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[00:00:00] Mike Howell: The dirt with me, Mike Howell, an eKonomics podcast where I present the down and dirty agronomic science to help grow crops and bottom lines. Inspired by ekonomics.com farming’s go-to informational resource. I’m here to break down the latest crop nutrition research use, and issues helping farmers make better business decisions through actionable insights. Let’s dig in.
Well, hello again everyone. Welcome back to The Dirt. If you’ve been tuning in this season, we’ve been trying to get everybody ready for this upcoming season. The next thing that I thought we ought to talk about to help get everybody ready is the current market conditions and look a little bit into the economics To help us do that, we’ve got Dr.
Chad Hart with Iowa State University with us today. Chad, welcome to the Dirt. It’s my pleasure to be with you, Mike. Chad, if you would, take a couple of moments and introduce yourself to our listeners and let ’em know what you do.
[00:01:05] Chad Hart: My name’s Chad Hart, extension Economist with Iowa State University. And what that basically means is I run around the countryside talking about corn and soybean prices and how they’re changing and what’s changing.
And as we move throughout the year, originally grew up down in southwest Missouri in a small locker plant down there. We did a little cow calf operation as well. And so when I moved up here to Iowa to go to grad school, they thought, oh great. You would make a great grain economist based on that. So needless to say, yeah, it’s been a an interesting road that led me into being the corn and soybean guy at Iowa State.
[00:01:35] Mike Howell: Well, Chad, we’re glad you’re with us and I heard you speak at A TFI conference last summer and you had a different outlook on things than a lot of people I’m hearing talk about, and I thought it’d be great to get you on the program and go through what you’re seeing for this year and what growers need to be aware of.
One of the first things I hear when I hear economists start talking is they talk about stocks to use ratio. Can you help our listeners understand what that is and why that’s so important?
[00:01:58] Chad Hart: When we’re talking about stocks to use ratio, what we’re basically looking at is sort of how much of the crop is left at the end of the marketing year.
Or to put it another way, how much of the crop do we have left in storage right before harvest? So this is the leftovers from last year, and we compare that to how much we use throughout the year. The use part is basically all the ways we use corn, whether it’s through feed, ethanol, exports, et cetera. The stocks to use ratio sort of gives us an idea of do we have.
A lot of stocks building in place, that stocks ratio is going higher and higher, or are we seeing that ratio move down, meaning that usage is growing? Typically that means higher prices because you’re seeing that usage start to eat through all those stocks. As we think about the corn and soybean markets for the past couple of years.
We’ve been seeing those stocks to use levels rising, meaning that those stock levels are building and that tends to put downward pressure on price. That’s why a lot of economists concentrate on that one number, that stocks to use ratio because it tells us the relative balance between supplies and demands and which one is growing quicker than the other.
[00:03:05] Mike Howell: Chad, tell us where we are today. Is that number coming up? Is it coming down? What’s it looking like?
[00:03:10] Chad Hart: In this case, it’s mixed, depending upon what crop you’re looking at. For corn, that number is coming down. We saw the supply side of the corn market actually move down a bit in terms of overall production year on year, but we’ve been seeing usage.
Actually gain to record levels right now. And so that’s helping lower those stock levels stocks, the use ratio is dropping and you’ve seen some positive momentum in the corn market over the past few months. On the other hand, crops like soybeans, it’s been a little more problematic that stocks, the use ratio’s luckily gone up a bit because we produced more than we were using.
And so that put a little squeeze on prices and not allowing it to grow. And when you think about how other crops are playing into this, they’re sort of falling in between those two extremes, like wheat. We’ve seen some gains there because yeah, the stocks to use ratios narrowed down a bit over the past couple of months.
[00:04:01] Mike Howell: Chad, what does this mean for growers? I’m hearing more and more talk about people increasing corn acreage or reducing soybean acreage. Do you think that’s real this year? Or what do you see in your part of the world?
[00:04:11] Chad Hart: Oh, I definitely do, and I would say farmers started to show signals of that. Actually even last fall, as I drove around right after harvest, I did get to see a lot of fertilizer being applied in the fall.
That’s usually a really good sign that that land’s going into corn production. I saw a lot of tillage happening there as well, and typically that happens more in front of corn as you look out there. And when we look at the, let’s call it the general rotation that we see farmers follow ’cause especially with corn and soybeans, they’re either typically either doing a corn soybean rotation or a corn corn soybean rotation.
Well, if we look back to what we planted in 2023. It was around 94 million acres of corn and around 84 million acres of beans. 2024, we saw the corn move down to 91. We saw the beans move up to 87 and the expectation, and in fact, USDA through their ag outlook forum basically said we’re gonna return back to close to what we saw in 2023, which is 94 million acres of corn and 84 million acres of beans.
So sort of following, if you will, the rotation that we’ve set in place over the past couple of years.
[00:05:18] Mike Howell: Now, Chad, I know you’re in Iowa, and corn and soybeans are the predominant crops up that way. We have listeners all over the world and another crop that we pay a lot of attention to is cotton. Is cotton something you pay attention to a little bit or can you give us any insight on what the cotton market is doing?
[00:05:32] Chad Hart: Yep. I can a little, in this case, this comes from growing up in southern Missouri. You had to know the southern crops well, and I look at it mainly from the perspective. If you think about corn, soybeans, cotton, they’re competing for a lot of the same land. So you do have to know what’s going on in those other markets and what’s happening in cotton is sort of like what we’re seeing with soybeans.
Usage hasn’t been growing quite as fast. Mainly because both soybeans and cotton are export driven crops. We tend to export half or more in case of cotton. Actually, I think it’s close to 80% of all of our production is exported, and especially if China’s a big market for those exports, that usage hasn’t been as strong for the past few years.
Stocks have been building up and prices have been in decline. So as we’re looking at cotton pricing here, right now, we’re not in a really good spot, and USDA’s projection says we’re not gonna move away from where we’re at right now, too much. We’re expecting actually a few less acres of cotton as we are looking out there with those acres, probably moving into something like corn.
[00:06:33] Mike Howell: That’s exactly what I’m hearing on the ground, talking with farmers in this area, more at cotton acres going away and corn acres coming back up. Chad, we’ve talked about the stocks to use ratio. We’ve talked about what the prices are doing, but there’s always something that could come in and drive these markets up one way or drive ’em down another way.
What kind of factors are you looking at that could make a significant change in these markets before we get to harvest?
[00:06:55] Chad Hart: Well, we’re definitely watching weather, which I know you’ve covered in previous episodes here, and we still have fairly significant drought throughout the country. It is a concern as we go into 2025, will that really have a big impact on production now, at least for the corn and soybean markets over the past few years.
You could argue the droughts of recent past haven’t had that big a bite out of production, but that’s not to say that’s one here in 2025. Couldn’t, and so definitely weather could still push prices significantly higher. But as we look at the demand side of the market, trying to figure out, okay, is there something sort of manmade that can pull these markets along?
The big mover right now is the export market. When we’re looking at what’s happening with corn and a rally, we’ve had. Over the past four or five months. A lot of that is because exports have been growing for the past six, seven months. Corn sales right now internationally are up about 30% and those sales are up almost everywhere you look, whether it’s Latin America, I.
South Asia. In fact, the only market right now that’s really down as far as corn sales are concerned is the Chinese market, and it’s that market there. That highlights a problem that I’ll say when we look at soybeans or when we look at a crop like cotton. That’s why they’re struggling a bit more on the price side.
China is not a very big market for us for corn. In fact, right now there probably are. 25th, 26th, largest market. So they’re well down the, if you will, the shopping list for us. But when we look at a crop like cotton, China’s usually in the top five. When we look at a crop like soybeans, China is number one.
So the idea is if that Chinese market’s down, that tends to impact the cotton and soybean markets a bit more. And that’s why we’ve been seeing a lot harder time moving prices higher for those commodities.
[00:08:42] Mike Howell: Chad, we really didn’t prepare for this talking before the episode, but I know you mentioned you were from southwest Missouri and you have dealings with the cattle markets as well, and I’m seeing all time record highs for feeder cattle right now.
How is this going to factor into that? Can these cattle prices stay up and is that gonna affect the corn markets? How is all of this gonna work together?
[00:09:01] Chad Hart: Well, that’s deal. I think. Can that price stay up? Yeah, it likely will because let’s face it, that cattle price has gotta stay up there in order to entice folks to begin to add to the cattle herd.
And right now we’re just not doing that. And I would argue there’s two reasons why. One, the drought, the idea is it’s hard to add cattle in the Great plains if you don’t have the grass to put ’em on. The other though is the price. As you say, prices are incredibly strong right now, not only for the animals, but as we think about the beef, the meat in the marketplace, the steak at the grocery store, and right now we’re finding that that heifer.
She’s worth a little bit more at stake right now than she is as a mama cow. And as long as you have that, that means that heifer’s going into the meat market. But it also means we can’t keep her retainer and start to build the herd. And as long as the herd shrinking cattle prices will remain incredibly strong.
That said, once we start to rebuild, that rebuilding effort will take the top off the market when that occurs. But at least as USDA’s looking at it right now, and I gotta admit, I sort of agree with them. We probably won’t start growing the herd not until probably later this year or early next year. And again, I go back to the drought as probably the biggest reason why you really can’t start to grow out there on the Great Plains unless we’ve got some grass out there to support that heifer as you grower up and breeder and start to create that next line of calves.
And so till we get better conditions there, it’s hard for the cattle industry to grow. So, like I say, I expect those cattle prices to remain fairly strong. The thing that’s been supportive of that as well. Is that US and international consumers have been willing to continue to buy beef despite those high prices.
Our consumers have went along with us and helped support the industry during this time of high prices.
[00:10:45] Mike Howell: There’s nothing like a good steak unless you get a good pork chop in there. Let’s go back to the row crop side of things, Chad. You know, the last few years, I guess, since Covid started really. Input prices have really been going up.
The price farmers have to pay for seed, for chemicals, for fertilizer has really went up. We saw that come down a little bit a couple of years ago, but talk to us about what you’re seeing this year in terms of inputs compared to the last couple of years. Well, I
[00:11:09] Chad Hart: think as we look back over the last couple of years, I would say we really hit the high watermark in terms of input prices, especially late 22, going in early 2023.
That’s where we saw a tremendous spike in the fertilizer prices back then, but we saw other costs rising as well. As we look here today, I would say in general, costs are staying relatively flat, but there are some categories going up while others are going down. For example, as USDA looked at it, what they were finding are things like agricultural labor continues to cost more and more.
That cost is going up. When you look at seed and technology that we use on the crop side, those costs continue to go up. As far as replacement animals for our livestock industry, those have been going up. But when we look on the other side of the ledger, we see things like fertilizer costs have actually come down a little bit.
Over the past couple of years, we have seen feed costs for our livestock industry work down. After all these lower crop prices tend to translate into lower feed costs, and so we’re seeing other things. Lower on the cost structure. So overall, when I look on like a cost per acre basis, I’m gonna argue we’re flat.
But what that also means is given the yield growth we’ve had, cost per bushel is slowly working its way back down again, which is typical of what we see. When you’re seeing incomes like we are declining over the past couple of years, it makes sense that the cost would eventually follow.
[00:12:29] Mike Howell: Chad, that leads me into my next question, and I’m sure you’ve spent a lot of time working on planning budgets for this year and trying to help growers understand which crops are going to be more profitable or less profitable.
And we’ve talked about a few of the things that go into those, but talk a little bit more about the planning budgets and how they look this year of what’s looking more favorable.
[00:12:47] Chad Hart: In the case of at Iowa State, we do a production cost budget each and every year. As we looked at that for the upcoming 2025 growing season, what we did see was that corn.
Costs have come down a bit. We were at four 60 a bushel in 2024. We’re not 4 35 a bushel for 2025. We saw a little bit of reduction on the soybean side as well, going from 1125 to 1115. But as you look at what’s going on in there, again, it’s a lot of cases that. Land cost here in the state of Iowa, relatively flat.
Fertilizer costs have come down a bit, and the big thing that’s gone up is that agricultural labor component is really the costly input here. But overall, as I mentioned, both on the national scale and the Iowa scale, cost per bushels coming down a bit. And what that has done is that it’s accentuating what we’re seeing in the marketplace.
Corn prices have been rallying over the past few months. Costs have come down a bit. Therefore, we got a lot of farmers who are wanting to plant more corn ’cause they’re seeing more of a profit opportunity there. Case of soybeans, while that cost has come down a bit, it’s still well above where market prices are at today, and so that’s making soybeans less attractive.
And so it looks like we’re gonna play it less in 2025.
[00:13:59] Mike Howell: Chad, those planning budgets and everything you just said doesn’t take into account any projected tariffs that we may be looking at. And just so our listeners know, we’re recording this on February the 27th. It’s gonna be a week or two before we get this episode released and who knows what’s going to happen.
But Chad, we’re gonna ask you to get your crystal ball out and talk a little bit about these potential tariffs and what effect that could have going both ways, products outside the US and products that we have to buy to grow our crops coming into the us.
[00:14:28] Chad Hart: You bet. I’m glad you brought up both sides of the equation there, because when we think about tariffs, I think we tend to think about what we sell out to the rest of the world.
So tariffs in, in this case, let’s think back to as we experienced back seven, eight years ago during President Trump’s first term, when tariffs were upping the ante. Back then we did see. Farm incomes and especially crop prices drop with those tariffs getting in place, we would expect the same thing as we look forward here, again, especially the agricultural markets because we tend to export a lot of corn, soybeans, wheat, cotton, rice, beef, pork, poultry.
So we’re a big export market to the rest of the world, and therefore, when those tariffs get put in place, when other countries respond with tariffs, they tend to target agriculture. But that’s only half the story. As we look at it, as you mentioned, the idea is that we also do import a lot of stuff to help us create that agricultural production.
The big thing I always think about is fertilizer. While the US does produce a fair amount of fertilizer, we don’t produce everything we need. And especially the big one to me is always pot ash. And that’s a case where our partnership with Canada looms large Canada is a big supplier of potash to the US market.
And so any tariffs that come along. Could not only lower the prices for corn and soybeans, but raise the cost of producing those corn and soybeans through higher fertilizer prices.
[00:15:52] Mike Howell: Chad, do you think that impact is going to affect us more this year? Or could that linger out into the 2026 crop more than the 25 crop?
[00:16:00] Chad Hart: I’m gonna argue it could linger and it could linger on for quite some time. If you think about these tariffs, they’re not just a short term impact. They can have long run ramifications. For example, I mentioned earlier, the idea is that one of the markets we’re really struggling in right now is the Chinese market, and it’s not because of the tariffs that we’re talking about here today.
But it’s more about the tariffs that were put in place back there seven and eight years ago. A lot of those are still in practice today. They’re still impacting markets today, so they can have a long run impact.
[00:16:34] Mike Howell: Chad, you have brought us an awful lot of good news. I’m saying that sarcastically, it doesn’t look real promising out there for our growers this year.
Can you give us anything that’s going to be a shining light, uh, something that may help us get through these tough times?
[00:16:47] Chad Hart: Well, I am gonna point out that the reason we’re seeing more corn acres going in is because it does seem to be a shining light. Right now. Prices are above production cost, and that’s why farmers are moving that way.
Again, farmers follow economic incentives. The other thing though, that what tends to happen is, let’s face it, we tend to over adjust for the markets that we’re trying to do here. While markets like soybeans and cotton are off right now, we know that if we shrink back here a bit maybe this year, that they’ll likely be in better financial standing next year.
When you think about it, we’re always farming for the next crop. We’re always looking for that next turn of livestock. That’s the deal. We’re in a little rough spot here today and have been for the last couple of years, but we do see the pathway forward and we do see the possibility for improvement as we’re looking.
[00:17:33] Mike Howell: Chad, we really appreciate you taking time outta your busy schedule to visit with us today. Before we go, I’m gonna give you a chance to give us any closing comments or anything that you think we may have missed that our listeners need to know about.
[00:17:44] Chad Hart: Well, we’ve covered a lot of territory. I think in this case though, it’s more the case of, as you think forward here though, I’d say the one thing we didn’t talk about is that what’s the potential of maybe some government support helping us get through these tougher financial times right now?
And it does look like we will get some additional support from the government to help. Blunt some of the financial stress out there that should be coming here hopefully within the next couple of months. As you think about the economic and disaster aid packages that were passed at the very end of 2024, that’s gonna provide a nice financial boost right as we begin to go into planting season to help producers manage their cash flows, at least here in the short run.
[00:18:26] Mike Howell: Well, that’s some good news, Chad. We definitely wanted to hear something good before we signed off here today. Chad, once again, thanks a lot for joining us. Listeners, if you will, please stay around for just a couple of minutes and we’ll be right back with segment two. Farming Isn’t Farming without Questions, and now there’s a place to go for answers.
At economics. An entire team of agronomists is waiting and ready to help for free. No question is too big or too small. Visit Nutrien Economics with a. And submit your question with the ask an agronomist feature.
Listeners, welcome back for Segment two. This is a part of the program where we ask an agronomist a question of the week. We’ve got Dr. Alan Blaylock, senior Agronomist with Nutrien back with us again today. Alan, welcome back. Thanks, Mike. It’s a joy to be here. I always love your podcasts. Alan, we have talked a lot in the past about nitrogen loss, and we did several episodes where we address questions about Volatilization.
Today we’re gonna change the subject just a little bit and talk a little bit about Denitrification. And our question today is, what is Denitrification and how much nitrogen can actually be lost through this process?
[00:19:35] Alan Blaylock: Well, Mike Denitrification is another. Gaseous loss of nitrogen from the soil. We talked about volatilization and losing ammonia gas via that process.
Denitrification also results in gas forms of nitrogen loss from the soil, but a very different process. Denitrification occurs when we have anaerobic conditions in the soil, so absence of oxygen generally occurs under. Saturated or nearly saturated conditions when oxygen in the soil becomes deficient and we have nitrate present in the soil, these microorganisms that function in the absence of oxygen, we call them eroes, they will take the nitrate and convert it back.
To some other nitrogen gases, one of several different gases, and two gas, which is the major nitrogen gas in the air is one of them. Nitrous oxide, which is a potent greenhouse. Gas is another one, and there are a couple other forms. These organisms will strip that oxygen off of the nitrate and in the process convert it to these other.
Nitrogen forms, which are gases that then diffuse out of the soil into the air. So we can lose a lot of nitrogen in this way when we have even short periods of water logging or ponding in our soils. I’ve seen cases where maybe we didn’t measure it exactly, and it’s hard to measure the total denitrification, but just based on yield, performance, and equivalency of different nitrogen rates, I would’ve guessed that at least 60 or 70% of the N that was applied was lost by denitrification.
I think this is really an underappreciated loss. We know that water causes nitrogen loss in a couple different ways, but I think lots of times we have denitrification going on and we maybe think about, think it’s leaching or we think it’s volatilization or some other loss. But I think we have more denitrification than maybe we really appreciate.
And when I look at some of the research, we’ve been involved with different nitrogen products around the country. I think sometimes those denitrification losses has been pretty large.
[00:21:32] Mike Howell: You mentioned we needed water log conditions or excess amount of moisture. Going along with that, it seems like, uh, soil texture is gonna play an important role in denitrification.
[00:21:41] Alan Blaylock: Soil texture is a really important factor because soil texture is a big factor in the movement of air and water, and the relationship between air and water, the size of the pores in fine textured soils. Or clay soils. We have very small pores, and even in a soil that we might consider not to be waterlogged, some of those small pores are still filled with water, and denitrification can be going on in those small pores while we have drainage going on through the larger pores.
So when we have structure in the soil and we have warm channels and root channels and those kinds of things, we still have water draining. But the micro pores, the small pores in the soil inside those aggregates. Can still be full of water and be sufficiently oxygen efficient that we have denitrification going on in those smaller pores.
[00:22:26] Mike Howell: Well, Alan, once again, we appreciate you taking time to visit with us today. I know I always get a lot out of these sessions and I’m sure our listeners do as well. Listeners, once again, thank you for joining us today. As always, if you have questions about anything we’ve talked about today, you can find out more information on our website.
That’s nutrien-ekonomics.com. Until next time, this has been Mike Howell with the. Hey guys. If you like what you heard today, do us a favor and share this podcast with someone else. It could be your neighbor, your friend, your crop advisor, or whoever you think would enjoy it. Your support helps ensure future episodes, so please like, subscribe, share, and rate the show wherever you’re listening from.
