Welcome into the Friday, December 29, 2023 installment of Marketplus.

Joining us now, Kristi Van Ahn-Kjeseth for the last show of 2023.

A couple of these questions are looking forward to 24.

What is the headline in commodities for 23?

Yeah, when you look at 23, I think the hardest thing is just how hard everything fell when really you didn't some people didn't expect it to and how hard it felt.

You know, you look at where we were last year for corn were 30% lower year over year for March.

Corn.

So you've lost a third of the value almost into a price.

And when you're still battling higher prices from a couple of years ago for inputs, that is really difficult to deal with.

Right?

I think another thing has been interest rates.

When you talk about interest rates and how they're starting to slowly make their way into affecting kind of your cash decisions.

It's been a while since you've really had to factor in those decisions into when you want to sell or what you want to hold.

So I think those are probably the two biggest talking points that you've had in 2023.

I think you can also talk about how you had some shining moments from ethanol profitability.

Crush margins have been very strong, but we've really seen crushed margins deteriorate the last three or four weeks.

We have a few questions that are all in those veins.

But let's start off the top, Neal, Social media reports with Keith in Illinois.

He says that Brazil's corn as a dollar 50 per bushel higher than ours.

That's what he sees on social media.

Why does China keep buying corn from Brazil if that it is such a premium to ours?

Am I getting politics right away?

I think so.

I think there's some talking points you could put in there that have to do with politics.

Right.

We look at the relationship right now between the China and the US.

It's probably not the best start.

It's it's been recently it's it's definitely not the worst, but there is some room to work there.

So I think that has some parts to do with it.

I also think that you're looking at them wanting to really invest in Brazil, create that relationship with Brazil, and Brazil doesn't fight them on a lot of things where the U.S. is going to come in here and consistently try and and push their way and make sure they're not getting ran over.

So I think they want to keep that relationship strong.

I think there will be a moment that they have to come to the US because you look at Brazil and they're just starting to plant.

They're suffering a crop, which is their big exportable crop.

And so this is corn, the US Corn's moment to really say, are we going to have that relationship with China or not?

We're going to figure that out over the next 2 to 3 months.

Is that a political statement?

I mean, in the sense of how the markets speak and dictate things.

Right.

But who's making that statement that you're saying that?

Yeah, I think it's just the fact that, like, does China really need the corner, do they not?

And if they really need the corn there, they're going to eventually not be able to find it in Brazil because they're at the end of it, they're just planting their crop where we have ample amounts of supply.

I think the US dollar could play a role into that, but I think overall it's just you're catching them at a time to say if they really want corn, we're going to be the one that can provide it the best.

Go back to Christie's comments about the dollar in the analysis segment there as we covered that there a moment ago.

Let's go to Mike in Iowa for a moment.

Kind of a follow up a little bit there.

Give us a little outlook.

What's it going to take to get some higher corn prices or is it even possible?

Corn is a little bit on the tricky one?

You know, I definitely don't want to sound like this perma bear that's always coming out here and always talking about the negative side of things.

But corn is not a realist, right.

And corn is not had a great story for a while and there was a question that was put on social media that was saying, are we going to have this corn hangover month over month?

And that is what we're going to have to deal with for a while, is that every month USDA is going to have a crop report and you're going to see a large number for corn for the U.S.

It's going to take some drastic cuts.

I think that if you, you know, majority of people that you're talking about, I'm not sure you can talk about a yield decrease in corn at this point for January 12th.

And if you do see one, I don't think it's sizable enough to really make a huge difference.

We do know that ethanol profitability has been there.

You look at feed use and say, hey, if we're going to be able to make this work, can you see some sort of feed use?

Exports have picked up.

We have seen them start to step in.

Our relationship with Mexico has been pretty good.

So I think do you have those moving parts?

But regardless, you're looking at some form of production cut or a increase in demand in a sizable matter to bring us below 2 billion.

And any time that you have a 2 billion or greater carry out in corn, it is going to weigh on the market and cause some issues moving forward.

So, Jim, you got two for one there.

She answered part of your question.

So thank you for that.

Let's go.

Russ in Iowa, this is a historical question Russ wants to know.

Historic early.

What are crop yields following a strong El Nino winter?

Yeah, So I think the biggest collaboration we can kind of see here is, is when you start to talk about what happens in the summer.

Right.

Did you have an El Nino summer or a La Nina summer and how that affects yields, those are your correlations that you're going to be able to see.

Right now, we're in a strong El Nino winter, but you're starting to see the trends, and some forecasts point towards a neutral spring and slowly move into a La Nina condition by the fall.

And we know that La Nina conditions have a history of giving us lower yields.

So I'm not so sure you actually see this El Nino winter pattern being a big dictator of where our yields can go.

But right now we need to be aware that that forecast does come in neutral.

To switch back down to La Nina at this point, sometimes they smooth, so sometimes they move fast.

But right now, if you carry a neutral stance into spring in the summer, it gives you those trend line yields.

However, I'm going to play like I asked you before, I think we were taping What if you're not?

What if the El Nino never arrived to you?

Look at the drought monitor where it's still dry.

How's that answer change then there.

So year over year, drought monitor is actually better in majority of areas.

Unfortunately, you look at kind of the eastern half of Iowa and there in like rough conditions, not only in the drought conditions, but like we could probably peg Iowa as a whole, southern Minnesota as a whole of having probably three years of drought conditions.

It has been really, really dry My issue when you start to talk about drought is the constant research and development that's put into seed genetics specifically for drought tolerance.

My concern on yields would probably come more in a wet, soggy year than it would dry.

I think this year in a lot of areas prove to you that drought tolerance and seed genetics does its job.

This crop kind of dug down, tried to find the moisture, but if you're coming on three years of no moisture, that's a little bit of a different situation.

There's that old saying that's been told to me since I can remember that if you plant in the dust, the bins will bust, you plant in the mud, the crops are a dud and you know, I know it's a saying and so many factors come into it, but that really does play into this market and does seem to be true that I would be more scared of a wet start than I would be a dry start.

But what happens after that is all on the table.

Well, let's look at soybeans then, because they really don't like wet feet, is the old adage.

I guess so.

Mitch in Iowa, though, wants to know what do recently narrowing spreads on soybeans signal to you about the near-term outlook?

I know we're kind of talking about the far term or the out the father term.

Yeah.

So that was really cool to see.

You're starting to see that come in in that demand show itself.

So soybeans and corn are in two different situations when it comes in corn and wheat have these large carries soybeans really started to narrow that up had the large carriers demand came in and shrunk that and I'm not so sure it's signaling a lot because you can look at the dynamic of saying to the next month, right, we're in the first notice now for January.

So it's a little bit different.

But coming into March to May, these type of things signal more like our decision making.

So as a company, we chose to do some marketing more into the May soybeans in case we see what happened between March and May, similar to what happened in January and March where that shrunk.

And if we do see that March contract start to creep up, they're close the carry and rally a little bit more.

We could apply that to it.

So I think it's more of we're looking at it and forming our marketing strategy differently because of it.

Okay.

So I'm going to steal a little bit from the next question to follow up to yours.

Beans, are we higher at this time next year?

Oh, there's so many moving parts.

I you know, I think you look at kind of the US crop that we have right now.

We have really tight carry outs right now, so you can support a good price right now off the US.

The problem is you look at the world dynamic and the potential of what's coming in and I know I hammer that that situation on on Brazil and Argentina together.

But even when you look at recent private estimates out of Brazil, they're 158 to 159 and that is not that far off from a record production.

So we're not looking at losing 20 million metric ton of soybeans right now.

And so that makes it tricky is that domestically we have a story worldwide is just not collaborating together very well.

We need those to come together.

So I look at kind of where we're at and I look at kind of moving forward.

You have, you know, twelves on a bean and fives on a corn.

I think that favors some corn acres.

And I think that's where you could see that really corn or beans needing to prove themselves to get some acres come this spring.

Well, Dan in Oregon is the reason I asked the follow up Dan wants to know that same question with corn by Dec 24, will grains be higher than they are today or lower?

I'm specifically asking you about corn since we talked about beans.

Yeah, same situation in corn is that there are so many moving parts that you can have, but the world dynamic in corn is a little bit different.

But overall we still have ample amounts of corn.

So we need to see something change.

We need some sort of story to shake that dynamic.

And when you look at when you pencil it and you can pencil it, anyone can put those acreage numbers in.

But if we're at 2 billion here and you're looking at anything above 90 million acres planted, which I think is totally feasible, that is looking at a situation of a growth in US carry outs without some sort of major problem.

Well, that's the corn and soybean.

I want to close with one final question here.

And this is Robert in South Dakota.

And this is the one I think I'm going to steal a little bit of what she's going to say.

This might be the positive to end this market.

Plus, is there any news we could get at this point to rally wheat seems to shrug off anything that could be or should be bullish.

Yeah, wheats been a dog.

It's not been fun to deal with, but it looks like it's running on a bottom.

It feels good.

You're starting to hear these stories come up.

The Russia Ukraine dynamic is heating back up.

We have demand showing up for wheat.

We are still at tight carry outs domestically.

So I think you have the stories to really be able to push wheat.

And I do think that if we can get that spark, if it wants to buy off on something worldwide, I think that we could be that leader.

And to be honest on bullish markets, if wheat is the leader, usually it's good for everyone.

All right.

It's been good to have you here.

Thank you, Kristi, for the time.

Thank you.

All right, before we close here, I need to give a shout out on a retirement that happened in Iowa.

Ed Westra is retiring as the general manager and head grain merchandizer for Hull Co-op on Friday after 41 years of service.

41 years is like the show has been on barely that long here.

So congratulations to him and to all of you as some of you also retire at year's end.

But we're going to see in 2024 because next week we are going to look at the high school class work, returning dividends to the community, and we'll have Mr. Mark Gold to start off the year.

Thanks for joining us.

We'll see you next time.