Is a New Grain Bull Market Beginning? Market Experts Weigh In

[00:00:02]Welcome back. Here to talk markets this weekend, we have Chip Nellinger and we have Dan Bosi. All right, Chip, are you surprised? I mean, last week there was so much talk about weather, so much talk about this heat, but are you surprised with the heat this week that corn moved less than 50 cents?

[00:00:17]>> Uh, not really, Ty. It's It's awful early in the process here that the extended weather models have been a little bit iffy as to how long this heat's going to last. kind of moving the ridge around a little bit and it's not totally dry. So, uh, you know, when the market sees that, there's going to be some rains that favor the north, uh, the far north. There's going to be rains that favor the far eastern cornbt that kind of shift around this ridge. And when the market sees something like that, it kind of has a hard time figuring out um, you know, how to trade that. So, not a surprise right now. Now, if we're going to fight this high pressure ridge across the Midwest for the next three or four weeks, I think the market will take uh much more notice, especially when we turn the calendar to August. But right now, I think the market's taking a little bit of a reserved uh approach to that.

[00:01:02]>> Dan, I know it's early to debate yield, but based on the weather conditions we have been seeing based on all of that rain in June, have you changed your outlook for this US crop this year, specifically corn?

[00:01:12]>> We Yeah, we we've nudged at lower times.

[00:01:15]So we're we're down at 181 bushels per acre on corn yields. We're at 52 and a half bushels per acre on soybean yields.

[00:01:22]Again, that's still the second largest soybean and corn yield on record. Uh it's not a crop of last year. We see denitification and some yelling of leaves as we go into central and southern Illinois. Soybean crop has some issues relative to wet feet that continued into into July. So, you know, the heat is not what we need. And uh I believe crop condition ratings will be down on Monday and we'll see uh uh yield estimates come down with time. I think directionally slightly lower than trend is where we need to go.

[00:01:48]>> Chip, are you in that same camp?

[00:01:50]>> Yeah, I have no argument with where Dan's at, you know, again, I think the next six weeks, how how much uh does it rain, where, how long does the heat last uh could maybe drop the bottom into that a little bit. I think where we're at right now on the calendar, uh I think Dan's right uh right in the ballpark. uh ad adverse weather with too hot, too dry in the rest of July and the first half of August could easily shave uh you know three or four more bushels off of corn and you know maybe another bushel off of beans pretty easily I'd say >> it's not just adverse weather though here outside the US Dan are we seeing the global grain balance sheet tighten >> no and we are I mean we're looking at corn stocks globally maybe doing being something like 265 270 million metric tons that's the lowest since 2013 So the big story is overseas and uh just coming back from Europe and seeing some corn in both France and Italy, uh it's it's rather shocking when you see a French corn field that looks like an onion field. So uh we're at about 7.2 million metric tonses in the French corn crop and I believe Europe will be the largest corn importer in the new crop year 26 and 27.

[00:02:57]>> So Dan, does this mean you've turned bullish?

[00:03:01]It has time. I' I've I've been bearish uh as you know for over two two and a half three years and we became bullish in late June. So we are looking for higher prices and I even hate to mention it. I think we could see $6 corn sometime later this year, early next year.

[00:03:17]>> Wow. I mean I I think he left me speechless with that one. Chip, you know, when you look at we're talking supply issues here. Demand's been good, too. We know demand rallies seem to have a longer tail. Do you think this is more of a demand or a supply driven story right now?

[00:03:30]Well, I I think demand, but I I think we're again, not to, you know, overemphasize the next six weeks of weather. I think the jury is still out on that. If we continue to see adverse weather uh and yields drop, particularly hot weather in August can really sap grainfill and take what looks like a really good corn crop and take 20 25 bushels out of it in a hurry um on a fieldby- field basis. So, I think it's too early to tell. The good news is, I agree with Dan, longer term, uh, world stocks are shrinking. We have the supply. We're in the driver's seat as far as exports go. And our, you know, our domestic demand is, uh, outstanding right now in corn and beans, both. So, I think demand, but it could be a little bit of supply um, side type of a bull market if we continue to shrink yield expectations going forward the next couple of months.

[00:04:19]>> Dan, wheat surged earlier this week. I know you said you just got back from Europe. So this momentum that we're seeing in the wheat market, is it all tied to the Black Sea region? Is it production problems? Really, what's going on with wheat?

[00:04:30]>> It's kind of a little bit of everything.

[00:04:32]European wheat crop will be lower. Uh that we are seeing both Germany and France coming down maybe 3 to four million metric tons. But in the background of this is this war uh in Ukraine and uh Russia that's now reaching levels that we've not seen since 2022 where they're targeting infrastructure on grain. They're targeting grain vessels. It's very hard for uh operators there or shippers to get uh what we would call insurance, freight insurance. It's very expensive.

[00:04:58]And so I don't want to call it a de facto embargo, but it's going to be diminishing exports from the Black Sea looking forward. And so this month, Russia will only export about 2 million metric tons of wheat. I'm fearing that it'll only be a little larger than that as we look at the month of of July. So I mean of August. So as I go forward, I do believe the Black Sea plays very large.

[00:05:20]If the attacks continue, you could see both areas really shut down. And remember, in 2022, we didn't have Russia and Ukraine both out. It was only Ukraine. This would be something very important for the markets longer term.

[00:05:32]>> Okay, Chip. Soybean prices this week were set to challenge their May highs.

[00:05:37]Is this is this demand right now or are there supply concerns out there?

[00:05:42]>> Uh yeah, again, I think both. You know, we saw a crush report out earlier uh this week that uh saw some amazing demand. you know, the soy oil stocks were far below the lowest estimate. We continue to almost on a monthly basis set records uh you know, as far as the domestic crush pace and so China's back in the market buying beans regularly.

[00:06:03]The demand side is firing on all cylinders. And again, I I think August is is the month of uh that makes or breaks beans as far as weather goes. So, I think the market's kind of hanging out here saying, "Hey, we don't have any margin for error. Uh what's August weather going to be like? Are we going to be trend line? Are we going to be subtrend line? Just tiny moves in the uh in the yield as we talked about earlier can have dramatic effects on price. So I think the bean markets looking at the good demand and saying, "Hey, we need to we need to have a big crop here at least towards trend line on beans or we're going to cut the carry out dramatically lower on the stocks to use ratio."

[00:06:39]>> Dan, I know a few months ago you were questioning whether this Chinese demand would actually come to fruition. Are you kind of fading away from that now? Do you think maybe China will continue to ramp up these purchases and live up to what they committed to?

[00:06:52]>> Yeah, from uh both my US and Chinese contacts, I'm becoming more and more comfortable that China will buy the 25 million metric tons of soybeans by the end of December. And I'm also starting to hear that they'll buy some corn and wheat. We think maybe a cargo or two sold to China this week uh from the United States, white wheat, if you will.

[00:07:09]But I think uh as you look forward, I think China is going to adhere to its agreements. We've got the presidency coming on the 24th of September to visit Trump at the United States. I think all of this kind of collaces around China actually fulfilling what it's saying and that it's going to be buying a prorated share of 17 billion and the 25 million metric tonses of soybeans.

[00:07:30]>> Any talk of corn?

[00:07:32]>> Yeah. No, I I'm I'm I'm hearing on corn somewhere between five and 15 million metric tons. Uh so I do believe that China will buy corn as it looks forward.

[00:07:41]I'm I'm becoming more encouraged about that every day. They're asking for offers on a daily basis now.

[00:07:46]>> All right, Chip, let's move to cattle because I know last week, you know, producers were kind of frustrated looking at that market action, but how did cash cattle trade impact futures prices this past week?

[00:07:56]>> Yeah, you know, Todd, I think it's uh more the the opposite maybe with the uh the tail wagging the dog in here. Uh we kind of got past our normal u you know, peak demand season here ahead of the the Fourth of July holiday. uh typically seasonally you'd see a little bit of a setback in uh in cattle prices here. uh and I think the break in futures was probably fundled also kind of coincided with uh you know uh our imports of beef from uh other areas of the world increasing a little bit and I think the drop in futures prices kind of drugg the cash market lower uh grudgingly but uh you know still I I think that there's maybe a little downside here but we haven't fixed any of the problems longer term herd numbers uh you know aren't building we've got the drought in the west we haven't fixed uh nothing's really changed longer term other than we maybe have a little more supply of uh of ground beef right now as we import that in better amounts than we have over the last year or so.

[00:08:52]>> I mean Dan at that point at this point is that needed more input ports of ground beef to fuel this record demand that we're seeing from consumers?

[00:09:01]>> Well, it's record demand but seasonally slow. But I do believe the imports of beef have changed in the last couple of months and I do think it's the bearish factor in the market today. Uh Brazil of course uh had tariffs slapped on them 25% but we exempted beef. So I do believe that that beef will keep coming in and uh that is going to be somewhat of a drag in the market but we should be nearing a seasonal low within the next week or so.

[00:09:24]>> Okay, real quick. Switching back to grains as we look at possibly weather impacting prices, we look at what's happening across the globe. Chip, what what are you telling farmers right now as they're looking to price old crop, new crop, uh you know, and all of the above?

[00:09:39]Yeah, old crop. Our windows kind of running uh you know, running close here and and I think you got to kind of be a willing seller of old crop from a new crop perspective, case by case uh scenario with each individual. Again, I not I think Dan and I are both bullish longer term, but that does not mean we can't see the way these ALOS and funds trade sharp breaks in the interim. Don't get caught up and emotional about those.

[00:10:04]Still protect your bottom line, but you're going to want to have some ownership longer term. It's about managing your inventory and your logistics and still maintaining some ownership longer term if we're going into a a multi-year uh demand le bull market here.

[00:10:17]>> Dan, >> yeah, leave your profits, leave your upside open, use options, use something in a call side or do something to keep your yourself in a game. I I believe we're in a different market than what we've seen in the last couple of years.

[00:10:28]And I think uh this bull market will run at least till the middle of next year.

[00:10:32]So remember, we've got a super El Nino.

[00:10:34]We're going to have weather abnormalities and the world just can't afford to lose a bushel of grain or a metric ton right today. And I have no idea what will happen in the Black Sea, but I'm very worried about what's going on between Ukraine and Russia.

[00:10:46]>> Dan, Chip, thank you so much for joining us this weekend. We appreciate it. Well, we need to take a quick break and then we've been talking about a possible labor solution when it comes to dairy, but is this the right fix? We're going to talk about that in Chip's Corner next.