Ep. 114 Harvest Season Outlook with Neil Schuller
In this episode of AgCredit Said It, host Kendra Heffelfinger, Director of Sales and Marketing, sits down with Neil Schuller, Head of Grower Solutions with the Andersons, for a wide-ranging discussion on current agricultural market conditions, input costs, and marketing strategies for producers. The conversation follows up on a previous discussion held approximately a year prior, with Neil noting that market conditions have changed tremendously since then, moving from a record crop and bearish outlook to a demand-driven environment with a razor-thin balance sheet and significant volatility.
- Transcription
Speaker 1 (00:08):Welcome to AgCredit Said It, your go-to podcast for insights on farm finance and maximizing your return on investment. Join us as we talk to industry leaders, financial experts, and area farmers, bringing you skillful advice and strategies to grow your farm's financial future. AgCredit Said It, where farm finance goes beyond the balance sheet.
Kendra Heffelfinger (00:39):Welcome back to AgCredit Said It, where farm finance goes beyond the balance sheet. I'm Kendra Heffelfinger, director of sales and marketing with the association. And today with me, I have Neil Schuller, head of grower solutions with the Andersons. Neil, it's great to have you back.
Neil Schuller (00:53):Yeah, thanks Kendra. Great to be back.
Kendra Heffelfinger (00:55):Perfect. Today you actually sat down with our board during their board planning session as we kick off things for this next year. And we sat down a year ago at an outlook meeting and man, a lot has changed since then.
Neil Schuller (01:08):A tremendous amount of stuff has changed since then. And we went from producing a record crop last year and by all measures, quite a bearish outlook to fast forward to today where the demand side has just really gone on fire. A lot of questions about what this year's crop looks like, how big is the crop, and the balance sheet as a result is just on a razor thin line right now, but it's creating a lot of volatility in the market as everybody's experiencing and has given us a reason for optimism going forward as well.
Kendra Heffelfinger (01:43):As we look at this year's crop, we tend to look at what we can see from the roadside, right? Yes. It's really a global market now. And so let's talk about what's driving some of the things within the market this year.
Neil Schuller (01:55):Absolutely. Well, first and foremost, I think you got to talk about geopolitical issues, the US-Iran war as well as Russia-Ukraine. The conflicts there are continuing to impact the US market. Most notably, fertilizer, obviously we saw that impact very early with the US-Iran conflict, but really crude oil values, incentivizing US crush to crush more soybeans for oil. So that's come off as well as increases in the RVO and the RFS in March, really created kind of a dynamic market to where you saw the incentive to be there for crush and ethanol, both the increase of domestic demand as well as exports just continuing as a result of things going on globally. I should mention Europe under an extreme drought right now, record breaking drought. So that's another demand source that's popped up. But then the variability that you've seen across the US crop, you have the plains that aren't what they were last year, much drier, the Southeast US as well.
(03:04):So it all comes back to the listeners here on the segment in Northwest Ohio, because with us having a good crop, the demand for our good crop is going to get pulled in many more different directions this year.
Kendra Heffelfinger (03:20):I know talking about domestically, Carolina also very dry down that area. And for the Northwest market, that's the Southeast feeder market. That's the old market from 30 years ago coming back for us this year. Coming off of a bumper crop that they did have, they're still going to need some of our Midwest corn.
Neil Schuller (03:37):Yeah, no doubt. I know speaking with some folks that I deal with down in that neck of the woods, the crop is definitely not what it was last year. North Carolina, a bit worse off than South Carolina, but for that feeder demand, they're not going to get locally what they're typically accustomed to just due to lack of production this year, which will back up into our market because of the rail feeder system down there. So you'll see an increased pull via rail down into that Southeast feeder market that should be firmer definitely this year over last year and perhaps among the highest levels we've seen for the last several years going forward here.
Kendra Heffelfinger (04:19):I know always on the table is that Chinese demand, right? China's always at the top of the list, but they've been in and out of the market the last few years. I mean, we went from very steady buyer of our commodities to almost non-existent. So what's that outlook look like?
Neil Schuller (04:34):Yeah, interesting. And I would say that the outlook remains to be seen, although at least some optimism around that. Thus far this year, they have booked more cargoes than what they have all of last year, thus far in the marketing year, but still a 25 million metric ton commitment that's at this point less than half committed. So a long way to go, but the demand seems to be there. We're constantly in competition with South America for that market and that will continue going forward. Paying attention to weather as it relates to South America as they get ready to go to planting a powerful historic, actually El Nino could be shaping up that could directly affect that South American market, which if realized would shift export demand more to us. So a lot remains to be seen. President Trump and President Chi of China meeting in Washington here at the end of September.
(05:31):The market will be keenly watching that meeting to see what may come out of that in terms of future export demand.
Kendra Heffelfinger (05:38):Profitability when we talk about the market side and for the crop, let's talk about the input side. What are we seeing in fertilizer costs? What are we seeing for potential, especially as we go into even 2027?
Neil Schuller (05:50):Yeah, it's obviously been an incredibly dynamic year on the input side. And I think the US producer who probably would not have been able to find the straight hore moves on a map at the start of the year certainly understands where that is and the impact that that strait of water has relative to the amount of global fertilizer that comes through that in terms of production in the Middle East as well as the flow out through that strait. We saw the impact of that February, March timeframe at the start of the war. Since then, the fertilizer market has largely kind of stabilized, albeit at a higher plateau than where we were. And right now the big question is around availability and timing. Not really seeing offers out there in the market past November, which for this time of year, typically we would start to see some spring numbers just not out there today.
(06:48):Could squarely hit the South American producer as they get ready to start planting. That dynamic would be akeen to the same conversation happening in the US in March. So supply, availability and ultimately price is yet to be determined, but suffice it to say we're going to be in for another year of challenging inputs as we head into the 2027 planting window. And there's probably just more question marks in the market today as to what that is versus answers.
Kendra Heffelfinger (07:18):And I think producers do have those questions. So even as they may hear outlook speakers throughout the summer, what do they do with that information? What are some suggestions that maybe the Andersons has or products and services that you guys can provide to help them make decisions in that area?
Neil Schuller (07:33):Yeah. I think the biggest thing is stay in touch with what's going on in that market. Be it with our team who do an incredible job of navigating an almost impossible scenario right now or whoever your local input dealer is, just staying at tuned with the market and then looking for opportunities to forward book when they're available. We should hopefully within the next 30 days or so start to see some spring numbers released. Typically, as you go through the fertilizer season, as a rule of thumb, price tends to get higher the further you go. So if there's an opportunity to take advantage of pricing early, getting ahead on prepays, things like that, it could really number one, secure your supply for the spring, but number two, put you in an advantageous price situation relative to where you might be come planting time.
Kendra Heffelfinger (08:29):As you've talked to producers across the country, what have you seen as far as the 2026 crop? How much have they have sold? Are they prepared to capture those rallies or are most producers sold at this point for this year's crop?
Neil Schuller (08:42):Yeah, I think I saw some statistics this week that suggested that the producer was about 50, 55% sold on 26 crop. I would say that's probably pretty close when you look at it on a national level. I've talked to guys that are 25% sold. I've talked to guys that are 75% sold. So that number seems to resonate pretty well. It appears that there is dry powder, if you will, that's available to take advantage of this rally. And the producer for all good reasons are quite bold up at the moment and the outlook is there. Would not be at all surprised if we see this market relax a little bit as we head into the harvest season, but then depending on how this crop ends up, which a lot of question marks remain on what the actual production's going to be, things of that nature, we really could see this thing reengaged, especially with the underlying demand that's in the market sometime in that post-Thanksgiving timeframe going forward.
(09:43):So really a lot of conversations about marketing new crop into those deferred months into 27, the stuff that's going to go into the bin, really making sure that we're putting together some maybe different strategies than we've approached that with over the last several years, leaving as much of the upside open for potential increase in this rally going forward. So it's changed that dynamic, but I would say largely the producer's probably in better shape in terms of percent sold at probably better profitability than they have been perhaps the last five years or so.
Kendra Heffelfinger (10:17):You mentioned that they're bowled up. So what's the anticipation of those grain bins getting filled up pretty quick and held onto into that rally of next spring?
Neil Schuller (10:28):Yeah, I think you're going to see a lot of corn that goes into storage, which is not atypical of any given year. But I think looking at that, guys are going to defer some of those pricing decisions perhaps all the way out into July of next year and just kind of work on a wait and see what happens on both the future side as well as basis. We have some issues with crop out west especially, and you mentioned the Southeast earlier that could really start to see this local crop getting pulled in a lot of different directions and we would expect to see some basis appreciation out of that as well. You got the Great Lakes system while it's working here before we get closure for the winter that will largely serve that European shortfall that they're having as well. So this Northwest Ohio area is really sitting in a great spot relative to having a good crop and having a lot of outlets to go with it.
Kendra Heffelfinger (11:32):One of those outlets that we've talked about in the past is ethanol and Northwest Ohio is prime in that market as well. Can you tell us a little bit about things that have changed in that market recently, some stability maybe that's coming into that market with some
Neil Schuller (11:45):Decisions the government's made? Yeah, in March we got updated guidance around 45Z and the RFS that's really kind of added a measure of stability into that market, offered some tax incentives to the ethanol refiner, and it's really caused the ethanol market to grind really, really hard, these high crude oil prices and how that plays into the gasoline market, more of an incentive to blend obviously ethanol into gasoline that's really for all the negatives that the Iran war has caused, the biofuel industry has really been a benefactor thereof. So both ethanol and soybean crush have good margins that they're working on right now, incentive to run as hard as they possibly can, and that should be favorable going forward on basis levels as they're in full go mode on grind right now. So especially here in our local market where ethanol plays in pretty favorably, we don't see that dropping off at any point in time.
Kendra Heffelfinger (12:52):Same thing on the soybean side of things Neil?
Neil Schuller (12:54):Yeah, absolutely. Soybean crush among the margins that the soybean crush industry is making right now are absolute records. The renewable volume obligation, the RVO that got passed also in March gives framework and guidance for the next three years on soybean crush and increases the amount that is looking to be crushed. So soybean crush plants are making margins that are 4X where they have historically. So the incentive is there for them to crush beans as much as possible. Then locally here in Upper Sandusky, we have the Louis Dreyfus plant that's set to come online. They will be doing so in an environment that's very profitable for them, which should have them flowing beans as much as they possibly can get.
Kendra Heffelfinger (13:44):At this point, most of the soybean crush going into oil production?
Neil Schuller (13:48):Yes.
Kendra Heffelfinger (13:49):Yeah.
Neil Schuller (13:50):They're crushing beans for oil. And we will have meal as a result of that and it'll look to work into that feed sector, especially as you look out west where the crop is not as big, you're going to have availability of meal, availability of DDGs as a result of the biofuel industry doing what it's doing on the other side of things. You're going to have feed ingredients that are going to be there and available and competitive in the market, both domestically and for export as well.
Kendra Heffelfinger (14:22):Anytime we have a huge crop like we did in 2025, it creates a little bit of chaos for a little while and then it seems to create a stale market. As we go into this fall, we're seeing that volatility happen. Is there one thing that producers could watch or look at that may help them determine which directions the markets could potentially go?
Neil Schuller (14:44):Sure. Just blanket reminder, I think we get into volatile markets and it can create a little bit of paralysis, but just do keep in mind that volatility in the market is your friend. That's what's given you opportunities here that perhaps that we weren't looking at or even anticipating back in January, February timeframe. The thing that we look very closely at with the balance sheet and monthly reporting by the USDA and WOSD is that stocks to use ratio number. For corn, we see a real big dividing line between markets that are very volatile when that number is less than 11% stock to use ratio and numbers that are fairly range bound or markets that are fairly range bound if it's greater than 11%. On soybeans, that number's nine and a half percent stocks to use ratio. So as these reports come out, it's a quick way that you can kind of hone in on a number.
(15:40):And again, 11% on corn, 9.5% on soybeans really is a dividing line, whether we see volatile markets, if it's less than those numbers or relatively range bound markets going forward. So both right now on obviously the smaller side of that on both, and depending on how this crop finishes up and the underlying demand that we're in right now, could see that either kind of stay where it's at or exasperate even further.
Kendra Heffelfinger (16:10):Well, Neil, always appreciate your insight and information. Anderson's obviously in the backyard here in Northwest Ohio, so it's a great partnership that AgCredit has been building in getting education out to the members. Appreciate you talking with our board today and good luck as we all go into harvest.
Neil Schuller (16:26):Absolutely. And just a reminder to everybody out there listening, take the time and stay safe as you get into a busy harvest season. We want to make sure that your families are counting on you to return home in the same condition you left home in and just stay safe. And if there's anything, reach out if there's anything that we can do to help you out.
Kendra Heffelfinger (16:45):Yeah, really appreciate it. And listeners, appreciate all of you tuning into another episode of AgCredit Said It.
Speaker 1 (16:58):Thank you for listening to AgCredit Said It. Be sure to subscribe in your favorite podcast app or join us through our website at agcredit.net so you never miss an episode.