The market sold off over $30 last week on very light volume. The futures market is being pulled toward the cash price with help from the funds and algorithms. The low volume could signal a bottom forming. Bottoms take time, and new lows are often made before it happens. The industry is searching for reasons for improvement, which is slowing any selling when hedging should be in place. This keeps focus on their cash and not futures for help.
The funds added another 538, totaling 3, 3847. When the funds go short, the spread becomes defined, and that excites speculators. The chatter from now until October 15th will revolve around the spread. Usually, at this time of year, I expect the spread to move $10 while futures rally $50. But as they say, ” when in Rome….
“We heard from builder Lennar last week and will get more updates soon. I’m not revealing anything new; builders are pulling back, waiting for a shift in the rate environment. This is somewhat positive. Less building means less supply. I included a mortgage chart below. We saw a 6.19% rate last week before it climbed again on Friday. I’ve mentioned the yield curve dynamics before. The rate increase on Friday is concerning, but the trend has shifted. Will this change manifest at the desired pace? Probably not, but you can’t expect more lows if the trend has shifted. Rates are key. It might be time to break below 6%. You can cut production, but that might only lead to new lows. Conversely, a slight demand increase could generate momentum.
The biggest hurdle in our industry is the potential rise in unemployment. The latest claims figures and revisions from the previous week show a stable unemployment rate, which is a relief. Two reasons support steady employment: first, the substantial amount of capital injected into the system, which has not yet been spent; and second, the BBB, which will add capital. Both factors will keep corporate profits high and employment steady. While this isn’t positive for housing, it does ease one major headwind.
The funds added another 538 to 3847. When the funds get short, the spread has a definition, and that gets the specs fired up. The chatter from now until Oct 15th will be about the spread. At this time of year, I would bet that the spread moves $10 while the futures rally $50. But when in Rome….
We saw builder Lennar’s earnings last week and will hear more in the next few weeks. I’m not telling you anything you have not been told already. The builders are pulling back, waiting for the rate dynamic to change. That is mildly friendly. Build less and you see less. I included a mortgage chart below. We did see a 6.19% number last week before it turned back up on Friday. I have mentioned the yield curve dynamics in the past. The turn up of rates on Friday is troubling, but the worm has changed. Will that change show up at the pace we want? No, but you can’t look for more lows if things have changed. Rates are the key. It could be a time for a break of 6%. You can cut all the production you want, only to see new lows. On the other hand, only a slight demand increase will create momentum.
The biggest headwind in our industry is a possible bump in unemployment. The last claims number and the revision of the previous week show a flat unemployment environment. That was a relief. There are two reasons for steady employment. The first is the extraordinary amount of capital that was pushed into the system. It hasn’t all been spent yet. The other is the BBB. It will add capital to the system. Both will keep corporate profits higher and employment flat. That’s not a positive for housing, but eases one headwind.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
This episode of “The Hedged Edge” explores the critical challenges facing US grain exports, focusing on wheat quality and Mexico’s market dynamics. Hosts Jeff Eizenberg and Ben Hetzel, joined by David Munoz from Bartlett Grain, discuss the USDA report, global grain trade complexities, and the potential risks of losing Mexico as a key buyer due to inconsistent wheat quality. The episode provides insights into transportation logistics, international competition, and strategies for maintaining competitive grain exports in a challenging global market.
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Check out the complete Transcript from our latest podcast below:
Quality or Quantity: Keeping Mexico as a Key US Grain Buyer
Jeff Eizenberg 00:54
Welcome to the next episode of The hedged edge. I’m your host, Jeff Eisenberg, and I’m here with my co host, Ben Hetzel. First of all, we can’t thank everyone enough for being a part of last week’s inaugural episode. The feedback from the community and everyone around was fantastic. And again, can’t thank enough to kbjm and kndc for hosting us. These episodes are designed to be here for the community, to be able to participate and engage and learn a little bit of something exciting today that Ben and I are on the air again here with you. It’s shortly after the September was the report. But here’s the shock. What people really need to know is that Mexico’s mills are asking for wheat from the United States that hasn’t consistently delivered. If we don’t raise the quality, we could lose our cornerstone buyer.
Ben Hetzel 01:42
Yeah, thanks, Jeff. Exciting to be on again today. Thank the listeners for tuning in to us here on the radio, and the people that download our podcast. We did have the USDA report out, kind of some minor tweaks, really honestly, Jeff, not a lot of news for the wheat side. Little bit of news on the corn side, and not much of anything for soybeans as well. So I guess on the wheat us ending stocks at 840, 4 million bushels supportive versus the estimates that were the trade kind of thought 865, global ending stocks at 264 point 1 million metric ton, a little heavier than expected, which keeps a little pressure on, but overall, not a big shock.
Jeff Eizenberg 02:30
And I agree with you, there Ben on the wheat. The biggest shock to me was two things, one in corn, 1.4 million additional acres planted acres. That’s 98 point 7 million planted acres, the largest ever. And then number two, you look at that number, most people will be running for the hills, thinking the market’s going to sell off, but no, we were able to rally the market about six cents. Now, you know, I don’t know how you feel, but that, to me, is about as shocking as we could expect,
Ben Hetzel 03:02
yeah, yeah, it is always interesting when you get these reports of what’s actually going to happen and what’s moving. The market. Did not expect the rally today in corn off of that it looked like beans rallied a little bit at the close as well. Or we had oil up pretty good today. But wheat, wheat stagnant, fell a little bit at the end.
Jeff Eizenberg 03:25
There we go. And then ultimately, on the beans side, the reality is we don’t have any buyers, and China is still absent and unavailable for purchases of beans. So we’ll see how that shakes out into the into the quarters ahead. But you had a comment then that you and I, you and I, you and I are talking about storage. It was kind of interesting.
Ben Hetzel 03:44
Yeah, I happened to run across the little article on the available farm storage versus the production. And production outpacing farm storage quite significantly. You got states like North Dakota at 131% versus storage. You’ve got Kansas at 133 versus storage, Missouri at 129 South Dakota, 128 pretty much all the states, until you get into the deeper south, well into the 15 to 30% more production than storage available. So it’s going to be interesting in what appears to be some challenging marketing conditions. We talked a little bit last week. One interesting thing, we talked about the potential for a nice crop of corn out in these fringe areas like western North Dakota and South Dakota. We did end up freezing quite a bit of our corn, so and soybeans. So it’ll be interesting to see how that all pans out, what what corn was far enough along, or what beans were mature enough to handle that frost. But we definitely will see a reduction,
Jeff Eizenberg 04:50
and you guys are now the you’re the wettest and the coldest, yeah.
Ben Hetzel 04:55
So it’ll be, it’ll be a challenging harvest for most producers. That have row crops and a lot of questions unanswered yet, you know what to do with this, this stuff, if it does end up having significant issues and so lot to unpack there down the road, but significant production all the way around. We talked a little bit about that last week too, Jeff, that there’s so much wheat, so much corn going to get harvested. Beans going to have a really big yield on beans, comparative even with acres down, we had a big canola harvest in the US. We’re expecting a big harvest in Canada. So one thing we are seeing in Canada is some quality issues, similar to what we’re kind of experiencing in western North Dakota in general, on the wheat side, but again, just big bushels, even with acres being down on some of these particular crops, not all of them, of course, we just learned on the corn. But the market is not really the same status quo as what we’ve seen, especially on soybeans, so stuff’s gonna have to find a home, and we’re seeing challenges on the wheat for sure, already.
Speaker 1 06:08
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Jeff Eizenberg 06:23
okay, flipping over to today’s topic, quality or quantity. Why the US risks losing Mexico. Ben, we’ve got our guests here with us. He’s online. Would you mind a quick intro?
Ben Hetzel 06:34
Yeah, thanks, Jeff. It’s my pleasure to introduce David Munoz. David is our guest today. He’s he was born and raised in Mexico. David spent the past 15 years in ag commodity trading stints in Mexico, China, Singapore, Thailand and now the US. He spent nearly a decade with serious global Ag in Minneapolis, focused on spring wheat and global supply and demand. He’s now helping integrate with Bartlett grain, who they just teamed up with out of Kansas City. David brings truly international perspective of grain markets, and he still finds time to spend with his wife and two young daughters. Welcome, David, glad to have you on here. It’s it’s a pleasure to have you join the podcast today. I’m excited to see where the discussion goes today with wheat in general, but global supply and some of the trade partners we have around the globe.
David Munoz 07:32
Excellent. Hi friends. Jeff, thanks very much for inviting me. Happy to be here. Absolutely.
Jeff Eizenberg 07:38
And David, your company is just merging. Could you give us a quick background there? It’s pretty
David Munoz 07:43
exciting. Yeah. So series global, AG, also known as Riverland. AG, here in the US, it’s been in operation for 15 plus years. Not that long, we operate a series of assets, physical assets, warehouses, elevators in Minnesota, North Dakota, and then across the border in Saskatchewan and Manitoba. It’s headquarter in Minneapolis, where I am based. And I personally been with the company for, like you said, for almost it’s gonna be eight, nine years soon. And just a couple of months ago, Bartlett grain was based in media in Kansas City. I’m sorry they decided to acquire our company. So at the moment, we’re in that period, that transition and merging with them. And I think it’s going to be exciting, as they have. They have some strengths, and we have some, and there’s some. Was no overlap, and the whole thing made a lot of sense, was probably going to make us stronger as one
Jeff Eizenberg 08:32
company. That sounds great, exciting. I gotta, I just gotta jump right in and ask you, you grew up in Mexico. Right now, Mexico is the quasi Savior to our American grain crop. And so can you help us all understand just a bit more? Is this truth or fallacy? Is the Mexico the great Savior?
David Munoz 08:53
Well, I mean, it’s truly just, I mean, it’s a neighbor. It’s there’s a lot of compliment each other, both countries. The infrastructure has grown expanded, and it’s much better than it used to be. And obviously, since the free trade agreement in the 90s, Mexico is is one of the top buyers of us, grain, bulk grain commodities. And then obviously Mexico sense what Mexico is good at in exchange towards north of the border. So there’s a lot of compliments, like I say, the population has grown the animal protein, the animal sector has grown as well. So that demands more and more corn meal, all types of protein. So it’s been, it’s been, it’s been a good market for the US in general.
Jeff Eizenberg 09:37
It’s good and, well, we can’t forget about the tortillas, right? So exactly.
David Munoz 09:41
So those are white corn. So Mexico self sufficient in white corn. But all the yellow corn then comes goes to the feed sector and the industrial sector like starches, but also as the population changes its diet, basically eating little bit less of tortilla, less corn, more wheat based products that require flour, that. That’s where the wheat consumption has has also grown over the years. And there’s some wheat production down there, including including a Derm, for instance. But there’s, it’s just clearly not enough, and the geography doesn’t lend itself. The US produces much better and cheaper, cheaper levels. So that that’s, well, it all makes sense. So that’s good market.
Ben Hetzel 10:18
So David, help our listeners understand, how does most this grain get to Mexico? You know, those of us in the trade understand, and that’s how I got to know you, obviously, through trade. But for the average listener or the producer out there, shed a little light on how we how we transport most of the screen. Obviously, we’re a border nation, but there’s more to it, right?
David Munoz 10:42
So I think that it’s pretty interesting, because it really comes flows across the border in all modes of transportation, primarily by rail, so the so called shuttle trains, so 110 car trains that carry 400 plus 1000 bushels of whatever, soybeans, corn, wheat, that’s the main transportation. Probably around 60% of the trade happens through that mode. But then, obviously, through the coasts, you have a bunch of it. So it goes through the river, gets loaded at the Gulf, both Louisiana or the Texas Gulf, and then goes through the main, the primary port, which is Veracruz. And that’s how probably 35 40% of all the exports from the US to Mexico happen. There’s some that also happens through the Pacific Northwest, where, let’s say, soybean crushers are based near the Pacific in the Guadalajara area. And then they bring the vessels through there. But then we also even have trucks, right? All what Texas produces, for instance, that’s, there’s a lot of trucking that happens just just by truck from Texas, so you get it all. So like I say, it’s just wheat, roughly what Mexico brings in from the US is primarily wheat, corn. Yellow corn is by far the biggest. Then you have soybeans. You have some meal, more and more with a with a crushing industry growing in the US, there’s a lot of meal. There’s going to be a excess supply of soybean meal, so that a lot of them is now making its way down there as well, although there’s some US based companies that have and domestic companies that have crushing facilities there. So that’s, that’s, that’s that also happens quite a bit.
Speaker 1 12:13
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Jeff Eizenberg 12:28
Viv, you had mentioned in our early conversation that we’re ultimately going to that we need to work to maintain our quality so that Mexico can consistently buy from us. Can you shed some light? Where are we in the quality discussion specifically related to wheat, North Dakota, South
David Munoz 12:44
Dakota region, yeah, when it comes to wheat. So the good thing is, Mexico is a consistent buyer of all classes of wheat when it comes to soft with winter, for instance, or HR, W, it’s all grown in the south the problem with that is that you have Russia, which has become a major, major grower of wheat in the world, and exporter to the point where it makes it cheaper to substitute HR w. So the HR W area is in trouble. But then you get with a high protein wheat, which is grown hrs, North Dakota, for instance, and Canada. That’s, that’s, that’s a wheat, prime wheat around the world that has no other substitute. That’s the good news. But the bad news is, or the other news, in a way, is that you’re competing against Canadians. What we’ve seen, I think, in the past few years, is that Canada has invested a lot of time and effort and money on on on its seed technology, and getting very close to the to the flower millers, just in general, what do they need? What milling characteristics? Characteristics are they looking for and trying to plant those seeds that feed their needs? So between that and also the weather, which we’ve had bit of an erratic weather here past couple of years in in the northern plains, that has made that the quality between both weeds, it’s they’re just not quite the same, or at least that’s what the feedback we’re getting from some of the farm bills down there. We’ve also heard that from some European based customers, because our company also seeps by vessel through Duluth to the European market, primarily Italy. So we’re getting more of this feedback that they feel that the quality is just not exactly the same with Canada. And obviously, if this keeps, if this keeps going into the future, probably what you’ll see is that then they’ll they won’t be as willing to pay the same amount of money for for for either or variety. And that’s where there’s a risk that you can, you can the farmer might see that reflected on on the bits. So something to keep an eye on.
Ben Hetzel 14:38
David, would you say that the US mill, because of the supply being so close, doesn’t have to deal with it the same way that the Mexico market does, in the sense that it just is reflected in price all the time. They want a specific quality or specific baking characteristics, they know roughly where to go find. That I know years ago, we used to run a program that we had some IP wheat. It was a very, very high quality in terms of baking and milling, and so we had growers that would grow that specific variety, and we would ship it in dedicated freight to those mills that needed that product. And the real world example. And I like to share this with kids that come through the facility on field trips. When you’re making a hot dog bun, it’s a lot different than when you’re making a hamburger bun or a loaf of bread. When you’re at a ballpark, you want that hot dog bun to hinge, and to get that hinge effect, you have to have really strong baking characteristics in that that dough. And so if you’re just making a loaf of bread or hamburger buns, it can be split and cut, and there’s no issue, but a hot dog bun has to be a little bit higher grade so that you can get it to flex. Do you think there’s that’s part of the issue, the US doesn’t have to deal with that same quality concern on a direct level versus Mexico, and that’s why our farmers are growing these varieties, particularly focused on yield, maybe not quality.
David Munoz 16:18
I would say there’s some of that. I would agree. I think the other aspect of it is that the US meal also brings some, some Canadian Wheat, for instance. So they also have, they have, I think, a better access to blend if needed. While the Mexican flour mills Also, due to space, it’s more constrained to try to bring two different varieties of the same wheat to then get what they need. So at some point, it’s just easier for them to buy one or the other. Now, I guess important to mention to to our listeners, that this year, the harvest we’re just is coming out of the ground looks much better. And I think it’s going to be very interesting we follow up here in six months or whatever, and see what the feedback we get from the end users. I expect them to say, well, at least that the spread between both both wheats is not as wide, which is what has happened almost for two years in a row, to the point where some of the millers, they’re like, I don’t want to take my chances. Just ship me Canadian if you can. Now, obviously you have other markets, like the Asian market, especially Taiwan, which they just buy really high quality wheat, but that’s what’s grown in Montana, and it costs more. There’s a premium for that. So the one thing now that you mentioned that segregation with some of the customers, they’ve asked for it like it’s possible. Now the problem, and I know a lot of the farmers are going to say, are they willing to pay for it? And that’s where it sometimes comes to not really, because it just costs more segregation, IP, the logistics, you just can do it at the same price. And that’s where the quality guy will tell you, that’s my dream. But then obviously the procurement and the purchasing department says, like, not really interesting.
Jeff Eizenberg 18:01
It’s a wild thing to think about, that the purchasing department is really in control, right? But, but in the reality, quality is something that has transpired over time to be the leading factor, particularly for higher end markets, higher end products. And just this week, I was passed an article because we we actually do some export ourselves out of the US into South America. And then in reverse, we have some customers in Mexico and in Dominican Republic that are buying corn out of South America. And the question when I actually went down to a facility, I was in facility in San Pedro, Dominican Republic, and I asked him, I believe I get you cheaper corn out of the United States. And his response was, I’m sorry, we don’t buy from the US corn. We only buy, yeah, from Santa rim and the I wanted to understand that more and literally, this week, we did the research. And it goes back to a 2008 2009 period when the local buyers were complaining about the quality of the US corn. It was too dusty. It was cracking. The myotoxins were out of control. They didn’t have the same color. The milling yield, to your point, wasn’t the same, and so they left the US market, Dominican Republic, and they have never come back, even though we can get them cheaper corn today. So if I think about that, then I asked the question you just mentioned, two years in a row of underperforming quality, is that a wake up call for the farmers and producers in the areas in the north that we’ve got to focus on quality and not just this quantity.
David Munoz 19:48
Yeah, I also, and it’s a good question. I mean, I’m not an agronomist, but I think it has to do with the seed technology, so something to be probably further invest. Get it. Why is this happening? I’m sure some of it has been weathered like I say. I’m sure the farmers, they do a great job planting the the seed, the seeds, and then doing whatever they they do best. But I feel that there’s something related to the tight connection between the farms, the millers, and what it’s needed to get that has seems to have been a little bit more put more emphasis on north of the border. I think in the US, I do see Association like the US wheat associates, or these organizations that help open the markets abroad, they do an excellent job of marketing us grains, or, in the case of soybeans, usig, or the US greens Council on the in the case of corn, they do an excellent job opening the markets. But there’s an element more on the wheat side that has to do with quality, right? It’s in a ways, corn, not necessarily, but corn is corn. There’s less, less differences between origins, but with, with, with wheat. Now wheat is created equal. And what we’re finding is that even between high protein wheats US and Canada, they’re not necessarily the same. So that’s something that definitely we want to we market heart of the of the wheat out of North Dakota. So we were very interesting that that doesn’t change right to the point where we have to almost sell at a discount to Canadians, just because of that, that aspect of the of the quality that we’re the feed that we’re getting,
Ben Hetzel 21:27
yeah, it’s it is a tough challenge for the wheat industry, because nitrogen fertilizer has such an impact on on that quality and the timing of getting it in there. And, you know, the agronomists obviously know a lot more about this particular topic, and work closely with our producers in this area, in the wheat growing region. But you know, as I think about what we’re talking about, and the price of nitrogen right now being so high relative to what the grains have done, and you touched on it, David, you said exactly what we see, you know, corn. You can raise corn East River in the I states, and then you can raise it out west here, and it’s still the same corn. It might be lighter test weight or or, you know, smaller kernel, whatever it is, but it’s still corn. And wheat is not that way. But you bring up a very good point that there are lots of different varieties of wheat out there, some that focus heavily on yield, some that focus heavily on characteristics, milling characteristics. So it’s just a good thing for our listeners, our growers in the region, to know that this does matter, and we’ve seen it. Two years ago, you and I traded some grain directly into Mexico, because our quality made sense to go there, versus where we traditionally trade to and and that particular year, we had a lot of grain grown for yield, and we had to get rid of it. So we were finding all kinds of homes for it, and that compounded the issue. We fertilized, we did everything we could, but it just out yielded and outperformed what, what it had available to it. And so we didn’t have that good, rich milling characteristics built into it that we needed.
David Munoz 23:13
Yeah, no, agree. And again, it’s, I think it’s a tough one, because the farmer needs to do what, whatever he can to so the operation works, and a lot of it, especially with prices, how low they are, one of the ways is to just out yield their way out of it. So I think it’s a it’s a tough one, and I understand, because we’ve had the conversation with growers in the past, and obviously the some of the feedback, they immediately say, Okay, well, but who’s going to pay for growing? Less yield and more with the protein or whatever other quality. So it’s a tough one. And then there’s an element of north of the border. Often they have a even on the fixed advantage, or they have a they have a competitive rails, just because how the system works in Canada, where there’s there’s the rates are capped by the government, so there’s certain amount of money that the rail railroad companies can make, and if they do, once they hit that, well, the rates have to be reduced so they don’t make more, more than, more money, than than the cap, which doesn’t happen in the US, right? It’s free market. And they’ll, they’ll raise them, or they’re lower them, if the market need, needs it like, like it’s happening recently with on the soybean cycle, there’s no there’s China side on the picture. So then the rates have just come down to incentivize. Yeah, it gets pretty
Ben Hetzel 24:29
complicated, the whole global trade. And we see even again, in the last week, some changes with India and Canada and some things going on there. The US had their round of that here, what, 10 days, two weeks ago, with India, as we increase tariffs due to them buying Russian oil. Now there’s some talk that India might hold some imports from Canada. So it’s going to be a challenge this marketing year with depressed prices, like you said, and then all these other issues. Is popping up between these nations?
David Munoz 25:03
Exactly. Yeah. And I think at a macro level, what we’ve seen is that as other countries have become more competitive. So in the case of we, we say Russia keeps growing at a cheaper, cheaper level, to the point where it can export into into Mexico cheaper than from Kansas or for the East Coast flour mills, it’s just cheaper to bring in vessels from from Europe or Russia than rail it across the Midwest, in the case of Soviets and corn is Brazil is now obviously a powerhouse, and it just feels that they can keep growing and growing and growing the area. So for the US is becoming harder and harder to compete. Obviously, that’s why at all levels of of government. They, they, I think they’ve understand that they, they need to create domestic demand as much as they can, and not rely on on the especially a single buyer, like in the case of soybeans, right at least for wheat is a bit more more diversified. It’s just a matter of competing. In the case of spring wheat, competing against Canada in this in this case,
Speaker 1 26:01
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Jeff Eizenberg 26:11
Shifting directions a little bit. We are talking here with David Munoz, with Bartlett grain, David, we’re shifting over to talk a bit on logistics. Right now. We’re hearing rumors about the Mississippi River going to be dropping eight feet. Are we going to get barges down the river? So what’s what’s going to happen with the export side of things? Are we going to have to shift over to rail, or is basis going to widen even further, because there’s going to be nowhere for our grain to go this fall? What are your thoughts on logistics?
David Munoz 26:39
I mean, so far, what we’re seeing is that there’s a very healthy book of business on the corn, on the wheat side. So for instance, corn, it’s, we’ll get a record export number. It’s been very competitive. It’s been even up until now. It’s competing against Brazil and Argentina into a lot of destinations. That window will close, and should have closed by now, but it hasn’t. There’s also one of the other big producers, which is Ukraine. They’ve, they’ve had, they didn’t have a very good crop last year. So there was an opportunity there. Now it will rebound. And the crops are seem to be rebounding in many areas of the world. So I think for next year, that’s where I think is going to get tough with a very large crop we’re getting. And then also export number on the estimates, that is really high and won’t be easy to to hit. On the soybean side, obviously it’s just bad. There’s no, no, no way around it. Without China, they’ve already covered October and probably part of November, with their needs out of Brazil. And then we know that the new crop, the Brazilian new crop, comes in in January, February. So the window is getting really, really narrow for the US to export. And spring wheat is relatively stable compared to last year. So that’s exports are going well. Mexico is taking quite a bit. Logistics are tight, but they’re not they could be worse if we had a Soviet program. But given that we don’t have a soybean program, that’s allowing, I think there’s capacity on the on the rail side, on the bar side, for the other grains. So I don’t foresee big issues at the moment, just because probably with like, like I said, we don’t have a soybean program, otherwise things probably they’ll be pretty tight. But by now,
Jeff Eizenberg 28:21
in terms of the buying from China, people also are hanging on to the fact that they’re going to buy our soybeans. And if I look at markets and the way that I track if we see both corn and beans trend higher because of our export program, and then a chance of China that would only probably drag wheat up with it, which could ultimately be good for all, all grains. But let’s, let’s be real. Do we think that China is coming?
David Munoz 28:47
In my opinion, I see, I mean, there might be some deal that gets done, but I think they’re, at least they’re getting ready not to. They haven’t bought a single bushel for, as we know, for this new crop, they have inventories in the country, which is something they do with all all the, all the grains that probably they don’t have to and then Brazil is coming up with a massive, massive harvest, probably for next year as well. Well, they had one this year, and now they’re, they’re about to plant their new crop, and they, I think it’s just a need. I mean, Brazil, by its own, feels that they can, they can, they can serve all China. And then obviously there’s some, some shuffling the US takes other markets. But it’s just not enough. There’s no one country that can substitute what what China buys. And at the end of the day, China consumption, just in general, it’s starting to decrease. Right as their, as their, their population is not growing that much anymore. It’s more more stable. So it just, I think that’s what we’re seeing here in the US, kind of the acreage, especially in the weed side of it’s just the charts are dramatic, right from 20 or 30 years ago. There’s just less, less needs to be planted, perhaps. And what it’s planted, they have to find uses, domestic and in other, in other ways. So no, in my opinion, I believe China is not gonna, it’s not gonna save us this time. But. Hope I’m wrong for the for the sake of the farmers well,
Ben Hetzel 30:04
and I think Jeff and David, one of the interesting little side notes that I’d like to add is, when you if you’re producing grain to market to the world, you need to target the places that are long term sustainable partners. You need to really build them up and and nurture those relationships, so to speak. And China has been on the decline, as you stated. But you look at India and what’s going on population there Mexico, which we have a we have good trade relations today, but India is a huge, huge player. And unfortunately, we don’t, we don’t really have a good relationship today in there. And so it would be interesting to see where this all goes. But it would be, it would be exciting to see some of these markets open up for the US, and hopefully we can get these trade deals, these this trade war, kind of put to the side a little bit and help these commodity prices come back for the producer, because that’s a challenging situation we’re in right now at the farm level. So but I one thing I want to say, Jeff, too, is when we talked about our mission on this show, it was to provide farmers, ranchers and users, or the Ag professionals, the tools and resources to navigate the market and maximize margin. And I think for today, this episode with David, it, it did all that. And I I’m super excited to bring this to the listeners and have David on here. I hope we can have him again sometime because of his insights and knowledge in the global market. So really appreciate that.
Jeff Eizenberg 31:42
Yeah, that’s right. And David, it’s been, it’s been amazing having you on here today, and the excitement that the listeners should hear that Ben is working with somebody like yourself to understand all these challenges. You know, where Ben sits at the Scranton equity Co Op, there’s an opportunity for him and his team to listen to you which you are working with the buyers. And so the ultimate thing is know your customer and understand who’s on your team. Like Ben just said, working again with the with the co ops to find out what is coming next. What the end users need and want is more important now than ever in this global market, we’re not just selling to your neighbor, we’re selling to the world. And we should, all the producers on here should, should be very proud of that. And also need to stay stay educated. Can reach out to Ben at the Co Op, pop over and see him in Scranton. Over at Scranton equity exchange. Give him a call. Check out our website, RCM, Max services.com, and David, if somebody wanted to get and get a hold of Bartlett, where’s the where’s the website for them to go to?
David Munoz 32:49
Yeah, probably in their browser. They can just put on bartlett.com they’ll find it. Our series global like website was just recently integrated into them. So if you go to the Bartlett website, they’ll see now the locations that are also the ones that the series global ag River Land ag business uses currently, absolutely. Thank you very much for the invitation. Happy to be here and
“If you got long each time a rumor was sent out, you would have been buying the highs and exiting on a new low.” What a great observation. The news that a mill would operate for 4 days and curtail production sent the futures market sharply higher on Friday. To put things in perspective, considering all the positive spins last week, the November futures closed down $1.50. Today, closing or curbing production is an extreme move. It comes after the mills fill up the K-Mart parking lots, expand the vendor management programs, and establish unorthodox reload programs. In other words, when they have too much wood. This process is a slow chipping away of the excesses. I’ll be the first one to claim being way too early in the call for par. I’m worried demand is slipping, making the decreases a wash.
Another silent market killer is the fact that JIT has changed dramatically. There isn’t a day that the cash guys aren’t in the market. They continue to build long-term inventories, which is the opposite of JIT. The disciplined cash buyer has been the employee of the year for the last two years. When they buy it is at lower levels. That needs to change for the market to shift.
The rate cut will help the psychology of the market. It will be positive at some point in the months to come. For today, the industry wants a rally to hedge. The funds adding shorts can help with a pop.
The Technical Read:
The biggest takeaway and risk I see today via the technical read is that November futures were at $712.00 on August 1st. We talked about how futures were at $418 in July of 2024. Well, August 1st. was only 30 sessions ago. That is a $200 swing in a flat market. There is no clever way to project the market. The simple answer is buying the discounts or selling premiums in futures, and then you turn off the emails. Today, the technical read is trying to indicate a slow bottom forming. We have been here before, only to see a sharp spike followed by new lows.
Under a 200-plus swing environment, there is no reason not to buy the cash items you need that are hitting new lows. There is no reason not to hedge at a significant premium. This is no longer a blocking and tackling drill. It is full pads, two-a-days. It’s all about discipline. It’s all about market parameters. It’s all about the plan.
Note: We were looking for a catastrophic September close. What if it spikes?
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Corn continued to move higher off last month’s lows following the September USDA Report. Most of the numbers came in along estimates but they increased planted acreage 1.4 million acres. This brings the US corn crop to 98.7 million acres, a new record. With about 90 million acres expected to be harvested, we will harvest 7 million more acres this year than in 2024, which equates to about 2 billion bushels larger crop than last year. Despite the added acreage corn bounced post report as weather issues, a dry finish, and disease pressure have caused speculation on the real size of this crop. As harvest gets rolling we will learn more about this crop.
The USDA Report did not have any surprises for beans as most numbers were close to estimates, but the report could be viewed as slightly bearish. To get beans moving higher, China needs to show up as a buyer and trade talks with China need to make progress. China and the US are reportedly close to a deal over Tik Tok which can hopefully build some momentum for progress between the two countries. The size of the soybean crop, like corn, has been hurt by lack of rains down the home stretch but with the solid start the end result is still in question as harvest rolls.
Equity markets continue to make new highs with the Federal Reserve expected to start cuts this month. With the downward revision of 911,000 jobs from March ‘24 to March ’25 the labor market weakness gives the Fed some ammunition to lower rates with unemployment being one of their mandates.
Secretary Rollins is in the process of looking into payments to farmers for this year with the low prices.
The wheat numbers were actually a bit supportive but lower world cash prices (Black Sea mainly) continue to plague prices. Wheat will remain an anchor for any potential corn rally as more wheat will be swapped in for corn in feed. Prices are back testing the 5 ½ year Covid lows.
Drought Monitor
Here is the most recent drought monitor as harvest begins.
Contact an Ag Specialist Today
Whether you’re a producer, end-user, commercial operator, RCM AG Services helps protect revenues and control costs through its suite of hedging tools and network of buyers/sellers — Contact Ag Specialist Brady Lawrence today at 312-858-4049 or blawrence@rcmam.com.
Cattle markets are at multi-decade highs, and producers are facing both incredible opportunities and serious risks. In this first radio edition of The Hedged Edge, hosts Jeff Eizenberg and Ben Hetzel dig into the realities of managing cattle risk when prices are running hot.
Joining the conversation are Dwayne Bowman, President of Dakota Western Bank, and Joe McKitrick, a North Dakota rancher, who share their perspectives on:
Why tight cattle supplies are driving record highs.
The risks of inflation, feed costs, and consumer “trade-down.”
How bankers and ranchers view tools like LRP, futures, options, and forward contracts.
Opportunities in feed, grain, and basis markets across the Northern Plains.
Why communication and discipline are critical in today’s cattle market.
Whether you’re a rancher, banker, or market watcher, this episode will give you a practical look at how to navigate risk — and why now may be the most important time to have a marketing plan in place.
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Check out the complete Transcript from our latest podcast below:
Bulls, Bears, and Beef: Risk Management When Prices Run Hot
Jeff Eizenberg 00:51
Welcome to the first ever radio version of the hedge edge podcast. I’m your host, Jeff Eisenberg, and I’m here, joined with my co host, Ben Hetzel. Ben, we made it big. We’re on the radio.
Ben Hetzel 01:02
Yeah, buddy, it’s fantastic to be here with you today, and I can’t wait to get into this, and I gotta thank you for all the work you’ve done to get this up and running gov of the inaugural show.
Jeff Eizenberg 01:14
Absolutely no thank thank you as well. Couldn’t have done it without you. And you know a lot of our listeners are going to recognize your voice straight away. You know you’re from the local lemon community. You’re the CEO and general manager of Scranton equity co op for myself, for everybody who’s listening, I’m a bit of a newer voice to the area, and the managing director of the host of the show, RCM, ag services. I thought it’d be a good idea just to give a little bit of background, Ben you and I, we teamed up about a year ago. Really, the idea that we had when we first got together was to support the local Co Op and the community around with additional education and information about risk management and hedging services that we’ve been providing in and around the Dakotas and throughout the I states and other parts of the country. But really, you know, the more we talked and the more we got talking about education, the idea of the show kind of came alive. And since this is the first episode, I thought no better person than you to give us a quick recap and give the listeners an idea of why, why we’re going to do this show. Why should they listen? So if you don’t mind, yeah,
Ben Hetzel 02:26
sure. You know, the landscape changes pretty drastically year to year, it seems like. And the way production, AG, is it has changed over my career. Anyway, one thing that hasn’t changed is the risk. I mean, there’s, there’s a ton of risk in production. Ag and and so our mission with this podcast is, as you said, that this inaugural start to what you used to do on the hedged edge, first you want to provide the farmers and ranchers, AG, producers, end users, any professional with tools and resources that they need to navigate the markets today and maximize margins, reducing risk in their business. Secondly, you know, I want to highlight the importance of building that right team. We’ve talked about our conversations. You know, that’s the banker, the insurance agent, suppliers, whether it’s agronomics or other, having that agronomist close to your business, your broker, grain buyer, metal buyer, and all also your people that are on the operation every day with you and, and it’s just, it’s all about bringing that team closer and and and minimizing risk In your operation.
Jeff Eizenberg 03:40
Yeah, no, that’s, that’s right, and it’s, it’s been kind of the heart and soul for you and for me our entire careers, and as you get talking to more and more people, least as I have and you’ve, you’ve shared with me, it’s also about longevity and legacy. For a lot of people, the ability to not just turn a profit this year, but set up their operations, their farm, their ranch, to pass on to the next generation. Pay back their banker today, you’ll find we’ve got a guest banker on the on the line, so he’ll be happy to hear that. And with all of this said, we’re excited to be able to share this platform with you. Each week. We’re excited to bring new guests and new new team members from around the local community together to have these discussions. So again, thank you for taking the time to put this one together. All right, now that we’ve walked through why we’re here, let’s jump into today’s episode, bulls, bears and beef. All right, joining us today. We’ve got Dwayne Bowman. Dwayne’s the president of Dakota western bank, and Joe mckich. Joe joins us from Bowman, North Dakota, where he’s actively ranching, and it has been his entire career in production agriculture. So gentlemen, Dwayne Joe, are you there? Able to able to hear us? I’m here.
Joe McKitrick 04:59
Do. Yes, Jeff, All
Jeff Eizenberg 05:02
right, thanks for jumping on and joining us. We actually Dwayne is in studio with with Ben, so we’ve got the two of them together, which is great. And Joe’s off in Montana today. So again, thank you both for jumping in you know today and where we where we’re going here with this first episode is, let’s just jump in and talk about cattle why not? Right? It’s the hottest market. There is grain markets. Well, we’ll save that for the end. But with cattle prices are at all time highs. Wanted to kind of start out with a couple quick stats, and then have you guys really share what’s going on, boots on the ground style. You know, I think many people have heard, if they didn’t already know, this is the smallest us cattle herd in 70 years, 70 years since 1951 there’s 86 point 7 million head out there on feed that is highly un contrast to the 2019 peak pre covid numbers, 94 point 7 million. So we’re way down. Number one, number two. This one’s pretty interesting. I think we all know it, because if any of you are like me, my wife goes to the store or Costco, they’re paying up big time for beef. The Department of Labor Statistics noted that the average retail ground beef price is over $6 a pound. That’s up over $2 or 50% from five years ago. So prices are through the roof and hitting our pocketbooks, but yet, still, the price keeps going higher. And we’ll get to some questions at the end as how do we cure this? But before we get there, I kind of want to hear straight away from Joe what’s going on out there in the field. You know that we talked last week, before we did this call about the cattle on feed report and cattle on feed had been pointing to lower placements nationally, and particularly in the south. But up by you in your area, it’s a little bit different. What’s going on?
Joe McKitrick 06:53
Joe, well, thanks for having me on Jeff. As far as placements go the North looks so much better than the South because of the screw worm issue we have and but one thing that you know is an interesting take on the placements is Texas. The Texas feeders are competing for feeders up north and feeders in Oklahoma because they can’t get the feeders, their feeder cattle out of Mexico right now. So it’s creating a demand up here that’s that’s higher than normal on a seasonal basis, and also making it so that the Oklahoma feeders are the same basis as we are dealing with here. So it’s kind of a unique situation to add on to, as you said, already a very large shortage of feeders in general. Yeah.
Jeff Eizenberg 07:48
And the the other part is that you’ve got some quality ground. Obviously, had good condition and good grass, so people are bringing it your way. Is that been something you’ve seen as well? A trend in your direction?
Joe McKitrick 08:00
Yeah, there was a lot of yearlings contracted early. People were, you know, excited about the price we saw in June with yearlings, so they went ahead and contracted them. You know, fear of the unknowns of the marketplace, as we saw now. You know, the market has fully gotten better and better, and there’s a lot of yearlings starting to show up last week, this weekend, next week. The, you know, in the three, four state area, sale barns are starting to receive a lot of yearlings, and receiving them on a very high demand. I mean, the prices just keep going up every day. The Northern index is, you know, some version of 375, 380, on an index sphere. So the prices we’re seeing are just phenomenal. But again, there is a, you know, there, there’s a visible shortage as far as what’s available up here.
Jeff Eizenberg 08:50
Yeah, that makes, makes good sense. And that’s the kind of the gets to the crux of the problem, right? It’s that we’re, we’re trending higher. There’s a lot coming in, and people are looking to sell, taking, taking profits effectively out of the market. How are people feeling about these high prices?
Joe McKitrick 09:07
Well, so 2025, brought in a, a whole new market for us. And like I say, in June, you know, we thought that as producers, they, you know, that was already record prices. And so everybody the video sales saw that to where the volume in June was almost a flip flop of a normal July, meaning the volume of July went to the June sales. And so it’s, it’s just a function of, you know, 2014 and 2015 isn’t a far distance in most people’s memories. And so they That was a short lived bull market. And so people just want to make sure they capitalize on what is in front of them. So, you know, we saw a lot of activity early. There’s still calves for sale, no doubt, but there is a lot of contractor calves already.
Jeff Eizenberg 09:52
And then Dwayne, from your perspective, people are selling. They’re taking profits. They’ve locked in. Some of the opportunity to market. Question starts coming back is, what’s next? Are they thinking about replacing this herd, and in what way are they able to leverage the banks to come in and support buying new calves at this at these heightened prices? Is it even feasible? What do you think?
Dwayne Bowman 10:17
Well, good question. You know, it wasn’t that many years ago, I remember sitting down with one of my producers, you know, it’s probably six, seven years ago, and you know, when we were doing projections on there, and we figured, you know, we needed to get to about $1.70 on a cap to break even for him. And you know that time abs are probably worth about $1.45 and needed to see $1.70 so here we are. Fast Forward, you know, to 2025 and we saw $3 and then we saw $4 and now I’ve even seen some five point cans at about five bucks. So it’s gone up so fast that, you know, I think, if anything, there’s some fear now in the market, as Joe referenced, you know, it’s 1014 2015 that was very short lived. So everybody’s still got that fresh in their mind. But yet, you know, right now, this is it’s going to be, it’s going to be awfully fun. When it comes to the end of this year, these guys are going to have the most money they’ve ever had in their pocket. Last year was a really good year for us in the ranching country here, but we were dry, you know. So yes, you were getting record calves at record cap prices, but they weren’t hanging on to a lot of extra heifers. You know, they were selling down, still on numbers, just because we were so dry, they didn’t have hay in their hay yards. The pastures look pretty bleak. And now this year we’ve received, you know, tremendous rainfall along with these record prices. So there’s a lot of optimism. You know, your question as far as, are they going to replace right now? You know, I would say on the cow calf site, you know, really, that we’re not seeing a lot of demand to increase their numbers. You know, they still remember when they paid 2800 bucks for a red heifer 10 years ago, and never really did pay for that red heifer. So paying 4500 now, there’s not a lot of guys doing that. They’re, they’re holding their numbers. So they might buy a few back, but they’ve also, they’re selling that call Cal for 2300 bucks so they can afford to buy back. You know, $1,000 more, $2,000 more on the feeder side, I think we will see the guys. You know, they’re going to continue to to buy, you know, whether it’s yearlings or whether it’s feeder calves, because they’re coming off of, you know, probably the most money they’ve ever made. So they have to put that money back somewhere. You know, they’re, they’re either, they’re either going to be paying income taxes, which both of them like to do, they’re going to have to put it back into cattle. So it’s, it’s going to be a little more challenging on the on the hedging side, when it looks, when you look on the board and and you’re looking at, you know, a $300 loss at this point, but yet, they know they’re going to have to put it back into cattle.
Ben Hetzel 12:18
Yeah, it’s going to be really interesting. Jeff, too, you talk about what happened the last time we seen prices spike, and this one being such an extreme, comparatively value wise, as a producer myself, small scale, you try to try to remember those things and do things different this time. So whether using futures and options or an LRP product to mitigate some of that risk. You might find yourself looking back on this last summer, earlier spring, and I wish I wouldn’t have bought that insurance or put that position on as a cow calf guy. Now, feedlot guys that are buying numbers and doing that, you know they got to be prudent and hedge their risk diligently. But you know, as a cow calf guy that maybe 10 years ago, never even thought about hedging those calves this year might have been looking, and maybe even in the last few years, looking at hedging them. They’re born or unborn, possibly, you know, and as that product’s changed, it’s it’s made it a little bit different this year. It seems like it’s a little more expensive early on, but the value is much higher too. So value of using that tool, but, you know, we’ll get into that a little later. I think Jeff too that, you know, it’s, it’s still not a, it wasn’t a mistake to to buy that insurance. And some people, probably, I’ve heard it from others that they probably think, man, you know, I wish I would have done that. It’s, it’s kind of a trap that I think producers can get in, and hopefully we can shed some light on why that’s that’s a good thing to be doing anyway. But going forward, it’s going to be interesting to see what the trend is. Continue to edge these calves right after they’re born on an LRP, or start getting into futures and options and understanding those tools that are available to them. I think the trends will definitely depict a new direction based on what’s going on this year.
Speaker 1 14:17
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Jeff Eizenberg 14:32
Ben, you mentioned something when we spoke the other day about the kind of misconception in the country that the banks are actually forcing people to put on these hedges and lock in losses. And you know, when you’re talking about losing on the calf rate as you buy it, what are your What are you guys thoughts in general, about this?
Dwayne Bowman 14:51
Yeah, like speak a little bit on the bank side, you know, I mean, no, I mean, we’re not forcing guys to lock in, you know, to put on losses. Obviously, the guys that are buying feeder cattle. Buying yearlings. We want them to be prudent and be doing some hedging, and just they’re putting so much money on the table right now, so they know they have to have some type of protection on there. But I don’t think anybody’s going to force anybody into taking a losses. We’re hoping you know that they’re going to be able to when they’re buying. Hopefully that that it looks like a break even at at worst, but definitely be doing need to be doing some type of protecting on, on their end, on the cow calf side, you know, as Ben talked about, you’re seeing more and more guys that are getting comfortable using LRP, a great tool to help kind of take, you know, to lock in some prices for them. And then we’re seeing a lot more guys that are just forward contracting, you know, a lot more hitting the video sales early. And they they understand that so much better. You know, hedging is a is a scary word for a lot of lot of producers, still. But when they forward contract and just know, hey, October delivery, I got 398, that 650, pounds, they know exactly where they’re so they like, they like that part of it. But the hedging is, is definitely going to be, definitely going to be a big piece going going forward, on the on the feeder side, on the fat site, just because there’s so much money at play this year.
Ben Hetzel 16:02
Yeah, that brings up an interesting point the way in that, when we talk about grains, and just for a moment, even though we’re not going to spend a lot of time on today, but oftentimes, in this geography, forward contract, particularly the because you could lose it, you could get hail, you could get lots around different things that happen to lose the job or lose the quality that you’ve guaranteed to the market. So that’s where the futures and options piece or or a product like LRP would would really kind of protect you. But we were pretty comfortable selling cash. And, you know, generally, if they’re on the ground and they’re healthy today, you’re going to be able to be able to sell them. And you know, you it wasn’t that long ago we had a storm called Atlas. If your cattle are contracted in November and we’re in a wet cycle right here, as you mentioned, and it’s you wonder if that’s crossed some producers minds, like, what happens if we get a bad one, you know, maybe they aren’t selling 100% likely not. But if they’re selling a high percentage, and the risk is there that something could happen, it’s usually doesn’t devastating level, but there’s some risk there.
Joe McKitrick 17:15
Going to your comment Ben, about, you know, hedging and doing something with the cow calf side. And we’re, I’m hearing it a lot in our travels that, you know, that was just a waste of money, or the put option, they bought more so the lrps, but they were a waste of money. And, you know, all too much marketing and egg is done on a recency bias. So you know, now that we got 2025 the big run of 25 under our belt, and the recency bias says that was a waste of money. You know, that’s one thing that I’d encourage, is that, you know, don’t give up on adding some protection, because the time that you don’t need it is right around the corner is the time you do need it. And obviously 2025 if you did nothing, that was the best case. But typically somewhere right around the corners when, when you do need your hedging program. So I think that’s an important piece of that conversation.
Ben Hetzel 18:10
Yeah, and I’m glad you went there, because I, I’ve felt like we, we had to touch on that, because, again, you know, personal experience, and obviously you live it every day. Dwayne sees it every day, Jeff, he’s he’s in the trade every day. It’s so important to protect yourself against the risk. And if you’re making money, when you put that edge on, it wasn’t a waste, waste of time or effort or money, because your point is market turn at any given moment, and you’re going to need it, because it may fall faster than it came up, and it catches you by surprise and but yeah, and that was part of that misunderstanding too. Is, you know, a lot of people get in that trap. Well, yeah, I wasted that $60 a head on my LRP, which, when I bought LRP, I said to my agent the day I did it, I said, Well, tomorrow, this might be a mistake, which it was, because it rallied big time. The next day, they said, This may look like, not be a mistake. It may look like a mistake. And I hope I’m wrong in doing this, because that’s a unique tool, just like an option, that it’s a fixed cost, and if the market keeps running, you’re going to capture some of that gain. It’s really unique. And I think producers need to know that, you know, just because you buy that product doesn’t mean you out of the market. You still have opportunity.
Dwayne Bowman 19:29
No, you’re right there. You know, Ben, that’s exactly what we’re hoping for. You know that you never have to use that tool. You know, as Joe said, the best thing the person could have done this year was nothing. Well, that’s we’re right around the corner from where you you know, things could turn the other way, really, really fast. And it’s, it’s the insurance, you know, it’s just the insurance that you’re going to be able to sleep at night having that protection on. Obviously, the bankers, we want to have that as well. We want to have that risk covered. The producers need to have that same thing. And it’s, you know, that’s why we put crop insurance on, you know, that’s why they put hail insurance on, so they can sleep better at night. They hope they never have
Jeff Eizenberg 19:58
to collect on it. Yeah, we’re talking. Working with Dwayne Bowman here, the president of Dakota, western bank. So Dwayne, when we talk about that right there, the relationship with the banker, I think that’s so important. You know, we have a lot of people that you know doing futures and options and other transactions that require the bank to be aware and communicative about where they stand with their potential gains, losses and margin calls. And, you know, we’re on the radio waves, and we use the word margin call, somebody might turn us off straight away. But the reality is that that can happen, and having that open line of communication with the bank in advance is paramount. And so, yeah, I just give you this chance to speak to that. And you know, the way that your bank handles, kind of working with their, their ag loans, whether it’s cattle, grains, whatever it might
Dwayne Bowman 20:47
be, yeah, I mean, the biggest thing when we’re putting their, their operating note together, or putting their note together to purchase the feeder cattle, obviously, a big part of that, a piece of that, is the risk protection, and it’s going to come at a cost, you know, whether it’s going to be put options, you know, and we’re going to build that in, or whether it’s going to be crop insurance. Going to be crop insurance, you know, we’re going to build that into the into the note, we have to manage our risk, and they’ve got to manage their risk. So it’s just, it’s a cost of doing business, but it’s, it’s no different than, than any other business out there. Like you said, it’s, uh, I think if anything, it’s just a lot of lot of producers still are just scared, you know, they don’t know enough about the marketing. They don’t know enough about risk protection, futures contracts, things like that. They’re they don’t have enough knowledge on it yet, but it’s a necessary piece to continue to get educated on. And that’s where I think this, this show is going to be kind of exciting, because hopefully it’s going to provide some opportunities for producers to get educated.
Jeff Eizenberg 21:38
Yeah, thanks, Dwayne, that’s that’s the goal. And really appreciate your feedback and being there to answer those questions in office, and you know they’re there locally. So that’s that’s great. Switch it over to Joe again, where Joe mckich from Bowman? Joe one kind of old trading fallacy out there. Maybe it’s the truth. Maybe it’s not. Is that higher prices cure higher prices. And so here we are. We’re higher prices. What’s it going to take the cure? Cure these higher prices. For the consumer, really? I mean, the the rancher, hey, keep on going. But for the for the consumer, we’re feeling the pinch we’ve got. The other day, I actually, I got a text message from friend up there and in Bismarck, and it was a picture of McDonald’s, and below the drive thru window, it said, financing available. So we all know beef is expensive. What’s it going to take?
Joe McKitrick 22:33
Well, I think you know, going to the McDonald’s conversation, the CEO was on again, and he talked about, it’s his lower to middle income consumers that they’re having a hard time getting them to come in the door. They’re skipping breakfast and eating at home, and he’s assuming that they’re skipping a meal altogether. So any of the consumers that have a household income, I think he used of 100,000 or less, they’re seeing a decrease in traffic. And so, you know, that’s always the fear. You know, the Packers, the funds, their job is to, you know, get prices as high as they can. They’re not really in it for that longevity of as much as today’s price. And what can they make a profit out of it today and and, you know, so that just say, what is going to limit demand? That’s to be seen. But obviously, if McDonald’s is saying that we’re limiting some demand today, the concern is permanent demand loss, since beef high and the wife goes home and makes a different meal, and then the family is okay with that meal, you know, based on pork or chicken, five years down the road when beef not as high, obviously, chicken still going to be cheaper, pork still going to be cheaper than beef at that time. Are they going to stick with that and not, you know? So we have more permanent demand law. There’s already conversation with a few fast foods are mixing pork with their beef for for ground beef. So concern of permanent demand laws is what is on every producers radar, that that the ones that we sustain the industry over a 20 year span, and we’re not just in it for the short term gain, like a fund is or, you know, packer is for the day. So I think that’s the real conversation is, how high do we have to go? We went to 475, and made during covid, and there’s a lot of forecasts that will get there fairly easy again that’s to be seen.
Jeff Eizenberg 24:28
Yeah, you know, from from where I sit, I’m feeling more and more as I talk with gentlemen like yourselves, then it’s really going to take the rebuilding of the herd and the numbers getting higher to drive that pricing back down. What are your thoughts? How long is it going to take to really, truly rebuild a herd?
Joe McKitrick 24:47
Well, so there’s two packers that have came out recently and said that, you know, we’re dealing with anywhere from three to six more quarters of really tight supply. And then, you know, getting to more normalization. What? How? However they define it. They did not define it in their in their notes. But you know 2027 being closer to more normalization. So assumably, we’re going to see some herd expansion somewhere along the journey that provides that
Speaker 1 25:15
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Jeff Eizenberg 25:29
The other question that’s going to come into play here Dwayne is interest rates. You know, we know President Trump’s been pushing for lower rates. What are your thoughts? How is interest rate play going to either support or impact the the herd expansion on the cattle side,
Dwayne Bowman 25:47
yeah, you know, really what I’ve seen the last few years with rates going up, it hasn’t had nearly as much impact on the Ag side as you’d expect. You know, land prices have been strong as ever. Have continued to go up. So in a producer actually said this to me the other day. He said, you know, interest rates, to me don’t mean, don’t, don’t mean nearly as much as as commodity prices. And he’s right. You know, commodity prices and weather are a much bigger factor and impact than interest rates. So I think we’re going to see interest rates go down. I don’t think that’s going to have a big impact on what cattle prices do, you know, like you were talking what kills, you know, high prices. You know, it’s high prices. And I think what, what we’re finally going to see at some point right now, the consumption, beef consumption in the US has been very stable. The last three years, it’s been right around 58 pounds per capita. So that isn’t changing. So at what point, you know, does the price cause them to go elsewhere? Chicken is still, you know, twice the consumption that beef is, but you talked about, you know, the $2 difference there is, I don’t think it’s enough difference right now that the consumer still knows that they enjoy, that their lifestyle, they know what they like. And we are, we’re definitely in a in a lifestyle to where we know what, what we appreciate, what we like, and as long as we can afford it, we’re going to continue to stay that way, like you talked about financing, you know, I thought this was kind of interesting. I heard this the other day about, you know, people love convenience, so DoorDash, you know, they love that. And you know, they’re gonna order that cheese burger from McDonald’s, and they’re gonna get fries and they’re gonna get their frosty. And next, you know, they’ve got a $17 meal, and they’re paying five bucks data delivered. So they’ve got 22 bucks, and they’re putting it on a credit card that they’re not paying off at the end of the month. Jeff, so you’re right, yeah, and that’s the lifestyle. So it’s going to come a point when they can’t, you know, make those payments, when they really are feeling the pinch. That’s where there’s going to be some lifestyle changes. And then we may see some adjustments on beef.
Joe McKitrick 27:36
I think Dwayne brings up a good point there too. That’s worth noting. Is the even though beef high, it’s not like chicken and pork are dirt cheap. Those competing meats have done a good job of trying to follow beef up, yet stay a little bit cheaper so that they maintain their demand. But if you notice that, you know that those meats are that’s just kind of in a silent move. So it’s not as big a disparity as one would say.
Ben Hetzel 28:07
The interesting thing would be the margins at the production level, you know, is, is the producer that’s raising, you know? And I know it’s all pretty well confinement related production, but where’s the margin, and all that landing. Jeff, you and I had a conversation the other day about what some of these fast food chains might be doing to encourage that middle class, lower class consumer to come into the store or the restaurant and and buy some, buy the meals, or whatever fast food. And it’s really interesting, they’re, they’re focusing a lot. If there’s traditionally a burger joint, you know, say, McDonald’s or or one like that, that, you know, first thing a lot of us think of is the Big Mac or some kind of a quarter pounder type thing. They really focus in there. They’re happy their daily specials, or whatever the meal deals around chicken.
Jeff Eizenberg 29:05
Yeah, I think we, think we saw, we looked it up. McDonald’s CEO came out and said, Oh yeah, we’re gonna bring back the value meal. And they have six new value meals. Well, five out of six are chicken, chicken related. So there, there you go. They’re trying to drive towards profitability. Shifting course here to the last question. Ben, I think this one is really slated for you, if you think about it, you know you got your finger on the pulse of the grain market, there at Scranton, at the at the elevator and the Co Op. Where are you feeling like the opportunities are in thinking about from the feed side and from the ranching side, is there really, is this a level that people should be coming in and thinking, Okay, how should I lock in and forward price some of my my feed?
Ben Hetzel 29:51
Yeah, we’re seeing some increased interest in locking in grain longer, earlier, longer, you know, whether or not you. Seasonally, this is traditionally. Maybe we’re coming into that, that lower price point where nervous ramps up the volume hitting the facilities and basis widens out. But I think some of them are trying to get ahead of it, even trying to figure out, how can we get some corn or maybe a different sheet stuff laid in earlier and have more of it on hand. I’ve actually heard of some feed lots building bins because they want to store more supply, which, you know, there’s all kinds of arguments around whether that’s a good idea or bad idea. It depends on your operation, probably as much as anything of what, what’s prudent there. But, you know, we got a big drop, especially geographically for us, we’ve got some pretty big drops staring us in the face, and it’s going to be tough to keep all of it moving at once. You know, locally, we’ve got as good a wheat drop as we’ve had. And it may not be a record, but it’s, it’s not gonna be too terrible, far off. And for some producers, and you know that’s, that’s just one of the crops they’re raising at extremely high levels of production this year, sharing a lot of good yields on other other crops, whether it’s keys, canola, flax, all of them are really good this year. And then we got probably what looks to be one of the the best corn crops I’ve ever seen. And I know Dwayne and and Joe. You guys travel this area a lot, too, and it kind of looks like Minnesota around here. You know this corn you drive down the road, you can’t see over the fields, and a lot of times the corn doesn’t get that Paul and and the height of corn isn’t always the the whole story, obviously. But when you talk to growers, it’s they’re just talking about how phenomenal is. So there’s opportunities coming for these guys buying feed. I guess to me, anyway, it feels like basis should widen out, you know, a little bit anyway, from where we’re at. And the big question will be how much export business that we pick up because of the lack of the soybean export program. You know, the facilities on the coast, the P and W, the Gulf, they’re going to have to elevate grain to keep the facilities buzzing. So they’re going to be looking to fill it with corn or wheat, you know, here in this this next quarter. So, you know, it looks like, even if China were to come in and be interested in some beans, it’d be tough for the US to execute on the P and W a bean program with what’s been put on the books for corn. So as long as demand stays high, maybe we, maybe we slot no here, you know, protect your risk on the board, you know, and, and the basis risk based on seasonality,
Jeff Eizenberg 32:44
makes sense, and Joe as your what’s your sense on that bin building at the on the feed lots, something you see as you travel?
Joe McKitrick 32:53
Well, there’s a lot of conversation about how to take advantage of it. You know, for the first time in probably two decades, you know, like southwest Kansas has a negative corn basis in areas and there’s just a loop. There’s a massive amount of corn growing this year, and like Ben saying, it looks like Minnesota in areas that are fringe acres, and maybe they’re normally 60 to 85 bushel or 100 and 100 plus.
Ben Hetzel 33:21
So yeah, say it 150 plus.
Joe McKitrick 33:25
Oh, yeah. I mean, I never thought we’d have a hot, you know, a 2023, corn crop, again, in the fringe acres, but it looks like we’re going to, and, you know, you get into western Kansas from north to south is there is a mountain of corn this year western South Dakota, same thing. So, yeah, there’s conversation of how to, you know, there’s a lot of places that are going to make a wet corn pile that would maybe normally make a small one, that are going to make, you know, one day last three quarters of the winter or something. And so, yeah, there’s a lot of conversation how to take advantage of this, you know, the large crop and and really large basis at harvest too.
Jeff Eizenberg 34:05
Looking ahead into 2020 end of 25 and end of 26 What are your thoughts, Joe,
Joe McKitrick 34:12
so 25 was a a demand driven market, and as we go into 26 we’re getting into a supply driven market, where the shortages of supply or the constraint is becoming the larger, and so the structure of the market changes. The safety of a demand driven market is greater this you know, the clarity of that it’s going to go higher is greater than a supply driven because there’s so many outside forces that could affect supply exports the Mexican import. So I think the you know, the conversation leads to what could potentially put a final top in this market, and and one of them is the NCBA is putting a lot of pressure on the USDA to do something about this Mexican feeder cat. Import situation, the Texas yards, you know, there’s a lot of Texas yards that make a living off of feeding Mexican feeder cattle. And in fact, the largest feed yard conglomerate in the US is only at 40% capacity, and not totally because of no imports of Mexican feeder cattle. But there’s a, you know, that’s a part of the situation. So, you know, what could put the final top in is, you know, the opening of the border. The other thing that’s, you know, transpired since last week is the Trump’s tariffs are now under pressure, judicially, yes, and if something like that changed to where Brazil could ship directly to the US. And so when you add in that, we’re increasing Australian imports as fast as as they can do it. And then you add in the Brazilian side, and then you put this, you know, the screw worm situation, in the rear view mirror. That’s a lot of headwinds for the market to keep going higher. And so then the supply driven side of it in 26 becomes a question mark of how, how is that going to affect supply? Obviously, demand is not going to fall out of bed, so we still have demand, but we don’t have demand as a driver. That takes us to a whole nother level from here, where, whereas supply of supply stay tight, we could go quite a bit higher. But given the factors at bay that are being held at bay, if any of them come alive again, there is serious risk to the market. And as we talked last week, there’s a lot of air gap to the market too. We came a long ways, really fast in 2025 and markets like to take it away as quick as they put it on too.
Jeff Eizenberg 36:42
So that’s the old other trader story. Yeah, take it away as fast as it came. Yep, exactly.
Speaker 1 36:48
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Jeff Eizenberg 36:57
Dwayne Ben, any
Dwayne Bowman 36:58
final thoughts? Well, I think, just to piggyback a little bit on what Joe said, you know, I think he’s exactly right. You know, the, I would say the imports is going to have even a could have a potential bigger impact than, than we keep talking about. You know, our US, cattle being down. I think we’re down 500,000 but we’re, what do you say? Jeff, 86 point 7 million cattle in the in the US. But I think globally, it’s 1.5 7 billion, you know. So the US is really a small piece of this. So the imports could have a have a huge impact. Tariffs could have a big impact, compared to the demand side, as Joe talked about, I think that’s going to stay pretty
Ben Hetzel 37:32
stable, yeah. And I think one, one last comment I have in regard to the beef talk, what a scenario to be in, though, good demand, as good as it’s ever been, not only domestically, but good demand for us, beef globally. And now you’ve got some supply constraints that can fuel the fire. So from a commodity standpoint, it really doesn’t get any better than that, you know. And so one without the other can be fun, but if you have them both, and you’re on the right side of it, it can be really exciting. But again, you know, where does that end? Where’s the party shut down? And so that’s, that’s really what we’re here talking about. And navigate markets and situations that whether it’s good or bad, like you said, Jeff, so happens the cattle market is fun to talk about today. Wheat markets, so, you know, we’ll get into that. But regardless, if you’re at the top, there’s tools out there, you know, RCM, egg services, whether it’s Jeff out in Ohio, some of the other brokers around the mid states here, or myself in Scranton, North Dakota, Scranton, equity. The tools are there. We’re more than happy to help people understand them, and that’s why we’re talking about it.
Jeff Eizenberg 38:50
That’s good. Well, you know, again, today’s been a great day. It’s been great to kind of talk with all of you guys. Obviously, Dwayne and Joe for joining the show and Ben shared at the beginning is that this is the most important part, is that you’ve got a team around you. There’s people in and around the area that are knowledgeable about different parts of the business, that have had different types of experiences. Come if you’re on the on the grain side and the you’re talking to a rancher, ranchers talking to a corn or wheat farmer, it’s just a different conversation. And you can learn something you pick something up, obviously, having great quality relationships with your bank, your co ops, your brokerage firms, again, be super important, particularly in these difficult times, whether the top or bottom of a market, the emotional cycle that We’re in is real. And again, our goal, and having having this show on the radio is is to be able to share experiences like Joe’s and Dwayne’s events in my my own through throughout the radio waves, and get some feedback from you all, and hoping that you stop into the co op or give Ben a call, or just check in on. The podcast and catch up with us next week.
You need to go back a year to find futures prices this low. That makes the next move either a return to previous lows or a bounce to a sustainable level. This isn’t a ‘could go lower’ or ‘could go higher’ statement. It’s a warning shot that the next lower targets are significantly lower if the reduced supply doesn’t support prices. There remains a wall of concern about economic issues that could hurt housing in the future. I’ve been hoping for a lower supply for two years now to offset this, but nothing has changed. All the run-ups have been driven by speculation. The market has never been short on optimism. The main issue with all this is that our industry, like the Fed, is data-driven, and that data lags. Economic data comes after the fact. I’m hoping that’s not the case today.
Once September expires, the industry will focus closely on the November contract, looking for any signs of increasing value. If demand stays the same, shrinking production will start to tighten the market. This process must be gradual enough for the industry to accept higher prices. Rumor or announcement rallies rarely last, and their aftermath often results in prices lower than needed. I believe lumber, as a commodity, is very efficient at price discovery and will, given enough time, settle near its true value. Today, however, we’re pushing it too high or too low based on nothing. Speculators love this, but it’s tough on the industry.
The Technical Read:
The factual data is that the last low was in July 2024 at 418.50, and the next low was in January 2023 at 352.50. That is the major worry. The minor read is a weekly gap from 499.50 to 493.00. The next down leg is to the trendline at 466.01. This market has always reduced its confidence level to zero and saw prices go well below value. That is a real fear today. I drove by a lumber yard in Mokena, Illinois, that was packed, and a few unloaded cars were still sitting idle. The only thing I could think of was that I hope it was hedged. My point being that we are focusing on the reduction in production while a shit load of wood is sitting in the US. The result of that focus has been lower prices, still heading lower.
Enough gloom and doom. The production side of the industry has been working very hard to find a breakeven level that carries through the spikes and valleys. The gap mentioned above, from 499.50 to 493.00, is probably a good value level on paper. There has been enough supply reduction to warrant a better cash price. Sub $500 (futures) is cheap. We still need the marketplace to adapt to levels that will be sustainable during economic uncertainty; it takes time.
The funds are getting short again. I’m not sure if that is good news or not.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
I have to start with the chart. It helps to clarify the argument that the mills’ added variable costs are of little relevance to the market. That said, it did cause waves. The market bottomed in July of 2024 after Biden dropped out. It rallied up until the tariffs were put on hold, fell, and then rebounded into the duties. The argument today states that the flat demand warrants the market to test the low again. After Friday’s disappointing trade, it could be possible. Outside influences have moved the market higher since July 2024. We could return to the mean, but that is unlikely. What is likely is a 61% retracement of the move back to $525. That is based on the Sept contract. The cash market has not found a foothold yet. A $20 break in futures is nothing. Market indicators:
Industry is getting long. Funds are getting short. This is in the early stages of development, but the funds usually win.
“A mill can’t survive and has to shut down.” I hear that every day, and I also said it myself back in March of 2024. It’s getting old.
Rates are coming down. Really?
Builders are lean and mean. Really?
Buy 10 cars, sell 3 at a profit, sell 4 at breakeven, struggle with the last 3. Sound familiar?
We remain a very efficient supply and demand market. Outside variables, while catching some momentum, do not change dynamics. Today, we have a macro issue. Stocks are too high for the pending increase in unemployment. Regional decreases in building activity can’t be picked up. And the last issue, and maybe the most important, is that a home is not affordable today. We keep putting lipstick on a pig, but housing is not affordable.
Note:
I like to mention the retirement of an outstanding person once in a while. Today I want to offer my congratulations to Jack Stevenson. We go back to the Tim Stock days. He finished up with USLBM. Great character and great market knowledge! Enjoy!!
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Corn has rallied off the post USDA report lows with a large up day on Friday to end the week. Pro Farmer Tour wrapped up their crop tour and has an average US corn yield of 182.7 bu/ac which would still be a record on top of the added acreage, but well below the 188.8 the USDA came out with. The two sides from the USDA’s report is that they likely won’t come out with a higher yield again with some small weather issues developing, but if they keep it high and make another big correction in January saying the crop wasn’t as big as they thought it could cost the farm community billions. The weather has cooled off for much of the country but the lack of rain for extended periods may be a problem in the home stretch.
The Pro Farmer Tour found a bean crop more along the lines of what the USDA had coming in with a 53 bu/ac estimate vs the USDA’s 53.6 bu/ac. Beans biggest problem right now has been lack of rain for pod fill but a few well timed rains down the stretch could lead to a massive crop. China really needs to show up as a buyer for beans to leg higher but they can get all they want from South America right now even though they are paying a premium to get them vs US beans. The funds have a neutral position on the market as they wait for news that could send the market any direction other outside of the $10 – $10.50 range it has been trading in the majority of the last 6 months. China still remains a cloud over the market with the Trump administration needing to get Ag purchase commitments whenever they work out a trade deal in the coming months.
Equity markets continue to claw higher amidst pullbacks as earnings wrap up and AI and tech still drive the market direction. The Fed is expected to cut rates in September while the Trump administration’s attack on the Fed’s independence continues with Lisa Cook in its crosshairs currently.
ADM plans to close a soy protein plant in Bushnell, IL.
Brazil’s investigation into the Soy Moratorium (curbs Amazon deforestation) could threaten sustainable soy sourcing, with potential ripple effects in the global supply chain.
Wheat has been relatively flat the last couple weeks.
Cotton continues to trade sideways waiting on demand to pick up.
Drought Monitor
Here is the most recent drought monitor.
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The feature last week was the fact that the futures market made a new low at a time when there was a massive round of short covering. That should have at least kept the market flat and at most rallied it sharply. By Thursday, the mills were in full panic mode and looking for orders. That brought in the noise of the week, with the conversation focused on a 15% tariff on Europe, 232, and a mill shutting down. By Friday, the industry saw a sharply lower print as the Fed, I mean Random, dealt with faulty data. September futures ended the week after all that excitement $7 lower. The noise on Thursday did chase some newly positioned shorts out.
The Commitment of Traders report again showed a steep drop in industry shorts. It also saw a sharp drop in fund longs. At 7000 open interest, the market is fully balanced. There had been a shift out of the short side for the funds, but the long side never picked up much. The funds, in general, are maintaining a very soft position in lumber.
It looks like Carney fell into line with the US, ending many of the added tariffs he imposed. We heard about the shift on Friday. This, like everything else we hear, lacks substance. I’m still in the camp that the smart people in the room want to end all of the duty and tariff drags and end up with a number.
Finally, the majority of economists out there are taking some of Powell’s delivery from his speech as meaning that there will be a cut in September. Nothing has changed. There are a couple of inflation reports coming out before the next Fed meeting. They will be inflationary. The Jobs report has to be weak. That said, a reduction in short-term rates does not immediately affect long-term rates. A quarter point in September will have little impact on the mortgage rates. The second cut will.
Technical:
September made a new low for the week and then rallied. At 17% RSI and low open interest, this was expected. When you throw in outside noise, the industry now turns hypervigilant. It no longer matters whether the news is correct or not; it only matters how the trade reacts. I do not use short-term moving averages very often because we are an all-in or all-out market. All in hedging all out rumors. This are no support or resistance points, per se.
The takeaway from the technical side is that if futures take out the lows of 588.00 this week, there is a fundamental problem much bigger than the economists and experts think. I don’t see it, but I have been wrong before.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
The feature of the week was the extreme down move between Monday and Wednesday. Sept futures dropped almost $46 in three days. At the same time, the open interest was rapidly decreasing. It was all liquidation. The longs were selling, the algo was selling, and the industry was buying their shorts back. The algo doesn’t accumulate a position, so it was all sides of the trade exiting. The Commitment of Traders report showed a sharp drop in the industry shorts. After nine sessions of selling, futures caught a breather on Thursday and returned to the sedate mode on Friday. At this point, the market needs a macro look now that most of the noise is behind us. The following points are key:
Futures are trading under print.
There hasn’t been enough trading to define a cash price.
6500 open interest signals that most of the industry has exited.
Factors for housing demand remain flat.
SYP has days when green shoots start to appear, only to end abruptly. OSB has nothing green around it.
There is a lot of inventory, especially in the wholesale hands, that just got cheaper via future gains.
For the first time all year, there is some momentum to trade. Most have been dormant all year. Any good news could find support.
It’s a tough call here. A bit of good news can pop the market, while no news erodes your inventory value. The data is neutral. I would look for a general pickup in demand or at least building going into the fourth quarter, but this outside noise never ends. Selling your cash is the best trade.
Technical:
The September futures have corrected 85% of the move. The majority of the time, if it goes 61% it goes 100%. That puts the 594.50 low as an objective. Now most are out of shorts already, so there won’t be a large volume to buy from here down. That makes least resistance down. The one caveat is that the RSI is only 20%. It needs a better correction.
Note:
Tuesday:
Starts 1.30 down from 1.32
Permits 1.39 down from 1.4
Friday: Existing a smidge higher…. more inventory, more sales.
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
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Corn continued to move higher off last month’s lows following the September USDA Report. Most of the numbers came in along estimates but they increased planted acreage 1.4 million acres. This brings the US corn crop to 98.7 million acres, a new record. With about 90 million acres expected to be harvested, we will harvest 7 million more acres this year than in 2024, which equates to about 2 billion bushels larger crop than last year. Despite the added acreage corn bounced post report as weather issues, a dry finish, and disease pressure have caused speculation on the real size of this crop. As harvest gets rolling we will learn more about this crop.
The USDA Report did not have any surprises for beans as most numbers were close to estimates, but the report could be viewed as slightly bearish. To get beans moving higher, China needs to show up as a buyer and trade talks with China need to make progress. China and the US are reportedly close to a deal over Tik Tok which can hopefully build some momentum for progress between the two countries. The size of the soybean crop, like corn, has been hurt by lack of rains down the home stretch but with the solid start the end result is still in question as harvest rolls.
