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Hello and welcome to From the Firm 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 today is June 4th, 2024. We start with the markets and the corn market is actually trading higher slightly for the july up to 455 new crop up one and a quarter cents at 464.

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The july soybeans up one and a half at 1185. The new crop November down three and a half at 1160. And you might make a note there that there is no Kerry in the soybean market. However, the corn market still has Kerry in it. July wheat down $0.10 at 662. Meanwhile, the deferred wheat contracts are all over $7.

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We turn our attention now to our guest this week. It’s our privilege to have Brett O’Connell ever AG’s director of grain foundations, and she reappears to this famous chair in the from the Furrow podcast. So we want to welcome her back. Thanks for tuning in and helping us out here today.

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It’s a pleasure to be back on. Mike Thank you.

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Justin Fagan ever eggs crop insurance agent also joins us today. Justin, welcome.

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Glad to be here.

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Mike, we’re going to start with Brett as we take a look at the grain markets and then we’ll talk crop insurance and some of the prevented planning situations for the Midwest with Justin. But Brett, first off, we probably should just start off by saying it’s hard to make a bullish argument right in the grain markets, but we’re going to ask you to list the three top bull and bear factors in the corn and soybean markets.

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We’ll start with the corn market. What do you think?

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Yeah, Mike, you’re kind of right. It is a little bit hard to come up with a lot of reasons to be really bullish. This market, you know, as I look at corn and this could be true of soybeans as well, the thing that we’re watching most is whether that’s regardless of the year, regardless of carry outs, regardless of what might be going on in the demand complex, this whole cycle starts with production.

00;02;02;25 – 00;02;25;20

And so we’re in this really key time of year where this crop, meaning corn and soybeans specific, we are determining what that final yield can look like and what those production numbers can be. So as I think about bullish factors, Mike, that’s probably the one that comes top of mind being mindful of the fact that later this year that can become a pretty bearish factor depending on how things play out.

00;02;25;20 – 00;02;44;28

So that’s one that we’re watching right now. Some of the other things on the potentially bullish side that we’re monitoring aside from weather is just global production right now. Brazil is just beginning. There’s suffering a corn harvest in some of those northern areas. And so we’re going to continue to watch and monitor that. All indications are that that’s going to be a good crop.

00;02;44;28 – 00;03;03;14

But we certainly know that weather is still involved in that process. And some of those later planted acres are not yet physiologically mature and still susceptible to some potential weather issues. So we’re going to continue to observe and monitor what’s going on there. And then I think the final one is we’re always watching demand when we think about corn demand.

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Maybe the one that has the opportunity for the greatest amount of vacillation is exports specifically. And how competitive is the U.S. going to be able to remain on the export front? Because that’s really where we could potentially take these really burdensome ending stocks and tighten them up a little bit. Ethanol is going to be relatively flat even as we look at our feed usage numbers, those are going to be relatively flat and not nearly as robust as exports can tend to be.

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And they can fluctuate either direction and make some pretty big sway. So that’s the other one that I’m watching. On the bullish side.

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Real quick, your comment about whether I think a lot of people forget that throughout the season you have planting weather and then once we get done with that, we’re nearly finished with that. With corn. Anyway, the market starts to focus on growing weather. And I think you’re exactly right. That picture and that scenario could change. Go back and forth quite a bit between now and harvest, right?

00;03;53;00 – 00;04;23;13

You know, that’s a really good point, Mike. And I think maybe that’s where some folks attention has really shifted to is, yes, rain does make grain, no doubt about it. But a lot of our soils are reaching a saturation point. And when we get these weather extremes early on in the growing season, it leaves us prone to additional risk if we continue to see that same wet weather pattern hold true because as detrimental as not enough moisture is too much, moisture can also be detrimental to yield and quality.

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And then we also run the risk of seeing a massive shift in the weather pattern and getting too hot and dry on. And so given the fact that these plants haven’t had to work real hard to access moisture and nutrients, they’ve been very readily available in the soil, they haven’t had to establish those really deep root systems. And while no means is it too late to do that, I think that’s something that we’re going to be mindful of.

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And again, this is a yearly discussion. There is never a perfect growing season anywhere, and every year there is an area that experience is something less than ideal weather conditions. And as we look at the U.S. drought monitor this year, there’s virtually no area that grows corn that is suffering from a drought. And so this year’s discussion is likely going to continue to more so revolve around adequate or maybe too much moisture and how that can play out.

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Let’s take a look at the soybean market, of course. Soybeans are down 8% on the year. We failed to mention corn’s down six. We go back to the original statement, It’s hard to make a bullish argument with the soybean market right now.

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It is making I’d say even more recently, it’s become increasingly difficult to create a more bullish soybean scenario for both corn and beans. We’ve come out of this really tight stock scenario and we’re working towards growing stocks. And as I look at the coming year and some of these original early predictions from the USDA have us growing stocks domestically, have us growing stocks globally.

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And when we talk about bearish factors, I’ll elaborate on some of those you ask for bullish factors. I’m going to say, of course, weather and I’m going to say demand as well on this one. And protein demand is continuing to grow globally. And we know that as folks move into the middle class, particularly in Southeast Asia, protein is one of the products that they demand most immediately as they move into the middle class and have more disposable income.

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And so there is a continuation of growth in the protein space. China is behind on new crop soybean purchases. And so that’s something I really want to be mindful of this year. South America, for the first time has the potential to fulfill most of the Chinese needs. On the soybean front.

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That blows my mind. I’m not shocked because we’ve seen that maybe a trend of this coming. But just to really stop and think about that actually happening, you know, do we ever have a chance to reverse that? That’s the thing. I mean, when things go one direction, it’s hard to turn them around. That would be quite something. If Brazil is able to continue to supply every need that China needs for soybeans.

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That’s unbelievable. Don’t you think.

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It is, Mike? I only think back to 2018, back when we were in a trade war and how we were talking about, hey, here’s the deal, guys. We are locked in a trade war with China. They aren’t going to buy a lot of product from us. But South America can’t supply that with all their needs. So they’re going to have to come to the U.S. or they’re going to have to change, you know, internally some things about how they feed their people in their livestock.

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And so that was only, you know, a few years ago, it feels like. And now they’re in this place where we continue. And Mike, this kind of is the piece that really makes me nervous. But we’ve got a challenge in front of us to be competitive on the protein front globally. You know, USDA in its first swag at South America and Brazil, specifically production, it came in at 169 million metric tons.

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This is not a yield discussion down there. This is an acre discussion. And really what’s going on in South America. You know, I liken it to what happened here in the US, probably 30, 40, 50 years ago. We’re seeing these they call them savannas, right? We call them pastures. They’re looking out across the horizon and they’re seeing these beautiful savanna cows and pastures.

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And they’re saying, Boy, I think that would be pretty easy to put beans it. And that’s what they’re doing. And then they’re bringing livestock into confinement. They’re doing what we did 50 years ago down there, and they have a lot more acres that they can add. And so the cadence down there is going to remain adding acres into crop production.

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And so maybe out in the horizon, there’s something that changes. Mike. But I think back to your point, this is something that we’re going to have to continue to wrangle with domestically. We have to figure out how we’re going to either remain competitive in the global market as it pertains to soybeans and or B, we’re going to have to really up our game here when it comes to domestic crush.

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You know, that was a story that for a long time was the bright spot in the grain space. And I don’t want to say it’s not a bright spot anymore, but in very typical U.S. fashion, we’ve done something very quickly, which is we’ve out produce demand. That’s something we’re incredibly good at. And right now we’re seeing the sustainable aviation fuel come online a little less quickly than what any of us had hoped.

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And we’re competing with some cheaper used cooking oils being imported from other countries. And so that has had an impact on some of these soybean crush margins and soybean oil prices directly. And so I think that’s something else that we really have to be mindful of in the next couple of years as we continue to see global stocks growing, as we continue to see Brazil add acres, we’ve got a task on our hands.

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Well, while we’re leaning bearish, do you have other thoughts on this current soybean market as far as the bearish factors?

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You know, today we went and tested support, Mike, and we’ve have so far anyway managed to kind of hold that t support. But, you know, as we look at funds in this way, they have in this marketplace, they’ve largely been on the short side of corn and beans, and we’ve seen them peel off some of that short next year as we were in the month of May.

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But the question really, I think, is going to center around where do they and how quickly do they want to shift their positions? Are they willing to jump on the long side? And they’re going to need a catalyst. They’re going to need a reason to do that. Or how aggressively are they willing to add back to that short position that they had before?

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And because June is really a critical month in the growing season, particularly for corn and for beans to to an extent, I don’t know how quickly they’re going to be willing to take this argument either direction, but I think we’re going to have to continue to watch and see how those funds position themselves in this marketplace.

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We’re going to have you back as we get closer to that June 28 acreage in quarterly stocks reports. Those are going to be very crucial, and I think that’s probably another show. But I would like to tap your brain a little bit about how farmers can prepare their risk management plans for the crop that’s in the ground right now from a pre harvest risk management plan to a post harvest.

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And give us a sense of, you know, how farmers should be thinking about that right now.

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Yeah. So what we’re thinking about pre harvest plans, really what we’re thinking about is, okay, crop insurance, what is my crop insurance marketable guarantee? Because we don’t know what we’re going to grow. We always want to be mindful that we keep ourselves sold underneath, that we don’t want to make any physical commitments to elevators above and beyond our marketable guarantee, because at that point, crop insurance is not going to help make us whole.

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We want to be mindful of that. That’s one of the key differences between a pre and a post-marketing plan. And right now there’s still risk premium in the market. Any time you are pre harvest, there are still a lot of question marks that remain about the crop. And because of that, the market hold some premium because of the unknowns.

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And when you have a crop established and you have that crop locked away in a bin, the market no longer needs to hold that premium. There’s not a lot that’s going to happen to that crop once it’s locked up in a barn and we’re dealing with a lot more certainty. And because of that, we could extract a lot of that risk premium.

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So I really encourage folks in an environment where we’re already carrying burdens and stocks where history tells us that the American farmers are incredibly excellent at his job and will very likely grow a very, very good crop. And I’m not going to try and prognosticate on yields. That’s another show, another time. But I am absolutely going to bet the American farmer grows a bang up crop this year and we’re going to be pushing the upper echelon unless we see some massive weather of yield opportunities here.

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And so I’m going to continue to encourage guys to be aggressive in taking advantages of these opportunities where there is risk premium still associated with the prices opportunities in front of them, because once we know we’ve got a crop, that risk premium gets sucked out incredibly quick. And you mentioned it here, it’s not just about the crop that’s in the ground, it’s about the 2025 crop.

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And we have to be mindful and we don’t want to get too carried away there. But look at the premium that’s being already maintained out there. There is Kerry in the market there of about $0.15 or so. So the market’s already maintaining a 15 cent premium just for being willing to stretch your legs a little bit further and get started out in that 2025 crop.

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And I always sell folks and encourage them, pick a spot and get started because now got a bit of a benchmark to work off of. So don’t neglect looking at 25 corn, but don’t neglect looking at 25 beans. And this is something I’ve really been talking with producers a lot on. I know there’s an inverse in beans, there’s a lot of times in inverse in beans, and I get it.

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It’s hard to sell an inverse, but if we grow a crop and if Brazil comes anywhere close to producing 169 million metric ton crop, which would shatter their prior record, there absolutely will be pressure on price.

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Well, I mean, the recent crop progress report backs up what you’re thinking, your optimism of a good crop this year. I mean, I know it’s early, but right now we’re 91% planted on corn. That’s up 2% from a five year average. But even more so is the condition rating for corn. It’s the best it’s been in two or three years.

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Soybean planted average right now, 78% complete on soybeans. That’s up 5% from a five year average. The transition here to Justin Fagin, the crop insurance agent forever AG is topical because farmers just last Friday, they reached their final corn planting date for corn in Iowa. Most of Minnesota, Wisconsin, eastern Missouri and southeastern counties of North Dakota, a large swath of South Dakota as well as Kentucky.

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Some face replanting due to continued rains. And Justin, that’s where you come in. What does this all mean for the farmers that are facing preventive planning?

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So on the replant side of things, what it actually means for producers is, you know, can you actually get that crop planted Timely and timely means, you know, June 1st would be for the area that you just spoke about there, Mike, however, it can kind of range throughout the countryside a little bit more. But most importantly for a lot of these producers, I know it’s been wet here as of recent.

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Everybody kind of likes to refer back to 2019 and how ugly that got throughout the country and what that meant to a lot of us. But again, like you said, you know, we are ahead of the planting progress report and we are actually doing a pretty darn good job at trying to get everything out there. But what I want to try to get people to understand is, you know, can you get that crop planted timely?

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So any time after that final plant date, you will lose 1% of your crop insurance guarantee per day. Typically, if you got corn out there, you’ve got a lot of inputs out there and you want to utilize those inputs as any good farmer should. The question is, can you get it planted within, you know, the next possible week, you know, to actually get a solid crop insurance on those acres and then it comes down to the 20 acres or 20%.

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So a 20 acres by crop by county or 20%, whichever one comes first. And that’s what you need to actually qualify. Without getting in to details on that, I just want people to understand that if you have a hard time getting it planted where I mean, some of these folks are out there trying to put the wing of the corn planter out as far as they can to get these wet spots covered, you know, and then in fall, if we have a wet fall, these guys are going to have to make sure they just won’t wait till it freezes to actually get it combined.

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I’m going to politely ask you guys, what’s your gut telling you? And should you really try to get it planted? Is it really in your best interest for some of those really, really wet areas?

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I think you make another good point when you talk about this just in about, you know, you can’t just turn a claim in on any field. There has to be some record of previous coverage, right?

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Correct. So the claims can be filed on a field that’s by crop by county, but it does actually follow the land. So if you picked up some, you know, new land this year and you have prevent planned on it, the adjuster will look back at history on that to see if it has been planted, insured and harvested in one of the last four recent crop years.

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So that’s probably one of the biggest thing is that people tend to forget is that prevent plant rules don’t follow the farmer, they follow the land.

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Now I want to go into our so what segment. So I want you to offer up your tips or tricks or whatever for farmers that are in this situation or may face this situation of preventive planning, what should they be thinking about? What timelines, what deadlines should they be thinking about.

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Realistically, especially when it comes down to a lot of this stuff? These are the environments when people really get disgusted by crop insurance. A lot of it comes back to having the right questions, having the right knowledge, having their correct conversations. And that’s what I really try to stay ahead of, is having these conversations now. And I try to urge every farmer out there when it comes to prevent plant, there are never any foolish questions to ask.

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Ask them all. There’s a lot of rules in. It’s really my goal to inform people on how to keep their policy working for them. Another thing is when in doubt turn in claim, it’s easy to withdraw that claim If you do end up getting that field planted or, you know, even after the fact that if we are past the final plant date on corn, you can switch your planting intentions to beans if there’s options out there.

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And I just want people to be understanding of that. Also, I just want you to be aware of your personal judgment. I said it before and I’m going to comment briefly on it. What’s your gut telling you? Do you try to plan or do you know when to call it what it is and understand that you just leave it be?

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And the last one, this is probably a really important one. If you do have prevent plant acres, those acres must match what you report at the FCC office. So if you use your corn planetary portal, your acres, that’s great. Those don’t necessarily need to match the FSA, but Prevent plant acres must match. And you can use your corn planter to really establish the acres in those wet spots.

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Great advice. Justin Fagan, ever Eggs, crop insurance agent. Justin, thanks for tuning in today and for helping us here today.

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Appreciate being here, Mike.

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You bet. And Brett O’Connell, director of Green Foundation Forever. Brett, thank you very much. Nice job.

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Thanks for having me back on the show.

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