Ben Buckner, Grain Market Specialist from AgResource, Shares His Outlook on the World Grain Markets in 2021

Hello and greetings from Chicago. It's a pleasure to be joining you virtually for the annual meeting again, and how things have changed this year. There's really no Ag market on earth that we can find that's been in a bear's trend since summer and on their own fundamentals. And it's part of, I think, what will make the next several months very special. There are no substitutes available. In that sense, US crops still competitively priced despite current prices. And it's a nice place to be. And our insight really is that not only will we have tight stocks this year, it's pretty well known, but what will probably be very tight stocks next year, even assuming trend yield. Record yield. By far record yield was needed to really change or solve a supply problem. And that's not somewhere that we've been for several years. We'll have the opportunity to sell higher prices. Revenue insurance guarantees will be helpful. And really the market's tolerance to weather issues this year, unlike the last five or six years is zero. If nothing else, that's what I want you to take away from this. It will be a bumpier ride moving forward, but this volatility in the air and, as always, will provide opportunity.

So to jump right into 2021 grain market fundamentals. The world markets of course turn bullish in late summer. And this is following the trifecta of lost supply. Major yield loss in Europe, US and Black Sea for corn, wheat, and oil seeds. And also in South America, we think. That's not been fully digested by the USDA and perhaps the market yet, and all crops have suffered losses. So it's not possible now to replace corn feeding with wheat feeding because those crops worldwide are also very tight. The markets worldwide cannot substitute rapeseed oil with soybean oil because those markets are all tight.

So even with trend yield in 2021, grain balance sheets could tighten further on a major export basis. Demand growth is also occurring. To some extent it will be about biofuels in the U.S., just on the margin eliminating small refinery waivers will help corn demand grow somewhat. Carbon becomes more important over the next four years, at least. And so that, we think bolsters the RFS and mandates more and more corn, soybean oil used in biofuel production.

But really the big driver has been China's hog expansion. So we knew this was coming, but it is happening based on the numbers that we get from reliable sources within China. And so far, that is important to us because China is not solving that issue by growing their own crops, rather on importing sizable tonnages of world corn, lots of sorghum, lots of soybeans to make soy meal. And even to some extent, they're starting to import ethanol. And that's all very good for the U.S. market.

At the same time that we've lost crop, we're adding to demand. We're seeing these growing protectionist food policies. Russia has implemented a pretty sizeable 50 Euro per ton tax on its wheat exports starting in March. This floating tax, to some extent, probably continues on Russian grain exports into the new crop year. And there's very strong indications that Argentina will follow because of inflation, because of potential crop shortages this year, but really more than anything, these are signals that these exported countries are focusing more inward on their own supply rather than choosing to dominate world trade as they have done for the last couple of years.

So to solve these issues is not going to take just one year. This is a multi-year bull market in global crops. It's very difficult to be bearish until we know that the supply problem has been solved, and that's only solved with record Northern Hemisphere crops. And that won't be known until late summer. And actually, we've learned from this year that you don't really know what final crop size is going to be until September or October. So we wait until then for a real bear market to resume. And any weather scare has an outsize market influence. We're at a point in the curve that even small changes in perceived US or world supply, having very, very impact, big impact on price.

Big picture issues are also supportive for the first time at this meeting. In a couple of years, we were looking at a weaker dollar trend. And so we think moving forward, maybe the dollar is neutral, but the change from the last 12 months has taken incentive away from the farmer in South America, in the black seed because of currency, there are no longer being incentivized as they were to expand production. And so as margins shrink, the incentive to continue to expand area and invest in technology will be eroding.

Practically speaking too, this does mean more inflow into raw materials. This shows the broad correlation over the last couple of decades between the U.S. dollar index and the basket of commodities in the US. And so as the basket of commodities starts to rise, we start to see more index fund investment. And so those aren't market-driving investors, but it does give us a pillar of demand or support. And we have seen over the last several weeks that the index funds have put lots of new money into the Ag space and the raw material space as a whole. And that doesn't go away until there are signs that it needs to change. But as inflation becomes a theme of 2021, I expect that money to stay in the Ag space.

Speaking of inflation, long-term we were thinking that there's potential for it to be very, very good for the commodity markets for the next 12-24 months. Oddly enough, COVID has triggered this need to produce nearly half of every dollar printed has been printed in the last 11 months. That either due to economic stimulus. And this is a proxy also for the world markets. The same is true in Europe. A lot of places in South America as well. And they're just printing money, stimulating the economy to maintain some semblance of welfare and wellbeing.

That money is not moving around very much though. And that's what's given us this sort of hiatus and economic growth. Demand for physical goods, stay at home purchases have been favor, but nothing else has been. So return to the velocity of money returned to something like 2009 is not expected at all, but even getting this back to pre-COVID levels. We have record amount of dollars in the economy, having those circulate at a faster rate, we think can be very, very good for a lot of things, including a lot of food products. And that working down the chain is really good for corn, soybean, and wheat as it pertains to your dairy products consumed, soybean oil in bakery consumption, et cetera.

And in the physical cash market it's not happening now. But the silver lining to that is it does come back in 2021, and the markets that we're seeing now are not based on physical demand for food stuffs. Just thinking about the metaphor of in-restaurant breakfast dining nationwide or worldwide, and what that will do to the price of eggs, price of butter, dairy operation profitability. So none of that has happened yet, but it is forthcoming. And so that will be yet another pillar of demand in the physical cash market once it does come back. And we think there's a lot of pent up demand and really interests for, myself personally especially, to go to restaurants and to do things outside of the home. So this goes back to zero or even positive. Again, we think in the second half of 2021, and that will have a big impact on the price of physical commodities once it does happen.

For grain market specifically of this year has been initially defined by the loss of production. Again, in all major exporting countries. And to put this into context, it is rivaling previous crippling drought years. So far, we have lost 54 million tons relative to initial estimates in May. We think this gets a little bigger, maybe add six or eight million tons to it as South American production is better digested. We're hearing very bad things about the early soybean harvest in central Brazil. Drought has returned to Argentina. So this tells you that we're moving towards the crippling drought of 2012 in terms of supply dislocation. And so of course, tight old crop end stocks become lower new crop beginning stocks. We're starting from a position in that we're not conducive to the return of a bearish market in the near or medium term.

And how that's impacted the U.S. corn balance sheet is pretty dramatic. Over the summer, we were concerned that the US farm economy would go through very, very dire period. And we saw a path towards the middle or end of late summer that Korean stocks would be three and a half billion bushels. Fortunately, that was erased and has been cut by more than 50%. And the USDA on Tuesday printed a number of 1.5 billion bushels. So that by itself is pretty supportive and validates current prices, but we think that this ultimately gets even smaller. As the US continues to be the dominant exporter of corn, and as South American crop loss forces even more exports to the US in calendar year 2021.

And soybeans, it's a similar trend though it's been a more multi-year process. We've gone in soybean inventories from nearly a billion bushels to now just 120 million bushels officially. We're kind of outside of waiting for the USDA to tell us what soybean supply and demand is though. It's more of a measure of determining the measure of rationing that's happening. The USDA has only printed soybean stocks below 100 million bushels one time in the last couple of decades. And so they won't get there until we know it's happened probably by the September stocks report. But 120 million bushels to us still seems too large. Based on the pace of crush and exports. And so some measure of demand has to be destroyed and it's clearly not happening now. We're still exporting much too many soybeans. There's really no incentive to slow down crush. Everyone's making money. And so this only gets solved by higher prices. It's not a situation unique to the US. Again, I mentioned the lack of substitutes.

We can pick really any commodity market in the world, and it shows a similar trend. So Malaysian palm oil supplies have gone from overabundant to very, very tight in a matter of 12 months. So this is comparable to about 42 cents per pound at the moment. So in that sense, US soybean oil is now above palm oil, but really is not uncompetitively priced in the world market. Malaysian Palm oil typically is supposed to be the largest traded vegetable oil in the world. And it's typically the cheapest. The cheapest vegetable oil in the world is trading at 40 cents or higher. That's telling us that if we need to slow soybean oil consumption, we need much higher prices than we're seeing now. It's very difficult to ration food products, but they're fairly inelastic. This is a very good source of calories as is wheat. And so it's very difficult to convince consumers to stop eating these cheap sources of calories.

And as exciting as soybean and corn and wheat and palm oil has been, the most bullish market... The winner so far this year has been sunseed oil market in Russia. So there's was clearly a problem developing. And as it relates to us, this is nearly 60 cents per pound. So in that sense, soybean oil, where it is today, it's fairly cheap. Where we're almost expecting an embargo on sunseed oil and sunseed exports from Russia based on their concern over inflation and just the need to end demand growth until you know that domestic stocks are adequate.

The second place on this list of most bullish markets would be the cash sorghum market across the US plains. So China is on pace to buy nearly all of our sorghum suppliers at the cost of the domestic market. And so China has bought a near-record amount of sorghum so far that has forced the domestic market to slow feed use. Virtually no sorghum will be used for ethanol production moving forward. Clearly that's because the price is so expensive. And this market is also buying for acres. So we think about the problems that need to be solved. We need more corn acres, definitely more soybean acres, but we've already planted more winter wheat. We'll be planting more sorghum. And so we're starting with a smaller pie to divide corn, soybeans, the cotton acres from. And so that's been the issue. And again, why I mentioned that all crops have suffered losses and if tightened supply and demand is how does this problem get solved and if it's not a one-year issue?

So, We're still bullish even at current prices. It's going to be bumpier moving forward, but our balance sheet is much tighter than the USDA's as of February. And so our end stocks were about 500 million bushels lower because we have a much higher export forecast. We think even the USDA's industrial use, ethanol use is too high, despite negative margins.

Soybeans are similar. We're above and beyond predicting some kind of stocks to use ratio. This is what we think is the absolute bare minimum, but also what we're on pace to accomplish at the rate of current crush, current exports. Even residual use has not shown us any side of providing a buffer against those two things. And so we do need these things to be realized in order to get new highs in the markets, but I'm going to tell you now why we think those will have be happening.

So, like I mentioned before, China has been the new demand driver. Not as big as the biofuel boom in 2005 to 2010, but sort of towards that in the spectrum. So they're clearly on pace to import to near record amount of feed products because of the hog herd expansion and economic growth has resumed.

In soybeans, we think that in the next year, imports will be 110 million tons. And so that demands higher production, not just in the U.S. but in South America. To turn bearish soybeans at this point, we need to record production in both hemispheres on a consistent basis based on China's need. We know China has opted for a long time not to grow some soybeans, but rather rely on the imports. And so this is a trend that gets exacerbated. And most importantly, you can see that we had a blip from the trade war and maybe the conveniently timed swine flu, but we're back to seeing growth.

And that's what's most important. So extrapolate this out for another 10 years and think about what kind of crops need to be grown in South America, and in the US, and even in parts of Ukraine, Russia. We need all the soybean production that we can get. Because they're not going to stop buying things. Because they're incentivizing hog herd expansion and efficiency. And because they've lost so many animals over the last couple of years. The margin to produce pork is just incredible. And it's being exacerbated by these new loans, which essentially are free. You can put up your animals as collateral. And so that's been part of this thing to facilitate new expansion. We've all seen probably the high-tech multi-story buildings that they're using to produce pork and grow bred pigs. And none of this is going to slow down with current margins.

And they are starting to accomplish their goals. And so again, this is a pretty reliable data, but as of September, 38 million head sow inventory. The target over the next 10 months is close to 45 million. But the rate of growth suggests that they will get there. To feed all those pigs, it takes a lot of feed. And we've seen this kind of massive expansion in hog numbers, in pork production. And again, this is only going to be accomplished for the next 12 or 24 months by imports. And also our theory too, is that you, we think this has all been a function of guilt retention so far. And so they haven't really started to explain animal numbers in terms of piglets. And so if you multiply every number of every animal that's there now, and multiply times 10 or 12 or something like that, then the need for Chinese feed production gets incredibly robust over the next 12 months. And so this is why the trade deal does help us and is partially why they started to buy US supply soybeans and corn specifically in late summer. But their need for feed is very real. It does not go away in the next year.

So to that end, we have been exporting far too much of our bean supply and we're getting to export too much of our corn supply. So this just tracks weekly export sales as a percent of final, or in the case of the current year, as a percent of USDA's forecast. And this is updated to match the USDA's new export forecast which they raised 20 million bushels in the February WASDE. It's still at a record amount. And so generally speaking, once the red line is outside of the yellow shaded area, exports are too low and vice versa. There's still nothing to suggest that we're really slowing down the pace of sales. And Brazil's really slow soybean harvest probably adds to old crop commitments over the next four to six weeks. And so mathematically, the USDA's forecast is still too low.

To date, there's been no sign that crush is anywhere close to their annual forecast. So NOPA member crush is up 7% from a year ago. The USDA's forecast for the year is up 1.6%. We will get a new number next week, but if this is at least 2% above last year, then the USDA's crush forecast is still too low. So this is not just an idea that we have that demand is exceeding the USDA numbers, this isn't just simple arithmetic still at this point.

And it's even more exacerbated we think in corn. And so after selling 230 million bushels of corn to China in the last two weeks on a known basis. 250 million bushels total. This is where we stand. So the USDA gave us a token increase in exports of 50 million bushels in the February WASDE, but it's still their export forecast, 2.6 billion bushels. It's still far too low, but we think up to 400 million bushels.

Thursday's export sales report will probably show a number of 100 to 115 million bushels. So this just shows you the discrepancy and what needs to happen and what's happening. So in every week that the US export sales number is above, at this point, 13 million bushels, the average needed moving forward gets lowered even more. So we think by the middle of March, the US export community only has to sell something like 10 to 12 million bushels per week to meet the USDA forecast. And even in years that we weren't competitive in the world market, we would average sales of 20 to 25 million bushels from February to August. So extrapolating this out, this gets you to 3 billion bushels pretty easy. Upwards of 3.2 to 3.3 million bushels if South American crop loss is confirmed. So that's, again, the arithmetic of corn exports.

Now, we're seeing this reflected in the cash market. Basis is firm relative to history in most places, not some of the feeding centered areas, but especially along riverways that have any tie to the export market. It's a spot basis has been firm for a long time. This is in Peoria, just pick a spot on the Illinois river, but it's the April and summer basis that's been most interesting and has really exploded. I think there is a concern in the cash commodity community that will we have the supply? And how do we get it from the farmer given that normal farm marketing patterns are heavily weighted towards selling during the fall and winter months.

And so if we're still physically shipping massive amounts to China and elsewhere in June, July, August, and we haven't locked in that supply, how do we get it? And so we think this sort of forward basis continues to reach multi-year highs. Continues to rally.

Because there's still no sign that we're going to slow down exports. And we have been competitively priced for really the last 12 months, but now we're seeing forward offers very competitive. This shows Argentine basis is starting to reflect the harvest, but this is an up river quote. And so you have to take the boat from up river to port and top it off. And that's about 20 cents a bushel given current rates. So that puts it at parody with the US. So US corn and Argentine corn are priced at even money today into Asia for spring and summer delivery.

So there's really no definite decision to be made. You could buy US corn or Argentine corn, and we'll see what Argentina's final crop size is, but we think it's going down. But really we're highlighting in this graphic that there was no competition from Brazil like there was a year ago. The competition from Ukraine is very, very limited given their tight supply situation that they have themselves. And so we don't think that corn export sales slow. Certainly not to the point that the USDA will be validated in its current export forecast. Again, this gets much closer to 3 billion bushels over the next couple of months.

Because we've had this very unusual growing season in Brazil, especially, and one that was somewhat expected in Argentina. This is percent of normal rainfall during the growing season ending January 31st. And so La Nina has been established for several months. And that tends to bode very poorly for rainfall in Argentina and as expected, we've had major drought and soil moisture loss there. So those crops in Argentina are still overstated.

But what's really important to us is this unusual drought that developed across the tropical latitudes of Brazil. These areas are adjacent to a rain forest yet very limited rain in December which is the beginning of the wet season. And it really hasn't caught up to normal. Argentina corn, specifically, rainfall to date suggests pretty strongly to us a final corn yield 10% below trend. And that is important because the USDA, in a lot of the trade, in their trade matrices are working with a number 3% below trend. And so this would take off another 4 or 5 million tons from Argentina's crop once it's harvested. And it again, because there is no carrier stocks, any demand of that representative would have to be shifted somewhere else. Going back to the previous [inaudible 00:23:15] lineup slide, that clearly goes to the United States because we're the only one with somewhat abundant supply at the moment.

And unlike last year, Argentina will not be saved by some abnormally wet February. Drought has returned, and this is based on, again, lingering La Nina. So well below normal precip February. And this is odd for this year specifically because the rainfall in January was better than expected but didn't really impact crop during critical stages. So the early planted crop in Argentina pollinated in December during a very, very dry period. The later planted crop, because it was delayed, will pollinate in the end of February and early March. And so all the rainfall in January did was provided enough moisture to finish planting. So there's still a lot of concern in South America.

These are pictures from our own crop tour of Goias and Mato Grosso in central Brazil during mid-January. This is not representative of the country as a whole but is representative of the very dry areas of central Brazil. And obviously those beans look terrible. And so this just shows us that Brazil is not immune to dry weather.

We're finding this unusual fungus that has been more widespread than we thought in Mato Grosso and in areas that did not experience drought. Fungus is now also spreading into Southern Brazil because it's been too wet over the last two weeks. So the weather has been wrong at exactly the wrong times in Brazil throughout the growing season. And now we're dealing with perhaps yield aside and weather aside, a timing issue. The crop was planted late. Development was slow. Now it's raining too much in the driest areas of Brazil. It's raining at the wrong time during harvest. And so we do get pretty good guidance on crop progress and harvest progress.

So as of last week, the crop in Mato Grosso, which is the largest corn and soybean producing state in Brazil, was just 11% complete. A year ago, soybean harvest progress was 45% complete. And so we don't think that soybean harvest will be 50% complete until the very end of February, maybe even the first week of March. And that's important for trade flows in the near term because we do know that there are 10 million tons of vessels waiting to load soybeans in Brazil. This is normally when their soybean export program begins, but those boats are not going to be loaded because harvest is so delayed. And as the vessel lineup grows, demurrage costs grow and it becomes prohibitively expensive to keep your boat there. And so we think that there will be more demand switched from Brazil to the United States over the next four to six weeks.

And this has a compounding impact on global corn supply and demand because the corn quite literally is planted... The planter rolls right behind the combine in central Brazil. So as they harvest the soybeans, they plant corn right behind it. So of course, as soybean harvesting is delayed, corn planting is delayed. And this winter corn crop now accounts for 70% of Brazil's total corn crop, so it is really the crop that world importers relied on. So as of last week, that winter corn crop in Mato Grosso... So again, the largest producing corn state in Brazil was only 8% complete. A year ago, it was 40% complete and probably doesn't reach completion until the second half of March this year, we think. And so we're already delayed getting that new Brazilian crop. Instead of being in August, the world importers now must wait until September to get Brazil's corn supply.

But the real issue arises because of seasonal rainfall patterns in Brazil. So usually if the winter corn crop can be planted in late February, mid-February, you get some of those April rains, maybe those May rains during pollination, but this year, the crop will start to pollinate in May. And we know based on all years, the wet season ends entirely in June. And so the odds of that crop being late harvested anyway, and pollinates during a fairly warm but completely dry month of May and June, it goes very poorly for this crop and for the world trade matrix and for global corn supply.

The last year that Brazil's corn crop was similarly late in 2016. It was also very dry during spring months there, but the USDA lowered Brazilian corn production by 20 million turns. So if that were the case, then 10 million tons of demand would be forced to the US and that's demand that all of a sudden we may not have. Or at what price do you get the corn farmer to sell all remaining bushels to maximize exports? But that also draws down US end stocks to sub 1 billion bushels. And so all of a sudden, we're at the supply and demand scenario that matches the 2010 to 2012 period. And we have evidence of how human beings react to corn stocks that tight. In $6 plus futures. So again, volatility is the name of the game. It will be a bumpy ride, but everything that we're seeing in the data is still bullish corn.

And because of La Nina, already in spite of all the normal seasonal risk that exists because of Brazil's wet season ends in June, the climate forecast as of now is dry during the spring months. And so all of this just creates an uphill battle to maximizing corn production in Brazil, which works in the favor of the US farmer. And this is also being reflected in Brazil's cash market, but again, you can pick any market and they all look very similar. They're all very bullish. Now because Brazil has no corn supply available now, their first crop, which is harvested in January and February, lost about 3 million tons from initial estimates. And so they're barely going to make it to bridge that gap between the first crop and the early second crop harvest. And so the domestic market has no choice but to stay very highly elevated. This is $6 plus per bushel in Brazil. So they're not going to be rejoining the export market anytime soon. We think September at the earliest, and that covers the entirety of our old crop market.

And there's still really no indication on the big picture since that that global demand is slowing. Partially because of China. Partially because of food security issues because of COVID. Global major crop trade will be record large in 2020 crop year. The only thing that changes or balances [inaudible 00:30:07] is price, and that's what we've seen the markets have been doing over the last several months is digesting this information. You have the 54 million ton loss in production from initial estimates. China's returned to the market because of their soaring pork production and hog herd rebuilding faster than expected. And just generally outside of China, no one's willing to go without food. And so price must go up to reflect this supply and demand scenario.

This too. Again, I wanted to highlight this because this is where we think that the major corn exporter stocks [crosstalk 00:30:44] will be in the end. Once we digest higher corn exports, higher Chinese corn imports, the loss of South American supply. And so this is just simply on par with 2011 and 2012, which $6 to $7 corn was routine. And so it doesn't happen immediately. And we do need to confirm crop loss in South America, but the numbers, again, are telling us that the psychological resistance levels, $5 first, $6 next are kind of meaningless in the big picture. So we've got to go to a price that encourages maximum maker expansion of all crops. Slows demand a little bit on the margin. and that's not where the markets are today.

This means that the US corn, soybean, and wheat export will be record large. Share of world trade will be the highest in years. And so this is all very, very positive. And as long as China stays the big driver of world Ag demand, the US has a decent foot in the door because of the phase one agreement. We think that China will spend ultimately a little over $30 billion on US products in 2020. And we will spend, at least in the language, $40 plus billion in 2021. And because China's need for feed and other products is very real, we think that comes either to fruition or very close to fruition. So the export totals will stay very, very large over the next eight to 10, 12 months.

And this doesn't give us any guidance for this particular February WASDE. And these prices are as of January 22, but I just wanted to highlight the curve. So our stocks do use curves closer to 7%. It starts to get very, very steep at that point. So projecting stocks to use 7% gives you a fair value at $5.70 plus. And so I again, just wanted to highlight that numbers are still very bullish for corn. And in soybeans we're adding very, very steep part of this curve in that the USDA's forecast of just under 3% stocks to use is $14 plus futures, which is, I think, why the soybean market has rallied against spite of disappointing export adjustments in a lower close and corn lead on Tuesday. But our number of close to 1% gets you close to $16.50, $17. And not that that happens, we don't want to make that necessarily part of the strategy, but we do know that we're moving to the left in this graphic. And so as you move even a little bit to the left from 3% and 2%, it gets very bullish very, very quickly. And again, the only way this is solved is through record crops in the US and across Northern Hemisphere in 2021.

But we're already seeing threats. The first crop that'll be harvested, of course, is winter wheat. Now droughts in [inaudible 00:33:44] now, and so that's concerning enough, but because of La Nina and its impact on weather in Texas and Oklahoma, NOAA in their latest forecast is predicting additional expansion in drought. And no change in drought to where it exists now. And so we do get into Nebraska, Western Iowa, that drought is expected to persist at least until the early part of the summer. And so that demands more rain from the sky if it's not there in the soil.

Well, La Nina is now forecast with low confidence, but it's forecast continues throughout the growing season. And this doesn't mean very much in the case of Nebraska or across the rest of the principal corn belt, but on the margin is worse than not having La Nina and is worse than El Nino. So we do see that yields below trend are more frequent than normal in La Nina summers. This is something that we'll watch very, very closely and notice that most of the models in this plume are in agreement that La Nina, to some extent, does persist in 2021.

The climate forecast into the end of April similar. Where drought exists now, it will remain. Very wet spring across the Midwest, which could pose problems in planting, which again, there's zero tolerance for any of this.

But we're also seeing sort of an atmospheric setup that's promoting drought long return. And so I wouldn't place much competence in any forecast details beyond 30 days, for example, but that this exists at a time when stocks are very, very tight, it's something that we need to pay very, very close attention to. And in marketing patterns we need to know what is produced before we make any big time decisions. New crop prices are attractive now, but we want to plant the seed that weather might be diverse during the summer months. And so keep that in mind as you make forward sales.

But really here's the crux of the issue. So our old crop soybeans end stocks 50 million bushels pipeline must have demand rationing. Our domestic use is lower than the USDA. Our exports are higher. Demand has to be kept 4.63 billion bushels. So if we're only carrying over 50 million bushels, and we assume that harvested area expands by 7 million acres. Record expansion. Trend yield. Lower total consumption next year. We're still left with what it's very close to pipeline stocks. And that seems fairly normal central US [inaudible 00:36:18]. 2.2% stocks-to-use is still $13 to $15 November soybeans. So that market is undervalued. Understandably, no one's focusing on supply demand now. Most important is the spread, as part of the arsenal that's used to ration supply, but that's the message is even in the best case scenario, the US soybean balance sheet loosens only fractionally.

Corn is not as intense but is a similar situation. If we're only carrying over 1 billion bushels next year, and this assumes a big Brazilian crop, which I highlighted may not be the case, then assuming acres expand, harvested area expands by 2 million. Record yield, slightly lower total consumption, and we're still left with only 1.3 billion bushels next year. Now this puts upside potential in December 21 corn at $5 to $5.50. If there are weather problems, we have newer highs and new part of this bullish cycle.

And so that's the message that we have is that everyone understands that commodities are highly priced now because supply and demand is very tight. But moving forward, even if mother nature is kind to us, it doesn't get much better. And so it's going to take consecutive years of record yields here, and in Ukraine, and Europe, and in Brazil, and in Argentina to really solve a supply issue. And eventually this [inaudible 00:37:48] bears pattern returns because Brazil is going to continue to expand to some extent. China eventually finds a balance between its food production and food imports, but that's not going to be next year. Perhaps the 2022 crop year, but we're still very bullish and very unwilling and reluctant to make new crop sales even at current prices.

And so I thank you for your time as always. And If you have any questions, please reach out to us at AgResource and we're happy to discuss marketing patterns and marketing strategies. And I hope you enjoy the rest of the meeting and have a wonderful night. Thank you.

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