Katie Geerdes

Mexico (Forth in a series) President Trump says that he intends to impose 25% tariffs on Mexican imports into the US but has not extended the same hand to Mexico to join the US as a state that he has Canada. He is serious about border issues with Mexico, combating illegal immigration crossings along with drug trafficking and smuggling. He has brought up these same issues with Canada but Canada is nowhere near the problem that Mexico is. Canada is already rushing to expand its border and customs controls responding to Trump. Mexico doesn't break as much sweat despite the temperature there officially interfering with illegal trade fearing retaliation from the Cartels. Its government has been infiltrated by the Cartels. They go for high profile actions to impress the US but accept the Cartels as part of their national identity, often protecting them rather than fighting them. Partnering with China for a source of fentanyl, the Mexican drug Cartels are threatened by the US that they will be declared Foreign Terrorist Organizations which gives our government authorization to use the military and all other resources against them. Expect the White House to declare a number of 'emergencies', both foreign and domestic, as these declarations…

Corn and soybean futures have strengthened over the last month, but basis has generally weakened. Higher board values offer an additional incentive for farmers to let go of more old-crop grain during a month that normally already features some of the year's heaviest selling activity outside of harvest. Grain merchandisers are also in a window of relative comfort given that there is carry in the price curve and still almost a month and half to go before March futures enter the delivery period. Marketing decisions being made following the latest futures rally should include particular consideration of your outlook for basis and whether or not it can improve before the grain will be delivered. Look at the futures spreads as well and run the math on whether carry premiums plus the potential basis gain will be enough compensation to offset your storage costs.   If you think that futures are nearing a top, that basis will not firm up again, and that the futures spreads are not wide enough to make deferred delivery pay off, then you should be selling cash grain at the current spot price. You should do nothing and wait if you believe that basis and board…

The same weather pattern in Brazil will continue this week with above average precipitation in the North and below average to the South. We do see rainfall beginning to return around January 20th and building into the end of the month but to what degree is uncertain. Everyday stress damage builds, especially in Argentina where temperatures remain elevated. While most of the dry pattern has fallen on RGDS, parts of western Parana and Mato Grosso do Sul have also been affected. We do see 2+ inches falling early next week in many areas but until then farmers will be on edge. It should improve conditions in Parana and Mato Grosso do Sul but showers do not appear to be as widespread in RGDS and Argentina.  While we typically rely more on the European model, it is important to note that the GFS model is much more generous, seeing widespread rainfall by January 27th.   The dry weather in RGDS will undoubtedly have an impact on soybeans yields, however they still have time to recover. It will likely have a greater impact on first crop corn yields that find themselves in the critical ear fill stage. Nearly 10% of the first…

Greenland (second in a series) Now when President Trump throws out buying Greenland what he means is acquiring control of what is necessary to protect for national security interest rather than specifically statehood. Greenland would be suited for becoming a territory of the US. He is also forward-looking addressing problems that may not be problems today but actually positioning for the future. China almost always appears to come up in the mix as they are looking ahead. As China is always positioning for the future it becomes compelling that we do likewise. China has led the world in researching the Arctic as ice lingers there less each year or it opens completely. The Arctic Ocean would provide the shortest trade route to Europe for Asia. It would provide alternative relief for China from many of the other choke points such as the Suez or Panama canals that it faces connecting to Europe. In 2007 the Northwest Passage opened part of the year to ships without an icebreaker. In 2016 a passenger ship with 1500 tourists transited the passage for the first time. In 2018 two freighters rounded eastern Greenland and used Russia's Northern Sea route going to Asia. There are plans…

Panama Canal (first in a series) President Trump has been throwing out ideas for the territorial expansion of the US. The Panama Canal now connects the Gulf of America to the Pacific Oceans according to newly named Trump nomenclature. He says that we need to reacquire the Panama Canal by force, if necessary, purchase Greenland and add Canada to our list of states as being a strategic necessity for us. While his comments have been taken as threats by those they were directed at and discounted as whims by others, I believe that there is a solid rationale behind all of them and they need to be taken seriously and further examined. DJT desires to leave a historical legacy of being a consequential president that Made America Great. That is not just a slogan. First of all, changing borders or adding territories of influence can be accomplished by negotiation and deal making and that is what our new President relishes doing. This is by no means the first time we have negotiated such real estate expansions from the purchase of Alaska from Russia in 1867, known as Seward’s Folly at the time, to the use as the 49th parallel as our border with…

Today was Crop Report Day – but it was not just one crop report that was released; there were seven of them. Along with the usual World Ag Supply and Demand Estimates (WASDE) update, USDA issued the monthly Crop Production report, a Crop Production Annual Summary report, the quarterly Grain Stocks report, the quarterly Rice Stocks report, an annual Winter Wheat and Canola Seedings report, and a Cotton Ginnings report. Here were the highlights:   The January data release is most known for the crop production summary report that includes possible revisions for last season's yield and acreage estimates. Shame on the USDA for waiting so long to realize such sharply lower yields relative to their November numbers – the corn yield dropped 3.8 bushels per acre compared to -0.4 expected and soybean yield fell one bushel against an average trade guess of down just one-tenth. With these kinds of misses, the government analysts should not be taking a month off and skipping the production review in November.   Accounting for the largest reductions in corn production were yield cuts in Nebraska (-6 bushels per acre), Indiana (-11), Minnesota (-9), and Kansas (-9). The Illinois state yield was dropped one…

I do not see another sector of our economy which is more at risk to looming trade and immigration issues in 2025 than ours, the Ag sector. The Ag economy is weak and grain producers continue to work with negative margins. Interest rates are unlikely to decline further and farmers are borrowing more money to subsidize the gap between incomes and expenses. Current farm bill safety net reference prices were worthless as they were set to low for relevance producing no payments despite losses. There is no safety in ARC and PLC. If these generate payments then we truly will be dealing with a financial catastrophe. Crop Revenue Insurance will continue to be the most important component of risk management. That has always been the case but Livestock Revenue Protection Insurance is now becoming much more widely used by livestock producers. Strong livestock production returns improved the overall net farm revenue in 2024 causing USDA to improve their initial forecast. Cattle prices are at historical highs now leading into 2025 with their chin.   The lame duck Congress did extend the existing farm bill but it is stale and in serious need of revision. I would not hold high hopes…

La Nina forces continue to bring drier than normal weather to Southern Brazil and Argentina. We have little doubt there is crop stress occurring in these areas, however, we must weigh that against the fact that an estimated 88% of Brazil's crop regions are flourishing. I would agree with the narrative that Brazil's good areas are out producing the losses in Argentina. As we have mentioned in previous reports, RGDS represents 20 MMT or less than 12% of Brazil's crop. If RGDS loses 10%, that amounts to 2 MMT. USDA has pegged Brazil's crop at 169 MMT and many private forecasts are already looking for a 3 MMT to 6 MMT boost. Therefore, it is not unreasonable to expect that the gains could offset the losses.   Potential losses in Argentina likely pose an even greater threat to the Bears. First off, triple digit heat is encompassing most of Argentina whereas in Brazil temperatures have remained surprisingly cool up until now. Second, Argentina has a very long planting window and the last 8% or so has not even been planted and with this dry period it will either get planted late or not at all. In our experience, a two-week…

Let's start the New Year by standing back and taking a big picture view of these markets. The corn market outperformed the soybean market in 2024 ending the year with a significant recovery from its August low with the March contract that we are working with now having recovered 57 cents to a recent high near 460 where weekly chart resistance begins. The initial rally was 3 waves up from that August low which is corrective suggesting the recovery is part of a major correction in what is still a bear market. There is as yet no confirmation that the correction has climaxed.   While corn production scored a record high yield in 2024, it was not the record that the trade once thought it was, being trimmed by USDA late season. The same could be said for soybeans which were impacted by the late season drought more than corn. My corn yield was 19% under my APH, impacted by flooding, and generated a revenue insurance claim. In the case of corn demand, it was underestimated during the demand season in all categories: exports, feed and ethanol usage. There was a significant regional disparity where corn west of I-35 saw…

There was a time last summer when funds imagined that corn demand was so weak and anticipated yields were so high that a 3 bln bushel carryover was not out of the question. Thank goodness that did not happen. I think that you could have taken a lot of bets that the 2024/2025 corn carryover would not be smaller than the 2023/2024 carryover but that is where the USDA went in the December WASDE report. 1.738 bln versus 1.76 bln bushels. They will still likely print a record yield but have understated demand for a long time. USDA is typically quick to tell bad news and slow to release good news. In my opinion they should have adjusted supply lower in the September stocks report but then again reducing the carryover as they did in the December WASDE report was early by their standards. I would have expected that they would have waited until the January annual report. From our perspective in NW IA, we have believed that corn stocks were overstated for some time. Our basis had run 30+ CBOT and we only touched par for the basis at the peak of harvest. The stocks were short in this…