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Sep 12 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the September 12 edition of Commodity Week. Todd Gleason services are made available to WILL by University of Illinois Extension. Well, welcome to commodity week. I am Todd Gleason. Our panelists for the day include Ellen Dearden.
• 0:20
  She's at AgReview in Morton, Illinois. Greg Johnson comes to us from right here in Champaign County. He's at TGM. That's totalgrainmarketing.com. And Shane Holtorf is here from Logic Ag Marketing.
• 0:34
  He's in Alta, Iowa. Our thanks to all three of them for joining us on a very busy Friday. I think we'll start with you today, Ellen Deirden from AgReview. Morning at eleven a. M.
• 0:46
  Central Time USDA released the September Crop Production and World and Agricultural Supply and Demand Estimates. What was your early assessment of the report?
• 0:58
  Ellen Dearden: Well, I thought the headline was the yield numbers from USDA and corn came in at 186.7, was down about 2.1 bushels to the acre, but larger than what the trade expected to see on this report. Beans came in at 53.5, down just a hair from last month, but a little bit larger than the trade expected. So that was the headline news. However, from my perspective, the big news was the harvested acres coming in with big jumps in the corn and a smaller jump in the beans. But, if we're going to harvest 90,000,000 acres of corn this year, those yields at 186 look pretty large.
• 1:50
  USDA assessed production at 16,800,000,000 bushels and that's really more than what the trade was looking at. So the immediate reaction on the corn was to sell off, then it came back to unchanged, then sold off again. So I think there's a lot of numbers here on The US figures that the trade was looking at. However, I went right and looked at, the world numbers, and I saw that, USDA world ending stocks numbers on corn, beans, and wheat were all lower than what the trade was looking for. And I thought interesting too, that the world bean oil stocks tightened up.
• 2:37
  I thought perhaps with the amount of cheap palm oil available to the marketplace, that the world bean oil stocks would, might have been higher. So basically, in The US, the corn yields were high, high, high West of the Mississippi River and dropped some East of the Mississippi River, but they were still remained pretty darn high.
• 3:04
  Todd Gleason: Just to go back through some of the numbers that you came up with, you gave us area harvested at 90,000,000 acres for corn. Area planted raised 1,400,000 acres to 98.7. Yield, as you said, down 2.1 bushels to the acre. It's at one eighty six point seven instead of one eighty eight point eight. Those numbers were big.
• 3:29
  The objective yield showed also one other item. This came from the executive summary where the ears per acre were just really, really high. They have been as high as twenty nine five and three three assessments that was last year, but they really haven't ever finished in anywhere near that high. About twenty nine seven, I think, this year. It's rough to see on that, but, again, just a bigger number, more ears per acre, and more acres to harvest from.
• 4:05
  So corn yield and corn total production is up as well. Anything else that you saw in those numbers that you think farmers should take to heart at this point as they look towards their own harvest and what they need to do?
• 4:19
  Ellen Dearden: Well, when I look at the corn numbers, we knew that the corn crop was a big crop and to address the ears per acre, I'm hearing in the Western Corn Belt just outstanding stands and that suggests to me that we would see more ears per acre. But, Brazilian Corn Crop too, USDA raised that to 135, and that's up 3,000,000,000 metric tons from a month ago. So we've got plenty of corn floating around in the world. We've got to figure out how we're going to use it and looking at the supply demand tables. USDA, I guess is content to say that exports are going to be strong because they did not lower feed and residual use of corn.
• 5:08
  Todd Gleason: Do you want to go through some of the soybean numbers more in-depth for me as well? I know you talked a little bit about some of the changes, a yield down 0.1 bushel to the acre from 53.5 to 52.5. Anything else there strike you as unique and different?
• 5:22
  Ellen Dearden: Well, on the supply demand sheet, they increased crush 15,000,000 metric tons, but then came back and decreased exports 20,000,000 metric tons. So the ending stocks of beans, really remained pretty much in line with what the trade was looking at, at 300,000,000 bushel. It's not tight, but if we would lose a bushel or two on the yield, we could tighten that thing up again.
• 5:49
  Todd Gleason: Oh, and we should probably finish the supply and demand table up for corn. They did raise, what, exports another 100,000,000,000 bushels to 2,975,000.000. Right?
• 6:00
  Ellen Dearden: Yep. And left the price unchanged, which I thought was interesting too.
• 6:04
  Todd Gleason: $3.90. So they're looking at ending stocks at 2,110,000,000 bushels this month. That was 2.117 last month. I guess they didn't think that was anything we needed to change. So, or at least as it's related to cash price.
• 6:23
  Now farmers, then, according to USDA, facing exactly mostly what they were looking at, going into this, as of August 1, not to which is different, I think, than what they were thinking at 10:59 this morning that they thought maybe there would be a lot less crop around and many more changes in the marketplace itself. What do you think the market will do, over the next couple of hours, I suppose, and then how it will manage this going into the fall.
• 6:53
  Ellen Dearden: I would say if December corn can hold above $4.2 going into Friday's close, that will be, from my perspective, a minor victory because that's kind of been a pivot point. We get under that, it's resistance. Get over it, it's somewhat supportive. So I think that this market looks like it still wants more information to make a move in either direction from that standpoint. The beans, however, look like they are looking at USDA numbers and thinking, maybe we're going to see some lower yields on the next report.
• 7:32
  Not much change in the acreages coming up, so, maybe this ten forty area is a good area on November beans to find support.
• 7:43
  Todd Gleason: And $4.26, which was the highest the time you and I talked for the December contract, that feels like that was an important number to hit today too, at least to go through 04/20 and get a better shot or a better look at what might the upside potential to be.
• 7:56
  Ellen Dearden: Yeah, and that considers that 04/24 to 04/26 has continued to be an area that, the market gravitates towards, but then can't quite get over it. So that's why I'm going to give myself a little grace today and say 04/20 is going to be kind of an important close.
• 8:18
  Todd Gleason: You watch the livestock very closely, what things have been happening in that world that you are concerned about or that you find of interest?
• 8:26
  Ellen Dearden: I do think that the correction that we saw this week in the live cattle and also in the feeders, the day we saw feeders locked down the nine point two five dollars limit was a wake up call that anything can happen on here. But these corrections, even though they're pretty broad sweep corrections, are still healthy for this market. Funds have been heavily, heavily long. The cattle and feeder cattle in here. And I would anticipate that this week's roller coaster action likely has shaken some of them out of the long side.
• 9:02
  So we may try to go back to trading fundamentals. The cash fundamentals, fed cattle this week, were on the weak side of things. So maybe we're just ready to take a little break.
• 9:15
  Todd Gleason: Indeed. Thank you much. I appreciate it.
• 9:17
  Ellen Dearden: Okay. Thank you.
• 9:18
  Todd Gleason: Ellen Dearden is with AgReview. She's in Morton, Illinois. Now let's turn our attention to Greg Johnson. He's at TGM. That's total grain marketing, part of the elevator system that stretches across the southern third up to a half of Illinois into Indiana as well.
• 9:35
  He's located in Champaign County. Hi, Greg. Thanks for being with us again today after our Wednesday talk about the marketplace. Your early assessment of today's USDA reports told you what?
• 9:49
  Greg Johnson: Well, the traders were kind of correct when they assumed that the yields would come down a little bit, but I think what took a lot of the traders by surprise was the acreage, corn acreage number went up again. We went from ninety 0.6 million two months ago to 97.3 a month ago, and now that number is up to 98.7. So if we keep going like this, we'll have 100,000,000 acres of corn planted one of these months. And so that is dampening the effect of the lower yield. I think the traders were, you know, anticipating a lower yield and we got a lower yield, maybe not quite as low as what some of them were thinking, but there are subsequent reports.
• 10:33
  But the main thing is the extra acres, in corn, probably mute the, bullishness of the lower corn yield production.
• 10:43
  Todd Gleason: And on the soybean side?
• 10:44
  Greg Johnson: Soybeans, I don't think the traders were too disappointed in the fact that the USDA only lowered the yield by a tenth of a bushel from 53.6 to 53.5. I think everybody realizes it's almost impossible to estimate bean yield until you get the combine in the field. And so the expectation was that USDA would probably not change the soybean yield this month. They're gonna let the combines roll here and get a better number a month from now. So if we are gonna see a lower bean yield, the fact that they didn't lower it today doesn't mean that they won't lower it a month from now.
• 11:26
  So I think the traders are okay with the bean numbers. USDA did lower exports. So the carryout is slightly higher, but a half a bushel change in the yield will more than offset that. So all things considered, I think it was a friendly report for soybeans and it was basically a neutral report for corn.
• 11:52
  Todd Gleason: After we're done talking with you, we'll talk with Shane Holthorff who is in the Western Part of Iowa. They will have a distinct and different version of what this means to them going forward because of the size of the crop they have in that state. However, USDA putting both Illinois and Iowa now at 219 bushels to the acre. So it's not as if we have a small crop in in the state of Illinois. In our part of the world, however, if you look at the drought monitor, and we have talked about this and the meteorologists have discussed it on the closing market report as well, we are in somewhat of a bull's eye locally and a drought that spreads to the South and a bit to the West or Missouri in parts of the Delta.
• 12:37
  I'm wondering what it might mean for harvest and when that really gets fully under the way. I knew you were taking few soybeans in on Wednesday when we talked to you last. Soybeans probably are gonna turn really fast. Has that been ramping up over the past two days?
• 12:54
  Greg Johnson: It has. We've seen our bean receipts increase every day, and that should continue. The one caveat I would say is that because we haven't had any rain, the beans are progressing at a different rate even in the same field. So there's still some immature green beans in the field, but 95% of the beans might be ready to cut, but that 5% is still immature. And so some farmers are gonna wait and see if they just mature on their own.
• 13:27
  Most years, one good rain will even those beans up and we can have, you know, pretty uniform consistent moisture beans. This year it kind of feels like without rain we're going to have some beans that are extremely dry and other beans that aren't quite fit, but I think they're going to get cut anyway. So that's where we are on soybean harvest. With corn harvest, the corn is drying down, but with the price where it is and drying charges where they are, I think most farmers are going to concentrate on soybeans for a while, let the corn dry down naturally. With this ninety, ninety five degree weather, we could lose almost a point of moisture a day.
• 14:06
  And so farmers will get the beans that are ready first and then approach the corn to try to get that harvested, but I don't think there's any rush from the farmer's point of view to get the corn out any sooner than they absolutely have to.
• 14:19
  Todd Gleason: Now producers locally and those who have had dry conditions for thirty five to fifty five days, for soybeans, we'll say, I think my early beans, the ones they're harvesting now, and you can confirm this, are pretty good. But the deeper into the season I get, the less likely I think they will be good. I wanna know about that locally. And do you think that will be a similar set of thinking across the whole of the Midwest just because it has been pretty rain free in lots of places?
• 14:55
  Greg Johnson: I would agree 100% with you locally. I think the early planted beans are going to be the best beans we see. We'll see some of those beans around here in the 70s as far as yield is concerned. And the expectation, at least mine is that as we get into the later planted beans and the fuller season beans that we could see that drop down into the 60s on the yield. But I don't think that's everywhere because if you had decent amount of rain in July, then even if you got a few tenths here and there throughout the month of August, I think that might be enough to keep those bean yields in the northern part of the state, for example, in the western part of the state in Iowa.
• 15:37
  I think we could still see some very impressive yields on the soybeans even though it was relatively dry because I think they had a little bit more subsoil moisture to work with. So yeah, East Central Illinois, I agree with you completely. The later the beans are, the lower the yield will be, but I don't think that'll be the case. At least I'm not expecting that for the northern and western parts of the state and the Corn Belt. As far as corn is concerned, the corn was farther along when the dry weather hit.
• 16:07
  So we will see a 10 to 15 to 20 bushel yield drop from last year, but last year was a record crop. So I guess I'm gonna be optimistic and say the glass is half full and say that it's still gonna be a good crop. But I agree, it's not gonna be as good here in East Central Illinois as what it could have been, you know, where we were given thirty, forty five days ago. It just looked like we had potential to have another record crop of corn, and I don't think that's going be the case now.
• 16:34
  Todd Gleason: You mentioned a 70 bushel yield, but not an 80 or a 90 or an 85 bushel yield for soybeans. I'm wondering, given that number and the thought that this will tail off as we go deeper into the season at least locally, whether that has changed your thoughts, related to how much storage you need and or how much basis depreciation there might be for both corn and soybeans going through the fall?
• 17:01
  Greg Johnson: Yes. First of all, when I say beans in the 70s, I'm saying that's an average. When you have an average, you're going have some fields that are 10 bushels better and some fields that are 10 bushels worse. But the point is I think the yield goes lower as we get into the fuller season beans. Yeah, beans in the 70s, but we could have beans as low as 55 and we could have beans up in 85, but in general that's where I think we're gonna be.
• 17:28
  So the overall smaller crop I think keeps the basis from dropping anymore. I don't think we have to worry about extremely wide basis. I think we'll have enough room to put this crop away. Yes, there'll be some corn piles outside because we're not shipping beans, so those beans will take up corn space and some corn will have to go on the ground. But the corn export pace is very good.
• 17:53
  I expect elevators to be able to sell corn. You know, may not be right when they want to, the trains may be a little delayed, but over the course of the fall harvest, I think corn will move and that will eliminate extremely wide basis levels, which we could have had if this crop would have been 10 bushels higher in corn and five bushels higher in beans.
• 18:14
  Todd Gleason: Is that a local phenomenon or one that would be wider spread across the Midwest?
• 18:21
  Greg Johnson: I can't really speak for the Midwest, but I know here we were concerned about what we were gonna do with the big crop. And now our expectations are that we're gonna handle 15 bushels an acre less corn than what we thought forty five days ago and probably five bushels less beans per acre than what we thought forty five days ago. So that's certainly the expectation in East Central Illinois. I don't know that that's everywhere else. So if the crops are big enough to the North and to the West, maybe we do see some weakening of basis in those areas.
• 18:57
  But I think Illinois, Indiana, Ohio, the Southern half of Illinois anyway, Indiana and Ohio, I think those areas are going to be deficit, moisture areas, lower yields, and so I don't think basis levels will need to get a whole lot worse in southern in the Southern half of Illinois and then all of Indiana and Ohio.
• 19:17
  Todd Gleason: Hey, thank you much. I appreciate it.
• 19:19
  Greg Johnson: Hey. Thank you, Todd.
• 19:20
  Todd Gleason: Greg Johnson is with TGM. That's totalgrainmarketing.com. He's right here in Champaign County, Illinois. Let's move from this part of the world in, the Eastern Side Of The Mississippi River to the Western Side. Shane Holtorf joins us from Logic Ag Marketing.
• 19:39
  He's in Alta, Iowa. Thank you, Shane, for being with us. Again, remind us exactly where you are because we only talk to you periodically. So where is Alta?
• 19:49
  Shane Holtorf: Yeah, Todd. Thanks again for having me on as always. Alta sits, I'm going to call it in the Northwest Corner of Iowa. So we're about, 10 miles north of Highway 20 and, 70 miles east of the, South Dakota border there.
• 20:07
  Todd Gleason: Okay. So I know pretty much where you are. I think some of the rest of the crew will as well. Tell me about the crop there, and then we'll take a look at what you thought of today's USDA report. How's the corn crop and the beans for that matter in your area?
• 20:21
  Shane Holtorf: Yeah. So, been an interesting summer. You know, we had moisture aplenty May, June, July, and then in August it stopped raining. Our lawns are all pretty well dead here and it's been interesting. So I think we have some corn out there that is really, really good And we have some corn out there that's going to disappoint some folks.
• 20:46
  You know, with the wet spring, we saw a lot of disease come in. Southern rust, as everyone's been tossing about, even with some fungicide applications, it still managed to find its way in. I think we're going to have a very good crop. We probably lost the top end from guys that have went in and got some corn started. I've heard yields from anywhere from 140 to two seventy.
• 21:15
  This general area has done about two forty to two fifty on average the last couple of years. In the Far Northwest corner of Iowa, they had a derecho early on in the year, or I should say midway through the summer and appeared that everything got out of it okay. As they started chopping, they realized that maybe the damage was a little worse than they had thought. And so they're pretty disappointed with the yields up there. So it's in one word, very variable.
• 21:47
  So on the bean side of things, I think we're going to see them average to a touch above average. You know, they didn't like the wet start, but they really settled in late in the summer and things look really good. Disease pressure. Yeah, a little bit, but not as much on the corn as on the corn side.
• 22:06
  Todd Gleason: Historically, I believe you're in crop reporting district number four. It's the Western District in Iowa. Whether it's four or not, I don't quite recall. It is the largest producing corn producing crop reporting district in the state. Do you have a record crop?
• 22:23
  Shane Holtorf: I don't believe we have a record crop this year. Just just with what we saw on the disease pressure side of things and some of the damage throughout the summer, I'm going to say that that we're a little bit soft of a record.
• 22:37
  Todd Gleason: And how does it compare to previous years? I know you had several years that weren't very good.
• 22:42
  Shane Holtorf: Yeah. So our last our last two years have been really, really good. I should say the last three years have been, have been really good. I'm going to say that we're, we're probably going to be on par with the last, the last couple of years. You know, I would say that the, the top end potential was, was far more, early on in the summer.
• 23:02
  And then we just, you know, kept staying wet, staying wet, allowed some of that disease to creep in and, and take our top end off, you know, on, on my own farm. I had some yield numbers in mind in early June and I was out walking the field and I know that's a dangerous game to play, but I've, I've probably trimmed my expectations up on my own stuff by about 30 bushel to the acre since June. So
• 23:27
  Todd Gleason: Yeah. If I remember correctly, there are about eight ethanol plants within an hour's drive of where you are, I think. Yep. So you generally have really good basis. Is that maintained or have they backed off on because of the size of the crop.
• 23:43
  But but what are they telling you about how they view what's coming to them this fall?
• 23:49
  Shane Holtorf: Yeah. So the interesting piece there is, there is still a lot of physical inventory out in the country, both sitting in the elevators hands and the farmers hands. And so they haven't gotten very aggressive on basis. You know, the last couple of years in this timeframe basis got crazy good until we got into the guts lot of harvest. And, and I just don't think we're going to see that.
• 24:13
  You know, we've been actually writing a lot of basis contracts here lately just because we think it's going to be a little bit different than it has in the last few years, you know, more so to what we're carrying over from last year's crop than what we're expecting on this year's crop. The same could be said for the bean side of things as well.
• 24:33
  Todd Gleason: So you're expecting to break how much?
• 24:36
  Shane Holtorf: On the basis side of things, you know, in this general neck of the woods, we've seen mid forties, pretty standard for basis. And I could see us in the, in the gut slot widen out to, and that's on the corn side, somewhere around 60. We see bean basis right now from anywhere, from 70 to 85 under. And, you know, I think we could slide that, you know, close to a buck probably during the gut slot of harvest. I really hope I'm wrong.
• 25:08
  But you know, we've, we've got a lot of opportunity to chew it up with, crushed plants and that demand has been strong. So I'm hoping if we can get through harvest, we'll see it rebound relatively quickly.
• 25:20
  Todd Gleason: You'll feel pressure, I would assume, from the North Dakota side not pushing beans out the PNW. Right?
• 25:26
  Shane Holtorf: Correct. Yeah. I mean, they're was I see the other day, they're a buck 60 under on basis, and, you know, I don't know what the rail freight to bring those down is, but it, you know, it's going to cover itself if they decide to go that route.
• 25:40
  Todd Gleason: Give me your assessment of today's USDA reports.
• 25:43
  Shane Holtorf: Sure. You know, I guess the report is probably about what what I expected here. Just kind of, you know, some moderate changes. What's probably shocking to me is what we've done post report on the trade side. Before I jumped on the call, I think we were up seven and a half on December corn and 14 on beans.
• 26:04
  And so excuse me, yield, you know, we kind of talked with our customers there in August that we believed that that would be the largest corn yield that we printed mainly to the disease pressure. They had talked about a lot of connections, Minnesota, Illinois, other parts of Iowa, and it kind of echoed the same thing. What shocked me probably the most was tacking on another, you know, 1,300,000 acres of, you know, anticipated harvest there. So left the left the production, you know, relatively the same in line with what the market was thinking here. And so, you know, this is a tough time of year.
• 26:46
  We're a lot more reliable and predictable than the August yield estimates. But, but truthfully, I think we need to wait for the combines to run to, to kind of help us hone that in. You know, on the bean side, again, not a lot changed from an acreage perspective or really a yield perspective. You know, as we look at this, we sit with the 300,000,000 bushel carry out, which, which isn't overburden something, but it's, it's comfortable. And, you know, so from our perspective, you know, I think everyone's got the same thought is we'd love to start seeing some flash sales in the morning from, you know, quote unquote unknown to be able to start chewing some of that up a
• 27:30
  Greg Johnson: little bit.
• 27:31
  Todd Gleason: Hey. Thank you much, Shane. I appreciate it.
• 27:33
  Shane Holtorf: Yeah. You bet. Thanks, Todd.
• 27:34
  Todd Gleason: Mhmm. Shane Holtorf is with Logic Marketing. He is in Alta, Iowa. Joined us here on Commodity Week. Our thanks go to Shane along with Greg Johnson and Ellen Dearden on University of Illinois Extension's Todd Gleason.