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Mar 05 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: The following is a special edition of Commodity Week. Illinois Extension. Well, welcome to Commodity Week. I am Todd Gleason. Today's program is taken from the all day ag outlook, our morning soybean panel, including Ellen Dearden from AgriView in Morton, Illinois, along with Chip Nellinger, who also in Morton, he's with Blue Reef Agra Marketing, and Greg Johnson of TGM, that's Total Grain Marketing in Champaign, Illinois.
• 0:36
  Commodity Week, of course, is a production of Illinois Public Media. It's public radio for the farming world online on demand anytime you'd like to listen at willag.org. That's willag.org. Now let's go to the beef house in Covington, Indiana on Tuesday, March 3, and hear what the folks on the soybean panel had to say. I asked Ellen Dearden to lay out her thoughts first.
• 1:03
  Ellen Dearden: I'm surprised, like a lot of other folks, that the rally that came out of the mid January lows has gone as far as it has. I see a lot of hope, from Chinese business build into this market, and I'm not so sure that we're gonna see Chinese business actually come about. So I'm really, thinking that this is a good time period to be cleaning out of old crop beans and probably, getting well along on new crop sales. I do believe that, with the, price of fertilizers probably and the availability given The Middle East situation that we may end up seeing a few more beans being planted than, what the, report came out of the Ag Forum suggested.
• 2:00
  Todd Gleason: Chip Nellinger, your opening statements?
• 2:03
  Chip Nellinger: Yeah. I I very much, agree with what Ellen said. I I I think to put in perspective, a couple things hit me. Number one, if China that's a big if. If they buy another 8,000,000 metric tons, there's that still puts them slightly under the previous two years.
• 2:22
  The USDA has a billion $6.50 projected for exports. You have to assume that there is already a a a fair amount of Chinese business in there. Yes. We're increasing the crush and the and the renewable diesel. That's gonna be a a supportive factor, but they already have, increased the crush, estimates as well.
• 2:44
  And so if they do if if if they do buy 8,000,000 more tons, I'm not so sure that that increases the exports because it kind of messes with the free market. You're looking at a crop size, in Brazil of at least six and a half billion bushels, maybe higher. For reference, we raised 4,200,000,000 bushels. So if China is forced to make a noneconomic decision to buy more of our beans, I'm not sure it actually increases exports. And the end result, we're gonna lose some, out the back door to, Brazil, and it's hard for me to believe that we won't have an effect of that massive supply, for for quite a mile.
• 3:28
  That does not mean they can't run another $50.60, 80¢ higher because the funds don't, sometimes, you know, factor in the fundamentals like that. But in the end, I think the massive crop in Brazil is is something that's gonna hang over the market for a while. And Greg Johnson.
• 3:46
  Greg Johnson: Well, every year we have a series of known factors and unknown factors, and throughout the course of the year, the knowns, the unknowns become known. I think this year we have a lot more unknowns than what I can ever remember in a long time. And so more unknowns means more price volatility. I think we'll have a wider range of bean prices this year. Normally, have $1.8 swing from high to low.
• 4:12
  That's the average. I think we'll see $2 plus from high to low this year. Some of the known factors is Brazil. Everybody's mentioned that. Joanna's mentioned that.
• 4:23
  Chip's mentioned that. They grow 6,500,000,000 bushels. Just for comparison, The US is number two at 4.3 and Argentina's a distant third at 1.3. So Brazil is here for the long run. Here's the other thing that hasn't been mentioned.
• 4:39
  Agriculture accounts for 5.5% of The US GDP. Agriculture accounts for 30% of Brazil's GDP. They are very, very committed to agriculture in Brazil. I don't see that changing. The number two known factor is, I think, US soybean acres.
• 5:00
  Ellen hinted at this and I agree. I think we're going to see 85,000,000 acres of beans. That's the five year average. And I think with the higher input costs for corn, you're going to see 85,000,000 acres. That's what the Ag Outlook Forum used.
• 5:14
  And if you look historically, the Ag Outlook Forum number is very, very close to the March 31 planting acreage report. Now it may not be anywhere close to where we end up because the government seems to change the number from March to June. And this year, this past year, they changed it from June to October. So you never know about the planting acreage number until it's all said and done. But I think you'll see 85,000,000 acres of beans.
• 5:38
  That's 84,000,000 harvested. Use 53 bushels to the acre. That's a 4,450,000,000 bushel bean crop, three fifty carryout. That's 4.8 supply. We use 4.4.
• 5:52
  So that leaves us a carry out of 400,000,000, assuming normal weather and assuming nothing changes on the demand side. But that's where we get into the unknowns. There's four big factors that are unknown in my opinion. What's the domestic biofuel policy going to be? Supposedly, EPA submitted their RVO recommendations to the Office of Management and Budget this week.
• 6:13
  There's a thirty day comment period. Maybe we'll find something out. Maybe they'll get kicked down the road. Number two is energy prices. The war going on now just underlies how important crude oil prices are to soybean oil prices, which impact soybean prices.
• 6:31
  Number three is China. The talks were off yesterday. That's why supposedly beans went from 20¢ higher to so many cents lower. But today the talks are back on tomorrow, who knows? But that China is going to be a very, very important thing to watch.
• 6:48
  And then number four are president Trump's policies, not just tariffs, not just with China, but all his policies. President Lincoln was called the great emancipator. President Reagan was called the great communicator. I think President Trump is the great disruptor. That's how he trades.
• 7:08
  He keeps people off balance, and that's part of his strategy. And so I think we're looking at very, very volatile markets. And so I'd say that $2 swing that we could see in prices, I think we could be anywhere from $10.5 to $12.5 Where are we at today? We're at eleven point three kind of right in the middle. So we could go a dollar higher or a dollar lower.
• 7:33
  Todd Gleason: I was gonna ask you what the range was. Thank you. I'm glad you put that in. I wanna deal with speculation upfront, which is not something I tend to do. But I think given the war in Iran, the military operation in Iran, I suppose, because it's not declared a war at this point, how will China react?
• 7:55
  Because at at this point, Allen, in the first two months of 2026, The United States has acted to remove leaders in two of China's primary crude oil Partners. Partners. And and I don't know how they and I I don't know that anybody knows how they will react, but I can't imagine they'll be very happy about it. What do you think that means to the marketplace?
• 8:26
  Ellen Dearden: I think it means, to the marketplace that, we're gonna see things move around the globe in a little different manner than they have in the past. And certainly, China, can buy crude from Russia as well as from Venezuela, move we've taken out their leader, or from other places, but not in a very expedient manner. And that's a big problem. Crude oil watch crude prices on a daily basis, and you get whiplash. Especially this week, we've seen just big moves higher.
• 9:12
  But crude oil and cattle have a very high, correlation. But crude oil also has a high correlation to soybean oil. So I watch crude and I watch palm oil as good indicators on demand side of bean oil.
• 9:33
  Todd Gleason: Chip, I want to inject in this process policy in The United States, the RVO's 45 z, the impact it has, and ask ask a question about the rally in soybean oil, the recent rally. So the market has a very good way of projecting what might happen. That's what it's supposed to do. So the question is is the rally in soybean oil because the market believes US EPA's RVOs are going to be really good for soybeans and the the movement of soybean oil into renewable diesel and biomass based diesel of some sort, or was it the expectation that something was going to happen in The Middle East?
• 10:25
  Chip Nellinger: No. I think it was, if you look at a soil oil chart, it was long before, there was an assumption we were gonna go and do something militarily in Iran. So I I think primarily it has been about expectations and hopes that our domestic renewable fuels policy is going to improve in regards to soil demand. This week, obviously, as Ellen mentioned, high correlation, but that can only take you so far. Right?
• 10:57
  A soybean crusher, it's a it's a margin business. So as soy oil rallies and the crush margins hold together and improve, crushers are gonna continue to buy beans at any level, and sell meal and oil and make money doing it. But if you go, however many miles it is here to Decatur, they can only be you can't have an unlimited amount of of crush capacity. There's a limit that we have, so we're gonna reach that at some point. Just add on to Ellen's point, and this is I was just scrolling through some news, earlier.
• 11:31
  So, Iran has stated that the Strait Of Hormuz is closed, but they're gonna allow Chinese vessels through. I don't I'm not sure if Chinese vessels, are going to agree to go through that flashpoint, just as a symbolic, you know, gesture. So this thing is changing on an hour by hour basis. Long answer to your your question. I I think primarily the rally in soy oil and thus beans has been about domestic policy rather than Iran.
• 12:04
  Todd Gleason: Ellen, you had something you wanna follow-up with
• 12:06
  Ellen Dearden: that one? I just think we're all talking about the the domestic policy for biofuels, And I think we need to keep in mind I mean, we always keep talking about, vehicles that are moving on biofuels, but the big the big deal, I think, is really gonna be the airplane fuel and maritime fuels. And we are seeing maritime fuels move quickly to use of biofuels, and that's gonna be huge. Think about how much stuff moves around the globe via ship.
• 12:46
  Todd Gleason: I'm gonna check something I think you'll have an answer to for me because, because of the corn growers connection. I was on a webinar maybe two months ago, and if you listen, you heard parts of this related to maritime fuels and how big that might be. But it is a and oddly enough, it's a methane and a could be a corn based function as opposed to a soybean based function. Is that correct? This answer comes from Phil Zicht.
• 13:17
  He works with the Indiana Corridors and is a farmer from Winchester.
• 13:22
  Phil Zicht: I was just last week, as I said earlier, Renewable Fuels Association down in Orlando. And to your point, they they had a presentation on the possibility of maritime fuel, and they were, I guess, saying primarily corn ethanol, and that could be a boom. Now conversely, LanzaJet is a company that that has put together a
• 14:00
  Ellen Dearden: Mhmm. Yeah.
• 14:01
  Phil Zicht: Yeah. On on sustainable aviation fuel, but I think that's still in its infancy in infancy. But I think this maritime fuel business has real possibilities, and I think that was spoken to last week.
• 14:19
  Todd Gleason: Yeah. Well, one of the things that's interesting about that is that it can be it it that it runs through the pipelines. I I did ask this question because to get it from here to the call coast means the pipelines have to be able to run backwards, and not all of them do. Right? Because usually it's from the coast in, and so not all of them do.
• 14:42
  So I I don't know how much of a difference that'll make. But maritime fuel is something that that may make a huge difference. Back to you on the RFS, the RVOs. What's crush capacity like in The United States? And is this a ethanol build out kind of thing or something else?
• 15:00
  Meaning, I think that the RVO, we understand it at this point, is not going to increase demand for crush capacity, but will fill crush capacity to the demand we've or to the to the point that we've already built it out. Is that right?
• 15:21
  Greg Johnson: If if you look at the crush numbers in The US, ten years ago, we were crushing 1,800,000,000 bushels of beans. This year, we're crushing 2.57. That's an average increase of 70,000,000 bushels per year. We're up 125,000,000 from just last year. So we've as as this renewable fuels policy has encouraged US producers to produce the renewable biodiesel, it also now this supposedly, what I hear, it's discouraging Chinese used cooking oil.
• 16:00
  They're not going to get full credit. They're going to get half credit. So all of these things are encouraging more soybeans to be crushed into soybean oil. And I don't know where that ends. But it's good news so far.
• 16:14
  Todd Gleason: That would be the half RIN or half renewable identification number, so the way that those are traded and paid out. And that's one of the things we're waiting this week to find out. So if you hear about a half RIN or not a half RIN, the other side may be rather than a half RIN, a 1.2 or 1.6 for domestic usage. So for soybean oil, for canola oil, and for corn oil. So across the board, this this side, what's being what's happening now in policy in Washington DC with the RVOs affects all of those.
• 16:54
  And we'll know more in the next week and a half. And, again, I talked to Todd Hubbs about this last week, and it's the article that the PharmDoc team, he and Scott Irwin wrote last week as well, and it'll air this afternoon. You probably won't be in the truck for that, but you can listen to it on the podcast and try to catch up. So we're we're still in this process of trying to figure out, hey. Do we have more domestic demand?
• 17:18
  Maybe. If we do, do we suppose, Alan, that that gets offset or chipped by a lack of exports? Because if we do have the export if we do have domestic demand and it's driven by this, there'll be a higher price internally, but it's paid out because of the government subsidy, and that might not work on our export market very well.
• 17:43
  Ellen Dearden: The US has abdicated their our exports of soybeans to Brazil and Argentina. I think that's pretty pure and simple. And so, therefore, building these new domestic demand for beans is gonna be critical. And I would add too, Todd, when you were talking about crush capacity, that there are three plants being built in the Dakotas as we speak, crush plants, and they are supposed to be compatible with the advanced biofuels.
• 18:22
  Chip Nellinger: Yeah. I I think longer term, it will help offset the lack of exports that we're gonna lose to Brazil unless they have some sort of a production hiccup, and and that's probably a, you know, one out of 10 years. In the very short run, though, I'm I'm fearful that this year and maybe next year, it doesn't offset the lack of exports. And and I think there's a really fair chance that the USDA is too high on their export projections. The other thing that doesn't get a lot of, didn't bring a bodyguard.
• 18:59
  I might need one after this. The the thing one thing that there's always, like, secondary ramifications. One thing that doesn't get a lot of talk right now to all this domestic crush, What? 18% of the crush is soy oil. 42% is soy meal.
• 19:19
  What do we get I know meal exports, have increased. What are we gonna do with all the meal? It's gonna compete with DDGs. It's gonna be potentially a direct, competitor to corn. You know, no one's talking about that a lot.
• 19:36
  And so we're gonna have to deal with that eventually or find an export market to ramp up fast on our meal.
• 19:43
  Todd Gleason: If you have you got questions out here? I know you do. Just raise your hand, and I'll bring the mic out to you. So so let's do talk about that just a little bit. And and because the meal meal needs to be offset, it's probably that whole crush thing may be a deeper discussion than is necessary here.
• 20:00
  But looking forward, maybe we can start with old crop beans. If they have anything left, do they sell them today or soon?
• 20:13
  Greg Johnson: Old crop beans, I think farmers are pretty much 80% sold in our trade territory and other elevators I've talked to. Farmers have done a good job of selling beans because there's been opportunity to sell beans at what I would call good prices. So you're holding on to that last ten, fifteen, 20% for gambling stocks. I think there's just as good a chance of them going up as going down in the short run. Again, keep reading the farm doc articles to find out how this RVO is going to play out, how everything else is going to play out.
• 20:45
  You know, I can, I will change my opinion when the facts on the ground change and the facts are changing all the time? But as far as selling old crop beans, I think farmers have done a good job. They really don't need to sell any more at this point if you're 80% sold. New crop beans, Todd, we've talked about since October, November, I wanted to sell $11 cash beans, which is 11.3 November futures because we've got a 30¢ basis. And that's where we're at today.
• 21:11
  We're still paying $11 I think you should have 20% sold there. And you heard me say that they could go to $12.50, but you heard me say they could go to $10.50. So we're right in the middle there at $11.50 ish. So why not sell some? I'm not trying to predict the price.
• 21:26
  I'm saying, again, I'm gonna lean on FarmDoc. FarmDoc says we can make $25 an acre at these prices in soybeans. We're losing money growing corn at these prices. So I'm gonna lock in a profit and sell some beans.
• 21:40
  Todd Gleason: Ellen Dearton?
• 21:43
  Ellen Dearden: Old crop beans, I wanna be done with. And I think that the Central Corn Belt farmer has done a very good job and probably is 80%, maybe 85% sold on all beans. But the further west you go, the more beans there are yet to market. And I've really been pushing subscribers of mine in that area to get moving. Transportation situation from here going west is, pretty difficult on the bean side, so it's the crushers that are driving the market.
• 22:19
  Basis is not as good as it is here. New crop basis is far wider than 30¢ even, in our area in Morton, Illinois, but there's a lot of fifty, sixty, seventy, eighty under basis for new crop. And not very many guys that I talk to in the Dakotas are all that excited about selling ten fifty beans at this stage of the game. They'll do a little more waiting and seeing. I'm really trying to encourage people to do some selling on these new crop beans as well.
• 22:55
  Todd Gleason: So what are you thinking about soybean sales?
• 22:57
  Chip Nellinger: Yeah. Well, I mean, we'd be out of be out of old beans right now. If you wanna play, that China's gonna save us, do it with call spreads. We would be 20 to 25% priced on new beans with another 20 to 30% with some sort of put coverage. My philosophy is this, especially for farmers in this room, in this area, this this type of dirt, if you can make a little money on beans right now, be more aggressive on new beans.
• 23:25
  If you're a dollar early, guess what? You're gonna make more money net net because you raise four times as many bushels as corn of corn as you do beans. And if beans rally a dollar, especially if it's in the next seventy, eighty days, we're gonna lose more corn acres. You're gonna you're gonna backdoor into a big corn rally. $5 December corn makes you a lot more money than $12.50 November beans, so we wanna be more aggressive on beans.
• 23:51
  I would be even a little more and I'm talking to you, like, next fall in the most bearish scenario. I'm not sure that $10.50, would catch it on the downside. I think you could push November beans into the nines very easily in the worst case scenario.
• 24:07
  Todd Gleason: With the soybean market as it is, because you you mentioned China not betting on it, they do wanna bet on it. What's the percentage that China saves the day?
• 24:19
  Chip Nellinger: That they're gonna buy?
• 24:21
  Todd Gleason: Yeah. Is you think there's a 20% chance they'll buy what they've what they've said?
• 24:28
  Ellen Dearden: It's strictly a political move. If they if president Xi has gotten rid of a lot of its his generals, six big generals left, does he have a a solid support from its his citizenry. If he needs more support from the citizens, I. E, the next round of generals that came in, he will try to cozy up to The US. And the easy way to cozy up to The US that I see right now is through policy, and part of the policy would include ag products.
• 25:11
  Chip Nellinger: Anybody else? I would just gun to my head, 35% chance. It's it's gonna cost them 3 to 400,000,000 extra dollars to buy our beans versus Brazil, but it might benefit them by a trillion to have access to other products imported into The United States. But it's non it's it messes up supply and demand in normal markets. So you still have a massive supply of beans in the Southern Hemisphere that we've got to deal with.
• 25:43
  Greg Johnson: Yeah, the tariffs that we put on Chinese products that come here are in the trillions. If they buy extra beans, we're talking billions. So yeah, they could lose money. It's uneconomic for them to buy those soybeans from The US. They can buy them 80¢ a bushel cheaper out of Brazil right now.
• 26:01
  But they might look at the big picture and say, okay, we're spending a little bit more money on the soybeans from The US, but in return, we're getting our products, over into The US at reduced tariff rates. Other
• 26:15
  Todd Gleason: questions? Go ahead. Yell it out from the back. Yes, please.
• 26:19
  ADAO Audience Member: Iran war, that is part of the China Russia complex of the communist and socialist parties. Somebody mentioned Venezuela. That's not gonna happen because we've already embargoed all the oil. So they won't be pulling much there. We've already shot down a couple ships going to China.
• 26:38
  So I just suggest this is the year to stay awake if you're in agriculture. Thank you.
• 26:42
  Greg Johnson: I think it ties right into my there's more uncertainties out there than there are certainties. I I And I'm going to change my mind three months, four months from now, Todd, when we're on the air. But right now, I like being 20% sold with another offer in to sell another 20% if we go $0.50 higher. And again, I'm not predicting that those are the high prices. I'm just saying those are profitable prices, and I don't know how else to do it other than lock in profits when the market gives you a chance.
• 27:09
  Because remember the January 12 crop report, we had a lot of doom and gloom for the next thirty days, and and that can happen again. I mean, when the prices go low, they tend to stay low until something happens. And, hopefully, we'll have a weather supply problem or we'll have some demand driven rallies, but we need to take advantage of those when they happen.
• 27:31
  Todd Gleason: Just for clarifications' sake. See, your your comment, your argument there was that you need to be you need to be vigilant, but you're worried that China is just gonna be out of the marketplace. Is that right?
• 27:46
  ADAO Audience Member: These are my opinions. I would highly suggest that China is not gonna be a major player in The US market with our tariff programs going on with the war in Iran still going on. I think there's gonna be a lot for them to be allies of their BRIC partners and utilize them. They gotta keep that coalition together. They gotta have food security, and they gotta have, they gotta have green.
• 28:11
  So there's no difference. I think there's one given in this whole situation is you got a crop insurance plan that basically 80% premiums are subsidized, and you can use them just as well as the CBOT to do some really good marketing. Thank you.
• 28:29
  Todd Gleason: So BRIC, Brazil, Russia, India, China. So Ito says, hey. China's gonna deal with the with the BRIC countries because they're working trying to figure that out. They're also trying to figure out if they can do their own currency together. Nobody believes that will happen, I don't think, because there are just too many competing industries or it it competing, things happening there.
• 28:50
  So just a quick final word from each of you at this point. We'll start with you, Chip. Chip Nellinger is with Blue Reef Agrimarketing.
• 28:57
  Chip Nellinger: Yeah. We talk a lot about uncertainty a lot, and we will, this afternoon, I'm sure as well. Have a plan. Right? If you don't have a plan we've seen a lot of volatility, and you need volatility to have opportunity, but you need a plan to take advantage of the opportunity.
• 29:14
  Have offers working. We see the last two days. Right? We're 20 higher in the overnight. By 10:00 in the morning, you're five lower in beans.
• 29:23
  If you don't have offers in, they're not gonna get filled potentially. So you gotta have a a plan of attack, have an have a plan, execute on it. Don't cancel if close. Don't don't, you know, put the old cancel of close order in and, you know, look at profitability. That that plan needs to, really zero in on the cost.
• 29:44
  I'm sure you're gonna talk about it in the corn panel. One thing I learned this this week, and I've been in the business a long time, about a third of the nitrogen moves through the everyone knows that how much oil moves through there. Third of the nitrogen. Urea prices are up 20%, at The Gulf this week, and it's Tuesday. So uncertainty, but you gotta have a plan to take advantage of it.
• 30:07
  Todd Gleason: Wait till Thursday. Alan Dearden from AgReview. Your final thoughts.
• 30:11
  Ellen Dearden: I think that, this is a year to have a market buddy, maybe, somebody that you can talk markets with, and it may not be somebody in your neighborhood. And I think that there's a lot of opportunities once you look outside your neighborhood to find somebody who will urge you to make sales or to remind you that not everything looks like Central Illinois or Central Indiana. Keep offers in.
• 30:43
  Todd Gleason: And finally, Greg Johnson with TTM.
• 30:46
  Greg Johnson: I would just echo what Chip and Ellen said. You have to have a marketing plan. If you don't have it written down, it's not really a plan. You can change it. I'm gonna change mine, but I've got it written down.
• 30:58
  I wanna sell 40% of my beans sooner rather than later. I've already got 20% sold, and I want to have another 20% sold. Now, that could change based on what happens, but, you know, you have to have beans sold. If I have 40% sold and they go higher, guess what? I've still got 60% of my beans left to sell at a higher price.
• 31:19
  At the money calls are well over 50¢. So just buying a call to protect a sale isn't going to work. But as Chip said, you can do vertical bull call spreads where you buy a $12 call and sell a $13 call, for example. You can do things like that to cheapen the cost of that insurance. The other thing we haven't really talked about, people say, well, yeah, I can make money at $11.50, but it's not sexy.
• 31:43
  It's just kind of so so. Keep in mind, you're going to get 75¢ from the government between the bridge payment and the ARC County payment. So you can add I like to justify, you know, 11:25 sales by saying, you know, add 75¢ to that. There's your $12 beans. So if you can get 75¢ from the government and $11.25 from the market, there's $12 beans.
• 32:03
  Don't forget about that government money.
• 32:05
  Todd Gleason: This edition of commodity week was recorded Tuesday, March 3 during the all day outlook at the Beef House in Covington, Indiana. Our panelists for the day included Chip Nellinger of Blue Reef Agromarketing, Greg Johnson from TGM, and Ellen Dearden of Ag Review. On University of Illinois Extensions, Todd Gleeson.