AG Squawk with Davis Michaelson | Davis's Fertilizer Update!

We walk through the day’s ag markets, then get brutally specific on what fertilizer and farm fuel pricing looks like right now in the Midwest. We share the charts behind nitrogen, phosphate, and diesel moves so you can plan ahead instead of getting surprised. 
• Export sales snapshot for corn, wheat, and soybeans 
• Weather outlook and why it caps rallies 
• Futures closes across grains, wheat, cattle, and hogs 
• Jed Sidwell on the feeder cattle and fat cattle selloff 
• NH3, urea, and UAN pricing and why NH3 pencils best per pound of N 
• Potash versus phosphates, plus why MAP and DAP stay firm 
• Fertilizer Price Index compared to expected new crop corn revenue 
• Diesel jump, tight distillate stocks, and why exports matter 
• Propane levels ahead of grain drying season 
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Transcript

Welcome And Today’s Game Plan

SPEAKER_00 0:13

It'll be just me today. Well, me and you. Thanks for tuning in to Ag Squawk in the afternoon. We'll chat about the markets as usual. And in fact, I might even bring in Jed Sidwell just a little bit to give us some clarity on the cattle market. Big down move there. But my main focus today is going to be fertilizer and farm fuels pricing. I've got a ton of charts to share. I've got maps. There's a graph in there somewhere. Stick around, and I'll give you the straight skinny on fuels and Ferts. From behind the big blue, bodacious microphone of Ag Bull, your pal Davis Michelson, the handsome newsman for Ag Squawk in the afternoon. Thanks for spending some time with us today. I like to do this every once in a while. I've been working on fuels and fertilizer prices since June of 2012, almost nonstop. And I've got some charts, I've got some graphs, I've got some thoughts. I've even got some stuff on diesel from Weesmire that you're not gonna not gonna want to miss. Well, you gotta know. And this is the thing: you gotta know. It's not all good news. I wish I could come to you and say that fertilizer prices have gone through the floor and that everything's gonna be okay and affordable and lovely. But I am of the mind that if you're gonna have trouble ahead, it's best to know as soon as possible so that you can maybe check off some variables, put in some strategies, get something figured out before things get too far out of hand, and because there's there's nothing worse than an unpleasant surprise. So we're gonna take the surprise out of the unpleasantness, and I'm just gonna give you the unpleasantness in charts, and we'll talk through it. We'll talk through it as we we go along here. So glad that you're here. Tomorrow I'll have Jim Weissmeyer. We'll go through some policy stuff. It'll be a Friday show. I'm really looking forward to that. Let's get into get into today's markets. Export sales for corn and wheat came in

Grain Markets And Export Sales

SPEAKER_00 2:21

within the range of expectations today. Export sales fell below the bottom end of the range of analyst expectations for uh for soybeans. Not a whole lot to report there, as as you can see on the we were within expectations on corn and wheat, and that's about the biggest thing that we can say about the export sales report today. Let's go to the tail of the tape. Corn and soybean futures were under light pressure in early trade this morning. Winter wheat futures were around a nickel lower. Cattle and hog futures slid lower as well. But around 10 a.m. Central, corn and soybeans and the front end of lean hogs flipped to the positive side. The soybean market is beginning to factor in both a higher yield and also increased demand. So there's a balancing act there that we're trying to figure out. Expectations for next week report are for an increase in soybean acreage from March. And then there is the weather. Let's look at the 8 to 14 day precipitation outlook. I've got a uh I've got a map up here. Let's see, right there. Yes. Look at all of this. So the the light green there is above normal precipitation or slightly above normal. And then we've got much above normal in other areas. The darker

Weather Map And Market Pressure

SPEAKER_00 3:36

the green, the more above normal precipitation expected. And I think this is going to make it tricky for corn and soybeans to rally and probably wheat as well, just simply because as we're getting through August, it's a crucial period, and as long as there isn't too much rain, everything may turn out to be just fine for this crop here in the U.S. So I think that the market is definitely factoring that in today. Rounding through the lunch hour, corn and beans were up a few cents. Winter weed futures had fallen double digits, and livestock futures ran hard to the downside. Before we get to the closes, let me mention plus 500 software. We use plus 500 T4 software every single day. Up to the minute. Quotes, futures and options, all sorts of features. You uh won't be won't be disappointed with plus 500, that's plus 500. Over to that plus 500, December corn settled at 462 even. That's up two cents on the day. Novi beans at 1177 and three quarters was up three. Over to the winter wheats down 10 and 3 quarters in your December Chicago wheat, 650 and 12. Your KC December, 717

Settlements Plus 500 Plug

SPEAKER_00 4:51

and a half, down 13 and 1 half cents. I'm gonna click over here to my spring wheat as well and just see here. Yeah, your uh December spring wheat down 13 and three quarters. It was all the wheats, all three flavors, 694 and 1 quarter. And then over to the livestocks. Bruh, it was ugly. I've got October feeder cattle, $331.95, down $7.47 and a half cents. Over to the October fats, $224.92.5 at uh let's $4.55 lower. And even the even the lean hogs off a buck 30 in the October contract, settled at $81.72 and one half. I wonder if I might bring in Jed Sidwell really quick. Jed is he's an expert on all things cattle, keeps an eye on things, and he's got a brand new walk-up theme song today, too. Happy to

Cattle Crash With Jed Sidwell

SPEAKER_00 5:49

everybody, Jed Sidwell, dude. Uh down seven and a half bucks in the October feeder cattle, down more than four and a half in the October fats here. Just real quick, I don't want to keep you forever, but doggone it, what the heck happened?

SPEAKER_01 6:06

I think we're starting to finally see some of these cash fat cattle go to the go to the packer in kind of a wave. We've talked about this front-end supply for a while now. They're 1,700 pounds, some of them, it's dang hot in cattle country with no relief in sight. They need to go to town, and I think it's finally starting to happen a little bit. The packer, for the first time in just a little bit of a while, uh, has some leverage to maybe, you know, uh say that, well, we have a lot of people that are offering us cattle right now. Long term, I don't think there's an abundance of cattle out there, obviously. So I think we'll see eventually the price start to go back up. But here in the short term, there's enough cattle that need to go to town. Packer finally has some leverage.

SPEAKER_00 6:48

Is that the the biggest fundamental shift? Because everything else, I think, is about as it was before, isn't it?

SPEAKER_01 6:54

Yeah, I mean, everything is fairly similar. We've seen a slight decrease in the number of choice and prime carcasses, and Mike Sands and I talked about that on our Fat Tuesday show. We speculated that it might be, you know, some of them maybe going earlier because of the heat. We've talked about that some of them, you know, are maybe getting docked for age or dark cutters this time of year. So it'll be interesting to see if that continues or if that's just a temporary trend.

SPEAKER_00 7:20

Imports of cattle have have skyrocketed as exports have fallen. You you gave that the side eye this morning in your morning comments. Would you care to just give us a little taste?

SPEAKER_01 7:32

Yeah, I was gonna say, I think someone's been watching my morning show, and uh I was like, yeah, that seems familiar. I just talked about it this morning. But yeah, imports have gone up, exports have held similar to slightly down. And the thing that concerns me more is that we're not if we're going to stay, continue being the premium supplier of prime and high choice beef, we need to export it to other countries and get them to get a taste for it. Because in my limited travels abroad, I've learned that not the rest of the world likes a good steak like we do, just because they don't have access to it, so we can maybe push our exports. I think that would help our import problem as well. So it would help grow the U.S. beef industry by giving enough cash to, you know, maybe help retention rates with the interest rates that we have right now.

SPEAKER_00 8:15

Yeah. Jed, there's a lot more that we could talk about. I should probably have you on the show for a longer conversation. Maybe we can uh maybe we can get that covered next week. But thanks, Jed Sidwell, for sneaking in here to Ag Squawk in the afternoon. You can check Jed first thing in the morning too. He's he's got Ag Squawk AM and he he's talks he talks about the overnight markets. He talks about you know the things that you need to know as you're you're heading into your day in the markets. And uh I get a lot out of it each morning. I I'll be honest, I I sit here in my uh in my bathrobe with my coffee and I watch Jed in the morning to to figure out what's what's what early on in the day. All right, now with that, what I'm gonna do is run you through some of these slides here that I have. If I can get them pulled up, there we go.

Nitrogen Prices And NH3 Value

SPEAKER_00 9:06

I'll click over to the first one. Oh, here we go. All right, all right. So I'm just gonna run these down, not a whole lot of commentary on the what's, whys, and wherefores because they're all pretty similar. We're dealing with the global market when we're talking about fertilizers. NH3 would be the one exception, and you'll see what that means for prices relative to the rest of the nitrogen segment in just a moment. But here we go. I've got this is according to USDA data as of the 24th of July. So I'm gonna talk about expected new crop revenue in in the future here in just a few minutes. I I took the corn quote from December Corn Futures from that same date. So they they will align. It'll be a little different than it is right now, but basically similar. We we had a decline in both Iowa and in Illinois. Iowa came in at 1,05 and 80 cents per short ton on NH3. Illinois a little higher at 1,022.50 per short ton for an average of 10, 14.15. Over the reporting period, that was actually down $56.88 and one half cents from the previous report that USDA put out. So NH3, as you can see by the chart there, the light blue is this year, the purple is last year, and the dotted line is the three-year average. We are well above the three-year average, well above year ago, but at least its nose is pointed in the right direction, which is to the downside. Let's flip on over to some other nitrogen products. Here's urea had a nice cascade in urea prices. We're down $14.87.5 since USDA's last report at a Midwest average of $738.75. That's still pretty high in my book. And let's let's move on before we discuss the nitrogen segment at large to UAN. I've got 28% down almost $20 per short ton at $5.30.56 and uh 32% still sticky at $584.09. Now, what's interesting about that, if I take all of these and go uh kind of put them all together in the same boat, so I compare them all one to one to anhydrous ammonia. Anhydris is the cheapest form of nitrogen there is out there. A lot of that has to do with the U.S. domestic production. There's not a lot of demand for anhydrous elsewhere in the world, and so we've we've got a pretty decent supply. Well, better than anybody else, still at 1,014.20 cents per short ton of anhydris, but on the same scale by the pound of N, and if if we work it all in together by the maths, you weigh in 28% on that same scale would be 140 bucks per short ton above anhydris. 32% is worse, way overpriced at $1,232.59. This is math stuff. These aren't actual prices, but this is as if they had the same nitrogen content, and it's a whole math thing. So if 32% and anhydris were the same thing, 32% would be about 200 bucks overpriced. And uh urea not quite as bad. That would come in at 1,044 and 81 compared to anhydris' $1,014 and 20 cents. So currently, right now, the cheapest form of nitrogen available in the Midwest, anhydrous ammonia, good old NH3. We'll probably see those white buffaloes coming out after harvest if we can get the if we can get the weather to cooperate. I know some are front bought clear out to spring on some of their UAN, and that's probably a good idea, although I would like to see these prices come down a bit, and I'm sure you would too, as we're looking at this UAN chart. You can see our present prices are well above year ago and well above the three-year average. Let's move on to gentle potash. Gentle potash up all of 46 cents in USDA's most recent report in the Midwest at an average of 495.44

Phosphates Potash And Fertilizer Index

SPEAKER_00 13:17

per short ton, well below the three-year average, but above the year ago price. Moving on to phosphates, and this one has been a stinker for a while. Chinese production, Chinese send-outs. We haven't been getting as much Chinese product, and this it's the it's similar for urea as well. Not as much Chinese product is being sent out into the export market. They're trying to grow their own crops, encourage domestic production. And what we're seeing is a direct price response here in the phosphate market, both MAP and DAP higher from the last report. DAP up just $2.78 per short ton at $8.82.78. MAP up $10.35, $9.22.86 per short ton presently on average in the Midwest. Now, I had those numbers where I compared the different forms of nitrogen to anhydrous. I've got the same math done on DAP and MAP here, and actually on potash. Potash is cheap compared to anhydrous right now. DAP is uh just slightly overpriced compared to anhydrous. MAP is substantially overpriced, actually. So your cheaper form of phosphate is going to be your DAP right now, especially when compared to the price of NH3. So I take all those numbers and make an average out of them. I call it my FPI, my fertilizer price index. It's what you might call a synthetic number. It's not in dollars necessarily, but it does give us a one-to-one comparison directly with one acre of expected new crop corn revenue, as you can see. So I've got the fertilizer price index in the light blue there, way above that purple line, which is expected new corn revenue. And there's all kinds of math that goes into this that that we won't get into. But the as with anhydris, we're seeing the fertilizer price index at least tip in the right direction. I'm at 1072.09 on that. That's down 48.30 points since our last report. Now, it it would be super keen if anhydris was a little a little more a little higher than expected new crop revenue. And it would be great if our fertilizer price index, our FPI, was uh a little bit lower than new crop revenue. We're at 1072.09. I calced out on this day, what was it, uh July 24, I said. I calculated out at 832.50 roughly per acre there in the Midwest. And so we're still at quite the premium when it comes to the fertilizer products compared to one acre of expected new crop corn revenue. Your yield will have an impact on that, of course. I've got to use kind of an average yield when I do this math here, but that's how she sits. When if you want a visual representation of fertilizer is just too doggone expensive, we're moving in the right direction. You can see we got a little strength going in the corn market, we've got a little softness going in the fertilizers overall, but wow, still still a fairly wide expanse betwixt the two. Let's move on to fuels. Look at this

Farm Diesel Spike And Tight Stocks

SPEAKER_00 16:36

one. This is quite the chart here. Farm diesel. This is again averages for Illinois and Iowa, and I've got Ruby Red averaging $4.32 a gallon up 56.5 cents since USDA's previous report. Iowa's at $4.19, Illinois at $4.44 per gallon, once again for an average of $4.32. I'm going to rip something here from Wiesmeyer's comments earlier today, and some of them from yesterday, too. But this is interesting. I'm just going to read a little bit here. He says, quote, the U.S. diesel market tightened again last week, and the culprit was not the refinery, it was the dock. The Energy Information Administration's EIA Weekly Petroleum Status Report released Wednesday showed distillate fuel inventories fell. So distillate fuel inventories fell 3.5 million barrels in the weekend of July 31. Even though refiners were running at near peak capacity. Refiners running at 96.5% of production capacity on your distillate fuels. That draw pushed distillate stocks. He continues to roughly 12% below the five-year average for this time of year, a deterioration from about 10% below just one week after here. And I'll bring this up too. This is quite the chart. What you're looking at here is a chart from EIA, the Energy Information Administration. And this kind of gray area here is the five-year average range. This little blue line clear down at the bottom and outside the bottom end of the five-year average. Yeah, that's current stocks. This is clearly price supportive. And if we've got refiners already running at 96.5% of capacity, we've uh we've got some trouble in River City. Now I did talk to Jim. I asked him, I said, is there any such thing as running 100% of capacity? Is that is that even a thing? And he says, well, sure, but it's kind of a moving target. You've got unexpected outages, you've got maintenance outages, you've got all sorts of things. 100% capacity really, you don't see it all that often. Really, we are running about as as we're refining as much as we can right now, is is the short answer. 96.5% of production capacity. So the other there's another sort of there's another wrinkle here, and it's exports, diesel exports from Wiesmeyer. Quote, foreign buyers are in effect outbidding the U.S. market for Gulf Coast barrels, with the tax having knocked out a slice of Russian refining capacity and Moscow's diesel export ban sidelining a supplier that normally provides about 12% of the world's diesel exports. Buyers in Latin America, Europe, and Turkey are paying premiums over U.S. wholesale prices big enough to cover ocean freight and still come out ahead. That arbitrage is exactly why a record 1.9 billion million barrels per day left U.S. ports last week. Every cargo sales because the foreign bid netted back to the Gulf Coast beats the domestic one. And here's, as Jim would say, bottom line, here's the bottom line. Until that premium narrows, U.S. farmers are competing with overseas buyers for the same gallon of Gulf Coast diesel, and the overseas bid is currently winning. Once again, let me just go ahead and pull up that that diesel chart because it is a bit of a uh a bit of a

Diesel Exports And Global Disruptions

SPEAKER_00 20:16

development. Man, we were we were we were so close. But if you look below here, you've got 2024 in that little green line at the very bottom. I didn't do a three-year average. 2025 is the purple. That's last year. And here, this blue line is this year's Midwest average as reported by USDA. Once again, coming in at 432 per gallon, up 56.5 cents on the week. We need to get some of this weirdness around the world figured out, especially we need to get some Russian diesel flowing again. We need to get that Strait of Hormuz back open again. Let's let me just look for a second here over at the crude oil because I think we were higher on the day for a while anyway. Come on, computer. There we go. There we go. Too many windows. Too many windows. Yeah, here we go. We're back up. We've we've seen some pressure on crude oil the last couple of days now. I've got the front end up 220, up 222 here in the October at 76.27, up $2.05, $74.99. Call it $75 in the November. Crudoil is certainly responding to all of the stuff that's going on. And I did hear rumors. I'll talk to talk to Jim about it for the details, and we'll see how it shakes out by Friday afternoon tomorrow. But it sounded like there's a deal in place with the one caveat that the U.S. can't use the Strait of Hormoose. Dandy. That's just great. I'm not sure that that helps us any. And I'm not sure the Trump administration is going to going to back down. I don't think they're going to see that as sufficient to end this conflict. All right. Just one more chart that I want to show you here. And that is propane. You're probably going to be getting letters if you haven't already for your summer refill. Currently, and I've got so many windows open here. Currently the US USDA puts it at a buck forty five per gallon. Feels high to me. You may find yourself if you're buying,

Propane Pricing For Drying Season

SPEAKER_00 22:16

you know, a whole crap ton for the winter, whether you're using it for heating or for grain drying, which you know, we saw that forecast. It it looks like it's gonna be wet for at least the next eight to fourteen days in the in corn country, in the gut slot. There, you're gonna probably need to run it through the dryer at some point. A buck forty five doesn't quite do it. I imagine your bid would be around maybe a buck and a quarter, a dollar thirty. I would say anything that you can get below a dollar thirty feels like feels like a pretty good deal to me because that average, yeah, it's down three cents from USDA's previous report, but at $145 a gallon, that's that's expensive propane. That's that's up there. So I that's about all that I wanted to share with you today. Let's go ahead and move on and talk about the weather. Today, uh, we got some uh thunderstorms overnight here in Kansas City. It's uh kind of cloudy today, just sort of muggy, but not nearly as hot. We're low 80s, which feels like relief. Um, it's not exactly Zak hefty weather, you know, 75 degrees and and sunny every day, but but we're catching, we're catching up. The National Weather Service says a front will bring scattered showers and storms to portions of the eastern uh and central United States. Severe storms expected in parts of the Great Plains and Ozarks

National Weather Roundup

SPEAKER_00 23:32

today. Meanwhile, dangerous heat to intensify across the desert southwest and the Indermountain West. Elevated wildfire conditions will develop across portions of the northern and central plains, and air quality issues will persist in the northwest. Quite the fire scene out there in the uh Pacific Northwest. I saw some video yesterday of people getting away from uh a lakeside community, they had to get in their boats to get away from the fires. Pray for those good people. Uh, massive losses and uh lives massively disrupted. Let's move on to some items of mild interest, should we? According to popculture madness.com in 1966 in a post-fight interview. How would co sell honors Mohammed Ali's wishes to no longer be called Cassius Clay. If you're watching on YouTube, leave a comment if you remember how it could sell. That's not a that's not a bad Howard Co sell. Yeah, Jed has no idea what I'm talking about, but that's okay. That's alright. In 2012, NASA's Curiosity Rover landed on the surface of Mars. Oh, and here's one to make you go, ah, this will make you feel better after all that fertilizer and fuels. Good news that I gave you. Get this. Wayne Allwine, the voice actor for Mickey Mouse, and Russi Taylor, the voice actress for Minnie Mouse, got married in 1991. Aww, don't we all feel warm and fuzzy? As we've said before, a group of giraffes is called a tower, a group of racco a group of raccoons

Odd Facts And A Quick Smile

SPEAKER_00 25:07

is a masquerade. Now, this a group of flies is most commonly called a swarm or a cloud, but can also be called a business. Huh. A group of flies is called a business. That makes you think. Moving on. We've got uh we've got to make time for today's Ag Bull Injustice. And today, for today's Ag Bull Injustice, I'm committing the ultimate injustice of all by using my own power as benevolent host of Ag Squawk in the afternoon to grant myself a pardon with full immunity from today's Ag Bull Injustice. And that's the most injust thing I could think to do today. Your Honor, I object. May I direct you to Agbull.com where you can dig deeper with AgBull Intel, 855-737 Farm. Take the Markets by the Horns with Agbol.com. And special thanks to Trade the News for keeping me and my squad updated on the news that moves the markets. Get useful

Ag Bull Injustice And Sign Off

SPEAKER_00 26:16

news from Trade the News. News you can use. That's TradeTheNews, Trade the News. Jed Sidwell will be back first thing in the morning to get you set up for your Friday, Friday, Friday. And then I'll have Jim Weismeyer for our Friday feeling conversation tomorrow afternoon on Ag Squawk. Come on back, won't you please go ahead and tell you?