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Apr 17 | Commodity Week · Commodity Week

0:00
Todd Gleason: This is the April 17 edition of Commodity Week.
0:09
announcer: Todd Gleason's services are made available to WILL by University of Illinois Extension.
0:14
Todd Gleason: Well, welcome to commodity week. I am Todd Gleason. Our panelists for the day include Kurt Kimmel. He's with AgMarket.net out of Normal, Illinois. Greg Johnson is here from TGM.
0:24
That's total grain marketing at the elevator owned by FS in Champaign County. Dave Chatterton joins us too from Strategic Farm Marketing in Champaign, Illinois, and from Nutrien Ag Solutions, Eric Snodgrass is here. Commodity Week is a production of Illinois Public Media. Find us online @willag.0rg. Let's begin with you, Eric Snodgrass.
0:46
We've been talking about the weather for the growing regions in The United States, since last, I don't know, October, November with you. You saw some things that suggested to you that it might be an interesting and wet springtime.
1:04
Eric Snodgrass: Were you right? Finally. I mean, it got one thing right. It's it's been really wet. I mean, the Mid South just saw a record start to their precipitation in April.
1:13
It's the wettest it's been on the Ohio Valley in any April we have record for. The Mississippi River at Memphis is up 30 feet from where it was before the April. And now I've got a forecast where parts of Arkansas, Missouri, Kansas, really into Oklahoma, and parts of Texas like the Red River Valley, I pick up another three to eight inches of rain in the next seven to eight days anyway. So this was anticipated that certain pockets were gonna be getting some pretty wet conditions into spring, and it's really gonna tighten things up. And there were some early estimates that the flooding we saw at the April through the Mid South, totaled, like, $80,000,000,000 in economic loss.
1:46
So this was this was huge. Now you've got folks though where we are here in Central Illinois where we're looking at a wet Easter weekend. We're kinda like, alright. Let's get a little more moisture on the ground, and then we'll get after this with the warmer temperatures following. You've got a lot of folks in Iowa that are pretty happy about some of the moisture coming in, plus their soil temps are pretty good.
2:03
And so it's kind of a mixed bag of emotions when you think about this upcoming forecast. Some folks need to go back and keep building their arc, and others are pretty excited to be recovering some some soil moisture ahead of this. But I think the big thing that we look at right now is it's mid April. Right? I mean, we're where we are all sitting here talking, we still have climatologically about 45% of our frost risks should still be ahead of us.
2:26
In other words, our average last frost date is tomorrow. But, the thing to think about is I don't have a forecast right now that's bringing in cold, which means when windows do open, folks are gonna go after this pretty quickly. Just don't know if they're gonna be planting in near ideal conditions through parts of the country that are too wet. So this is it. This is the time to be thinking about way this crop gets established, and there are some good and there's some bad.
2:48
And then there's always something in the future we worry about. So we we definitely need to talk about that risk as well.
2:54
Todd Gleason: Well, tell me about it. Is there anything new or newsworthy about the future? And you have been saying that it could be pretty hot and dry this summer, at least dry.
3:03
Eric Snodgrass: Yeah. I mean, there's just some historical precedents, Todd. And and then on top of that, we've put together a list of years that we're concerned about. So those years are '96 and '99. They're they're o six and o eight.
3:15
They're, well, honestly, '11, '12, and '17. Now what's interesting is outside of November, all those other years, drought wasn't here in Illinois where we were. We had some drier conditions, but it was in the Western Corn Belt or in the Northwest Corn Belt up in the Northern Plains, especially like in the years like o six. That's a good analog, I think, to this year. But, concern is that most of those years had tendencies on the hotter and drier side of things.
3:40
Now we can grow a good crop in a little bit of drought. It's just when you combine it with the heat, and I think this is gonna be a hotter summer. So it's interesting to say that we've got storms and we've got wet weather now, but it's spring. That's pretty climatologically consistent. We just think that there are some indicators going later into the season based off those analogs were drier.
3:58
Then we just got support from the new weather forecast models from the Europeans, the models we run-in The United States, and then just today, I sent this to you via text. Right? We just saw that the new climate prediction center report is just hammering the Western Corn Belt with dry conditions in the middle of summer. And that's now the gosh. This would be the fourth forecast in a row they've done that.
4:17
So that's four months of consistency. And to be honest, the dividing line seems to be the Mississippi River. So we look at that and just wonder, are are we gonna be looking at some sort of supply side shock that gets these markets really going after something and or or is it gonna be giving us a narrative that's gonna be told and the market's gonna listen to until it's not. Right? It's one of those things too where I've seen markets move on fear and nothing else.
4:41
Right? And I've never put a dime in the market, so I get to be this outside observer. But it's interesting how it is. Right? And and all of a sudden, we just see, the weather collapse and give us something favorable and, all of a sudden loses every bit that it's gained.
4:54
So, Todd, I hate saying that, but that's where we are. It's April 17. And to be honest with you, we need to do this again on June 17 when we really have a strong indication of whether or not that summer heat and drought's there.
5:04
Todd Gleason: We'll schedule to schedule you to be with us. That time, Dave Chatterton, might you have a question for Eric related to the weather here or anywhere else across the planet?
5:15
Dave Chatterton: Across the planet. Well, I don't I don't think I really have a question, but I wanna commend Eric for a, you know, carrying the torch and doing it early and and coming out with an opinion because it is a value. It's not you know, we know that it can't be predicted with accuracy of a %, but, you know, giving us something to look at and look forward to and and and work around. And so far to this point, I think the picture that he's painting, Todd, is one that really should get the attention of the market in terms of we're we're sitting on stocks levels here that are adequate, but we can't afford much of an upset really anywhere in the world. And you're in a situation right now where we've kind of, in our part of the world and in a lot of other parts of the Corn Belt, lost that kind of early mid April planting window.
5:54
We're looking at a pretty wet week next week. I've been fairly impressed with the, I guess, the patience of the farmer to this point in terms of planting corn in our part of the world. But when you look at the, let's say, Mid South, you've got, you know, this acreage increase that we're talking about in corn that we need. We need those acres, and we also need a trend or something close to yield, if not above. And we're working into a situation where we're starting to compress the odds of that by a late planting date and by suboptimal planting conditions.
6:21
Take, you know, Kentucky, Tennessee, Arkansas, Mississippi. Each of those states supposedly, according to USDA, adding over 200,000 acres of corn this year, you know, 300,000 in Illinois, and a lot of those, you know, two and a half or 2,600,000 of this additional three and a half to four and a half million acres is coming from the Western Corn Belt. And you just heard Eric talk about, you know, the potential for dryness in those areas. So I think it's something we need to be paying attention to in terms of how we approach marketing, and I think it's a big part of the fabric of why the the grain market has I I wanna say held up or performed as well as it has relative to what we've seen since the the tariff, you know, inauguration day of Trump on the second.
7:01
Eric Snodgrass: So let me ask you this question then. Let's play devil's advocate and see I'm wrong. So Western Corn Belt does not slide into a hot dry summer. We still have the issues of probably mudding in a crop around the Ohio Valley given how wet it's been and the storms that are coming. But let's say that we hit let's say we hit a half bushel above projected USDA trends.
7:22
You look at today's prices. What what do you think that could do by the time we get to August and September to those prices if we do instead get great weather? And I'm completely wrong because I'm more than prepared to be wrong. I'm just I'm curious.
7:33
Todd Gleason: Well, he's asking that of of you, Dave, but I'm gonna make Greg Johnson answer that question, and see what he says. So if we're at one eighty one and a half and we plant 95.3. Three million acres. Yep. What kind of numbers do you come out with?
7:52
Greg Johnson: 95,300,000 acres. We harvest 91 and a half percent, so that's 86.7 on a one eighty one crop. That's a 15,780,000,000 bushel corn crop. Demand is fifteen two. So we add 600,000,000 bushels to the carryout.
8:07
Carry out's 1.4. That gets you right at 2,000,000,000 bushels. 2,000,000,000 bushel, carryout is probably $4 December corn. So that's the downside. Dollars 5 is probably the upside unless it's a major, major drought.
8:20
So use those parameters, I think, 4 to $5 when we're at 4.6 something today. So we're in the upper half, but we've got the whole growing season ahead of us. So hopefully we can get a little bit better opportunity to get something sold a little bit better than this. But keep in mind that if we do have a good crop, we could be going down closer to $4.
8:38
Todd Gleason: You also have a question for Eric?
8:39
Greg Johnson: Yeah. I wanted to follow-up, Eric, on your comment about we can grow a good crop with a sub subnormal moisture as long as it's not accompanied by heat. Right. I remember 02/2012 was hot and dry, and, of course, that was the have have there been any other years since, where we've had hot and dry between 02/2012 and and recent or even before? When when when's the last time?
9:01
Because last year, we were dry, but it wasn't hot. And so we had a good crop. The year before, we were a little bit below normal on moisture, but we had not heat. So we've had good crops. I'm just wondering when's the last time we had a hot and dry year.
9:16
Eric Snodgrass: Yeah. I mean, so you brought up 2023. Right? This was fifty five days of no rain in spring, but it didn't get hot because Canada was burning, and we had a layer of smoke in the atmosphere, and it was five degrees cooler than average because of that smoke. So then all of a sudden, it starts raining late June through July, and we hit incredible yields in Illinois, and the crop just waited on us.
9:34
And that's one of the amazing things about modern seed tech. Alright. So when was the last time let's say Illinois really had a problem, and you have to go pretty far back. I would tell you that if I'm thinking about the Corn Belt, I remember 2021 was problematic for parts of the Western Corn Belt. 20 17 was problematic for the Western Corn Belt.
9:53
20 0 8 and twenty o six, the Plains took on tremendous heat, but Illinois had ridge riding thunderstorms. And so we we when they took it on, we got the benefit. And what happens in those years is, I hate to say it because I know not everybody listens just from Illinois, but we can carry the country. If if we if if Illinois and Iowa hit, then sometimes, unfortunately, the markets will ignore problems happening in these places where you just mentioned there's gonna be acreage added. And and I think that's that is a real possibility this year that Illinois could ruin this good good rally because we've we're doing okay.
10:28
You know? And and this everywhere I travel, by the way, people hate us. They just don't like Illinois, and I get it. But, you know, I watched a guy dig a basement in a neighborhood over Muhammad lately. 25 feet down, still wasn't in clay.
10:42
And I mean, so I get it. We we've we've got soil in spades, and that what's what protects us and prevents us from seeing these major problems. But your question is is good. I'll go back and look more data and send it to you and Todd on when was the last time we really got hit with real hot summer conditions. I'll tell you this.
10:57
For the last fifty years, maximum temperature trend in Illinois is flat. We're not getting hotter during the day during summer here.
11:05
Todd Gleason: Kurt Kimmel, you have a question that you'd like to ask, Eric?
11:08
Curt Kimmel: Yeah. Kind of a twofold. You mentioned before you'd know or be more confident on June 10, or you still dialed into that date. And secondly, to go with that, are we looking at omega high pressure anchor, a ridge rider, or something that kinda up Yeah. Mhmm.
11:22
Dallas?
11:24
Eric Snodgrass: Yeah. So so why June 10? Or why that week of, like, June 10 to June 7? So first of all, from your perspective, every time I've seen a weather based market rally, it almost always happens in the June. And that's because that's when guys like me can see out there to the beginning of pollination.
11:41
We either see a problem or we won't see a problem, and we'll know up to that point how much stress we've accumulated. Alright. What happens in June? During the month of May into June, that thirty day stretch, mid May to mid June, what we're watching for is the atmosphere to lose momentum, lose its speed, give it up to somewhere else. Maybe it's the Southern Hemisphere, maybe it's the Equator, but it loses its pace across the North Pacific.
12:04
When it does that, we allow cold water to upwell in the Gulf Of Alaska. So if I start seeing cold water on the map in the Gulf Of Alaska, that's actually symptomatic that the atmosphere is not pushing warm water over to that spot, which means it slowed down. And if it slowed down, guess what it wants to do over the West? Dip. And if it dips there, it bumps up into what you mentioned, a big omega block that's anchored somewhere between Montana and Minnesota.
12:28
And if it's in Montana, we're not there's no problem for us. We're gonna get ridge riding storms. It's gonna be we'll worry about wind. We'll wind about worry about hail. If it's over Minnesota, well, that's eighty, eighty three, 80 eight, and 12.
12:42
And so those are the ones. So it's it's one of those two m states. Montana would be better for us in Illinois. Minnesota is the type that ruins Iowa, Illinois, Wisconsin, Minnesota crop, and that's what we have to worry about. But you got it's it's gonna be the symptom will show up by mid June right along the Gulf Of Alaska, and that'll tell me if we've lost momentum or not, and we're not gonna get it back anytime soon.
13:03
That's the that's the thing to watch.
13:05
Todd Gleason: You started the conversation talking about a graphic that you sent to me today from Noah. I do have a question about that. Same question I asked you, in text was that this graphic, centers the, deepest part of dry conditions in the three month period of July, August, September, right, on Iowa. However, it is a one inch deficit
13:28
Eric Snodgrass: Yeah.
13:29
Todd Gleason: In in precipitation for that three month period, which isn't a lot. So the question is, why does it worry you, and does it change very much the white areas, generally speaking, which are neutral or fifty fifty dry, fifty fifty normal? Yeah. Does it change it to what kind of percentage that this is going to be above average dry?
13:50
Eric Snodgrass: Yeah. So whenever we look at any of these maps, I don't care who they come from. If it's from the Europeans or from the models that we run-in The United States, ignore the value of the anomaly on the seasonal forecast. It's it it it is useless. What we do instead is we look for patterns.
14:06
So the pattern is dry along the Mississippi and West, and that hits Northern Missouri, Iowa, Minnesota. It looks as though Illinois, we're in this kind of fifty fifty thing. So this comes down to does the ridge set up in Minnesota, or is it over Central Dakotas, or is it over Montana? And no one knows that. So that's that spread that you see there.
14:27
Probability wise in that really driest area that's on the map, again, Missouri, Iowa, Minnesota, the the the risk is at sixty percent still. Everything points to sixty percent climatological risk of that going into drier and drier conditions by July, August, and September. And back to your question a moment ago, we've had drought bookend our our our seasons for the past three years. There was a spring drought, then we had the fall droughts, but we've always gotten these summer thunderstorms. It just looks like this year, we have the middle season problem, and we've not had that for a while.
15:00
Greg Johnson: It seems like it's been windier this year than in in the past. Am I just imagining that? And if if it is windier, is there any correlation or any reason and anything that ties that to weather growing conditions in the this summer?
15:15
Eric Snodgrass: Yeah. That's a really good question. Let me answer the second part to that first. Do we have a correlation between a windy spring and a hot and dryer or a cool and wet summer? There's not a correlation.
15:25
That's good to know. What's been driving the very windy spring this year, which by the way, NOAA released a study that found that this spring, March through mid April, is the windiest spring in fifty years. Fifty years. And what's really driving that was that we did have really good snowpack in the West. We lingered we had lingering snowpack across the Canadian Prairie longer, but Texas got hot early.
15:46
I you've seen the big dust storms coming out of Texas. It's that thermal contrast north south that's set up twice in the month or three times in the month of March and then once in the April that has just driven these incredible wind systems. So it's always about thermal contrast to drive a wind, and we've had it in spades this spring. As soon as we get to the Canadian Prairie warming up, it's all gonna be done, and that'll happen in June. So we could expect to see some more strong winds going forward.
16:11
Todd Gleason: Eric, thank you so much. I know you have another appointment to get to. Thank you for coming to us. I'll give, the South Paul social here in Mohammad a big thanks too. We appreciate you taking the time with us, and I know you'll be setting off now.
16:24
Let's continue this conversation here at South Paul Social with Kurt Kimmel. So you've been listening to Eric talk about the weather, but we need to put that into a marketing plan. We heard some of the numbers from Greg. Yes. It's related to the supply and demand tables.
16:40
USDA using a one eighty one. You asked about, I think, a half bushel better. Somebody did. I'm wondering, though, because one eighty one is not trend. Trend is one eighty two and a half if I remember correctly, much higher than that.
16:58
If we are there or say we're at one seventy seven, how much volatility on either end of those?
17:04
Curt Kimmel: A lot, I suspect. But how do farmers protect themselves in front of those kinds of different outcomes? Yeah. The Ag Market team, we're 100% sold on old crop corn. It's all gone, and we're going to we've already replaced 50% with some July options.
17:23
We're we're gonna add another 50% with some additional July options, call options. So we're all in. We're 100% covered on all of our cash sales, expecting some volatility to pick up in through here. We feel it's much better to buy some options anywhere from 7 to 15 cents instead of waiting till later on and buying options when they're $30.40 cents. We're buying it here versus 50¢ higher.
17:48
So we're out of cash grain. We're getting heavily long, some call options in through here, expecting some volatility to pick up. But if you still have cash grain, don't read between the lines here and hang on. You still gotta move cash grain. Cause a lot of guys are saying, well, I'm gonna see if you're right or not.
18:06
Well, that's fine. But you still use some strength in here to get some cash still.
18:11
Todd Gleason: Yeah. So I was talking with the producer yesterday and thinking about the grain that they had left, maybe a production loan that they have for the coming year, which they could pay off with the old crop if they wanted. They so they're gathering interest both on the grain in the bin and paying interest to the banker. That seemed like an option that wasn't particularly good, though they've hung on for a long time. So I'm wondering what you're thinking, as a grain elevator operator and then somebody who helps to advise producers in these situations what they ought to do.
18:45
Let's stay with old crop for the moment and and grain they might have.
18:48
Greg Johnson: Okay. Our farmers are basically 80% sold, the ones I talked to. There's some that are a little bit more and some that are a lot less, but in general, we're 80 sold, I would say. And most farmers, if they're 80% sold, they feel comfortable enough that with all the uncertainty with the weather, with the good demand that we've seen export wise, we're 200,000,000 bushels ahead of pace from what the USDA is using for export projections. So there's a lot of possible friendly things out there.
19:14
They're content to hold on. And I tell them if you're going to hold on, you're probably going have to wait till June or July because it's probably going to take a weather problem to get this. And it's probably not going to be a planning delay that's going to get it. It's probably going to be the hot and dry weather this summer if that happens. So we've got we've got April and May to get through yet.
19:31
So if you're going to hold on to old crop corn, just be prepared to hold on to it for another two months because the rally probably, if it's going to come, isn't going to come until then.
19:39
Todd Gleason: Any different advice from you, Dave? And if not, you can move on to the supply and demand table looking into the May World Ag supply and demand estimates, and how those numbers from your perspective might tally.
19:52
Dave Chatterton: Yeah, Todd. I mean, I think just maybe just
19:53
Eric Snodgrass: to twist it just a
19:54
Dave Chatterton: little bit. Think, you know, the argument or the the kind of the the way it's framed up, I think these two guys did a good job of that is old crop is really not the concern right now. Most farmers have marketed a high percentage of their old crop. It may not be a %. It it may be less than 80.
20:09
You know? Who knows? But at this point, we've got a market that, you know, has a little bit of question about weather and planning pace. We have you know, we we we're in a position where if you look at the, let's say, the ending stocks of the the exporters of corn around the world, there's four primary exporters of The US, Brazil, Argentina, Ukraine, that stock to use ratio figure is at a very low historical mark. And what that tells us is we can't afford to lose a lot of corn anywhere in you know, around the world.
20:37
Right now, rainy crop from Brazil is developing rather well, you know, it still has a ways to go. We have a lot of questions about what happens in The US here when we get this crop planted. It's a scenario where we bought ourselves a little bit of time, and I think we've seen that reflected in the price action here of late of the the, you know, the trouble and the yanks that we've seen in a lot of the outside markets, the the equities, a lot of the other commodity markets where where grains have held up relatively well. It doesn't mean that we're outright, you know, overtly bullish by any means by the supply and demand fundamentals, but they can change very quickly. So I think that translates into when we're looking at new crop, you know, do we have a little bit of time here to watch and see with how things develop?
21:16
And I think the answer to that is yes. I think we're well supported, you know, at this particular point from a marketing perspective. Does that mean you should be doing nothing? Certainly not. It means you better have offers ready to go and and do the things that are out there.
21:29
One of the things that we haven't talked about that could affect markets, of course, is the geopolitical element. I'll call it the Trump effect just for a lack of a better word in these trade deals and tariff policies. And we we've taken the negative side of that. I think the market has mostly digested that to this point. Now I don't know what the next headline is going to be, but I do know that there's a bad side and a good side to that scenario.
21:49
So far, we've been taking it in the chin and and had the bad side. But a week from now, a month from now, we might get that headline that a a trade deal gets cut between The US and China or The US and Europe or different trading partners out there that leads to that, you know, renewed buying, if you will. So I think it's a very interesting marketplace, and have to be very disciplined, know your costs. And and the idea here is when we have profitability on the table, let's take a look at locking that up. Let's use some options to keep our upside open if we need to or or different things.
22:16
Keep the flexibility, but but pay attention and have your offers working.
22:19
Todd Gleason: It does concern me that USDA in its ag forum numbers using that one eighty one and a 94,000,000 acre make acres of corn as opposed to a one eighty one and a 95,300,000 acre corn crop. And also only including policies that were in place at that point, so no tariffs. There still aren't really a lot of those tariffs on things going out of the country except from China. And a $4.20 season's average cash price for twenty twenty five, twenty six. That's a fairly low number.
23:01
It's below where we are now, and it just concerns me that USDA has that set of numbers. They knew quite a bit about the world world supply at that time, except for the safrinha crop, which is apparently going to be on track with what USDA has said so far. They have not changed anything. So how how do you put that into context with what producers really ought to be thinking about and where where they should? Should they be neutral?
23:33
It's a normal year. Should I be neutral leaning to the bullish side? Just a bull, a bear. I I don't know how they should lean.
23:43
Greg Johnson: Well, Dave hit it on the head, I think, when he said the all the uncertainty has bought us some time. So the market, the corn market especially, is hanging in there very well. And so farmers have not had to be as aggressive on their sales because, quite frankly, the market hasn't gone down. We're up for the week. We're up for the month.
23:59
We're up for the year so far. Not a lot, but we really haven't lost anything, even staring at planting right around the corner. But I would remind people that while we're 80% sold on old crop corn and beans, where farmers in general are less than 10% sold on new crop corn and beans. Those sales will have to come at some point in time. Farmers seem to be of the opinion that they can wait until June, July and hope to get that rally and they hope they sell it higher before it goes lower.
24:27
And that's, you know, there's certainly reason to believe that that's the case. But my point is, as I said before, if everything goes well, like you said, a one eighty one average on the 95,300,000 acres, assuming all that falls into place, it probably won't. But even if we shave a little bit off, you're still looking at a 2,000,000,000 bushel carryout or something close to that, and that's $4 corn. And so don't pass up $4.65 4 point 7 5 dollars out of hand. I mean, you know, maybe it goes to $5 but maybe it goes to $5 and then if you don't sell enough, it goes to $4 So you have to have parameters in mind.
25:01
And, sell I always like to say if you sell in the upper half of the range, you'll be farming again next year.
25:06
Curt Kimmel: Yeah. As a producer, you've we've always got downside risk. There's no you know, you always gotta keep that in mind, it gets kind of messed up as you go into the growing season when you start to see weather and other things kick in. So from ag market team, we're wanting to put everybody in the best position to take advantage of the ups and the downs. A year ago, the new crop balance sheet showed ending stocks 2.1.
25:27
Now we're down to talking 1.3. So anything can happen in through here. Even to add a little fuel to the fire with the equities going down, there could be a flow of money from paper assets to hard assets. So the volatility is going to increase substantially as we move forward here.
25:44
Todd Gleason: We haven't talked much about soybeans yet. What's your view on soybeans looking into the new crop?
25:50
Curt Kimmel: Well, what's China gonna do here, Hal? I can be positive corn and little concerned about beans, but the beans, we we've got less acres, and it's gonna come come come down to to weather. The ag market team strategy on the beans, not as aggressive on the corn, but we'd be covering some hedges here on some weakness with the idea we can reestablish at some higher levels.
26:15
Dave Chatterton: Yeah, Todd. I'm gonna jump back to corn just a second. And I'll do the math a little bit differently just to kinda give a, hopefully, a holistic perspective. But let's say we get the 95,000,000 acres, but we're increasing two and a half million acres in the Western Corn Belt where it could be dry and in some soils that aren't the most tolerant of that. We're increasing in the Mid South and the Delta, again, same story.
26:36
And then we're increasing to a lot lesser degree or a lot smaller degree percentage wise in the Eastern Corn Belt where we expect the weather to be good. So you take that yield from one eighty one to one seventy eight, one 70 seven. One 70 seven is two and a half bushels below where we were last year with a good yield. Well, that takes, you know, at at a harvested rate of 92,500,000 acres, you know, you're taking roughly 400,000,000, five hundred million off the balance sheet right there, and you're right back to where we start this year, one five, one six, one four. And so that that's the other side of the the situation.
27:11
But that, I'm not saying that happens.
27:12
Todd Gleason: But Is is it really the other side of the situation? What's the cash price today, by the way? What what's what's cash old crop cash price?
27:20
Greg Johnson: $4.70, 4 60 5, 4 70. Right.
27:23
Todd Gleason: So instead of $4.20 or 50¢ higher. Right?
27:26
Dave Chatterton: Yeah. But I mean, like I said, that's the other side of the situation that can you know, where do we go with that yield and what does it become? And are we really going to build a carryout year over year? I think that's the question for the market, Todd. Beans, if you look at that situation, 84,000,000 acres, again, doesn't take much, you know, on that type of a yield scenario or that type of an acreage base, excuse me, doesn't take a big problem.
27:47
You're already pushing your carryout levels to instead of growing year over year to basically, you know, depending on your demand scenario, what you think of China, where you're at with exports, different things, you know, you're basically, you know, not growing carryout year over year in that situation. It doesn't mean, again, that we're overtly bullish, but a market needs a story. And in a market where yields are coming down and we're getting to a point, we all have seen this where the compression level or the multiplication level on the risk to the downside for those yield and production produces an outsized price, you know, risk versus, hey. We're getting good. We're getting better and better and better and better.
28:23
So, again, I don't want to come off as as wildly bullish because I'm not. I just think it's a situation where you have to consider both sides of this fence and you want to have your your house in order in terms of of how you're marketing and and approaching the market.
28:35
Greg Johnson: I agree with a lot of those premises that Dave said. The acres, the extra corn acres are going to come from suboptimal producing areas. But here's the thing that I've argued and argued and argued with, and I find myself standing in front of a freight train. The USDA is gonna come out with one eighty two, and I'm gonna come out with one seventy eight, one 70 nine. And I say I can go up three bushels an acre or down three bushels an acre.
28:58
The government cannot go up. They can only go down. And when will they go down? Not until the the fall. So the traders look at that number that's printed by the government at one eighty two in April, May, June, July, August, and and that January is just too big of a number.
29:16
So unless it is a full blown drought this summer, the traders look at that 182 and say, Oh, 95,000,000 acres at 182. And we all know it's going to be 179 or less, but those three bushels, four bushels don't come off until later in the growing season. And by then, we're past the pollination scare. And so then the the three bushel reduction in yield doesn't do as much price work for us as it would if they do it right now.
29:41
Todd Gleason: We better come back and do the soybeans. What what are your thoughts on on that marketplace?
29:48
Dave Chatterton: Well, I think that three bushel yield decline in, you know, November to January of this year had a pretty good effect. But, you know, soybeans, again, I mean, we don't have the sizzle that we do in corn. The global situation is not nearly as tight. We just came off of a record production in South America. We're gonna see them expand acres again this year.
30:04
The real is getting a little stronger, but in essence, you know, China is invested in South America. The whole tariff thing, Todd, I guess, I don't know what to make of it, but I know that to this point, it hasn't changed a lot of what China has done. They will they will shy away from US beans until they need them in the fall, until South American beans are running out and our harvest comes in and those values are cheaper. Whether or not we can get a trade deal by then, I I don't know. Again, I think that could break both ways.
30:30
You know, whether it's reinstituting the MFP or, you know, phase one trade deal and and making that those bushels up or whether it's a new, you know, phase one b, we'll have to see. But I think you have to be more defensive on the soybeans. We're in a position right now where we're not in profitable situation in beans. So if we get into that $10.75, $11 resistance area, I think you need to be paying a lot of attention, being pretty sharp with your numbers, and be ready to to to be more aggressive on marketing new crop soybeans versus new crop corn.
30:59
Todd Gleason: And from you on beans?
31:00
Greg Johnson: Yeah. Just similarly to I had a range of 4 to $5 on corn. I have a range of 9 to $11 on beans, and here we are around $10.50. So you you've I've talked to you before, Todd. I I'm 40% sold on beans already, and I know it may not be profitable, but I'm not sure we're going to get many opportunities to get much better than that.
31:19
So hopefully we get to this $10.75 to $11 sometime during the summer. You know, the government could mandate more biodiesel usage. You know, we could get this trade deal. So there's some government related things that could get there. But, we'll probably plant a few more half million more acres to a million more acres of beans assuming a normal yield.
31:36
China's not happy with us, so they're going to buy as many beans as they can from South America. So for all those reasons, I want to be a little bit more aggressive on soybean sales than I do on corn.
31:45
Todd Gleason: And let's get a final word now from each of you. Kurt Kimmel, we'll start with you.
31:50
Curt Kimmel: I talked to our buddy Zwicker. He said giddy up, so that's my story, and I'm sticking to it.
31:56
Todd Gleason: Well, we'll we'll check with Dan later in the year and see if that's changed, but we're gonna go with giddy up today. Dave Chatterton, your final word.
32:03
Dave Chatterton: Well, Curt, I don't know what moon phase we're in, and I'm not even sure I know what giddy up means. And and like I said, I I don't wanna just clarify. I don't wanna come off as bullish. I I do wanna come off as optimistic. We've been through kind of a tough period here in Cranes and gotten beat up through most of last summer and fall.
32:19
We kinda came out of that funk in the winter here a little bit, and we've been oscillating back and forth here. And so the idea is that I I think we you know, there are some things that point to an opportunity ahead, whether it's the seasonals, whether it's the weather and the combination of those two, but you have to be ready to take advantage of that. And, you know, this isn't a year where you should be looking to pad your pocket and, hey, for really strong margins. This is a year where, hey, we're we're not not living to farm again next year, but we have to set our sights on something more modest and and just be ready to act and know what those prices mean to you and and where you wanna be in your marketing plan.
32:51
Todd Gleason: And Greg?
32:52
Greg Johnson: I think there's two unknowns in the soybean market. Both of those are government related. That biodiesel mandate, we haven't seen anything. The other thing related to that is the Section three zero one port tariffs, which could really add a cost to shipping grain out of The US. But on the flip side, we could we could get a trade deal done with China too, as well as with some of our other trading partners.
33:14
So there's so many unknowns with soybeans that are government related that it's almost impossible to outguess that until it happens. And by the time it's announced, it's almost too late to react. So that's why I like to be a little bit more aggressive on soybean sales. We're not gonna make money on soybeans this year. Let's make our money in corn and then just try to break even or lose as little lease as possible in the soybean pit.
33:37
Todd Gleason: The Trump administration, of course, had proposed pork tariffs earlier in the year. They have not imposed them. They brought them back for, some more consideration. North Dakota State University had done some work suggesting that the pork tariffs would, drop basis equally, roughly speaking, for corn, soybeans, and wheat by 40 to 60¢ a bushel. You've been listening to commodity week from Illinois public media.
34:02
Our thanks go to our panelists, including Greg Johnson, Dave Chatterton, Kurt Kimmel, and Eric Snodgrass on University of Illinois Extensions, Todd Gleeson.