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Jan 08 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the January 8 edition of Commodity Week. Todd Gleason's services are made available to WILL by University of Illinois Extension. Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Naomi Bloom.
• 0:19
  She's at Total Farm Marketing. That's totalfarmmarketing.com online in West Bend, Wisconsin. Ellen Dearden is with AgReview out of Morton, Illinois. Chuck Shelby joins us from Risk Management Commodities, a division of Zaner Ag. He is in Lafayette, Indiana.
• 0:36
  Good afternoon to you all. Thanks so much for being with us. Let's turn our attention to the items that maybe we should discuss for the day. I think, Chuck, I'll start with you. What's on your list?
• 0:47
  Chuck Shelby: Well, we're beginning a new year here, and, I was talking to some farmers today is what's the mixture of acres gonna be for '26? Are beans going to get the attention? Are we going to have a good enough price there? So just looking ahead what we're going to plant next year.
• 1:04
  Todd Gleason: Ellen Dearden from AgriView, on your mind?
• 1:06
  Ellen Dearden: I sure have had a lot of calls in this last week about old crop corn, settling old crop corn, and my guess is that the farmer has half his old crop corn yet to move.
• 1:20
  Todd Gleason: And finally, Naomi Bloom with Total Farm Marketing.
• 1:23
  Naomi Blohm: And I would like to talk about new crop corn and the value that it's at now versus where it was a year ago. And also keeping an eye on the potential supreme court announcement for Friday, we might find out if these tariffs are legal or illegal.
• 1:36
  Todd Gleason: Well, let's take that up first because by the time this airs on WILL and many of the radio stations that carry our program or when people hear it on the podcast, that decision may have been delivered. I think it's due if it actually comes, and these are only opinions. It's it's not necessary that this will show up. But if it does come, it'll come on Friday morning. What do we think, might be the results, Naomi Blohm, if the Supreme Court says that the tariffs are not legal?
• 2:09
  And if they do say that they are legal, how much of a difference does it make?
• 2:13
  Naomi Blohm: Well, I would say if it's, deemed legal, then we kind of continue on as is for the moment. And then it'll be interesting to see how China comes into play because I feel like China has been dragging their feet with some of their purchases regarding US beans, waiting to see if this tariff announcement was going to be legal or not. Now, if it is deemed illegal, then I don't know what is going to transpire because it affects all the commodity markets and outside markets. And we might just see a lot of trader jitters or position squaring heading into the weekend. So be ready for anything that comes from it.
• 2:46
  But to your point, right, the Supreme Court may just come out with thoughts and feelings and and tell us, you know, just kind of an update on things but may not officially announce a decision. So you just gotta be ready for anything and, again, how that might affect outside markets and then trickle down into US ag as well.
• 3:04
  Todd Gleason: If there is a decision that's rendered and it, is posted as illegal. I'm wondering if that makes a difference, Chuck Shelby, on Monday morning, at 11AM central time when USDA releases the world agricultural supply and demand estimates. It does always use policies that are in place at the time of the release, so it could change things.
• 3:29
  Chuck Shelby: Yeah. You talk about some surprises that always happen in USDA reports. That's one that could skew the information of the day. But like most things that happen anymore, especially in reports, we see an initial reaction and the market kind of evaluates the information. And I think eventually, you know, no matter what they say, the report is gonna be important going forward, especially like, we talked about corn.
• 3:57
  Todd Gleason: So at this point, if you've not looked yet to see whether US Supreme Court has released something as it's related to tariffs, probably ought to take a look and to think about that as it's related to what might happen on Monday or what's happening in the Friday trade from the CME Group in Chicago. Let's move on now. We'll begin with old crop corn sales. You mentioned, Ellen Dearden, that your thought was that around 50% of the corn was yet to be sold by producers. I'm wondering whether that is more or less than normal at this time of year and if that makes much of a difference, and then what you've been telling producers as they call.
• 4:40
  Ellen Dearden: I believe it is there is more corn still in storage both at home and in commercial storage at this time of year compared to normal. In, Central Illinois anyway, typically move a lot of corn in January, February, March timeframe. I would say there were some Jan sales made. Those may all be delivered in the next week with this, rather good weather that we've had and there's nothing booked for February, March, and I think that's problematic. I think mister Farmer is still looking that last year we rallied during the month of February and, thinking that maybe that will happen again.
• 5:25
  You know, we all have pretty short memories.
• 5:28
  Todd Gleason: And you don't believe that's the case?
• 5:30
  Ellen Dearden: I think that it's it's illogical to see much upside. Well, probably much downside in the corn. They're so locked into a narrow trading range. You know, if we would see some kind of new information out on Monday from USDA, maybe we'd see a pop but I don't believe that even an upside breakout above this $4.51 level will on the March will take us very far.
• 6:00
  Todd Gleason: Naomi, can you plumb that narrow trading range? I think you and I talked about that a bit, Ma, during your closing market report appearance on Tuesday of this week and what, the charts look like at this time.
• 6:12
  Naomi Blohm: Yeah. So building on that March corn contract has been in about a a two and a half month sideways trading pattern where, in general, the March contract has had a hard time getting above $4.50, where $4.35 seems to be pretty solid support. So the biggest thing I want to have people think about and look at is that there's two different chart formations happening on this chart, actually potentially three. So you have a pennant flag formation where we have had the uptrend channel line from August hold as support and you have the downward channel line from a year ago holding as resistance. It's a sideways pen and flag.
• 6:51
  And when you get into that narrow point, once the market breaks out a particular direction, you can kind of get a feel for how much the directional move would be based on the wide end of the pen and flag. It's pointing to about potentially 40¢ for a potential move. Now we don't know if the move is higher or lower. That's going to depend on the actual news that comes from the USDA on Monday. We also have an potential upside down head and shoulders formation that if we get friendly news, points to a 40¢ rally.
• 7:21
  But again, we need the friendly news from the USDA to make that happen. Then we have the two and a half month sideways trading range, which would point to more of a short term $0.15 breakout higher or lower. But the longer market trades in a sideways pattern, the bigger the breakout is going to be once the news transpires. So this report on Monday, it is going to set the cornerstone for prices going into the new year. It is our fundamental setup.
• 7:49
  Then farmers, of course, regarding cash sales, old crop, new crop, we have to focus on that. That would also then of course lead into the acreage conversation for the springtime and where prices are going to be. So we're gonna see some, I think, pretty big fireworks next week, depending on whatever this report comes out and says.
• 8:10
  Todd Gleason: Ellen Deirden, I wanna give you an opportunity to talk about some of these charts. I know you follow that fairly closely as well. And then, Chuck, I'll I'll turn to you at that point to talk about acreage. But this net this report set of reports, all four of them, the grain stocks, crop production, WASDE, and the wheat acreage figures are really important for setting the tone for the first three months of the year. When you look at those charts, what are they telling you, from, the perspective that you're looking at them from Ellen?
• 8:40
  Ellen Dearden: I can see Naomi's upside bias, would say, particularly on that tenant formation. It just seems to me that we have a hard time moving in one direction or another. We've got to get some little cycle lows put in here in the next month's time before I could get a little more friendly.
• 9:05
  Todd Gleason: Okay. Now let's turn to the acreage figures, a battle that may or may not need to ensue. I think most are thinking what that there should be a lot more soybean acres this year than there were last. Is that what you're hearing, Chuck?
• 9:21
  Chuck Shelby: It's a consideration to the guys I talked to today. They'd certainly like to see beans rally into the $11 or maybe above there to make that decision. I think that goes back to what that report does Monday, how important that is. If we can get the breakout that Naomi has been discussing here, then I think it leans probably more favorable towards corn. If we do see the tariffs aren't legal, then I think that could hurt soybeans and that would damage the case for more bean acres.
• 9:58
  There's a practicality point. Certain farmers in certain parts of the country, corn on corn isn't probably their best choice where if you're in Illinois, Indiana, Iowa, parts of Minnesota, corn on corn is a lot easier and maybe more profitable. So a lot of things to go that we don't know yet. I think next Monday will probably be a point of a decision that will help the producer make, make his decision.
• 10:27
  Todd Gleason: Okay. So I wanna follow-up with you just a bit because you're in one of those areas where they could do corn on corn, but really a primary soybean production area known actually as a soybean production area across the whole of the Midwest, there around Lafayette and, you know, spanning from Kankakee going West through Lafayette and into Indiana. Are producers considering corn on corn more often than not there than they have in the past?
• 10:55
  Chuck Shelby: I think in a lot of areas, the confidence level of their corn yield has been in the last few years with pretty good yields. They have more confidence in their corn yield. The beans are so subject to those August rains. And in the past several years, a lot of areas have been short on rain. So, and profitability wise, again, if you can grow a really good corn yield, it still works better than beans with less confidence on what you're going to yield.
• 11:30
  So inputs are certainly higher too. We were booking some nitrogen today and it's higher than last year. So that's a little bit concerning. It's a lot of moving parts at this point in time and I think you guys are going to need more information. What's a crop insurance price going to be in February?
• 11:49
  I think that's going to have an impact too on what producers decide to plant next spring.
• 11:54
  Todd Gleason: While I have you in your home area, I wanna follow a tangent that's not quite related to the marketplace, but I think you will have noticed, and I don't know what your practices are like on your own farm, cover crops, for those who have been following them, just like soybeans, which are a production high in that part of the world, cover crops apparently are also a really big thing through your area. Many people will drive that and say, hey. There are a lot of cover crops in this area. Have they changed the way producers think about bean production very much? Because they would come in after corn generally.
• 12:34
  Chuck Shelby: Oh, my answer to wheat has always been make it the national cover crop, and that would solve a big part of a wheat problem. Know, use cover crops on our farm and minimum programs for several years. You know, one of the problems or difficulties, I guess, in establishing cover crops is always, what kind of weather do you have in the fall? We've had really dry falls last several years. So getting your cover crops established has been challenging.
• 13:06
  So it's certainly part of the puzzle pieces, but I don't know that that is an answer up to what we're going to plant or not going to plant. It's a lot of input. It is more expensive this year any way you cut it.
• 13:26
  Todd Gleason: Yeah. So it was mostly I was interested in the use of cover crops in that area and the production side of as opposed to the impact actually. Although there would be an impact if people get used to using cover crops on there because they really need beans in the rotation to pull that off. Still doesn't work all that great with corn, though maybe you've had better luck than others. I don't know.
• 13:45
  We can talk about that at another point. So let's look forward to some of the other numbers that are coming, in the Monday reports. Let's start with the grain stocks. Ellen Dearden, I want you to talk a little bit about what the grain stocks on farm and off farm might look like given that you think, that half of the crop has yet to be sold. Where is it stored?
• 14:08
  Ellen Dearden: I would imagine that a larger than normal, percentage of corn will be located on farm. And the reason I say that is it's not just upright bins that are holding corn, but it is also bags. And there are some areas that bags are very prevalent. And I think that will be a little difficult to count however. We know what the bag's supposed to hold, but, you know, really what does it hold?
• 14:36
  So that may be in question. I think the, we will see the Western Corn Belt with a large, amount of corn in commercial storage, however.
• 14:47
  Todd Gleason: Oh, interesting. Why do you suppose that's the case?
• 14:50
  Ellen Dearden: The crop was big and, they carried over some crop from the previous year, the just in case bushels. And, I think we will just see, that that we've not seen a big outflow of corn out of bins, the commercial bins because of the fewer outlets for that corn.
• 15:13
  Todd Gleason: Well, I wanna follow-up with you just a little bit because, I jumped to the conclusion that you were talking about in commercial storage, but you were talking about just in storage across the board in in both commercial and on farm in the Western United States?
• 15:26
  Ellen Dearden: I think on farm, in in the Eastern Corn Belt or the Central Corn Belt will be a larger percentage than normal. In the Western Corn Belt, it may not be as big a factor on farm.
• 15:38
  Todd Gleason: Naomi, in that, Western Corn Belt, if it's in commercial storage or maybe even if it's in the bin, oftentimes because, they have far different storage conditions than we do, the drier moisture levels in those parts of the world allow them to store grain for much longer periods of time. You know, if we get to July and there's still corn around, you really have to think about how hard that is. If there's soybeans around, then you might be in trouble. But in that part of the world, they can store things for a couple two, three years sometimes. How much of a difference does that make for the availability of corn, particularly, to move into the feedlots or to back up into ethanol plants and to the Mississippi River in the coming year?
• 16:26
  Naomi Blohm: Well, is something to be mindful of. In talking with clients that I have in those areas, I think there's always like a handful of producers that maybe have a couple of years worth of grain on farm or in storage. I'm not sure how prevalent that is this year. I'm very curious, I think Ellen had just a lot of great points about the amount of grain that could be in storage. The quarterly grain stocks is going to be a real big component to Monday's report for sure.
• 16:56
  But you know, the thing that producers need to be thinking about if they've got grain in storage is, and this is where I agree with Ellen. Like if we don't get a really friendly report on Monday, the path of least resistance is sideways to lower. And so if you're not moving your grain in the coming weeks, then what you're gonna end up doing most likely is saving it and storing it and kind of hoping maybe, I hate to say it like this, but hoping for a drought in order to make prices rally in the summer, in order to pay for storing your grain all those extra months. You know, just truly at the end of the day, you got to remember as a farmer, you are a business person and you've got to be moving your product. Like I said, it's we gotta have an over the top friendly report or prices may struggle here in the short term.
• 17:52
  Todd Gleason: This brings me, Chuck, to the production agriculture side, the bridge payments, which many agricultural economists are fearful that producers may use, so they may have learned their lesson through the m f a MFP period, not to use it to wait, as a way to increase cash payments or to increase the kinds of fertilizer inputs that there are chemical inputs they're putting on, but actually to go ahead and service debt and to make sales both. So are you of a mind that sooner rather than later is a better option still?
• 18:29
  Chuck Shelby: Yes. I think that's the best plan of action. You know, another interesting thing, there are a lot more bags around than I've ever seen before, but the practicality of that is it's not frozen out there right now and you can't get that out of there. So that might be a factor of why bags are a great alternative at harvest if you don't anywhere to go, but unless the weather cooperates here and it starts getting really cold and freezes up that grain is not going to move it's stuck out there so a little interesting caveat that we haven't really seen in the last year or two but another interesting thing about this, you know, payment, it's not supposed to come to the February. I'm wondering if we have another government shutdown here at the January.
• 19:18
  I know USDA is still open, but does that treasury still send those checks out at the February if we're in a government shutdown again? So another unknown out there that it it could impact us in agriculture, but we don't know the answer.
• 19:36
  Todd Gleason: Okay. Let's talk more about you're right. I don't know what I don't know where to go from there, but but but you certainly are correct, and producers will have to think about what that means too. I hadn't considered that as an option. Let let's talk more about the reports on Monday.
• 19:53
  Feed and residual, Chuck, that number all year long has been one of the banes, I think, of the industry because it's so large. And it it along with exports when combined is a a super big number, though the though there's you know, it's not clear feeding a smaller number of beef cattle has made up for that to heavier weights that is and or how the exports, which have been on a terror of a pace to Mexico, change what those numbers look like. Will USDA adjust them on Monday, do you suppose?
• 20:34
  Chuck Shelby: You know, that's a, you know, the really big wild card. I think going into the report though, if you look at the estimates, they're not really the averages are not really bringing the yield down that much. And so they're not really changing the carry out that much. So to me, if we could get any kind of reduction without an offset on the feed and residual, then that's gonna be the positive catalyst. So I think you got to look at the attitude of all the people that try to analyze what USDA is going say, they're really not changing it much.
• 21:08
  So if we get a reduction I think that could give us a positive, you know going forward.
• 21:14
  Todd Gleason: Ellen Dearden, if you could follow-up on the exports and the livestock consumption patterns and what you've been considering as it's related to the Monday reports, I would appreciate it.
• 21:25
  Ellen Dearden: Corn exports have been outstanding. Phenomenal might be a better word and, that will probably continue. Although I did notice that the recent buys on the corn instead of all going to Mexico, now we're seeing some go to South Korea and some to Japan. And I like that it's being spread out a little bit. I also think that that, we need to always keep in mind that feed is feed and residual.
• 21:56
  So seeing that 6,100,000,000 bushel number there, is high but may not, we need to consider that residuals thrown in there too. Ethanol should should remain steady I think at that 5,600,000,000 bushel place. I I think the the thing that has to happen is ending stocks of corn have to drop below 2,000,000,000 bushel to even see an inkling of people wanting to buy.
• 22:24
  Todd Gleason: Naomi, do you think that's very possible?
• 22:27
  Naomi Blohm: Well, it depends on what to do with yield. That's just the bottom line. Last year, the January report was the game changer with the yield going last year from one eighty three point one down to one seventy nine point three. That was the game changer for the entire report last year. But we had carry out in the December WASDE last year at 1,700,000,000 bushels, and then on the January WASDE it changed to 1,500,000,000 bushels.
• 22:54
  Now we're sitting with carryout going into this report at 2,000,000,000 bushels. We're at a higher level of carryout already. We really do need a combination of the lower yield, lower than expectations. We need to see the USDA keep the export demand numbers strong, keep that ethanol demand numbers strong. Then as we were talking about earlier, the elephant in the room is that feed and residual number and what they do to that because we're at 6.1 right now, like Ellen was saying, but a year ago at this time, we were at 5.77.
• 23:33
  So That's the big concerning number that traders have been talking about, and that's the one that could get shifted. Plenty of front moving parts on this report. The algorithms are gonna go, I think, really, ballistic over the first couple minutes after this report comes out line by line, and then we'll be able to see where the dust settles and and where everything falls.
• 23:59
  Todd Gleason: Okay. Once the dust settles, and I think I want all three of you to think about this and maybe tell me a little bit about your thoughts, and there is a tone, a direction set. Usually, this is for about three months until we get to the acreage report, that we've discussed with Chuck some. During that three month period, if it is a friendly report, I won't say bullish because I'm not sure that that'll happen, but it could. A friendly report, how should farmers think about at that as it's related to both old and new crop marketing?
• 24:34
  And on the opposite side, if it is a bearish report, and I suppose we can say either of those are half a million half a billion to a billion bushels move in either direction, what should producers do? So how patient are they once this report comes out given the direction or tone of the report? And Ellen Dearden, I'll start with you, follow-up with Chuck, and then Naomi, you can pick up.
• 24:58
  Ellen Dearden: Farmers going into this report own too much inventory, just flat out own too much. And I think they have always thought that there's gonna be something to bail them out. So if this report should turn up to be not friendly and prices don't rally, then they're gonna say, well, we'll just wait till the plantings report. We'll see what that plantings report say. They're always looking that kind of a mindset.
• 25:28
  And I think that we need to have a time give up point as well as a price give up point on bushels and have offers in at the report and after the report.
• 25:42
  Chuck Shelby: If we get a positive report I think you'll see producers let go of their corn that they've been holding on. Most producers I think have sold a higher percentage of beans so the corn is the issue. If we get the rally, I think it's a good opportunity to get rid of the old crop and to start looking at new crop. On the downside, I would say you'd be still be choppy sideways because the demand is so good. You look at the, you know, ethanol blend set a record here the other day at over 11%.
• 26:17
  So I think the demand would kind of keep us in the range. So we might visit the lower end of the range. So if a negative report or not one that's positive, I think producers are gonna have to look to let it go. And then again, there's some extremely cheap options out there. If you, you know, can't stomach the idea that letting it go or, you know, you're wishful for a positive bullish acreage report.
• 26:43
  It's better to, you know, cash it in and pay your bills and pre owned on a paper if that's, you know, what it takes to get the job done and moving to corn.
• 26:54
  Todd Gleason: The record, by the way, that Chuck is referring to is 11% ethanol in the gas as lean supply for the full 2025 calendar year. That's never happened before. By law, supposed to be about 10%. It does range somewhere around nine and a half to 10 and a half generally in any given year. So an 11% number is a big number, and that includes, of course, the exports, which have been really, really good for ethanol.
• 27:24
  Finally, Naomi, your thoughts as, related to what to do given the tone of the reports, whichever direction that happens to be on Monday.
• 27:33
  Naomi Blohm: I would take a strategic tone with it and, look at March corn puts. You can get a $4.40 put for 7 and a half cents. It's good for forty two days. That gives you downside protection just in case the report is bearish. That way you have some price protection there.
• 27:50
  Also, it leaves your upside open. So in the same breath, have the puts there as a price floor, but have those cash targets higher. And on the March chart, $4.75, $4.80, $4.85 would be targets higher if we get a friendly report and have those orders in at the elevator ahead of time. Because reality, in my opinion, is that we don't have a reason for corn to get above $5 unless the USDA report is so friendly. Then you need to have some bearish, I should say bad weather in South America to make their crops smaller to justify corn prices to go through $5 I'm saying those are slight odds.
• 28:29
  Have some realistic cash targets in place between $4.75 and $4.85. Have those March puts in place just in case the report is negative. And then on new crop, this is the thing I want to really have people focus on. You know, right now we've got Dec corn, you know, between the 46465 area and $4.75 is big resistance on the December contract so far for 2025 during 2025. When you look at the twenty six December corn price, the high price was 4.77 back on June 9 for the December 2026 contract.
• 29:08
  Last year, when we were talking about new crop corn, these corn had a hard time getting over $4.90. So we are kind of in the vicinity where you've got some potential higher end value from a historical perspective. So don't ignore the December corn, your new crop corn, to be thinking about forward contracting at these levels as well.
• 29:30
  Todd Gleason: Commodity week, of course, is a production of Illinois Public Media. You may find and listen to the whole of the program anytime you'd like on our website. That's at willag.org. Our thanks go to our panelists today including Naomi Bloem at Total Farm Marketing, Ellen Dearden from AgReview, and Chuck Shelby of Risk Management Commodities on University of Illinois Extension's Todd Gleeson.