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Jan 23 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the January 23 edition of Commodity Week. Todd Gleason services are made available to WIL by University of Illinois Extension. Welcome to Commodity Week. I am Todd Gleason. A special program today pulled in part from the FarmDoc daily webinar held on Thursday morning with Joanna Colusi from the University of Illinois talking about Brazil and Argentina and crop production there, And Paulina Lescano joined her from Argentina where she lives in La Pampa.
• 0:35
  She's a grains analyst. You can find her online at PaulinaLescano.com. And then we paired that with a conversation which we had with Joe Jansen at the U of I along with Kurt Kimmel of agmarket.net about the commodity markets in general. It's a great show. Stay with us here at Illinois Public Media.
• 0:55
  We'll pick up first with that FarmDoc webinar, which you can watch in full at youtube.com/atfarmdoc. At the end of the webinar, I asked Paulina Lescano to introduce herself. She's a grains analyst, as you might recall.
• 1:10
  Paulina Lescano: Well, yes. As you told, I I am a agricultural engineer. I am grain analyst. My main, work is to advise farmers to, follow their commercial position so, they they can decide when to sell the grain and how to cover it from the volatility. I give speeches.
• 1:35
  Companies hire me to give a talk in different, countries even in I I was in United States. This is my main focus. I work in the business almost for 25 years, until now. I work in a company, in a exporter, a broker, and finally, I work by my own as adviser.
• 2:01
  Todd Gleason: Can you tell me a little as well, about what you see on the ground in Argentina today? We talk about this often on the radio programs that I host, the condition of particularly the corn and the soybean crops. I know they're like here in the United States, they're in a wide range of growing season periods there. But can you give me a rough idea of how the La Nina has impacted growth, and what your concerns might be for the crop?
• 2:32
  Paulina Lescano: Well, I I think the La Nina wasn't so a hard as we thought previously. And we, until I think until the beginning of January, we had a a really good condition order all over the the country. And as Joanna told perfectly, we have different situations. I think, the main problem is in the north of Buenos Aires and south of Santa Fe. That is the the main productive area of the country.
• 3:11
  This is a huge problem because that area, it is, it has the worst scenario for almost 3, crops, one other other, the the next. So, this is the the worst problem in our country. But if you go to other, provinces, for example, almost 70% of the soybean and corn, we can have it in Cordoba and Buenos Aires province. We have, different situations, but in general, we have a good condition, in corn and soybean. And as I as Shauna told us, the the the best condition is, for crops that are in vegetative stages.
• 4:04
  And in the case of soybean, the first planted soybean, it is in general in good condition. The worst scenario for soybean is the second planted soybean that, is, planted after, for example, wheat. So, the soil was without any water. And after that, we have, a hot period and without rains. So in generally, I I think we will have a good, harvest this year.
• 4:35
  Todd Gleason: That would not be what the trade has been talking about, generally speaking, because you're following the commodity markets every day. Do you have a different view of, clearly you have a different view of of the marketplace and what the pressure on it might be because of the size of the crop coming out of Argentina.
• 4:56
  Paulina Lescano: No. No. I I don't have a different point of view, but I think we still have, we continue, in the run. I think we have some losses that we can, not recover. For example, I think maybe, the Rosario Grain Exchange, talk about 2,000,000 tons, of, loss losses and in corn production, but I think we will still we still have the possibility to have a 50,000,000 tons of corn and 50,000,000 tons of soybean.
• 5:34
  I think this is a hood a good harvest for our country. I think what the market was seeing, is the possibility that the the weather wasn't, getting more rains. And what we are seeing the last, 2 weeks is different, rains in different areas that are making the the or the possibility that yields, continue stabilize and not to continue falling down. So I think what the market was, seeing or the rally that we saw is an opportunity for farmers to take that prices because I think finally, between Brazil and Argentina, we will have a really good, harvest. So, that is the way that I see it.
• 6:27
  Todd Gleason: As a reminder, we're talking with Paulina Lescano. She is in Argentina at Paulina Lescano dot com. Joanna Colusi is with us as well from the university of illinois She's located in brazil today in her home state in the southern part of that nation You have something you wanted to follow-up with and we have some questions too that are coming in from, our audience, that we'll get to, but you're you had some thoughts, Joanna, that you wanted to include.
• 6:56
  Joana Colussi: Yeah. Just, to clarify, when you say early soybean and late soybean, how much percent of the total soybean production in Argentina are late and early just to have that picture?
• 7:09
  Paulina Lescano: I'm
• 7:09
  Joana Colussi: not familiar.
• 7:10
  Paulina Lescano: Yes. 70%, almost 75% of the soybean product production in Argentina is the 1st season that, you call the earliest the early planted is the 1st season, soybean. And that are
• 7:27
  Joana Colussi: in good condition.
• 7:29
  Paulina Lescano: Yes. They are
• 7:29
  Joana Colussi: in good condition.
• 7:30
  Paulina Lescano: Yes. They are in good condition, in almost the the majority of the area. If you go to the north of Buenos Aires and south of Santa Fe, you can see, some, farms that they lost almost everything, but in general, they are in good condition. The second planted, soybean that represents, less than, 30%. It is in worst condition, but it is in vegetative state.
• 8:01
  So if rains come from now from now on, we can, have, hopes that that soybean would be in good shape because they are as you show in the pictures, they are in in really first stages of so if they they receive good rates, they could, have potential.
• 8:22
  Todd Gleason: So I I have a follow-up, and I was going to ask that same question, Joanna, as well, with you because here in the United States, we'll have something like maybe 6,100,000 acres of harvested soybeans from this last season, and that includes what we consider first, well, the first crop, which we simply call soybeans for the whole year and then we have 2nd crop soybeans, which are planted again after wheat mostly. Sometimes we refer to them as wheat beans. So is the 2nd season just an abbreviated season season in in Argentina? I assume it's far enough south that the season's short Yes.
• 9:00
  Paulina Lescano: Yes. They are short. They are they have a a small Yeah. Time to to develop. Yes.
• 9:10
  And did As you as, the same that you said, they planted after the wheat. So that is why this year in La Nina, year, soils were after the wheat, almost without any millimeters.
• 9:28
  Todd Gleason: And and generally speak speaking, a a much lower yield than the full season soybean.
• 9:33
  Paulina Lescano: Yes. Exactly. Okay.
• 9:35
  Todd Gleason: And what do logistics in Argentina look like today? I
• 9:39
  Paulina Lescano: Yeah. We we are a much small country than Brazil, and we the the characteristic that we have is that, almost 80% of the all grains produced in the country, are shipped by an area of almost, 100 kilometers. So, we have a big, big concentration of, companies and, areas where, all the the trucks have to go. So this is our biggest, bottleneck. It is okay in English.
• 10:16
  The bottleneck of our logistic is that we have to concentrate all the logistic in a 100 kilometer, companies that are located in the Parana River. So this is our, bottleneck if you if you want. And, after same, in Brazil, almost, maybe 90% of, our harvest is moved by truck. So this is a problem too, and it is much expensive than, for example, in in United States that you use a lot of of rivers and everything. So this is the common with Brazil.
• 10:59
  With Brazil, we have a a track dependence, and the difference with Brazil is that, we have 80% of our going out to the to the other countries in one small area.
• 11:13
  Todd Gleason: And can deep port, vessels make it all the way to the most northern portions of the Piranha there, the the top of that 90 kilometers to to load?
• 11:27
  Paulina Lescano: Oh, yes. This is this is other big problem because we have that concentration and a big, dependence on on the, Parana river, high water water high. So if we have, for example, La Nina or we have, a drought problem, for example, in Brazil, in the Amazon and everything, big ships can't go to their, ports of Parana River. So, the the ships have to, finish, the the charge in this in the ports of the south of, Buenos Aires. So we have a really dependence on, the weather, not only to to have crops, but to, ship our harvest to the world
• 12:16
  Todd Gleason: of harvest. One last question, Paulina, for you. And I think you addressed this early on, but are you suggesting to producers that you advise that they sell their crop earlier rather than later?
• 12:29
  Paulina Lescano: Yes. I advise my my my client, to, take advantage of the rally, rally prices that that, we are seeing, for example, for Trump, volatility or or for weather climate, volatility. Because I think we continue in a in a situation where we will have a huge amount of soybean from Brazil and from Argentina too, but especially from Brazil that is difficult, to, allow market, especially in in soybean to continue to having a a big increase. So my best advice maybe is, to take advantage of the rally to, begin to put prices, to to put floors prices, so they are covered. In any case, we begin to to see farmers, with a huge machines harvesting the huge crop.
• 13:38
  So, this is my advice. And now
• 13:41
  Joana Colussi: I just say remember that when I talk about South America, 170,000,000 metric tons from Brazil plus 50, 52,000,000 metric tons from Argentina, plus 11, 12,000,000 metric tons from Paraguay, a little bit from Uruguay. You are talking a crop season over 230,000,000 megatrends in South America. It's a record. It's a lot of soybeans on the market. I know that's not a good news for farmers that like to see the prices going up, but when you see a lot of supply, I mean, there is no way to fight against that in terms of supply and demand.
• 14:19
  Todd Gleason: Joanna Colucci is with the University of Illinois, part of the FarmDOG team, joined us along with Paulina Lauscano, who is from Argentina, for our webinar hosted on Thursday morning. Now we are turning our attention to Joe Jansen and Kurt Kimmel. Joe, of course, a member of the FarmDOG team at the UOI, Kurt with agmarket dot net. Joe, let's pick up on some of the themes that took place in this last, oh, few minutes here as we're related to South America, but more broadly, the global fundamentals. We know, at least at this point in time, that both Joanna and, Paulina believe as long as well as USDA that there is a record size soybean crop coming out of South America.
• 15:03
  You can talk about corn as well, but begin with the fundamentals across the global space as it relates to those 2 crops.
• 15:10
  Joe Janzen: Yeah. I think the the big thing that is that we're gonna see record global stocks of beans this year. Whether, you know, even, despite, you know, the cutbacks in US supply that we saw from USDA a couple weeks ago in the in that January WASDE, record crops, up over 30% stocks to use, globally for soybeans. That's kind of what's weighed on this market, kind of kept us from, that bean market from really following the corn market higher. We've we've obviously seen, you know, a strong rally in the corn market the last few months.
• 15:43
  That's a big marketing opportunity in part just because the US is a much bigger part of the the global s and d for corn relative to beans. What happens in South America really affects that bean market, and we've we're really gonna fill up, fill up the global granary, so to speak, on on beans this year.
• 15:59
  Todd Gleason: When you tell us that there is a 30% stocks to use ratio, what does that compare to over time?
• 16:07
  Joe Janzen: We've, in the last couple decades, seen that stocks to use ratio typically in that, you know, between 20 30%. So 30 is relative we saw that, sort of post, post China US trade war in 20 18, 19. We saw stocks to use kind of hop up, in part because we were holding a lot of beans here in the United States. This is a little bit different. It's the the the the stocks are not necessarily all here in the US, but the the effect is the same.
• 16:34
  The market is well supplied.
• 16:36
  Todd Gleason: And and I would guess, and I'll get to you in a moment here, Kurt. But I wanna understand one more thing that because, that stocks to use ratio represents a crop that is mostly consumed not in the countries that are producing it and the bulk of the crop from the United States, the bulk of the crop from Brazil are both going out of the country, then it really does make a difference that, fundamentally, we are on the top end of that scale at 30%.
• 17:07
  Joe Janzen: That's right. I mean, it doesn't sort of matter where in the world those beans are. If we if the market knows it, they they're out there, it can go get them, from wherever, and price will price will do the job. Cash markets will
• 17:19
  Todd Gleason: do the job of of pulling those beans from wherever in the world they are to wherever we need them. Can we see that, Curt, in the rally that has taken place in the marketplace? So is corn dragging soybeans along with them, respectively, as it's made its move higher? Well, we've seen some surprisingly positive news here that we weren't expecting here in the USDA crop report, of course.
• 17:44
  Curt Kimmel: You know, low uncertainty on, weather in the southern hemisphere. Then 2, China picking on Brazil here for a change on, maybe some pesticides and some of their beans and maybe canceling some beans here. So we've had some surprisingly good news to help the beans follow corn, somewhat. Yes. But if you'll you mentioned there, those beans are gonna come on the world market here fairly quickly.
• 18:10
  There's a dollar difference between Brazilian beans and US beans, so, I I believe you're gonna find some buyers here at some point in time. We can talk logistics and so forth, but the main thing on the on the bean complex is if you look at a long term price chart, the $11 mark seems to be a swing point on it. The ag market team's pointed that out several times. So the question is, can these old bean futures move much above $11 or not? If you go back about a couple weeks, we were looking at that daily price chart in the November beans.
• 18:42
  We were talking about the right shoulder, and it did form the right shoulder. We got lucky. It moved higher here. And the upside price rejected there was about, 10.80. So with the South American crop coming on and these beans meeting meeting the upside objectives here, technically, we we might be running out of some steam here in the next week or so.
• 19:01
  Todd Gleason: Yeah. So we have to watch that very closely. Have have you, and I I believe this is the case, been all along saying, you know, on this rally, this is the time to finish marketing, to catch up marketing, to just market.
• 19:16
  Curt Kimmel: We're we're we're about 300% sold. I I there's nothing worse than selling something anything unless you find out it's higher priced down the road. But, no, we've been moving in into it. For guys that sold early, we were fortunate enough to have a few get some call replacements on. We've rolled those up and starting to slip out and say enough's enough for right now.
• 19:38
  Because, basically, if we keep going higher from here, our our main theme is let these old crop beans pull new crop beans up and get started on 25.
• 19:48
  Todd Gleason: Is that something you look at and follow and are thinking about?
• 19:51
  Joe Janzen: Yeah. I mean, we obviously know that, you know, new crop prices aren't what where old crop levels are at. So it's not quite as attractive to to market new crop beans or hasn't been, but, yeah, we're starting to get to the point where, you think you'd wanna start thinking seriously, both in terms of where we're at in the calendar, moving into that sort of February, March period where I think you sort of start to really think about marketing new crop. But, also, those those new crop, both corn and bean futures have moved higher where, you know, in that 4 60 ish range on new crop corn. That's a level at which you sort of start thinking about, you know, it's not a me it's not an amazing price level, but it's one where we may not get too many opportunities, you know, at levels far far in excess of that.
• 20:38
  It's a it's a level to start thinking about.
• 20:40
  Curt Kimmel: What what do
• 20:40
  Todd Gleason: you think, both of you, the range, at least at this point when with a normal crop season in the United States and, I don't know, a 92 and a half or 93,000,000 acres, maybe a 94,000,000 acre corn crop, what what do you think kind of range wise you would look at look at for them to trade in? Is it a 4 20 to 485, 4 is it a narrow range is what I'm trying to ask for December?
• 21:10
  Joe Janzen: So new crop futures and, I you sort of think about what's the long run price level, and the FarmDoc team's done some work on that. You can find it on FarmDoc Daily. That long run price level for corn is a number that's somewhere between 4 and 4.50, and we need tight supplies to get us above 4.50. That's what we have had what that's what we've seen in the last couple of months. And the question is sort of, you know, from, you know, going into a new crop year, are we gonna get something like that, that moves us outside of that 4 to 4.50 range?
• 21:45
  Todd Gleason: I wanna follow-up because that to understand the supply and then demand table and what a tight supply is, I think reflects the stocks to use ratio, which is 10.1% or something thereabouts for new crop, 9.9 for maybe old crop. I don't quite recall, but they're not very far apart. They're right at the 10 10%. Is 10% a regular stocks to use ratio? And does that mean 1.57 is kind of a midpoint for carryout?
• 22:17
  Joe Janzen: So 10% stocks to use is a rule of thumb that I and I think a lot of other market analysts would say is that, you know, a level that's sort of a knife edge level below that. We sort of get to be pretty tight. We're kind of on that knife edge right now, going into a new crop year where we expect to see, you know, a substantial surge in corn acres that might kind of, you know, change that situation back to where we thought we were a couple months ago, which was, you know, abundant supplies for corn.
• 22:44
  Todd Gleason: So given all of that information and and your history and background in trading the marketplace, I suspect you're going to tell me that there will be opportunities, particularly because we were because our carryout is as, I won't call it tight, but in the area that it is, that the knife's edge can slip pretty quickly, particularly to the downside.
• 23:07
  Curt Kimmel: Well, yeah, there's a lot of market in front of us, a lot of moving parts in front of us. You know, who who who knows? We're we're looking at maybe some ample supplies. But on the corn, if you go back to May, early in the supply demand balance sheet, we were looking at carryout 2.22,300,000,000. We're down to 1.5.
• 23:25
  So that's huge. Now the function of the market has been to move back up to maybe that, price area. The the thing about stocks to use, I appreciate that, but I'm from the early eighties. In the early eighties, we had stocks used on corn and beans about 50%, percent, wheat 100%. We had CC supplies in the grain bins, and there's no way physically the market can go up.
• 23:49
  But we had good old fashioned drought and off we went. So, you gotta stay flexible in your marketing, but respect respect the world supply demand balance sheet and respect it. If we get in a favorable weather pattern, it's gonna be awful hard to see the market go up to the higher end. As far as old crop prices, the JSA team had this $5 on corn, $11 on beans, kinda the upper end. And I'll have a lot more knowledge of the new crop prices.
• 24:18
  After we have our seminar in Nashville in February, they're gonna release what their projections are, goalpost that is on the upside and downside.
• 24:27
  Todd Gleason: So no preview today from you on that. But if you go to agmarket.net, of course, you can find, the Nashville event. I'm told that it is just a magnificent place to go. I wanna say that's February 2, 3, and 4. Correct?
• 24:43
  Curt Kimmel: Yeah. We'll we'll we'll start off, I'm gonna get down there Saturday night and see what's going on. But, we'll start off after lunch on Sunday, have a good session, and then, all day Monday. And we have a fairly,
• 24:57
  Todd Gleason: neat lineup. You see that lineup at agmarket.netwebsite. Yeah. So one of the people that Joanna happened to mention during today's webinar on Thursday, Dan Bossie will be with you this year again too down there.
• 25:11
  Curt Kimmel: Yeah. He does an excellent job, and, we got a whole list. We got the head of, Rural King coming, so maybe we'll have some 50% off coupons for us.
• 25:20
  Todd Gleason: Alright. Well, that will be fun. Let me tell you also that if you can wait another month or, you wanna do both, and certainly the all day outlook, is easier to get to. It's coming up on Tuesday, 4th day of March. So put that one in your calendar at the Beef House in Covington, Indiana.
• 25:36
  Both of these folks will be there. And in between, you can always catch up with the farmdoc team and their webinar series. In fact, Joanna was on this Thursday. Joe was on last week to kick them off. There are 4 more of those to go.
• 25:51
  That whole series, there are 6 of them on YouTube at youtube.comforward/@signfarmdoc. That's at farmdoc or just search farmdoc under the YouTube search engine, and you will find them. Okay. So with all of those commercials out of the way, let's, finalize some advice for producers at this point. Old crop, do they clean up what they have mostly, and do they get started on new crop for corn and soybeans?
• 26:25
  Yeah.
• 26:25
  Joe Janzen: I think there there's less and less reason to wait. We've seen carry in the bean or in the corn market kind of get eroded here in the last, you know, few days again. There's kinda little incentive to to hold on to old crop bushels. On new crop, I mean, I am typically not of the mind that, you know, one needs to act right away, but I think this is a situation where, you know, that this market has rallied, and it's worth paying close attention to going forward.
• 26:53
  Curt Kimmel: Yeah. Old crop, we've been pushing out the door. We've done some cash replacement strategies. I think you can go clear out to July on those now, with some covered positions. That way, if we're getting some weather, you can try to capture, a little bit more, onto the upside there.
• 27:08
  But we're in the mindset here on new crop, defend 450 and 1050. 450 on these corn and 11 or 10.50 on, November bean futures. Put that price floor in. Basically, if we have good weather and we run-in some trade issues and these beans go to $8, you're covered. But if we run into make farming great again and all of a sudden things take off, we get hot and dry, you can turn around and sell that crop higher.
• 27:36
  So I think that is the best strategy you can even look at is putting a price floor in, say, come get me. I can sell my cash higher. If it goes down, I've got my cash covered with some, floors.
• 27:48
  Todd Gleason: Commodity week is a production of Illinois Public Media. You may find and listen to the whole of of the program anytime you'd like. You can do that on our website at willag.org, willag.org. Our program today was pulled in part an excerpt from the FarmDoc Daily webinar that took place on Thursday morning. You can find that at youtube.com/atfarmdoc.
• 28:14
  It included Joanna Cozzi from the U of Vibe along with Paulina Lescano, who is from Argentina, grain analyst there found at PaulinaLescano.comonline. And then we talked a bit later in that same day with Joe Janssen from the University of Illinois and Kirk Kimmel from agmarket.net. I'm Todd Gleason.