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Jun 05 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the June 5 edition of Commodity Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Matt Bennett. He's at AgMarket.net. Erin Curtis joins us from Midco.
• 0:22
  Alan Dearden is here as well. Commodity Week is a production of Illinois Public Media. It's public radio for the farming world online on demand at willag.org. That's willag.0rg. Let's get a list of items from each of you that we might want to take up.
• 0:42
  Ellen, what's on your list today?
• 0:44
  Ellen Dearden: I'd sure like to talk about tariffs and why the, most recent reactions have been pretty blunted anytime there's more information out.
• 0:56
  Todd Gleason: From Midco, Aaron Curtis on your list.
• 0:58
  Aaron Curtis: Yeah. We've had three positive days here in Corn. I know it hasn't been a whole lot, but is there much more to to come? What are the factors that could help, maybe per corn up a little more as we move through, this early summer months? And do we expect a lot of activity in the June reports, either supply demand or acreage and stocks at the end of the month?
• 1:20
  Todd Gleason: And finally, Matt Bennett of AgMarket.net on your list.
• 1:23
  Matt Bennett: Yeah. I think both those reports would be fun to talk about, you know, especially given, you know, some of the spread activity and some of the thoughts that there's gonna still be tightness relatively speaking as far as old crop stocks go, but I'd like to cover those reports pretty good here today.
• 1:41
  Todd Gleason: Well, let's begin, Aaron, with the three positive days for corn this week. We're recording on Thursday afternoon. What factors do you think are most important going forward?
• 1:51
  Aaron Curtis: Well, a couple things. Right? I think a little bit of optimism on some trade talks between the EU and The U. S. I think last few days prior to this little bounce, little bit of concern, especially with some corn sales still destined for Europe yet this marketing year that maybe something would change there.
• 2:08
  But the fact that they both parties came out and said that they were at least talking and not as concerned about these steel and aluminum tariffs increase in here midweek was a little bit positive to the market. Obviously, we've had a little bit of bearishness going in this until this three day period. So probably due for a bounce as well. And then still a little bit of talk about a ridge development here as we move through the latter part of the month. And I see I think we're putting just a touch of weather premium back in the new crop contracts, which has also helped weaken up those new or old new crop spreads this week by a large amount.
• 2:47
  But Henry, up until now, I hadn't have a lot of weather premium in this east corn contract. Seasonally, we try to bounce a little bit here until the June. So it seems like we're paying a little bit more attention to the extended forecast. I don't know if there's a big concern, but there is obviously if you look at the drought monitor from Nebraska up through Northern Illinois, those soil moistures are a little drier than what they would like to be, especially after a dry winter and early spring. That area is going be closely watched.
• 3:17
  And if we have an extended period of some dry weather, I think the corn market is going to pay a little bit of attention to that. Between a little bit positive tariff talk and trade talk, and then maybe it's just a little bit of concern about the extended forecast Todd.
• 3:32
  Todd Gleason: Ellen, let's stay with the tariff and trade talk this week. The president imposing a steel and aluminum tariff, particularly, I think, targeted at the European Union, but it was across the board of 50%. And, also, president Xi and president Trump met by phone on Thursday. You say the market reaction was blunt, and clearly that was the case. Why do you suppose that was the case?
• 4:02
  Ellen Dearden: I think the the trade in general is tired of talking about tariffs and every headline that comes out, people instead of going, oh my gosh, the sky is falling, seem to be saying, Well, wait a second. What do you think that means? And the steel and aluminum tariffs are certainly a big factor. But the fact that the market really didn't react very negatively to that, I took as a positive. I don't know if that's just wanting to be positive or not, but I think that's the way the market's reactions have been.
• 4:43
  Todd Gleason: When you couple that with the three days of good news out of the corn market this week, what do you see going forward into the June 12 WASDE report?
• 4:55
  Ellen Dearden: Well, first of all, I think part of the lift that's come in corn has been because the wheat looks awfully bottoming. If you look at a wheat chart, the nearby July chart, particularly in the Kansas City, but also in the Chicago, shows a head and shoulders bottom. That's a good sign, I think, it will spill into corn and has been spilling into corn. We talked, Aaron talked a little bit about the July Dees corn spread, but that thing has been losing ground now for several weeks. This isn't the first week we've seen the July lose to the December or the December gain against the July, whichever way you want to look at it.
• 5:38
  But putting carry back into this market really suggests that the old crop stocks, the trade looks at old crop stocks as being just enough to get us through harvest.
• 5:50
  Todd Gleason: Do you believe, Matt Bennett, that when we see those supply and demand tables from USDA next week that they will adjust the export market up for corn?
• 6:00
  Matt Bennett: Well, I mean, they've got the ammunition to do that. You know, and in all honesty, I mean, I kind of agree with, you know, what Ellen said is that, essentially, I think we've got a tight situation. It's significantly tighter than what it was a year ago, but the trade season has been enough. So, you know, I would assume that even though spread activity and the performance of the July corn contract would tell you otherwise, I think that you're going to be looking at a tightening old crop balance sheet once again based on the back of exports getting adjusted maybe 0 point 5 0 to $0.75 higher. So our official estimate was to take exports up 75 and, you know, go ahead and bring feed and residual down 25.
• 6:45
  And so, you know, I believe that we ended up, oh, thirteen sixty. So be interesting to see, you know, how close we are here, but, I do think that you're gonna be looking to the tightening balance sheet for old crop here.
• 7:00
  Todd Gleason: Ellen, I do wanna come back to you. I wanna talk a little bit about wheat. How quickly do you think it can bottom and historically does it bottom prior to harvest across The United States, for wheat? Is that is that something that has happened, does happen? I I don't watch that market very much.
• 7:22
  Ellen Dearden: Yes. It has happened and it tends to happen in years when we have late production problems. And I would consider the heavy rains that have hit Kansas and Oklahoma in particular would be late season weather problems, I. E. More disease in this week, even if the bushels are there, more disease, even lower test weight.
• 7:46
  So that I think is a positive and could could have meant that the low is made already the seasonal low in wheat.
• 7:55
  Todd Gleason: And, Aaron, would you agree with that assessment? Is that that how you view that marketplace, and how does it translate back into old crop stocks for corn?
• 8:03
  Aaron Curtis: Yeah. I think the wheat is definitely a market to watch. I mean, not only Southern Plains, Southern Illinois obviously is going to have some wheat concern. It feels like with all the rain that they've had. We've also got some dry conditions in Canada and China, Black Sea as well that are trying to keep wheat somewhat supported.
• 8:21
  I mean, the years, wheat's been a hard market to trust. So we have definitely seen some increased feeding of wheat and sorghum out to the West. So I think that probably does bring that feed number down on corn a little bit. I just don't know if the USDA is going to wait until after the stocks number at the end of the month before they make much adjustments. So maybe see something more in the July and August reports as far as old crop, feed demand.
• 8:49
  But, definitely in terms of its relationship, to feed wheat, if we do get some sort of bounce here in wheat, that's going to be supportive to corn or it should be.
• 8:58
  Todd Gleason: Yeah. So those who are out looking at both the hard red winter wheat and the soft red winter wheat crop, Kansas and Illinois found record crop sizes. However, the breeders from both would have told you that they also found, at least in Kansas disease, which would become more problematic, I think, as usually is the case in hard red winter wheat with the rainfall, and certainly the breeder here on campus, small grains, said, you know, it was a big crop there, but the potential can be blunted pretty effectively by disease, especially if rains continue to come. So we'll be watching that closely, and maybe I'll check-in with her again next week early to see whether she's hearing much about wheat in Southern Illinois and disease within that crop because of rainfall. Let's do turn your attention, Matt Bennett, to the end of the month acreage stocks figures, which, Erin mentioned.
• 9:57
  How do you suppose USDA will deal with them? I can recall that Darrell Goode would tell us and probably you too in class and otherwise that the June 1 can be pretty wonky as it's related to the numbers that they get.
• 10:15
  Matt Bennett: Yeah. I mean, there's no doubt it can get pretty wild. You know, obviously, we're all gonna be interested in this acreage number. Of course, stocks, a lot of times will come in and be the surprise of the report. But whenever you start kind of talking acreage, I know a lot of folks are out here saying there's got to be some loss of acreage due to what's going on in Ohio through the Delta and, of course, parts of Southern Illinois.
• 10:41
  And there's probably going to be some prevent plan. Don't get me wrong. But I guess I would be very cautious as to assume acreage goes down, especially when we see the pace of planting across the Western Corn Belt. I don't want to be, you know, bear a bad news by any means, but I sure wouldn't bet against maybe acreage even staying as high as what it was there in March or even going higher. As far as stocks go, you've got to assume the way that these spreads have worked that you could get some sort of a bear surprise there.
• 11:15
  I mean, clearly, feed usage should have been called into question in the first half of the marketing year with all of the poultry that we eliminated, and that's your biggest consumer of corn. And so you've got to think that maybe overall usage due to feed could maybe back off just a shade. But at the same time, of course, we've really posted good ethanol numbers. We've had phenomenal export sales and inspections. So you've got to hope that if you get bearish acreage new, and I know hope is not a strategy, but you got to hope that maybe this stocks number doesn't come in and get too bearish on us as well.
• 11:55
  Todd Gleason: I know, Ellen, that you will be watching the feed and residual number really closely, on both the WASDE and then the grain stocks figure and what it shows as it's related to, the end of the year and how much is left. Your expectations over those, intervening days, how how do you see the market dealing with each of them and what
• 12:17
  Aaron Curtis: do
• 12:17
  Todd Gleason: you think the stocks figure might look like at the end of the month?
• 12:20
  Ellen Dearden: I don't know what the stocks figure is gonna look like, but it's always such a wild card that you hate to say much anything. I do anticipate that USDA will lower that feed use and, probably should have come down a little bit on the last report, but they'll probably lower that feed use some. I'm hearing more and more reports about Milo being fed. You know, typically, it's a big export market going to China, and that market, of course, has fallen apart. It's not used as much in ethanol as, what I was led to believe, a year ago.
• 12:58
  So I'm gonna continue to watch that. I think the number to watch on this report is gonna be what corn acres look like. And I say that because my anticipation would have been that the corn acres would be up 2,000,000 acres from the already high number that was put out in March. However, this, exceptional amount of rain in the in the Delta and the Mid South probably will leave that, acreage number pretty unchanged on corn.
• 13:30
  Todd Gleason: Does anybody think that USDA WASI, and they only do this on occasionally from the World Agriculture Outlook Board, will change the acreage number next week prior to the time that we get to the acreage report, actual acreage report at the end of the month? There's a lot of data that they will have gotten at that point.
• 13:50
  Matt Bennett: No. No. If you look at precedents, don't I don't I don't really I don't think so. I mean, could be wrong.
• 13:57
  Aaron Curtis: I'd be interested to
• 13:58
  Matt Bennett: hear what everyone else thinks, but I I I don't see it happening.
• 14:01
  Ellen Dearden: I think it might be a bigger question to ask is whether there's gonna be a resurvey in August of acres.
• 14:07
  Todd Gleason: We'll find that out, I suppose. I know we will. By the time we get to the end of the month, you'd yeah. It could be.
• 14:13
  Ellen Dearden: Yeah.
• 14:14
  Todd Gleason: Yeah. And they would resurvey Ohio, parts of Indiana, Indiana Yeah. Maybe Illinois too, I I suppose. So it'll be interesting to
• 14:24
  Ellen Dearden: watch. Too.
• 14:25
  Todd Gleason: Yeah. And Kentucky. Yep. So we'll find out. Acreage acreage, by the way, for corn at 95.3 at this point.
• 14:34
  For soybeans planted, that is at 83 and a half million acres. We haven't talked much about soybeans, Aaron Curtis. What's the thing you've been watching in the last week in it?
• 14:46
  Aaron Curtis: Well, we are starting to see little bit of competitiveness now for The US for late summer into Europe. Brazil premiums have perked up here a little bit in the last couple weeks or a little bit more competitive in terms of export business going into Europe here late summer. So that's gonna be interesting to watch to see if we, have an opportunity to to increase exports. The question is gonna be probably where do some of these beans come from. We're already seeing, you know, some especially to the East, some pretty well elevated basis levels at the processor side.
• 15:19
  So we continue to see basis overall. The processor continue to be well supported. A farmer really owns the remaining beans, whether it's 15% to 25%. And here at ten fifty and below, they just haven't had a lot of interest in moving. So it's gonna be interesting to kinda keep an eye on this bean basis because it could have some spots around the Midwest where we get, get into the fireworks here as we continue to move forward if we do not rally this board.
• 15:48
  Obviously, the conversation today between the president of China and president Trump is is interesting to watch. Want to continue to try to get some sort of trade agreement done before this fall because new crop sales on the books today are pretty dismal. Of course, they were dismal last year at this point too. So maybe can't read a whole lot into that. But obviously, we'd feel a little bit better going into the new marketing year if we had some sort of agreement or at least some sort of handshake between the two countries that they're going to continue to look for us for a lion's share, or at least our portion of their bean needs here, going into the new marketing year.
• 16:29
  Todd Gleason: Alan, how how should the trade or maybe just you think about what president Trump has said about the phone call that he had with Xi Jinping on Thursday and that leadership, from the administrations, each of them would be meeting soon to talk about, trade. But that in general, the president likes to make the final decisions and do that, more personally. Does this mean we have quite a bit of time to deal with China and we're not as we're not that close at this point?
• 17:07
  Ellen Dearden: I would say that we're not that close at this point. And, yes, I would anticipate that trying Trump would make the final, thumbs up or thumbs down with anything, dealing with China. And I think he's hesitant.
• 17:23
  Todd Gleason: And it's something we will watch and see how it and follow along and see how it moves. As you said, the trade has had a, blunted review of these market volatility things this week. Do you think that's good or bad, by the way, that the trade has been more cautious with them?
• 17:44
  Ellen Dearden: Personally, I think it is, a positive to trade, by I wouldn't say ignoring the the tariff talks, but just looking at the the sideways glance rather than the full front.
• 17:59
  Todd Gleason: Alright. So let's talk a little bit about what producers maybe should think about as it's related to marketing. And we can deal with the old crop if you want, but mostly I'd like to talk about new crop corn and soybeans. Matt, how far along do you think producers really are and how much pressure do they have in the next month to make new crop sales?
• 18:24
  Matt Bennett: You know, the the problem I see, is that, a lot of these producers aren't very far along at all. I I do know that there's, of course, gonna be some exceptions to the rule. Is these corn shade under $4.5 right now and no beans at $10.33 I mean essentially a vast majority of growers would share most likely that if they have average yields, a good crop, but not a banger necessarily, if that's the case that they're not necessarily profitable here. And so it's been very hard for them to step in and get real aggressive at any point in time. I mean, we know this crop was obviously expensive to put in the field again this year, and so it makes it problematic.
• 19:11
  I mean, how much, you know, pressure is there on them, to answer your question? That all depends on their situation at home. You know? If you don't have a whole lot of storage, you know, I'd be very cautious as to go into harvest and try to make that decision during harvest. You're gonna run out of time for a weather market at some point this summer.
• 19:34
  We know that's a ways down the road, as Aaron suggested. A lot of these models are in agreement that we could dry out towards the June. And then whenever you go into July and August, a lot of your longer term models, especially in the Western Corn Belt, you know, are suggesting that that Nebraska, western Iowa, western Minnesota, and the Dakotas could be awfully dry. If that's the case, maybe this market gets a chance. But if I'm a grower and I'm underwater, I certainly don't wanna make a decision right now here in June before I have a chance to see whether mother nature is gonna help us out any.
• 20:08
  So, you know, as far as getting scared into making sales right now, I'm not sure that that's something that, I wanna propagate. I do wanna have a grower, though, that has a a plan moving forward and has got some sales, some targeted sales in here and has some flexibility just in case they do end up drying out after after all.
• 20:27
  Todd Gleason: I know, Aaron, you will be talking to producers and growers and giving them some ideas of what those targets ought to be. What are you telling them?
• 20:34
  Aaron Curtis: Well, we bought less than 5% of new crop across the Midwest. So once again, we're going into the summer months with very little on the books overall. If you remember last year, did the same thing. Of course, corn market now last year never really gave anybody much of an opportunity. The seasonal didn't really play out and really never had any weather scares and it was kind of a slow retreat all summer and into fall.
• 20:58
  Seasonally, we still think there's a chance for a little bit of a bounce in here typically into this mid June timeframe. We'll see if the crop report next week helps us out with that at all. But today, if I was looking at numbers, 4.75 ish is kind of an objective to add to sales, which is still another $0.25 higher. But I guess still, call it hope or call it wishing, but I still think we get a little bit of a corn bounce in here at some point this summer to add to those sales and hopefully increase that risk management here as we go into the fall.
• 21:34
  Todd Gleason: And Ellen, your thoughts on old crop or on new crop corn?
• 21:37
  Ellen Dearden: I'm very cautious about the guys that need to sell off the combine because they do not have home storage. And for those particular fellows, I'm really anxious for them to be 50% sold with feeling that they want to be a % sold of the new crop. They have to sell off the combine on the corn in that $4.60 to $4.75 range.
• 22:03
  Todd Gleason: How about for soybean?
• 22:04
  Ellen Dearden: Beans, I'm I have a little bit more hope because we got a little bit more targeted time frame that weather issues look to be, a little bit more on the hot and dry side. So I think we've got a little time on our side. However, saying that, I would caution that keep in mind that weather markets don't last very long. If you get five trading days to ten trading days for a weather market to make their move, that's what it's going to be. But that ten sixty, 10 70 area, November's where I'm targeting to make sales.
• 22:43
  Todd Gleason: On the soybean map, Bennett, they also have acreage on their side because it's what down at that 83 and a half million. And the areas that are wet plant more bean acres a lot of times than they do corn.
• 22:56
  Matt Bennett: Yeah. I mean, there's, there's no doubt that you could see a few more bean acres, you know, at the same time, some of these areas that are wet, it's going to factor in later on, of course, getting those beans planted in such a late fashion. Now we know we can still raise good beans there. But as far as acreage is concerned with soybeans, I'm probably pretty close to where we were for March intentions. First of all, as far as selling beans, I'm like Ellen, I would like to see something above that spring price of $10.54 and we've visited that a couple of times, whereas with corn, we haven't gotten back up to that $4.70 level.
• 23:35
  Over the last twenty years, when we come out of the month at a lower price than that average for February, we've always gone back and revisited on corn. We haven't done that so so far, but soybeans, you know, we have. So I I'd still like to get back up closer to that $10.75 level before I get real aggressive. I think if you could get guys a bid in front of them pushing $10.50 out of the field, they'd probably show some interest.
• 24:01
  Todd Gleason: And then finally, I'll turn to you Aaron. You talked about being 5% sold across the Midwest for corn. Do you have an estimate for soybeans? And and then what's your suggestion?
• 24:14
  Aaron Curtis: It would be similar on beans. It's not very heavy. It's been pretty light on beans as well. So I'm going to say somewhere in that five ish percent as well. So very light sales for both new crop corn and soybeans.
• 24:29
  But to me, right around that $10.75 area for November beans is what I'd be looking for as a target to increase sales if we get there.
• 24:39
  Todd Gleason: What do you want to watch most closely in the next, I guess, two to three weeks? Or and is that the time frame you're thinking about and what changes that time frame if it's not?
• 24:52
  Aaron Curtis: Yeah, so these extended models, if they continue to advertise a little bit of hot dry weather, I'd be using that to the advantage of hopefully get a little bit of bounce here. I still think they're just a negative sentiment on the grains that are continued despite the fact that old crop carry out is relatively tight. I mean, you look at the world numbers, taking China out, the balance sheet is even tighter than what it is in The U. S. So that should be relatively supportive for corn, got a big Brazil crop comment as well.
• 25:26
  So continue to watch that competitiveness versus The U. S. For the corn side. But I guess I wouldn't fall in love with any big rallies if we see them based on weather because I still think there is a little bit of negative sentiment from some of the managed money. So I wouldn't trust a very extended rally.
• 25:47
  We'll be getting some offers in if we do see a little bit of a weather rally to add to some sales.
• 25:52
  Todd Gleason: And, Alan, because we talked with Matt about the cattle market during the closing market report on Thursday afternoon, folks can find that online @willag.org. Look in the podcast section. It'll be there for five or six days there. Can you tell me about your assessment of what's been happening in that marketplace?
• 26:12
  Ellen Dearden: We've been showing, the cash market leading the futures market. That's a bullish scenario for the cattle. And we have continued to see the futures market work higher, making new contract highs every day. That's not a market, but I think we're in some pretty lofty levels. You have to be cautious.
• 26:34
  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. You can do that again on our website. The address there is willag.org. Our thanks go to our panelists this week including Ellen Dearden of AgReview.
• 26:51
  She's in Morton, Illinois. From Midco in Bloomington, Illinois, Erin Curtis joined us. And from Windsor, Illinois, we were joined by Matt Bennett of AgMarket.net. I'm University of Illinois Extension's Todd Gleason.