October 17, 2025 • 47 mins
Extension Agricultural Economist, Ben Brown, provides current insight to the economics of this year's corn and soybean crops, giving some understanding of what's happening in global markets as well. Join Tim Reinbott as Ben dives into what is happening in the agricultural world right now, whether it's about the number of bushels of corn remaining from last year's crops or the effect of the government shutdown on agricultural reports.
YouTube Video Part One: https://youtu.be/fPdEj0ct4Us
YouTube Video Part Two: https://youtu.be/bMB1_gbWXlI
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The Missouri Agricultural Experiment Station (MOAES) extends CAFNR research to nearly 14,000 acres across the state to meet regional research and demonstration needs of agricultural producers and natural resource managers. MOAES has a storied history of major impacts in advancing science in agriculture, food and natural resources — locally, nationally and globally. These CAFNR laboratories provide research faculty with a wide variety of real-world conditions to test and develop strategies for agricultural production based on the geographical and climatic differences of our diverse state.
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Episode Transcript
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(00:00):
[♫]
(Tim Reinbott) Well, welcome to Tim's Take! And today we have a very special guest on a very
timely topic with Dr. Ben Brown, the Extension Specialist, row crop economics. So, Ben,
this is... we're taking a beating here the last several months, and we had a new report came out
(00:23):
today. (Dr. Ben Brown) Yeah. And so we're filming this the end of September on September 30th. And,
uh... we get the quarterly grain stocks numbers, um... four times a year. Uh...
the... the importance of the September grain stocks report is, for corn and soybeans,
this represents the end of the marketing year. And so, uh... the grain stocks numbers that we
have on hand as September 1 are the official ending stocks for the old crop marketing year,
(00:48):
and they become the beginning stocks, uh... for the new crop marketing year. And um... for corn,
the numbers were bearish. Uh, we... we actually had almost 200 million more bushels of corn than
what was expected. Um... (Tim) As old crop or new crop? (Ben) As old crop. So these... so
let me back up and just kind of explain. So this is a point estimate. Basically, this says as of
(01:09):
September 1st, how much... how many bushels of corn, soybeans, wheat, grain sorghum, cotton,
rice, whatever it is, right? Um... how many... how many units, in the case of corn, how many
bushels do we have on hand? Whether on-farm or in commercial storage as of September 1. Uh...
and... and it's a point estimate. We get it at the end of the month. That way it gives time for
(01:30):
tabulations and things of that nature. But because the marketing year ends for corn and soybeans on
August 31st, the new marketing year starts on September 1st, and so whatever we haven't used,
um... that's still sitting in either on-farm storage or commercial storage, becomes the
beginning stocks number for the new crop marketing year. Um... and so, uh... what the corn numbers
(01:56):
today showed was that there's more corn out there than what was anticipated. Uh... this doesn't
necessarily surprise me all that much. Um... we've had very strong corn exports so far this... this
year. Um... this summer corn exports were very strong, and they continue to be, um... here
this fall. Um... we've had solid grind, um... for ethanol production. Taking corn and turning that
(02:21):
into dried distillers grains and... and ethanol. Both of those categories go through a point... a
checkpoint, right? Um... when you take corn to an ethanol plant, they... they show receipt for that
corn. When you take corn through an export terminal, um... there's a receipt for that
corn. The largest category that we don't have any records for is feed grain use. Um... and this is
(02:43):
largely corn that's just sitting out across, um... you know, large feed consuming areas. Think of
western Missouri, Kansas, Oklahoma, Texas, (Tim) Nebraska. (Ben) Yep. Nebraska, Iowa, South Dakota,
Right? Like, um... you know, these areas where we feed a lot of corn, um... you know, a lot of that
never goes through a checkpoint. Um... it might get delivered to a... a feed yard somewhere, um...
(03:05):
but it doesn't ever have to really go through a checkpoint. So when I think about where the...
the... this extra corn's coming from, I'm sitting here and saying, well, it's... it's showing up in
these large feed grain areas or feed consumption areas. Um... we don't have as many cattle,
um... in... in the United States. We continue to liquidate our breeding herd, um... that doesn't
produce. You know, when you... when you cut down on mama cows, you don't have as many calves to
(03:28):
send to feed lots. And so there's... (Tim) Because the price is so high. (Ben) Yeah! Yeah. Well, for
a number of factors, but one of those right now is we've been asking people, "Why haven't we been
seeing cattle herds rebuild?" And you ask producers and they say, "Well, why in the world would I give
up the profit that I could get today for certain for that heifer versus retaining her at the risk
of having an unborn calf or, you know, a calf 18 months from now, um... that I can sell?" And so,
(03:55):
uh... that's... that's one of the challenges that we've had, uh... with rebuilding this herd.
But it's not just the domestic cattle herd. It's also, we're not seeing cattle move north and from
Mexico. Normally, Mexico would send us a couple million head of cattle to feed. Um, they're born
in Mexico. They ship north into the United States to be fed in places like Texas and Oklahoma.
(04:16):
Um... because of the New World screwworm outbreak that we've seen, the border, um... for live
cattle trade with Mexico and the United States is closed, and it has been closed for several months,
uh... to... to help prevent the spread of New World screwworm into the United States.
So those cattle aren't coming north to be fed. Instead, what's happening is we're sending corn
south. Only instead of it showing up in the feed category, it's showing up in the export category.
(04:40):
Um, and... and I don't see the border between the United States and Mexico opening anytime soon.
Soon being defined as probably the next couple of months, um... because we just haven't seen,
uh... the control of spread of New World screw... screwworm in... in Mexico. So I think that's going
to keep the border shut. We'll probably see, um... larger than normal exports of feed grains, corn,
(05:03):
grain sorghum, and wheat to Mexico, um... in the exchange of not feeding as much here in the United
States. (Tim) And that was a 200 million bushel? (Ben) Yeah. So 200 million bushel surprise. This
was the largest bearish surprise, um... that we'd seen in a grain stocks report since December of
2020. Um... and... and so, this is... while it's large, we have seen larger surprises, but this
(05:28):
was definitely a large bearish surprise to the corn market, um... and will... will create some
price headwinds for us as we move forward. I... I talked about how this is the old crop supplies,
right? This is as of the end of the marketing year. Um... we have 18.2 billion bushels of corn,
um... here in the United States. Uh... currently, that's what the expectation is of corn that we
(05:51):
will have produced this year. Corn that is, um... that we thought we were carrying over. And I'll
come back to that statement there of thought here in just a second. But um... 18.2 billion bushels
is the largest supply of corn that we've had to deal with ever. Um, in fact, we've never had above
a 17 billion bushel corn crop. So to... so to go from high 16 billion bushels all the way to 18.2,
(06:14):
that was prior to today. We have 200 million more bushels now, um... almost 200 million
bushels more now. So that takes that carryover from 18.2 to 18.4 billion bushels of corn supply.
In some ways, we could say that it is amazing that the cash corn market has been hovering in the high
$3 range to even at times $4 cash corn given how much corn we have on... on... in supply. (Tim) Oh,
(06:40):
my goodness! And there's no, uh... big cattle herd to start feeding. (Ben) Correct. Yeah. (Tim) And
that's what... because I think, uh... animal scientist folks said it takes five years before
you break even on a heifer by... by keeping her back, takes five years to break even. (Ben) Yeah,
that's a... (Tim) That's an investment! (Ben) Yeah. So, we... we call that capital budgeting,
(07:02):
right? And so, like the repayment capacity. Uh... and... and certainly that's... those returns and
those out years are uncertain, right? Like we don't... we have an idea of what a... a steer
price might be five years from now, but there's a lot of things that could change that. So, you also
have to bake in some... some risk, some return risk into those out... out years. (Tim) Now,
our poultry and... and pigs can increase quicker though, couldn't it? (Ben) Yes! Um... and we do see
(07:28):
turnover. Uh... poultry has been one of those areas that's been growing a lot in places like Missouri.
We... we see a lot of interest, um... for poultry and layers. Um, I... I talk and work with quite a
few people in this sector, and... and one of the companies that builds poultry barns, currently has
a three-year wait. And so, if you want to build a barn today, it would be three years before, you
(07:49):
know, they could actually get to you. The waiting list is that long. So there's a lot of interest
in this space. One of the challenges just from a, um... you know, cons... corn consumption side is,
you know, this is an industry that got hit really hard with, um... High Path Avian Influenza,
um... the disease that killed poultry. And so, that's part... you know, so on one hand, the...
the lack of birds, because of the disease, has been what's created the economics to expand, um...
(08:15):
and... and see an expansion in poultry. But on the other side, you don't have as many birds to feed,
um... due to because of the disease, and so, um... a little bit of a trade-off there. But we do see,
um... poultry as a... as a growth sector, um... for... for Missouri and broader regional
commodities, especially soybean meal. Um... I... I think we'll continue to see growth in soybean meal
(08:38):
consumption, um... primarily for poultry feed, um... and... and other products too, but poultry
seems to have the biggest growth area, um... for... for soybean meal consumption. (Tim) So
was our, um... our new crop corn about the same then? (Ben) Are you talking about the supplies?
Or the... ? When you say, "new crop corn", what do you mean? (Tim) Uh... the the estimation on the
(09:00):
crop size. (Ben) Um... so the... the stocks report is all corn together. Um... and... and so it's a
point estimate as of September 1, right? Um... the 18.4 billion bushel estimate is the new crop.
That is the '25 that's being harvested right now that'll be marketed all the way for the next 11...
(09:21):
12 months, right? End of August. So 18.4 billion. Um... that's taking the 18.2 we thought we had,
adding 200 million more to it today, after... after today. So 18.4 billion would be the new
crop corn supplies that we'll have to chew through in the year ahead. (Tim) Oh, wow. And now, a lot
of folks thought that was overestimated. (Ben) So, um... we... we have heard a lot of reports,
(09:45):
and I've gotten quite a few as well, of this crop faced all sorts of challenges, uh... from,
um... extreme precipitation at planting to tassel wrap. Remember when that was a thing?
And pollination issues to, uh... rust over the summer, especially in Iowa. So there is a lot of,
(10:05):
uh... concern and doubt about the size of this crop. Uh... we get estimates both from
the private and public sector throughout the growing season. We're getting more this week,
um... even from the private sector, um... on the size of the US crop. Producers seem to think that
the crop is getting smaller. I also think the crop is getting smaller. But one of the challenges that
(10:28):
we could have, and... and this we're sitting here at the end of September recording this, is um...
the USDA WASDE report, which is kind in NASS, the NASS production report, which is kind of our
public facing estimate of the size of this crop is set to come out on October 9th. Um... and the
government shutdown that is facing us potentially delays or even eliminates that report. And so,
(10:53):
we've seen this happen before. Back in... in 2013, we had a government shutdown early in October and,
uh... the October report didn't happen, and we had to wait till November to get some clarity in
terms of the size of the crop. And so, um, I... I would, I guess, just throw out there that when
I think of my potential bullish factors to corn, soybeans, and... and wheat, but primarily corn and
(11:17):
soybeans at this point, um... one of the bullish factors that could happen is this crop just isn't
as big as we think it is. And... and of course, we would find that out in a public way with
the WASDE report. Well, if it doesn't come out, we're waiting a couple more weeks even for that
information. (Tim) There's not a lot of factors going to push to mark... corn market then really,
other than lack a production. You know, there's not going to be a big export, or... (Ben) Well,
(11:43):
so there... there could be, Tim. And this is... this is, I think, what makes marketing extremely
challenging this year is, um... I... I think most people are aware of the challenges that
we've seen, or changes that we've seen in the trade environment. And um... we have seen very
strong corn export sales this year, um... largely due to Mexico, but every other country has also
(12:07):
increased their imports of US corn, um... because there's just not a lot of corn in
the global market. If you take out the United States and China from the global corn picture,
we're at the tightest stocks of corn relative to our use in 30 years. (Tim) Oh, really? (Ben) And
so, if you have cor... if you need corn somewhere else in the world, there's very few places to look
other than the United States. And that's why we've seen our corn export picture be as robust
(12:30):
as what it is. That's not necessarily true on the soybean side. There are alternative sources for
soybeans on the global soybean market. And so, um, China is our largest buyer of soybeans. China has
bought zero soybeans this year. Um, and... and that's been well documented all... all through,
um, the... the nation in terms of the challenges. Um... you could envision a scenario to where
(12:54):
a trade agreement gets, you know, established that includes substantial purchase commitments
of soybeans, and all of a sudden, the soybean market really turns around. I have a, you know,
a kind of a love/hate relationship with purchase commitments to be truthfully honest. On one hand,
I am a producer's son, and I want better prices for our product. (Tim) Right! (Ben) Right? I...
and purchase commitments are the one of the ways that we can get higher prices for our product. So,
(13:18):
on that st... standpoint, I'm... I'm hoping we see purchase commitments. On the other side of this
question, which, you know, two-handed economist, one-hand versus the other side, right? Um,
purchase commitments can disappear just as fast as they come about. Um, and... and they're not really
based on, you know, any economics or fundamental analysis. They're just kind of based on a policy
intervention. Um, and... and that makes making decisions. This is why I struggle with this, is
(13:43):
do I sell my soybeans or not? Well, if I believe that there's a trade deal that's going to be made,
you know, I'm probably not all that interested in selling my soybeans because it could in... there's
the likelihood it includes purchase commitments. All the other trade deals the administration has
made so far have included purchase commitments. So, you have to think that that's a possibility.
That happens. Soybean prices rally, um... and if I had sold, right? I miss out on that rally.
(14:09):
Whereas, if I sit here today and I say, "Well, what if that purchase commitments never happen,
right? And I'm just eating away at my profitability because I'm storing this crop?"
And it's costing money to store this soybean crop, and the fundamentals aren't certainly suggesting
storage for soybeans. Well, then you enter into a period of time where... where you sold too early,
and... and you know, you missed out on the rally, um... and because the fundamentals weren't there.
(14:32):
So that's what makes marketing in this environment relatively challenging. (Tim) But as you mentioned
before we went on the air, some elevators now are cash only. (Ben) Part of that is, um... you know,
just the size of the... of the crops, both corn and soybeans. I mentioned the 18.4 billion bushel
corn crop, a very sizable soybean crop as well, um... and we're following that... or we're...
(14:54):
we're bringing all this to market when we had a... a very large wheat crop as well. Now wheat,
you know, doesn't always get stored, right? When we move a lot of wheat in different places,
and we find a home for it by the time the corn and soybeans come in, but it does take up space. And
um... and so, I think what we're seeing from elevators is a lack of space. And I... I think,
you know, we're going to see this broadly across the Western Corn Belt. I think more specific to
(15:18):
the Western Corn Belt because the Eastern Corn Belt had a... a drought last year. They didn't
have as much production, um... and so their stocks from last year are relatively low compared to
ours, um... here in the Western Corn Belt. So quite a bit of supply sitting out there. We're
bringing a large crop to the market. And I think elevators are saying, "Hey, we don't have anywhere
to go with this either. Um... the only way we'll take delivery of your soybeans is if you sell
(15:39):
them to where we can put them directly onto a rail car and send them somewhere." Um... and so we're
hearing more and more reports of that. We're also hearing storage rates. If the elevators that are
taking storage of product, um... those storage rates are increasing as elevators work to say,
"Hey, we will actually discourage you from bringing that crop to us. We want you to keep it."
Um... and that's... they do that through basis, by changing basis levels and through storage cost,
(16:03):
commercial storage cost. (Tim) Yeah. What are the... how are the basis around? Are
they...? (Ben) Yeah. So, um... this is something that changes all the time. Uh... and it's... it's,
uh... one of those things to where basis can look very different in parts of Missouri than other
parts, and we also have to keep in mind the time of the year. Um... right now corn basis for spring
(16:24):
delivery (March) is actually pretty competitive, um... to where we... we typically see it. And so,
um... or strong relative to, I guess, where we... we would typically see it. And I think that kind
of speaks to this nature of, um... you didn't ask the question, but I'm going to kind of answer it.
You know, the economics, uh... certainly suggests storing corn over soybeans. If you only can store
one crop, um... corn seems to have the... the better fundamentals, um... compared to soybeans
(16:50):
and in terms of storage. On the soybean side, basis bids are... are weak, um... both for current
delivery and... and future delivery. We... we have a lot of soybeans, and we're trying to find places
for all these soybeans to go. And um, elevators like we just mentioned, some of them are saying,
"Hey, we'll only do cash delivery." Um... and they're discouraging the delivery of soybeans, and
they do that through weaker basis bids. (Tim) So it's really the... it's the worldwide demand for
(17:13):
corn that's going to be that... that thing that could push us for some higher... higher, uh...
prices in November, December, January. (Ben) Sure. So, I... I think we're setting up very similar for
this winter that we did last year. Um, I... I think we... we have a very similar opportunity,
(17:34):
um... of a very large crop. Keep in mind, last year's crop was a record as well. Um... this
year we had additional acres, and at least as of right now, additional yield, um... and so that...
that leads to more production. One of the things, though, that has has really kind of transpired,
and... and... and maybe people are aware of it, we're just not talking about it as much
is... is Brazil continues to increase the size of their second crop corn production. They had
(17:58):
a very large second crop corn this year, um... but it gets planted in January. Um... that's
when their corn crop gets planted, following their soybeans. Um... and there was a lot of
expectations around the size of that corn crop. It did end up be... you know, it... it did produce
a sizable corn crop. Uh... but in January, there was actually quite a bit of risk premium built
(18:20):
into the market because there was fear that the drought was going to hamper that crop production,
right? Um... the size of it, just like we see here in the United States in June and July, you know,
you start to get a dry weather pattern that kind of materializes in a prime growing region of the
world, and it... it can have impacts on prices. And that's what's happening a little bit with
(18:41):
our corn market is we probably, you know, not that long ago would have considered March to
be an attractive time to move corn because elevators and... and ethanol facilities here
in the United States, um... were... were needing corn, and so, it would... it would attract kind
of some of that... that spring delivery. I would argue it's starting to move a little bit earlier.
Um... it's getting closer to a January or February window, um... because that's when we're seeing the
(19:06):
risk premium kind of come into the market from a South American corn crop. Um... and so all this to
say, Tim, that's where I'm going with this is the riskiness of South America is providing us some
price opportunities outside of our growing season. Um... and... and we see that in soybeans as well.
The size of their crop is... is very large. Um... and... and so, any type of production challenges
(19:29):
they have feeds into the global marketplace as well. (Tim) What was our soybean? Was... was
it bearish on that... on that too? On the report? (Ben) Oh! So the grain stocks report that came out
today was very close, um... to expectations. (Tim) Oh, was it? (Ben) Soybeans... soybeans, um... if
you think about the soybean market, we don't have the phenomenon that we do in corn to where we
have soybeans that never go through a checkpoint. Um, you know, soybeans either get sent to a crush
(19:54):
facility to be crushed into corn and soybeans, and so they get reported that way, um... or they
get sent to an export terminal, so they get reported that way. Um, we're not holding soybeans
that never get marked, and so, rarely do we see surprises on the soybean side. Um, the soybean
crop... the soybean stocks numbers at the end of the marketing year were 26 million bushels lower
(20:16):
than they were last year. (Tim) Oh, really? (Ben) Um, and... and keep in mind, last year we had,
you know, some yield challenges in the back end of the marketing year. It got dry. Very similar to
this year as well. (Tim) Yes. (Ben) Um, and... and I think we're going to see the same thing. I think
we're going to continue to see soybean yields come down, although the early reports so far have
been pretty strong. Um, you know, I think we're going to see soybean yields come down and... and,
(20:36):
um... I... I think there's the opportunity for even a smaller soybean crop. But I... I will
just... I will say that one of the things that's countering that is we're just not using as many
soybeans, um, and... and global supply chains take a while to... to... to change. Um, you know,
in the long run, they might look very similar to where they are at today, um, but in the short run,
(21:00):
we have a lot of beans, and we're trying to figure out what to do with them. (Tim) Now, some would
argue that we haven't exported any... any to China. There's only so many soybeans out there.
If they don't buy them from us directly, maybe they'll buy it from us indirectly. (Ben) Sure.
The... thank you for asking the question. I was kind of answering the question without you asking
it. So, I appreciate you asking the question directly, right? Um... this is a question I
(21:25):
get all the time. If China's buying soybeans from Brazil, well then, can't we sell our soybeans to
where Brazil was selling their soybeans? Um... Brazil's largest buyer was already China. Um,
and... and so, they were already selling into that market. Um, the last couple of weeks,
we... we saw Argentina reduce their export taxes on product. And we could get into export taxes and
(21:47):
how Argentina operates as a government, but they reduced their export taxes, and in a period of
about 48 hours, China came in and bought several metric tons of soybeans that would have likely
been from the United States. Um, and... and so we could add Argentina into this mix. Well,
if Argentina is selling their soybeans to China, can't we just sell our soybeans to where they...
they shell... or they sell? History has told us time and time again, and we could look at multiple
(22:13):
things, the most recent being the Russian invasion in Ukraine, and... and the challenges we had in
terms of moving supply chains around, um... as a result of that. We have this term in economics
called slippage. And basically what it means is that markets and supply chains are already
selling their product to the most efficient place to sell them, right? Whether that be based on
(22:34):
transportation cost, logistic proximity, something like that. And so, um... markets are already
operating in an efficient manner to the current scenario. If you shock it, and you start moving
these things around, you move places around, you do get some substitution. For us, instead
of selling soybeans to China, we're selling a lot more soybeans to Egypt. Um... and Egypt
(22:56):
is becoming a... a very good buyer of ours. Um, that's an example. The... the difference though
is instead of pulling up getting one more bushel from the rest of the world that we would have
sent to China, maybe we're only getting 75% of a bushel, right? We're... for every four bushels,
we're only... that we used to sell to China, we're only getting three bushels from somewhere else
in the rest of the world. That's what we call slippage. It's showed up time and time again.
(23:18):
And so that'll happen in the short run. We... we won't see a complete substitution of product in
the short run. In the long run, it... it balances back... way back out. And by long run, I mean,
it'll take a couple of years. Um... relationships have to be built. Um... logistic markets have to
adjust. Um... and so, it'll... it'll change. But what happens in the short term is we create these
(23:39):
price wedges where soybean price increases in Brazil, and Argentina encourages their producers
to produce more. Soybean price declines in like the United States and discourages our producers
from producing soybeans. So, we see those shifts, too. (Tim) All right. (Ben) That was a long-winded
answer. (Tim) Oh, no, that's great! So, that... that recaps corn and soybeans, and it's... it's
(24:00):
marketing, too. All right. Well, that's it for this Tim's Take, and we'll talk to you next time.
(Tim Reinbott) Welcome to Tim's Take! And we're continuing our discussion with Dr. Ben Brown,
our Extension Specialist in row crop economics. And Ben, we've talked about corn and soybean,
but wheat has become a minor crop to us, but what have those acres done over the last few
(24:20):
years? (Ben Brown) Well, we saw a little bit of a rebound in wheat in the United States when Russia
invaded Ukraine and wheat prices went high, right? (Tim) Right. (Ben) We saw relatively
high wheat prices, um... record high wheat prices in some cases. There was some interesting market
phenomenons that happened during that period to where the futures market was... was very high,
but the cash market that producers were actually experiencing, um... wasn't following,
(24:42):
and so we actually saw some breakdowns in terms of risk management tools on the wheat side. But the
high prices for wheat globally, and even here in the United States, actually brought some acreage
back into wheat production. We had some producers that hadn't produced wheat in a number of years
that kind of got back into it. We saw people that had wheat expand their wheat... wheat acreage. But
the long answer, or that's the long answer. The short answer is over a long period of time, we
(25:05):
have been decreasing wheat in the United States. Um... and... and... (Tim) Not just Missouri, but
the United States. (Ben) Everybody. Everybody's been decreasing wheat. We've replaced a lot of
those wheat acres. You think of Kansas, right? The bread basket, the wheat state, right? A lot
of those wheat acres became soybean acres in Kansas. Same thing in North and South Dakota as
well. So we've been... we've been replacing those acres. Um... and... and wheat production has just
(25:28):
been declining over a long-term period of time. Part of that is because, um... you know, when
it comes to wheat, uh... you know, we... we do have good quality wheat, but we've also got a lot
of feed wheat. Um... and so, you know, if you're feeding wheat, you know, on a relative basis you
can usually buy a bushel of corn cheaper than you can buy a bushel of wheat. Um... and so there...
(25:49):
and grain sorghum's now competing with wheat, or you know, we've seen grain sorghum compete, and
uh... it's... it's a challenge. Wheat... wheat's one of those crops that, um... it's... it's as
much the profitability of it is a challenge as it is the timing. Um... you know, for when I talk to
producers, and I ask, "Well, why don't you plant as much wheat as you used to?" And a lot of times
(26:10):
the answer is, "Well, in the fall when we need to plant wheat, we're trying to harvest our corn. Um,
and in the spring when we need to be harvesting wheat, we'd really like to be planting soybeans,
um... or spraying corn." And uh... and so the... the labor side of wheat just makes it a challenge
for most farms. Um... I like wheat. I've always liked wheat. My dad, I... sometimes I joke, I think
my dad plants wheat just because I like wheat. Um... I have very fond childhood memories of...
(26:35):
of harvesting wheat with my grandpa, um... and... and so anyways, I... I hold it kind of near and
dear to my heart. But the other, from a economist side, uh... double cropping soybeans behind wheat,
um... in some cases is our most profitable option for acres. Um... and... and again, there are
(26:55):
challenges. Sometimes you don't get the wheat out in time, and it delays the soybean planting. Uh...
but... but broadly speaking, if we can get 35... 40 bushels of soybeans following a... a decent
wheat crop, that's usually a pretty profitable acre for us. (Tim) And that has pushed north
in Missouri and other parts of the country that they can double crop soybeans, which is great.
(27:16):
You know, some friends of mine refer to wheat as the landlord crop because the older landlords used
to plant wheat, and they want to continue to see wheat planted. But as you mentioned, there's other
reasons why they don't want to. (Ben) Yeah. I... I can... I can paint a picture as to why wheat
has gone out of favor with... with producers. Um... I... I get it. I... I fully understand,
(27:39):
and... and, um... you know, there are people that have made it work, especially if you can bale the
straw. There's some good profitability with the straw that comes with it as well. Of course, then
you have to add fertilizer back because you've... you've taken some of those nutrients away. But,
um... I... I find wheat to be a... a great rotation crop to help break some disease cycles,
(28:00):
and it... it... it fits well into rotations. Um... but you know, for a number of other factors,
you know, it's... it's not a crop that people enjoy planting and harvesting. So... (Tim) When
we look at soil health, I was just talking to a graduate student yesterday on some rotation
studies, and he mentioned you can really pick out the wheat crop, the wheat rotations,
(28:23):
because the... the soil health indicators are better. (Ben) Well... (Tim) From that standpoint
that's also in... an... an advantage. (Ben) Yeah. So, you're getting to an area quickly here, Tim,
that I don't know anything about. Um... (Tim) Well, economics, I don't buy high, sell low,
you know. (Ben) Yeah. Yeah. Yeah. You know, I, um... I do work with quite of our soil scientist.
I'm on a couple of projects right now looking at soil health and just different things because,
(28:46):
you know, ultimately what I care about is profitability and... and what we can do...
what we can do to increase profits, and... and so we... we look at all these things, uh... as well.
And so I'm on some of these projects. And, um... you know, it's just like I said, wheat
offers some... some cover, some ground cover, in the winter, um... and it... it helps, you know,
provide some... some, uh... nutrients when... when that crop decays. If we take the straw away, we...
(29:12):
we got to add it back in... in some way, and... and, uh... (Tim) But the cash flow. My dad always
liked wheat because of the cash flow that you got in the middle of the summer. (Ben) Mhm. (Tim) That
you actually you got a crop sold. (Ben) There... there's truth to that too, Tim. I... I... I agree.
I... I... there's a number of things I like about wheat. (Tim) Right. (Ben) I... I don't
know how... I could stand on a rooftop and... and sing about wheat all they want, and I don't think
(29:36):
it's going to change people's mind... (Tim) No. (Ben) ...in Missouri of planting it. (Tim) Because
of the harvest. It's planting at the same time you harvest. Um... is it more of a... a lower
risk but lower reward type crop? Or is it... or is it about like every... when you do the budgets of
wheat compared to corn and soybean? (Ben) Well, that's a great question, um... because I need to
(30:00):
go back and look at this. We have seen probably some stabilization in terms of wheat yields. And
I think part of this is the people that are now growing wheat, grow wheat, right? Like they manage
wheat, um... and it's... it's... it is a crop, and they... they... they manage it, they spray it,
um... apply fungicide to it. (Tim) Right. (Ben) And so we just don't see as much variability in
(30:22):
wheat yields as what I think we used to see, um... for wheat. And I think that's showing
up in crop yield data. I think that's showing up in crop insurance, you know, premiums. You know,
lower premiums mean that there's not as much variability. And so I think we're seeing all
that in there. I don't have a good answer for you in terms of this high risk, high reward. Low risk,
low, you know, or high risk. How did you phrase that? High risk, low reward,
(30:43):
I think is how you said it. Something like that? (Tim) Or low risk but lower reward. (Ben) Oh,
there you go! Low risk, lower reward. Yeah. Um... the risk for wheat, and I kind of alluded to this
just a little bit earlier, the risk for wheat is there's been years, this was a year where this
was a case to where the wheat just never matured. Uh... we were in the end of June, uh... when some
(31:05):
of the wheat was maturing. People were... it had rained so much that people needed to spray corn.
We needed to bale hay in parts of Missouri. We needed to harvest wheat. We needed to plant full
season beans, right? And so the risk is the wheat crop comes out late, and you don't get the soybean
crop planted. Um... it is yet to be determined, uh... because we haven't harvested many of those
(31:27):
late planted soybeans yet in Missouri, but given the way the drought materialized this year,
I actually think some of these later planted soybeans, um... depending where they are at,
you know, hit the drought right at pollination and... and will struggle. Um... that's why I
think the yields are going to decline. The early planted beans got ahead of pollination and...
(31:48):
and weren't as impacted by the drought, whereas some of these later planted soybeans behind the
wheat. So I would maybe say that that's where the risk is is you push that soybean planting,
and especially if it's going to start keep getting drier in August, which is what the
climatologists all tell me is that August is going to be a month that just keeps getting
drier for us. So... (Tim) Really? Well, yeah. Some of these double crop soybeans really didn't see
(32:10):
a significant rain. (Ben) Did they see any rain? (Tim) Not till recently. (Ben) I was going to say,
we went like two months. (Tim) It was almost too late. (Ben) I was going to say, we almost went two
months without any rain, Tim. So... (Tim) That's right. That's right. So, uh, but corn and soybean
budgets, I mean, how do they look? We... because we're hearing that input costs are up 60% in...
in the last five years or so, and that's got to blow these budgets apart, doesn't it? (Ben) Yeah,
(32:34):
your listeners aren't going to like what I have to say. (Tim) Uh-oh. (Ben) Um, our early indication
for '26 crop is the input costs are higher for '26. (Tim) Again?! (Ben) Again. Um... anywhere
between a percent to two, right? Somewhere... somewhere in that mix. Um... and... and that is
not us forecasting. That is just simply taking what we... what we get and what we see from...
(32:55):
from the information. Um... producers here at the end of the calendar year are going to be
making a lot of their seed decisions. A lot of seed companies have already set their... their
market prices for seed. Um... so we take those and look at those, and those are all looking higher,
um... to flat at best frankly. Um... and... and, you know, we could see producers make some
decisions. Maybe you buy, you know, older traits of seed. (Tim) Yes. (Ben) You know, and different
(33:18):
things that exposes you to other risk if it's got, you know, a stacked variety hybrid to it,
right? That maybe helps prevent corn root worm or some of the other diseases we've seen. But,
um... you know, that's a management choice producers will have to make. They could cheapen
corn decisions, but maybe they're giving up on some of the technology packages. Um... fertilizer,
(33:38):
I think, is going to continue to be a challenge. We've seen fertilizer prices rise, got maybe a
little bit of relief here the last couple of weeks I think might hang with us for just a little bit,
um... but my early indication is that fertilizer prices are going to heat up again by the time we
get around to spring. Um... (Tim) And we import a lot of fertilize. (Ben) Well, it depends on
which fertilizer you talk about. Good economic answer right there. It depends. (Tim) That's
(34:00):
right! That's right! (Ben) We produce most of our own nitrogen, um... or anhydrous. We... we
produce most of our own anhydrous. Uh... the challenge with anhydrous, uh... is that we are
in a global fertilizer market, and US anhydrous is the cheapest form of nitrogen on the global
market. So we're actually exporting a lot of anhydrous, um... and... and other products,
(34:21):
and so that competes with US producers. Um... you know, other places around the world are asking
for our nitrogen source, and that's... that's what's keeping the price high even though we
produce a lot of it here. Um... UAN, uh... is... is a product we import some... quite a bit of.
Um... it is in tight supply globally, and it is gonna... and it's going to remain high. Uh...
(34:43):
phosphates have gotten a lot of news. We import a lot of phosphates, um... and phosphate prices are
very high, um... and so, you know, depending on the product category. Potash is one of those that,
you know, there's actually... there's, you know, it's... it's high because of everything else, um,
but there's actually a lot of potash production potentially coming to the global market in the
(35:06):
next couple years even. Um, so I'm not as worried about potash as some I am... some of the other
fertilizer categories, but, um... I certainly think we could see fertilizer prices really rise
this winter into the spring. (Tim) And anhydrous, it... it's a very energy dependent crop. It takes
a lot of... a lot of natural gas to make it. (Ben) Yeah, we've seen natural gases rise a little bit.
(35:28):
We... that's showing up in the ethanol data as well. (Tim) So we're competing against that,
too. (Ben) Yeah. Yeah. So... (Tim) If they could make more money selling as natural gas, they will,
versus making anhydrous out of it. (Ben) We saw that in Europe two years ago when natural
gas prices in Europe got really high, um... they sold the natural gas to... to homes basically for
heating and other sources and... and shut down some of their industrial production,
(35:49):
whether that be fertilizer, even their biofuel sector. Uh... and so, you know, that could happen
here. I don't know if we'll see a whole lot of ethanol plants, or sorry, fertilizer plants,
uh... sell their natural gas versus producing fertilizer because I think the fertilizer prices,
the output prices, (Tim) Is high enough. (Ben) ...is going to be high enough that it's going
to continue to encourage production. Uh... the biggest thing here is it's just a global market,
(36:12):
and... and we're... anhydrous prices in the US are the cheapest source of nitrogen in the world,
and... and so, you know, there's people bidding for the product. (Tim) You know, you mentioned
the, uh... in Europe, they use... use the natural gas to heat homes. It's kind of like
in California, you could either... either use it, water for the people to drink,
or... or for crops. (Ben) Yeah! (Tim) You got to start making those decisions, and people are going
(36:36):
to win out each time. (Ben) Sure. Yeah. (Tim) Have to. (Ben) Yep. (Tim) So... (Ben) Yeah. So, that's
my answer is input across, at least as where we see it now, um... continue to put this pressure.
Um... you know, we had the... the appropriations bill passed earlier this summer. The... the Big
Beautiful Bill, the One Big Beautiful Bill, um... that got passed earlier this year, our early
(36:58):
assessment shows that it does increase input cost. Um... the... the... the farm safety net programs
that were included that, in the long run, show some... some increased pressure on upward prices.
Um... I think you're hearing a lot of that amongst farming community right now of, uh... you know,
needing better profitability, but direct payments probably don't necessarily help the producer. They
(37:18):
just flow right through to the input provider of the bank and, um... keep input prices high. And,
um... our early analysis, of at least the One Big Beautiful Bill and some of the other things,
would certainly suggest that is true. (Tim) So what should farmers do? Because I've heard some
of them say, "2026, I'm going to plant a crop that I'm going to lose money on." (Ben) Many of them
(37:39):
did that in '25 as well, and some of them did it in '24, depending on when they bought fertilizer.
Um... (Tim) Just control input cost is all you can do. (Ben) Yeah. So, so should is a value judgment,
right? Like that's... that's one of those things that I could say, well,
you should do this, and everybody... somebody else would say, well, no, you should do that,
right? Should is a... should's an opinion. It's a value judgment. Um... I remember talking down at
(38:02):
the Missouri Farm Bureau Annual Meeting, um... probably three years ago. Prices were... were
high. Um... the outlook was for lower prices to come. And I remember quoting a banker that I
heard when I was a kid, so 25 years ago, maybe... I don't... 30 years ago. I don't know when it was,
but I remember the quote almost like it was yesterday. The... the quote was, "Be committed,
(38:24):
uh... when... when things are bad, um... and be disciplined when things are good." Right? And...
and the nature of that comment is that good farm management starts when... when profitability is
strong, right? Not over bidding for cash rents. Being smart in terms of what you're spending your
money. Because eventually, the cost structure, or you know, the price change, but the cost structure
remains. And that's kind of where we're at right now. Um... and so, you know, for... for everybody,
(38:50):
profitability is low to negative, right? Very few people... (Tim) Right. (Ben) ...even at,
it doesn't matter your cost structure, people are struggling. But the ones that I think continue to
focus on... on their cost and... and think about, you know, how do we... how do we diversify? How do
we find other forms of revenue for this operation? Um... I think those are the ones that are showing
(39:10):
some innovation right now, and innovation is going to be the name of the game. Um... I... I
did a call at a program yesterday with a bunch of interns from across the country. I had one intern,
um... from... from Michigan State University that... that asked about, "Well, if you wanted
to go back and farm today, what would you do?" And I... I, my answer was relatively simple. I said,
(39:32):
"You know, I did. Um... I came out of college during an era where it wasn't very attractive
to go back to farming, and I wanted to go back and farm. And what I did is, I found that I could do
an Extension job and be connected with production agriculture that fed my desire to do that. But I
was... I was helping make a, um... a living for myself." Right? Um... and so that was kind of the
answer. But then I turned and I said, "Today, if I was graduating today and looking at some of the
(39:56):
farm pressure that we see, uh... you can buy some equipment relatively cheap compared to where it
was, right? Equipment prices have really come off. Um... there's some great interest rate programs
through the federal government, through the farm credit system, through some commercial banks. Here
in Missouri, we have the... the MOBUCK$ program to where you can use low interest rate and go out and
buy equipment and start a custom farming business. Takes a lot of the risk of the production side off
(40:18):
the table, um... but you're... you're involved in production ag and doing a custom farming business.
Now, that comes with marketing costs, right? Or marketing. You got to be a good marketer because
you're... you're no different than other service providers like, you know, an accounting firm or
a you know, a... a tax firm, right? Like you're trying to get business. So, you got to market. Uh,
you got to be a good marketer. And the second thing is you got to be a good employer, basically.
(40:42):
A good business partner. Show up on time. If you tell somebody you're going to plant their corn on
a certain day, you better plant it, right? Or at least be transparent about what you didn't plant,
right? So, it comes with different challenges, but that's some of the innovation, um... that I think
exists out there." Um... certainly, we've got people in southeast Missouri that are trying to
grow canola, um... during the winter season. Um... and... and that's innovation in terms of getting
(41:05):
some more additional money out of each available acre that's out there. Um... we see people looking
at agritourism. Uh... you know, pumpkin patches, wedding barns, right? (Tim) Right! (Ben) We see
people doing that. It has risk, right? You got legal risk. You got human resource risk that you
didn't have before. Um... but certainly those are some of the innovative things that I think people
are trying and trying to figure out how to just survive this downturn. (Tim) Is there any one crop
(41:30):
that's probably a little more profitable or we all... ? (Ben) Sorry, I shouldn't. I'm sure there
is. Uh... they're all pretty bleak. Uh... frank... frankly, you know, the... the most profitable
combination is some type of winter crop, whether that be canola or wheat, followed by a soybean
crop. Um... that's... that's the most profitable combination that's out there. Um... right now,
(41:52):
corn, actually. Probably. (Tim) Which is so surprising with the high input cost. (Ben) Yeah,
with high input cost structure, probably corn. If you're in a market where you can get rid of
grain sorghum and sell grain sorghum for a niche product, maybe, uh... poultry or bird feed or,
um... there's some areas where they use sorghum for mill. They mill it and make a... a kind of a
sorghum type of flour or whatever. Popped sorghum is another example. You know, if you've got some
(42:15):
of those niches, sorghum can be, because it's a low input crop, and you can generate some...
some returns there. Um, but truthfully, Tim, none of our products on the row crop side,
um... need more acres or even the current acres where we're at, we need to, you know, we... we
got to have some type of supply shock here, I think, to get higher prices. (Tim) Right. Um...
(42:36):
whether it's a weather event or... or, hope not, a war, but across the globe or something. (Ben) We
need some type of supply shock, right? (Tim) Yes. (Ben) Um... preferably somewhere other
than the United States, right? That would be, you know, for our producers that would be preferable.
Um... (Tim) Because I know my brother in 2019, the fall of 2019, was really bearish on... on...
(43:00):
on... on economics of farming. Was not going to look good, and then we had Covid. (Ben) Yep. And
Covid kind of created some interesting dilemmas in terms of scarcity. We also had a couple of
short crops in there, actually. Um... (Tim) Right. Some... some weather. (Ben) Multiple
years... multiple years of drought here in the United States and a prime growing region,
and multiple years of short crops in South America as well. Um... that all just kind of compounded at
(43:22):
the same time. So a supply shock is probably what it's going to take. However, there are... so when
you get into periods like this, right, low farm income and I talk about the innovation, you start
hearing calls for different type of demand uses, right? E15, year round E15 is one of those things
that's being called for right now. Earlier this year, we saw the US EPA actually propose higher
volumes for biodies... biomass-based diesel. Um... and... and you know, upwards of 30% increase in...
(43:48):
and stuff. Now that hasn't become official. They proposed it. There was a comment period. We're
awaiting the EPA's official ruling. Um... but you could assume that that would increase the demand
for soybean oil and soybeans. Um... same thing E15 would do for... for corn, ethanol and corn demand.
And, um... you know, we've heard about the... the 45Z tax credits. Um... that creates an opportunity
(44:10):
for, you know, a differentiated market. You got to capture and record what your management practices
are to generate those tax credits, but that could be potentially an increased revenue source as
well. So... (Tim) Or selling carbon credits. (Ben) Or selling carbon credits, right? That's... you
know, it's interesting. The carbon market we knew would go through ups and downs, and... and some
(44:31):
of your viewers are probably sitting there saying, "No, he didn't. That... that guy didn't know that
these..." But every market goes through ups and downs. Look at ethanol! Look at renewable fuels!
Every market, when it's developed and goes through its ups and downs. Where I think the carbon market
is right now is it's in a regrouping stage. It's... it's regrouping, and it's trying to
figure out, okay, how do we... we've had the early adopters, and we've had the early shocks. Okay,
(44:53):
what does... what does a base start to look like moving forward? And so to me, this is
a... an exciting... this is a time for... for, you know, the future of carbon markets to kind of get
developed. (Tim) Sure. Just like anything else. (Ben) Yep. Yep. Just like... every other market
has gone through this. (Tim) Right. (Ben) Yep. (Tim) You look at when tractors first came out,
there was 25 different styles out there. Then they all get down to two or three. So, all right. Well,
(45:17):
anything you want to end with on this? Uh... (Ben) Uh! (Tim) I mean, it's not all bleak. I mean,
like you said, be disciplined when... when times are good and stay on task when... (Ben) Yeah,
we didn't talk about cattle. I'm not a livestock economist. I... I, uh... but you know, you want
to talk about positives, right? Like the... the positives on the cattle side in Missouri
right now, but I'll end... you said it's not all bleak. And I... and I'll end with this because I
(45:42):
find myself, as I work with producers, and I... I give 80 talks a year around Missouri, um...
I find myself in a very interesting spot right now. Um... and it really starts two years ago,
I was depressed. Every... every farmer meeting I went to two years ago, I left the meeting feeling
like I didn't help anybody, and I just made them all sad because the outlook in my eyes
(46:06):
was... was prices were heading lower, and... and we were going to really enter into this financial
crunch. And that's largely what happened. However, producers weren't there yet, right? They weren't
feeling it two years ago. They're feeling it now. And so I find myself in this weird spot.
When I actually look out two years from now, I see higher prices and better profitability. Two years
from now. Um... and so from that standpoint, I can be optimistic, um... about it. The problem is is
(46:29):
we're facing the pain now. Um... and producers are hurting now. Um... and so even though, you know,
I say, "Hey, you know, things I... " You know, in my price forecast, I've actually got green, um...
for... for next year. Prices are actually higher next year than they are now, um... but we got to
get there first. (Tim) But we got to get through this 18.4 billion bushel corn crop. (Ben) Yep! We
got to get to the '26 crop, um... and I think we've got some opportunities.
(46:53):
(Tim) All right. Well, thanks so much, Ben. And I know this is such great information for
everybody. (Ben) Yep. Thanks, Tim. (Tim) This is it for Tim's Take, and we'll see you next time.
[♫]
[♫]
(Tim Reinbott) Well, welcome to Tim's Take! And today we have a very special guest on a very
timely topic with Dr. Ben Brown, the Extension Specialist, row crop economics. So, Ben,
this is... we're taking a beating here the last several months, and we had a new report came out
(00:23):
today. (Dr. Ben Brown) Yeah. And so we're filming this the end of September on September 30th. And,
uh... we get the quarterly grain stocks numbers, um... four times a year. Uh...
the... the importance of the September grain stocks report is, for corn and soybeans,
this represents the end of the marketing year. And so, uh... the grain stocks numbers that we
have on hand as September 1 are the official ending stocks for the old crop marketing year,
(00:48):
and they become the beginning stocks, uh... for the new crop marketing year. And um... for corn,
the numbers were bearish. Uh, we... we actually had almost 200 million more bushels of corn than
what was expected. Um... (Tim) As old crop or new crop? (Ben) As old crop. So these... so
let me back up and just kind of explain. So this is a point estimate. Basically, this says as of
(01:09):
September 1st, how much... how many bushels of corn, soybeans, wheat, grain sorghum, cotton,
rice, whatever it is, right? Um... how many... how many units, in the case of corn, how many
bushels do we have on hand? Whether on-farm or in commercial storage as of September 1. Uh...
and... and it's a point estimate. We get it at the end of the month. That way it gives time for
(01:30):
tabulations and things of that nature. But because the marketing year ends for corn and soybeans on
August 31st, the new marketing year starts on September 1st, and so whatever we haven't used,
um... that's still sitting in either on-farm storage or commercial storage, becomes the
beginning stocks number for the new crop marketing year. Um... and so, uh... what the corn numbers
(01:56):
today showed was that there's more corn out there than what was anticipated. Uh... this doesn't
necessarily surprise me all that much. Um... we've had very strong corn exports so far this... this
year. Um... this summer corn exports were very strong, and they continue to be, um... here
this fall. Um... we've had solid grind, um... for ethanol production. Taking corn and turning that
(02:21):
into dried distillers grains and... and ethanol. Both of those categories go through a point... a
checkpoint, right? Um... when you take corn to an ethanol plant, they... they show receipt for that
corn. When you take corn through an export terminal, um... there's a receipt for that
corn. The largest category that we don't have any records for is feed grain use. Um... and this is
(02:43):
largely corn that's just sitting out across, um... you know, large feed consuming areas. Think of
western Missouri, Kansas, Oklahoma, Texas, (Tim) Nebraska. (Ben) Yep. Nebraska, Iowa, South Dakota,
Right? Like, um... you know, these areas where we feed a lot of corn, um... you know, a lot of that
never goes through a checkpoint. Um... it might get delivered to a... a feed yard somewhere, um...
(03:05):
but it doesn't ever have to really go through a checkpoint. So when I think about where the...
the... this extra corn's coming from, I'm sitting here and saying, well, it's... it's showing up in
these large feed grain areas or feed consumption areas. Um... we don't have as many cattle,
um... in... in the United States. We continue to liquidate our breeding herd, um... that doesn't
produce. You know, when you... when you cut down on mama cows, you don't have as many calves to
(03:28):
send to feed lots. And so there's... (Tim) Because the price is so high. (Ben) Yeah! Yeah. Well, for
a number of factors, but one of those right now is we've been asking people, "Why haven't we been
seeing cattle herds rebuild?" And you ask producers and they say, "Well, why in the world would I give
up the profit that I could get today for certain for that heifer versus retaining her at the risk
of having an unborn calf or, you know, a calf 18 months from now, um... that I can sell?" And so,
(03:55):
uh... that's... that's one of the challenges that we've had, uh... with rebuilding this herd.
But it's not just the domestic cattle herd. It's also, we're not seeing cattle move north and from
Mexico. Normally, Mexico would send us a couple million head of cattle to feed. Um, they're born
in Mexico. They ship north into the United States to be fed in places like Texas and Oklahoma.
(04:16):
Um... because of the New World screwworm outbreak that we've seen, the border, um... for live
cattle trade with Mexico and the United States is closed, and it has been closed for several months,
uh... to... to help prevent the spread of New World screwworm into the United States.
So those cattle aren't coming north to be fed. Instead, what's happening is we're sending corn
south. Only instead of it showing up in the feed category, it's showing up in the export category.
(04:40):
Um, and... and I don't see the border between the United States and Mexico opening anytime soon.
Soon being defined as probably the next couple of months, um... because we just haven't seen,
uh... the control of spread of New World screw... screwworm in... in Mexico. So I think that's going
to keep the border shut. We'll probably see, um... larger than normal exports of feed grains, corn,
(05:03):
grain sorghum, and wheat to Mexico, um... in the exchange of not feeding as much here in the United
States. (Tim) And that was a 200 million bushel? (Ben) Yeah. So 200 million bushel surprise. This
was the largest bearish surprise, um... that we'd seen in a grain stocks report since December of
2020. Um... and... and so, this is... while it's large, we have seen larger surprises, but this
(05:28):
was definitely a large bearish surprise to the corn market, um... and will... will create some
price headwinds for us as we move forward. I... I talked about how this is the old crop supplies,
right? This is as of the end of the marketing year. Um... we have 18.2 billion bushels of corn,
um... here in the United States. Uh... currently, that's what the expectation is of corn that we
(05:51):
will have produced this year. Corn that is, um... that we thought we were carrying over. And I'll
come back to that statement there of thought here in just a second. But um... 18.2 billion bushels
is the largest supply of corn that we've had to deal with ever. Um, in fact, we've never had above
a 17 billion bushel corn crop. So to... so to go from high 16 billion bushels all the way to 18.2,
(06:14):
that was prior to today. We have 200 million more bushels now, um... almost 200 million
bushels more now. So that takes that carryover from 18.2 to 18.4 billion bushels of corn supply.
In some ways, we could say that it is amazing that the cash corn market has been hovering in the high
$3 range to even at times $4 cash corn given how much corn we have on... on... in supply. (Tim) Oh,
(06:40):
my goodness! And there's no, uh... big cattle herd to start feeding. (Ben) Correct. Yeah. (Tim) And
that's what... because I think, uh... animal scientist folks said it takes five years before
you break even on a heifer by... by keeping her back, takes five years to break even. (Ben) Yeah,
that's a... (Tim) That's an investment! (Ben) Yeah. So, we... we call that capital budgeting,
(07:02):
right? And so, like the repayment capacity. Uh... and... and certainly that's... those returns and
those out years are uncertain, right? Like we don't... we have an idea of what a... a steer
price might be five years from now, but there's a lot of things that could change that. So, you also
have to bake in some... some risk, some return risk into those out... out years. (Tim) Now,
our poultry and... and pigs can increase quicker though, couldn't it? (Ben) Yes! Um... and we do see
(07:28):
turnover. Uh... poultry has been one of those areas that's been growing a lot in places like Missouri.
We... we see a lot of interest, um... for poultry and layers. Um, I... I talk and work with quite a
few people in this sector, and... and one of the companies that builds poultry barns, currently has
a three-year wait. And so, if you want to build a barn today, it would be three years before, you
(07:49):
know, they could actually get to you. The waiting list is that long. So there's a lot of interest
in this space. One of the challenges just from a, um... you know, cons... corn consumption side is,
you know, this is an industry that got hit really hard with, um... High Path Avian Influenza,
um... the disease that killed poultry. And so, that's part... you know, so on one hand, the...
the lack of birds, because of the disease, has been what's created the economics to expand, um...
(08:15):
and... and see an expansion in poultry. But on the other side, you don't have as many birds to feed,
um... due to because of the disease, and so, um... a little bit of a trade-off there. But we do see,
um... poultry as a... as a growth sector, um... for... for Missouri and broader regional
commodities, especially soybean meal. Um... I... I think we'll continue to see growth in soybean meal
(08:38):
consumption, um... primarily for poultry feed, um... and... and other products too, but poultry
seems to have the biggest growth area, um... for... for soybean meal consumption. (Tim) So
was our, um... our new crop corn about the same then? (Ben) Are you talking about the supplies?
Or the... ? When you say, "new crop corn", what do you mean? (Tim) Uh... the the estimation on the
(09:00):
crop size. (Ben) Um... so the... the stocks report is all corn together. Um... and... and so it's a
point estimate as of September 1, right? Um... the 18.4 billion bushel estimate is the new crop.
That is the '25 that's being harvested right now that'll be marketed all the way for the next 11...
(09:21):
12 months, right? End of August. So 18.4 billion. Um... that's taking the 18.2 we thought we had,
adding 200 million more to it today, after... after today. So 18.4 billion would be the new
crop corn supplies that we'll have to chew through in the year ahead. (Tim) Oh, wow. And now, a lot
of folks thought that was overestimated. (Ben) So, um... we... we have heard a lot of reports,
(09:45):
and I've gotten quite a few as well, of this crop faced all sorts of challenges, uh... from,
um... extreme precipitation at planting to tassel wrap. Remember when that was a thing?
And pollination issues to, uh... rust over the summer, especially in Iowa. So there is a lot of,
(10:05):
uh... concern and doubt about the size of this crop. Uh... we get estimates both from
the private and public sector throughout the growing season. We're getting more this week,
um... even from the private sector, um... on the size of the US crop. Producers seem to think that
the crop is getting smaller. I also think the crop is getting smaller. But one of the challenges that
(10:28):
we could have, and... and this we're sitting here at the end of September recording this, is um...
the USDA WASDE report, which is kind in NASS, the NASS production report, which is kind of our
public facing estimate of the size of this crop is set to come out on October 9th. Um... and the
government shutdown that is facing us potentially delays or even eliminates that report. And so,
(10:53):
we've seen this happen before. Back in... in 2013, we had a government shutdown early in October and,
uh... the October report didn't happen, and we had to wait till November to get some clarity in
terms of the size of the crop. And so, um, I... I would, I guess, just throw out there that when
I think of my potential bullish factors to corn, soybeans, and... and wheat, but primarily corn and
(11:17):
soybeans at this point, um... one of the bullish factors that could happen is this crop just isn't
as big as we think it is. And... and of course, we would find that out in a public way with
the WASDE report. Well, if it doesn't come out, we're waiting a couple more weeks even for that
information. (Tim) There's not a lot of factors going to push to mark... corn market then really,
other than lack a production. You know, there's not going to be a big export, or... (Ben) Well,
(11:43):
so there... there could be, Tim. And this is... this is, I think, what makes marketing extremely
challenging this year is, um... I... I think most people are aware of the challenges that
we've seen, or changes that we've seen in the trade environment. And um... we have seen very
strong corn export sales this year, um... largely due to Mexico, but every other country has also
(12:07):
increased their imports of US corn, um... because there's just not a lot of corn in
the global market. If you take out the United States and China from the global corn picture,
we're at the tightest stocks of corn relative to our use in 30 years. (Tim) Oh, really? (Ben) And
so, if you have cor... if you need corn somewhere else in the world, there's very few places to look
other than the United States. And that's why we've seen our corn export picture be as robust
(12:30):
as what it is. That's not necessarily true on the soybean side. There are alternative sources for
soybeans on the global soybean market. And so, um, China is our largest buyer of soybeans. China has
bought zero soybeans this year. Um, and... and that's been well documented all... all through,
um, the... the nation in terms of the challenges. Um... you could envision a scenario to where
(12:54):
a trade agreement gets, you know, established that includes substantial purchase commitments
of soybeans, and all of a sudden, the soybean market really turns around. I have a, you know,
a kind of a love/hate relationship with purchase commitments to be truthfully honest. On one hand,
I am a producer's son, and I want better prices for our product. (Tim) Right! (Ben) Right? I...
and purchase commitments are the one of the ways that we can get higher prices for our product. So,
(13:18):
on that st... standpoint, I'm... I'm hoping we see purchase commitments. On the other side of this
question, which, you know, two-handed economist, one-hand versus the other side, right? Um,
purchase commitments can disappear just as fast as they come about. Um, and... and they're not really
based on, you know, any economics or fundamental analysis. They're just kind of based on a policy
intervention. Um, and... and that makes making decisions. This is why I struggle with this, is
(13:43):
do I sell my soybeans or not? Well, if I believe that there's a trade deal that's going to be made,
you know, I'm probably not all that interested in selling my soybeans because it could in... there's
the likelihood it includes purchase commitments. All the other trade deals the administration has
made so far have included purchase commitments. So, you have to think that that's a possibility.
That happens. Soybean prices rally, um... and if I had sold, right? I miss out on that rally.
(14:09):
Whereas, if I sit here today and I say, "Well, what if that purchase commitments never happen,
right? And I'm just eating away at my profitability because I'm storing this crop?"
And it's costing money to store this soybean crop, and the fundamentals aren't certainly suggesting
storage for soybeans. Well, then you enter into a period of time where... where you sold too early,
and... and you know, you missed out on the rally, um... and because the fundamentals weren't there.
(14:32):
So that's what makes marketing in this environment relatively challenging. (Tim) But as you mentioned
before we went on the air, some elevators now are cash only. (Ben) Part of that is, um... you know,
just the size of the... of the crops, both corn and soybeans. I mentioned the 18.4 billion bushel
corn crop, a very sizable soybean crop as well, um... and we're following that... or we're...
(14:54):
we're bringing all this to market when we had a... a very large wheat crop as well. Now wheat,
you know, doesn't always get stored, right? When we move a lot of wheat in different places,
and we find a home for it by the time the corn and soybeans come in, but it does take up space. And
um... and so, I think what we're seeing from elevators is a lack of space. And I... I think,
you know, we're going to see this broadly across the Western Corn Belt. I think more specific to
(15:18):
the Western Corn Belt because the Eastern Corn Belt had a... a drought last year. They didn't
have as much production, um... and so their stocks from last year are relatively low compared to
ours, um... here in the Western Corn Belt. So quite a bit of supply sitting out there. We're
bringing a large crop to the market. And I think elevators are saying, "Hey, we don't have anywhere
to go with this either. Um... the only way we'll take delivery of your soybeans is if you sell
(15:39):
them to where we can put them directly onto a rail car and send them somewhere." Um... and so we're
hearing more and more reports of that. We're also hearing storage rates. If the elevators that are
taking storage of product, um... those storage rates are increasing as elevators work to say,
"Hey, we will actually discourage you from bringing that crop to us. We want you to keep it."
Um... and that's... they do that through basis, by changing basis levels and through storage cost,
(16:03):
commercial storage cost. (Tim) Yeah. What are the... how are the basis around? Are
they...? (Ben) Yeah. So, um... this is something that changes all the time. Uh... and it's... it's,
uh... one of those things to where basis can look very different in parts of Missouri than other
parts, and we also have to keep in mind the time of the year. Um... right now corn basis for spring
(16:24):
delivery (March) is actually pretty competitive, um... to where we... we typically see it. And so,
um... or strong relative to, I guess, where we... we would typically see it. And I think that kind
of speaks to this nature of, um... you didn't ask the question, but I'm going to kind of answer it.
You know, the economics, uh... certainly suggests storing corn over soybeans. If you only can store
one crop, um... corn seems to have the... the better fundamentals, um... compared to soybeans
(16:50):
and in terms of storage. On the soybean side, basis bids are... are weak, um... both for current
delivery and... and future delivery. We... we have a lot of soybeans, and we're trying to find places
for all these soybeans to go. And um, elevators like we just mentioned, some of them are saying,
"Hey, we'll only do cash delivery." Um... and they're discouraging the delivery of soybeans, and
they do that through weaker basis bids. (Tim) So it's really the... it's the worldwide demand for
(17:13):
corn that's going to be that... that thing that could push us for some higher... higher, uh...
prices in November, December, January. (Ben) Sure. So, I... I think we're setting up very similar for
this winter that we did last year. Um, I... I think we... we have a very similar opportunity,
(17:34):
um... of a very large crop. Keep in mind, last year's crop was a record as well. Um... this
year we had additional acres, and at least as of right now, additional yield, um... and so that...
that leads to more production. One of the things, though, that has has really kind of transpired,
and... and... and maybe people are aware of it, we're just not talking about it as much
is... is Brazil continues to increase the size of their second crop corn production. They had
(17:58):
a very large second crop corn this year, um... but it gets planted in January. Um... that's
when their corn crop gets planted, following their soybeans. Um... and there was a lot of
expectations around the size of that corn crop. It did end up be... you know, it... it did produce
a sizable corn crop. Uh... but in January, there was actually quite a bit of risk premium built
(18:20):
into the market because there was fear that the drought was going to hamper that crop production,
right? Um... the size of it, just like we see here in the United States in June and July, you know,
you start to get a dry weather pattern that kind of materializes in a prime growing region of the
world, and it... it can have impacts on prices. And that's what's happening a little bit with
(18:41):
our corn market is we probably, you know, not that long ago would have considered March to
be an attractive time to move corn because elevators and... and ethanol facilities here
in the United States, um... were... were needing corn, and so, it would... it would attract kind
of some of that... that spring delivery. I would argue it's starting to move a little bit earlier.
Um... it's getting closer to a January or February window, um... because that's when we're seeing the
(19:06):
risk premium kind of come into the market from a South American corn crop. Um... and so all this to
say, Tim, that's where I'm going with this is the riskiness of South America is providing us some
price opportunities outside of our growing season. Um... and... and we see that in soybeans as well.
The size of their crop is... is very large. Um... and... and so, any type of production challenges
(19:29):
they have feeds into the global marketplace as well. (Tim) What was our soybean? Was... was
it bearish on that... on that too? On the report? (Ben) Oh! So the grain stocks report that came out
today was very close, um... to expectations. (Tim) Oh, was it? (Ben) Soybeans... soybeans, um... if
you think about the soybean market, we don't have the phenomenon that we do in corn to where we
have soybeans that never go through a checkpoint. Um, you know, soybeans either get sent to a crush
(19:54):
facility to be crushed into corn and soybeans, and so they get reported that way, um... or they
get sent to an export terminal, so they get reported that way. Um, we're not holding soybeans
that never get marked, and so, rarely do we see surprises on the soybean side. Um, the soybean
crop... the soybean stocks numbers at the end of the marketing year were 26 million bushels lower
(20:16):
than they were last year. (Tim) Oh, really? (Ben) Um, and... and keep in mind, last year we had,
you know, some yield challenges in the back end of the marketing year. It got dry. Very similar to
this year as well. (Tim) Yes. (Ben) Um, and... and I think we're going to see the same thing. I think
we're going to continue to see soybean yields come down, although the early reports so far have
been pretty strong. Um, you know, I think we're going to see soybean yields come down and... and,
(20:36):
um... I... I think there's the opportunity for even a smaller soybean crop. But I... I will
just... I will say that one of the things that's countering that is we're just not using as many
soybeans, um, and... and global supply chains take a while to... to... to change. Um, you know,
in the long run, they might look very similar to where they are at today, um, but in the short run,
(21:00):
we have a lot of beans, and we're trying to figure out what to do with them. (Tim) Now, some would
argue that we haven't exported any... any to China. There's only so many soybeans out there.
If they don't buy them from us directly, maybe they'll buy it from us indirectly. (Ben) Sure.
The... thank you for asking the question. I was kind of answering the question without you asking
it. So, I appreciate you asking the question directly, right? Um... this is a question I
(21:25):
get all the time. If China's buying soybeans from Brazil, well then, can't we sell our soybeans to
where Brazil was selling their soybeans? Um... Brazil's largest buyer was already China. Um,
and... and so, they were already selling into that market. Um, the last couple of weeks,
we... we saw Argentina reduce their export taxes on product. And we could get into export taxes and
(21:47):
how Argentina operates as a government, but they reduced their export taxes, and in a period of
about 48 hours, China came in and bought several metric tons of soybeans that would have likely
been from the United States. Um, and... and so we could add Argentina into this mix. Well,
if Argentina is selling their soybeans to China, can't we just sell our soybeans to where they...
they shell... or they sell? History has told us time and time again, and we could look at multiple
(22:13):
things, the most recent being the Russian invasion in Ukraine, and... and the challenges we had in
terms of moving supply chains around, um... as a result of that. We have this term in economics
called slippage. And basically what it means is that markets and supply chains are already
selling their product to the most efficient place to sell them, right? Whether that be based on
(22:34):
transportation cost, logistic proximity, something like that. And so, um... markets are already
operating in an efficient manner to the current scenario. If you shock it, and you start moving
these things around, you move places around, you do get some substitution. For us, instead
of selling soybeans to China, we're selling a lot more soybeans to Egypt. Um... and Egypt
(22:56):
is becoming a... a very good buyer of ours. Um, that's an example. The... the difference though
is instead of pulling up getting one more bushel from the rest of the world that we would have
sent to China, maybe we're only getting 75% of a bushel, right? We're... for every four bushels,
we're only... that we used to sell to China, we're only getting three bushels from somewhere else
in the rest of the world. That's what we call slippage. It's showed up time and time again.
(23:18):
And so that'll happen in the short run. We... we won't see a complete substitution of product in
the short run. In the long run, it... it balances back... way back out. And by long run, I mean,
it'll take a couple of years. Um... relationships have to be built. Um... logistic markets have to
adjust. Um... and so, it'll... it'll change. But what happens in the short term is we create these
(23:39):
price wedges where soybean price increases in Brazil, and Argentina encourages their producers
to produce more. Soybean price declines in like the United States and discourages our producers
from producing soybeans. So, we see those shifts, too. (Tim) All right. (Ben) That was a long-winded
answer. (Tim) Oh, no, that's great! So, that... that recaps corn and soybeans, and it's... it's
(24:00):
marketing, too. All right. Well, that's it for this Tim's Take, and we'll talk to you next time.
(Tim Reinbott) Welcome to Tim's Take! And we're continuing our discussion with Dr. Ben Brown,
our Extension Specialist in row crop economics. And Ben, we've talked about corn and soybean,
but wheat has become a minor crop to us, but what have those acres done over the last few
(24:20):
years? (Ben Brown) Well, we saw a little bit of a rebound in wheat in the United States when Russia
invaded Ukraine and wheat prices went high, right? (Tim) Right. (Ben) We saw relatively
high wheat prices, um... record high wheat prices in some cases. There was some interesting market
phenomenons that happened during that period to where the futures market was... was very high,
but the cash market that producers were actually experiencing, um... wasn't following,
(24:42):
and so we actually saw some breakdowns in terms of risk management tools on the wheat side. But the
high prices for wheat globally, and even here in the United States, actually brought some acreage
back into wheat production. We had some producers that hadn't produced wheat in a number of years
that kind of got back into it. We saw people that had wheat expand their wheat... wheat acreage. But
the long answer, or that's the long answer. The short answer is over a long period of time, we
(25:05):
have been decreasing wheat in the United States. Um... and... and... (Tim) Not just Missouri, but
the United States. (Ben) Everybody. Everybody's been decreasing wheat. We've replaced a lot of
those wheat acres. You think of Kansas, right? The bread basket, the wheat state, right? A lot
of those wheat acres became soybean acres in Kansas. Same thing in North and South Dakota as
well. So we've been... we've been replacing those acres. Um... and... and wheat production has just
(25:28):
been declining over a long-term period of time. Part of that is because, um... you know, when
it comes to wheat, uh... you know, we... we do have good quality wheat, but we've also got a lot
of feed wheat. Um... and so, you know, if you're feeding wheat, you know, on a relative basis you
can usually buy a bushel of corn cheaper than you can buy a bushel of wheat. Um... and so there...
(25:49):
and grain sorghum's now competing with wheat, or you know, we've seen grain sorghum compete, and
uh... it's... it's a challenge. Wheat... wheat's one of those crops that, um... it's... it's as
much the profitability of it is a challenge as it is the timing. Um... you know, for when I talk to
producers, and I ask, "Well, why don't you plant as much wheat as you used to?" And a lot of times
(26:10):
the answer is, "Well, in the fall when we need to plant wheat, we're trying to harvest our corn. Um,
and in the spring when we need to be harvesting wheat, we'd really like to be planting soybeans,
um... or spraying corn." And uh... and so the... the labor side of wheat just makes it a challenge
for most farms. Um... I like wheat. I've always liked wheat. My dad, I... sometimes I joke, I think
my dad plants wheat just because I like wheat. Um... I have very fond childhood memories of...
(26:35):
of harvesting wheat with my grandpa, um... and... and so anyways, I... I hold it kind of near and
dear to my heart. But the other, from a economist side, uh... double cropping soybeans behind wheat,
um... in some cases is our most profitable option for acres. Um... and... and again, there are
(26:55):
challenges. Sometimes you don't get the wheat out in time, and it delays the soybean planting. Uh...
but... but broadly speaking, if we can get 35... 40 bushels of soybeans following a... a decent
wheat crop, that's usually a pretty profitable acre for us. (Tim) And that has pushed north
in Missouri and other parts of the country that they can double crop soybeans, which is great.
(27:16):
You know, some friends of mine refer to wheat as the landlord crop because the older landlords used
to plant wheat, and they want to continue to see wheat planted. But as you mentioned, there's other
reasons why they don't want to. (Ben) Yeah. I... I can... I can paint a picture as to why wheat
has gone out of favor with... with producers. Um... I... I get it. I... I fully understand,
(27:39):
and... and, um... you know, there are people that have made it work, especially if you can bale the
straw. There's some good profitability with the straw that comes with it as well. Of course, then
you have to add fertilizer back because you've... you've taken some of those nutrients away. But,
um... I... I find wheat to be a... a great rotation crop to help break some disease cycles,
(28:00):
and it... it... it fits well into rotations. Um... but you know, for a number of other factors,
you know, it's... it's not a crop that people enjoy planting and harvesting. So... (Tim) When
we look at soil health, I was just talking to a graduate student yesterday on some rotation
studies, and he mentioned you can really pick out the wheat crop, the wheat rotations,
(28:23):
because the... the soil health indicators are better. (Ben) Well... (Tim) From that standpoint
that's also in... an... an advantage. (Ben) Yeah. So, you're getting to an area quickly here, Tim,
that I don't know anything about. Um... (Tim) Well, economics, I don't buy high, sell low,
you know. (Ben) Yeah. Yeah. Yeah. You know, I, um... I do work with quite of our soil scientist.
I'm on a couple of projects right now looking at soil health and just different things because,
(28:46):
you know, ultimately what I care about is profitability and... and what we can do...
what we can do to increase profits, and... and so we... we look at all these things, uh... as well.
And so I'm on some of these projects. And, um... you know, it's just like I said, wheat
offers some... some cover, some ground cover, in the winter, um... and it... it helps, you know,
provide some... some, uh... nutrients when... when that crop decays. If we take the straw away, we...
(29:12):
we got to add it back in... in some way, and... and, uh... (Tim) But the cash flow. My dad always
liked wheat because of the cash flow that you got in the middle of the summer. (Ben) Mhm. (Tim) That
you actually you got a crop sold. (Ben) There... there's truth to that too, Tim. I... I... I agree.
I... I... there's a number of things I like about wheat. (Tim) Right. (Ben) I... I don't
know how... I could stand on a rooftop and... and sing about wheat all they want, and I don't think
(29:36):
it's going to change people's mind... (Tim) No. (Ben) ...in Missouri of planting it. (Tim) Because
of the harvest. It's planting at the same time you harvest. Um... is it more of a... a lower
risk but lower reward type crop? Or is it... or is it about like every... when you do the budgets of
wheat compared to corn and soybean? (Ben) Well, that's a great question, um... because I need to
(30:00):
go back and look at this. We have seen probably some stabilization in terms of wheat yields. And
I think part of this is the people that are now growing wheat, grow wheat, right? Like they manage
wheat, um... and it's... it's... it is a crop, and they... they... they manage it, they spray it,
um... apply fungicide to it. (Tim) Right. (Ben) And so we just don't see as much variability in
(30:22):
wheat yields as what I think we used to see, um... for wheat. And I think that's showing
up in crop yield data. I think that's showing up in crop insurance, you know, premiums. You know,
lower premiums mean that there's not as much variability. And so I think we're seeing all
that in there. I don't have a good answer for you in terms of this high risk, high reward. Low risk,
low, you know, or high risk. How did you phrase that? High risk, low reward,
(30:43):
I think is how you said it. Something like that? (Tim) Or low risk but lower reward. (Ben) Oh,
there you go! Low risk, lower reward. Yeah. Um... the risk for wheat, and I kind of alluded to this
just a little bit earlier, the risk for wheat is there's been years, this was a year where this
was a case to where the wheat just never matured. Uh... we were in the end of June, uh... when some
(31:05):
of the wheat was maturing. People were... it had rained so much that people needed to spray corn.
We needed to bale hay in parts of Missouri. We needed to harvest wheat. We needed to plant full
season beans, right? And so the risk is the wheat crop comes out late, and you don't get the soybean
crop planted. Um... it is yet to be determined, uh... because we haven't harvested many of those
(31:27):
late planted soybeans yet in Missouri, but given the way the drought materialized this year,
I actually think some of these later planted soybeans, um... depending where they are at,
you know, hit the drought right at pollination and... and will struggle. Um... that's why I
think the yields are going to decline. The early planted beans got ahead of pollination and...
(31:48):
and weren't as impacted by the drought, whereas some of these later planted soybeans behind the
wheat. So I would maybe say that that's where the risk is is you push that soybean planting,
and especially if it's going to start keep getting drier in August, which is what the
climatologists all tell me is that August is going to be a month that just keeps getting
drier for us. So... (Tim) Really? Well, yeah. Some of these double crop soybeans really didn't see
(32:10):
a significant rain. (Ben) Did they see any rain? (Tim) Not till recently. (Ben) I was going to say,
we went like two months. (Tim) It was almost too late. (Ben) I was going to say, we almost went two
months without any rain, Tim. So... (Tim) That's right. That's right. So, uh, but corn and soybean
budgets, I mean, how do they look? We... because we're hearing that input costs are up 60% in...
in the last five years or so, and that's got to blow these budgets apart, doesn't it? (Ben) Yeah,
(32:34):
your listeners aren't going to like what I have to say. (Tim) Uh-oh. (Ben) Um, our early indication
for '26 crop is the input costs are higher for '26. (Tim) Again?! (Ben) Again. Um... anywhere
between a percent to two, right? Somewhere... somewhere in that mix. Um... and... and that is
not us forecasting. That is just simply taking what we... what we get and what we see from...
(32:55):
from the information. Um... producers here at the end of the calendar year are going to be
making a lot of their seed decisions. A lot of seed companies have already set their... their
market prices for seed. Um... so we take those and look at those, and those are all looking higher,
um... to flat at best frankly. Um... and... and, you know, we could see producers make some
decisions. Maybe you buy, you know, older traits of seed. (Tim) Yes. (Ben) You know, and different
(33:18):
things that exposes you to other risk if it's got, you know, a stacked variety hybrid to it,
right? That maybe helps prevent corn root worm or some of the other diseases we've seen. But,
um... you know, that's a management choice producers will have to make. They could cheapen
corn decisions, but maybe they're giving up on some of the technology packages. Um... fertilizer,
(33:38):
I think, is going to continue to be a challenge. We've seen fertilizer prices rise, got maybe a
little bit of relief here the last couple of weeks I think might hang with us for just a little bit,
um... but my early indication is that fertilizer prices are going to heat up again by the time we
get around to spring. Um... (Tim) And we import a lot of fertilize. (Ben) Well, it depends on
which fertilizer you talk about. Good economic answer right there. It depends. (Tim) That's
(34:00):
right! That's right! (Ben) We produce most of our own nitrogen, um... or anhydrous. We... we
produce most of our own anhydrous. Uh... the challenge with anhydrous, uh... is that we are
in a global fertilizer market, and US anhydrous is the cheapest form of nitrogen on the global
market. So we're actually exporting a lot of anhydrous, um... and... and other products,
(34:21):
and so that competes with US producers. Um... you know, other places around the world are asking
for our nitrogen source, and that's... that's what's keeping the price high even though we
produce a lot of it here. Um... UAN, uh... is... is a product we import some... quite a bit of.
Um... it is in tight supply globally, and it is gonna... and it's going to remain high. Uh...
(34:43):
phosphates have gotten a lot of news. We import a lot of phosphates, um... and phosphate prices are
very high, um... and so, you know, depending on the product category. Potash is one of those that,
you know, there's actually... there's, you know, it's... it's high because of everything else, um,
but there's actually a lot of potash production potentially coming to the global market in the
(35:06):
next couple years even. Um, so I'm not as worried about potash as some I am... some of the other
fertilizer categories, but, um... I certainly think we could see fertilizer prices really rise
this winter into the spring. (Tim) And anhydrous, it... it's a very energy dependent crop. It takes
a lot of... a lot of natural gas to make it. (Ben) Yeah, we've seen natural gases rise a little bit.
(35:28):
We... that's showing up in the ethanol data as well. (Tim) So we're competing against that,
too. (Ben) Yeah. Yeah. So... (Tim) If they could make more money selling as natural gas, they will,
versus making anhydrous out of it. (Ben) We saw that in Europe two years ago when natural
gas prices in Europe got really high, um... they sold the natural gas to... to homes basically for
heating and other sources and... and shut down some of their industrial production,
(35:49):
whether that be fertilizer, even their biofuel sector. Uh... and so, you know, that could happen
here. I don't know if we'll see a whole lot of ethanol plants, or sorry, fertilizer plants,
uh... sell their natural gas versus producing fertilizer because I think the fertilizer prices,
the output prices, (Tim) Is high enough. (Ben) ...is going to be high enough that it's going
to continue to encourage production. Uh... the biggest thing here is it's just a global market,
(36:12):
and... and we're... anhydrous prices in the US are the cheapest source of nitrogen in the world,
and... and so, you know, there's people bidding for the product. (Tim) You know, you mentioned
the, uh... in Europe, they use... use the natural gas to heat homes. It's kind of like
in California, you could either... either use it, water for the people to drink,
or... or for crops. (Ben) Yeah! (Tim) You got to start making those decisions, and people are going
(36:36):
to win out each time. (Ben) Sure. Yeah. (Tim) Have to. (Ben) Yep. (Tim) So... (Ben) Yeah. So, that's
my answer is input across, at least as where we see it now, um... continue to put this pressure.
Um... you know, we had the... the appropriations bill passed earlier this summer. The... the Big
Beautiful Bill, the One Big Beautiful Bill, um... that got passed earlier this year, our early
(36:58):
assessment shows that it does increase input cost. Um... the... the... the farm safety net programs
that were included that, in the long run, show some... some increased pressure on upward prices.
Um... I think you're hearing a lot of that amongst farming community right now of, uh... you know,
needing better profitability, but direct payments probably don't necessarily help the producer. They
(37:18):
just flow right through to the input provider of the bank and, um... keep input prices high. And,
um... our early analysis, of at least the One Big Beautiful Bill and some of the other things,
would certainly suggest that is true. (Tim) So what should farmers do? Because I've heard some
of them say, "2026, I'm going to plant a crop that I'm going to lose money on." (Ben) Many of them
(37:39):
did that in '25 as well, and some of them did it in '24, depending on when they bought fertilizer.
Um... (Tim) Just control input cost is all you can do. (Ben) Yeah. So, so should is a value judgment,
right? Like that's... that's one of those things that I could say, well,
you should do this, and everybody... somebody else would say, well, no, you should do that,
right? Should is a... should's an opinion. It's a value judgment. Um... I remember talking down at
(38:02):
the Missouri Farm Bureau Annual Meeting, um... probably three years ago. Prices were... were
high. Um... the outlook was for lower prices to come. And I remember quoting a banker that I
heard when I was a kid, so 25 years ago, maybe... I don't... 30 years ago. I don't know when it was,
but I remember the quote almost like it was yesterday. The... the quote was, "Be committed,
(38:24):
uh... when... when things are bad, um... and be disciplined when things are good." Right? And...
and the nature of that comment is that good farm management starts when... when profitability is
strong, right? Not over bidding for cash rents. Being smart in terms of what you're spending your
money. Because eventually, the cost structure, or you know, the price change, but the cost structure
remains. And that's kind of where we're at right now. Um... and so, you know, for... for everybody,
(38:50):
profitability is low to negative, right? Very few people... (Tim) Right. (Ben) ...even at,
it doesn't matter your cost structure, people are struggling. But the ones that I think continue to
focus on... on their cost and... and think about, you know, how do we... how do we diversify? How do
we find other forms of revenue for this operation? Um... I think those are the ones that are showing
(39:10):
some innovation right now, and innovation is going to be the name of the game. Um... I... I
did a call at a program yesterday with a bunch of interns from across the country. I had one intern,
um... from... from Michigan State University that... that asked about, "Well, if you wanted
to go back and farm today, what would you do?" And I... I, my answer was relatively simple. I said,
(39:32):
"You know, I did. Um... I came out of college during an era where it wasn't very attractive
to go back to farming, and I wanted to go back and farm. And what I did is, I found that I could do
an Extension job and be connected with production agriculture that fed my desire to do that. But I
was... I was helping make a, um... a living for myself." Right? Um... and so that was kind of the
answer. But then I turned and I said, "Today, if I was graduating today and looking at some of the
(39:56):
farm pressure that we see, uh... you can buy some equipment relatively cheap compared to where it
was, right? Equipment prices have really come off. Um... there's some great interest rate programs
through the federal government, through the farm credit system, through some commercial banks. Here
in Missouri, we have the... the MOBUCK$ program to where you can use low interest rate and go out and
buy equipment and start a custom farming business. Takes a lot of the risk of the production side off
(40:18):
the table, um... but you're... you're involved in production ag and doing a custom farming business.
Now, that comes with marketing costs, right? Or marketing. You got to be a good marketer because
you're... you're no different than other service providers like, you know, an accounting firm or
a you know, a... a tax firm, right? Like you're trying to get business. So, you got to market. Uh,
you got to be a good marketer. And the second thing is you got to be a good employer, basically.
(40:42):
A good business partner. Show up on time. If you tell somebody you're going to plant their corn on
a certain day, you better plant it, right? Or at least be transparent about what you didn't plant,
right? So, it comes with different challenges, but that's some of the innovation, um... that I think
exists out there." Um... certainly, we've got people in southeast Missouri that are trying to
grow canola, um... during the winter season. Um... and... and that's innovation in terms of getting
(41:05):
some more additional money out of each available acre that's out there. Um... we see people looking
at agritourism. Uh... you know, pumpkin patches, wedding barns, right? (Tim) Right! (Ben) We see
people doing that. It has risk, right? You got legal risk. You got human resource risk that you
didn't have before. Um... but certainly those are some of the innovative things that I think people
are trying and trying to figure out how to just survive this downturn. (Tim) Is there any one crop
(41:30):
that's probably a little more profitable or we all... ? (Ben) Sorry, I shouldn't. I'm sure there
is. Uh... they're all pretty bleak. Uh... frank... frankly, you know, the... the most profitable
combination is some type of winter crop, whether that be canola or wheat, followed by a soybean
crop. Um... that's... that's the most profitable combination that's out there. Um... right now,
(41:52):
corn, actually. Probably. (Tim) Which is so surprising with the high input cost. (Ben) Yeah,
with high input cost structure, probably corn. If you're in a market where you can get rid of
grain sorghum and sell grain sorghum for a niche product, maybe, uh... poultry or bird feed or,
um... there's some areas where they use sorghum for mill. They mill it and make a... a kind of a
sorghum type of flour or whatever. Popped sorghum is another example. You know, if you've got some
(42:15):
of those niches, sorghum can be, because it's a low input crop, and you can generate some...
some returns there. Um, but truthfully, Tim, none of our products on the row crop side,
um... need more acres or even the current acres where we're at, we need to, you know, we... we
got to have some type of supply shock here, I think, to get higher prices. (Tim) Right. Um...
(42:36):
whether it's a weather event or... or, hope not, a war, but across the globe or something. (Ben) We
need some type of supply shock, right? (Tim) Yes. (Ben) Um... preferably somewhere other
than the United States, right? That would be, you know, for our producers that would be preferable.
Um... (Tim) Because I know my brother in 2019, the fall of 2019, was really bearish on... on...
(43:00):
on... on economics of farming. Was not going to look good, and then we had Covid. (Ben) Yep. And
Covid kind of created some interesting dilemmas in terms of scarcity. We also had a couple of
short crops in there, actually. Um... (Tim) Right. Some... some weather. (Ben) Multiple
years... multiple years of drought here in the United States and a prime growing region,
and multiple years of short crops in South America as well. Um... that all just kind of compounded at
(43:22):
the same time. So a supply shock is probably what it's going to take. However, there are... so when
you get into periods like this, right, low farm income and I talk about the innovation, you start
hearing calls for different type of demand uses, right? E15, year round E15 is one of those things
that's being called for right now. Earlier this year, we saw the US EPA actually propose higher
volumes for biodies... biomass-based diesel. Um... and... and you know, upwards of 30% increase in...
(43:48):
and stuff. Now that hasn't become official. They proposed it. There was a comment period. We're
awaiting the EPA's official ruling. Um... but you could assume that that would increase the demand
for soybean oil and soybeans. Um... same thing E15 would do for... for corn, ethanol and corn demand.
And, um... you know, we've heard about the... the 45Z tax credits. Um... that creates an opportunity
(44:10):
for, you know, a differentiated market. You got to capture and record what your management practices
are to generate those tax credits, but that could be potentially an increased revenue source as
well. So... (Tim) Or selling carbon credits. (Ben) Or selling carbon credits, right? That's... you
know, it's interesting. The carbon market we knew would go through ups and downs, and... and some
(44:31):
of your viewers are probably sitting there saying, "No, he didn't. That... that guy didn't know that
these..." But every market goes through ups and downs. Look at ethanol! Look at renewable fuels!
Every market, when it's developed and goes through its ups and downs. Where I think the carbon market
is right now is it's in a regrouping stage. It's... it's regrouping, and it's trying to
figure out, okay, how do we... we've had the early adopters, and we've had the early shocks. Okay,
(44:53):
what does... what does a base start to look like moving forward? And so to me, this is
a... an exciting... this is a time for... for, you know, the future of carbon markets to kind of get
developed. (Tim) Sure. Just like anything else. (Ben) Yep. Yep. Just like... every other market
has gone through this. (Tim) Right. (Ben) Yep. (Tim) You look at when tractors first came out,
there was 25 different styles out there. Then they all get down to two or three. So, all right. Well,
(45:17):
anything you want to end with on this? Uh... (Ben) Uh! (Tim) I mean, it's not all bleak. I mean,
like you said, be disciplined when... when times are good and stay on task when... (Ben) Yeah,
we didn't talk about cattle. I'm not a livestock economist. I... I, uh... but you know, you want
to talk about positives, right? Like the... the positives on the cattle side in Missouri
right now, but I'll end... you said it's not all bleak. And I... and I'll end with this because I
(45:42):
find myself, as I work with producers, and I... I give 80 talks a year around Missouri, um...
I find myself in a very interesting spot right now. Um... and it really starts two years ago,
I was depressed. Every... every farmer meeting I went to two years ago, I left the meeting feeling
like I didn't help anybody, and I just made them all sad because the outlook in my eyes
(46:06):
was... was prices were heading lower, and... and we were going to really enter into this financial
crunch. And that's largely what happened. However, producers weren't there yet, right? They weren't
feeling it two years ago. They're feeling it now. And so I find myself in this weird spot.
When I actually look out two years from now, I see higher prices and better profitability. Two years
from now. Um... and so from that standpoint, I can be optimistic, um... about it. The problem is is
(46:29):
we're facing the pain now. Um... and producers are hurting now. Um... and so even though, you know,
I say, "Hey, you know, things I... " You know, in my price forecast, I've actually got green, um...
for... for next year. Prices are actually higher next year than they are now, um... but we got to
get there first. (Tim) But we got to get through this 18.4 billion bushel corn crop. (Ben) Yep! We
got to get to the '26 crop, um... and I think we've got some opportunities.
(46:53):
(Tim) All right. Well, thanks so much, Ben. And I know this is such great information for
everybody. (Ben) Yep. Thanks, Tim. (Tim) This is it for Tim's Take, and we'll see you next time.
[♫]
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