Market Plus with Elaine Kub

Brooke Kohlsdorf: Welcome to the Friday, March 1st, 2024 installment of Market Plus. And joining us now is Elaine Kub to discuss all things agriculture that we didn't get to in the other segment. So, Elaine, let's start with Louis in Iowa. Last week, Cotton prices were hovering near $100. How will this impact corn and soybean planted acres? We touched a little bit on that in the main segment.

Elaine Kub: Yeah, we did. And I want to emphasize that that $1 level, that's not for the new crop. When you look out for the December contract, it's only about 83, $0.85. So. So all of the the explosion of the nearby stuff, which is exciting, it's not necessarily going to play into this acreage question that they're asking. But nevertheless, any boost is going to be helpful. So if that's the hot market and corn and soybeans are not hot, I mean, I don't I don't know the specific profitability difference that there would be between an acre of cotton and an acre of corn or soybeans in 2024. But you have to assume that it will definitely take away some of those corn acres, which will be good. I mean, we have enough corn in the United States certainly for the current marketing year. So as we look out for the next marketing year, if we were planning to see another record large crop or record high yields, which at this point there's no reason not to expect that. Yeah, anything that can take away some of those corn acres will help stabilize the market and keep a supply crush from happening.

Brooke Kohlsdorf: All right, Brian, in Nebraska wants to know, how big could a corn beans spring summer rally be when and if funds with all these shorts spring into longs?

Elaine Kub: Yeah, and I think I've made it sound like I certainly expect to see that at some point there will be something that causes these funds to. Yeah, pull out their short positions and we will see some sort of a boost in prices. But I do want to caution folks from getting really bullish. Like I don't think that that would be enough to pull us back into even $5 corn necessarily. You know, you would need to have some sort of more fundamental change to the supply and demand scenario. And currently, as I mentioned, we just have enough of this stuff. You know, the stocks to use ratio for corn is 14, 15%. So there's no danger at this point of the industry feeling like it's going to run out of corn. For end users to be panicking and start to bid up, you know, significantly higher prices, you would just get a futures rally, which would be an opportunity for folks to sell something. But I don't think that folks should get really high optimistic hopes based on that rally.

Brooke Kohlsdorf: Mm hmm. Okay. So there's your answer. Tim in Minnesota, Does Elaine have any words of encourage men about the markets for farmers headed into spring planting, asking for a friend? Well, okay. It's really me, he says.

Elaine Kub: Well, thanks Tim for the question. Encouragement. I mean, I don't feel a very I don't feel really optimistic that 2024 is going to be one of our big banner years of profitability at this point in time unless something strange happens. So instead, the game needs to be not necessarily to sit back and and wait for some big rally to come and save us, but rather to make steps to make sure that our own costs of production are as low or as as efficient as we can get them. And lower fertilizer prices will help that any sort of negotiation you can do to to manage keep your land prices as manageable as possible. Those kinds of strategies will be the thing that are going to save folks in 2024. So if you're feeling good about your management practices, that's my encouragement for Tim and everybody else.

Brooke Kohlsdorf: Okay. What about Sam in Tennessee? He's wondering, are we going to see $4 five weight calves and $3.50 corn at harvest? And can you explain what that means?

Elaine Kub: Yeah, the $4 five weight cap. So if you were to see 500 pound calves come through a sale barn and get $4 a pound, I mean we are not there yet, but I don't, I don't want to be on the record and say it's never going to happen. I mean I'm sure I assume assuming I live long enough, we will see that sometime in my lifetime. I don't know that this year is going to be that year. I mean, where it's definitely above $3, but that would just be very, very rich. You know, when even when you look out and see cash cattle trading at 190, that's the kind of price that I'm used to seeing feeder cattle at, you know, like we've just entered into a new realm of prices for the cattle market generally, which is fine. I mean, we've entered into a new realm of prices for anything. You go to the grocery store and nothing that is the price that you remember it being two years ago or five years ago. So that's appropriate. I wouldn't have those kinds of expectations and I wouldn't necessarily expect $3 corn at harvest either. I mean, that's that would be quite a world, wouldn't it, for cattle feeders if they could get both of those prices. But no, I don't think I'll see either one of those. But we might get close. I mean, those are good directions to be headed in.

Brooke Kohlsdorf: Okay. So Rodney in Wisconsin is wondering how much does interest rates play into corn and soybeans into the market? And does that play a role in overseas sales?

Elaine Kub: So I don't know if he's if he's, you know, trying to get at like the management decision of whether or not we would see more corn or more soybean acres based on interest rate prices or borrowing costs, farmers borrowing costs. And if that was the question, I would say it would be more of a concern in a world where we had really high fertilizer prices, a really high input costs that people would need to finance for six months, but I don't think that will be as big of a of a weighing factor between corn and soybean acreage in 2024 as it was even a couple of years ago. If the question is more based on broadly how do markets react to changes in the Fed interest rate, let's say if they start cutting rates again? Yeah, I mean, I think all markets would respond to that and you'd see some spillover activity from the stock market, responding from the dollar responding. I would expect that that could be the kind of thing that would be the trigger for those funds to get out of their short positions.

Elaine Kub: But it could go either way. I mean, it's not a very clear relationship. There's not a very clear relationship for that for the grains.

Brooke Kohlsdorf: Okay. All right. When you were driving down from your home, South Dakota, is home, and you were looking out at the fields, the brown bare fields, what were you thinking?

Elaine Kub: I was thinking, gosh, these Iowa farmers have done a lot of tillage already in February. Are they? Yeah.

Brooke Kohlsdorf: Ants in their pants, right?

Elaine Kub: Yeah, yeah.

Brooke Kohlsdorf: Yeah. Do you think because we've had this just crazy February where it's been so warm and dry that farmers are in more of a hurry? Are they more anxious to get out there like earlier than usual.

Elaine Kub: Absolutely. And I people have told me that that they're, you know, getting their planters ready. They want to try to do something. All right. I mean, come on. It's February. Technically, when we're talking today, it's February 29th, leap day. So that would be insanely early. But as I mentioned, you know, folks, there has been talk about the early Easter could potentially trigger some folks to want to get out there and start planting, particularly early this year or feel pressure that they should be out planting early, which I think would be a trap. I mean, I'm not an agronomist. I can't tell you exactly what would happen if you plant too early other than you might just have to replant if you had an early frost, which isn't going to really matter to the markets. The markets I don't think are going to respond to that kind of behavior. But it's just, you know, a caution that we have a long time between now and May and weather could certainly happen in April and May.

Brooke Kohlsdorf: Oh, yeah. We've had snow in May before and not that long ago, so that could happen. All right. Well, I'm curious about so we were talking about ethanol a little earlier in the show, and I mentioned that Southwest Airlines made an announcement this week that they're going to pour a lot of money into making jets and some infrastructure to use renewable fuels. So how much of an impact could this have on ethanol? Well.

Elaine Kub: You know, it would take time, but it certainly could be the kind of thing that would help that market. I don't know exactly how much market share the aviation renewable aviation fuel sector would compare to, let's say, gasoline for commuter cars. But either way, I'll say this about ethanol. It could use whatever help it could get right now. We did see in a report this week that production numbers are slightly falling, which makes sense because when you do the sort of calculations about profitability, ethanol plants are either barely making money or not making money anymore at these certain at these price levels, certainly the price levels for DDGs. So that's not necessarily bearish doesn't mean that the ethanol industry is going to fall apart immediately. It just as a caution that, yeah, it's one less thing to come in and sort of boost boost corn prices.

Brooke Kohlsdorf: Okay, All right. I think we are done. Elaine, thank you so much for sitting down with us.

Elaine Kub: It's been a pleasure.

Brooke Kohlsdorf: All right. Next week we look at the economic factors affecting higher priced livestock and we'll have commodity market analysis with Ross Baldwin and Jeff French. Thanks for joining us and have a great week.

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