Latest / Closing Market Report / Jan 17 | Closing Market Report

Transcript

Jan 17 | Closing Market Report · Closing Market Report

• 0:00
  Todd Gleason: From the land to Grand University in Urbana Champaign, Illinois, this is the closing market report. It is the 17th day of January 2025. I'm Extension's Todd Gleason. Coming up, we'll talk about the commodity markets with Mike Zuzolo. He's at globalcommresearch.com out of Atchison, Kansas.
• 0:18
  In fact, Mike joined us yesterday as well when we were recording Commodity Week along with our other panelists, including Ellen Dearden of AG Review out of Morton, Illinois and Brian Stark of the Andersons. He's based in Mansfield, but helps to manage the flow of grain into the food grain facility owned by Frito Lay out of Sydney, as well as the ethanol plant in Logansport, Sydney, of course, in Illinois, and Logansport in Illinois and Logansport in Indiana. We'll hear all of that program on our home station today and many of these radio stations over the weekend. In the closing market report, I'll let you hear the audio from a viral video. Yeah.
• 0:57
  It's really a viral video from the farmdoc team about the a r a, the American relief act that was signed by congress, the outgoing or the last congress as they finished out that term, and the information that you might want to know about as it's related to agricultural economic payments. And then as we close out our time together in the first half hour, we'll hear from Eric Snodgrass at Conduit Ag about the agricultural weather forecast all on this Friday edition of the closing market report from Illinois Public Medium. It is public radio for the farming world online on demand at willag.org. We're celebrating 40 years, some 10,000 episodes, and more than 30,000 interviews. Todd Gleason services are made available to WIL by University of Illinois Extension.
• 1:50
  March corn for the day settled at $4.84 and a quarter, 9 and 3 quarters higher. The May at 4.93, up a dime. December contract at 4.56, 3 and a quarter higher. March soybeans up 15 at $10.34. The May at 10.44 and 3 quarters, 13 and a quarter higher.
• 2:08
  November soybeans, $10.27 and 3 quarters, up 7. Bean meal, $2.80 higher. The bean oil, up 66¢. Wheat futures, soft red, a penny and a quarter higher at 5.38 and 3 quarters in the March contract than the hard red March at 548a half. That finished a quarter of a cent higher.
• 2:28
  You're listening to the closing market report from Illinois Public Media on this Friday afternoon. Find us at willag.org. Mike Zuzlow is here now from globalcomresearch.com out of Atchison, Kansas. Hi, Mike. Thanks for being with us and thanks for being on Commodity Week yesterday.
• 2:44
  We'll hear that program a little bit later in this hour. Really good stuff, by the way.
• 2:49
  Mike Zuzolo: Yeah. You know, I enjoy everybody that you have in the group, but, it just felt like that Ellen and Brian and I had a really heart to heart discussion and almost like a fireside chat kinda type mindset. And I feel like, you know, you'll get a lot out of it if you listen to it. So thanks for leading that. You always do a great job leading it, Todd.
• 3:08
  Todd Gleason: Thank you very much. So you told us yesterday, and this is the last thing in the first half hour today or to the end of the closing report where you say, you know, simply, after the trade yesterday, you thought, I don't know enough yet. I'll know more by the end of next week. As to whether this is a correction or if we're going higher. I suspect you haven't changed your mind on that yet, but what you make of today's trade?
• 3:35
  Mike Zuzolo: No. You're right. And and, you know, the other thing that we talked quite a bit about was the idea that this could be a 2012 moment for Argentina's corn crop, because they desperately need a rain to give them a stand knowing that they're just now planted. Knowing that, my colleague in South America told me this week that there's still about 7 to 8% roughly that's not been planted because farmers have stopped planting due to dryness. I suspect what little rain comes through this next 3 to 4 days, they'll go ahead and try and finish up because they don't like to leave acres unplanted in Argentina.
• 4:11
  They're just like us here. But he's also noted that leaf hoppers are back now, and there are other pests that would obviously promote the idea that, you know, those those nasties come out when the drought gets worse. But Friday, I think, told us that we're trying to build more weather premium in and that Thursday's close was more of a consolidation and a check of technicals. And I will feel a lot better after Tuesday, Wednesday when we get past inauguration. We see what the currency markets do, and we get past what the actual 5 day rainfall totals are.
• 4:46
  But Friday morning, the radar returns were disappointing, and precip levels had been cut by a third to a half in some key regions. And so we started we closed Thursday afternoon with soy lower on the week and corn right at the 473 and a quarter breakout, high from 20 24 calendar year. And then we closed Friday. Soybeans higher on the week and corn the highest since October 2023.
• 5:13
  Todd Gleason: Yeah. So I was looking, back because of your comments yesterday, it that I will know more by the end of next week. So I I pulled the March contract up and then just simply said show me the the lead month. And I made note, and this is probably on the technical side where you are, that if you go back, we are now trading in that March contract right at that, what, 4.78, 4.80 area, something like that. Bit more than that.
• 5:45
  Where in 2021, December, and we broke out to the upside and managed that whole time, above that level. So I assume that's what you're thinking at this time.
• 5:59
  Mike Zuzolo: Absolutely right. Because we have the identical planted acres right now in Argentina for corn of 7,440,000 hectares, that we did in 21, 22. And USDA has us at an 8.3 ton per hectare yield level. We ended up being at just below 7 tons per hectare in 2021. So instead of a 55.5 that USDA is on pace with a record production this year, We can be at 52 pretty easily, I think, in a week to 10 days from now.
• 6:35
  And I would not be afraid to go to 48,000,000, 48,500,000 by the end of January if the heat returns. And that's coming straight from producers through the colleagues that I work with and soil moisture profiles. Now the interesting thing apart about you asking what you just asked, Todd, is now we start the clock ticking on how the South American corn prices look versus right now. We're golf corn prices at 546 Friday. That's the highest since October 23.
• 7:05
  That's 2 15 a ton. Argentina is at 2 25. Brazil, 2 30. I want Argentina and Brazil to just keep climbing and kinda chase and force us higher. Beans are doing almost the exact opposite.
• 7:16
  Brazilian beans are actually falling at Paranagua as of Friday. So this is the disconnect between the row crops right now.
• 7:23
  Todd Gleason: Yeah. So it really is a matter of watching the weather, I take it.
• 7:26
  Mike Zuzolo: Weather and cash prices in South America, and then the third leg of the stool is the currencies. Do we get a sell signal in the dollar after president Trump comes in because we can kinda breathe a sigh of relief on the tariff threat? And does that then stimulate buy signals in the real, in the yuan, the rupee, Canadian dollar, and and and the and especially the Russian ruble? We've gotta get the wheat on board, and we talked about that on commodity week as well.
• 7:52
  Todd Gleason: And 2 of those things we'll know about next week, tariffs or not, more or less, and then, of course, rain or not. I suppose the cash price, we might know more something about, but certainly the first two, I would guess.
• 8:04
  Mike Zuzolo: I think so because I think farmers selling here in this country, especially in corn, has pretty much peaked at this stage. It would be my guess.
• 8:10
  Todd Gleason: Anything on the soybeans or wheat before I let you go? Well, the
• 8:13
  Mike Zuzolo: big thing in wheat is we've got cold weather without any snowpack, and the trade is putting a discount. We're 15 to 30¢ away from our yearly lows right now, Todd. So a very disappointing week in both wheat and the meal. Argentina weather equals corn and meal in my book. So wheat meal need to pick it up here next week.
• 8:31
  Todd Gleason: Hey. Thank you much.
• 8:32
  Mike Zuzolo: Thank you, sir.
• 8:33
  Todd Gleason: That's Mike Zuzalo. He's at globalcalm research.com out of Atchison, Kansas. Stick around. More with Mike in our Commodity Week program at the end of this half hour, and if you can stay with us here on the home station for the whole of the rest of the hour at Illinois Public Media and on Commodity Week. Well, let's hear now from Nick Poulson, agricultural economist at the University of Illinois.
• 9:00
  In something of what has become a viral video from the Farm Doc team, he breaks down the American Relief Act of 2025 or the ARA and its $10,000,000,000 worth of economic assistance package for farmers. In it, we learn about payment rates for major crops, eligibility requirements, and the financial impact on farm operations.
• 9:24
  Nick Paulson: Hello. I'm Nick Paulson from the FarmDoc team and the Department of Agricultural and Consumer Economics at the University of Illinois. Today, we're discussing the recently passed American Relief Act of 2025 and what it means for farmers across the country. The act, in addition to continuing funding from the US government into March, includes 3 components which directly impact agriculture. First, the act extends the current 2018 farm bill into 2025.
• 9:52
  2nd, it includes nearly $21,000,000,000 in aid associated with natural disasters. And third, they've allocated $10,000,000,000 in economic assistance payments to farmers. We'll focus on the $10,000,000,000 economic assistance package and what it means for corn and soybean producers. The Act outlines how the economic assistance payments are calculated, being based primarily on estimated economic losses for each eligible commodity. The economic loss is estimated as the difference between expected production costs and expected gross returns for 2024.
• 10:27
  The USDA's Economic Research Service provides the production cost projections, while the expected gross returns are calculated using price forecasts and 10 year average yields from the USDA. Producers of eligible commodities will receive the larger of 26% of the estimated economic loss or a minimum payment, which is based on a commodity's statutory reference price and average price loss coverage, or PLC, program payment yield. For corn producers, we estimate payments of around $43 per acre. Soybean farmers are estimated to receive around $30 per acre. These payments will be provided on planted acres and 50% of prevent plant acres for 2024.
• 11:11
  For example, let's consider a farm business with 1100 acres, 600 acres in corn and 500 acres in soybeans. This farm would be estimated to receive just over $40,000 in economic assistance payments. That breaks down to just over 25,000 in payments for corn acres and just under $15,000 in payments for soybean acres. The Act also defines payment limitations for the economic assistance payments, which will apply separately from payment limits associated with other programs. If less than 75% of the farm's adjusted gross income from 2020 to 2022 came from agriculture, the payment limit is 125,000 per individual or entity.
• 11:53
  If more than 75% of income came from farming, the payment limit increases to $250,000 Let's put these payments in perspective for a central Illinois farm situation. Our 20 24 crop budgets for high productivity land in central Illinois, released in September, projected net farmer returns of negative $161 per acre for corn and negative $53 per acre for soybeans. The economic assistance payments will provide some welcome relief, but projected returns will remain negative at $118 per acre for corn and $23 per acre for soybeans. While this assistance is significant, it's important to understand its broader implications. These payments will help offset losses and reduce financial stress, making loan renewals and financial planning easier for the 2025 crop year.
• 12:45
  However, there are potential unintended consequences as well. This aid could slow necessary cost adjustments in the agricultural sector. For example, negotiating lower cash rents with landowners may be more difficult and pressures on farmers and input suppliers to reduce other costs might be reduced. Our projections for 2025 suggest negative returns to corn and soybean production are expected to continue. If commodity prices don't increase, we might see additional calls for assistance by year end.
• 13:17
  I'm Nick Paulson. Thank you.
• 13:19
  Todd Gleason: For more detailed information and resources, you may visit the University of Illinois Farm Doc Daily website, or you can watch this video on our website right now at willag.org, willag.org. There's also a link there to the full article detailing the American Relief Act legislation as it impacts agriculture. It's entitled Impacts of Economic Assistance Payments. Let's turn our attention to the, oh my gosh, cold weather that is coming. Eric Snodgrass is here.
• 14:05
  He is with Conduit Ag. Hi, Eric. Nice day today, relatively speaking, when we're talking, but things are gonna change very quickly here in the United States. Can you give me a broad stroke, brush look at what is taking place and the causes behind the air when it spills into the middle section of the US?
• 14:29
  Eric Snodgrass: Yeah. So so this that's a good question, Todd.
• 14:31
  So here here's what I'm thinking about. What's missing? Right? So go back to last winter. We had kind of a 2 pronged approach to last winter, and that was a jet stream that came through the North Pacific and one that came from Hawaii.
• 14:43
  So we had this subtropical piece to the south and this polar piece to the north, and it just flooded across North America with strong winds. And therefore, we had frequent weather systems, but too much mild air. And that's why we really only had one, maybe week and a half of cold air in the middle of January. And the rest of that year we just had constant systems invading from the west, and they even took over in spring. Right?
• 15:06
  Remember how wet spring was especially in the western corn belt? Alright. So this year, we we don't. We just have this northern branch, and it wants to go all the way up into, you know, like Alaska before diving into the United States. So what's the problem?
• 15:19
  Well, the problem is we don't have any flow coming into the west right now when you think about Oregon and California and Mexico, and that's why we've seen flow reverse. And sometimes, like we saw with the wildfires more than a week ago, they they came out the wind came out of the out of the east. So as long as that's missing, that risk is gonna stay there. Drought will continue to anchor there, And what we're going to end up getting is more often than not flow from the upper levels of the Hampshire that targets us from Canada. And so back to what you originally started with.
• 15:49
  Okay. Yeah. Yesterday was amazing. Like, so I don't know. I'm gonna say up to 40 degrees.
• 15:52
  I washed I washed all the cake, the salt on my car off so that I, you know, can see out of my my my headlights going into this weekend. But problem is is this drive of cold air coming in, well, it's all symptomatic to what I just said. And in this case, the cold air is brewing over the Arctic Circle right now, and it's heading our way and it'll be here by the end of this weekend. We're gonna have a couple of early morning low temperatures early next week that are going to be down there in the minus 4 to minus 8 range, just like we saw earlier this week. It only touched once earlier this week, but we're gonna have a few days of it then.
• 16:25
  And the thing is, though, is all of the risk of precip is pretty far to the south. I mean, there might be snow in southeastern Texas, like how often do you say that, or Louisiana or maybe even parts of the southeast and it'll climb up the east coast, but in the middle, we've got a pretty high chance of staying relatively dry the farther west you go. Now there is a little system sneaking toward us today coming out of Texas through Oklahoma into Missouri, and it's gonna bring some moisture to the central and southern part of Illinois and then farther to the east. And don't be surprised if we maybe get a little little bit of snow on the backside of it. But, man, if you're in the northern half of the state or anywhere west of us, I've got nothing.
• 17:02
  And it's all just symptomatic of what you asked me at the beginning, which is kind of what's missing in the pattern. And it's that one dimensional jet stream that's causing all of this.
• 17:10
  Todd Gleason: Does that mean anything going forward into the growing season?
• 17:15
  Eric Snodgrass: It does. I mean, if we think about February, we're only expecting that one piece to drive the jet stream across the northern tier of the US. So I do see February giving us more access to cold air. I see February bringing better moisture to the Ohio Valley, which we're a part of, and that's that's good. But then you say, what about the growing season?
• 17:34
  I I mean, we could start off March on the cooler side of average. And then by most accounts, like, every forecast I have access to plus the ones I make myself suggest that we could have a pretty wet spring all while drought that's in Mexico and in the southwest will start to creep through the plains. And what I'm worried about is that it's knocking on our door by the time we get into July. So there you go, Todd. That's that's all of it in a nutshell, and I think it's all one big connected system.
• 18:01
  And if you want me to ask or want me to tell you what I what I want to have happen, I'd like for the Hawaiian Express, the, you know, the pineapple express to get going and send moisture to Mexico. And that would change everything, but doesn't seem to be in the cards with the salami.
• 18:15
  Todd Gleason: Speaking of sending moisture, the, farmers in Argentina particularly would like to have some moisture sent their way. Yeah. Anything in the offing?
• 18:24
  Eric Snodgrass: There is. I mean, there were storms in central Argentina yesterday. We saw storms getting into southern Brazil. These are our big dry areas, down there. And most models bring in modest rains to some of these driest pockets or at least eating away at the driest pockets over the next couple of weeks.
• 18:39
  Where we're expecting it to get drier is in, the center west, I mean, Matagrosso. And there's no problem with that. They've been soaking wet. They need a good couple of weeks of below normal precipitation because they're supposed to start harvest here pretty soon. And to be honest, the forecast I just gave you for all of South America is not bullish in any regard.
• 18:58
  In fact, it's the opposite because we're backing off the rains where they've been too heavy and delivering some scattered modest precip to places that have been dry, which is gonna kinda stop the bleeding down there. And as a result, I think we're gonna be settling our discussions away from the risk of drought building and maybe back toward, you know, the discussions on just how big this crop's gonna be.
• 19:20
  Todd Gleason: On that note, we're gonna just gonna close the CME Group on Monday. We won't have trade on Monday.
• 19:27
  Eric Snodgrass: Good. I I you know, I'm I'm looking forward to, to maybe having one less day of chaos. But, yeah, I don't know that the news is necessarily that great coming out of South America. And now you know my opinion on North America.
• 19:39
  Todd Gleason: Indeed. Hey. Thank you much. That, of course, is Eric Snodgrass. He is with Conduit Ag.
• 19:44
  In fact, trade is closed at the CME Group on Monday for MLK Day. You're listening to the closing market report from Illinois. A public media, it's public radio for the farming world. Find us online at willag.org. Our Commodity Week program comes up next.
• 20:01
  If you're gonna stay with us for the whole hour, you'll hear all of it. If not, many of these radio stations carried over the weekend, then it's up on the website already.