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 Tanner Ehmke, Lead Economist, Grains and Oilseeds with CoBank. The 2024-25 marketing year started with slow export sales – is that trend likely to continue? What has to happen to keep grain sales on pace? How much US corn and soybeans will be up for grabs after the upcoming harvest? Mike and Tanner discuss those topics and a whole lot more.

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

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Hello again and welcome to From the Furrow, 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 today with a review of the markets. And today we’re up on the corn and soybean markets. The December corn contract trading about four, 12.75, about three and a half since new crop November.

00;00;37;21 – 00;00;50;05

Soybeans up nine and a half cents at 1021. Now we want to first off welcome our guest today, Tanner Mike banks, lead economist for grains and Oilseeds. First off, thanks, Tanner for joining us today.

00;00;50;08 – 00;00;51;19

Absolutely. Thanks for having me, Mike.

00;00;51;20 – 00;01;15;27

And we give this a timestamp. Wednesday, September 4th, 2024. We’re going to talk about two things for sure. The pace of U.S. corn and soybean exports. And also preview next week’s USDA waste report and the FSA acreage report that will be updated as well. First off, I’m reminded, Tanner, that the November soybean futures are up $0.68 from their August 18th low.

00;01;15;27 – 00;01;36;18

December corn futures are up $0.28 from their August 27th low, and December wheat futures are also up $0.50 from their August 26th low. So August ended fairly strong, right. And some of it had to do with exports, especially for the soybeans. But we’re still on a slow pace, I take it for the 20 2425 new crop season, I guess I should say.

00;01;36;18 – 00;02;04;03

Now, to make a real quick note, the July census U.S. soybean exports for this week were 55 million bushels versus 47 million last year. At this same month, the USDA was 1.7 billion bushel goal for 2023 2024 projections. Still looks pretty good. That’s for the soybeans. And let’s start there. I’m going to turn it over to you to give us your perspective on how we have done to finish the 2023, 2024 marketing year and how things look going forward.

00;02;04;06 – 00;02;23;24

I just pointed out there we did so much better this year. We ended on the 2324 crop year very strong notes, up 30 almost 40% on corn year over year. Just a phenomenal performance. But what you get when you have bushels to move. We I could crop. And so when you have the bushels there you’re able to achieve these higher export numbers.

00;02;23;24 – 00;02;47;05

But that being said we had some strong demand, especially from Mexico. Mexico really stepped up. And even though you have the bushels it takes, a buyer who’s willing and able to take. And Mexico was the top destination, taking so much more record amount, we can owe that to a couple of things one. The Mexican peso was very strong this past year, and so that made their ability to buy a lot stronger.

00;02;47;05 – 00;03;04;01

Their hands were stronger, so to speak, because of that stronger currency. And they also had a drought. So there’s a couple reasons right there. Why why our number one buyer in Mexico was able to take so much, plus the fact that we had the bushels to sell. But we also had other customers like Japan and Colombia, us also strong buyers.

00;03;04;01 – 00;03;25;16

They really stepped in also. So I think, you know, we had bushels to sell, but some strong customers, reliable customers who really, really stepped in. My concern here, heading into the new crop year that we just started, were down just a touch from where we were compared to last year’s pace. Mexico’s new crop sales are down just a little bit, as is the case with Japan.

00;03;25;16 – 00;03;44;22

And I think that we’re they’re looking at a smaller crop this year and also a much bigger crop from Brazil, potentially for them to buy from a smaller dropped buy from the US. And so I think what they’re doing is they’re hedging or exports coming out of Brazil and that we’re soybeans. We’re always talking about soybeans. How poor the sales pace is there.

00;03;44;22 – 00;04;05;00

We’re down, of course, year over year for 2324 heading into new crop year that we just started. And Mike, right about this a lot can’t be said enough starting the year behind more than 50% behind last year’s pace. But we’re really historically we’re at historically low levels for new crop sales, and there’s a lot to be written about there.

00;04;05;00 – 00;04;27;07

Horace, our currency is strong. The Brazilian rial is very weak. And that’s made Brazil’s exports very competitive to the US. Then you have also geopolitical issues. Chinese have been very reluctant to buy, although we have seen some strong sales here last couple of weeks. And very impressive. You still look at the data. We’re down more compared to years prior and we’ve got a lot to make up for.

00;04;27;08 – 00;04;43;03

So I’m still a little concerned about our new crop sales piece facility, and it’s going to take a significant event, I think, to turn things around. And I think really the story here is going to be about Brazil and Argentina. We’re going to have to have a supply shock down in South America for our soybean export program.

00;04;43;06 – 00;05;12;24

Really well. And Brazil is getting set to begin their planting season in a couple of weeks. I understand the northern part of the country has the worst drought right now since the 80s, and we’ll see if that continues or not. But you’re right, the focus will be on Brazil’s planting and growing season before we know it. Now in August, Tanner, you wrote an article for Cole Banks Knowledge Exchange section of the Kobe Inc.com website, and you asked, as a slow start to the export season like we’re having main a poor finish.

00;05;12;24 – 00;05;16;03

I’d be interested to hear your thoughts on how you answered that question.

00;05;16;05 – 00;05;39;23

Well, statistically, Mike, when you look at our early season sales and what we did, you just take the pace of new crop sales at the end of August and compare that to how the marketing year ended up. We did that going back over the past 20 years, and we found out the correlation is very low. So even though whether you start out strong or whether you start out really slow, that does not mean you are destined for a certain export year ahead.

00;05;39;26 – 00;05;58;11

There are so many things that can happen in the crop year ahead that to shift the flow of trade. So although we are down significantly from years prior, that does not guarantee that we’re going to have a poor finish to the crop year. As I said, or as you mentioned already, very dry, historically dry, even parts of South America.

00;05;58;12 – 00;06;17;12

They’ve got a lot to catch up on in regards to moisture. And so as they start their planting season, we’re going to keep an eye on what happens in Brazil that could change things drastically. What takes a crop failure down in Brazil to turn us forward very quickly? There’s a couple of other things that we highlight in our paper that you mentioned, Mike, that would be beneficial to our export program for soybeans.

00;06;17;14 – 00;06;39;25

Number one would be European demand. Aside from any supply shock that happens in Argentina and Brazil, in Europe, they need to start sourcing veggie oils that come from non deforested acres, meaning that if they’re going to be buying any soybean oil or canola oil or palm oil, they have to prove that the vegetables came from land that had not been deforested over the past ten years.

00;06;39;27 – 00;06;59;24

And so that means the United States is basically their first place they’re going to buy. We haven’t deforested any land here for soybeans in over 100 years. And so that is going to bring in new demand that the Europeans buy about 13 or 14 million tons of soybeans every year. So we might see some good demand. And there’s a couple of other things that we might benefit from.

00;06;59;25 – 00;07;17;08

Federal reserve is going to be cutting rates probably in September. Now it’s already been priced in the market. So we’ll see what happens afterwards. If they’re more aggressive on cutting rates, that would be a tailwind to our exports, as that would make our currency and it might make resilient rial stronger. And of course, the Chinese are also cutting interest rates.

00;07;17;08 – 00;07;37;26

And that might boost their economies as well. And that might support their demand. Animal protein and feed imports or soybean imports. So there’s a lot of things here that could change the tenor of trade. So I wouldn’t be too discouraged as of yet. Although it’s easy to get discouraged looking at these issues and exports sales numbers, we can’t say that the U.S. soybean export program is completely out.

00;07;37;26 – 00;07;39;10

There’s a lot of things that could change.

00;07;39;10 – 00;08;03;03

And then we turn our focus to corn, the corn exports for July. Anyway, the census numbers came out and they show that exports totaled 207 million bushels in July versus 115 million last July last year. So right now, the 2023, 2024 marketing year exports totaled 2.29 billion bushels. And that’s right at the USDA’s goal of 2.25 billion bushels.

00;08;03;03 – 00;08;06;20

So not a bad ending for the corn exports. How do you see it going forward?

00;08;06;24 – 00;08;24;11

Well, like I said, we’re starting the year just a tad behind last year’s pace. And the way I see it is we’ve got to have if we’re going to sustain a strong export program. First of all, you got to have the bushels and we’re going to be down from last year because the smaller we may be down further on production, you can see more reductions on yield.

00;08;24;17 – 00;08;42;14

We have a really record high heat here recently. So that may not be good on yields. And so you got to have the bushels there to support an export program. If we have smaller crop. And that’s going to impact our export program obviously. But a few other things we need the Mexicans to continue to buy. Right now the pace of buying is a little bit slower.

00;08;42;15 – 00;09;01;22

My concern is the Mexican economy. They have a new administration there that is a leftist government. And so that’s not been positive on their currency. Their currency is weakening. That’s going to be impacting the Mexicans ability to import from the United States. So I’m a little concerned there. But I do see a positive here potential with the weather in Brazil.

00;09;01;22 – 00;09;22;15

It’s very dry there. And if that dryness continues, then potentially we could be replacing some Brazilian corn exports. And so that would be a pause. And then of course the US dollar needs to come down a little bit and give us a tailwind. And we might see benefit there from the Federal Reserve cutting rates. So I think there’s some positives here, especially if we see some weather issues in Brazil.

00;09;22;15 – 00;09;27;26

But our main importers like Mexico, I am a little concerned there because their peso is starting to beat.

00;09;27;28 – 00;09;46;19

Well, let’s move on to the previewing next week’s USDA was the report. We’re going to see updated supply demand numbers for the US and world in the Wisely Report. We’ll get updated figures for U.S. crop yield and production and the crop Production report. And we’ll also see new acreage numbers from the FSA acreage report. So three different things to look at there.

00;09;46;19 – 00;10;08;24

But let’s start with free report estimates. They’re out just late this week. Two separate firms have released their numbers, with one estimating U.S. corn crop at 15 zero 2 billion bushels. So right at 15 billion, a yield of 180 2.2. And that’s versus USDA’s 15.1 billion bushel estimate in August. Now, the firm says about the same 1509 billion bushels.

00;10;08;24 – 00;10;27;09

And then for soybeans, one firm is estimating the production at 4.5 billion bushels and another one at 4.6 billion. That’s compared to USDA’s 4.5. So these numbers are all kind of right in there together. I don’t see a really big difference. What do you expect the USDA to come out with and print next Thursday?

00;10;27;10 – 00;10;50;06

Well, I think a yield reduction is coming. We saw during the Pro Farmer Crop tour, which I look at historically, the Pro Farmer Tour is fairly consistent in indicating where a USDA is going to be. In September. Reporting their changes from August, Pro farmer came out. There were yield of 180 1.1, which is smaller than the USDA. I’m going to put my corn yield at around 182.

00;10;50;06 – 00;11;07;07

That’s kind of where I’m at. And so obviously that’s going to tighten the balance sheet a little bit. USDA is going to move some numbers around on the balance sheet for usage. probably tighten up the export numbers a little bit. But I do see the ending stocks number coming down by 75 to 100 million based on what we see just on the tighter yield.

00;11;07;08 – 00;11;27;25

Now, you mentioned we might see some revisions on acreage in those acreage numbers. Half of the acreage numbers and plant acreage numbers might come back just a touch counting for that plant. Things like that happen up north western Midwest because of planting delays, because of ponding with all the flooding that we had. And so I think that might impact the harvest in numbers too.

00;11;27;25 – 00;11;31;13

So I think we’re definitely going to see a tighter balance sheet here than the report.

00;11;31;17 – 00;11;42;25

All right. Very good. Well, again, Tanner, thank you for your time. We do appreciate you’re a repeat guest because there’s a reason for that. Because you have very good information. And we rely on your research and the things that you do there at Cal Bank. Thank you.

00;11;42;27 – 00;11;43;21

No, absolutely.

00;11;43;21 – 00;12;00;09

Anytime I Tanner, Mike Kovacs, lead economist for Grains and Oilseeds, we thank Tanner for his appearance here today. 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. Thank you to the ever Egg Insights Crew for their work on today’s show.

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