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Mar 20 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the March 20 edition of Commodity Week.
• 0:09
  announcer: Todd Gleason's services are made available to WILL by University of Illinois Extension.
• 0:14
  Todd Gleason: Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Danny Poff from Strategic Farm Marketing in Champaign, Illinois, and Matt Bennett of AgMarket.net. Commodity Week is a production of Illinois Public Media. It's public radio for the farming world online on demand anytime you'd like to listen at willag.org.
• 0:34
  That's willag.0rg. We'll begin as usual by getting a list of items that we should discuss from our panelists. We'll start with you, Danny Poff.
• 0:46
  Danny Pfoff: Oh, I think we should make sure the farmer's in the loop on the most recent e cap payments with FSA, check-in with them as they look forward to 2025 marketing as 2024 marketing is mostly wrapped up. I think we need to organize and work on our game plan for 2025.
• 1:04
  Todd Gleason: And, Matt Bennett, how about you? What's on your list?
• 1:06
  Matt Bennet: You know, we're coming up on acreage, of course, so we wanna talk about that somewhat. Clearly, tariffs has been a big concern, but I don't think we've got a whole lot of answers there. But, yeah, I saw some bull spread in the market there on Thursday, and I thought it was, certainly compelling to talk about, you know, some of the demand, that we've got going on with this corn market, you know, and looking at exports moving forward with the USDA might have to do as far as go.
• 1:30
  Todd Gleason: Danny, let's begin with those Ecap payments. These are the last thing that was our were signed off by president Biden in the lame duck session. There will be some paperwork that comes out on them. What can you tell us, from your perspective in, the crop insurance industry what this means?
• 1:49
  Danny Pfoff: Yeah. So I think FSA really kind of got the ball rolling on applications on Wednesday this week. And I just said, there's a little bit of variation county to county. Some are doing DocuSign, some are doing in person signatures, some are mailing these out, some haven't quite had the training if they're short staffed at some of these county offices. So as always, I would have a little bit of grace here and work with those folks there at times a little bit understaffed and things like that.
• 2:20
  But I think as we transition to what it means for the marketplace, I think this extra funding of $42 an acre on corn and just shy of $30 an acre on soybeans, it will have an 85% pay factor on this first payment. But it may embolden the farmer to really kind of tune out on marketing, think even more here on old crop. And as Matt said, I think bull spreading is really apparent here and basis is firming up as the farmers is pretty uninterested here and the market seems to be kind of in the mode of let's watch some March madness games and hurry up and wait on this March 31 report.
• 2:59
  Todd Gleason: I take it that you are of an opinion, Danny, that producers really do need to pay continue to pay attention, particularly on old crop and making those final sales. I believe I saw something that they were maybe 77% along in, their old crop sales now. A big push in January.
• 3:16
  Danny Pfoff: Yeah. I I, I would concur with that figure. I think soybeans could be higher than that. Cash flow was needed. We've had a really nice rally, so hats off to the listeners on taking advantage of that rally.
• 3:30
  And we saw basis under pressure as a result during that June time frame. And as the farmer shifts gears and focuses more on field work, it's coming back around and basis is firm and spreads are firm, as Matt indicated.
• 3:45
  Todd Gleason: Matt, what's your assessment of current market conditions?
• 3:49
  Matt Bennet: You know, I I think, the way I see the market, right now, of course, it's kind of in a holding pattern. Yes. You've got some bull spreading going on. I agree. The farmer is very short on old crop corn.
• 4:02
  There's not a whole lot out there yet. We're going to say maybe 20% is still in the farmers' hands of some sort. So that is whenever you can see a rally, when you don't have the natural seller present. And so clearly, if you do end up whittling down these stocks, it could be a pretty dynamic market as far as old crop is concerned. New crop, of course, can be held back somewhat by big acreage adjustments.
• 4:27
  Most of us in the industry are noticing producers' unwillingness to be heavy on soybean acres whenever you're looking at sub-ten dollars fall bids. And so I think that beans is certainly a more challenging situation than corn. But I think moving forward, we'll learn a lot more whenever we get out towards the end of the month, see what those acreage estimates are. And then from then, it'll be weather. And I think there's a whole lot to think about whenever we look at weather.
• 4:58
  Clearly, we've got some challenges here this year. It's something that a lot of these guys have been talking about for quite some time. Certainly, lot of dryness, the national drought monitor looks tough. The subsoil moisture levels aren't good at all for most growers. And so we've got to hope for maybe a little bit of an active pattern here moving forward or at least to be able to spoon feed this crop because right now, it sure looks like, moisture is gonna be a deficit for most of us, at least get started.
• 5:25
  Todd Gleason: Well, on the flip side, that generally means producers will move quickly in the field, and those numbers will be dropping out from USDA NASS each and every week showing that corn and soybean planting is progressing quickly. I would think that would put push, put some pressure on the marketplace too.
• 5:44
  Matt Bennet: Oh, it certainly could. You know? I think that a lot of the forecasts I'm looking at are showing Western Corn Belt should make very rapid advancement. I think Eastern Corn Belt might be a little on the wetter side, you know, and that includes us. I mean, I know Eric Snodgrass was on our fundamental video here though on Monday, and he talked about the chance that Illinois through the Eastern Core Belt could be a little bit on the wet side here this spring.
• 6:09
  I think a lot of others are calling for something similar. But in the West, I think they're going to go hard. And there's some question marks, hey, if they're excessively dry, will growers, for instance, the Dakotas, in some of the areas in the Upper Northwestern quadrant of the Corn Belt, would they maybe back off corn acres? I don't think that's the case because typically if they do get into a tough weather situation, their best hope for insurance anyway and biggest payout would be as far as corn is concerned. It may call into question how much they invest in that crop.
• 6:42
  But I agree with you that if we make rapid pace, there's no doubt the market in the past has looked at that with a bearish viewpoint, but we got to pay close attention to what the weather's offering us at the same time.
• 6:54
  Todd Gleason: And, of course, as we look forward to this, Danny, that we're still, at least two, maybe three weeks out from farmers really making a push in a large part of the Corn Belt, though I suspect that you and your colleagues there at strategic farm marketing have been, working through some of the numbers just as AgMarket.net has and the impact on the marketplace. Do you see a big push in the Western Corn Belt because of the crop insurance payout figures and the money that they just put in their back pockets from ECAP towards more corn acres?
• 7:32
  Danny Pfoff: You know, I think that train's already left the station. You know, you tell a Nebraska farmer, hey. You're you're gonna be better off planting corn. You didn't even need to finish the sentence. They'd rather plant corn.
• 7:44
  What's more, I think, surprising to me, I just got off a big crop insurance sales season, so I've been at the kitchen table with farmers every day for about two months straight. The amount of corn on corn in Illinois and Indiana was just really it's an anecdotal comment, Todd, but it was just really surprising that I have guys at traditional, they all just rotate, rotate type of thing. But almost every visit, there's a field here or there going corn on corn in the Eastern Corn Belt that I think will really add up when it's all said and done. So I'm really interested to see these March 31 numbers on corn acres. And then a bigger another question, kind of a follow-up to keep the conversation going here.
• 8:28
  If this core number is pretty darn high, let's say the higher end of the range $95,000,000 perhaps, what does that mean for beans, Matt? If beans are 83%, eighty three point five % and then all of a sudden, all these stocks are heavy in Brazil and elsewhere and President Xi is planned to visit President Trump in The U. S. In the not near distant future and they make some sort of agreement and these bean acres are not going to be bean acres, they're going to be corn. So I'm kind of speculating looking out ahead there, but any comments there?
• 9:07
  Matt Bennet: Yes. I mean, I think you're on target. I whenever you look at acres, just tell you, our official estimate on corn, 95.39% and beans was 82.75%. So even a little under. Yeah.
• 9:21
  And the comment, I think, to your point, is a lot of folks are looking at the economics and saying, hey, I just don't think I can make this work. I mean, to crop insurance, you're $04 $05 above a year ago as far as corn is concerned, and beans aren't far from $1 lower than what they were a year ago. So I think it just adds fuel to the fire that you could see a pretty big shift. Now whenever you look at the domestic balance sheet, if we hold at three eighty million bushels for this marketing year, there's no doubt that only throwing 82,500,000 to 83,500,000 acres of soybeans gets you razor thin as far as the balance sheet goes for next for this marketing year that we're currently in. And so I tell you what, you could be looking at a pretty sizable difference between the world balance sheet and U.
• 10:10
  S. Balance sheet to where a lot of that production shift, if you will. I mean Brazil over the last twenty years has averaged 3% more planted acres on soybean. Would there be an agreement at some point? And you've got to hope that here in The U.
• 10:23
  S, we see that we're continuing to not only lose the share of world exports, but we're actually seeing our exports move lower over the course of the last few years in totality. So as far as beans are concerned, so with that being the case, we need some domestic consumption here if we're going to continue to plant soybeans. You've to have some renewable fuels initiatives that are going to be supported towards, for instance, renewable diesel, towards potentially SAF. If we don't get those, and I think you're looking at a pretty big shift. And who knows, maybe there could be an agreement to where some of the other, let's just say Brazil, let's just talk about it.
• 11:02
  Brazil is going to be your soybean producer, we're going to be your corn producer. But I don't think Brazil overall would be happy with just that. I think they're still going to want to plant a heck of a lot of corn as well. So I think we're looking at some challenging times if if the government doesn't get solidly behind, you know, domestic renewable fuels program.
• 11:21
  Todd Gleason: Danny, what's your thoughts on this process? You asked the question, but I'm sure you have some thoughts as well.
• 11:27
  Danny Pfoff: Well, I just think it's just the the once these the anhydrous goes on the field, once these seed decisions are mostly made, there's just kinda no going back from it. So it's just it doesn't, you don't flip the switch and turn all those corn acres into soybean acres. So it could be really interesting dynamic, which would be par for the course for 2025. The geopolitical front is affecting trade flows. I'm looking outside markets, equities are having a tough month for those folks.
• 11:59
  So I think that, the funds are kind of leaning, trying to make a buck here. Also the other dynamic here on this March 31, guys, it's going to be month end and quarter end. So, just so many moving parts here that it's almost unbelievable.
• 12:14
  Todd Gleason: And we'll get the grain stocks report as well. I would like the two of you to continue to focus on this corn conversation just a bit. Because, Danny, you were at the table and because, Matt, you farm, what was it last fall when many of these decisions were made that caused producers to decide they were going to put more corn acres in the ground, if that's truly and I know, Danny, from your perspective, it has happened because you, were at the table. But if it's truly a larger number, why is it? What were the economics?
• 12:46
  What was the decision point that caused them to change their rotation?
• 12:51
  Danny Pfoff: You know, it's a simple answer, but just better chance at profitability. I mean, you looked at a profitability grid on soybeans, the stars really got to align to make a buck there on beans. You need to have top 10%, top 15 of yield possibilities and we got to sell the beans at the high of the markets, whatever that may be when we arrive at that and no pressure, right? Pretty tough to do. Matt mentioned the Fed average is a whole dollar lower on soybeans.
• 13:24
  Believe it or not, the Fed average on corn is the third highest in the last ten years because corn was such a dog 2014 to 2020. So a simple easy answer is profitability. There is another factor too. Farmers would rather plant and harvest corn, in my opinion. Soybeans can be a little finicky in harvest season on soybeans.
• 13:48
  So like I mentioned, was kind of joking, but kind of not. Western Corn Belt, those guys would rather, farm and be a corn farmer if they could. And if the economics align that way, even better.
• 14:01
  Todd Gleason: Matt, from your perspective, is he right?
• 14:04
  Matt Bennet: Yes. I mean, absolutely. I think another thing, and I'm sure he would agree with this, is that some of the decisions for even bigger corn acres have been made recently. Quite frankly, the weather has been conducive. This spring has been quite mild.
• 14:19
  You've seen that some of these guys, from what we were told last week, were putting on anhydrous on soybean stubble. And then they turned around and went to the co op and said, hey, we're going to put some corn on corn on as well. It's just going on like a dream. And we're sitting here looking at profitability potential for corn being substantially better than what it would be for soybeans. And so yes, guys like planting corn, there's no doubt about it.
• 14:46
  My part of the winter that I've spent, for instance, in Iowa, Nebraska and the Dakotas, every room I've been in front of, I've just asked, how many guys are going to plant or gals, either way, how many of you guys are going to plant more corn? In every room I've been in, a substantial percentage of the hands went up. And I've even had some anecdotal comments, hey, we can't raise as good of beans as you do in Central Illinois, but we can raise as good of corn as you do. We've got ethanol plants all around us, especially when you get in parts of Iowa. And so you think about it, in Central Illinois, a lot of us are able to grow incredible beans in this part of the world.
• 15:23
  And to hear from someone doing crop insurance that, hey, a lot of these guys that can grow 75 to 85 bushel beans are still going to switch to corn. It just tells you, Todd, that it's really tough when you look at the economics and you say, hey, right now I can only get whatever, 9.7, dollars 9 point 7 5 for a fall bid. How excited are you about going ahead and planting soybeans in that situation? I think the clear answer is that the vast majority of growers are saying, hey, this just doesn't work for us very well. So I think that our estimate is certainly higher than what some of them will come in.
• 16:01
  But Todd, I won't be surprised one bit if we're not fairly well under the number, you know, a true number if USDA is able to get to it. If if it's not much over ours, I think that that's the trend that's gonna go, you know, because I I think in on June 30, you're probably gonna find out The US Farmer with a decent spring is gonna have planted a ton of corn.
• 16:24
  Todd Gleason: Okay. So you and I both had two late gender ag economist Daryl Goodmey talking to him for twenty years, on the radio, you in ag economics classes at the University of Illinois. Danny, I don't know where where you went to school, so I can't say out loud whether you had Daryl, but I'm sure you learned from him. Here's what he would have told us at that point, at the point at which farmers made the decision to plant more corn acres, to do corn on corn, to change their rotation, that whatever it was that they saw in the marketplace that caused them to do it should have also caused them to market the new crop corn. And maybe, I I think that's I'm I'm really quite positive that's what he would have told us.
• 17:12
  Maybe you can tell me you agree or disagree with that, Matt, and then follow-up with how they catch up because they probably did not.
• 17:21
  Matt Bennet: Yeah. I mean, that's absolutely what he would have told us to do. One point I wanted to make I haven't made yet, is just the ratio from soybeans to corn is still running at a multiyear low. And it tells you from an economic standpoint, that's something that growers are going to look at. As far as the marketing goes, Todd, I don't believe that growers were super active as far as making sales when they made that decision, just from what we've witnessed.
• 17:49
  I think a lot of growers are of the mindset that better days are coming, whether that's right or not. Unfortunately, I think that's the mindset a lot of folks get into. Now whenever we look at the crop insurance price at $4.7 on the years that we come out below that crop insurance average, if you will, in the last twenty years, we've actually traded back to that average before Dec corn before the fall average. So there's obviously a very strong chance that you at least get back up into that neighborhood, then we'd sure hope the growers will at least take a look at that as far as managing some risk once you get back into that level. You're only going to be if you get to 4.7 you're going be $0.09 $75 off the highs that we've set so far.
• 18:36
  Can we get back up to $4.8 I think we can. But at the same time, incrementally selling into the rally to get caught up probably makes quite a bit of sense, especially if you're one of the growers that's decided you're to go ahead and push corn acres just a little bit heavier because I would totally agree with doctor Good's assessment. If you're making a decision based on economics, you need to do something about the economics.
• 18:58
  Todd Gleason: Danny Poff, like me, you would have had access to Darrell for quite some time. You worked in the cash grain segment, in ADM Archer Daniels Midland, have been at strategic farm marketing. How do you view the catch up sales if they need to be made, and I suspect you're gonna tell me they do at some point on these extra acres that producers have?
• 19:19
  Danny Pfoff: Yeah. I I would agree. I don't think they were sold back to back, if you will, to offset that economic decision. Like, they they probably should have been hindsight. But, I agree with Matt.
• 19:30
  I mean, as far as that trend, we usually trade above that Feb average, which was 4.7%, again, for the listeners. And we got the 4.79% in three quarters, back on February 20. So at some point here, I think we could reapproach that recent high. So the message is get
• 19:50
  Matt Bennet: your offers ready, get your orders
• 19:51
  Danny Pfoff: ready. And just in general, like I have a lot of guys that have to really dial in. What are your total acres this year, your share? You're going have some corn on corn? Is this still fifty-fifty?
• 20:03
  What are your share acres? What are we marketing? And then what's if we want to sell 15%, what's that math? So get organized, use real numbers, real figures. There's nothing worse than randomly selling 5,000 bushels or 10,000 bushels.
• 20:17
  What does that even do to the to your pie chart, if you will, if you think of it in that fashion. So get ready. We do have a really strong seasonal in corn. May, early June, ahead of that fourth of July weekend. It's usually some pretty good marketing opportunities that aligns with the weather market.
• 20:37
  Almost every year during that time of year, I'm sure Mac can attest, we get people calling us to buy calls, to have upside on the crop. And if we're only 10% or 20% sold, we should probably just be selling the rally, whatever that looks like at that point. But it might be a little challenging, up getting crazy bullish if we had, my goodness, 95 or 96,000,000 acres of corn, something something like that. That's a pretty big, area to to overcome, I think, this year if that if that happens.
• 21:09
  Todd Gleason: So if you're thinking about when those sales need to be made, you either put the orders in for the futures contracts at $4.80, or $4.40 or $4.45 or $4.50, I suppose, on the cash side depending on what your basis looks like.
• 21:24
  Danny Pfoff: Yes. And I I am a fan. I I know Greg Johnson, a friend of ours. He's pushing their their seasonal average contracting, program. I I do a lot of those with different grain elevators.
• 21:35
  I really do. Because we can have all these offers ready to go, let's say, 4.8, four point nine five. If they don't hit, it means nothing, okay? So a challenge a lot of my clients over the years doing this is execution. So if we think we can get a good chances are we'll get a market balance in May, June or whatever time frame you want to pick.
• 21:58
  I love those averaging contracts. They just execute and kind of balance that with some just traditional offers as well.
• 22:05
  Todd Gleason: Alright. And and then what what can we do on, the future side, as well as the cash side, Matt, from your perspective? And how important is it, for instance, if you're just within the marketplace, either way, cash or futures, to have the order in because
• 22:25
  Danny Pfoff: of
• 22:25
  Todd Gleason: the volatility in the overnight markets?
• 22:27
  Matt Bennet: Yes. I mean, we absolutely would expect a lot of volatility here this year based upon the fact that your balance sheets continue to tighten both U. S. And world. And so there's a pretty real chance that the volatility could be enhanced from what last year was basically nonexistent.
• 22:48
  So if you don't have an offer in, the unfortunate reality at times, things can happen on the overnight market. And you can say, well, I was kind of wanting to sell at $480,000,000 If it gets back to $480,000,000 today, let's go ahead and make a sale. And unfortunately, it doesn't always work out that way. I think that you've got to pay attention. As far as what can you do, in my opinion, you've got to keep some flexibility.
• 23:11
  I agree, of buying calls and getting over your already loans, You got to be cautious with that. The only reason that some folks that we've talked to have bought some calls is because they've actually sold a decent amount of corn. Not everyone's in that camp, but a few of them are. And I think after hearing some of these potential weather scenarios play out, they want to at least have something out there. I wouldn't spend a ton of money here, Todd.
• 23:38
  The thing is that a lot of your growers are going to say maybe they're not as worried about the run from this corn in the 450s up to like a $5 type thing. They just don't want to miss out on a rally that's 1.5 I'm not saying something like that's going to happen. If a drought occurred, clearly, that would be a distinct possibility. And if it was, there's always a chance you're one of them affected by the drought. So you don't want to sell 40%, fifty % of a crop and then end up 70%, eighty % sold.
• 24:12
  So we're urging growers to at least be somewhat cautious in how they're marketing here this year. That doesn't mean they ignore the market, just trying to keep some flexibility. And I think you can do that if you keep a few cheap calls around or maybe you just put a floor under the market whenever you take into account basis and what it's going to be. If that put can make you sleep better at night, I highly recommend as the market goes higher, if you've gotten to the physical sales that you want to be at, you know, layer in a put option here and there just to give yourself a floor.
• 24:45
  Todd Gleason: Okay. For the both of you, we've got a little bit of time left. Do we have a similar marketing plan for soybeans given the expected low number of acres we will have? Danny, I'll start with you.
• 24:58
  Danny Pfoff: I still think, corn's kinda driving the bus. Beans are a follower due to the heavy global supplies of soybeans, but I think we can have offers. I would target probably around that $10.7 mark. We were there mid early February. And then October, we were actually around that $11 handle on the new crop November 25.
• 25:19
  So those seem like can do crazy things. So you just got to have the orders ready. If you don't have them ready, they can't hit. So similar mindset, have the orders ready on beans above where we're at here. I'm not a seller today, just my opinion here at 10:10.
• 25:39
  I think we could get some follow through action as a follower, so much a leader on the bean market. And the seasonals aren't quite as strong as corn, so not as much adoption in some of those automatic pricings on soybeans, like we do see on corn. But yes, beans can be volatile. We've all seen it over the years. They can move $1 very quickly and can humble you very quickly.
• 26:06
  Matt Bennet: Yes. I think for me, it's just as simple as this. Most growers I talk to can't make money here. If you can't make money here, it's March. I see no reason to lock in a loser this earlier in the year.
• 26:19
  I just don't it doesn't interest me at all to sell at this ten ten level. It's just not attractive. It's not profitable. If someone was making a sale here, it's likely due to the fear the market is going lower. But at the same time, if we're going to be talking low bean acres, I'm not saying it's going make the bean rally bean market rally, but it could certainly provide some support to a market that's needed it for quite some time.
• 26:44
  And so I would be a little bit more patient here, kind of let this thing play out a little bit. There's no doubt over the course of the last few reports, you've seen world supplies, which were burdensome up there, 01/1933, '1 hundred '30 '4, get drawn down here to 01/2020. If you start talking about really low bean acres, then maybe your bean market will actually get some life in it. I don't think you're looking at any major rally, but I'd be the same way. I'd at least get back up to that spring insurance price before I considered it.
• 27:15
  But ultimately, the decision has to be based on profitability. If you can call it a profit, I have no issue stepping in and doing something. But, again, very few people can do that today.
• 27:25
  Todd Gleason: Do either of you have a final word?
• 27:28
  Danny Pfoff: Go Illini. Go Illini.
• 27:30
  Todd Gleason: Go Illini indeed.
• 27:32
  Danny Pfoff: Yeah. Same. How about that?
• 27:34
  Todd Gleason: Danny Poff is with Strategic Farm Marketing. Matt Bennett is with AgMarket.net. You've been listening to the March 20 edition of commodity week. I'm Illinois Extension's Todd Gleason.