Marketing

Grain Outlook Corn sees slight surge; soybeans no

The following marketing analysis is for the week ending Nov. 18.

CORN — Happy Thanksgiving! After a slightly soft start last week, Nov. 15’s headline that a missile landed in Poland and killed two people shook up the market. Thankfully, cool heads prevailed before any retaliation was undertaken. It was determined the missile was errantly fired by Ukrainian air defenses and was an accident, not an intentional attack against Poland by anyone.

In the last half of the week, the United Nations, Russia and Ukraine agreed the Black Sea grain corridor would be extended beyond the Nov. 19 end date for another 120 days. The UN and PHYLLIS NYSTROM Ukraine had been hoping for a CHS Hedging inC. full-year extension. The current St. Paul deal’s details will be maintained; but Russia says they still have issues which need to be addressed concerning removing barriers to their grain and fertilizer exports.

Russia’s bombardment of Ukraine’s energy grid and infrastructure continued — regardless of the grain agreement.

Rail logistics moving forward are in flux. This week, the smallest union — the International Brotherhood of Boilermakers — rejected the proposed contract. Negotiations are continuing; but if one union strikes, other unions have indicated they will not cross a picket line. The two largest unions are expected to announce voting results on Nov. 21. All 12 unions need to approve the contract. If a strike occurs, the earliest date I’ve seen it could occur is Dec. 9.

Water levels on the U.S. river system have improved with recent rains. The situation has not been solved, however. For now, barge drafts and tow sizes have been increased. CIF and barge values have declined as the upper Mississippi River prepares for its winter closure. Demand for barges has subsided on other rivers as harvest completes and bin doors slam shut.

Mexico made the fifth-largest single-day corn purchase on record this week of 73.5 million bushels. Of the total, 48.9 million was for this year and 24.6 million bushels for next year. This was a little interesting since Mexico has said they won’t accept GMO corn beginning in 2024. In another purchase, Mexico bought 9 million bushels of U.S. corn for this year.

Cash Grain Markets

corn/change* soybeans/change*

Stewartville $6.26 -.02 $13.98 -.02 Edgerton $6.86 -.02 $14.52 -.08 Jackson $6.68 +.01 $14.34 -.06 Hope $6.47 +.01 $14.15 -.13 Cannon Falls $6.24 -.04 $13.97 -.06 Sleepy Eye $6.59 -.12 $14.32 -.03 St. Cloud $6.30 -.11 $14.17 -.13 Madison $6.45 -.13 $14.32 -.08 Redwood Falls $6.60 -.06 $14.27 +.87 Fergus Falls $6.30 -.20 $14.02 +.55 Morris $6.44 -.12 $14.32 -.18 Tracy $6.65 -.06 $14.32 -.08 Average: $6.49 $14.23 Year Ago Average: $5.57 $12.31

Grain prices are effective cash close on Nov. 21. *Cash grain price change represents a two-week period.

Weekly export sales were a marketing year high; but were within expectations at 46 million bushels with Mexico as the largest buyer. Total commitments of 626 million bushels are down 52 percent from last year. Commitments as a percentage of the U.S. Department of Agriculture outlook are 29 percent and the lowest since 1994. We need to average 35.3 million bushels of sales per week to hit the USDA’s 2.15 billion bushel export projection.

Expectations are the Federal Reserve will raise interest rates another 75 basis points in December and we could be headed to a recession may limit the upside.

Weekly ethanol production fell by 40,000 barrels per day to 1.01 million bpd. This was the first production downtick in seven weeks to a five-week low and 4.6 percent below last year. Stocks fell 894,000 barrels to 21.3 million barrels, the lowest since December 2021. Margins dropped 35 cents to 36 cents per gallon. Gasoline demand declined by 269,000 barrels to 8.74 million barrels. The fourweek average gasoline demand is down 5.3 percent from last year.

Short-term rain events have helped Argentina’s crop as seen by the Buenos Aires Grain Exchange rating their corn at 11 percent good/excellent and up 2 percent from last week. The BAGE put corn planting at 24 percent vs. 36 percent on average while the Ag Secretary put it at 32 percent complete vs. 48 percent complete on average. More rain will be needed going forward as drier conditions are expected to return in the next two weeks.

Brazil’s first corn planting is 86 percent complete and just ahead of the 83 percent average.

Outlook: Corn had a decent technical week by holding above its 100-day moving average and posting two outside, higher days. The $6.50 per bushel level is seen as the next support level with $6.80 as the first resistance and trading range bounded by the 50 and 100-day moving averages. Seasonally, corn trends moderately higher through the end of the year. The U.S. dollar had some big swings during the week, but was in a sideways trend. We seem to be trading headlines that incorporate macro influences. Expectations are the Federal Reserve will raise interest rates another 75 basis points in December and we could be headed to a recession may limit the upside.

For the week, December corn was 9.75 cents higher at $6.67.75, July gained 4.25 cents at $6.62.5, and December 2023 eked out a three-quarter-cent higher close at $6.10.5 per bushel.

Price action around Thanksgiving shows March corn has only moved a dime in either direction once since 2011. In seven of the last 11 years, March corn has moved in the opposite direction the day after Thanksgiving vs. the day before.

The grain markets will trade normal hours on Nov. 23, and then don’t reopen until 8:30 a.m. on Nov. 25 and will close early that day at 12:05 p.m. December options expire at the close on Nov. 25.

SOYBEANS — Rainfall in South America put a damper on soybean prices to begin the week and pressure extended throughout the week. January soybeans were led lower by a very weak soyoil market despite the highest soybean weekly export sales report of the marketing year. The only fresh daily export sale announcement this week was to Mexico which bought 9.6 million bushels of U.S. soybeans.

The extension of the Black Sea deal keeps sunflower oil exports alive. A strong ringgit and perceived competition for exports setback Malaysian palm oil to a one-month low. These factors in combination with weaker energy markets shot soyoil prices to their lowest since late October.

At the G20 Summit, the presidents of China and Argentina met. China committed to deepening its cooperation with Argentina in the areas of infrastructure, agriculture, energy, and aviation. Trade chatter includes Argentina considering offering a special exchange rate for agricultural products beyond soybeans. This has not been confirmed and is still a rumor. Covid cases in China are on the rise and raise concerns about Chinese demand for about everything. Citizens in Beijng were urged to stay home over the weekend.

Recent rain in Brazil and Argentina were most welcome and leaves Brazil in generally good shape. Argentina will need additional rains as a return to

See NYSTROM, pg. 15

THIESSE, from pg. 13

costs, plus about a $50 per acre return to management, was $4.09 per bushel, with a range of $3.57 per bushel to $4.66 per bushel. The 2021 FBM average breakeven price for soybeans was $7.74 per bushel, with a range of $6.53 to $10.00 per bushel. The 2021 FBM average yields were 203 bushels per acre for corn and 62 bushels per acre for soybeans, which were above-average yields.

Considerations for flexible cash leases

An alternative to a flat cash rental rate which may be difficult to “cash flow” would be for producers and landlords to consider using a “flexible cash lease” rental agreement. Flexible cash lease agreements allow the final cash rental rate to vary as crop prices and/or yields vary; or as gross revenue per acre exceeds established targets. The use of a flexible cash rental lease is potentially fairer to both the landlord and the farm operator, depending on the situation, and how the flexible lease is set up.

A “true” flexible cash lease allows for the landlord to receive additional land rental payments above a base land rental rate if the actual crop yields and/or market prices, or the gross revenue per acre, exceed established base figures. It would also allow for the base rent to be adjusted downward if the actual crop yields and prices per acre fall below the established base figures.

Most flexible leases have been modified in recent years into a “bonus rent” agreement. This type of flexible lease uses a reasonable base rental rate which can flex upward with an added rental payment to the landlord if the base crop yield and/or base crop prices, or the base crop revenue per acre, are exceeded. However, the final rental rate does not drop below the base rental rate.

There are many variations to setting up a flexible lease agreement between a landlord and farm operator — including using yield only, price only, a base crop revenue compared to a harvest crop revenue. The big key, regardless of the flexible lease agreement, is that both the landlord and tenant fully understand the rental agreement and the calculations used to determine the final rental rate. It is also very important that flexible lease agreements, as well as all land rental contracts, be finalized with a written agreement.

Flexible leases can work well for newer or younger farm operators who may not be able to afford the higher cash rental rates for farmland. A flexible lease makes it easier for producers to utilize risk management tools such as crop revenue insurance policies and forward pricing of grain. A flexible lease, with a fair base rental rate, allows landlords the security of a solid base rental rate, while having the opportunity to share in added profits when crop prices and/or yields exceed expectations — such as occurred in many areas in 2021 and 2022. Flexible leases are a nice alternative for landlords who want to continue to work with long-standing farm operators on multi-year rental contracts, without setting cash rental rates too high to keep the current tenants.

Utilizing flexible cash lease agreements between farm operators and landlords can be a good management strategy as an alternative to extremely high straight cash rental rates. However, these agreements need to be fair and equitable to all parties. Landlords also need to be willing to adjust the base cash rental rates lower as necessary if crop margins become quite tight, as occurred from 20152019.

It is extremely important that all aspects of a flexible land rental lease agreement be detailed in a written rental contract signed by all parties. The agreement should include the base rent and yield, price determination, as well as other provisions of a flex lease. Successful flexible cash lease agreements — just as any other long-term cash rental agreement — have always involved cooperation, trust and good communication between the farm operator and the landlord.

Iowa State University has some very good resources on flexible cash leases and written cash rental lease contracts, including sample cash rental contracts, which are available on their “Ag Decision Maker” web site,: http://www.extension.iastate.edu/ agdm/. The University of Minnesota puts out an annual publication on annual rental rates and has some worksheets available for determining equitable land rental rates and evaluating flexible lease examples — as well as sample cash rental leases which are available at https://extension.umn.edu/ business/farmland-rent-and-economics. For additional information on flexible rental leases, land rental rates, and 2022 crop budgets, as well as sample lease contracts, contact me via e-mail at kent. thiesse@minnstarbank.com.

Kent Thiesse is a government farm programs analyst and a vice president at MinnStar Bank in Lake Crystal, Minn. He may be reached at (507) 726-2137 or kent.thiesse@minnstarbank.com. v

Good weather in South America will hold down soybean price

NYSTROM, from pg. 14

drier conditions is predicted in the next two weeks.

This week’s October National Oilseed Processors Association Soybean Crush report was almost exactly as expected. The crush was 184.5 million bushels and was the second largest crush for October and the fourth-highest on record for any month. Soyoil stocks were 1.528 billion pounds. Crush margins have declined, but are still historically strong which will help limit the downside in soybeans. The flat price will need to be high enough to keep bushels moving in the pipeline.

Safras and Mercado raised its Brazilian soybean production estimate by 3 million metric tons to 154.5 mmt compared to the U.S. Department of Agriculture’s 152 mmt outlook.

The BAGE put Argentina’s soybean planting at 12 percent complete vs. 28.7 percent last year and 31 percent on average; but the Argentine Ag Secretary put it at 32 percent complete. There are concerns Argentina’s soybean acres could be smaller than expected if conditions don’t get better.

Weekly export sales were a marketing year high and the highest since September 2020 at 111.3 million bushels! Over half the total was to China. This moved total commitments from 1 percent behind last year to 4 percent ahead of last year at 1.3 billion bushels. Total commitments as a percentage of the USDA target are 64.6 percent and the biggest since 2020. We need to average 18.2 million bushels of sales per week to reach the USDA’s 2.045 billion bushel export forecast.

Outlook: January soybeans dropped to their lowest since Oct. 31 on weaker vegetable oil and energy prices and recent rain in South America. January soybeans have once again moved to the lower end of the recent $14.00 to $14.70 per bushel trading range. Its 100-day moving average is near $14.13 per bushel.

If South American weather is favorable and China’s Covid cases continue to increase, the upside may be limited. At least one weather forecaster believes La Niña’s effects are fading, which if true would lead to expectations that Argentina’s losses may be limited and Brazil would be on pace for a record crop.

For the week, January soybeans dropped 21.75 cents to $14.28.25, July tumbled 17.75 cents to $14.42.25, and November 2023 was 13.75 cents lower at $13.73.5 per bushel.

March soybean price action around the Thanksgiving holiday is a mixed bag. In four of the last five years, prices have moved in the opposite direction the day after the holiday vs. the day before.

Weekly price changes in December wheat for the week ended Nov. 18: Chicago wheat fell 10.5 cents to $8.03.25, Kansas City fell 9.25 cents to $9.34.25, and Minneapolis rallied 5.75 cents to $9.51.5 per bushel. v

HUGE HOLIDAY DISCOUNTS!

neighborhoods where the rain was just right, the a pretty severe drop in early summer. Since then, yields are very good.” with reports of lower yields nationwide, prices Kent Thiesse, farm management analyst and vice president at MinnStar Bank in Lake Crystal, said he regained about half of what was lost in the early summer. was impressed with the corn and soybean yields he Corn sold locally out of the field at about $6.50 per was hearing about, but said some areas got more bushel and soybeans at about $13 a bushel. timely rains over the summer. “Those are nice numbers,” he said. “Some areas only had 8 to 10 inches from May 1 through September and they’re still getting average yields. In central and southern Blue Earth County and down to Iowa, they picked up 15 to 20 inches of Hog prices the past year have been relatively good, but Duncanson said the higher price of corn used to feed hogs has made it an “OK” year for hogs. rainfall in that period so it was highly variable.” And for the first time in a long time, there has been But in northern Nicollet County, and to the north and west of there, they didn’t see as much rain and saw more variation in yields. almost no new construction of hog facilities. “High construction costs and higher interest rates means projects just don’t work financially,’’ Duncanson said. “But things will change. It’s not doom and gloom.” Duncanson said he believes that farming practices his family has been involved in in recent years is also producing better yields, while protecting the soil and water. Ag education a focus Bowyer said the agribusiness and food innovation major in the business department and the agricultural sciences major out of the college of engineering

“We’re happy to see some of our soil resiliency prac- and technology are new, but he sees a lot of growth tices are continuing to pay off. Reduced tillage, and and potential. almost no till in some cases, and cover crops on some farms,” Duncanson said. “It’s starting to pick up and it’s exciting. We’re just continuing to put it together to show we do have ag.” “That’s just an overall shift in our farming practice — much less intensive tillage.” Bowyer said there are a lot of well-paying and varied degrees related to ag, but students and their Supply-chain snags parents may not know about them. The biggest story for farmers the past year was supply-chain issues and Duncanson expects they will continue. “We have to work at showing all the potential and good jobs there are. We have a lot of students from rural areas but farms are getting fewer. We have a lot

“We’ve gotten used to the supply issues. There’s of students from the Twin Cities who think ag and almost an expectation that things like parts or any- think farms and farm labor. thing will be delayed. That’s a fundamental shift. We used to get things the next day or two routinely but not anymore. “So we were intentional about our name — ag innovation and food innovation — because then students can see how it funnels into a lot of different indus-

“Sometimes we’re starting to get more things in a tries.” timely manner, but there’s just an apprehension that we don’t know how the supply chain is going to work.” He said agribusiness degrees work into a variety of careers, including ag lending, marketing, accounting, crop insurance, implement manufacturing and more. Prices hold up Thiesse said crop prices, although lower than early in the summer, were still strong as the harvest was in full swing. On the ag science site, careers include agronomy, soil and nutrient analysis, food processing and a variety of other science-based ag careers. Duncanson said that after Russia invaded Ukraine in February grain prices shot up but then there was The Free Press and The Land are sister publications owned by The Free Press Media. v

By TIM KROHN Mankato Free Press

Since before statehood, farmers have been working the rich soils of south-central Minnesota. The grains and livestock produced in the Mankato region continue to provide a major economic benefit and southern Minnesota is one of the leaders in Minnesota and U.S. ag production.

As farms have grown and flourished so has the agribusiness sector in and around Mankato. Soybean oil crushing, food processing, ag technology companies, ag banking and many more are attracted to and growing steadily in the local area.

Shane Bowyer, director of the AgriBusiness and Food Innovation Program at Minnesota State University, said the ag dominance in the area prompted the university a few years ago to start agribusiness programs. “We have a lot of alumni in the agribusiness world who wanted us to do more.”

The program, in MSU’s business department, got up and running last year. There is also a new Agricultural Sciences program in the college of science, engineering and technology.

Bowyer said that while the programs are young, the university’s goal is to create a school of ag. “We want to let students know they don’t have to go out of state to get an ag degree. We want to get to a point where we don’t just have a few majors, but really partner with industries.”

While the University of Minnesota has a school of ag and Southwest Minnesota State University in Marshall has a small program, many students seek a school of ag out of state.

“South Dakota State, Iowa State, U of M and River Falls have them. We’re right in the middle of all those, in ag country,” Bowyer said.

A good harvest

While southern Minnesota went into the fall in a deep drought, the harvest, while varied based on location, was good and crop prices remained relatively strong.

As Mapleton area farmer Pat Duncanson was harvesting in October, he said it was apparent some areas were blessed with timely rains over the summer and some weren’t.

“It’s location, location, location. If you’re in the FSA elections open this week The U.S. Department of Agriculture is mailing ballots for the Farm Service Agency county and urban county committee elections to all eligible agricultural producers and private landowners across the country. Elections are occurring in certain Local Administrative Areas for these committee members who make important decisions about how federal farm programs are administered locally. Producers and landowners must return ballots to their local FSA county office or have their ballots be postmarked by Dec. 5 in order for those ballots to be counted. Newly elected committee members will take office Jan. 1, 2023. Producers can find out if their LAA is up for election and if they are eligible to vote by contacting their local FSA county office. Eligible voters who do not receive a ballot in the mail can request one from their local FSA county office. For more information, visit fsa.usda.gov/elections. This article was submitted by the U.S. Department of Agriculture. v