Todd Gleason: 00:00

Up next, our last panel for the day. The FarmDoc team the rest of the FarmDoc team is here in the last panel. Gary Schnitke is with us along with Scott Erwin, Nick Paulson, and, of course, Jonathan Koppas. I'm going to let each of them talk for oh, three to five minutes on their subject area. Do you want to do so they're on the

Todd Gleason: 00:21

do

Todd Gleason: 00:21

you two have you two divided this up? I didn't ask. Are you gonna do crop insurance and far farm management, or what or what do you wanna do? You you start, Gary. Gary's gonna start.

Todd Gleason: 00:33

Gary's gonna start. He'll are you starting with you start. You pick your topic.

Gary Schnitkey: 00:38

Alright. Alright. So I get to pick pick pick my topic topic. So, well, let's just go over what we think about risk management. I'll cover briefly crop insurance and our PLC and Nick will do farm incomes and something like that.

Gary Schnitkey: 00:56

Alright. So crop insurance, most of you have taken, you know, pretty high coverage levels of IRP in the past several years. I would, probably, stay there. That's a good place to be. And one of the things that I would be thinking about is sort of staying in the 80 to 85% coverage level range.

Gary Schnitkey: 01:17

And the reason why I say that is because, if you remember, ERP back in 2022, it, had it it it topped up prop insurance to 95%. Well, I would estimate that, the $21,000,000,000 in, ad hoc disaster assistance will top up in a ERP like program in, '23 and '24. And we don't have any clue about 2025, but I would guess that there's gonna be the same program again. So stay in that 80 to 85% coverage level. I would consider strongly ECL, particularly after this last couple, tariffs, consider it.

Gary Schnitkey: 02:07

It's not a slam dunk, but, you know, ECO goes from 90 to 95% down to 86%. The premium is, will be less this year. And again, that 95% coverage level is, 90% will kick in sooner. Again, think about that. The caveat to that is if we have the ERP, you're sort of washing out your program, your payments, but who knows if you get get that ERP like in 2025.

Gary Schnitkey: 02:43

And then for commodity title programs, ARC County strong lean on all three. Soybeans in particular, but followed by corn and wheat. The only thing that you might not think about, or the only reason to do PLC is two, one, you really think prices are going to be down and, prices being down would be below $3.43 60 market year average for corn. That seems kind of low. So think strong lean for our county.

Gary Schnitkey: 03:20

The other reason, if you take our county, you preclude SCO, But I think our county's probably the one you want because it's free. So I'll stop there.

Nick Paulson: 03:36

Me? Alright. So I mean, the the story we've been telling on the farm income outlook situation has been, pretty consistently depressing now for about six months. You know, we I I think back to August of twenty twenty, quite a bit because I remember that being the month we released 2021 crop budgets, and it was sort of a sky is falling story at the time. And then about two months later, we looked extremely stupid because the corn soybean market started what ended up being basically a eighteen month rally where the best time to sell corn and beans was always tomorrow.

Nick Paulson: 04:15

And we've just been in a the opposite, type of situation now for the last, two years. A little bit of life in the corn market, more recently, but, both corn and beans have just kind of consistently grinded their way down. Coming off the high incomes in 2020 and even more so in 2021 and even more so in 2022, we saw production costs adjust up. So that's kind of been another, big theme of of what we've been talking about in the management side of things, on farm back, in the last, six months. And that's I mean, those high production costs, historically, we don't see a lot of downward adjustment, that is achieved on the production cost side.

Nick Paulson: 05:00

Our markets are very, responsive. We can see price movements, both up and down relatively quickly, but, those costs, are much harder to get back down once they've once they've gotten up into certain ranges. So the, you know, the the the support payments, I think, were mentioned a lot today, and Bruce talked a lot about the the shift in recent years towards, going back more and relying on ad hoc payments. Maybe our current ARC PLC programs aren't designed to address some of the, financial challenges that we faced, in the last few years. I find all of that to be a little problematic and concerning moving forward because it's almost like we're getting, Band Aid solutions, every year to to problems that are much more, systematic and severe.

Nick Paulson: 05:54

Where where markets are trading and where we would still argue that longer term prices are at just simply don't really make sense with where production cost levels are. And if we continue to get support payments that continue to keep those production costs high and don't force some of those adjustments. We're just kicking the can down the road, year after year. So, on the on the price side, you know, I'll I'm gonna credit Scott and and Daryl Goode who, you know, back in 02/2006, '2 thousand '7, they did some work where they sort of projected where, the new era of corn and soybean prices would be, because of the ethanol boom and export market development, and expansion in China on the soybean side. And looking back, they they pretty much nailed, the trading ranges and those new longer term averages.

Nick Paulson: 06:47

And again, where those longer term averages are, markets are a little bit below, maybe where those long term averages are at, but, they're still very much in line with the trading range we should expect. And and, again, production costs are just out of line with those longer term averages. They may have worked with, 5 plus dollar corn, $14 beans, in 2022, but, it just it just doesn't it doesn't work at, you know, mid or low $4 corn and mid $10 or even $11 beans is is pretty tough at the cost levels that we have. So I I kept the the good vibes going today. Thought I was gonna actually sound I thought I was gonna sound more optimistic after the soybean panel, but I think I failed at that.

Nick Paulson: 07:34

So

Todd Gleason: 07:35

Apparently. That's alright. Shall we talk about policy next?

Scott Irwin: 07:40

Oh, one or two. I tried to get him.

Jonathan Coppess: 07:42

Yeah. I can I can be real brief? I don't know.

Todd Gleason: 07:50

Biofuels?

Scott Irwin: 07:53

You're a tough act to follow, Kappas. Okay. Well, I'm in the unusual situation of being the optimist on the group. So I'm going to start on ethanol, Todd, and I'm going to list, from my most optimistic to least optimistic drivers in the ethanol space. The number one most optimistic factor for ethanol is the one that is being least discussed right now, and that is the Trump administration is going to slow down the adoption curve for electrical vehicles in The United States.

Scott Irwin: 08:50

It's a long complicated topic, but I'll put it this way. Well, start with the EV adoption has started. It's going to continue, but it's going to take decades, not years. The think of the benefit of a whole a change in a whole suite of policies under really the last sixteen years that were designed to speed up the adoption of EVs. We are clearly going to pull back substantially on those incentives.

Scott Irwin: 09:32

And what is ethanol industry and corn producers if you put off peak gasoline use five or ten years? That's what I believe is going to happen as a result of the changes in to incentivize EV adoption over the in the, Trump two point o. That is going to be worth billions of gallons of annual ethanol use between now and 02/1930 and into the mid two thousand and thirty's. We're still going to lose some demand from EV adoption over that time frame, but it's not going to be nearly as severe as you would have projected just three months ago. So that's number one most positive factor for corn ethanol.

Scott Irwin: 10:42

The second is ethanol exports, largely driven by climate policies in other countries. Our number one ethanol export in The from The United States is, guess where, on tariff Tuesday? Canada. They're taking 40% of our corn ethanol exports, which in 02/2024 looked to be just shy of 2,000,000,000 gallons. Now Canada has made a jump from basically e five to e 10.

Scott Irwin: 11:19

Probably some growth, but big growth there is is probably over. But it's it's a big part of our corn ethanol exports, which are in that 2,000,000,000 gallon range. And we have another, couple of potential big markets that have announced policy changes. Number one is, Japan. Japan could easily be over a billion gallon a year ethanol market in total.

Scott Irwin: 11:52

The US won't get all of that. And so I expect robust growth, in US corn ethanol exports to Japan if they follow through on their plans, and it won't be immediately, but but it will happen. And then the third most, third down the list is E15. It's interesting. That's all that the corn ethanol and corn, corn people want to talk about is E15, but it's been growing agonizingly slow.

Scott Irwin: 12:29

We're just always around the corner of, you know, it's gonna just take off next year. Well, then next year, it's gonna just take off. The RVP waiver that everybody talks about, I believe that that is gonna happen in the new congress, and it will give e 15, more of a fighting chance moving forward. But, I think for a variety of reasons that I could talk about in the q and a if you want, I still think that the growth in e 15, even with that year round passage, is going to be slow. So, but at least it's still positive if that gets passed, but it's not nearly as important ethanol.

Scott Irwin: 13:15

Moving now down to, biomass based diesel, which is famed biodiesel and renewable diesel. I'll kinda just go with Jonathan. I have no idea. Actually, there is, for some the people thinking about the, soybean market and the soybean oil market, it would take me more time than I want to take, to explain, but there's a situation developing where I think we could have a very surprising pop in the soybean oil market in the February as we finally have to get serious about meeting the RFS mandates for FAME and renewable diesel. But but I'll leave it at that.

Scott Irwin: 14:06

Obviously also tremendous uncertainty related to which feedstocks, you know, basically right now that sector is kind of seized up because of the tax credit purgatory that we're currently in. But but, people people are overgeneralizing that. That cannot last soon. In a few months, the market will have to incentivize the meeting of those mandates. Last thing I'll talk about is SAF.

Scott Irwin: 14:35

I think it's on life support. I'll end there, Todd.

Todd Gleason: 14:40

I have a follow-up question for you, which is, and I asked this question of,

Todd Gleason: 14:46

I don't

Todd Gleason: 14:46

remember, somebody in in in AFB in in November, a a couple of guys that should have known, related to e 12 versus e 15 and why when 12% has already been approved to be used in all cars 2,000 and newer, they push 15 as opposed to just e 12. And I think there's also I think does e e 15 has to be blended in a blender pump. Right?

Scott Irwin: 15:17

Right. E e 12

Todd Gleason: 15:18

is 12 would not. E 12 could just go into the regular system.

Scott Irwin: 15:24

That's that

Todd Gleason: 15:25

They they looked at me rather knowingly, and it was either, man, that's a stupid question, or there's something that I don't know.

Scott Irwin: 15:31

What what is on the books from the EPA, e 15 is approved for use in all vehicles 02/2001 and older in The United States. Newer, you mean? Newer. Excuse me. Yeah.

Scott Irwin: 15:47

Yeah. 02/2001 and newer. There was a move towards potentially, e 12. I don't remember. Sometime around ten years ago, but the corn ethanol industry didn't get behind it.

Scott Irwin: 16:03

And some thought that that could be consistent with existing Clean Air Act regulations, but it's in kind of a legal gray area is what I would say. And keep keep the focus on e 15.

Todd Gleason: 16:19

Okay. So on the question side, you've gotta ask questions because I have two six packs of giveaway and eight farmdoc ace college of ace hats. So I have to have at least 10 questions out there from you. You can start asking those when you want.

Nick Paulson: 16:34

You're really gonna let Jonathan get away with absolutely nothing?

Todd Gleason: 16:37

No. I'm coming to no. That's why I turn my that's why I turn my back

Todd Gleason: 16:41

on them as I want Jonathan to to actually lay out what he thinks.

Jonathan Coppess: 16:47

I still don't

Todd Gleason: 16:47

Ad hoc versus how how about this? What are the possibilities of a farm bill being done this year? Maybe that's a short answer.

Jonathan Coppess: 17:00

It's it's not gonna happen this year. Okay.

Todd Gleason: 17:03

So I mean, let

Jonathan Coppess: 17:04

let me okay. Let me let me put this in a little bit of context before I get in trouble Okay. With with my colleagues. You've seen in the news, Congress is now going to be consumed by budget reconciliation, and if you don't know what that is you can thank your sanity for not knowing what that means. In effect it's going to be, it's going to take over the whole kind of legislative process for the next however many months and in tucked into that are instructions to the committees like the agriculture committees to cut spending in their jurisdiction.

Jonathan Coppess: 17:39

The house budget committee's reconciliation instructions for $230,000,000,000 reduction for the house agriculture committee. That's out of the farm bill that presumably is almost all SNAP, the supplemental nutrition assistance program, but it's that process that's going to consume Congress for the foreseeable future. Makes it really hard to imagine that a farm bill has any chance to squeeze in anywhere, certainly not during that time frame. After that, you know, we're well down the road, to start a start a farm bill process, which I think brings back to what a lot of people were saying throughout the day, this ad hoc assistance. You know, that that 10,000,000,000 is on its way out the door probably in the next month, within the next month, and that's really become the farm program.

Jonathan Coppess: 18:24

At this point in time, ARC and PLC, I think Nick was probably too nice about it, ARC and PLC are looking more and more like failed programs, failed policy, and we're just throwing in ad hoc spending. You know, if you're putting these two together the irony might cause you to fall off your chair because the budget reconciliation process is cutting spending at the same time the ad hoc system is adding spending but we don't count that because it's off budget. So it doesn't count in all the budget scoring which might be why we're you know at whatever debt level we're at at $2,000,000,000,000 in deficit annually. So you can see where this is headed, but it's not headed towards the farm bill.

Gary Schnitkey: 19:04

Just just just to note on that, EA program, which is now named something else, ECAP. ECAP. ECAP. E slash cap. And and Nick estimated the payments on that to be $43 per planted acre for corn and 30 ish for soybeans and wheat.

Gary Schnitkey: 19:26

Take 85% of that, or you know, 35 to $25 this month per planted acre, plus 50% on prevent plant acres. And that should be actually, if you read the secretary's press release, you will get the application by the March 20 deadline. So we'll we'll we'll see about that. But it does sound like that is that is coming and obviously that will be a big deal. Right?

Todd Gleason: 19:55

So I we had that that discussion this morning. So there is an application that you have to sign for this?

Gary Schnitkey: 20:01

Yeah. Yeah.

Jonathan Coppess: 20:02

According to the secretary at the Conner Classic meeting, what they're doing is pre filling the application. So you everybody reports their planted acres, right? Five seventy eight form to FSA. So they're going to pre fill those out if you've already turned in your acres so they have it on file and send it back out. Now having once worked at that wonderful agency, I would strongly encourage you to thank your FSA employees.

Jonathan Coppess: 20:26

Yeah. Enormous amount of work that they're going to be doing on your behalf to fill out your report, send it to you, you sign it, send it back, checks in the mail, or electronically dropped into the bank account. So it is a much more automated process. Obviously at the same time we're watching massive cuts in federal, employment and agencies, so be nice, would be my my suggestion because I think they're going to be stretched pretty thin to get this done, but it is it is set up to be more automated than probably what you've seen in the past. It will be filled out, sent to you, signed, sent back.

Todd Gleason: 20:59

Good news. Hold off they're holding off the ARC PLC decision till April so they get a little more a little more time.

Gary Schnitkey: 21:06

The other thing is there's $21,000,000,000 of, disaster assistance, which I think will be an ERP extension into 2324, which I just they've done it so many years, they'll do it again. So be on the lookout for that, which if you had a crop insurance payment in 2324, that will top it up. So that that could be another cash flow.

Scott Irwin: 21:35

Now when you were saying the yields, is that their '24 crop that was harvested in the fall of twenty four yields that the FSA office

Gary Schnitkey: 21:43

needs? No. They need acres.

Jonathan Coppess: 21:45

You've already reported acres. For it's the twenty twenty four acres.

Scott Irwin: 21:48

Just acres. Okay.

Jonathan Coppess: 21:49

It's just acres.

Scott Irwin: 21:49

You said something about yields at the end of

Gary Schnitkey: 21:52

it. Let me get your data. That that would be if if they take the emergency relief program and write it for $23.24 then all of that would flow from your crop insurance and you would get another application. Hey. Wait a minute.

Gary Schnitkey: 22:12

Hold save one another. What?

Jonathan Coppess: 22:14

The six pack. The one thing we're gonna have to wrestle for that last one. The, the one thing I would add, and I think you're probably wanna write a general ERP. The one caveat I might tack onto that is the priority for that damage will be the hurricane Helene, destruction that went through North Carolina and parts of Georgia. So my my guess is they prioritize that, and then there'll be something around it.

Jonathan Coppess: 22:37

An ERP top up for a lot of the other, long list of natural disasters that they covered for '23 and '24.

Todd Gleason: 22:43

The beer? Fine. The farm doc team's really good to me, so I'm gonna give that to them. And and Wayne went and got

Scott Irwin: 22:51

I'm sorry.

Todd Gleason: 22:52

And took her back, so he got the other the other six pack. So you're only down to this. Alright. What is your question here?

attendee: 22:59

Will the sudden price of

Scott Irwin: 23:02

My personal view is I I agree with you that it might, temper it, but it's like a tempering from 94.5 to 94, maybe a few hundred thousand acres, in total. I think those plans are pretty much largely set at this point. That's that's my view.

Todd Gleason: 23:24

So that question was whether, about expansion of corn acres. Yes.

attendee: 23:29

So the price of insurance that go up, Ben? So we dropped so much price this last three days or whatever.

Gary Schnitkey: 23:37

So The price.

Todd Gleason: 23:39

That a volatility question on crop insurance?

Nick Paulson: 23:41

Well, I mean, we so we got the projected prices are $4.70 for corn and, $10.54 for soybeans. That's based on February average settlements in February for the Deese corn and November bean contracts. 4.7 is at 4¢ higher than last year's projected price, so that would tend to increase premiums a bit just because your guarantees are higher and your premium as a percentage of your, insured liability. But the the volatility factors sort of working in the opposite direction on corn. We'd expect your corn premiums for same product you bought last year, same coverage level to be very similar to what they were last year.

Nick Paulson: 24:24

On soybeans, premiums will be lower. That projected price is a buck off of what the projected price was last year. So and the volatility factor on on on that bean price that affects premiums is also down. So bean premium should be lower for the same thing you bought last year. Corn should be, I think, pretty similar.

Nick Paulson: 24:44

Right, Gary?

Gary Schnitkey: 24:44

Yeah. That's why I wouldn't yeah.

Todd Gleason: 24:47

So that being said about the crop insurance, the ECO policy on top, is up to 9%, but it can be bought by the percent. Right? Is there a sweet spot? Like, is it is it 3%? Is it 5%?

Todd Gleason: 24:59

Is it all nine? Do you guys have any thoughts on that?

Gary Schnitkey: 25:02

So you can buy from 80 85 to 86 and also 90 to so you got two coverage level options. 95 or 90 both go down to 86%. Personally, I would take the 95 because that, that triggers earlier. Then you have to make a decision about a protection level. And a %, you're still gonna see premiums of 20, $17 for corn, but you can lower the premium by lowering the protection level.

Gary Schnitkey: 25:40

So if you lower the premium 10%, you'll also lower the payments when they happen 10%. So it's sort of whatever you wanna pay. Margin protect margin protection insurance from '24, what kind of money we expect, and then same for this year or '25 if we already signed up for it. Twenty four. Do you know?

Gary Schnitkey: 26:11

I'd

Nick Paulson: 26:12

I don't follow margin protection.

Jonathan Coppess: 26:14

You stumped

Todd Gleason: 26:14

the ag economist.

Gary Schnitkey: 26:16

We don't know. Twenty five. They don't know. You know, honestly, the the cost part of it was probably about a wash between in both those years. So it'll be, be based on whether you if you bought it in 90%, it'll be it'll be tough to trigger both years, I would guess.

Gary Schnitkey: 26:42

Maybe. I don't.

Scott Irwin: 26:46

Okay. I'm gonna go back to what we were talking about earlier on the the payments. Are double crop beans gonna be included under the wheat payment, or are they a separate payment, or has that been disclosed anywhere? Because I've not found it yet.

Gary Schnitkey: 27:03

On EA? I don't

Jonathan Coppess: 27:05

On e gap. Yeah. Yeah. We've not I mean, I think unless you have I think we're in the same boat. We don't have any specifics on how they treat it.

Todd Gleason: 27:16

The guys

Jonathan Coppess: 27:17

some's gonna depend on the county. Right? If you're double cropped if you're in a double crop county where they where they count as a planted acre, but I haven't seen anything specific on it, so I don't know.

Nick Paulson: 27:26

We we've we've asked to and not gotten answers. No. It's it's not you.

Gary Schnitkey: 27:32

It's not you.

Todd Gleason: 27:38

Other questions? So the question is, what happens to the bean meal if we begin to really crush for oil? Right.

Scott Irwin: 27:49

Unless we see really even more robust growth in livestock numbers in

Todd Gleason: 28:03

question we've asked a couple of times on the air, particularly when we're talking to Fran Olson out of North Dakota State, because so much is railed to the, Northwest, and so many of their soybeans are going, and they also have crushing capacity there. The problem, again, is infrastructure, both at the port, which I think they have built out for bean meal loading, but rail too. So you have to have both you have to have infrastructure the whole way, and and that's more difficult. And meal's not easy to transport, apparently. Other questions.

Todd Gleason: 28:41

Yeah. Scott mentioned that SAF is on life support. Why is SAF on life support?

Scott Irwin: 28:53

Well, first off, I don't think in my professional career, I've seen quite as big of a difference in the ag sector between, headlines and reality. SAF is, there's almost none of it actually produced in The United States. A couple dozen, million gallons in a sea of jet fuel of about 25,000,000,000 gallons. So it's extremely small to start with. So it's just not gonna take off quickly because it's starting so small.

Scott Irwin: 29:34

That's number one. Number two, even with the stack of policy incentives that are in place for SAF right now, at least in theory, it's questionable that that's enough to really incentivize large scale major investment in SAF production facilities. And then what you have to deal with right now is the likelihood of the new Trump administration, really pulling the rug out from underneath the tax incentives, that questionably incentivize the industry. Specifically, if 45 z goes away, which currently is my expectation, that's just a death knell for SAFE. It it will it cannot make it without that subsidy.

Todd Gleason: 30:34

Is it only a domestic death death now? Do do you have the same opinion on the world or global stages as it's related

Scott Irwin: 30:41

to the global aviation fuel? I think that, actually, allows me to get a little bit on my soapbox for ag in the long run. The bottom line is Europe has a very small mandate, 2%, starting this year for SAF on flights that land in in and out of Europe or the EU countries. The US is relying on basically tax incentives. And until we mandate SAF, like we have originally ethanol and biomass based diesel in the form of fame and RD, I don't think that that industry is ever gonna really get off the ground.

Scott Irwin: 31:38

And I think that if you're looking for something new, innovative, that is in very much the long run. Let's look fifteen, twenty, thirty years down the road. The most important, policy development that USA, well, crop agriculture should push, is the expansion of the RFS to, jet fuel and sustainable aviation fuel as a separate part. Right now, sustainable aviation fuel earns RIN credits under the RFS, so it can contribute to meeting the, mandates. But there is no mandate for, SAF.

Todd Gleason: 32:28

Oh, rather than just being part of the advanced biofuels, you think it should have its own own an actual mandate.

Scott Irwin: 32:36

And I think because in the long run, the EVs are gonna win and ethanol is gonna lose that market in the very long run. Now that might be twenty, thirty years down the road, but, the only real market I can see to replace that demand loss in the long run is SAF. And I think the only way to make sure that happens and get that industry kick started is through a mandate.

Greg Johnson, TGM: 33:07

Ethanol got start thirty some years ago because it was a higher oxygenate without the cancer causing the m t b e. We don't hear anything about that anymore. Is there another alternative to ethanol or, you know, does it have to be mandated, I guess, if if people really believe that this is the only thing we have that can increase the oxygen, you know, that

Scott Irwin: 33:30

Well, that that's a broader, issue. That's has to do with the octane value, is what you're talking about. And that's one of the great untold stories. In fact, I have a seminar I'm giving in our home tomorrow home department over at the U of I on exactly that topic, which is, you know, the story is the RFS kind of kick started the investment in the ethanol plants, and then, somewhat begrudgingly, the crude oil industry figured out, well, if it's going to be made, it turns out it's actually the cheapest source of octane that we have. And so up to 10%, the way I would put it, you could, kill remove the RFS tomorrow.

Scott Irwin: 34:28

All just imagine a world where it just went away. I don't believe we would use one gallon less ethanol in e 10 in The United States because it is by far and away the cheapest source of octane in that e 10 blend. The competitors there's there's a number of competitors in, from petroleum feedstock sources. They're mainly called the aromatics. There are some others, but they're just much more expensive to produce, and then the aromatics have some nasty cancer causing problems that also make them less attractive.

Scott Irwin: 35:14

So, you know, that's a very positive market story for corn corn ethanol in United States. It is firmly entrenched in e 10. Not as much, when we talk about e 15 because the additional octane that you get about an additional point, thus the e 88 campaign, isn't in a sense needed because 87 octane is regular gasoline in The United States. And so, to really for the, gasoline refiners to take advantage of e 15, they'd have to completely reoptimize their, petroleum feedstocks again, and that's really costly. And to get just an additional point of octane, the the analysis I've seen says that they they won't.

Scott Irwin: 36:14

But, you know, maybe this is something that could be more wind behind the sails, for e 15 is the Octane story, then, I might have given it given it credit. We'll we'll have to see because one of the things that's been most interesting to me in studying over all these years the, ethanol and biofuels market is learning how complicated the cock chemical cocktail we call gasoline is. It's just not one thing, and it can be, the composition changed depending on the price and availability of different kinds of petroleum feedstocks and biofuels. So, but overall, it's a very positive story, and it has some real profound implications.

attendee: 37:11

How do you build markets for new agricultural products? Or what's the best way?

Scott Irwin: 37:20

Well, there's a long history, others may comment, of trying to start all sorts of new agricultural markets. I think probably ones I'm most familiar with would be biofuels and they've gotten their start with policy incentives. Basically, they're they're subsidized to get started. And ethanol in e ten is a great success story because, it really, has left the infant industry protections and can stand on its own. But that would be and there's probably others that I'm not thinking of.

Todd Gleason: 38:01

Soybeans soybeans in The United States. Right.

Scott Irwin: 38:05

Right? That happened in the thirties and fours.

Todd Gleason: 38:07

Put a tariff on, what, Manchurian soybean oil, if I remember correctly, so that they could press it at Tate and Lyle. Raised daily at the time. Any other questions? I have one last one. Yeah.

Todd Gleason: 38:21

Okay.

Todd Gleason: 38:22

Is it, e 30 actually superior to the other blends?

Todd Gleason: 38:27

Is e 30 superior to other plans?

Todd Gleason: 38:30

Is e 30 superior

Scott Irwin: 38:30

to other plans? That depends on who you talk to.

Todd Gleason: 38:36

Okay.

Scott Irwin: 38:41

E 30 has the advantage of, you know, you're getting a very high octane premium fuel mixed with 84, if you're mixing it with 84 octane. If the blend is 84 octane petroleum and then something like 115 to 118 octane, ethanol, you know, in a 30%, seventy % mixture, you've got a really high octane premium fuel that you can then, in theory, better, more efficiently run really high compression engines. But we really aren't set up to do that right now. And so, you know, I think that's the argument, but I don't think that it's gonna get very far because everybody is thinking about really long term investments in the in in the surface transportation area, staring down the barrel of the EV transition. So are we really gonna go through and make massive I I understand the argument, but I don't think it's gonna happen.

Todd Gleason: 40:11

But isn't

Todd Gleason: 40:12

Let let

Todd Gleason: 40:13

Is it total EV, though,

Jonathan Coppess: 40:14

if the

Gary Schnitkey: 40:15

pipe really What? Total EV is the fact really a

Todd Gleason: 40:20

pipe It Oh.

Scott Irwin: 40:21

Well, that's I I I don't believe it. No. I I think that we're it it will proceed, and I guess here's my answer.

Todd Gleason: 40:30

The question is whether our EVs are pipe dream.

Scott Irwin: 40:33

An area in our modern economy where digital techno technology has not ultimately won?

Todd Gleason: 40:44

Name one. How how about rather than total EV, more EVs in the automobile industry. It it it Then

Scott Irwin: 40:55

then fifty years from now, there will be no internal combustion engines. There you go. Now, but it's gonna take a lot of decades and a lot more technological technological development. Today, we cannot do that, and we cannot do it with reasonable cost, with our present, electrical generation capacity, the capacity of the grid, the range of the vehicles, issues with, batteries and safety. There there's a whole menu of technological problems with EV technology that's going to have to be overcome.

Scott Irwin: 41:38

But I believe they are a superior consumer product, and they will win in the long run.

Todd Gleason: 41:48

You don't own one though. Right? Me either. And I and I'm with him. I

Scott Irwin: 41:53

I think well, actually, I do, Todd. Oh, you do? But it's it's it's not and it's not really even a technicality. I I own a hybrid, which is a form

Todd Gleason: 42:03

Oh, you do own a hybrid.

Scott Irwin: 42:04

It's a form of an electrical vehicle. And in fact, over the next decade, hybrids are much more of a threat to corn ethanol demand.

Todd Gleason: 42:12

They just buy a hybrid. Electric vehicles, buy a hybrid. They're

Scott Irwin: 42:16

Basically, Toyota's versus the Tesla, you know, you should be worried much more about the Toyota.

Todd Gleason: 42:22

I don't I don't own

Todd Gleason: 42:23

a hybrid at the moment either, but just we've driven them on campus for such a long time. It's since the early two thousands, and they usually tend to be fantastic vehicles.

Scott Irwin: 42:34

Was that strong enough of a end point for you, Todd?

Todd Gleason: 42:36

So No. It's not.

Todd Gleason: 42:37

I've got one So

Todd Gleason: 42:38

not yet? Yet not I wanted it to be, but I got one more question.

Gary Schnitkey: 42:41

No. Just let me you know, honestly, I whether you want to debate that or not, if you're looking out, it's difficult to see growth of corn and soybean demand. Right? I mean, just just look out and say, tell me what it is, and we can more easily list things that cause it to come down than go up. And then remember, there's Brazil.

Gary Schnitkey: 43:07

And even if we do increase it, there's Brazil. So and I don't say that

Todd Gleason: 43:15

to be

Gary Schnitkey: 43:16

negative, but to say that you better get used to four thirty corn and ten forty soybeans.

Todd Gleason: 43:23

But that was my actually, my last question.

Scott Irwin: 43:25

That's why we need an SAF mandate.

Todd Gleason: 43:27

Yeah. There you go. So so my last question was actually to see That's

Gary Schnitkey: 43:33

all I want.

Todd Gleason: 43:33

You were at 04:30 corn and what?

Gary Schnitkey: 43:35

So I I'll go four yeah. Four thirty corn, ten forty soybeans, and it could be four fifty corn. I don't care what it is. But at those price levels, our cost structure is not built for that right now. And, as long as we keep getting economic assistance, we won't go back there.

Gary Schnitkey: 43:58

Right? And so we're sort of stuck here. So that's what we're doing.

Todd Gleason: 44:04

Bad circle. Right? Economic assistance and low prices.

attendee: 44:09

I got one question then. The elephant in the room here seems to be input. Yep.

Jonathan Coppess: 44:14

That change. So That was prints.

attendee: 44:15

That's inputs. That's agribusiness. They don't change. So what what

Todd Gleason: 44:20

is producing Related to the related to the answer he just gave you.

Gary Schnitkey: 44:23

Yeah. So you you I don't see seed coming down, and I don't see fuel coming down, and I don't see pesticides coming down, and machinery isn't coming down. And the only thing that that's sort of left is cash rents and you're not gonna lower them until you have to, right? So you won't and then what you're hoping for is that three years from now, we have a drought or someplace. And And you get a price spike, and it all kinda works for a while.

Todd Gleason: 44:54

And the economic assistance you put back into the inputs, which keeps them from coming down, which was

Gary Schnitkey: 44:58

But so that that that's not all I'm not trying but but the thing that I notice now versus in 02/2005 is just just the larger losses that you take on cash rent farmland when you're at at at the prices we're at, you're taking larger losses on cash rent farmland. If you own land, you're okay because you're, you know, you're sort of a lot letting your own land cover your cash rent land because you're not paying that $350 cash rent. Right? So that's sort of the conundrum that you face right now.

Todd Gleason: 45:43

That I

Gary Schnitkey: 45:44

don't think I think farm line prices are gonna hold in there just fine, but you gotta look at what your what those returns are on that cash rent. Look look at your operation and see if you have a high cash rent farm, what it's actually adding to the financial stability of your farm.

Todd Gleason: 46:07

So last question, and I guess, Jonathan, you probably won't don't need to answer this question. But of the three that are dealing with the supply and demand tables, I don't your your projections at the moment, I don't want you to talk about those relatively speaking other than do you think you will have to project season's average cash price higher or lower as we go through this marketing year when you change the budgets?

Scott Irwin: 46:42

I'm not sure I understand your question.

Nick Paulson: 46:43

If we updated our crop budgets today, what would we use for prices?

Todd Gleason: 46:47

No. When you when you get to June and August and September, are you going to do you think you do you think you will have to update them higher or lower? I don't

Nick Paulson: 46:58

The prices? Yeah. Well, depending on where the markets are at then, but, I mean, if, like, if so our our last budget update was in January and

Todd Gleason: 47:08

if

Nick Paulson: 47:08

we had done it two weeks later, it would have looked different. But right now, I don't even know if I'd change our crop budget prices. We had a little bit of rally in corn, but that's sort of been wiped out in the last week. It's it's somewhere in the low $4 range and somewhere in the low $10 range. And I don't think anything has changed that, Gary.

Nick Paulson: 47:26

I don't know if you

Scott Irwin: 47:28

You tell me what Trump's gonna do for the next

Todd Gleason: 47:32

three months. What I wanted you to do was to tell me you didn't need to tell me the reason why, but which direction it was gonna go was my question. But that's okay.

Nick Paulson: 47:39

Well, that's a different question.

Scott Irwin: 47:41

Yeah. Well, what Don't know.

Todd Gleason: 47:45

Don't know? No.

Scott Irwin: 47:46

I mean

Nick Paulson: 47:46

Yeah.

Scott Irwin: 47:47

Uncertainty in that respect is off the charts because there's just so much, you know, the trade uncertainty could be removed in a few weeks, and then the the mark the grain markets will rally again. And it will also be a function of, the weather. I probably lean outside of the trade thing, which is very unpredictable. Slightly positive on grain prices because of what I see in biofuels. And, I I just think that early signs of, bad weather and and drought concern me for the summer.

Todd Gleason: 48:35

On that note on that note, rather than the EV note, we will finish. Thank you much. Give these guys a nice round of applause. Thank you for sticking around for the day. We do appreciate it.

Todd Gleason: 48:46

Have a good trip home.