Katie Geerdes

"China's economy is a juggernaut that defies the laws of economics by becoming an evolutionary new species of capitalism deftly managed by Xi Jinping." The Chinese economic performance over the past few decades has caused many to accept that narrative. I believe that the more likely scenario is that China is a fraud…something more akin to being a Ponzi scheme. It may well be the greatest fraud ever perpetrated on the planet, the risk of that being the sobering potential calamity that will result when the Chinese economy implodes. A Ponzi scheme is when someone cooks the books to show profits/growth that attracts new investment and absorbs leverage to keep the wheels spinning higher and higher above the ground. When it stops there is not a copasetic outcome. The bigger they are the harder they fall and the Chinese economy is poised to drop from never before inflated heights of hubris.   As the need for positive Chinese economic data becomes more important to sustaining their illusion, the less transparent that it has become or will be. There is always good and bad economic news and China is skewing the relationship by ending the release of bad news to cloak…

The morning started off with fresh estimates from Brazil's CONAB agency that served as benchmark levels to compare with the USDA report. Traders seemed to still be skeptical of the USDA doing much to close the gap, since corn and soybean futures largely shrugged off what looked to be bullish numbers from CONAB. In the end, it was right not to count on the USDA coming down to earth on its Brazilian estimates, seeing as the government analysts came in well above the average trade estimates because they did not change the numbers at all.   Some analysts argue that CONAB is holding too low on its Brazilian acreage estimates, but that does not seem to account for entire discrepancy against the USDA's figures for Brazilian soybean production. The difference between the USDA and CONAB is now over 300 million bushels for this year's soybean crop while the USDA will still higher than CONAB on last year's soybean crop by almost 275 million bushels. The distance between estimates for Brazil's corn crops from both this year and last year has USDA on the high side by nearly 650 million bushels.   Even with all of the anticipation that had been…

Brazil's soybean harvest pace is beginning to slow as it nears its conclusion.  We expect over 85% will be harvested by the end of the week.  Most of the Center West region has wrapped up the harvest along with Parana.  The MAPITOBA region is roughly 75% complete.  RGDS is the main laggard with only 25% complete but yields there are reportedly doing very well overall.  The April WASDE report will be out Thursday morning and yet again much attention will be focused on the size of Brazil's crops.  In the case of soybeans, the trade expects the USDA to make cuts at or below 152 MMT.  We believe this cut is warranted but whether the USDA will make good on that is a different matter.   In the case of Brazil's corn crop, the trade is looking for a cut below 122 MMT compared to 124 MMT last month.  Again, we feel this reduction is justified as farmers had very little financial incentive to plant safrinha corn.  While growing conditions have been conducive to reaching trendline yields that will not be enough to reach the USDA estimates for corn.  Much attention will be focused on how many acres they actually…

Interest rates are the cost of capital. Is the cost of capital going to rise or fall? Everyone looks to the Fed for the answer to that question but the Fed essentially responds to underlying fundamentals rather than makes them up. They can temporarily directionally impact capital markets but they will eventually come back to whatever trendline that is fundamentally supported. The Fed is looking for an opportunity to reduce rates but that is against the backdrop of changing demographics. How did interest rates and the cost of capital get so cheap this decade before it has now gone up? The answer is that as of 2023, 51.3% of the wealth in the US was held by baby boomers…$78.1 trillion. 70% of the economy was being driven globally by the wealth of the baby boomer generation. That is why when in the throes of the Covid pandemic that interest rates could fall to as near to zero as they did. This generation hit the sweet spot of their earnings potential as we entered this century generating an unprecedented pool of capital but this will fade with their further aging. “Some $53 trillion will be passed down from boomers to their…

The above map shows the spring average last frost dates for regions of the country. First and last frost dates have been extending the growing season for much of the country. One could say that spring is coming sooner but this year was unprecedented for us to have had a dose of spring in early March. Farm publications all have stories on cover crops as they have become the new thing. They are not very applicable to the NCB starting at the Iowa/MN border as there is little time for them to develop before row crops go in. Our crop insurance date for corn is April 10th and for soybeans April 15th. Farmers like to get both crops planted in April if conditions allow. Note that in NW IA where we are, planting soybeans in April is challenging the final frost date. Farmers bumped up the soybean planting date from what it used to be generationally by as much as a month resulting in improved yields. Cover crops just get in the way of early planting. They are still being tried because of carbon credits. A farmer shared his experience at a recent carbon conference. I understand carbon scoring and…

Gold prices rallied to new all-time highs again today as investors priced in the increasing likelihood of inflation staying a problem. The latest jobs report may have pushed back against bets for interest rates to start falling soon, but the data did nothing to quell inflation fears. The shift in monetary policy still expected for later this summer has major banks such as Goldman Sachs and Bank of America maintaining a strong outlook for gold, oil, and other commodities because of the view that lower interest rates and a weaker dollar will be linked to persisting concern about inflation.   In a recent report by Goldman Sachs, the analysts cited the historical tendency for gold and crude oil being two of the top performing commodities during periods of falling interest rates. Grain and livestock prices were also observed to benefit in such an environment, but to a lesser degree than most other commodities. Currently down sharply since the start of the year, grain futures have considerable room to catch up to the broader market, as the Goldman Sachs Commodity Index is higher by about 11 percent year-to-date.   The caveat to the bullish commodities argument is that the Goldman study…

On the Grains Markets are mixed in overnight trade thus far. Corn is mostly steady, beans on the soft side with wheat firming. Yesterday started off with crummy weekly export sales either near or below the low end of the range of trade expectations. Yet crop futures absorbed them surprisingly well, corn finishing a little higher, beans off only slightly and wheat closing mixed, with winter wheat in the red but MGE wheat in the green.   On Monday we'll get the next Weekly Crop Progress report after markets close now that they've resumed for the growing season. What will get top attention are planting progress and wheat condition ratings. The eastern Corn Belt is cold and soggy with bad flooding reported in the Ohio River valley. That's good news for Mississippi River barge traffic but will definitely slow fieldwork in the ECB. Not so for most of the WCB, however. We should see good planting progress for the WCB Monday and the latest 8-14 day outlook appears ideal for rapid progress across nearly the entire Midwest and Plains.   The outlook is for wetter than normal during this period in most of Texas, but it will be welcome there…

When the headline surfaced, "Officials Confirm HPAI Dairy Infections" a thread began to unravel that we have not seen the end of yet. North America appears to be awash in Bird Flu virus as the wild bird migration traverses the continent. Biologists were concerned that at some point the virus would jump species to animals other than poultry. Finally, it happened when dairy cows in TX and KS were confirmed to have been infected with Highly Pathogenic Avian Influenza (HPAI) virus. That gave this story some new legs. The cows got sick but there was no associated mortality. Initially observers discounted the risk saying that milk from unhealthy cows is discarded while milk consumed by the public is pasteurized and there was no way the virus would be passed along through the food chain. USDA gave its seal of approval that "there was no impact on human health." They did also offer the caveat that this was "a rapidly evolving situation." HPAI was also found in a Minnesota goat. Then again not enough research has been done to know anything for sure yet with high confidence. Cows also tend to be more exposed outdoors. The load of virus in the…

The Fed is closely watching prices and inflation. Gas and food prices are unlikely to fall near term due to seasonal factors. Strong housing sector prices contribute to inflation. A contractor says that while lumber prices have come down, paint, materials and labor costs have gone up to offset it so building a house has not gotten cheaper. I have to admit I'd have lost money betting against home values rising further given mortgage rate hikes. I thought that home values would fall to compensate for higher rates but…   They explain the strength in the housing market as demand exceeds supply with many more prospective buyers than homes on the market. There is less turnover of older homes as owners do not want to give up favorable mortgages to upgrade homes at higher interest rates. My granddaughter and her spouse just moved into a townhouse as new first-time homeowners. The two professionals bought what they could afford which was a modest starter home in Omaha. There were multiple offers at the listing price. I was favorably impressed with the amount of square-footage they got for their investment. Rent is high in part because the high cost of home owning…

Last year our crops sucked all available moisture from our soil profile in order to finish here in NW IA. We had enough subsoil moisture reserves, where there are deep soils, to finish the crop with better-than-expected yields. Our moisture was tapped out in the process, so we were bone dry at harvest. Then it started raining here again in October. My partner who tracks his accumulations says that we got 8 inches in October which went a long way to restore our soil moisture deficit. Our soil profile can hold 11 inches that is available to a corn crop on our farms. Next to happen is that it did not freeze hard until after Christmas. Some did field work up until Christmas and some tilers worked here in January before we got hard frozen ground. We got another 2 inches of rain in December. The late freeze allowed this to soak into the soil profile as well. The winter freeze did not last long, as I told you that the car that they park on the ice on our lake, fell in the earliest ever before in the 'guess the date' contest. This year the lake was frozen for…