TIME FOR A RAIN DANCE? ....and Brazil E32

[00:00:05]Hello Comstock channel. This is Matthew Cruse. So, got a lot of things I want to discuss today and first and foremost, let's talk about weather and what we're seeing. What you're looking at here is one of my farms. This is a NDVI map that I get and it's something that I guess I'd like to look at cuz it kind of helps me look for any potential problem areas and kind of see how the overall crop health is progressing on the farm and I guess one of the things I wanted to point out is that we've gone through a very hot period here in the first part of July and kind of want to see if there anything that stands out and and so so this is the July 12th on this particular farm. You can of see that the high biomass is in the in the dark green so 4.1% 29.1% is kind of mid-level green here as you can of see. This red is actually a a CRP grass waterway isn't the crops aren't bad there necessarily. But you can of see how it varies across the field that there's a better area here for whatever reason. I don't know. I mean it was all planted on the same date.

[00:01:15]It's all the same variety and so we can of see how it differs across the field.

[00:01:20]Just could be soil type you know could could be several different factors but basically we just kind of compare from from a week ago or July 12th to to last Friday July 17th and so just kind of see ultimately how well has the crop withstood the heat that we've experienced cuz we've been accumulating a lot of stress degree days as have a lot of other areas.

[00:01:47]Not a whole lot of change in the case of this kind of mid-level green area actually went up 21.9% to that high now that high green level went from 4.1 down to 3.8 so not a not a huge difference but in the case of let's look at the yellow areas compare those 20% increase to 20.5% so not a huge change overall what that tells me is basically we're we've weathered the heat up until this point at least so far and now temperatures are cooling off appear to be cooling off in and large portions of the grain belt not maybe everywhere and but they do appear to be coming back again at least briefly for this weekend and Eric Snodgrass talked about this week that overall looking at the NDVI levels for the whole Midwest and obviously this varies from region to region but overall we're well above average on NDVI levels which which would indicate that photosynthesis levels are very strong overall crop health is still very strong up till this point but that obviously isn't going to last forever we're still going to need additional rains to finish out this crop we'll come back to weather in a little bit but one thing that I made the news here recently is how due to a lot of the increasing fuel prices Brazil has increasing their national ethanol blend from 30% to 32% and so they've historically for a while now they've been at 30% now you're increasing that a couple percent and what that is going to do is there they estimate that over the course of a year they will it will allow them to import roughly 240 million gallons less of gasoline that they're going to essentially displace that by producing that much more ethanol and so on and so forth and so I just want to show you what domestic corn demand has done within Brazil and you might say well why do I care about their domestic demand? Because the more that they're consuming then the less that they can export. And so there that is kind of the silver lining here.

[00:04:00]And so and a lot of that has to do with the corn ethanol that is increasing domestically within Brazil. And so you can kind of see that the estimates continue to increase by five to almost six million metric tons year-over-year here in the last few years. And so it the we're seeing more corn ethanol plants coming online in Brazil and and more growth taking place.

[00:04:23]And so we expect that trend to continue.

[00:04:27]And that is interesting because when you at least for next year, we're looking for their production to kind of take a pause. I guess you could say that in terms of acres, we're not looking for much increase in acres.

[00:04:43]You know, we're almost flat if you will in terms of acres. Now, they're still looking for an increase in production. I think USDA and CONAB is.

[00:04:53]Obviously there a lot can happen yet, but the fact that they're calling for an El Niño year would suggest that it would be drier in the northern part of Brazil and wetter in the south. Now, some people might tell you well, one might offset the other. I would disagree with that just because most of their production has shifted north. And so you have roughly 70% of their soybean production and 80% of the corn production in the northern tier, especially in the center and west region of Brazil. And so I think that leaves it much more exposed to potential drought, things of like that. But essentially what this is showing that we do see kind of a tapering off here of Brazil corn exports. Or at least what they have left over for for exports here into the future. And a lot of that is because we kind of see corn production flatlining where a lot of growers just don't have the appetite because of surging fertilizer costs that they're going to either plant less or they're going to apply less fertilizer.

[00:05:55]And then you have the corn ethanol plants consuming more domestically. And so we actually see that their their corn for export dropping off. It might see a little bit of a bump this year, but next year we see that dropping off going into next year. And so long-term that's a positive trend. And a lot of that has to do with you know just their increasing their ethanol blend demand. And they're actually already talking about this is just step one. They're actually still longer term believe that they want to increase that up to 35%.

[00:06:29]And so this is something that will continue to grow and increase in and in Brazil. And it's something that I kind of wish that we could do in the United States that we're you know stuck at 10%.

[00:06:38]We can't even get to 15% while Brazil is you know has this button that they can press to to basically put off or or reduce or mitigate the some of the fuel cost inflation that we're seeing around the world from some of the issues in in the the war in Iran and so on and so forth. Let's come back to weather here in the United States and and first focus on the heat. And we've seen tremendously hot temperatures you know 10° above average especially focused in the the Dakotas and parts of western Minnesota.

[00:07:13]We're now seeing those those temperatures pulling back, but I don't know and now we see [clears throat] kind of a below average trend here going forward. So it's kind of a good thing here. We're going to see heavy precipitation here in Nebraska kind of the the middle of this week starting Wednesday.

[00:07:31]But I I do think that we'll see some warm temperatures coming back. It looks like into the weekend here they come. So this is in Saturday we see temperatures They are at least hot temperatures coming back into the Dakotas again, so it's not completely over with, but there's still large parts of the Corn Belt that we do see some relief coming in, but it's still not not good news. Look at that and here we are in uh and we're still Saturday. We see temperatures reaching almost 20° above average. So that's going to be very hot in the Dakotas and that kind of lingers into to Minnesota into this weekend.

[00:08:06]Um let's look at kind of a 10-day anomaly just to give us a different view of what that looks like. You kind of see here that this gets us out into August 2nd and so we kind of see the temperatures are still lingering in going into August in that western to northwestern part of the Corn Belt are are well above average. not everywhere.

[00:08:27]Obviously we're seeing in the in the eastern Corn Belt a different story.

[00:08:31]But it's it's not great news for for those reasons in the Dakotas. It continues to remain hot and that's going to increase the water demand obviously for crops there. Now let's look at precipitation. Now we've started to see some pretty rosy estimates for for private estimates for the corn and soybean crop that are above trendline.

[00:08:52]Now I would probably agree that's the case but to get there we're still going to need some rainfall to finish out this crop, right? We're probably in the third quarter here. Now this takes us out into through this weekend here. Look at starting this weekend we see rainfall building kind of centered over parts of Nebraska, eastern part of Kansas, part large parts of Missouri.

[00:09:14]Southwest Iowa gets a little bit but we're still kind of skipping some of these critical regions in the Dakotas and and these parts of Iowa. Now eastern northeast Iowa, southwest Minnesota just got a good rain here yesterday so they're probably sitting pretty good but we're still skipping large portions of central Illinois.

[00:09:33]Let's jump out even further and see what happens as we get into basically August.

[00:09:39]Now this is the European model and this is what's concerned me is there's still we get out to August 5th and there's still no relief coming into the Dakotas and and large parts of of Minnesota.

[00:09:51]Uh now let's switch over to the GFS because we do see some differences between those two different models. Now this is the GFS model still kind of same idea but now we see a little bit more of that rainfall picking up especially into the eastern corn belt which would be great. Get hitting parts of Illinois. Uh kind of the western portions of and center portions of Iowa.

[00:10:13]Uh do see some some rain. Nebraska continues to get rainfall. So that's about the only thing that the GFS and and European model agree on is rain in Nebraska perhaps.

[00:10:23]Uh the first part of August.

[00:10:26]Um again they're skipping a lot it's kind of hit or miss in a lot of these areas. Maybe North Dakota gets some.

[00:10:32]But I think the point is that it's a lot of scattered showers. It's a lot of hit and hit or miss. There's going to be a lot of haves and have nots. People that get an inch uh here during tasseling I think that's going to go a long way.

[00:10:44]Um but there's going to be a lot of hit or miss and I think our main concern are a lot of those areas in the Dakotas where it's been extremely hot and evaporation rates have to be going uh sky high. You know I think crops in a lot of areas still look good. They've been weathering the storm but sooner or later we need a rain and uh and I think a lot of those areas it's it's going to go very quickly from it'd be nice to have a rain to we need a rain now or the crops going to start to go backwards in some areas. Now um I think this rain here um in that July 28th needs to materialize but it's kind of been being pushed back where we saw a rain in uh in the 23rd 24th of July and that's gone away. It's been pushed back and so um you know I think this rain will be important. Obviously these rains in in the eastern corn belt. Um it does look like Nebraska is is more of a sure thing, Uh but if you focus on the European model, it's much less generous.

[00:11:40]The GFS model does provide more scattered showers, but still not the widespread showers that we're hoping for. The market's going to be clearly watching for these rains to materialize and kind of see where they do happen. We're seeing almost daily changes in some of these weather forecasts. One day they're there, next day they're not, and so we need to uh look for confirmation that the these rains do happen, but I I do think the market's going to be very volatile going back and forth.

[00:12:08]Um, it it's not the widespread rainfall that we're hoping for, and so I think it could kind of potentially uh provide support to the market going forward as we wrap up July. That's what I have for you today. Thank you. Have a good day.