Episode Transcript
[00:00:00] Speaker A: All right, Canola this morning, up. Well, just slightly up, actually. The May contract, trading at6.89 soybeans, were gaining about 4 cents, last I checked at 1154. Bean oil also trading in positive territory to start your Tuesday. So let's keep that momentum going. It's just over 60 cents a pound here, reaching a pretty important level on the chart. Let's change gears to spring wheat flat at 596 on the May contract. Kansas City wheat down a couple of pennies today and corn down a quarter of a cent.
Pretty quiet there. The Canadian dollar also trading lower at 72.88 to start your Tuesday.
Now, for this week, of course, we're going to talk fertilizer for the entirety of the rest of the show here. We had a couple of questions come in. Obviously, two big ones. You know, if I haven't bought my fertilizer yet, you know, I'm sitting here, it's February 24th. I haven't bought anything yet. What do I do? You know, how do I treat the next couple of months here? Because we need to plant a crop. Some of us are going to start in what, six weeks or so. Definitely a lot of action in eight weeks.
So we are, we're there. We're right around the corner. The second question is, you know, how does summer look? How does that market reset look? Should I be strategically looking at top dressing, my crops looking good here, late June, early July?
What's the market gonna look like at that time? So those are the big ones here for today. I do have one little crop marketing thing that we will do right at the end of the show.
So, you know, you can stay tuned for that. There's some important stuff going on. We got Josh. We need to make sure that we, we take advantage of his time. So let me go and see if I can bring in the guy.
Josh, can you hear me, buddy?
[00:01:56] Speaker B: So you bring me on. And the technology for the live event works perfectly. Coincidence? I don't think so.
[00:02:03] Speaker A: Oh, man. If you, you, you should have seen the last two weeks, man. It's. Yeah, just chaos in the garage studio here. Anyways, Josh, you've been, you're always a busy guy. You've been across the U.S. you know, attending all sorts of events. What, what's, what's the temperature out there? How are people doing? How are farmers doing? How are things looking?
[00:02:24] Speaker B: Not horribly. It's just, what level of bad is everybody doing? And I think that's something shared. It's not just us. It's not just Canada. I Think it's kind of globally speaking. I think farmers are looking at high input prices. Fertilizer, chemical equipment, land, grain prices not doing us a whole lot of favors. Even though they're up like you're talking about, still not up nearly enough to offset with high input prices. Are. So 2026, as of right now, with the information we have in hand, it's going to be another tough year. And I think guys are sick and tired of I kill myself all week or all year raising this crop just to not make any money or worse yet, lose money.
Why. Why do we keep doing this?
[00:03:00] Speaker A: Yeah, I, you know, I've been feeling a little bit optimistic with, you know, our canola futures have rallied here for 10 weeks. Obviously, soybeans have. Have had a nice little pop here as well lately. So trying to feel a little bit more optimistic. But at the end of the day on our farm, we've got half of our acres where we're trying to figure out how to reduce our loss to the minimum, and the other half trying to make sure we do a good job of those ones. Cause they're the ones that make money and they spread it across the whole thing. And there's not much left at the
[00:03:29] Speaker B: end of the day.
[00:03:30] Speaker A: Now, Josh, in Western Canada, it's been a complete Gong show the last couple of weeks. So I was chatting with a farm and I'm like, hey, did you guys tidy up your purchasing for fertilizer? And they said, actually, we have a meeting.
We're talking to the head guy at this retail. He's the guy that is in charge of the whole thing.
And, and we'll get back to you in the next couple days. He ended up having lunch with this guy.
No urgency at all in the meeting. Just, yeah, we'll get you some numbers. Great, let's have a great lunch together. And then chaos.
Like, the next day, the market shoots up. Urea shoots up in western Canada, like 100 bucks a ton. A bunch of retailers go to no bid, no offer.
And then we start to hear about shutdowns and equipment issues and, and then we get comments like, I've been in this industry for 20 years. This may be as bad as it's ever been for getting inventory to farm or to retail. This spring, what happened?
[00:04:35] Speaker B: It's. It has been a grouping of issues that if we had called this, let's say the fertilizer starts July 1, let's start then. If we had come at July, one said, listen, here's all the things we think are going to come Together to happen. By the time we talk middle of February, most people would say, you are nuts. There's no way. Yeah, the things are always out there, but they never happen.
Honestly, it's something we had talked about and that's exactly what it's been. It's not one factor that's causing this thing. There are global factors, there's domestic problems, there are local issues that you talk about that have all come together that make this happen. So listen, we could spend hours talking about all the global issues that are going on out there. I mean, you can really boil it down to it's China and their lack of exports until August, which is what they've told the world, which is huge for urea and phosphate. It's this US Iran war situation.
Yeah. Iran on their own is major. They're the third biggest urea exporter, 10th largest anhydrous exporter. But even more important, what if Iran starts attacking boats in the Strait of Hormuz and shuts that body of water down? Now you've removed three of the biggest urea exports, three of the biggest anhydrous and one of the top five phosphate exporters, and there's only five major exporters. That's a huge thing. European nitrogen production is still down. The Russia, Ukraine war is still going down. So we've got all these world problems that are driving prices up.
And the issue is, and this is something we've been slowly and kind of trying to tell people all the way through winter is like, watch your basis.
That is a very common term, obviously, in the grain markets. It might as well be in Latin when it comes to fertilizer.
But your basis is just your price. Local price based against nola, New Orleans, Louisiana. That's our base, North American marketplace. And we've been telling people we think that number is going to blow out the closer we get to spring.
Number one, we had a lot of nitrogen facilities that went down for repairs. You were planned, these nitrogen plants, very high temperature, very high pressure. It weighs down, weighs on equipment. It's hard on equipment, and you have to repair it or that plant's going to break and you have to go find it. And it takes a lot longer, you lose even more production. So they had to make the repairs. We lost production in the local markets.
B, the farmer has not seen an opportunity to block in profit.
I have not seen a single opportunity where the farmer's like, hey, this is a good chance I can lock in so many acres at a profit. I can go ahead and do this. It's not existed. So what does the farmer do? I'm not going to do anything. I'm going to sit back, I'm going to wait.
Well, the retailer, the co op, private retailer, it doesn't matter who it is, the supplier to the farmer has looked at it and said the same thing. If the farmer is not buying, I'm not buying. Because I've seen this play out before. I saw 2008 major cycle up, immediate cycle down, 2012 major cycle up, cycle back down. I cannot take losses at these higher prices. So I am going to be very cautious on my buying patterns. Distributors saying, well, if the farmer's not buying and the retailer's not buying, I'm not going to buy.
And now all of a sudden we start looking at the calendar. Today it's February 24th to your point, the best point you can make to anybody out there. Spring is around the corner and now all of a sudden everybody who's been waiting and waiting and waiting is now all of a sudden going to jump up and say, I need product.
How are you going to get it here?
There's only so many barges, there are only so many rail cars, there are only so many trucks. And we've already got a situation where we've been warning and saying, hey, these production facilities have got less production because of these repairs that they need to make and it's not their fault. It's just part of the process.
It is the brought to multiple factors coming together to make the situation the way it is. And if we had sat there and said July 1st, this is exactly what's going to happen, you would have been laughed at or yelled out of every single room you tried to say that in. But that's what we're starting to get into.
[00:08:17] Speaker A: It's incredible. It's incredible to me. Like you know, I sympathize with the entire, the entire process and the entire chain here to some degree. But you know, it has it gone. Like we, we talk to farmers and I preach risk management and if you, you know, checked anything out lately, I've been talking about strategies. We have a rallying market, how to hedge yourself, how to protect yourself. Is there not mechanisms for the retail network or like do they not have risk management tools that they could incorporate? Or is it just buy at this price, sell at this price right away, buy at this price, sell at this price. Like is there not something that they could mitigate that risk?
[00:08:54] Speaker B: There is, but it's growing, it's building and it's in its infant stages. So Right now to your point, you go to any elevator and you say how many bushels have you got unhedged right now in? The vast majority of those guys are going to sit there and tell you it's basically less than a truckload. Right?
Every single bush that goes through is hedged. You go into a fertilizer retailer and say how many tons have you got hedged? Most of them will go cross eyed and say I don't know what this hedging thing is you're talking about. I don't understand how this works. That's a lot of what we're trying to do, right? We're trying to teach the industry how this happens. We actually had our CEO in the office, Kansas City a couple weeks back and we were talking about, you know, all different products. This is doing great. That's doing great. We started talking about fertilizers at this time.
Right now the futures market of Fertilizer trades like 4 million ton, 4 to 5.
You're talking global fertilizer production in the nine figures and then you start to overlay that with how many times over like the corn market trades, actual production, that's the type of growth potentials out there. But the fertilizer market is stuck back in like what the grain markets were back in the 60s and 70s where you walked in and said how are you guys hedged? We're not, we don't know how to do that. So yes, to your point, it's still a very buy sell pattern and that's what made the situation the way it is. And we kept warning people we can rely on just in time demand, that's fine. But the problem is just in time demand has to pay just in time logistics and those are not cheap. And that's what we're finding out today.
[00:10:19] Speaker A: Yeah.
So we had a question come in yesterday prior to the show about what do I do now? If I, if I've done nothing, do I just keep waiting this out? If I don't have any of my needs secured for the spring, do I just wait this out? And I don't know if you have a comment on that or not, but I did chat with a retail that said like we don't even know when it's coming at our facility. So if you want to put your hand up for some, you should so that you get something anyways. What do you think on that comment?
[00:10:51] Speaker B: I think it's more conversations when it gets like this. And listen, I'm not going to sit there and say there has been a single opportunity since July 1st, when we started this fertilizer year, that has been like, oh, if you were to listen to me, is one of a great chance.
I didn't see prices getting to where they were. I did not foresee a situation where there hasn't really been an opportunity to lock in anything that I've seen is attractive. There's not been one opportunity I've seen out there.
So I think, as of today, I think the best thing we can do is we talk to that supplier and I get it.
Bad last year, bad two years ago, bad this year. What do we want to do? We want to stick our head in the sand and say, I don't care about this. I don't want to look at it until I absolutely have to. I'm already depressed. I don't need help.
The issue is, we do that, it makes a bad situation much, much worse. I think the conversations need to be a whole lot more. And going to that supplier and saying, okay, let's sit down. As of right now, here are my plans, here are my expectations, here's what I'm going to need across all the different products out there.
I don't know that I can lock them in today because I'm know be locking it at a loss. I don't want to pull the trigger. But can you put me down on your book as saying, this is kind of what we need so that you can make plans as you're making your purchases and lining up logistics and things like that. You have me in the back of the head saying, hey, I know this guy needs 50 ton of this, 25 ton of that. I think those conversations, we've been saying that all winter, the difference between, let's say like the start of the year and springtime is nowhere near as wide as it seems. You've got to have these conversations sooner than later in these types of environments. Because that person that waits until the absolute last minute, I don't want to say they're going to go without, but it's going to be a very, very difficult spring.
[00:12:27] Speaker A: Okay, fair enough. All right, we have two or two questions that came in here. One from Tim and one from Kent.
Tim asks, is Trump's 15% worldwide tariff going to affect fertilizer prices?
[00:12:41] Speaker B: Okay, let's start with saying, I'm not a lawyer, so all the lawyers speak documentation, stuff like that. I'm not paid enough to understand how that stuff works. Yep. Things we have heard and the simple breakdowns that we have seen means the short answer is no. It will not affect fertilizer. We believe that the second round of tariffs that he put in after the Supreme Court said, nope, you can't do that. We think that he mirrored what the tariffs were, and the tariffs, as they were before they got struck down, did not include anything on fertilizer. So as of right now, and again, D.C. can change on a dime. Right? But as the information that we have today, we are telling people we do not think there is any sort of a tariff impact on any fertilizer for North America, for us. I always talk about North America, right? Because people get upset, like, well, Canada is in the US we are all one market, guys. Yes, we share a border, but we share a border. So unfortunately, some of the stupid stuff we do in the US Matters significantly to Canada. It matters a whole lot more to central and western Canada than, say, Eastern.
[00:13:42] Speaker A: So, okay, all right. Good answer there, Kent. Comes in. What percentage of urea is imported into western Canada? Do we produce? The majority of what we use in Canada? So I believe.
[00:13:55] Speaker B: Yeah, I was gonna say I believe. And I. I don't have the numbers offhand, so I'm going off memory here, so I'm probably wrong, because my memory is crap. That's why I'm in fertilizer. Not something that pays well.
[00:14:02] Speaker A: It's a live show. You can say whatever you need to. It's off.
[00:14:04] Speaker B: Okay, we can do that.
So Western cat, I think you guys produce what you need. And that's why when you look at it, the US And Canada, we share tons back and forth. On the eastern half of our countries, there is a general shift north of tons. In the western half, there's a general shift south of tons. And I think that's one of those things, is the nitrogen that you guys produce, you produce for your own, and you shift it south.
In fact, I can tell you, years ago, for grain farms Ontario, we did a major project. It was one of those things like, hey, look out in the future and try and see what are some things that Canada could do to improve itself so it's not as reliant on the world. One of the things we talked about is improve the efficiency and the capacity of your east west rail lines so you can bring more of your own nitrogen produce in Canada from western side over to meet your needs, rather than having to buy it from the rest, rather than having to bring it in from the U.S.
so, and that's from that standpoint that you guys have got adequate. And frankly, you know, one of my big talking points this winter has been why, as a North American marketplace, are we bringing all this urea and everything else in from the rest of the world?
We can produce it here, we can produce it cleaner, we can produce it better, we can produce it more reliably. We don't have to worry about global relations.
Our demand is right here. Why. Why are we importing this stuff from the rest of the world? Let's build it here and move it.
[00:15:20] Speaker A: Yeah. You talked about food security on X the other day. And. And, you know, this obviously being a part of food security, but, like, when's the last time something new is built? I haven't looked it up, but, you know, like a new facility is built. There's. There's one being proposed in. In western Canada. But it's got a long way to go to build trust. It. The trust has been kind of fractured, and it's got a long way to go to build some trust to get people excited about that project.
[00:15:49] Speaker B: 2012, okay, 2012 was the last time that we saw a major wave of North America production increases.
Now, the majority of those were from the back of deep bottleneck projects at facilities that are existed. They were sitting there saying, hey, if we do XYZ put some money into it, we could increase the production. But it doesn't really change. It doesn't produce a new plant.
The one plant that we saw built and actually turn into a real plant from that time frame was Weaver, Iowa. It was produced by oci.
Well, that plant was up as operational. It created more tons. It created more competition. But OCI decided, hey, we see this as the high of the marketplace. We want to sell out. We want to cash in our chips. They sold that plant to Coke, and that just went back into one of the big three manufacturers for nitrogen. That's really, you know, rubbed people raw down here in the States.
There was obviously some other things that happened out there north, but since then, we haven't seen a whole lot. We have seen a lot of these issues be propped up like green produced, anhydrous and stuff like that. I struggle with that. I'm not gonna sit there and say the technology won't eventually work or there's technologies there that work today. But the project that we've looked at so far, that's cat green. Anything attached to it, I wouldn't say it's unreliable because it's so dependent on taxpayers, subsidies. A lot of those plants we saw, if they were forced to stand on their own two feet, they fail. They need those tax dollars to make them work. So unfortunately, since that 2012 increase that we saw, that really finished up 2017, 2018, that's when everything was kind of finalized.
[00:17:21] Speaker A: Yep.
[00:17:22] Speaker B: We haven't seen anything major since then. And that's a disappointing thing because, listen, we import a lot of urea, we bring in a lot of UA and anhydrous. There's no need for it.
[00:17:30] Speaker A: Now, Jim asks, is the tightness in all forms of nitrogen and phos P products, is it tight across every form or is there something that may be in a little bit more supply? That might be a bit of a. I don't. Deal's not the right word. But anyway, yeah.
[00:17:52] Speaker B: And I would say it's every form and the reason is some of these other forms. It may not have supply tightness based on normal markets. Right.
But the issue is, let's say all of a sudden the urea market gets extremely tightly supplied and the price goes up. Well, what do you as a farmer do? I don't want to pay the premium. What if I can go buy UAN for cheaper? I'm going to do that. What if I can go buy an hydrous, it's cheaper. Well, all of a sudden that demand wave hits. What do those products do? Their price goes up because there's less supply to the demand that's out there. Well, then I'm going to switch to this. Well, that starts to go up and it just. It's a domino effect. It's a wave effect that hits everything one after another after another after another. And so when we look at, let's say, like urea, look globally, China is one of our top five exporters right now. They're saying we're not going to export anything. January through July, we may come back in August.
That's a huge loss. European production is still suffering as it has since late 2021. That's three and a half million tons gone. And they're buying from the rest of the world. All of our production downtime, the possible war with Iran. There's a lot of supply that is missing from the global S and T uan. You can make similar arguments. And hydrous, you can make similar arguments. Phosphate has problem. I mean, it's just we could spend hours talking about all these problems around the world, but it is a supply situation.
[00:19:05] Speaker A: Yeah.
All right, one last one for you. The timer just went off. So one last one. This is from Jim as well.
Is there really incentive to build out more capacity if the margins are good with current global or if the margins are good with current global markets? So is there an incentive to build up capacity.
[00:19:24] Speaker B: And I think what he means is, is there incentive for the current manufacturers to increase it? Because dude, that's a great question. That's one that we talk about quite a bit. The answer is no.
If I am a major manufacturer right now, why would I want to build more production? I like my margins, I like the tight supply. I like you groveling at my feet and kissing my ring when it comes time to buy something. I like the way this is set up. More production means I lose that capacity. I lose the ability to dictate to the marketplace what it will and will not do.
And so I think from that standpoint, if one were to break and start a new project, I think the others would follow suit and probably say, oh crap, if they're going to do it, we're going to do the same thing. But it's a gentleman's standoff. You don't do it, I won't do it. We're not talking, we're not having conversations. But there's just no reason really to go forward.
And that's why when we look at it, my big thing as I've been standing on stage, is to say this.
The US government, let's just say, for example, has given some pretty sizable loans to new potash production in the States.
And for love of everything, I don't understand why, as long as we can just keep from upsetting you guys, which, who knows, after the Olympics, after the hockey games, you guys must sit there and say we're keeping to our potash, to ourselves. We're not helping you anymore.
Listen, as long as we're on good terms, between the two of us, we're fine. There's more than enough potash go around.
If those funds were to go to a new production plant, world scale nitrogen production plant, under the umbrella of a brand new company not currently in the space.
It creates more supply which helps lower the price. It creates more competition which lowers the price. Does it solve every problem in the world? No, we're still going to ebb and flow with the global. If we lose Iran, China, Europe, all this stuff, we're still going to be dealing with a high price, but it's going to help ebb that situation. We're not going to be as reliant on the rest of the world, which is what I think it is. I to your point, every nation around the world, from my limited point of view, shares one national security issue.
It's food supply. How do you grow food? It's fertilizer. Why are we so dependent on the rest of the world that who knows what the next 5, 10, 15, 20 years looks like if we can produce it here at home, we don't need to worry about that.
[00:21:32] Speaker A: Yeah. All right, one last one for you, Josh. We're over time.
Summer reset. We're used to a summer reset in Western Canada, late June, July, we get, and I expect a reset because it's going to get crazy here over the next eight weeks.
Are you thinking reset as well or, or don't get that excited about a. We call it the summerfield program over here.
[00:21:54] Speaker B: Yeah, I think that we're going to see a reset. I just don't know to what level.
When we look at nitrogen, I can see that resetting pretty well. Just because we're going to come out of it to your point, I think these prices are going to get goofy. Logistics are going to play just as much part as the supply and everything else. So you're going to see prices up significantly and I think the summer reset is going to look pretty attractive. On the follow phosphate, I do not expect as much of a reset. Now, your inland basis, that's one part of the story. But as an overall phosphate market, I'm not expecting it. On the one side, we're still seeing supply stay tight around the world. That's going to be a limiting factor. On the downside, number two, production cost. And people listening are probably like Linville, don't you start with me. Phosphate producers are doing fantastically. I get where you're coming from. I understand the anger. I have to talk to my family all the time. I hear the same arguments all the time.
But when you look at it, sulfur prices, incredibly high, stuff we've never seen and hydrous prices, incredibly high. Guys, those are your two biggest variable cost inputs for phosphate production.
My current, our current working theory is let's go back to NOLA, right? New Orleans, Louisiana. If that price drops substantially, 50, 100 plus dollars a ton, I think you'd see curtailment production issues because they're going to sit there and say we've got a finite amount of phosphate rock. We are not going to produce these tons into a finished good for a loss. So we'll just sit back produce and we'll wait, we'll shut down production until that point comes. And that's the unfortunate reality of it. It's the cost of production is so high that if this price does drop substantially, say China comes back or something like that, spring demand is terrible. I still think it's limited And Potash, listen, it's, it's already well priced. You look at their price versus grain values, it's where it needs to be. I know it's still high. It could be cheaper, don't get me wrong, but it's really out of the three majors, it's the only one that makes sense. Could it be lower? Yeah, maybe. With all this new production coming online. If BHP gets the Janssen mind going, Laos bumps theirs up, Russia builds their up. We get some of our big ones coming. Yes, they can push the price lower. I just don't see it as a short term. I think Potash stays pretty steady.
[00:23:53] Speaker A: All right, Josh. Well, I appreciate you being on the show this week. I'm going to wrap up with just a one insight here and, and thank our sponsor. You can hang out if you gotta go. Don't, don't be shy. You can jump off as well. So thank you so much for, for joining cup of coffee this week, folks. I said I'd talk grain marketing for just a second. My, my, my. One big takeaway right now. Headlines were kind of boring this morning, but in western Canada specifically and on hedgeable crops, you need to be dialed in right now. All right. Canola reaching levels we haven't seen since last summer, the early part of July.
Spring wheat futures hitting that October high here as well. You need to be dialed in. You need to take a, a look down the road here a little bit further into 26, maybe a peak into 2027.
Do some math, figure out how that looks for your farm. Securing worst case scenarios is just a, a no brainer because you can leave yourself exposed to some upside. All right, this week's cup of coffee was brought to you by DG Mobile Seed Cleaning. Contact Dion at 306-321-5411 for your seed cleaning needs.
Of course, I got to shout out a good Saskatchewan based business out of my hometown of Dormy, Saskatchewan. So a couple of young fellas just given her there. I'm out of coffee. Thank you, Josh. That's it for this week.
I'll see you guys Friday on what the futures.
