Latest / Commodity Week / Jun 04 | Commodity Week
Transcript
- cw260604 In the June 4 edition of Commodity Week, host Todd Gleason and panelists Logan Kimmel, Sherman Newlin, and Shane Holtorf analyze the recent, severe sell-offs across the agricultural grain markets. The discussion highlights a 12-day consecutive drop in wheat futures—exacerbated by fund liquidations and crude oil market trends—that consequently dragged down corn and soybean prices. While domestic crush capacity provides a baseline of support for soybeans, the panel emphasizes that renewed export demand from China is critical for a sustained price recovery. Looking ahead to the late June acreage report and the potential for summer weather volatility, the analysts caution producers against liquidating grain at current lows. Instead, they recommend establishing calculated, profitable price targets for both old and new crop inventory and keeping working orders actively placed with buyers to capture any sudden market bounces. Finally, the panel notes rising volatility in the livestock sector due to screwworm headlines, urging cattle and hog producers to aggressively manage their downside risk. Panelists - Logan Kimmel, Roach Ag - Sherman Newlin, Zaner Ag Hedge - Shane Holtorf, Logic Ag Todd Gleason: This is the June 4 edition of Commodity Week. Todd Gleason's 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 Logan Kimmel. He's at Roach Ag out of Woodridge, Illinois. Sherman Newlin is here from Zaner Ag Hedge. He's in Hutsonville, Illinois and Shane Holtorf joins us from Logic Ag. He's out of Alta, Iowa. Commodity Week of course is a production of Illinois Public Media, it's public radio for the farming world online, on demand anytime you'd like at willag.org w i l l a g dot o r g. Our theme music written and performed, produced in courtesy of Logan County, Illinois farmer Tim Gleason. Let's start by getting a list of items to discuss for the day. Logan Kimmel will begin with you. What's on your list? Logan Kimmel: Yeah we've undergone a sizable break here in the grain markets and folks hanging onto the old crop are running on a shot clock here. Go through ideas what to do there and also put together a plan and some targets here on this new crop corn and bean market that has a little more time, a little more prone to possible weather this summer, maybe some more opportunities there, but walking through targets on old and new crop sales. Todd Gleason: Sherman Newlin from Zaner Ag Hedge? Sherman Newlin: Yeah, I mean we've had a heck of a sell off here the last, you know, week or 10 days. It's, you know, something that producers don't like to see. So I'm hoping, you know, we can find a low in through here pretty soon and, and you know, like Logan said, find some targets to the upside to put some sales in. But you know, trades gonna start watching weather. We've got the, you know, end of June we got the crop report coming up on acres. So that's gonna be discussed going forward and, and then, you know, we gotta talk about or the trade's gonna be talking about, you know, is China gonna come in and buy any of this 17 billion that they had promised. And those things could give us a, you know, a boost back up into the market. Todd Gleason: I do want you to put something on your list Sherman because you do raise wheat or at least I think you're still a wheat producer. 12 days in a row down in the market and I want to know what you think about that hard red winter wheat. Not what you raise, soft red, but I do want to talk to you about that. And Shane Holtorf of Logic Ag in Iowa. What's on your list for the day? Shane Holtorf: Yeah, it's as we talked about the first two guys talked about, it's a little bit depressing to sit here and look at all the red day after day. And so, um, let's hit on some bright spots here about, you know, spurring demand specifically on the crush side and what we've done with bean oil and the potential E15 that's laying out there um for the ethanol side. Todd Gleason: We will do so. Let's turn our attention Sherman back to that 12 day event. It's not for Christmas that's for sure. And I have to admit it was Matt Bennett that pointed that out to me on Thursday afternoon. It's been a really rough wheat market. What have you made of that? Sherman Newlin: Hey it's yeah it's kind of hard to take, right? But you know how the futures market is, they price something in and, you know, short, you know short crop, long tail is the old adage and it's definitely showed us, you know, up here in this wheat market. I mean I talk to producers out in Western Kansas and Eastern Colorado and, and you know, I know it's really tough for them because their wheat's been zeroed out. I mean there's just no wheat out in some of those areas. And we know that hard red winter wheat crop's gonna be small, but you gotta remember, you know, wheat's grown all over the world. Uh, and I think that was it, you know, we priced ourself out of the market there pretty quick and the market just turned around and started selling off with everything else. And and you know, and also with the crude oil market. I mean wheat had been kind of following crude up on those sharp higher days and then on the days it were down, it seems to want to follow the crude oil market back down. You know, because wheat was an inflation play so to speak uh for some trade in the trade. And um, you know if crude oil can start to come back down, maybe inflation could come back down at some point. So I think there's the market got a little bit ahead of itself, got a little bit too high, a little bit too frothy, and then you saw, you know, some of the funds take advantage of that, jump back out and then you know, started going back in from the short side. Todd Gleason: So I want to transition with you real quick and let you get us into the corn and soybean markets. Did wheat lead this process? Sherman Newlin: I I don't I'm not sure wheat led it, but it didn't help anything because everything corn and wheat both just kind of went down hand in hand it seemed like. And then the day beans just kind of like, hey we need to play catch up. I mean there's some reasons why beans went beans went down today, but it like beans had to play some catch up here too. But uh you know, once the funds start leaning on the wheat and it's very trending type market and they see, you know, more downside potential at least they did. And yeah, it definitely didn't help anything. Maybe it did lead the way um to a certain degree, but hopefully hopefully we can find a bottom in in everything here pretty soon. Todd Gleason: Shane Holtorf, what is your assessment of today's trade, this Thursday loss particularly in the soybeans, uh and how it came about? Shane Holtorf: Yeah I mean uh I'll be honest with you here since I mean the soybean demand has been really good. Um you know as we look at from a bean oil perspective, I think that's what's provided us the floor under this market. And we've been pretty skeptical or we were pretty skeptical um most of the winter and into the spring about why the bean uh price was holding uh in where it was, you know and attribute that to bean oil of course. But if you take that away, um it's it's doesn't have a lot in its favor. Uh I think we need China to come back to the market um as she had mentioned, but you know if I sit here and look at it today with the way that these charts are pointed, one could argue that um the bleeding is not going to stop quite yet in my opinion. Todd Gleason: Well I have some follow up questions and I'll stay with you for a moment Shane on that because it on the bean oil it has been lifted I suppose uh by the biomass based diesel uh fuel sector uh and the uh and the RVOs, the renewable fuel volume obligations set by uh the United States EPA, the Trump administration going forward. We are going to run at capacity or at or better. USDA in its May uh WASDE report looked forward and said you know, this is this is what we think the season's average cash price will be and it was a good one relatively speaking. Not a 12 dollar cash price by any means, um but still um is there hope do you think given that uh I mean was the cash price 11 dollars and I'd have to look was it 11.40? I'm wondering how much downside do you think we have because you mentioned that, and then how much of a bounce might we get? Shane Holtorf: You know I I think we're getting close to an area of support here, you know if I if I sit down and look I could make a pretty strong case for 15 to 20 cents down just from a technical perspective. Um I know that we can make those charts show, you know, what we want them to show, but yeah like you said, if we if we go back um to that kind of the quote-unquote floor of the market provided by bean oil, I mean we cannot run these crush plants at any higher capacity than we're running today. And I know that we've got a lot more slated to come online throughout the year, um but what's interesting to me in our neck of the woods is they're going gangbusters on crushing um but the basis certainly hasn't shown that they're needing to um you know, really, really pay up to get these beans uh in the cash market. It's you know we um there's not a ton of competition out there I guess. And so earlier in the winter we railed some beans out locally which surprised me because we've got an uh a crush plant 4 miles down the road. Um but you know, even with these elevators cleaning up and railing it out, they're not bidding up. So I think the the country is pretty comfortable where they're at and we're going to rely on the futures market to do the work. So you ask about a little bit of a rebound Todd, um and I think if we're, you know, if we're watching the old crop market here, um you know, like I said we probably got the opportunity to see 15 20 cents down. Um and then that 12 dollar mark um has been a little bit of a magnet. Um we went up and toyed with that and uh you know if we look through to July, um I know where our days are numbered, but that would be what I would target if we would if we would start to see this market move back up. Todd Gleason: Logan Kimmel, you mentioned that uh because of this sizable break, uh the shot clock is on for old crop uh particularly. I wonder what ideas you do have as it's related to soybeans. You can talk about corn too. Logan Kimmel: Yeah I think in regards really for both um folks down to their last bit uh maybe they were open for something more uh or waiting uh later in the summer for call it gambling bushels. I think you really gotta take a look at any sort of bounce we get on these July contracts. Uh sooner than later might be wise to to price those out because I think as we're already into June uh as we approach the end of summer, naturally there'll be bushels held onto too that ultimately seems like get priced at the tail end of uh summer and all at once when the July contracts coming off the board. That's generally not associated with with the better prices throughout the year. So I I feel on on the break we've had we're getting close to finding some some buying some support you know at 4.25, 4.24 corn and 11.29 beans. So yeah if we catch a few days here uh where you where you do get some some buying setting in and maybe you do see a little pop I I think you gotta be realistic though what to expect and have orders in to to get the rest of your old crop old crop priced. Um the narrative certainly is flipped here since the middle of May. So um just going back to the drawing board and and if you had made some previous sales at better prices um you know factor that in uh but you know to to see this old crop corn or or beans you know we're it would take a lot in a short amount of time to realistically get back to uh levels that we saw. So um be on top of it here on on recovery bounces uh which I think you'll see. Uh but there might be those marketing opportunities to finish up if folks are still hanging on to what they have on old crop. Todd Gleason: So Sherman when we think about fall beans um and you know November finished at what 11.41 and a half. Um so USDA I did take a quick look is at 11.40 for their season's average cash price. That's not gonna happen at least not at the moment and so so I I can recall the first time we popped over 11 bucks or thereabouts and it was go ahead make a sale. Might if that's the worst one for the year that's that's a good deal. Hopefully producers have been making sales along the way. Where should where should they put their range at this point? Where and if if they need to make catch up sales particularly, where should they put where should they put their range or or down? Uh what what kind of marker level are you thinking about? Sherman Newlin: I mean just two days ago we were up over 11.74. Um I think if you can get back up in that area that shouldn't be that difficult um at all to make that happen. I mean that was an old high that we had back in the middle of March. Uh so that could be you know an area of support or resistance to take a look at and I think you know we can retrace some of that. So in 11.75 I mean it's going to struggle to get back up above 12 in my opinion without um some help from China you know coming in and maybe surprising us and buying anything and that don't have to be beans, maybe they come in and buy wheat or maybe they buy corn um here sometime this summer. Uh but you don't forget I mean we're got we got the acreage numbers that'll be coming out eventually. Those are probably going to show a little bit higher bean acres so that's going to be a little bit of a negative. Um but uh you know we got the whole summer of weather and you you know month of August can be pretty brutal for some areas uh as far as yield goes so I I do think we're have some scares. Uh but you know, before that, maybe the market wants to continue to liquidate and we go back down to that, you know, low 11, 11.10 area in the short term and find some support. I hope we don't, but we might have to. Todd Gleason: There's probably a lot of time Shane uh for the soybean market to think about dry weather and scares potentially, particularly in the US because we won't really worry too much about them until we get to the month of August. Corn on the other hand we'll watch June certainly. By the time we get to July, uh we'll be thinking a lot about it. Why don't you transition us uh into corn and what you're thinking as it's related to the new crop there. Shane Holtorf: Yeah as I mentioned um it sounds to me you know that um well certainly in Iowa the majority of Iowa things got planted under pretty ideal conditions early. You know people were getting a little impatient because of wetness early on, but um in uh respect to the calendar, things were certainly planted um in a timely fashion. Um we've gotten some rains in the western half of Iowa um starting to get a little drier there in the eastern half of Iowa. Um but you know early in June is is probably an okay time for it to be dry. Um you know as it goes back, but you know I was talking with a customer this morning and um you know it's going to be really hard I think in June to cry wolf um if it gets dry because if we reflect back to not necessarily so much last year, but the two, three uh even four years prior, um you know we we talked about how darn dry it was the entire summer and then continued to grow um our best crop followed by our best crop. And so I think you know that we've become a little bit uh numb to the fact or they've become a little bit numb to the fact in Chicago of dry weather until it really has shown up. And so um I do agree here on these bounces I think we need to be on the offensive uh for pricing um new crop corn. Todd Gleason: And where would you do that at? Shane Holtorf: I look at I think again with if we look at the December 26 I I do think we probably have a little bit of downside just to follow through here um to find some support uh sorry, some support. Um if I'm looking to start layering things in, uh certainly if I haven't made any sales, um you know these ranges are pretty small, but I'm probably looking at that 4.60 to 4.65 area to get started. Um 4.75 to to continue trucking along there. Um I think would be the two places that I'd be eyeing here. You know um I don't think that that December board today without any real concrete um evidence of a drought um has much of a reason to probably go past that 4.85 area. Todd Gleason: Logan, when you talk to producers, what are they telling you about the conditions of their fields across the Midwest uh and I know today they probably were very worried and your discussions were mostly about calming folks down. Um but how do they manage their risk in your opinion going forward? Logan Kimmel: The first part pretty well widespread um folks got the crop in uh pretty good really uh without a lot of issues. I there's some problems out east uh folks in Ohio uh struggled a little bit. But you know generally speaking there were not a were not large areas of planting disruptions. And you know to pair that with I I think that's uh part of the last 10 days of liquidation in in the markets is just no weather problem or threat right now up until this point. Uh and so nobody likes this price action at all and it can be very uh frustrating uh for producers to to see another day uh where where the markets uh especially in the beans sizable red bars to the downside. But I think when we when we see where we're at here different from the old crop looking at this new crop with a little more time, this is an opportunity to go back to the drawing board and look at what you got in the ground, uh what you got priced on new crop up until this point, what you're expecting to have. And put targets in. I agree with with targets you know in that 4.70 range on bounces. I think having orders in if we see China step in and buy uh say corn or or wheat or we see weather set in around uh the next month to uh you know August time frame and you do have a little bit of a threat I you could see this corn market tack on quite a bit in in a short amount of time. You you could work back up to levels that might not seem realistic right now. Um that could happen quick. But I think having orders in to make cash sales uh if we do see a quick couple few day pops and and you and you get those orders placed and and or sales made. Um I think right now that's the best plan to have. I don don't think this is an area you go in and do a bunch of marketing after the break we've already had. I think you let the market uh try to find a bottom here and and like I said put put targets in that make sense for your operation at levels you can be profitable and manage those throughout the next two to three months because I do think uh we've seen a lot of money flow from the funds um stay in the in the long side of of these grains but most recently peel back out. They can move in and out and I I think if you saw China headline come across or or purchases uh or weather, they might want to step back in and give your give your marketing opportunities uh back to the farmer. Uh so that would be what to do at this point or or plan to put together on on the new crop. And for the beans same as well. We saw the bean market on on Nove November new crop hold a pretty steady trend all throughout the year really since January. A little concerning that we've broke to the downside the last two days out of that trend. But if you do uh work your way back up and retest the bottom side of that you know call it maybe 11.70 uh to 11.80. I think those are reasonable areas to have targets in for new crop beans. Uh and it did seem like that 12 dollar range uh was an area that kind of served as a little resistance. So those are some realistic targets I think you could go back to the drawing board right now, put together a plan if things uh change here in the next month or two and we get some weather premium and volatility. I think it'd be wise to have a plan put in place and and orders in to make those sales. Todd Gleason: Sherman and Shane, you as well because you both farm. I'm wondering uh whether Sherman you adjust your projected yields throughout the season, what the crop looks like now and if you have adjusted it in one direction or the other and when you do and you talk to producers in whatever areas, do you also consequently change their target prices? Sherman Newlin: Uh yeah I mean yeah you can change your target prices based on what things are looking like in your area. You know obviously you gotta know, you know when do you need to move corn and do everything. Uh you know, do you need to sell it in the fall, can you wait till January, first of the year, all those things make a difference in your marketing program. I mean like here though I mean talking about our farm, we've got two different crops of corn Todd. I just finished replanting corn for the third time day before yesterday. Uh so I started April 6th, that corn looks beautiful and I've got corn in the ground that hadn't come up yet. So we've replanted replanted 20% of our corn and 20% of our soybeans uh in our area. And there's been quite a bit of that in central Illinois, southern Illinois, parts of Indiana. So I do think there's some you know, the crop isn't a perfect out there. Um I know Iowa finally got everything going and they're getting some rain uh and that's all that's all well and good, but there's you know, there's some areas that are um not perfect by any stretch of the imagination. Ohio's had too much rain. Um now the guys out in Kansas, they finally started to getting some rain so they could finish planting corn out there. Uh but they don't have high hopes for you know a big yield in that that western Kansas area either. So I think there's a lot of time for this market to go back up. I mean I I agree I don't think trade's gonna bite on a weather scare you know cause we've had that happen the last few years and it really went nowhere. We still ended up with really good yields. But uh you know, to try to you know get anything close to what we did last year I think's going to be a little bit tougher because I maybe not all producers but some producers have cut back on fertilizer. Some guys may not uh because of the cost, some guys may not side dress. Um there there could be some forego um you know fertilizer or uh fungicide, fungicide for corn and soybeans this year just to save some dollars. So that may you know end up having some effect on yield at some point in time. Um but yeah I mean I think you we do have some upside potential from here. I mean looking back at that December 25 contract, I mean it really never got below 4.40 so I mean I would watch that area. If it would tend to break down below that then we might go on down you know a little bit lower than that. Uh but let's hope that doesn't happen and we can get some good news and get the market to start to rebound. Todd Gleason: And Shane as I think we talked about before we started the program I traveled earlier in the week to Kansas and back. It did hurt my heart I have to admit to find that the best looking corn that I managed to see between here and Junction City Kansas side of the border uh that that and they had just gotten rain and it was tall relatively speaking, you know that uh knee to uh knee to I don't know hip high or not quite hip high but mid thigh high out there and looked nice and green. Uh you are to the west of Fort Dodge in Iowa on Highway 20 as you said. Shane Holtorf: Yeah so it's out west of Fort Dodge um and right right on Highway 20 as you said. Um locally things look really good, spent the last couple days um out spraying fence lines, very pleasantly surprised um with with how things are. Um but if you go too far south, um you know people people were in the machine shed digging out the rotary hoes this year. And there was a ton of acres that got rotary hoed for crusting. Um you know things have come around but I would argue that our bean stands are probably a little bit thin. Um you know depending on who you talk to, they say we're still at 100% of yield potential. Um you know so I think folks are pretty optimistic around here. You know it's really hard I've learned through the growing season to come in and and raise and lower the expectations throughout the year. Um you know I've tried that over time and I tend to really just stick with our folks on our crop insurance guarantee until we get into harvest and we start to know and then can change that plan from there because uh I think if nothing else it plays a little bit of that mental mind game of expecting a big crop and it's not there. Um you know so I I've learned to kind of stick to stick to what we know um to start out. Todd Gleason: When you're talking to producers do they ask you many questions about fuel needs and pricing that in for the fall and or about nitrogen for the 2027 crop? Shane Holtorf: Yeah so I mean uh nitrogen has has been um I don't know if it's just because of um what we went through this spring. Some folks went through that didn't have it booked or fall applied. Um in our neck of the woods, um I don't know if that was just a traumatic experience that we've pushed that off. Uh but we haven't really talked about it and part of the reason is is it's tough to get good pricing. Um you know no one's really stepping into the market and offering anything up. But uh diesel obviously or fuel as we look forward to fall, tons of questions about it. You know I would say nearly every producer that I had talked to has taken for granted the relatively stable fuel prices over the past few years and got caught with their shorts down here uh this spring. And uh so I think folks are looking for the opportunity to lock some of that in. You know the local co-op here sent out a flash message on Monday hey we're down 75 cents uh from the highs and and that got me thinking man maybe I should lock some in and I come to the office the next day and crude oil was up $7 again. And so um I I do think we're going to look for that opportunity to lock something in. I'm hoping that things you know this Iran US conflict can start to stabilize as we move into the summer and provide an opportunity for guys to lock some fuel in. Todd Gleason: I want to look forward Logan Kimmel to the June acreage report. Sherman mentioned this already. Uh it's due out at the end of the month. Uh what kind of changes do you think it might show from USDA? Logan Kimmel: Well with not a ton of areas that uh suffered planting disruptions, I I don't know I kind of agree with Sherman maybe slightly more bean acres uh slightly. Um and you know and I wonder too if uh there were some changes made uh for the folks that did not have uh fertilizer booked for this year's crop uh you know in regards to the corn that maybe made those changes due to higher prices. Uh so so possibly a a slight change there would be you know my thoughts um you know just looking at it here today. Todd Gleason: Let's get a final word I think from each of you now. Sherman Newlin from uh Zaner Ag Hedge I'll start with you. Your final word for the day? Sherman Newlin: Yeah I mean we've kind of talked about everything it's a matter of you know seeing if this market can rebound and bounce and I think we all three of us tend to think it will. Um you know so you'll have to be you know have some orders in. I I I really do think that's important to you know have working orders with your elevator or wherever you plan to sell your grain. On on at least what you can't store in the fall. I mean if you have on farm storage, you can store you know some, that that's probably good. You can you know look to maybe sell that for later on and hold you know sell that carry. But I would definitely be working hard on selling crops that you have to take to the elevator in the fall so you don't have to pay storage on it if we can get and and I think we will, I think we'll get see some, you know, some rebounds in these prices. But I think, you know, that's your first order of business right now is to, you know, uh work on that getting some prices in and and you know hopefully we can get them hit. Todd Gleason: Shane Holtorf from Logic Ag in Iowa, your final word for the day? Shane Holtorf: Yeah I would I would tend to agree with that. Um it's really easy to get down when you watch these markets the way that they've done um the last couple days and and get disengaged from the marketing plans. And so uh I would echo you know talk to talk to your broker, talk to your grain buyer, find some price targets um you know use what the three of us have talked about here today but but get them working um because the market can work in your favor when you're least expecting it and then your emotions are going to get jerked the other way. And so um you know be prepared. Todd Gleason: And finally Logan Kimmel from Roach Ag out of Woodridge, Illinois. Your final word? Logan Kimmel: Pretty good coverage on the grains here today uh do want to touch on the livestock uh boy we've got the headlines coming in uh screw worms here and we're seeing large swings in the cattle. Uh I think this serves as a reminder for for livestock producers to uh be prepared. Uh you're you're in a volatile market. Uh protect your risk uh on on the livestock especially the cattle. As these headlines roll in I think it's gonna be more volatile, larger daily limits uh in place now. So you're gonna see big swings and there's a lot of risk on the table. For the hog producers I think you got to look and see if this is a late seasonal uh move we might see to the upside. And uh if if you didn't get hedges or or sale or you know uh risk in place uh that we saw back in the spring, there might be an opportunity on some of these August uh October December hog contracts. But be prepared to do so. We saw how fast the money flow in the hog market from the funds went from net long to you know pretty close to net neutral. So livestock producers uh be mindful uh of seasonal runs here and and uh protect your downside. Todd Gleason: Commodity Week of course is the production of Illinois Public Media, it's public radio for the farming world online, on demand at willag.org w i l l a g dot o r g. Our thanks go to our panelists this week, including Logan Kimmel from Roach Ag, Sherman Newlin with Zaner Ag Hedge, and Shane Holtorf of Logic Ag. I'm University of Illinois Extension's Todd Gleason.