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Sep 18 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the September 18 edition of Commodity Week. Todd Gleason services are made available to WILL by University of Illinois Extension. Well, welcome to commodity week. I am Todd Gleason. Our panelists for the day include Mike Zuzlow.
• 0:18
  He's a globalcomresearch.com out of Atchison, Kansas. Kurt Kimmel joins us from agmarket.net in Normal, Illinois. And Dave Chatterton is here from Strategic Farm Marketing. He's in Champaign, Illinois. Commodity Week is a production of Illinois Public Media.
• 0:34
  It's public radio for the farming world online on demand anytime you'd like to listen to us at willag.0rg. Let's begin by getting a list of items that maybe we should take up for the week. I think Dave Chatterton will start with you today.
• 0:51
  Dave Chatterton: Yeah, Todd. I mean, we've got a USDA report behind us now. We're looking forward here. We've got a a Trump Chi phone call tomorrow to talk about, know, TikTok. We don't know that that will involve trade, but certainly, we're still debating yields here in The US.
• 1:05
  What the USD will do with that going forward. We're looking at the the Trump, you know, trade policy and what it means for China and particularly for soybean imports going forward. And I think we have to start talking about Brazil. Know, new crop bean has started. Rainfall looks like it's starting to pick up there.
• 1:19
  The monsoon looks like it's coming in just in time for what will be a favorable planting season. We had Conava today which is the Brazilian version of the USDA talking about, you know, harvesting a record corn and soybean crop in the country here for the twenty five, twenty six crop years. So, you know, I think the supply side versus the trade war is still the debate here in the trade.
• 1:41
  Todd Gleason: Mike Zuzlow on your list.
• 1:43
  Mike Zuzolo: Yeah. I think Dave set that up really well. I'd I'd only add two common themes that I continue to monitor at this point, Todd, and that is the major driver this week seems to have been the Federal Reserve, both before the announcement and after the announcement. And I think it's a bigger narrative that the weaker dollar and going down to a forty three month low after the Fed news came out has really done a lot in the idea that maybe we do have a commodity demand low in this marketplace given how robust our exports are. The second thing would be it just seems like between the rapid harvest, the yield comments, even the weekly chart technicals and the gap that we left this year after the September went off the board and December took over as lead month, still looks a lot like September.
• 2:29
  So wondering if that can't be maybe something we can tap into as we head into the end of the month and like last year going into October, find some higher highs in the corn market or not.
• 2:40
  Todd Gleason: Anything top of mind for you, Kurt, that hasn't been listed yet?
• 2:44
  Curt Kimmel: Oh, boy. We got a two day seminar there. But the only other thing I'm kinda interested in to see what Mike Dave kinda think is we're gonna probably get a government payment here sometime ranging anywhere from 50 to a $100 an acre. And what would be the farmer psychology with that payment coming is gonna be able to wait for that payment store sale? That's kind of the mindset, looking forward here with optimism or hope that might happen?
• 3:10
  Todd Gleason: Let's start with that just to see what everybody thinks about it. Of course, USDA has been discussing the secretary, Rollins, the possibility of a payment more loudly this week, somewhere between 50 and a $100. And it's likely to come much sooner rather than later. What impact do we suppose that might have on the marketplace? Dave Chatterton.
• 3:35
  Dave Chatterton: Yeah. Todd, I mean, certainly the drumbeat is happening. And I think if you kind of look at maybe the bigger negotiating scheme here, it you know, I think the administration or the Trump administration is kind of, you know, foretelling or shadowing that they're willing to exchange a direct payment to farmers in in lieu of having China come back to The US ag market and particularly for soybeans. If you look at the Chinese imports and apply the tariff year over year at this 20% level, which is we'll call it the the fentanyl tariff, you're talking about a $90,000,000,000 plus or minus income into the US Treasury. By comparison, if China agreed by some reason to purchase, let's say, an amount of beans equal to what they did last year in that 22, 22,500,000 metric ton range, you're talking something that's more like a $9,000,000,000, you know, purchase of beans.
• 4:27
  So, you know, you put yourself in Trump's shoes tomorrow, 90,000,000,000 on one side versus a 9,000,000,000, you know, receipt on the other. I think you take the 90 and you you pass some of that along to the farmers. So, that's essentially what I think by Brooke Rawlins and by the head of the, you know, the congressional, the the house and the senate ag committees are both talking about this relief program and as Kurt mentioned, you know, we don't know exactly what form it's going to take. We don't know exactly the timing but it looks like it will be out there. What that does is, I think, enables farmers in a low price environment to hold more grain off, to create better cash flow, and to maybe weather some of the the higher input costs as we look forward to next spring.
• 5:06
  But for the direct impact on futures, I don't I don't necessarily think it's bearish, but I don't know that it gives us a big lift here just at the at at this particular point.
• 5:14
  Todd Gleason: Mike Zuzolo, your thoughts?
• 5:16
  Mike Zuzolo: Only thing I'd add is I would hope my wish would be you take a third of that and take on those higher fertilizer prices that we're probably going to just have to eat at this point. Take a third and work on your crop insurance, but also take a third and get into your marketing and hedging analysis and structure your profitability in the very beginning of the year. And I say that specifically, Todd, because we're still dancing around ten seventy five, $10.80 on November 26 beans, the closer we get to $11 the more beans cash flow, but it also means probably in my mind, and I'd be interested in what the other guys think, but also probably means more bean acres in '26. So I don't see the Brazilians going hard after corn. I think they're going to go more aggressively after soybeans both in terms of their own costs and fertilizer prices plus what China's wanting to buy from them.
• 6:08
  And so, you know, theoretically we could have a very large supply of soybeans around this world, especially if our yields don't get hit as much here in this crop as we think they probably could be.
• 6:20
  Todd Gleason: Okay, Kurt. Follow-up on what we've been discussing, but I'd also like to take up that November bean contract for next year. We did have a listener write in and wondered whether what he was seeing in the charts for November beans and uptrend could be continued and if there was any possibility that you might have some upside potentials. But start off with, what your your question was, really. What happens if there is a 50 to a $100 payment?
• 6:52
  Curt Kimmel: Yeah. It's, something we've been visiting about here. I mean, the administration's did a great job kinda promoting it as far as stalled trade talks is costing The US producers. So there in return, some type of help coming. But just a short survey, the mentality or the mindset that we're kind of seeing is store and ignore.
• 7:17
  So it kind of tells me that initially air producers are thinking store or hang on to it, use the cash to pay fertilized, do other bills, and kind of hang on to cash grain, which means we're going to probably have more cash grain to move after the first of the year here. As far as the November soybean chart goes, we've got a lot of different things in progress. You can read it quite a few different ways, but this continues to stall out here at the upper end of the trading range for November beans. Really to get something going here, we need to move above this $10.7 But we've got, you can develop a little bit of a channel, an upward channel. We need to hold the early September lows.
• 8:06
  The two on the bean chart, if you want to get bullish, you can kind of build a sloppy head and shoulders bottom, which suggests if we start moving above $10.6 $10.7 and all of a sudden we can challenge that $11 resistance here. So the chart points are gonna be real critical hold the early September lows here, Todd.
• 8:27
  Todd Gleason: Indeed. Anything, Mike, to follow-up on that because you started that commentary with me?
• 8:31
  Mike Zuzolo: Yeah, a couple of things. I think the person that I really follow a lot when it comes to administration taking seriously is Senator Grassley. He's kinda like the Pat Roberts of the twenty first century. Whatever he says is gonna be taken seriously by anybody in the White House. And he came out and said this week that, you know, for farmers, you're looking at an all time high in terms of fertilizer prices relative to the grain prices.
• 8:56
  And so I do think that we're going to move and see something done by USDA. But that really does open us up to more susceptibility on the cash versus the futures market. And that's what's been so difficult from a standpoint of us and our industry managing those two markets that have really kinda separated themselves out. And I just think, you know, more direct payments in light of the tariffs is gonna just gonna keep the futures and the basis so far separated from one another and make it more difficult.
• 9:24
  Todd Gleason: And if history is any indication, I think, Dave Chatterton, when these payments come, particularly at this point after we've had some inflation, it's quite likely that the input side will try to recoup some of those, I would think. Does that bother you very much? And do you suppose that farmers need to consider really where that money is going to end up going?
• 9:49
  Dave Chatterton: Yeah. Todd, think it opens up a much larger debate and really the, framework of that if you want to just cut to the core is that the government payments that are made to farmers are basically a conduit that go right back into corporate shoes, whether it's equipment, whether it's inputs, whether it's seed, you know, pick your poison, you know, farmers are spending money, you know, to to do that. I think at this particular point, we need to kind of not lose sight of the fact that, you know, margins on the farm, even with some improvement in prices here and maybe yields kind of being hopefully a little bit better than expected, not record in in many cases and and not, you know, as good as they once could have been but those payments are desperately needed. If you look at what's happened here with this Todd and really put it into perspective. If you're in an area that got rain and you have good yields and prices are improving, you're sort of yielding your way into a small profitable situation at least on corn and getting there on beans.
• 10:44
  Here's a situation where you didn't get a lot of rain and your yields are somewhat questionable or maybe below EPH. The situation's really getting worse for you because you have less grain to sell. You do have a higher price but you're losing out on all the the you know, the arc and the PLC type payments that would be coming in, ECO type payments that would be coming in at the end of the day on a profitability grid, you're actually going backwards a little bit. So, those payments are needed and certainly, they're going to go back out. They're not going to stay in the farmer's hands very long, I would say.
• 11:14
  I think my bigger concern is that we've had this detachment that Mike mentioned and fertilizer prices, nitrogen, P and K are are great examples of that where if you look at those as a ratio to corn, they're at levels that look very high compared to their current corn price but I think, you know, dealers, producers, whatever you want to call it, are going to be able to maintain those levels as we put money in in the farmer's pockets and they they they go ahead and purchase those high priced inputs. So, what it means is probably more acres. I might disagree just a little bit and think that we might not have quite as many bean acres next year. Farmers are a little financially healthier. They might they might stick with some corn, but in doing so, more inputs going into that crop.
• 11:55
  You're have stronger yield potential next year, and you kinda make this supply problem. I don't I don't wanna say worse, but it continues to carry it down the road a little bit.
• 12:05
  Todd Gleason: Yeah, Mike. So that that was my going to be my follow-up question, but I would like you to consider that as well. If the payments come in, and they simply go into things that producers need to put in a crop next year, and they pay for more inputs, that's more supply. It seems like it's a circle that that might not work very well.
• 12:29
  Mike Zuzolo: Yeah, I agree. And I think one of the things that I'm trying to battle here on this side of the Corn Belt is I probably am hearing more clients say that they don't want to plant hard red wheat in hard red wheat country, but I think I've had more clients in Illinois and Indiana call me this fall and talk to me about planting more soft red wheat than I have in the last five years and asking me where they I think prices can get to in the new crop and you know assuming that's going to come at the expense of corn. That that's that works into the the idea too. And some of that goes back to the double crop beans not performing hardly at all. It's South Of I-seventy and Route 50.
• 13:11
  So it's up in the air right now in my mindset. I just feel like the rotation and the cost of production, it feels a lot heavier in the farmers' minds than it did last year at this time if you ask me.
• 13:22
  Todd Gleason: So they're suggesting they're going to double crop soybeans or are they far enough north that that's not the idea?
• 13:29
  Mike Zuzolo: The exactly. They're far enough north. That is not the idea now because they just have not been happy with their yields.
• 13:35
  Todd Gleason: And so in Illinois, and some other places further to the South where, soft red winter wheat has grown, you don't follow-up after corn simply because there is a disease problem. That's not the case if you're further to the North, but generally speaking, so that that would take corn acres out of out of the rotation. It was something I was thinking about too, Kurt Kimmel was what acreage might look like next year because we have so many, something like 90,000,000 harvested acres for corn, nearly a 100,000,000 planted this year, 80,000,000 harvested acres for soybeans that there ought to be a lot of soybeans going in the ground next year. Do you suppose with a little extra cash in their back pocket that farmers really would put more acres of corn in the in I know Mike's making an argument for wheat, soft red, but that's about a lot of acres probably in the state of Illinois.
• 14:34
  Curt Kimmel: Well, what we're hearing on yield results thus far, you know, there's some 80 bushel beans coming out of the field that only received, you know, three quarters of one inch of rain since August 1. So with the mindset that these bean yields are holding in there versus what we're hearing corn with the different moving parts and problems with corn, I think you can probably lean that way. But as Mike said, the rotation kind of favors beans somewhat. But on the other side of the corn, though, I know you got higher inputs. Right now, these 26 corns, what, four sixty twos, four sixty three, we're close to where we were a year ago.
• 15:15
  Even with the higher inputs, you look at the spread between twenty five and twenty six, they're paying up as much as $0.40 here to make sure we have some acres. So yes, there's gonna be more bean acres, but I think guys are gonna probably hang in there on corn. But next report, we're gonna have more acres in general. That's the big key here is we're just finding more acres every report that comes out.
• 15:45
  Todd Gleason: And before we leave this kind of topic, Dave Chatterton, one of the things that Daryl Good would talk about is if something causes you to make a change in your acreage mix, when you make that change, particularly if it's related to the price, in the following year, that you should at least sell that many bushels or acres going forward so that you have that part covered. Is that something you talk to producers about?
• 16:20
  Dave Chatterton: Yeah, Todd. I think it goes exactly to the point we've been talking about. If we see this, let's say, at minimum four to 6,000,000 acre, you know, migration out of corn into soybeans and we'll leave the the weed and that that whole conversation aside for a second. You know, to to Kurt's points, the general rotation of high corn acres plus I think some financial, you know, difficulty on the part of of the the small and mid sized farmer to to finance next year is going to to force more bean acres and in doing so, if we don't have a China export program and we're going to have more bean acres on our on our balance sheet next year as a as an individual farm operator. You have to start thinking about that and with that November bean contract, we'll call it $10.80 or as a round number today but certainly with the use of a structured contract, a one by two or some kind of a, you know, a non traditional contract with your local elevator or you can get an $11 $11.10, $11.15, $11.20 floor on a portion of that production and to to your point, I think if you're going to plan on those additional acres next spring, you you definitely don't want to end up in the same battle that we've been fighting this year in these sub $10 you know, type of numbers.
• 17:29
  So, you know, I think it works to your benefit to have a floor under at least that first 10 or 20% going forward and if those end up being your worst sales at $11 or $11.10 or $11.20, I can live with that as far as my P and L and my banker can live with that. But if we're $9.50 next fall, obviously we're in the risk management business, and we can't rule that out if China buys zero beans and if if Brazil if CONAB is right in Brazil, has another record crop with acreage up another 3.7%, I think, what they called it today.
• 18:01
  Todd Gleason: Yeah, Mike. So when you talk to producers on both sides of the corn belt, one who's thinking about giving up winter wheat, the other who's thinking about putting winter wheat in. Are are you talking to them about pricing out those changing acres too?
• 18:16
  Mike Zuzolo: Yeah. I am. And and, you know, I would love it if we could get the wheat and the and the, soft red wheat, especially in the crude oil market to continue its recent pattern. And this goes back to the currencies, goes back to our strong demand on a four week basis. Those two futures markets are running at about a 95, 96% positive price relationship.
• 18:37
  And I think it is large part due to the strength of the emerging markets, due to the weakness in the dollar and those emerging markets in their currencies going up. The Brazilian currency just made a new fifty month high right before the Federal Reserve comments. I think offshore Chinese currency is at an eleven month high at this point. And I think the Mexican pesos right up there at about a one year high as well. This all adds to the idea of the weekly export sales.
• 19:04
  Wheat was a little bit softer, but overall, very nice export sales again on Thursday. I would hope we'd get to $6 in both hard red July and soft red July and wouldn't wanna let them slip back below that, Todd, without getting some risk management done on the protection on the downside.
• 19:22
  Todd Gleason: Kurt Kimmel, coming back to this season, what have you been hearing about yields across the Midwest?
• 19:28
  Curt Kimmel: Just highly, highly variable according to whether you had tar spot, rust, heavy ground, light ground. Iowa particularly, if you didn't spray, there's stories of maybe an 80 bushel hit. If you sprayed once, you've only got a 50 bushel hit. If you sprayed twice, maybe a 30 bushel. I've heard a new saying, swimming and rest.
• 19:54
  So it's an issue in some areas there. On the flip side I've heard some better than last year yields too. So we'll see how we move along here. Bean wise it seems like bean yields are fairly good for the most part. Avoided the white mold, stem rot, so beans kind of held in there.
• 20:20
  And it's going to be quite interesting to see how the last part goes, particularly the ones that really suffer due to this dry August and September.
• 20:30
  Todd Gleason: Dave, can we take up the Trump Xi TikTok trade and whether that might actually come up with some kind of agricultural agreement. I can't imagine it would be a trade agreement, probably some kind of framework, but or maybe, and this has been done in the past. There would be a set of numbers, goals for getting sales done. Do you suppose that could happen tomorrow or over the weekend?
• 21:01
  Dave Chatterton: Yeah, Todd. I don't you know, I guess the first rule when we when we talk about Trump and then you throw in China, nothing's off the table. Anything can happen, and you don't wanna rule anything out. That said, I think the odds are are are highly favoring that we probably don't get a comprehensive trade dealer framework at least tomorrow or this week. I think the idea is here is that if enough common ground can be found in this call tomorrow and it moves beyond TikTok into some other areas of, you know, rare earths and and hopefully trade and hopefully agricultural purchases that we have a framework for the two of those leaders to meet personally whether it's in Beijing in October or later in November in South Korea at the Apex Summit.
• 21:41
  At that point, I think it takes the two of those guys getting together face to face to really get a phase one type of agreement in place. If our math is correct on that, you know, if I look at, if you look at the buying window for China of US soybeans, you know, they're our largest soybean buyer. Let's just say they take 60% historically of our beans or 65, but that window is very compressed between, let's say, mid September and mid January. At this point, even if even if the issue is solved tomorrow, you still have, you're talking probably you've lost September, October, and probably close to half of November. It's gonna take you four to five, maybe six weeks to get a ship, you know, in place and loaded headed to China.
• 22:26
  So you're talking you're out into November at this particular point. So at best, that would leave China maybe buying half of what they would traditionally buy from The US and I'm not saying that that can't happen but China's you know, negotiating stance to this point has been very consistent in the fact that they're willing to buy US ag products only if Trump withdraws the 20% tariffs that that I referred to earlier as a fentanyl tariffs. And in that calculation, as I said, those tariffs are generating 90,000,000,000 in revenue to the US Treasury. The cost of of that of losing China's soybean business for the entire year at a at a full rate is around 9,000,000,000. So, but again, I think the writing is on the wall here that the plan from the administration is to take part of the 90 and use that to replace the nine in some form of an MFP or an emergency ad hoc payment to The US producer.
• 23:22
  You could certainly be wrong about that, Todd, but that's the the tea leaves as I see them currently.
• 23:28
  Todd Gleason: Mike Souzil, you watch these macroeconomics very closely in trade policy as well. How do you view it?
• 23:35
  Mike Zuzolo: I can't add anything better than what Dave just said except that when it comes to a common denominator in this relationship, it really is Russia, and it really is China and Russia coming together. And I think from the very beginning of his campaign in the second term, running for president, president Trump made a very big point about the previous presidents allowing Russia and China to hook up together both trade wise and geopolitically, and that was a huge mistake. And so now the common denominator is Russia, and China is backstopping Russia right now. And when you look at what president Trump is asking Europe to do in terms of throwing a 100% tariffs on China and on India so that they would stop buying Russian oil, you see that Mexico is putting 10 to 50% tariffs on China in their import of goods, especially because of the car situation. I you know, it just doesn't seem like to me that we have politically the reasoning to go and and match up and meet and make a trade deal right now between these two countries because is the trade deal going to give us the ability to negotiate peace between Russia and Ukraine?
• 24:48
  And I just feel like that's kind of a bridge too far that China's not only not willing to do that. They probably don't mind that we have this on our plate right now. So that's kind of how I see it right now, Todd. I I think honestly, after this weekend, I'll I'll be putting out something to the clients and subscribers about maybe the idea that The US China relationship could be going off the rails if we don't see some something come together here very, very soon, and that puts more pressure on the domestic biofuel demand.
• 25:17
  Todd Gleason: Speaking of rails, Mexico still has not gotten a trade agreement, Kurt Kimmel, with The United States. They're on pause as well. I don't recall till when at this point. However, they are trading and purchasing corn. I'm wondering whether that continues to be good, and if you think it will be maintained during the new crop marketing year.
• 25:44
  Curt Kimmel: Yeah, I think it will and I think it's going to stay very strong. Several things to look at, the extra feed usage, feeder cattle and so forth. But two, the unknown or the not talked about feed usage in Mexico is they've got a huge, huge pet, lots of pets to feed, and they see a lot of growth in the pet industry. And they look forward to a lot of consumption of incorporating grain in pet food. So, you know, until Mexico can figure out another way to import green into their country, I I think we're still good at continuing to see Mexico as a buyer as they stepped up today and bought another 110,000 tons of US corn.
• 26:29
  Todd Gleason: Brazil, also, one of those places that they could purchase from Dave Chatterton. As you mentioned, Conab coming out with, some thoughts that they may have record corn and soybean crops again in the coming year. Is that based on extra acreage or hectares, from that nation?
• 26:50
  Dave Chatterton: Yeah, Todd. I mean, planting year over year is up in their eyes 3.7%. So you've got the extra the, you know, the ground there. They're looking for favorable, I think, you know, fertilizer and input situations despite the currency. And you know they're looking at what looks like a you know a non threatening weather pattern at this point.
• 27:08
  Now that can all change. We're a long way from landing that soybean crop. It's just early in the planning process and particularly in Central And Northern Brazil but guys are getting started and if, you know, just to remind folks, I mean, it's it's important not only that it early planning maximizes the soybean yield but it also is the most favorable outcome for the second crop or the safrinha crop on corn which is the important one in terms of production and exports. They're able to get that corn in quicker, get it, you know, get it harvested and get through pollination before the dry season enters and and have the best yield opportunity to do that. You know, plenty of competition coming down the road and I think if you put that in terms of what, you know, Kurt was commenting about and you're going towards Mexico.
• 27:49
  I mean, traditionally, Mexico has dipped their toe in the water with the Brazilian cargo here or there but haven't really found a way to solve that. I don't know that they still have the infrastructure there, but unlike China, Todd, Mexico faces no tariffs in terms of importing South American soybeans. If you look at what happens to The US going to China, Brazil right now is, we'll call it, a dollar, you know, there's a dollar to and 20¢ per bushel premium to US offers on a five to five basis. China continues to take South American beans because a 23 effective 23% tariff on US soybeans is $2.50 a bushel. So, it works and it makes some sense economically.
• 28:34
  Mexico doesn't face that issue. So, for whatever the case might be in terms of whether it's corn or whether it's soybeans, if those values, you know, are at parity or they're at a discount, those numbers will start to be, you know, start to be calculated and there there's always the opportunity for that business. I agree with Kurt. I don't think things are changing in a hurry here, but I think it's definitely a a slow burn in the back pocket that needs to be monitored here.
• 28:57
  Todd Gleason: Okay. Mike Sizzlow, I wanna come to you. There are two class questions, that I want you to take up. We'll get to both of them. But first is, that you kind of think and you've been talking about this for a while, that this market looks a lot like last fall's market, meaning there was a fairly early low and we climbed in through October or thereabouts.
• 29:20
  There was a setback, I think, in September. Can you tell me what you're thinking today?
• 29:24
  Mike Zuzolo: Yeah. I think it's steady as she goes right now, Todd. The next step here is as we close out this week, to to reject filling the gap in the weekly corn chart and it's interesting to note that last year in September after the September crop report we gapped higher. We did not fill that gap until July. It took a whole another ten months for the market to come all the way back down and fill that three ninety four gap in that chart, three ninety four, three ninety five gap from last year.
• 29:55
  And so what my ideal scenario would be is that wheat, crude oil, soybeans, especially with the wetter harvest bias as far as potential to lose some crops in the fields with some extremely heavy rainfall totals being shown on some of the models right now, that these markets would not want to dare try and go back and fill the gaps from where September went off the board and and they reject that lower level like they did last year at at that time and that gave us another couple weeks of up move And by the October 1, had made kind of our harvest or pre harvest high and then the market had to set back some. So that's what my ideal scenario would be. But again, as I said, between the rapid harvest early, this weather setting in the yield comments, I'm hearing the same thing that Curt is hearing. The only thing I would add is that I've got clients near me that are a third done with corn at this stage and their yields are good. And they're almost as good if not as good as last year, which somewhat surprises me but remember, USDA's got Kansas at five.
• 31:03
  4% better than last year. They've still got Illinois at a percent better than last year. Indiana, three and a half percent better than last year and and Ohio almost 10% better than last year. I'm not seeing it right now. And so I'm hoping the trade reacts that way as well and keeps this momentum to the upside going.
• 31:22
  Todd Gleason: Finally, I'll stick with you one last time, Mike, because you wanted to talk about the Federal Reserve just a bit. Maybe Dave or Kurt will want to follow-up about the interest rate drop this week, and the signal that there might be more to come before the end of the year means what to the commodity markets?
• 31:39
  Mike Zuzolo: We don't know yet, but it's it's a concern right now because the reaction since the report came out and the fact that the Fed policy only did a 25 basis point cut, seems to me to be a little bit of a letdown. And going into the Fed, the market, the CME Fed tool that we can all use as far as what the bond markets are pricing in had like a 94% likelihood on Wednesday, a 70% likelihood for October and a 65% likelihood of more cuts of a quarter point in December. And so I would really like to see that dollar to resume its downward move its downward trajectory and not break above a major trend line of resistance that we tested earlier this month. That would disrupt that commodity demand low mindset that I've been keeping in my in my analysis, Todd.
• 32:29
  Todd Gleason: Kurt Kimmel, let's turn our attention to our final word for the day. What do you have to say?
• 32:35
  Curt Kimmel: Well, we'll go off of days 9,000,000,000 of if you give a farmer $1, he'll spend two. So there's $18,000,000,000 $18,000,000,000 coming back into the economy. Then on Mike's corn version there, yeah, the charts look fairly good. Our technical analyst, says we've a hammer bottom in the charts, particularly long term charts with a monthly reversal to the upside. South America is going be real important.
• 33:06
  I believe we're going have a weather market there because they're fairly well sold out and everybody's going to be buying out South America. Then lastly, if we see Chinese premier and Trump get together October 31, is it gonna be a trick or
• 33:20
  Todd Gleason: a treat? We'll find out then, I suppose. Dave Chatterton, your final word for the day?
• 33:25
  Dave Chatterton: Well, let's ask Kurt what the moon phase is gonna be on Halloween, and we'll get the trick or treat settled, you know, settled right here and now. But, you know, good comments from everybody. I I think a couple of different things. One is that, you know, to me, these these yield cuts can be important to the market, but I don't think they're the reason to sustain rally. I think for the market to sustain a rally at this particular point on the future side, you need the yield cuts to come in place, but you also need a trade deal with China or something that creates additional demand.
• 33:53
  When I look at the corn balance sheet and the USDA having already filtered in record demand on just every corn line we have, whether it's feed, whether it's ethanol, whether it's exports. I just don't see a lot of room to go up there. I think if we get the yield decline tied that that that we've been talking about to a degree here, what you're going to find is a situation that because of the additional acres that we found from the June report to where we are here in the September report, it's three and half million additional corn acres kind of win the day over yield decline. So, in other words, you know, if you can take, if you use the USDA's yield, you need about a seven. Three bushel cut per acre from the current USDA yield number just to kind of get back to the zero point of adding those acres into the balance sheet.
• 34:37
  If you take our number which is closer to 180 that we're using in house, you still need a a seven, you know, a bushel type of a yield decline to get there and it's just, you know, it it's a big ask to do that. So, I I think the key here is asking yourself, what is the recipe for sustaining a rally and do we have that on the table and unlike last year where the yield cuts were were taking were a little bit of a surprise. I don't think they are this year. I think people are looking for the USDA to come down on their yield inputs when we get into the subsequent reports here in October, November, and the final. So, we'll we'll see how that goes.
• 35:12
  One quick word on the cash market here. I think commercials are a little bit disappointed in their receipts today than to pick up on a comment that Mike made. I'm gonna have some guys that are done with bean harvest this weekend in Central Illinois. And as you mentioned, you know, he's got guys that are that are moving right along in corn. And every commercial out there on the book, I think, came in with empty bins, saw big carries in the marketplace, and was anxious to to, you know, buy at a very cheap basis.
• 35:36
  And, you know, 35 under the Decis, 70 under the July type of a deal and and, you know, and and and play those carries. I think what they're finding is that because of the farmers reluctance to sell because of the potential for this emergency payment maybe because yields being off a little bit from where they once were, you know, projected to be. Farmers isn't anxious to sell bushels as they they might have been or take them to town and so we've seen some basis pushes which is a little unusual at this point in harvest but don't settle for the posted basis. If you need to make a false sale, don't don't be afraid to go out there and negotiate a little bit and see what see what can happen. It's very variable from market to market, but certainly, the commercials wanna make sure they come out of harvest full in light of the carriers that are in the marketplace.
• 36:18
  Todd Gleason: And finally, your final word, Mike Zuzolo.
• 36:21
  Mike Zuzolo: Yeah. Just real briefly to dovetail what Dave was talking about for what we're dealing with out here with being 80 under in soybeans here in Northeast Kansas and that going all the way to a buck 55 under in North Dakota. I think in certain parts of this corn belt, we really do have to separate the cash from the futures, the basis from the futures. And so if we don't get a trade deal with China and if we curb bean yields, I could see where the futures market would be holding too much of a premium, the basis market being way too wide. So that might be something to think about here in the next week or two and design a marketing plan around that.
• 36:58
  Todd Gleason: Commodity week, of course, is a production of Illinois Public Media. You may listen to the whole of the program anytime you'd like at willag.org, willag.0rg. Our thanks go to our panelists this week, including Dave Chatterton from Strategic Farm Marketing, Kurt Kimmel of agmarket.net, and Mike Suslow with globalcomresearch.com. I'm University of Illinois Extension's Todd Gleeson.