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Feb 19 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the February 19 edition of Commodity Week.
• 0:08
  announcer: Todd Gleason's services are made available to WILL by University of Illinois Extension.
• 0:14
  Todd Gleason: Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Jim McCormick. He's at agmarket.net out of Barrington, Illinois. And in Naperville, Illinois, we're joined by Logan Kimmel with Roach Ag Marketing.
• 0:29
  Commodity Week is a production of Illinois public media. It's public radio for the farming world online on demand at willag.org. That's willag.org, where today you can purchase your tickets for the all day agricultural outlook. It's at the Beep House in Covington, Indiana. This thirty sixth annual event cost just $40 to attend.
• 0:52
  It's the most interactive day you will ever have at a conference. Come and join us. We have a great lineup, including the PharmDoc team along with Joe Jansen as well as Gary Schnitke, Nick Polson, and Bruce Sherig. Oh, and Joanna Colucci will be there. She's at Purdue now, but will continue to talk with us about things that are happening in Brazil and agriculture there.
• 1:17
  We'll also have on hand with us to kick the day off Eric Snodgrass from Nutrien Ag Solutions. And along the way, many of our regular analysts that you hear each and every business day on WILL will join us in either the corn or the soybean panel. This is kind of a back to the basics day. No PowerPoints, Just you, the speaker, and a whole lot of questions along with a great beef house meal at the noon hour. Oh, and coffee and rolls from the beef house in the morning as well.
• 1:46
  The cost is just $40, but you have to sign up. Get yourself registered right now at willag.org or on the PharmDoc website at pharmdocdaily.illinois.edu. The All Day Ag Outlook is a production of University of Illinois Extension, the PharmDoc team, and willag.org. Now let's get a series of questions from our analyst for the time. Jim McCormick, let's start with you.
• 2:14
  What's on your mind?
• 2:15
  Jim McCormick: Well, a couple of topics we definitely ought to dive into, Todd, is obviously we had Outlook Forum numbers that came out this week. They're a beginning talking point to start the discussion for 2026, but I think it may add a little bit interesting tidbit in them. And then I think the other thing we got to talk about is this wheat market. It is taken out technical resistance and we are scaring the funds out of the short position and that'll be interesting to see how far, well, we can push this week. So that's probably another topic we ought to dive into.
• 2:42
  Todd Gleason: And Logan Kimmel, from your point of view?
• 2:44
  Logan Kimmel: Yeah. Clock's ticking here on some old crop contracts based off the March. Just going through some ideas on what folks maybe could look at there. We've also seen the soybean market trade relatively strong here really since the January report and might be presenting some new crop marketing ideas from soybeans as well.
• 3:06
  Todd Gleason: Okay, so let's start with the outlook form numbers. Jim McCormick, I can recap them, but I'd rather have you go through them. What do you see?
• 3:15
  Jim McCormick: Well, think, you know, the trade was looking for closer to 95,000,000 acres of corn. It came in at 94, maybe a little bit below the number. When you look at the bean planted acres, you got 85,000,000. I find it a little bit interesting, Todd, that I thought maybe those two combined would be closer to the right at that 180,000,000 combined. So the fact they're a little bit below 180, I think is a little bit of a surprise.
• 3:37
  And then the one number I think that kind of stands out to me, Todd, on the demand side of the equation is the feed residual for the upcoming year. They put it at 6,000,000,000 bushels down from 6.2 for this current season, and I would argue 6.2 is way way too high. So it feels to me like they're doing a little bit of moving the numbers around trying to keep that carry out below 2,000,000,000. I fear when it's all said and done, Todd, unless we have a real legit weather issue this summer, that carryout is gonna be way over 2,000,000,000 potentially.
• 4:08
  Todd Gleason: Let me go through some of those numbers, and we'll, do wheat as well. USDA projecting 45,000,000 acres for wheat, 94,000,000 acres for corn, 85,000,000 acres for soybeans. I believe combined that that's down just about 1%, but as you said, corn and soybean numbers were down a million acres combined. Usually, it's around one eighty. That's a rough estimate.
• 4:35
  In yield, they put the yield per wheat at 50.8 bushels to the acre, corn at 183, and soybeans at 53 bushels to the acre. Seasons average cash price, $5 per wheat, $4.20 for corn, and $10.30 for soybeans. What numbers were you paying closest attention to in that set of figures? Logan Kimmel.
• 5:01
  Logan Kimmel: Yeah, I think just looking at the corn numbers, one thought might be that maybe a little bit low on the acreage potentially here in this we get into the spring. I'm also curious to see what last minute decision get made as we've seen beans sort of trying to buy acres here recently. Sticking onto the beans, one other number, just interesting observations, what they did with the exports, bumping them up to a 1.7, might be hitting that some continued or increased demand on the export front here this coming year was one observation we saw.
• 5:40
  Todd Gleason: Given that, they left ending stocks by the time they got the whole supply and demand table at 350,000,000 bushels and above, actually at three fifty five for this year. The ending stocks currently for the old crop is three fifty. They did raise, as I said, season's average cash price at the farm by 10¢ to $10.30 from $10.20. I'm wondering whether you think think that $3.55 number for a second year in a row is worth that much money.
• 6:10
  Logan Kimmel: Yeah. Think it comes down to I mean, on that and and even the core number, if we don't have a weather problem, I'm starting to wonder if those carryout numbers go up from there, corn and beans. So these are all projections and I think we'll find out more here going into the planting season. But as we look forward to what will alter those numbers, given what they have penciled in, I think it comes down to potentially a weather problem here this spring or summer, to see those carry outs come down.
• 6:40
  Todd Gleason: Jim McCormick exports for corn were down 200,000,000 bushels and ending stocks were also off by about 200,000,000 bushels, meaning meaning usage was down relatively speaking, I suppose, particularly for exports. But ending stocks at 1.837, billion bushels was lower. Still, USDA thinking that's not gonna result in much of a uptick in the season's average cash price for corn. Should it be better than that?
• 7:10
  Jim McCormick: I would hope it's gonna be better than that, Todd. I fear it's gonna be lower than that when push comes to shove. Like I said, I have a real problem with the old crop carryout number or excuse me, feed and residual number where you're looking at 6,200,000,000 bushels. So that's 734,000,000 higher year on year, same amount, if not less livestock. That number just looks way too high.
• 7:33
  So what I believe, Scott Todd is you're looking at the two one two seven carryout for this old crop in essence. It's probably two three hundred million too low. So your carry in's gonna be a lot higher and that will eventually push this carry out back over 2,000,000,000 unless Logan is right. We have a weather issue right now and we'll see. I mean, I think talking to Eric Snograss, I think his early analog years would suggest more like an odds are a normal type of weather pattern this summer, but driving across the Eastern Part of the Midwest, it is very, very dry.
• 8:07
  A lot of people are concerned about how dry it is for this time of year. And the weather is gonna have a final say on where these ending stocks end up and where the average prices end up when it's all said and done.
• 8:18
  Todd Gleason: Well, let's deal with the old crop for the moment, and I think we'll stick with corn. Logan Kimmel, I'll start with you. You say the clock is ticking at this point for producers who have old crop that they need to make a sale on. I'm gonna suggest that they're thinking, well, I have it in the bin. I can handle that all the way through July.
• 8:36
  What are you telling them?
• 8:37
  Logan Kimmel: Yeah. I think there's a little more flexibility there if if you do have it in the bin. But, I mean, I think about a month ago, Jim and I were on here and we had talked about on corn after the report from January, if we saw a little bit of a rally, you'd be met with some resistance here on this old crop. It looks to me like that's been the case just from the sheer amount of unpriced old crop corn bushels still in the farmer's hand. It seems like corn has been and would continue to struggle a little bit here while we've seen the wheat in the bean market perform a little bit better.
• 9:14
  So I think if you're a producer making that decision here, which on March contracts has to be made by first notice day next week, weigh your options. Generally speaking, the February is very friendly here to front month corn as cash grain gets sold. There are still ways to participate in rallies potentially this later spring or summer, keeping some upside with a bull call spread for an example. But I think we need to be mindful on this old crop. We're almost into March.
• 9:48
  We've seen the market trend higher slightly since the January report, but know the amount of hedge pressure that potentially could hit this market. And then as you look to the May contract, folks that elect to roll, I'm guessing there'll still be bushels in the farmer's hand here in the next two months to get get priced in the cash market.
• 10:09
  Todd Gleason: And then, Jim, as you're thinking about those March contracts expiring, what are you telling producers who have corn that they need to market? Probably at the elevator as opposed to in the bin, but you can take your choice or do both.
• 10:22
  Jim McCormick: Well, I I agree a lot with what Logan has said said. I mean, the reality is this, Todd, you know, look where Dees corn was. On going into first notice day, Dees corn is trading around $4.25. It had a dead cap bounce to $4.40 during delivery. It finally went off the board on the last trading day around $4.31.
• 10:39
  Where do you got March corn today? Trading at $4.25 and three quarters. So you can see the value of corn going into deliveries always around $4.20. The fact of the matter is it unless we get a surprise buy of China buying corn or something, that seems to be value of corn right now with a carry out that's over 2,000,000,000. So as a producer's gotta make a decision, especially if he's gonna roll it out from a basis contract or something like that, he's gonna eat that carry that 10.5¢ carry.
• 11:09
  And I would argue way history is going is eventually May corn is gonna fall right back down toward that $4.30, four twenty five zone. And I'm guessing July will do the same situation because we've just got too much grain and if we do not have a weather problem, Todd, you're gonna get to the latter part of the summer, June, July, August, and I think it's gonna get really ugly if we have what looks like a huge crop coming at us because what are we gonna do with 2.1, 2,400,000,000 bushels of corn? So I would agree with Logan, take the money and if you wanna play the what if, that's where the options come in. You get a fixed risk, you can participate if the weather does go bullish, but you cut that risk, you cut that cost and the fact of the maritime is a lot of guys need money, let's face it, the farm situation is very tough. Maybe get the money, pay down some of that debt, and use an option to play for the what if.
• 11:58
  Todd Gleason: Okay. So the what if then is in play. You're saying go ahead and market this crop because it costs too much to carry it forward, but should carry it if you want to forward in a different way. What are you telling them about new crop corn marketing in that case, Jim?
• 12:15
  Jim McCormick: I'm doing a little bit of it, Todd. I mean, the fact of the matter is I don't really like the price. I mean, $4.60 is not great. A lot of the clients are either using an option play where they can leave the topside open or maybe sell some grain and then maybe buy some shorter dated out of the money calls in case we do have a weather problem. But like I said, I'm very fearful.
• 12:34
  This carryout is not 2.1 on the old crop. I really fear it's closer to 2.4, 2.5. 94,000,000 acres if we have a normal weather pattern, you're going to push the stocks to use closer to 15%. Unfortunately, historically, when you have stocks to use that high, the argument economically is this corn market's gonna fall closer to that 3.75 to 3.5 zone. Just two years ago, that September corn went down to 3.65 into the latter part of summer.
• 13:03
  Why'd they do it? You had projected stocks to use around 14%. That is where we are stacking up right now. So I think there is some downward risk. So starting to lay off some of this new crop corn, but maybe leave the upside open.
• 13:19
  I think you gotta start doing it. We had a lot of clients a year ago, Todd, that were begging to sell corn at $2.70. We never quite got there. If you can sell some of these 26 corn at $2.65, just shy of $2.70, or excuse me, $4.65, you know, I'm going encourage people to at least take some of that risk off.
• 13:36
  Todd Gleason: Now Logan, some of the next goalposts that Jim would be looking forward to where USDA could make some changes to the feed and residual numbers would be the grain stocks report coming up at the March. Of course, it is paired with this prospective plantings report, a survey of farmers across the nation as to what they expect to put in the ground for the spring crops, particularly corn and soybeans. Is it worth waiting, do you think, for them, for the new crop, given how Jim is considering what that might mean for the Indian stocks if it gets rolled forward? And he's correct.
• 14:15
  Logan Kimmel: Yeah, you know, I wouldn't just judging by the last report, wouldn't be banking on a friendly number to do a lot of marketing off a USDA report necessarily. I think what we got to do is just look at, you know, what has maybe presented an opportunity and that right now could be these new crop contracts which have actually traded decent. New crop December corn has run all the way back up to where it was trading the report day in January. So my fear would be are we on corn for new crop? Are we in the middle of a marketing op, a quiet marketing opportunity that might be presenting itself?
• 14:57
  And I think back to last year, February was one of the better opportunities that producers had, even though it's not great. So that's my concern on this corn and looking at the new crop. I think it's an area to lay off some risks, keep some upside, but, you know, I don't want to look back and think that this might be our winter, one of our winter marketing opportunities that we might be in the middle of right now. So I, yeah, I don't know if I'd stick around and wait and see what the planted acreage number is. If it is friendly, there might be some more spots to be selling as folks get the crop in the ground and get a little more familiar with what they might have.
• 15:36
  The same goes for the soybeans. I think we might be in the midst of an opportunity here on new crop for producers to take a look at what they're going to plant, give yourself some flexibility, but not ignore where we're at on a chart and where we've come since the January report.
• 15:49
  Todd Gleason: Yeah, Jim, so on that new crop, of course, there's a lot coming forward. The crop in Brazil, Argentina, in the midst of harvest, particularly in the Center West part of Brazil, although I'm not sure that hedge pressure comes right away because that that tends to show up, I think, in March and parts of April as it reaches the port. How do you put that all together as it's related to the current strength in the marketplace for soybeans and what producers ought to do as it's related to new crop sales?
• 16:20
  Jim McCormick: I think you gotta take advantage of it. I I think the market is rallying on two headlines. The first one is the tweet from president Trump saying China should he's encouraging China to buy another 8,000,000 metric tons of beans. Are they gonna do it? Economically, it makes zero sense for them to do it.
• 16:39
  Beans in Brazil are being sold a dollar cheaper than us. So if they buy it, it is a political buy just like it was in late fall. But remember how the market played in the fall. China came in and bought beans, the trade rallied the prices up dramatically to try to stick it to the Chinese. The problem was that as they did it, it moved a lot of people away from The US market because they could buy it cheaper.
• 17:03
  We're doing it again. So I fear that just like we saw in the fall, the moment China actually does start buying beans, which could happen in April when president Trump's actually in China, are you gonna get a meltdown just like you did, a few months ago? The other storyline I think is really being bid up is this RVO mandates. We're supposed to be finding information here this week about what the government's proposing. It's the same situation.
• 17:30
  We've heard these numbers been battered around by the press and by the industry for a very long time. So it's the same situation. You're setting yourself up for the buy the rumor, sell the fact. So the spec money is being poured in on the AI buying, I believe on these headlines, But once we get done trading the headlines, the reality says we're gonna bring the market back down, I fear. Why is that?
• 17:50
  Because we're overvalued compared to the rest of the world. So this coattail rallying of the old crop by the new crop, I think has given the producer an opportunity to sell beans at a lot prior price than they would have thought just a few weeks ago. And the second thing, like Logan suggested, you might actually be buying some bean acres on top of it. And do we need more bean acres? With the crop, it looks like coming out of Brazil at this point in time, we probably don't.
• 18:14
  The world does seem relatively supplied without a weather problem this summer.
• 18:18
  Todd Gleason: RVO or renewable volume obligations are released by US EPA. We'll look forward to those numbers as they come out. We'll, of course, have them during the closing market report, and we'll talk about them at Commodity Week. Both can be found @willag.org. One of the other things, Jim McCormick, that you wanted to talk about was the wheat market.
• 18:38
  I think to the upside as it was related to potential. However, USDA dropping a $5 season's average cash price for wheat today, and it feels as if that would put a real cap on any move that corn might be able to make for new crop. How do you put the two things together as related in your mind? The production risk, I suppose, for wheat is that's what you're talking about, and the $5 mark that USDA is using.
• 19:11
  Jim McCormick: Well, I I think what you're looking at is kind of two dynamics. I mean, the USDA, you know, the outlook for them, they're looking at the long term play. There is plenty of wheat in the world. You know, I think what you're looking at is a market that's playing a little weather event. You got some very windy, dry conditions in the plains.
• 19:29
  People worried about the quality there. You've got some cold weather going on in Argentina, but I think the storyline that's been interesting, Todd, is we've been in a sideways market, this weak market, literally since mid fall. We're finally taking out moving averages, we're taking out downturn lines, I think it's interesting. It's not weather that's driving it. It's not the weaker dollar in general that's driving it.
• 19:50
  It is the funds that are caught short, worried about what's going on in The Middle East. President Trump has said he's gonna decide if he's gonna attack Iran within the next ten days. There's reports out of other European leaders are encouraging their people to leave Iran immediately. So obviously the Trump administration's given vibes that they are going to attack Iran. And with wheat being the main staple of the world, it feels like the fun traders right now are like, I don't wanna be in wheat until we know what's going on.
• 20:25
  They remember what happened when wheat went ballistic when Russia attacked Ukraine. Now it's a different type of game. Obviously, doesn't grow wheat like the Ukraine does, but I think that fear is what's driving this market up and it may be providing some opportunity for our US producers here if this market really gets unnerved. And if we do attack Iran, I think it could get interesting on the energy market. Remember when we bombed Iran's nuclear facilities, they did a relatively muted reaction to us.
• 20:56
  They bombed a couple our bases, but they telegraphed whom they were going to bomb, when they were going to bomb, knowing that no personnel would actually get hurt. They are now threatening to bomb a lot of institutions or facilities in The Middle East that could unnerve the oil market. Right now, Todd, we're producing about 2,500,000 barrels a day in excess of the world than what the world needs to consume. Iran is pumping out 5,000,000 barrels a day of that. If this world gets really upside down and Iran cannot produce oil, cannot ship it out, the world will go from a surplus to a shortage.
• 21:33
  The market will respond bullishly, I think, in the energy market, and that would actually probably be a little bit bullish everything because I think you'll see the funds kind of come in here and buy ag as the inflation hedge.
• 21:43
  Todd Gleason: Logan Kimmel, anything to add on the global geopolitics and what might be happening in the world as you and roach ag marketing view it?
• 21:53
  Logan Kimmel: Well, I think Jim's spot on. Think if you look at the wheat market and the crude oil market here in the last few weeks, kind of correlating and maybe alluding to geopolitical pressure or tensions. I think that's exactly what you're seeing. What you're also doing, as Jim mentioned, I think you're scaring the funds short out of this wheat that might have stayed around too long. So if you're a wheat producer, I think if anything, you got to use the short term tension or volatility as potentially an opportunity, maybe to do marketing.
• 22:29
  Because when you zoom out bigger picture, as we've seen from the outlook numbers, you might not have the longer term story. I hope you do, but when we're sitting here at multi month highs, I think as a wheat producer, you got to look at this and use this as an opportunity to do any marketing.
• 22:47
  Todd Gleason: As we start to wrap up, I do wanna come back to the outlook numbers and look forward to the prospective plantings report, which is a survey of producers. USDA will be actively taking those numbers, and they do massage them some once they come in. However, this is, I think, 70 to 80,000 surveys. It should be a pretty good and accurate survey of what farmers think they'll put in the ground. Jim, do you think farmers will show a big bigger number for corn acreage than what USDA is at today?
• 23:22
  Jim McCormick: Right now, I lean to think it'll be a little bit bigger. I think it could a little over 95,000,000 is where I've been thinking it would be at, and I'm going to stick with that number for the moment. I think that's where we're at. I am going to give it a little bit of caution though, depending on how the market reacts to it, how far they can carry the beans on this China hype of buying 8,000,000 metric tons and how the spec money maybe drives the bean oil once we get some clarity on the biodiesel mandates that might, if you get beans to push new crop beans back up toward eleven fifty or higher, then I think you're probably gonna lose some corn acres to beans. I mean, now, the real million dollar question to me, Todd, is what are the guys in the South gonna do?
• 24:06
  They're not gonna plant cotton, are they gonna plant rice? Can they afford to plant it? What crop do they go to right now? But right now, my gut says a little bit 95,000,000 acres on the corn.
• 24:15
  Todd Gleason: Do you suppose that it makes much of a difference for them what the payout would be from the bridge payments on a crop as to what they might plant?
• 24:27
  Jim McCormick: I think as a whole, as in someone's trying to market, trying to guess what the government's gonna do on bridge payments, no. But could it have an impact on the psychology of a farmer depending on how beat up he is financially? The fact of the matter is he gets a big enough bridge payment and it's gonna allow him to essentially cover more of his input costs, he may go ahead and say, I'm gonna go and try to push into that corn because a lot of my clients, they just feel like they can bushel up a little bit better with corn. They have a better odds of getting above trend line in corn with the insurance payments than they do beans, but it's you know the fact of the matter is there is a lot of farmers that are really having a hard time getting financing for this upcoming year, and that will be have the bigger impact potentially on are they planting beans or corn? What can they officially actually afford to plant?
• 25:17
  Todd Gleason: Yeah, well, so I have a secondary question about that. When you run through numbers, and Logan, you can answer this too, I suppose. When you run through numbers with producers, are they showing, from their own figures that they actually can make more per acre with corn, or is it with soybean?
• 25:36
  Jim McCormick: Right now, Todd, a lot of the producers I've talked to and all that, you know, their breakeven for corn, it's somewhere around that $2.60 level. Well, you got board price corn trade or excuse me, $4.60 level, $4.60, $4.70, and you're right there at $4.61 today, so you're relatively close. When you talk to clients in the beans, they're probably a little bit closer to $11.50, some are a little bit closer to 12. So if you look at close closeness to break even, the corn in general is a little bit closer, but the fact of the matter is beans are making a fight and argument for acres because if you look at where you were on those November beans just trading here back at the February at ten sixty eight, that makes it an easy push to go with corn. You're a dollar away from breaking even.
• 26:24
  Now that you're getting closer to $11.20, if you can get another 25¢, I think you're gonna get a fighting choice to get guys to go to beans, but then it just comes down to how much fertilizer was laid down last fall as well.
• 26:36
  Todd Gleason: Logan, have you pushed those numbers with producers, and what do their breakeven show you about one crop versus the other?
• 26:42
  Logan Kimmel: Oh, those are pretty well in line, and I think it brings up a good point on the to watch this new crop soybean market here going forward and what does it do as it increases in price close to $11.50. I think that's gonna provide opportunities for producers.
• 26:57
  Todd Gleason: Let's finalize our program for the day. I'll get, a final thought from each of you. Jim McCormick from agmarket.net in Barrington, Illinois. Your final thought for the day.
• 27:08
  Jim McCormick: Well, overall, outlook numbers were nothing too shocking. It's a starting point. Don't get hung up, producers, on those numbers. The game is just beginning. We are getting some surprise moves in the wheat market because like I said, the geopolitics, we'll see if that can pull this corn market up on the coattails.
• 27:25
  I do believe we're getting another secondary opportunity to move old crop beans as well as new crop beans. Don't look a gift horse in the mouth. That is my argument. I know a lot of people get hung up on I can't sell grain in February because it's always higher in certain type of months. We're breaking some of those historical patterns.
• 27:42
  If the price is profitable, pull the trigger, start locking in profits this year because it could be a very tough year without a weather issue.
• 27:49
  Todd Gleason: And Logan Kimmel from Roach Ag Marketing, your final word.
• 27:53
  Logan Kimmel: Keep paying attention to the outside markets as we discussed on and what opportunities that might provide here looking at new crop, especially for the two markets that have traded well here as we've mentioned the soybeans and the wheat. And again, just to reiterate folks on the old crop corn given the situation, be mindful. I just, you know, agree waiting around until July and August with cash bushels and old crop corn might not look so good barring a weather issue. So there are still ways to participate in a market rally here potentially this spring or summer. But, you know, interesting time of the year.
• 28:32
  A lot can change as well. I don't want to get too down. There's still a lot of growing season ahead for producers. But I think these market opportunities when they present themselves.
• 28:42
  Todd Gleason: Commodity Week, of course, is a production of Illinois Public Media. You may find and listen to the whole of the program anytime you'd like on our website at willag.org or search it out by name in your favorite podcast applications. Our thanks go to our panelists this week, including Logan Kimmel from Roach Ag Marketing out Naperville, Illinois, and Jim McCormick at agmarket.net in Barrington, Illinois. I'm Yulvi Extension's Todd Gleeson.