey, the producer coming into this 2024 harvest is widely undersold.

00;04;43;29 – 00;04;54;05

And Brandon want to talk about the reception that you’re getting from farmers as the markets get weaker or stay weaker, does the idea of grain marketing get stronger in your conversations with them?

00;04;54;08 – 00;05;20;28

It does. I think it makes people want to take a more proactive approach to things moving forward. The last few years, it was very easy to market grain, right? You could pretty much pick any given day the sale you were making looks good, especially in hindsight. But as we move back into what I would call a more quote unquote normal balance sheet environment, the idea of being proactive and making sure that we’re taking the right steps to manage risk out into the future is only going to continue to become more important.

00;05;21;04 – 00;05;26;19

And traditionally, has this been the case when the markets are up consistently? Farmers don’t have a lot to worry about, right?

00;05;26;19 – 00;05;46;01

In that way. Yeah, I mean, we know that markets are very cyclical in nature. And so this isn’t the first downturn that we’ve been through. And this won’t be the last. There will also be brighter days ahead. The markets will move higher at some point. And so it is really about managing that time in between and really being efficient about the decisions that they’re making.

00;05;46;02 – 00;06;07;14

So, you know, I think we tend to see farmers who lean more aggressively into forward marketing. There’s a saying in our base that says the more you know about a crop, generally speaking, the less it’s worth. And so being able to sell that what we call risk premium, because there’s not a lot of certainty around a crop in 2024 or 2025 and being able to capitalize on that and utilizing multiple tools that are at their disposal.

00;06;07;15 – 00;06;22;12

You know, all of those things are back on the table when prices are seven and $8. You know, folks, you know, they don’t have to work real hard. They can load a truckload of grain and they can take it to town and make money. Doesn’t require a lot of thought and tough decisions. It’s now when the metal really meets the road.

00;06;22;12 – 00;06;27;09

And, you know, I have no doubt the American producer is up for the challenge, if you will. But it will be. It will be a challenge.

00;06;27;09 – 00;06;34;05

And finish this up for us if you would. Our so what segment, you know, what can producers take away from this conversation and some of the things we’ve talked about.

00;06;34;09 – 00;06;50;17

Yeah I would say you know kind of like we talked just making sure that not only do you have a plan in place, but you have the ability and the wherewithal to execute on that plan. That’s the biggest thing is we look at, you know, kind of moving forward into the future. How do we kind of approach this market and, you know, do so in a proactive manner.

00;06;50;17 – 00;07;13;02

And it’s just having executing a plan. I think you guys got to step out of this comfort zone and take a good, hard look at 2025 prices. We’re seeing a big carry into new crop 2025 compared to 2024 crop. And I think you guys got to take a look out there and realize that additional premium could be a very good opportunity as we work into the next production cycle.

00;07;13;05 – 00;07;29;28

Thank you very much. Brett O’Connell, director of Grain Foundations Forever AG, Brandon Wiggle, grain market advisor, and Vera Prather, buyer relations director, ever.AG. We want to thank all of our guests today and thank you. And if you’ve enjoyed today’s From The Furrow, be sure to tell a friend or to and subscribe to us wherever you listen to your podcast.

00;07;30;00 – 00;07;34;00

Thank you to the Insights Crew for their work on today’s show.

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