Latest / Commodity Week / Jul 02 | Commodity Week
Transcript
- cw260703 In the July 2 edition of Commodity Week, host Todd Gleason and panelists Shane Holtorf, Naomi Blohm, and Matt Bennett review regional disparities in crop conditions, highlighting strong growth in Iowa and Wisconsin against waterlogged, disease-threatened fields in East Central Illinois. Analyzing the USDA Grain Stocks report, the panel notes that while a brief market rally occurred, old crop corn stocks remain near an eight-year high, advising producers to sell before seasonal pressure mounts. New crop corn carryout is projected between 1.80 and 1.90 billion bushels, with prices likely to test harvest lows unless major weather disruptions occur or WASDE reports introduce bullish data. Similarly, despite current resilience driven by strong domestic crush margins, the soybean market faces significant downside risk and technical selling pressure without immediate new crop purchases from China. Panelists - Matt Bennett, AgMarket.net - Windsor, IL - Naomi Blohm, TotalFarmMarketing.com - West Bend, WI - Shane Holtorf, LogicAg.com - Alta, IA --- Todd Gleason: This is the July 2 edition of Commodity Week. announce: Todd Gleason’s services are made available to WILL by University of Illinois Extension. Todd Gleason: Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Matt Bennett of agmarket.net. He’s in Windsor, Illinois. Naomi Blohm joins us from totalfarmmarketing.com out of West Bend, Wisconsin. And Shane Holtorf is here from logicag.com. He is in Alta, Iowa. Commodity Week, of course, is a production of Illinois Public Media. It is public radio for the farming world, online on demand at willag.org. Going into this holiday weekend, I’d like to start by asking each of you to give me an update on crop conditions in your area. We’ll start with Shane Holtorf, out west from us at least. You are in Alta, Iowa. Can you tell us where that is, and then give us an update? Shane Holtorf: Alta, Iowa sits right north of Highway 20. We’re about 90 miles east of Sioux City and about 60 miles west of Fort Dodge. In this general area, crops are off to about as good of a start as we’ve seen in the last 5 to 10 years. We’ve been getting nursed on little rains here and there, and things are off to a really good start. If you get out of this general 5- or 6-county area, we’ve seen a lot more rain in northwest Iowa. Things could slow down for them up there, and it seems like every rain they’ve had has been accompanied by some winds or hail. Generally speaking, things still look pretty good for what they’re dealing with. I would say we’re off to a pretty optimistic start here in northwest Iowa. Todd Gleason: Naomi Blohm at totalfarmmarketing.com in West Bend, Wisconsin, you’re a bit north of Milwaukee. Tell me what conditions are like where you live. Naomi Blohm: Really remarkable. We had a slow start to our planting, but since then, things have just been going fantastic. We’ve had timely rain, and the heat that occurred this week was actually needed for our crops. Every morning I walk my dog by a soybean field and a cornfield, and the amount of growth just this week is amazing. The crop looks absolutely spectacular. The corn right now is about thigh-high, which is pretty normal for us in Wisconsin. The soybean field rows have totally filled in, and it looks lush. It’s off to a great start here in Wisconsin. Todd Gleason: Matt Bennett in Windsor, Illinois, not too far from Mattoon. Give me an update on conditions in your part of the world. Do you talk about Mattoon being in East Central Illinois or the Charleston-Mattoon area, or do you use a different moniker for your area? Matt Bennett: A lot of people say East Central. Obviously, they had a tornado go through there. There has been a significant amount of hail in this part of the world compared to what we normally see, but I think our crop looks good overall. On the pattern-tiled ground, it could be a record-type crop. The problem is anything that isn’t pattern-tiled. We’ve averaged anywhere from 7 to 10-plus inches on most of the farm ground in this immediate area in the month of June. There are a lot of growers pretty concerned about disease and denitrification. You get south of us, and they’ve had even more rain than what we have. Overall, I think the corn crop is good. I wouldn’t call it a record at this stage of the game. With soybeans, there are a lot of yellow beans. Of course, they don’t like wet feet, but I do think there’s a chance they’ll come out of that. Disease will be a bit of a concern there as well, but we’ve just had too much of a good thing in a lot of places this spring and early summer time frame. With all that being said, I think we’re sitting in a decent spot. Todd Gleason: Shane Holtorf, it was just two days ago, and it seems like much longer, that the Grain Stocks report was released by the United States Department of Agriculture. Historically, farmers in your area and to the west and north of you have stored much more grain on the farm for longer periods of time, partly because of the drier conditions—it’s easier to store than those in the eastern part of the corn belt. When you looked at those Grain Stocks numbers, what did they tell you about the marketplace? Shane Holtorf: It was really interesting. I would say that’s where we got our nice little pleasant surprise to give this corn market a kick in the shorts. It doesn’t necessarily align with what we’ve seen here in northwest Iowa or what our basis would tell us. We actually railed a lot of corn and beans out of this neck of the woods, which hasn’t happened in quite some time. We are talking to a lot of farmers that are kicking themselves today because of how much grain they still have on the farm that is unpriced. Basis generally shows it. We haven’t seen the basis improvements into the July time frame like we saw 3 or 4 years ago. They’re in competition with themselves right now to continue kicking this out of their bins. I’m not overly optimistic on basis in our neck of the woods. I think there’s plenty of crop still being stored. Todd Gleason: Matt Bennett, when you look across the whole of the corn belt for the old crop corn, does basis differ widely from one side to the other? Matt Bennett: No question about it. You get east of us very far, parts of Indiana into Ohio, and of course, it’s a totally different story. It’s very unfortunate in that part of the world in the north. When you get into the Dakotas, unfortunately, I’ve talked to some growers that are seeing sub–3.50 corn. Quite a few of them are in that position in that part of the world. Whereas you go east of us into parts of Indiana and Ohio, you’ll hear some +20s and +30s and even better than that the farther east you go. The eastern part of the US is a corn deficit area; you’ve got a lot of hogs and chickens to feed out there, and they’ve got to figure out a way to get that price elevated enough. That rising tide lifts a lot of boats east of us. There is a big disparity in what basis looks like from east to west this year. In our part of the world, basis has been decent. We’ve got the river that has been a pretty decent draw with a strong export program, but we’re right in the middle of everything. There are a lot of overs at times, but you have to get to the processor to do something like that. An even-type basis, option-price type stuff, has been fairly common, especially when you get to the end user. Todd Gleason: Naomi Blohm, a little more local to you, Wisconsin is dairy country, and that, along with the northeastern part of Iowa, tends to grow a lot more corn on corn. It gets used locally to feed the dairy industry. What are you seeing in the way of basis in those areas, and if you want to talk about the Grain Stocks report more broadly, you may. Naomi Blohm: Basis here is more of a traditional, wider basis for this time of year. Especially in our part of Wisconsin, we had really good crops last year, so we are seeing that basis stay a little bit wider, maybe normal wide for this time of year, 40 cents under or so. Regarding the report, even though it was short-term supportive from the standpoint that the stocks number of 5.295 billion bushels was over 115 million bushels below expectations—so that gave us some support for a quarterly stocks report—for June 1st stocks, it still was near an 8-year high. That is a reminder that we still have sufficient supplies out there and grain that needs to find its way to town before harvest. If we can see any kind of a continued rally into next week, I want producers to be mindful that it might be an opportunity to be a seller. I look back at the last 10 years, and years that we had big carryout: after the June 30th report and into the 4th of July in 2017, we had a big carryout and a two-week rally of about 42 cents. In 2019, we had a two-week rally of 44 cents. But as soon as that July WASDE report came out, prices drifted lower into the harvest low. Keep that in mind; seasonals might take over, and if the US has a decent weather outlook when we come back from the 4th of July weekend, prices might start to go back on the defensive. Keep an eye on it. Todd Gleason: Let’s stay with old crop corn particularly for the moment. We’ll get to new crop in just a bit. Shane Holtorf, because you’re in that area and there is a lot of corn in storage still, more than maybe usual, what are you telling producers about what they should do? Shane Holtorf: Naomi’s point about the 42-cent rally is really well taken, and that’s just making sure we get these offers out and working. This market has certainly shown us that it’s not afraid to move in either direction and fairly quickly. Set up to protect yourself if we see these rallies. One thing we’re fortunate about in our general area is that if you stand in my driveway and draw a 60-mile circle, I believe there are 8 ethanol plants. Ethanol demand has been really good. They’re making money, and we’re just thankful that the basis is what it is based upon those. Long story short, get your offers in. I think basis is as good as we’re going to see it, so reward a futures rally if it comes. Todd Gleason: And Matt Bennett, how do you talk to your producers from the east to the west differently about this old crop and what they need to do yet? Matt Bennett: Obviously, if you’re farther east, you still have some opportunities. I agree with these guys; you definitely need different news as far as old crop is concerned to be able to change the trajectory of what we’re looking at right now. We know we’re going to have all kinds of corn to get to harvest. I think you’re going to start to change the scope of discussion once you start talking about the new crop balance sheet. I understand what Naomi is saying. If you look historically, you could take this market lower after your July WASDE. There is a decent chance you’re going to pull 100 out of both old crop and new crop, or in that range, considering they slashed demand for new crop in the May WASDE. You have to remember what the corn market has done since the May WASDE; we’ve done nothing but go lower. We’re not doing anything to ration demand whatsoever. If USDA is vastly too low on new crop demand, any sort of weather issue could definitely be a supportive type deal on new crop. I just don’t think old crop will be able to follow along a whole lot because I’m afraid that if you rally much, basis will widen out. Todd Gleason: Tell me about new crop. Is it related to the acreage report, Matt? Continue down this line on what the supply and demand tables you think might look like going into the fall. Matt Bennett: You could make a case with the 95.3 acreage and yield, they’re probably not going to mess with yield anytime soon. I know the crop’s not rated nearly as good as a year ago, but it’s not enough that they’re going to make any adjustments probably before August. You can make a case for like a 1.8 type carryout on new crop. But you have to remember, they really slashed export demand. This is a time when we know exports for this year are probably too low. You look at ethanol, for instance, this year; you could make a case the USDA is a little too high. Ethanol has been good, but you’re a hundred million short. Either disappearance was better on some end, or maybe they missed the 2025 crop by a little bit. It’s understandable considering the acres and yield we were talking about. Bottom line, we have less corn available than we thought we did. It’s still enough, but you have to start working that into the new crop balance sheet. If you end up coming in with something closer to a 1.80 than a 1.85, it starts to get fairly snug, particularly if you hold exports constant from this year to next year. I do think there could be some opportunities post-harvest this year because I think this is going to tighten up quite a bit. Todd Gleason: Naomi, I have a what-if for you, but let’s start with where you are on the supply and demand tables for new crop for corn. Naomi Blohm: Pretty similar to Matt. As far as the acreage number, now we know for next Friday’s report, I agree they are probably going to keep the yield unchanged at 183. We’ll see that carry-in number come down a little bit. I am cautious if they make a lot of changes to new crop demand at the moment; I think the ending result is that carryout for new crop probably shows up near 1.9, maybe a little bit lower. With that, it’s a comfortable number. Just on that report data, if we still have a carryout closer to that 2 billion bushel mark at 1.9, that’s not necessarily a bullish argument. It would have to come into something happening on the side, some sort of dramatic weather event here in the US or somewhere else around the world. My thought process is that the funds see the report on Friday the 10th. If it has more of a negative tone to it, they go back into sell mode and push prices lower into August. Just a reminder that the December corn futures for the 2025 year—so last year—when they finally bottomed in August, they were at 3.90. In 2024, when December corn finally bottomed in August, it was closer to 3.85. December corn today on the board is at 4.41. There could still be this risk of downside pressure here in the short term, especially after that WASDE report comes out. One other thing I agree with Matt on is that when we see a harvest low, I think it will be a very significant harvest low because there are enough friendly things coming ahead for 2027 that prices could have a pretty decent rally later on. The tricky thing is for producers who are in any sort of a cash flow or storage crunch. If you have to move the grain at harvest and sell it at harvest, make sure you’re looking at re-ownership strategies to get you well into 2027 for some upside potential. In the very short term, history and seasonals suggest that after the July WASDE, corn prices, old crop and new crop, do have a tendency to slide lower, and history would suggest it could be 40 to 50 cents lower from here. Todd Gleason: The Trump administration has decided not to sign on to the USMCA again, as of July 1. That puts it into mandatory reviews every one year at this point. I’m wondering on the what-if side, what happens if Canada and or Mexico decides to play a little hardball, and either Mexico doesn’t take as much corn and turns to, say, Brazil, and or Canada finds a different source for ethanol in the near term to the marketplace? What impact might that have, and is this something we should worry about, Naomi? Naomi Blohm: It is something to be mindful of because those are definitely scenarios that could occur. We’ve seen it in years past where Mexico will try to do a little bit of a flex at the United States and turn to Brazil to purchase corn just to say, “Hey, United States, we know there are other places we can buy from.” We want Mexico to be buying our corn; they are our best trade partner that way. Regarding the ethanol, Canada is a huge buyer of our US ethanol. We have some issues there to be mindful of; it creates uncertainty. I don’t think the USDA would address it on any upcoming USDA reports in the short term, but that uncertainty just makes you wonder where demand ultimately will come into play. We do have to be mindful of that agreement and what comes from it in the coming weeks or months. Todd Gleason: Shane, does the ethanol get railed from your area to Canada? Shane Holtorf: It’s kind of split. It’s interesting; the ethanol plants on the northern side of our territories typically get railed up there, and the southern and eastern parts tend to find their way towards the European markets. Todd Gleason: Is it a concern for them yet? Shane Holtorf: I don’t think so. As we’ve seen on the political side of things lately, there’s just an awful lot of posturing ahead of negotiations, and I think that’s the point we’re at so far. We’ve seen some decent escalations throughout these negotiations over the past couple of years in this administration, so things could certainly change. But the folks I’ve talked to today say the demand is still healthy. The infrastructure is there to have us be Canada’s number one supplier of ethanol. We are the path of least resistance, and one could say the same for corn down to Mexico. Todd Gleason: Finally, let’s turn your attention to soybeans. We only have a couple of minutes left. I’ll ask each of you to deal with new crop. We’ll start with Matt Bennett. Matt Bennett: In all honesty, beans have been just so resilient. It’s been pretty impressive, quite frankly. We have good domestic demand. I don’t want to take up too much time here, but I do feel like there could be some downside if this bean crop starts to straighten out. I don’t think we’re going to look at any less production out of Brazil on soybeans, so I’d be a little bit cautious. I wouldn’t snub my nose at 11.50-type November beans, personally. If they work for you, I think locking in the worst-case scenario is probably something you need to be considering. Todd Gleason: Naomi Blohm, your thoughts on new crop soybean? Naomi Blohm: If we do not get any bullish news from the WASDE report next week, I think you see seasonal selling come in and technical selling. There is a very distinct head-and-shoulders formation on the November daily chart. If it comes to fruition and we don’t get any friendly news in the very short term, it points to a potential downside of 10.50, essentially a retest of the January lows. Todd Gleason: And finally, Shane Holtorf, your thoughts? Shane Holtorf: I would agree with both of those. I say thank God for a really strong crush. Soybean oil has been keeping the bean market propped up. The market desperately wants a headline regarding China purchasing additional new crop beans, and I think if we don’t get that, I would have to be in line with some of Naomi’s numbers she just said. Todd Gleason: Commodity Week, of course, is a production of Illinois Public Media. It is public radio for the farming world, online on demand at willag.org. Our thanks go to our panelists this week, including Matt Bennett, Naomi Blohm, and Shane Holtorf. I’m Todd Gleason. Trent Ford: From the Illinois State Water Survey at the University of Illinois Prairie Research Institute, this is Illinois State Climatologist Trent Ford. Temperatures this week packed a punch, ranging from high 70s in Northern Illinois to low 80s in Southern Illinois, between 1 and 4 degrees above average. This week featured our first real summer heat wave across the state as high temperatures reached into the mid–90s with very high humidity, pushing peak heat index values well over 100. However, that persistent humidity and very warm nights were the truly remarkable feature of this heat wave. Chicago saw more than 60 consecutive hours with heat index values over 80 degrees, creating some very stifling nighttime weather. The ridge that brought us the heat also mostly kept rainfall away this week. 7-day totals ranged from virtually nothing in the Quad Cities to just under 4 inches in Southeast Illinois. The relatively dry end of June was quite a contrast to the month as a whole, which ended up being a top 5 wettest June on record statewide, and the third wettest on record in both Bloomington-Normal and Galesburg. The calmer, albeit hot, weather this week also brought us a 5-day stretch without any storm reports in Illinois, which was the longest such streak in the state since May. Looking ahead, the heat and likely that storm report streak will both come to an end as we move into the weekend. The ridge will move east, and behind it will be a more disturbed pattern with highs in the 80s and more frequent chances of thunderstorms and showers. The latest 7-day forecast from the National Weather Service has the northern half of the state picking up between half an inch and 2 inches, while Southern Illinois will likely see mostly less than half an inch this coming week. Farther out, the outlooks for mid-July show slightly higher chances of warmer weather coming back with best odds of wetter than normal weather, too. Look for that disturbed, warmer, and stormy weather to appear off and on throughout this, the climatologically hottest month of the year in Illinois. This is Illinois State Climatologist Trent Ford, wishing everyone a happy, healthy holiday weekend.