Market Plus with Elaine Kub

Brooke Kohlsdorf This is the Friday, March 3rd, 2023 installment of Market Plus. And joining us now back for more is Elaine Kub. Nice to have you again. Okay. We've got some more time to talk about. We we sort of ended the regular segment talking about fertilizer costs. They have been down, but still kind of unknown where they're going to go from here.

Brooke Kohlsdorf So we don't really know yet. Farmers don't know yet what production costs are going to look like. So how is that going to play out as they figure out what to plant and what not to plant?

Elaine Kub Exactly. Exactly. So. So Iowa State University has put out their their estimates for crop production cost in 2023 and sort of their middle of the line projections would be a cost of production for corn at about $4.79 per bushel. And that's assuming you can grow 202 bushel corn. And the cost of production for soybeans was maybe 11.79, something like that.

Elaine Kub But it is entirely dependent upon where you where you pin that fertilizer price. So fertilizer prices do continue to come down towards May, towards actual planting season and somebody hasn't foolishly locked in a higher fertilizer price. Then they will have opportunities to grow corn even cheaper than that and make more profit per acre on their corn, which would continue to motivate more corn acres, which is what the USDA has has projected in their.

Elaine Kub In their very preliminary 2023 acreage projections. So it, as I mentioned, is just totally up in the air, really dependent upon how fertilizer prices change at this point. You know, you might lean towards soybeans if you had high priced fertilizer, but let's say you did lock in high priced fertilizer. Now you've kind of locked yourself in like maybe a sunk cost fallacy idea there that you have that fertilizer, so you're bound and determined to grow the corn anyway.

Elaine Kub So I don't I don't know that actual acreage numbers are going to be so variable based on how fertilizer prices change. But I do think that the profitability of corn versus soybeans is still entirely, entirely to be determined. Hmm.

Brooke Kohlsdorf Okay. So a lot could happen between now and May?

Elaine Kub Yeah. I mean, if you followed the same when fertilizer prices last spiked in 2012, they had a spike and they came back down and they went right back down to 2009 kind of levels within a year. I mean, it was a very brief spike. And then back down to normal. So if it followed that same pattern, then yes, we should expect to see fertilizer prices continue to move down.

Elaine Kub But, you know, don't take that to the bank. I think in this world with Vladimir Putin and, you know, who knows what what's going on throughout the globe if we're going have a nuclear war? I mean, you just really cannot predict that with any level of confidence.

Brooke Kohlsdorf And natural gas had a spike this week, right? Yes.

Elaine Kub Natural gas is notoriously volatile. And that was one of the reasons, one of the main reasons why fertilizer prices got so hot last fall and spring anyway. So. Absolutely, that's that's the fundamental volatility behind the whole thing.

Brooke Kohlsdorf All right. So switching gears just a little bit, so we'll get into some of our social media questions some people have for you. So this first one is coming from Farmer Kolb and he's asking with the Argentine bean crop looking worse all the time, is that pushing new US crush plants to get up and running to open to potentially large margins and demand?

Elaine Kub Well, a couple of interesting things. Yeah, you see Twitter pictures from the Argentinean drought and it is really grim. And not just the soybeans, but the corn too. Crucially, for the for the global feed grains markets and Argentina would ordinarily be expected to be a corn exporter. But you see these pictures of fired corn fields and it looks very grim.

Elaine Kub So this questioner is very right to point out the opportunities there for for soybean meal exports from not just the U.S., but from Brazil, obviously, and and all the big Asian customers for that soybean meal will be a big opportunity here, more so than the soybean oil in the next, let's say, 18 months.

Brooke Kohlsdorf All right. So the next question from Bradley Chocate. Is any of the decline related to the freeze event or is this drought damage?

Elaine Kub Are we supposed to be talking about wheat, I’d imagine?

Brooke Kohlsdorf Yes. Yeah, I think so.

Elaine Kub Well, and like you mentioned on the main show, the Kansas wheat ratings are so poor, 51% very poor to poor and and yet you see no no bullish market reaction to that yet because it is such a global market. I mean, it's incredibly frustrating. And and the long term forecasts from the Climate Prediction Center and elsewhere do not seem to be giving much relief to that.

Elaine Kub All of the the drought areas are projected to remain dry. And the Eastern Corn Belt, where, you know, you have better soil moisture now is projected to to get a more normal soil profile as we move away from La Nina. So there's just really no good news for farmers who are suffering from that southwestern drought at this point in time.

Brooke Kohlsdorf And we were talking about the drought in the south as well, related to cotton. We sometimes talk about cotton on the show. It's down more than a dollar this week. Will it continue to drop as long as those conditions are super dry?

Elaine Kub Yeah, again, very frustrating. I would I would imagine for the for that old crop market. Yeah. There's just not a lot of upward momentum for the old crop. But I do notice some recovery or some willingness of the new crop cotton market to price in some higher prices. And I, I wonder or I hope if that is a reflection of the prospects of, you know, very dry conditions in cotton growing country.

Brooke Kohlsdorf All right. We'll move on to our next question from Twitter. So will we reach 5.50 a bushel for corn before April 1st? I know you love questions like this, don't you?

Elaine Kub Maybe up, down or sideways. You know, my my inclination is for new crop. I that must be a question for new crop corn to be moving lower by April 1st. And my inclination would be that yes there is no reason at this point other than the Southwestern drought for the core of the Corn Belt. If we're expected to move away from La Nina and into neutral or El Nino conditions, our expectations should be for a fairly normal corn growing season for the new crop market.

Elaine Kub And in that case, you would expect to see prices continue lower. So there may be good opportunities. There are definitely profitable opportunities, but they may be limited time opportunities to be locking in some of these prices. Yes.

Brooke Kohlsdorf Okay. All right. What will help to stop interest rates from rising?

Elaine Kub Yeah, let's get out of our way. Yes. Yeah. Well, I don't know that we I mean, I don't know that there's really anything that could happen in the economy that would put a stop to it at this point, because it has to happen to to pull back the inflation, things that have been going on through this economy and not just the US economy, but global economies.

Elaine Kub And it's so clearly the expectation of of traders this week in the bond market to see higher interest rates based on where they're trading. Those Treasury yields. So I don't know that you want to step in front of a moving train in that interest rate scenario right now.

Brooke Kohlsdorf All right. This is the last one from Cody in Oklahoma is the party over for the grain complex? He's wondering.

Elaine Kub Yeah. I mean, so long term, I eventually will see prices lower. But in the meantime, there could be volatility from outside markets. There could be continued. You know, the funds could come back into it. All it would really take would be one nice, big, juicy export sale to get, let's say, you know, the commercial is coming back in the futures market and see things juiced up in those nearby contracts again very easily.

Elaine Kub So, no, I don't think the party is necessarily over in the old crop market or in the in the very near term.

Brooke Kohlsdorf Okay, Elaine, thank you for joining us. It's been a pleasure. And get back to your cows now. Right. And South Dakota, hopefully. Yes, they need you. All right. Well, next week, we take a look back at the early days of No Till and we'll have commodity market analysis with the Jeff French. Thanks for joining us and have a great week.