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Jan 07 | Closing Market Report · Closing Market Report

• 0:00
  Todd Gleason: From the Land Grant University in Urbana Champaign, Illinois, this is the closing market report. It is the January 2025. I'm extension's Todd Gleason. Coming up, we'll talk about the commodity markets with Greg Johnson, the weather forecast with Drew Lerner, and we'll hear from Jordan Fife who is with BioEurgia. We talked with him from time to time.
• 0:21
  They own the ethanol plant in Peoria, but he also is centered in Houston right there in the energy sector and has worked extensively in that area. We'll talk with him about Venezuela and crude oil from there and how it might be processed here in The United States on this Wednesday edition of the closing market report from Illinois Public Media.
• 0:40
  announce: Todd Gleason services are made available to WILL by University of Illinois Extension.
• 0:46
  Todd Gleason: March corn for the day settled at $4.46 and three quarters, up two and three quarters. December at $4.63 and 3 quarters up two, and March beans, ten and three quarters higher at 10.67. The November new crop at $10.75 a quarter, up 7 and a half cents on this Wednesday afternoon. Greg Johnson from TGM, totalgrainmarketing.com now joins us to take a look at the marketplace. Hi, Greg.
• 1:10
  Thanks for joining us again on Wednesday. It's been a fairly good week, particularly for soybeans. I guess China's been back in the market, and sometimes the market's happy. Sometimes it is well, we already knew that and happy again today. Were there more sales or something else happened?
• 1:27
  Greg Johnson: No. That's exactly what it is. The sales have a lot of people thinking that China has now fulfilled 10,000,000 metric tons of the 12,000,000 metric ton commitment that they supposedly agreed to, even though we haven't seen the actual agreement yet. But yes, every time there's another sale announced, that gets us a little bit closer to the $12,000,000 people have always asking, is that good or bad if China buys 12,000,000 And I always say, well, dollars 12,000,000 is better than zero. But you have to remember that in previous years, they bought as many as 23,000,000 to 25,000,000 metric tons of soybeans from The U.
• 2:04
  S. So we're still not back to where we were, but obviously, it's better than zero.
• 2:09
  Todd Gleason: It is better than zero. I do have a question about that, 10,000,000,000. Is is it that they have purchased made new purchases? Or does that count something from the beginning of the marketing year?
• 2:27
  Greg Johnson: Well, that's a good question. I think this counts for the marketing year, which started September 1. Or is it yes, September 1. So the question is, once they fulfill the 12,000,000 ton quota or for the agreement, when does the 23,000,000 metric ton quota start? Is that a calendar year?
• 2:57
  Or is that a marketing year? And does the marketing year not start until the '6? Or is that a calendar year where they have to buy those by the '6? Because you would think that the $12,000,000 they're getting they have to buy that by the February. Chances are they'll get that done.
• 3:15
  They're well on their way, ten out of twelve. But then the South American crop comes online March forward, and you would think that China is going be buying most of their beans needs from South America for the next six or seven months. So that kind of takes us out of the market until this fall. And depending on how many beans South America has, will they it doesn't look very likely to me that we will be exporting many beans to China during the spring and summer months. And so then well, it's kind of critical that we start back up again in the fall.
• 3:48
  So I guess I think it's a croppier thing that probably won't start until September '6.
• 3:56
  Todd Gleason: It also might be interesting to see how China reacts to the Trump administration's, playing in the Venezuelan oil fields. China is its primary export marketplace. I suspect that they might not be very happy about that, and it could have an impact, I suppose, on trade in the coming year as well. We'll have to wait and see what that looks like. In the corn market, what have you been watching this week?
• 4:23
  Greg Johnson: Corn market just continues to stay in that 30¢ trading range. The good news is we're back to the midpoint that we were down at the bottom of the range. Now we're in the middle of the range. So that's good. We do have a USDA report.
• 4:35
  The all important January report comes out Monday at eleven Traders are hoping, expecting USDA to lower that corn yield. Some people buy as many as four or five bushels of the acre. And I was just doing some back of the napkin figuring, a four bushel drop would translate to about three eighty million bushels if they lower the feed usage by a couple of 100,000,000 from $6,100,000,000 to $5,900,000,000 That would offset 200,000,000 of that 3.8 drop. So we could see a net drop of maybe 180,000,000 bushels, which sounds good. But keep in mind, that just gets your carryout from 2,100,000,000.0 down to 1,900,000,000.0 or $1,850,000,000 So we're not going to run out of corn.
• 5:22
  It makes the ending stocks table look a little tighter, but 1.85 is still plenty of corn. And so I guess I'm still in the camp. If we do get a friendly report, that might be a selling opportunity, not the beginning of the next bull market.
• 5:39
  Todd Gleason: And Friday morning, the US Supreme Court will deliver some opinions. It's not clear that there will be an opinion delivered about tariffs. It is possible. We'll be able to talk about that Friday afternoon. It could have an impact on the World Act supply and demand estimates as it's related to exports, I suppose, too.
• 5:57
  Greg Johnson: Oh oh, yeah. You you talk about, causing chaos and and confusion. If the Supreme Court would rule it that the Trump tariffs are not constitutional, where do we go from there? Do we have to renegotiate all these individual trade deals? Do we have to give back money?
• 6:14
  Oh my gosh, yes, that some people are saying that the Supreme Court may kind of allow it to tell them that they're not illegal, but we'll let you keep what you've done just because it would be so confusing to try you know, rectify what's already been done. So, yeah, that that that I I think a lot of people are gonna be, you know, interested in in what the supreme court decides whenever they decide that later this week or next week.
• 6:41
  Todd Gleason: A couple of big things to watch. Thank you for helping us pay attention to both the US supreme court and the World Act supply demand estimates. The final crop production numbers, those are throughout Friday and Monday, respectively. We'll talk with you again next Wednesday.
• 6:56
  Greg Johnson: Sounds good. Thanks, Todd.
• 6:57
  Todd Gleason: Greg Johnson is with TGM. That's totalgrainmarketing.com. You all may remember that we have talked to Jordan Fife of Bioergia. He's the president
• 7:11
  Greg Johnson: of
• 7:11
  Todd Gleason: Bioergia Trading actually out of Houston, Texas. We've done that from time to time over the years. That company, BioEurgia itself, owns some interesting assets including an ethanol plant there in Peoria, Illinois and a couple of other things. Jordan is based in Houston. And as it happens, Jordan, you're right in the middle of the energy sector with, your neighbors in the office buildings, I suppose, being Chevron and Conoco and BP and a whole bunch of other places?
• 7:42
  Jordan Fife: That's correct.
• 7:43
  Todd Gleason: So I'm gonna guess that the last three days when you've been out just at the local pub or eating lunch, that there has been a lot of interesting conversation. I want to talk with you about Venezuela and the oil that is produced there to begin with, and then to maybe get some insights from you as it's related to what the consequences might be or the future, either one. Let's begin with the kind of crude oil that comes out of this Venezuela fields. It it is heavy sour as opposed to sweet light. What are the differences?
• 8:24
  Jordan Fife: That that's a a great question. Thanks always for for having me, Todd. Happy to to speak, about this topic. So Venezuela has, as you alluded to, a heavy sour crude. That means it's dense.
• 8:38
  That means, in the industry, a lot of people call it roots and rocks. It's harder to extract. It's much, much denser, and its application is different than a light sweet. Light sweet is what we have here in America, and that's what we're running through our Gulf Coast refineries right now. And our Gulf Coast refineries, just for for your edification, is running at about a 95% efficiency.
• 9:00
  So, that's about as much as you can run a refinery right now. That's the pedal to the metal, the floors to the ground. That will be important a little bit later on in this conversation, but put a little bookmark on that. So we're running a light sweet through, much easier to extract. The application for light sweet is much more on the gasoline side.
• 9:17
  It's a lighter end, so you're producing a lot of lighter end products out of it. When you use a heavy, sour, like a Venezuelan crude, you'll produce more asphalt. You'll produce more diesel. But there is a complication that I don't know if a lot of people know about with Venezuelan crude. It is so dense that you actually have to add what's called diluent to it to make it liquid enough to go on to a vessel to export it.
• 9:44
  So you have to add something that thins out the crude once you extract it from the ground. That is not the case with the light sweet crude. A light sweet crude, is very liquid. And it's also a very different color. If you've never seen it, it sometimes is a yellow.
• 9:56
  Sometimes it's a green. Most people think all crude is black because they call it black gold. The dense dense stuff is very, black, but the light sweet is actually a different color and it's it's it's not nearly as viscous. So one, just for everybody, you have to add this stuff called diluent to put it onto a boat or to put it into a pipeline or anything like that. So that is something that has to be imported.
• 10:15
  Diluent comes from natural gas processing. The most of the diluent that we get in The United States comes from Canada, because Canada also produces a heavy slate. Their their tar sands are are are heavy. Not as heavy as Venezuela, but it's it's something that is much more close to that than what we produce here in The United States. In addition to it being extremely viscous, the Venezuelan crude, it is also higher in sulfur.
• 10:42
  So you have to treat that. And there's a lot of refineries that are not set up to do so. So I'll pause there, and if there's any questions you'd like to ask around that, if not, can kinda go into the configurations of the Gulf Coast refinery versus the Midwest refinery here in The United States and then the impacts that this could have on the oil industry in large.
• 11:02
  Todd Gleason: That was my next question, was the difference between the configurations and what this might mean in The United States. Because here in the Midwest, we do have refineries, but they certainly are configured differently than those that you have along the Gulf Coast. Tell me about
• 11:17
  Jordan Fife: Absolutely. The Midwest refineries are actually more suited to take Venezuelan crude because the Midwestern refineries in let's call it Joliet in Illinois or BP Whiting in Indiana or your refineries in Michigan, or the Dakotas even. They're taking in a lot of Canadian crude. And that Canadian crude, as we just discussed earlier, is a heavier crude. So they, again, once again, diluent and everything like that to it to thin it out a little bit.
• 11:43
  Maybe they'll blend it a little bit with a little bit of light sweet. But those refineries in the Midwest are more capable of taking a heavy, crude. The refineries, and I alluded to this earlier, that are running at 95% in The Gulf, they're taking in a little bit of of of heavy crude. But for the most part, they're running a light sweet crude through their their slate right now. If you took in all of the Venezuelan crude and then stopped taking the light sweet to our refineries in the Gulf Coast, you'd have to play some shell game to re reconfigure everything.
• 12:17
  And as I said, since we're running at 95% capacity, it's not like there's extra capacity out there to run it. So it's a very interesting idea. You know, we're hearing the news and everybody like that saying, oh, we're just gonna bring in all this because the the refineries can take it. Well, they've got contracts in place, you know, for crude they've already bought well throughout the year. So you can't just displace those barrels and not take them.
• 12:37
  Again, they've configured these Gulf Coast refineries to take more light sweet, and and they're profitable. The last thing you know is is is these oil refining companies are extremely profitable right now. Do they wanna overturn the apple cart on something that might not be there in two years? That's kind of the these are the the next questions we start to ask ourselves. How long does this last?
• 12:59
  What kind of government guarantees do we have? You know, And and that hasn't even touched on the fact that the Venezuelan oil infrastructure needs billions and billions and billions of dollars to get it back to its heyday. And would that cut off the oil industry's nose to spite their face because they have invested billions and billions of dollars in United States oil extraction that's going very well? So I think there's a lot of people's expectations that we're just going to The United States as we we'll just start taking all this Venezuelan crude into the Gulf Coast. Well, one, it's really not set up to do it right now.
• 13:30
  Two, the refineries are running at a high, rate of of efficiency, so there's not excess capacity to take extra crude. And three, the real refineries that should be taking more heavy crude are the Midwestern refineries as we've discussed, but they've got contracts with Canada. So the the displacement of crude really would come from more heavy, you know, brothers in arms, if you will, long term, which would be Canada. I I I don't know how it's gonna play out, and frankly, I don't believe anyone does. But I can tell you right now, we have not increased The United or excuse me, the global oil production overnight.
• 14:06
  All we have done is just reshell game where crude could potentially go. I don't think it's a long term solution. It would have to be a very long term solution. So I should be able say more short term solution that we're going to have this flood of Venezuelan crude into The Gulf to be processed and and then sent back out. I think it would make more sense to resell the oil to West Africa or to China or to someone like that.
• 14:29
  We frankly don't need it just yet. And I don't know how you would get it to the Mid Con refineries that are more set up to take it. Again, we've discussed you need to put diluent into it to make it to more liquid, less viscous. You'd have to maybe ship it up the Mississippi River. These are all expensive and non, preferred logistics.
• 14:50
  It's not a slam dunk. It's not a home run. It's not like we just found something that will automatically be processed is, I guess, what I'm trying to convey.
• 14:57
  Todd Gleason: So you, in a former life, worked for Racetrack Petroleum for five years in various positions, including as their transportation analyst, pipe and waterborne scheduler as well. Do you see a way that things could be reconfigured longer term that that would possibly displace Canadian crude coming into the Midwest? And I think mostly, is it piped in, or is it coming in by rail?
• 15:27
  Jordan Fife: The Canadian crude is piped and rail. Crude by rail has decreased over time, but that used to be the kind of invoke way to do it. The company I work for, BioOrgia, actually used to own, we have sold it since, a North Dakota crude by rail facility. And by the end of the asset's life under BioOrgia, before we sold it, it was mainly doing frac sand. And so so crude by rail has almost it hasn't evaporated, but it is decreased 90% since we've found ways to extract heavy Canadian tar sands.
• 16:00
  Most of that is being moved by pipe. But there is some truck, there is some some some rail, no doubt. But but long long term, absolutely, things could be displaced. But most of the time, and, you know, let's let's take this back to like an agricultural analogy, You change your behaviors when things are no longer profitable. Right now, these companies are profitable in doing what they're doing.
• 16:26
  So to change it just because and I'm not just saying, you know, I'm picking on Trump or anything like that, but just because Trump has done something and it's like, well, now you need to do this. There's a lot of hesitation. And and, you know, rewind the tape. Oil companies were in Venezuela. Venezuela was, nationalized, and they created Pedevesa under Chavez, and then obviously went to Maduro.
• 16:45
  But these oil companies are, you know, once bitten twice shy. Right? Would you go back to somewhere that you used to operate in that your your assets were were nationalized by a dictator? You need a lot of assurances to do that. And the the infrastructure and, you know, you've probably heard a lot about that, the infrastructure has been decimated over the years of neglect in Venezuela.
• 17:04
  But on top of that, their best engineers and everyone like that fled Venezuela, and and a lot of them live in Houston. My my old neighbor was a a petroleum engineer from Venezuela, and he could not go back home. He can now, so that's a win. But, they've lost a lot of expertise, and they've lost a a lot of infrastructure. It would take a lot of money, in in addition to assurances that this would not occur again for it to really start displacing.
• 17:33
  Right now, it's holding pattern. Everybody's waiting to see what's next. You know, the oil companies are visiting the White House. There there's talk of hedge funds. I think Trafigura is going down to Venezuela to meet, both with The United States side and and current Venezuelan representatives.
• 17:49
  People are lining up and and getting poll position. But I think it's much more of a we want to hear what you have to say before we start investing money. Because it will be tens and tens of billions of dollars and and years and years of hard work. You guys have probably seen the facts and figures. They're they're extracting a small amount of the oil that they need right now.
• 18:08
  Ultimately, it will come down to if it's economically viable or not. And and from what I've read from multiple reports, it takes between 60 and $70, per barrel for new Venezuelan production to come online. And right now, right before I came in here, oil was sitting right around $55. I know everybody wants cheap gasoline. Everybody wants cheap distillates.
• 18:32
  You know, I'm in that camp. But if you look at inflation, and and to other commodities, rare earth specifically, and then you compare it to the inflation we've had in oil, 55 to $60 crude oil is pretty cheap, to be perfectly honest. I I I know that's hard for some to hear, but it's actually pretty cheap. And I don't think the oil companies are going to continue to explore and flood the market knowing that, you know, a lot of the shale production starts coming offline at sub $50 crude. So increases in one is gonna push down another in my mind.
• 19:08
  And to answer your question, sure, you could start displacing and moving stuff around, but it's gonna be years. I I don't think it happens overnight. I've been wrong before. I'm gonna be wrong again. I feel pretty confident in that statement.
• 19:20
  Todd Gleason: Hey. Thanks much. I appreciate it, Jordan.
• 19:22
  Jordan Fife: Anytime. Thanks, Doug.
• 19:24
  Todd Gleason: Mhmm. Jordan Fife is with Bioergia Trading where he's the president. Thanks to him for joining us here on the closing market report. Now let's turn our attention to the weather forecast. Drew Lerner joins us from World Weather Incorporated in Kansas City.
• 19:37
  Hi, Drew. Thanks for being with us. Let's get right to it. Start here in The United States. Things warmed up a lot.
• 19:44
  I'm wondering how the hard red winter wheat growing regions are faring and what issues you might see them facing in the future.
• 19:53
  Drew Lerner: Yeah. You know, probably the most important thing with the wheat is the fact that it's been dry. That's actually the saving grace, I think, this situation. I say that because it has been so warm. The soil temperatures are definitely supportive of weak development.
• 20:08
  If we had moisture in the ground for Oklahoma and Texas and even the Delta, and we've had some pretty impressive days. I think last Sunday afternoon, we had highs in Western Kansas reaching 79 degrees, which is hard to believe. But nonetheless, winter hardiness is certainly been reduced or removed in a lot of places, but we are warm enough in Oklahoma and Texas for crop development. It is so dry that that development is pretty much on hold. Still have reduced hours of daylight obviously and some, some coolness at night, but I, it's really important that we get back on track here and bring in some colder weather and, and not let it rain while we're still warm.
• 20:52
  I, I think that is so important. If we get a good rain in these areas and it stays warmer than normal, and we're going to really stir up some crop development. And I think that's gonna set the stage for a problem later. So that I think needs to be closely monitored. We do have a low pressure center that will occur tonight coming out of the Southwest United States and will move through Kansas and very quickly to the Great Lake Street and all that will occur tomorrow during the course of the day.
• 21:19
  Behind it will be a little stream of rain and that will probably produce a trace upwards to maybe three or four tenths of an inch in hard ribbon or wheat country. Some greater amounts certainly occurring from Eastern Kansas outside of wheat areas through Iowa and into Wisconsin. We're going to see some one inch plus amounts of rain in that corridor. So that'll be good for them down the road. But again, it's not so good for putting moisture in the soil and weed areas.
• 21:44
  Now we are gonna cool it down though. And we're gonna actually stir up a second storm system that'll occur Friday and it will generate snow in Colorado and areas southward into the Northern Texas Panhandle and Southwestern Kansas. We'll see a small area there. They'll come up with some healthier amounts of snow. So that will contribute to the moisture that we're going to get from tonight and tomorrow.
• 22:07
  So the bottom line is we wanna cool it down and we will cool it down for about two days and then we'll turn around and bring some warmer air back into the plane. So again, I just kind of encourage a little closer watch on the Southern Plains as we go forward through the second half of winter. I don't wanna advocate a big problem or anything, but things could get out of hand if we don't get more consistent cool weather.
• 22:31
  Todd Gleason: Speaking of problems, and I don't wanna talk about Brazil because I don't think there's a problem there, but in Argentina, it's kinda do they or do they not have an issue that is developing? What can you tell me?
• 22:41
  Drew Lerner: Yeah. You know, last week, we saw temperatures in the nineties to over 100 degrees in La Pampa and Buenos Aires and some neighboring areas in the San Luis and Cordoba. And that Southwest corner of Argentina has been dry for a good couple of weeks now, and they do need some right now. I'd say dry. They've had a few showers, but it's been well below normal.
• 23:02
  With the heat last week, it really zapped a lot of that moisture out of the soil. So topsoil and subsoil moisture is very limited in La Pampa and San Luis and some areas in Southwestern Cordova, just in that particular area. You get a little bit of further to the east and subsoil moisture is still relatively good. And outside of last week's heat, we really haven't had that much hot weather. And we do have a few showers that are occurring today across some of that region.
• 23:33
  They aren't very impressive, but it's going to add a little buffer for those areas that have subsoil moisture around. Now this weekend, we're going to see central parts of Argentina come up with some significant rain. And then late next week, we'll finally bring an opportunity for some moisture of significance to perhaps Buenos Aires. So the bottom line here is that, yeah, there some areas that are hurting, but most of the major grain and oilseed areas have not been seriously impacted thus far. And if we get the showers that are advertised over the next week to week and a half, we will probably stop them from having a real serious issue.
• 24:14
  But I can't get excited about this having a big long term impact. And it looks like when we look down the road in weeks two and three, there's an opportunity for some showers and certainly no high pressure ridge is gonna make them hot and dry. So think I for right now, we just kinda need to watch what goes on, not get too excited. This isn't gonna be a a big deal, I don't think, unless something changes for the second week.
• 24:36
  Todd Gleason: Hey. Thanks much, Drew.
• 24:37
  Drew Lerner: You have a great day.
• 24:38
  Todd Gleason: You too. Drew Lerner is with World Weather Incorporated in Kansas City, joined us on this Wednesday edition of the closing market report that came to you from Illinois Public Media. I'm Todd Gleason.