Current spring row crop conditions: How we lookin’, are we cookin'?

Speaker A: Foreign. Flavelle's Hot Commodity podcast series. Empowering clients with commercial intelligence, supply chain expertise and risk management solutions. Good afternoon everybody. My name is Craig Ruffalo, vice president here at McKinney Flavelle, and today is Friday, June 26th. And welcome to, to our Hot Commodity podcast. And today I am being joined by a vice, uh, President himself, Mr. Eric Thornton, to talk a little bit about the crop progress and maybe even dip into some of the ideas for next week's stocks report, grain stocks reports, and maybe even a wasde preview. What do you say, Eric? What's going on with you today?

Speaker B: Yeah, hey Craig. Happy Friday and hello podcasters. Hot uh, commodity podcast. It certainly is hot, uh, for a lot of folks on the weather front.

Speaker A: Not true. You know, it's crazy is that you see all this weather like going on in the Midwest, all the rain, but then you go into pockets like up at, by where you are or other places in the country or even outside of this country and it's just a

Speaker B: heat wave that it is. I mean we are getting close to July and hey, summer. So it's not uncommon. But yeah, I think that was part of our idea today, right, Was to kind of focus on uh, yeah, weather and conditions and impactful or not or good or bad or bullish or bearish type type talk.

Speaker A: I think that's a great idea. We'll have to, we'll have to talk about the comfortability on this markets. You know, weather does create volatility in markets and so sometimes that's not a bad thing. And predicting weather is never easy. I don't want anybody to go out there and think that somebody's got the solution, uh, to that. But uh, hey, before we start, I want to remind everybody out there, start logging on to our IQ platform and we are sending out daily market updates. So anything that's new that's posted, you should be getting notifications, uh, via email right now. On our commercial intelligence, some of the pricing tools we have. Hey, dynamic charting. This is kind of the cool thing that I love about IQ is you can kind of plug in some things or change some, some dynamics within the charts that you might want to see and you can even grab them, pull them down and put them in your own presentations. But if you're not a client, m man, you gotta, you gotta get on that, call us, call your local McKinney Favel rep, get a demo on what uh, you might be able to see on our current version of iq. And with that, Eric, let's, let's Launch this baby. Let's, let's talk a little bit about what uh, is going on on the crop progress. You know, u. S Department of agriculture has been uh, busy surveying those producers. Uh, what hear you on, you know maybe a little bit about uh, the wheat and corn soy, uh, complex. What are you hearing out there?

Speaker B: Yeah, I say bottom line up front at least largely good to excellent really when it comes to looking at a lot of the spring row crops. You mentioned wheat. I'll just briefly touch on that. Spring uh, wheat crop is pretty much right on par with last year in terms of the at least Weekly crop progress ratings. 54, 4% Good to excellent. That, that is you know, record potential at least if we're talking about comparing to 2025. And you know all signs point towards that certainly being plausible. Uh, we're continuing to see rains in North Dakota, the number one wheat producing state for spring wheat that is. And um, yeah it looks like it's going to be you know, good amount of moisture right through early July. And at that point we've only got about five, six weeks left of the uh, growing season in order to uh, solidify a record crop there. So really spring wheat I think is looking very good and thus a reason why you're actually seeing another fall in wheat prices where we're back down to four month lows almost uh, levels we haven't seen since mid February before we got into the wow Iranian conflict as well as the you know, weather issue in the southern plains that did a number on the hard red winter wheat crop. But man, spring wheat's looking great. Um, Greg, maybe I'll kind of toss something over to you since it's in a similar growing region. But how is the sugar beet crop looking this at this point? I know we had some replants earlier this year but what's the latest you're hearing?

Speaker A: Yeah, so the farming community is, is always speculative on, on exactly how well a crop is developing because the next day could create some consternation or the next week. I've been told that so far in the red river valley things look pretty positive and I think they're kind of in the same boat as the spring wheat because you get rain, you don't want rain towards the end of the crop. So we don't want rain in August and September excessively. Uh, you probably want a little bit because it's dry farming. They're not irrigating much up there. Uh, the area of concern I think for sugar beet crops is, is the plains you know, the same problem that we had, concerns over the winter wheat crop and development there and of course didn't get any, any successful real change to that, uh, is the same that we're having for some of the growing regions in the Great Plains. So whether you're talking about Colorado or Nebraska, you go on up into Wyoming, there's a little concern and certainly in Idaho they're not getting the rain that they normally would like to see. Uh, so those areas are a bit concerning. But the Red River Valley, which is about 70 plus percent of sugar beet acres, is looking pretty fine.

Speaker B: Excellent. Yeah.

Speaker A: So I'm not anticipating much in the way of change as far as crop development there. In fact, if you want my personal opinion, I think USDA by the time we get to harvest will have adjusted the production number up to just above 5 million short, uh, tons raw value.

Speaker B: Yeah, I know they kind of uh, had a large revision I think correctly. Uh, at least in the last was the report for the crop estimate, you know, far too low there at 4.72 million short tons in May and now they're sitting at 4.939. So yeah, I kind of tend to agree with you. I think when all said and done, August, September, there could be something north of 5 million tons there for sure.

Speaker A: Yeah, I, I think there's a really good possibility of that. And on the, on the cane side, I would say that the Floridian crop is still the one that everybody's kind of keeping their eye on. You know, that that early freeze is, didn't have as much impact and of course USDA certainly would agree with that, uh, on production as maybe some thought. But the concern I would have is if you don't get any, you know, I would say you don't need flooding rains from, from uh, you know, named storms that even if don't turn into hurricane. But you do need some consistency in rains, uh, to refill Lake Okeechobee where a lot of that sugar cane has grown. And you know, water levels at Lake Okeechobee have not risen in two crop cycles. So they do, they do need some rain in Florida. Right. They don't need any in Louisiana. Maybe they could export some from, ship it to Florida. Florida, so exact opposite, you know. Ah, the other grains. I was taking a look at the crop ratings for corn and it looks like the ice dates still look pretty positive. You know, 68 good percent good to excellent for the entirety. But the uh, the ice dates look pretty good and we've got 5% of the crop already in silking stage. Yeah. So we're progressing um, as we want to probably see no less than what the USDA's projection in June was for, for production for 26. You know I, I think the interesting thing that I saw this morning is the markets are anticipating that June 1st stocks report. Right. To show the largest stocks that we would hold since 1988. Uh, at 5.408 billion bushels. That would be up 16% year on year and would be again as I stated, the largest stocks number on the June stocks report since 1988. Now I think that might be some of the reasons why the market has gone from a net long of 300,000 contracts to net short. Just because, you know, I think there's other factors. But when you've got that much corn sitting on inventory, despite the fact that we've got, you know, record exports, I mean commitments to this point in the year over 3.3 billion. Yeah.

Speaker B: So impressive.

Speaker A: I don't know Erica, you tell me. But it sounds like to me that the stocks to use ratio on corn might need to be revised upward a little bit for the current crop and we'll see how things go um, as we get into harvest for, for the next crop. But I don't think farmers are going to be able to liquidate five plus billion in, in a uh, four month window.

Speaker B: Right. Yeah. I mean it makes you feel like if they didn't market what they had left back, you know, say April into early May before this downdraft came, um, they're probably uh, wishing they did when we were seeing you know, 5 to 5, 25 corn.

Speaker A: Yeah.

Speaker B: So you know, dollar per bushel lower at the moment. And like you mentioned, conditions looking largely uh, excellent for this crop. And we talked about heat. It does look like there is some heat moving in to those ice dates uh, here the next say seven to 10 days, which you know, frankly actually might be a good thing uh, to see some um, 90 degree days and offer a little bit more sun. Because we've had so much rain, it's been pretty cloudy or sort of the, you know, development of the crop might be just a bit behind and this could actually be a good thing.

Speaker A: Right.

Speaker B: Corn's tropical, uh, plant and it enjoys heat. Uh, obviously we've got the moisture um, to work with and I think the rain doesn't completely shut off either with this forecast. It's not going to be one of

Speaker A: those, uh, that would be most ideal if that's the case, if that actually comes to fruition. That would be ideal.

Speaker B: I think it's going to be more scattered in nature. Either you're in it or you're not. Versus, you know, seems like we've had a lot of big storms that have moved right through the grain belt the past few months. And yeah, this could actually be very favorable headed into the pollination period here in July. So I think all signs are pointing towards at least probably, uh, yield revision higher and looking past even next Tuesday's report into the July wasde. So, okay, how do you think, uh, acreage will shake out for corn? And so Craig, for next Tuesday's report, great question.

Speaker A: I was thinking about that because I think we even had an internal discussion. I don't think we're universal on, on our ideas. I find it interesting, generally speaking, I've, I've been a little more uh, bullish on acres for corn, uh, than most, predominantly just because of the natural bias our farming community that at least a few that I speak to feel uh, about corn. You know, they know how to grow it, they know how to get yield out of it. And with. Despite the fact that the ratio would tell you on a November to December beans to December corn that there should be no adjustment, um, to the acres number, I would not be shocked if we see a half a million acre increase come the, the uh, report here on the June 30th numbers. I don't think we're going to get a million out of it, but I wouldn't be surprised if there's a half a million minimum m. Half a million acre adjustment upwards on corn acres. What about you? What are your thoughts? Because as I say, everybody's got their opinions on this but uh. And nobody's inaccurate.

Speaker B: Right, Right. Yeah, I tend to, I mean I can't disagree with the notion of wouldn't be surprised to see more corn acres. I think it would probably be more surprising if um, you know, soybean acres declined or I'd probably.

Speaker A: Right.

Speaker B: I'd probably put a little bit more of my betting money, if you will, on soy acres rising. And truthfully, I mean you look back at the prospective plannings report and it's been widely talked about how poor the survey responding. Uh, I should say respondents have been on those reports with, you know, the farmer participation I think just below 40%.

Speaker A: Uh, that's right.

Speaker B: So opens the door for a potential shakeup. But really I think where they came out with on um, the 31st is probably, let's say close to or we shouldn't see anything maybe more than a Million acre change up or down for either. Yeah, but who knows, right? Could bring fireworks and that could lead to some volatility for our buyers out there next week. But I tend to agree. I wouldn't be shocked to see a small increase to the corn number. I'd probably be betting though that soybean acres are also due for an increase from the 84.7 million projected acres this year.

Speaker A: Eric, I think if you looked at the carryout and then therefore a stock to use ratio, not that farmers are paying attention to stocks to use ratios every day or anything, but I think that they understand the balance sheet, um, for soy is a little tighter than corn. And that probably led to some better cash values. Right. Uh, or at least anticipated cash values. Uh, and then with the, the dynamic of crush margins being so good for soy, you would think that the crusher refiners are certainly encouraging growers to continue to want to plant soybeans in the areas where they've got those crushing refining operations. So, you know, no encouragement to swing from, away from soy. Uh, for that matter. You know, I don't know that we could sit back and say that uh, the soybean export market is going to improve much, but certainly the products, uh, meal, uh, and oil, obviously we've got now something that. I don't know if you've done much in the way of reading about this, if this is going to have much of an impact, but I read this morning that the US and the EU finally agreed to a trade deal, um, that would lead to reduced tariffs on certain products from the US uh into the European Community. And I don't know if that will include additional opportunity for soybean oil, um, as a byproduct or byproduct, as a byproduct of crush, but as a, uh, feedstock for renewable biodiesel. I don't know, but it could lead to something like that. I don't know. I'm, um, just, you know, you throw that out there as a means for which might be supportive for soybean oil prices. Right. And then thus keeping growers more interested in sticking with soy, uh, even into the 27, 28 spring plantings next, next spring. But we'll, you know, obviously all speculative at this point.

Speaker B: Yeah, well, the timing of that could be good as well for the EU because we are also monitoring and maybe folks are seeing in the headlines a pretty, uh, intense heat wave over France and in some parts of the EU at the moment, I think record setting temps and this is like their second heat Wave this, uh, early summer. I think they had one there in mid May and already seeing some talks at least of their corn crop probably taking a hit.

Speaker A: Okay.

Speaker B: They're not the biggest producer and certainly, you know, don't really matter in the export category. However, you know that global corn balance sheet is already pretty tight.

Speaker A: Yeah. As it is.

Speaker B: And that to your point earlier, might even lead to uh, a little bit more in the way of interest for our corn because we've got. We're going to have a lot of it and probably be the cheapest on the market. And I certainly think, uh, we could be testing, you know, 3.3 billion bushels again, despite the fact that USDA started the new crop year at 3.15 bushels.

Speaker A: Yeah. I think on the corn balance sheet the big interest will be is will they change much in July on the demand? They might increase exports. 50, 100 million. I don't know that they'll change the rest of the balance sheet on the demand side. The, the. And they will definitely increase exports if they do any kind of yield improvement on uh, on the 26, 27 numbers based on this, uh, crop conditions. The uh, the number that's still in question and, and I think all of us have had a little bit of discussion over it is the feed demand. Although they just said that cattle on feed improved 2% as far as numbers go, which blew my mind away from year over year. I, I didn't uh, anticipate hearing that number improve because of the screw worm and everything else going on. I didn't think we were increasing our herds in cattle. But uh, we'll see. I, I still have a question on the feed number for, for corn. Um, I'm, I'm speculative on that one. I'm, I'm not convinced other than that, man. I think the uh, balance sheet's pretty and tight uh, for uh, for July. I think by the time we get to the harvest is when we'll see probably October, September, October. I think we might see uh, the uh, the real moves on the grains balance sheet. I think for sugar we ought, we ought to anticipate as they seem to do more so than any other crop is talk about change. Um, I don't know if we'll move much on the import side, but we will see some change probably on the beet sugar number. And, and uh, we'll. We'll have to see if. How confident they are in their uh, forecasted food use deliveries number for next crop year. I put a huge question mark over that one.

Speaker B: Agreed, Agreed. Agreed.

Speaker A: Anything else that is of interest to our listeners out there, Eric, that we haven't covered yet today? I mean, we've covered a ton of. Other than what your World cup prediction is. I mean the, uh, it's, it's anybody's game right now, but there's a few, I think, leading countries. Yeah, there's a few countries that are kind of extending their, their play. I think France, Spain, Argentina certainly would be some of those that we have to keep our mind eye for as far as leaders into the clubhouse, if you will.

Speaker B: Yeah, I think aside from, of course rooting for the USA to advance as far as they can, or who knows, surprise and go all the way. But my other dark horse, uh, I'm rooting for is Norway. I love that, uh, Erling Holland.

Speaker A: Yeah, right.

Speaker B: Ford striker guy, he's just an animal. And then I got a, that uh, row chant that they do in the stadium is just super impressive. If anyone hasn't, uh, seen that, it's pretty cool.

Speaker A: I, I gotta say, I, I think this is my perception based on social media and that's a question in itself, but I think the Scottish have won the World cup.

Speaker B: As far as fandom, I mean, took over Boston.

Speaker A: Took over Boston and, and uh, to the point now where Robert Kraft is asking the NFL to maybe do a game over in Scotland. You know, I think that uh, the New Englanders and the Bostonians are very much now fans of the Scotches. Um, so I, you know, their social media is awesome. Coming into us, into a town with bagpipes of blaring. I mean, between them, the Dutch, uh, the Norwegians, it's just so great to see the fans over here kind of showing up, if you will, to the US it's been pretty impressive. So. All right, well, with that, let's wrap this one up. It's probably gone longer than most people were listening for, but it is Friday on the, uh, 26th of June. So with that, we'll wrap this one up. Thanks, Eric. And for all those out there, thanks Craig.

Speaker B: Yep.

Speaker A: You know what Mike wants to say. We want to thank you first and foremost for listening, but, you know, live with an attitude of gratitude. Just enjoy life. Don't take it too, too seriously. Be willing to make fun of yourself or, you know, and enjoy it and laugh and hey, look at what's going on with the World cup fans. If you're not interested in, in, uh, in the actual soccer, look at what they're doing out there and enjoying life. And until next time, everybody take care. That concludes this hot Commodity podcast episode. Log into McKinney Flavelle's IQ ingredient intelligence platform for in depth information on commodities, ingredients and market intelligence. If you're not a subscriber, visit mckinney-fovelle.com to learn more.