Ep. 62 USDA September 12th Reports Highlight Record Corn Production and Downward Revision in Rice Price

00;00;00;00 – 00;00;22;24
Dr. Hunter Biram
USDA finds over 1 million corn acres. We unpack why the corn market rebounded after the report and the downward revision in rice price, resulting in a larger PLC payment rate. That and so much more on this episode of Morning Coffee and Ag Markets.

00;00;22;26 – 00;00;40;23
Dr. Hunter Biram
Well, I’m your host, Dr. Hunter Biram, and with me in the studio, I’ve got, mister doctor, Professor Scott Stiles, and, Scott, I just want to say, I mean, I always brag on you, but especially today, man, I’ve just been running ragged. I know that you have been. And, I just got back from the NASDA meeting.

00;00;40;23 – 00;00;53;22
Dr. Hunter Biram
That was yesterday, and, we’re having technical difficulties, but y’all, like, Scott, he’s a smart guy, but he is a guy full of grace, too. And I just want to note that. And Scott just can’t thank you enough for the wonderful human being that you are. I’m glad that you’re here.

00;00;53;27 – 00;01;00;07
Scott Stiles
Appreciate the kind words, Hunter. Appreciate it. Appreciate all the work you do. You, you got a heavy travel schedule this week.

00;01;00;08 – 00;01;16;22
Dr. Hunter Biram
I do, heading to Vicksburg tomorrow, and that’s going to be more professional development. Ryan and I are going to go with our colleague from Fayetteville, our new faculty member, Dr. Kristiina Ala-Kokko, we’re going to go down to Vicksburg, and we’re going to share research, insight and pitch some ideas to our colleagues across the river, Mississippi State and LSU.

00;01;16;22 – 00;01;34;18
Dr. Hunter Biram
And I think some folks from Texas A&M normally show up, so, excited to engage with that group. And then Houston, heading off to talk about crop insurance with some beginning farmers and ranchers. And so, I just got back from NASDA, like I said. And Scott, I know that you’ve been engaging a lot with the ag lenders. There’s a group that you’ve been sharing with me, some really cool insights with.

00;01;34;18 – 00;01;45;22
Dr. Hunter Biram
And so I know that we’re all out and about and getting this podcast done is very important. But I’ll tell you, it does, we have to fight for it, I’ll say. We have to fight to get this out for sure. So I appreciate you being willing to fight for us, Scott.

00;01;45;23 – 00;01;54;08
Scott Stiles
You’re welcome. We got a little bit of good news, I guess, in the markets, this month to talk about. But anyway, I’ll let you kick us off and we can take it where you see fit.

00;01;54;09 – 00;02;08;09
Dr. Hunter Biram
Well, we will definitely talk about the good news. And so let’s just start off with talking about corn. You know, the September update shows record high corn production. There was more acres that were found, but the yield was downward adjusted. Can you unpack a little bit of that for us, Scott?

00;02;08;12 – 00;02;34;28
Scott Stiles
Okay. They did find another 1.4 million acres this month. So I think that was a surprise to the market. And, creating a bit of discussion out in marketing circles is, now we’re a full 3.5 million acres above the June 30th acreage survey. So people are wondering, you know, that’s a sizable miss in the survey, but NASS is, now they’re looking at, you know, what’s been certified at the FSA office.

00;02;34;28 – 00;03;01;11
Scott Stiles
And, and, you know, the actual acres are, you know, increasing month to month. So, but anyway, we did find another 1.4 million acres, but as a partial offset to that, they did lower the yield some – 2.1 bushels down to, it’s still a record 186.7, but that is about two bushels lower than last month. Disease is showing up in the Western Corn Belt and the areas that have gotten, you know, a lot of rain this summer.

00;03;01;11 – 00;03;18;24
Scott Stiles
And then tail end of the season was really dry in the Eastern Corn Belt. If you look at parts of Ohio and Kentucky, if you look at the precipitation rankings for August, some of those areas in the Eastern Corn Belt where the driest in the last, you know, 133 years and some of them were probably the top five driest in

00;03;18;27 – 00;03;38;01
Scott Stiles
as long as weather records have been kept, so you could segue from that into, you know, why the Mississippi River is so low again, for the fourth year. That’s, you know, part of the reason why that’s occurring, too, so, you know, the dryness has impacted yields in the Eastern Corn Belt. But, you know, you kind of had offsetting factors, more acres, less yield.

00;03;38;01 – 00;03;44;23
Scott Stiles
But the market response was firm. I mean, corn prices are a dime higher today than they were going into the report, so.

00;03;44;25 – 00;04;02;12
Dr. Hunter Biram
So, you know, Scott, one thing that’s really puzzled me is, I mean, finding a million acres. And I mean, that just seems like a lot of acres. I mean, yeah, I mean, we talk about, what, we got about a 90 million acre corn crop? And I mean, one out of 90, I mean, maybe about a percent, but still, I mean, it seems like a pretty significant amount.

00;04;02;12 – 00;04;10;18
Dr. Hunter Biram
So what do you think was driving that? I mean, are we talking about just reporting or like did farmers switch? I mean, what’s going to drive that change, you think?

00;04;10;19 – 00;04;34;10
Scott Stiles
Well, I think NASS’ comment was, is that they felt like survey responses were down from past years, and they feel like maybe they didn’t get as accurate of a survey in the June Acreage report as they had in past years. So I think that, you know, the number of responses I think is something that they attribute to the fact that there’s such a difference between the June 30th acreage and what they’re finding at the FSA office.

00;04;34;10 – 00;04;48;29
Dr. Hunter Biram
So then, despite this, I mean, record corn yield, you know, it was revised downward. But there was also this upward revision in acreage, almost essentially no change in total production. So why did the market more than recover after that was released?

00;04;49;06 – 00;05;07;07
Scott Stiles
Well, I think the market is looking forward, and I think it senses that, you know, in future reports, we’re going to see a lower yield. Early reports from farmers are a bit disappointing in some areas. They say disease problems really did have an impact on yield in the Western Corn Belt. I think next month we’ll probably see another downward revision

00;05;07;14 – 00;05;24;29
Scott Stiles
in the U.S. average yield and, and maybe, it may move more toward the Pro Farmer survey yield. It was pretty close to 183 bushels, 182.7, in that neighborhood. So I don’t, I don’t know if we’ll see the U.S. average get that low. But, you know, we’re certainly moving in that direction, I think.

00;05;24;29 – 00;05;40;12
Dr. Hunter Biram
So let’s move on to soybeans, then. So soybean crush forecast was raised to a record level, while exports dropped to their lowest level since 2019. So what does this shift tell us about changing demand drivers for soybeans and how could it affect processors versus exporters?

00;05;40;17 – 00;06;03;01
Scott Stiles
They did revise exports down some, which I think that the trade sensed that would probably happen. We’ve talked about a lot. You know, China has not purchased any new crop soybeans to date. And you know, that’s a huge void compared to last year’s. If you look, at this point last year, China had purchased about 183 million bushels from us by this time last year.

00;06;03;02 – 00;06;20;15
Scott Stiles
Of course, we haven’t made any sales to them at this point. So, we’re into the ideal window in which the U.S. would be making sales to China, which is normally from September to January, so that, you know, we’ve lost some opportunity there on the huge crop that was in Brazil. And of course, the tariffs that are in place now,

00;06;20;15 – 00;06;40;11
Scott Stiles
make us, you know, less price competitive. If you look at just, on a price per bushel basis, the U.S. has been priced a little bit below Brazil. But when you add, you know, a 23% tariff on to the cost of U.S. beans, and that adds easily $2 a bushel. So that’s, that’s really the difference that has moved the Chinese demand over to Brazil.

00;06;40;11 – 00;06;59;22
Scott Stiles
So that’s a concern. And, so, we really…. there is talk this morning that the Trump administration’s trying to get a face to face meeting with China that may occur in late October, early November, you know, with the hope that we could see, you know, some firm numbers on a deal to buy, you know, for China to buy U.S. soybeans at that time.

00;06;59;22 – 00;07;19;08
Scott Stiles
But, you know, at that point, a couple of months of our ideal export window have passed us by. So, so I think that, you know, that’s part of the reason that we saw the, you know, the downward revision in the export numbers. We make up some of that with record crush. They put crush at 2.55, which, as we were talking about earlier,

00;07;19;08 – 00;07;38;17
Scott Stiles
that is basically the maximum crush capacity that we have in the U.S. right now. There’s 68 plants in the U.S. and you know, their capacity is right at that two, you know, 2.5 billion point. So we may not see that number move higher in future reports. But the big variable, as we were talking about, is the exports.

00;07;38;21 – 00;07;44;28
Scott Stiles
If we miss a good portion of our export window to China, we may see this export number dial down a bit more.

00;07;45;02 – 00;07;49;06
Dr. Hunter Biram
Yeah. And you know, correct me if I’m wrong, but China accounts for what, 55% of our exports?

00;07;49;11 – 00;07;57;04
Scott Stiles
Yeah. On average, it’s going to be in the low 50s in that neighborhood, 50, 53, 55%. So, sizable.

00;07;57;10 – 00;08;17;23
Dr. Hunter Biram
So then my question is, do they need us right now? Because they’re not buying. Brazil is currently in their growing season. And so, you mentioned January, that’s when that Brazilian crop comes online. So, does China need us right now? I mean, what is their domestic level of stocks look like? I mean, can they outlast us and make it to Brazil in January?

00;08;17;23 – 00;08;43;05
Scott Stiles
With the record crop in Brazil, that’s a yes. And Brazil’s not the only source of their soybeans. They’re buying soybeans from Uruguay, and they’re sourcing meal from Argentina. So they’re not just dependent entirely on Brazil for sourcing their needs, but they do have some sizable stocks there that’ll help bridge the gap. I’m looking at their balance sheet from September, they’re projected to have 43 million metric tons in stock.

00;08;43;05 – 00;08;53;27
Scott Stiles
So they do have some reserves that they’ve built up. But a lot of times we think they’re just buying solely from Brazil, but they’re buying from South America. They have other sources they can tap into.

00;08;53;27 – 00;08;56;23
Dr. Hunter Biram
Other sources that is not the U.S. of A.

00;08;56;25 – 00;09;15;10
Scott Stiles
Not the U.S. At this moment, we have not sold anything to China. I looked back at data, back to 1999 was as far as I could go back, and I couldn’t find a single year in the last 25 or 26 years where China had not bought some soybeans at this point. So this is a first. A first in the last quarter of a century.

00;09;15;10 – 00;09;37;18
Dr. Hunter Biram
And Scott, I just feel like that’s been the story of our lives this year. It has been: everything is unprecedented. It’s hard. I mean, and it’s, frankly, very worrisome for me when I think about, well, I mean, if they’ve got enough stocks on hand to make it to January and then Brazil, or South America more generally, comes online, I mean, is it a possibility that we don’t sell any soybeans to China for the first time ever in a given year?

00;09;37;19 – 00;09;47;11
Scott Stiles
If there’s not a deal struck. That’s what we’re really hanging our hopes on, is we’ll get a deal similar to the phase one. But we may not have a deal like that in place until, maybe early November.

00;09;47;11 – 00;09;49;08
Dr. Hunter Biram
So that eats up a good two months.

00;09;49;15 – 00;09;57;15
Scott Stiles
Yeah. You’ve got just from November to January to really do some business. By the end of January, the Brazilian crop will be available.

00;09;57;18 – 00;10;11;06
Dr. Hunter Biram
So let’s move into rice. Long-grain rice production was cut while imports hit a record high. You mentioned at the start of this that we’ve got downward revision in price resulting from that and higher PLC payments. Can you paint us a little bit of a picture around that?

00;10;11;06 – 00;10;34;22
Scott Stiles
In August, they were projecting the season average price for a long-grain at $5.85 a bushel, or $13/hundredweight. So it made a big downward revision to the price outlook in September. The season average is now forecast at $12/hundredweight or $5.40 a bushel. So it’s a move in the direction of reality. It’s a move in the right direction.

00;10;34;22 – 00;11;04;17
Scott Stiles
And it was a warranted price drop. But still, I mean, we’re seeing cash bids today for, if you were doing spot delivery to the elevators today, cash bids are $4.88 a bushel to about $5 a bushel, at the mills. So, USDA’s outlook is, you know, just keep in mind I mean, they’re looking at a full 12 month marketing year and making a projection on a number of variables over the next year, but I think the move was warranted considering where cash bids are today.

00;11;04;19 – 00;11;16;25
Scott Stiles
Of course, you know, I don’t know how to take this. I mean, it’s bad and it is a reflection of the price environment. But we’ve got a better safety net. I’ll say that, Hunter. For the ‘25 crop. I’m tickled about that, at least.

00;11;16;25 – 00;11;34;11
Dr. Hunter Biram
You know, we have a better safety net, but, you know, as you and I have looked at, payment limits, I think, are going to cause an issue. Yeah. While we do have this qualified pass through entity change from the OB3, the issue is, farmers that may need to restructure, they don’t have any opportunity to restructure their legal, I guess the legal structure, their legal entity, for their farms.

00;11;34;11 – 00;11;56;16
Scott Stiles
Yeah, you know, under the old provisions, you know, one payment limit would have captured all projected payments. And then when you raise the reference price as you go from one payment limit to needing four, if you have a lot of rice, basically, it can have a huge impact. So, I am concerned that a lot of operations aren’t legally structured to the point where they can capture all the payments they need to for ‘25.

00;11;56;16 – 00;12;14;02
Dr. Hunter Biram
Right. Well, one thing that I do want to ask, and it’s fine if you don’t know the answer this, but you know, I’ve been seen in the news, you know, there’s a big farmer meeting in Brooklyn that everyone’s talking about that’s now made national news and has gotten national attention. But some comments that I’ve seen spurring out of that, someone had said because China is not buying rice, we’re in trouble.

00;12;14;02 – 00;12;17;13
Dr. Hunter Biram
Is that true? I mean, how much, how much rice does China actually buy?

00;12;17;15 – 00;12;45;07
Scott Stiles
Very little from the U.S. You know, they are large importer of rice. But it’s… we don’t sell any long-grain rough rice to China. You know, our primary markets for long-grain rough rice is Mexico, number one, consistently, and Central American countries. Guatemala, Nicaragua, El Salvador, Honduras those are perennially our top five markets for rough rice. And then our milled rice, long-grain milled is, top markets,

00;12;45;07 – 00;13;05;07
Scott Stiles
last couple of years have been, you know, Haiti’s consistently number one, if not Iraq. Iraq, they bought a sizable volume last year. Canada, Mexico or Saudi Arabia. That’s going to be top five for milled rice. So, China is not really a player in Mid-South long-grain rice import. What they buy from the U.S. is very small, if anything.

00;13;05;07 – 00;13;21;23
Dr. Hunter Biram
Well, appreciate that insight. I was just curious, because I was wondering, like, I’m not sure that’s totally right, but I knew that you would have the answer for us. To wrap things up here today. Let’s talk about cotton. What are some comments? What are some takeaways there? I mean, any light at the end of this sixty cent tunnel?

00;13;21;26 – 00;13;46;07
Scott Stiles
Cotton is trapped in a trading range, Hunter, and has been all this calendar year. I think 64 at the very low end, and you know, somewhere between 64-70 at the very top. And it seems like the upper end of the price range has kind of gravitated lower over the course of the year. But it’s just, it’s been really a sideways rangebound market all of this year.

00;13;46;07 – 00;14;11;27
Scott Stiles
And USDA didn’t make any changes of any significance in the September report. I think they bumped up production 10,000 bales, really insignificant, but that didn’t change the ending stocks. Projection 3.6 million is what they’re projecting on stock. Season average price: $0.64. So, probably at this point, the cotton market’s probably more focused on what’s happening on the foreign balance sheets.

00;14;11;28 – 00;14;33;14
Scott Stiles
You know, you can’t talk about cotton without talking about Brazil. Brazil’s export estimate was left at 14.3 million compared to our 12 million. So that’s still a point of discussion in the cotton world, is how Brazil has emerged as a top exporter in the world. It used to be the U.S. for forever. And now Brazil is top in cotton exports.

00;14;33;14 – 00;14;53;04
Scott Stiles
Brazil’s crop estimate was unchanged. Production was at 18.3 million bales compared to our 13.2. So Brazil’s production is up 1.3 million from a year ago. Exports are up by the same amount, 1.3 million from a year ago. So continued growth there in production and exports.

00;14;53;04 – 00;15;10;14
Dr. Hunter Biram
Scott, to wrap up. Can you just briefly help us understand how we even got here? Because, I mean, wherever I started, it was in 2022, and it was right after, we were coming out of COVID. And I mean, we had $1.20, I mean, almost double the price of what we’re seeing now. Was it just a lot of production like everyone said,

00;15;10;14 – 00;15;25;25
Dr. Hunter Biram
all right, let’s just grow a bunch of cotton because, I mean, we got $1.20 cotton here. I mean, we can make some money on this. And then now we have all these stocks? Now that demand has kind of gotten back to where, more or less, where it was prior to COVID? I mean, what are some things that you think are factors that led us to get to this point?

00;15;25;25 – 00;15;50;19
Scott Stiles
I’d say the growth in Brazil has been one factor. And in an interview earlier this week, you know, we were talking about the changes that have taken place in Brazil just since the first Trump administration. We were focused on soybeans in a discussion, but since the first Trump administration, Brazil has added 24 or 26 million acres of soybeans since the first Trump term.

00;15;50;19 – 00;16;13;05
Scott Stiles
And production has increased 1.5 billion bushels and exports have increased like 768 million bushels just since the first Trump term. So it’s you know, there’s been a substantial… that’s just in soybeans. So a similar thing has occurred in cotton, if you, you know, if you look back at, you know, where their production was in cotton in the first Trump term.

00;16;13;05 – 00;16;20;23
Scott Stiles
So I mean, the same thing is happening. It’s just a huge expansion there. And that’s created a lot more competition for us.

00;16;20;26 – 00;16;23;10
Dr. Hunter Biram
All right, Scott. Well, do you have any good news for us?

00;16;23;10 – 00;16;25;20
Scott Stiles
[…] I will say.

00;16;26;18 – 00;16;48;13
Scott Stiles
You know, the markets have been surprisingly firm since the report. We talked about corn is up a dime since the report. I would suggest that people, you know, pull up the charts for the December corn and really focus on this gap. It seems to be headed for, $4.32. There’s a gap there. And you know, and you talk about good news, I mean the basis on the river it was zero.

00;16;48;14 – 00;17;13;27
Scott Stiles
The builds are even with the board for corn. So, and that’s because the export demand is so strong right now for corn, it is really, really strong. So the basis is even now, basis improves even more as you get out into December and January. So the river bid was $4.30 yesterday for spot delivery. It’s $4.58 when you get out into December, $4.65 for January.

00;17;13;27 – 00;17;25;27
Scott Stiles
So that’s good news. Soybean prices of $10.47 this morning. So if we keep seeing yields creep down we could see, you know, November futures test $10.62 to $10.70 before too long.

00;17;26;00 – 00;17;26;28
Dr. Hunter Biram
That is encouraging.

00;17;27;00 – 00;17;36;16
Scott Stiles
Yeah. Yeah, I think we’ve seen the highest yield estimates already, you know, from USDA on a national basis. I think yields go, creep lower from here.

00;17;36;16 – 00;17;40;29
Dr. Hunter Biram
All right, Scott, thank you so much for your time and your expertise, as always.

00;17;41;01 – 00;17;42;19
Scott Stiles
No problem. It’s good visiting with you.

00;17;42;19 – 00;17;55;15
Dr. Hunter Biram
As always. All right, folks, well, stay tuned for the market report. Thanks.