Podcast Summary
Layoffs and Bird Flu: John Deere is laying off employees in Illinois and Iowa for the third time this month. Bird flu in dairy herds remains a concern but the risk is low according to the Department of Agriculture and CDC. Corn prices continue to struggle with oversupply, causing market trends to negatively impact farmers.
John Deere is implementing another round of layoffs in their Illinois and Iowa plants, marking the third time this month. Meanwhile, concerns regarding the spread of bird flu in dairy herds persist, although the risk remains low according to the Department of Agriculture and CDC. In the grain market, corn prices continue to struggle, with the market trending negatively and producers suffering from oversupply. Chris Robinson from Robinson Marketing discussed the current state of the grain market, noting that while corn started the year strong, it has since dropped to fighting for the $4 level. Despite the American farmer's ability to grow a good crop, the market is currently pricing it in at lower prices.
Corn and Soybean Market: Farmers holding onto stocks due to low prices, improving basis, and concerns about record short positions in corn and soybeans. Market is well-supplied, growing season in South America uneventful, and potential standoff between producers and end users.
The current market situation for new crop corn and soybeans is causing farmers to hold onto their stocks due to low prices. The cash market basis, or the difference between the futures price and the local cash price, has been improving as end users struggle to obtain supplies. The sell-off in corn prices over the past month has also contributed to better basis. However, concerns about record short positions held by funds and low new crop sales, particularly in soybeans, could keep prices low and further improve the basis. Overall, the market is well-supplied, and the growing season in South America has been uneventful, adding to the downward pressure on prices. Farmers may be hesitant to sell their stocks, leading to a potential standoff between producers and end users.
Agricultural Market Pressure: The agricultural market is under pressure due to increased supply from excellent crops in the US and Russia, lack of interest from China, and aggressive Russian exports.
The agricultural market is currently under pressure, with prices around $10 for soybeans and $20-$24 for corn. The market is reminiscent of the 2014 market, which saw price pressure throughout harvest. Yesterday's export numbers showed a few hundred thousand metric tons of soybeans going to unknown destinations, which could potentially be China. However, interest from China in American soybeans has been lacking, and prices are hoped to hold at $10. Producers and hedgers are advised to protect their revenue with hedges. The wheat crop in the Great Plains and Southern Illinois has been outstanding, but the excellent crop conditions have put pressure on prices due to increasing supply. The Russian crop is also larger than expected, and Russia has been an aggressive exporter. These factors contribute to the current market pressure. American farmers have done a great job producing, but the increased supply is putting pressure on prices.
Russian grain production, livestock markets: Russian grain production remains steady while livestock markets, particularly cattle, see prices reach 8-9 month highs. Producers should take advantage of high prices while they last.
Despite concerns over dryness affecting crops in France and parts of China, Russian grain production has remained steady, with no significant drops reported. On a positive note, livestock markets, particularly cattle, have seen prices reach 8-9 month highs, with the market recovering from a sell-off earlier in the year. This has not deterred consumers from buying expensive beef, and the cash market has remained strong. The cattle market's rally, which began after the bird flu scare in April, has been a welcome development for producers. The feed market has also been on a tremendous rally since the 2020 lows. However, it's important for producers to take advantage of these high prices while they last, as markets can change quickly. The Cadillac expansion currently looks promising, but producers should remain cautious of potential scares or sensitive market factors that could impact the cattle market.
Stock market corrections, impact on commodities: Agribusiness professionals in the cattle industry should monitor potential stock market corrections, which could negatively impact commodity prices, particularly corn and soybeans. Support levels to watch are $450 for corn and $1050 for soybeans. Oversupply situations in both domestic and global markets may lead to tough times for the industry in the next year and a half.
Agribusiness professionals, particularly those in the cattle industry, should be concerned about potential significant corrections in the stock market, which could negatively impact commodity prices. Cesar Cruz, from Advanced Trading, expressed his worry about potential 30-40% corrections in the stock market, and the potential impact on commodities such as corn and soybeans. He suggested keeping an eye on support levels of $450 for corn and $1050 for soybeans in the upcoming years. Cruz also highlighted the current oversupply situation in both the domestic and global markets, which could lead to tough times for the industry in the next year and a half. It's important to note that setting hedges is not a bearish move, but rather a protective measure to safeguard revenue. Brazil is a major producer of corn, soybeans, soybean meal, soybean oil, and coffee.
Brazilian Agriculture: Brazil, the world's largest tropical country, is a significant producer and exporter of various commodities including beef, pork, poultry, sugar, orange juice, and corn. Its unique agricultural dynamics allow farmers to plant different crops at different times, making Brazil a crucial player in the global commodities market.
Brazil, being a large tropical country, produces and exports significant quantities of commodities like beef, pork, poultry, sugar, orange juice, and corn throughout the year. The agricultural dynamics in Brazil are unique, with farmers in different regions planting different crops at different times. For instance, soybean production begins in September, and once harvested in early 2025, farmers move on to plant their second corn crop. Brazil is the world's largest producer and exporter of orange juice and has become a crucial player in the global market for livestock and protein. The country's agricultural productivity allows it to feed large herds of cattle, dairy, poultry, and pork, making it a vital exporter in these sectors as well. In essence, Brazil's vast size and tropical climate enable it to maintain a consistent agricultural output, making it an essential player in the global commodities market.
Soybean exports from Brazil: Brazil is the world's largest soybean exporter to China, but US beans may become more competitive during their harvest season, and Argentina's recovery from drought increases competition in the market. Brazil's relationship with China may become more politically significant due to trade tensions between China and the US.
Brazil is the world's largest exporter of soybeans, with China being its primary buyer, accounting for nearly 70% of Brazil's total soybean exports. Brazil and the US are competing in the international market, but as the US harvest begins, American beans may become more competitive in price. Argentina, another significant soybean producer, is recovering from last year's drought and is also exporting more beans to China. Brazil is a member of BRICS, and its relationship with China may become more politically significant in the coming years due to the ongoing trade tensions between China and the US.
BRICS corn exports discrepancy: The BRICS partnership has led to significant corn exports from Brazil to China, but there's a large difference between USDA and Kanab estimates for Brazil's corn production, making it unclear how much competition US products will face in the global market.
The BRICS partnership, including Brazil, has led to significant corn exports to China, making it the main destination for Brazilian corn. This partnership also brings financing opportunities for projects in BRICS countries, leading to increased competition with US products in the global market. Currently, there is a large difference between USDA and Kanab estimates for Brazil's corn production, with USDA estimating 110 million metric tons less than Kanab, which is the largest difference in history. The market is trying to understand the reason behind this significant discrepancy. Additionally, Brazil and Argentina's current corn crops are under attention due to the large production estimates, with Brazil estimated to produce around 116 million metric tons. The difference between the two agencies' estimates has been increasing over the last three years, and while the gap has been reducing recently, it remains the largest in history.
Brazil's corn yield: Brazil's corn crop is projected to yield around 120 MMT, potentially competing with US production. Impact on global commodity markets is significant.
Brazil's corn crop is expected to be a significant competitor to the United States, with estimates suggesting a yield of around 120 medium metric tons. The crop is still in the harvesting stage, and the full extent of its size will become clearer as more data is released. Corn, soybean, and wheat futures all finished down for the day, while cattle and hog futures also saw declines. In other news, Texas crude oil finished the day up. Brazil's agricultural sector continues to grow, and its impact on global commodity markets is something to watch closely. As we wrap up this episode of Backroads of Illinois, remember to tune in for more commodity market updates and insights. Until next time, have a great weekend.