Latest / Closing Market Report / Nov 27 | Closing Market Report

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Nov 27 | Closing Market Report · Closing Market Report

• 0:00
  Todd Gleason: From the Landecrand University in Urbana Champaign, Illinois, this is the Closing Market Report. Happy Thanksgiving. Coming up, we'll hear a portion of our Commodity Week program. Actually, just one of the three analysts that we interviewed for that program will appear today, Matt Darrow. He is with Kipler and has a very interesting story as it's related to trade, policy, and the movement of grain across the planet.
• 0:27
  We think you'll be interested in that on this Thursday edition of the closing market report that comes to you from Illinois Public Media. It is public radio with the farming world online on demand at willag.org willag.org. Todd Gleason's services are made available to WILL by University of Illinois Extension. Matt Dara now joins us from The United Kingdom. He is with Kipler.
• 0:55
  To remind you, we've talked to a few folks from Kipler from time to time, from Dubai and other places. They are a transportation and freight company, intelligence that is, that is following those sorts of things and how global commodities move across the planet. Matt specializes, I believe, in commodity markets, corn, soybeans, and wheat. Hi, Matt. Thank you for being with us.
• 1:22
  Where in The United Kingdom are you?
• 1:25
  Matt Darragh: So I'm based in England in the West Midland, so fairly central in amongst most of our arable production.
• 1:32
  Todd Gleason: Okay. Well, how did how did the growing season there go? We don't talk very much about The United Kingdom, but just out of interest, how did the growing season last summer go?
• 1:42
  Matt Darragh: Relatively favorable, favorable, I I think. Think. On On the the whole, more favorable than we had perhaps two years ago and the year before, I'd say. Generally benign weather conditions across the board, which has really helped to establish our wheat crop. We are expecting to see a little bit of a contraction on our sort of barley area, but I think wheat is still very much in rotation, and we perhaps might be seeing a larger oilseed rate area as well this year.
• 2:11
  But on the whole, generally growing conditions have been favorable so far as we head into tormenting.
• 2:15
  Todd Gleason: Remind me what it is Kipler does and why.
• 2:18
  Matt Darragh: Of course. Yeah. So Kipler is mostly a a cargo tracking company. So we provide real time information with regard to the volume of cargoes tracked across a number of commodity markets from major exporters to major importers. And this can give users a real time understanding of exports across a number of commodities that covers energy and dry bulk commodities such as grains and oilseeds.
• 2:49
  And then also there are sort of there's a second vertical there, which is the insights package. So alongside the cargo tracking side of things, we also offer research analysts, which some users find useful in regards to understanding the context behind why we're seeing those cargo flows.
• 3:05
  Todd Gleason: And I suppose this is where the intersection comes between freight and what you do, as it relates to commodities such as corn, soybeans, and wheat?
• 3:15
  Matt Darragh: Absolutely. Yeah. Absolutely. So we can help users understand why we're seeing the volume of Brazilian soybeans head to China and why we might not be seeing the same kind of volume from a seasonality point of view of US soybean to China.
• 3:27
  Todd Gleason: Well, what did you tell them early on about this?
• 3:30
  Matt Darragh: Yes. Yes. It's it's a good place to start, I suppose. We we started out the year when we back in April, when we saw that kind of sort of breakdown in favorable trade ties between The US and China. At the start of the year, we were quite pessimistic with regards to US soybean exports to China.
• 3:49
  In fact, we were one of the first research analysts to put out our estimate for well, we were one of the first research analysts to forecast zero US soybeans to China for the 2526 trade year, which obviously is quite at the time, we were looking quite far ahead there. But when we looked at the fundamentals, we saw that we had this huge soy South American soybean crop coming online. And we didn't see we didn't see China necessarily requiring US soybeans in 2526 off the back of the supply it already had available and also taking into account its current reserves. Of course, present day, we are now seeing US soybeans be purchased by China, but and we've adjusted our forecasts accordingly. But we're still quite hesitant with regard to whether that 12,000,000 ton sales commitment will be reached.
• 4:45
  Of course, this is what The US has put out there, but it's yet to be acknowledged by China. And, of course, I appreciate there's a number of analysts in the market there who are doing the numbers here, but we're so four weeks have passed since we had that meeting between US and China and South Korea where we heard of this 12,000,000 ton quote because the commitment be announced. And, of course, I think we're just over 2,000,000 tons, so we're somewhere around a quarter of that commitment being reached. But we only have five weeks left until the end of the calendar year, of which is when China was meant to have reached that 12,000,000 ton commitment. So there's a little bit of concern in the market there that this commitment won't be met, and this is something that we are well, suggesting to our clients is that we don't think it will be reached.
• 5:32
  And we're concerned about the impact this is having on the the twenty twenty six soy corn ratio because at the moment, there's a signal there. I think I was looking at the ratio earlier today. We're about 2.4. So it's it's moving more towards from where it was a few months ago, it's moving more towards soybean planting. But this is off the back of assuming we reach that commitment from China to purge of the the purchase of soybeans.
• 5:57
  So there's a danger there that if China doesn't purchase the soybeans that it's supposedly committed to, that The US will produce a larger soybean crop. And come 2026, they'll be requiring might be again on the phone to China asking for more soybean sales.
• 6:14
  Todd Gleason: There are a couple of questions I have for some clarification's sake. As you talk about the marketing year of 2526, do you think that China will make the total 12,000,000 metric tons for the full marketing year as opposed to by the end of the calendar year or using a different number for the marketing year?
• 6:35
  Matt Darragh: We don't see China reaching 12,000,000 tons for the full marketing for the full marketing year. So for 2526, our current estimate is below 12,000,000 tons, and we may revise this even lower depending on how we see things develop in the coming weeks. And just for just for further context for 2627, we still are a little bit unsure as to whether that '20 I appreciate the 25,000,000 ton commitment was a calendar year, but we're still unsure that we'll see 25,000,000 tons of US soybean exports to China in 2627 as well.
• 7:09
  Todd Gleason: Okay. So given that set of numbers and the ratio that has changed because the price of soybeans has outpaced on the commodity markets at the CME Group, the rise in the price of corn. What are you telling your end users as it's related to the intelligence and where the market might be headed?
• 7:33
  Matt Darragh: We're sort of informing our users that The US sort of corn export campaign will be very important. Of course, in the sense of we're we're off the back of a very strong export campaign at the moment, and we're still expecting this to continue. And, also, the strength of this export campaign is very key with regards to where this will see corn ending stocks come the end of the 2526 marketing year. And if we don't see an improvement with regards to US soybean exports to China, therefore, we might see greater corn planting. And as a result or we may see corn acreage staying at historically high levels, which could lead us to a continual a can you a continued supply pressure with The US corn market.
• 8:23
  For The US soybean market, we're informing our clients that we are seeing very elevated crush demand in in The US. And off the back of this, we're seeing a greater domestic supply of US soybean oil and soybean meal. And as a result, that's why we're seeing that weakness in the soybean meal market. Of course, it's improved in recent weeks off the back of elevated well, increased US soybean sales to China. But nonetheless, historically, Cbot soy meal market is still relatively weak.
• 8:56
  And as a result, we are seeing, elevated competition, globally for the soybean meal market.
• 9:02
  Todd Gleason: How do you see other nations coming into the marketplace for US soybeans, and will they be able to pick up the slack in exports that you do not see going to China?
• 9:13
  Matt Darragh: Yeah. So this is the concern that we have. It's definitely another point that we've been illustrating to clients is that when you look at monthly import volumes by destination, China accounts for about 60% of global demand. So therefore, by month, China accounts for more imports than any other than all other nations globally. So the danger there is that The US soybean price has increased off the back of increased Chinese demand.
• 9:42
  It has now begun losing that demand from rival from alternate export markets. So the likes of Taiwan, Egypt, the Southeast Asia, and North Africa is where we see some of these countries pivoting back towards Brazil. And as a result, The US sector soybean export campaign could be in a worse position because what's happened is Brazil FOB market has begun pricing below the likes of US, this discount to US origin will only widen once we see that 26 crop come online around February time. So the window for US soybean exports to perhaps dominate the export campaign, the the window is is narrowing. And The US could actually be in a worse position if this demand from China is not realized as it's lost as it's also lost demand from alternate export markets too.
• 10:37
  Todd Gleason: Let me see if I can summarize that correctly. So what you're suggesting is that because China was was willing to come into The United States market at a higher price, above what they could actually purchase out of Brazil, make purchases which all were intertwined with the higher price. It priced other nations which would have been turning to The United States at this point to look elsewhere, potentially buy from Brazil, and that in total, if China does not buy from The United States, will reduce even more fully the number of soybeans that are exported out of The US.
• 11:20
  Matt Darragh: Yes. Yes. Exactly that, Todd. Yeah. And that and that's and that's the concern that we have, currently for The US soybean export campaign for 2526.
• 11:28
  Todd Gleason: What kind of number then in that case are you using for the 2526 marketing year for soybean exports from The United States in total?
• 11:36
  Matt Darragh: We're just we're around 10,000,000 tons at the moment. In our in our monthly well, we produce monthly balance sheets. So when we published our November balance sheets, we increased our US soybean export US soybean exports of twenty five, twenty six by 3.2, around 3,200,000 tons. So obviously, we factored in that increased demand from China. But obviously, we've lost demand from alternate origins, which we've already mentioned.
• 12:06
  So we're around that sort of 10,000,000 ton figure. But if we don't see much well, an improvement in Chinese demand in the coming weeks with regards to US soybean sales, we're looking to perhaps drop this lower, which may yeah. We're looking to drop this lower, and we'll also need to factor in our forecast with regards to where we see US soybean prices. If if we can look to see if we might see more demand from the more demand from the likes of Mexico or Southeast Asia for US soybeans.
• 12:35
  Todd Gleason: So consequently, when you were talking about the 2.4 to one ratio, you expect that to change and for more corn acres potentially to be sown in The United States and show up in the March USDA report, I suppose?
• 12:53
  Matt Darragh: With it's definitely a watch point going forwards. We we do we do expect soybean acres to rise year on year at the moment under current fundamentals. But the concern we have in the market, concern that we're telling to our users is that if soybean acres rise beyond if soybean acres rise too much, we may find ourselves in a position of greater US soybean supply and off the back of an absence of Chinese demand. I think that's that's the that's the concern that we have at the moment. So we do think we do in our balance sheets, we do expect US soybean acres to rise year on year for 2026.
• 13:34
  The concern is just that to what extent? Because if we don't see if we don't if that Chinese demand isn't realized, but the market is pricing as if it will happen, this could lead to a greater than necessary soybean acreage expansion and therefore lead to a greater supply of US soybeans on the market and lead to a concerning situation regards to stocks at the turn of the 2627 marketing year for US.
• 14:02
  Todd Gleason: I'd like to turn your attention to freight and longer term functions I know that you have been following, particularly the Belt and Road Initiative China has underway and the port that it is putting on the Western Side of South America so that soybeans can be shipped out of Brazil, I think through Peru. How might that change the global picture once that port opens in your opinion?
• 14:30
  Matt Darragh: In our opinion, I think it would have obviously, accelerate soybean exports from Brazil to, so you it would obviously accelerate Brazilian soybean exports to China, and, obviously, give, Brazil a greater advantage to access Chinese demand in the sense of having a tighter window. And I think I I I'm not too close in the freight market, but I think I would only be able to sort of acknowledge that we would obviously see a smaller window of time for Brazilian soybeans to reach China. And obviously, what this could, in theory, do is usually The US soybean export campaign to China peaks around the time around sort of q four, q one of the calendar year. But if we have a shorter time time frame that's required for Brazilian soybeans to be harvested and sent to China, This could narrow the window that The US has to access Chinese demand, in a year of lesser Brazilian supply.
• 15:33
  Todd Gleason: That would be an interesting function and and drive US soybean exports lower at that point, just closing the window in which you have The United States might be able to export its soybeans. In The United States, domestic crush, as you know, and mentioned earlier, is really on a rip snorter this year. Is that sustainable in your opinion? And will there be demand for bean oil outside of The United States and inside The United States, and how do you see the meal market reacting?
• 16:12
  Matt Darragh: I think we still forecast quite a high utilization for US domestic crush off the back of generally quite obviously very ample supply. And I think for the bean oil market, of course, we're still waiting to hear about the from the EPA regarding the reallocation of SREs, is a key watch point in regards to how that shapes soybean oil demand going forwards. But, obviously, it is leading to downward pressure on the meal market. We did forecast that crush demand would rise in The US earlier this year off the back of those more favorable biofuel policies. But we did acknowledge that, obviously, this would lead to a greater availability of mail within The US and ultimately leading it quite dependent on a strong export market.
• 17:05
  Now this has been challenged by the global situation, of course, where we have a good fundamentals an ample fundamental supply of meal across across other key major exporters, the likes of Brazil and Argentina. And it's also worth mentioning that of the rather elevated imports of Chinese soybeans so we recently had Chinese customs for October, and we've had the sixth the con sixth consecutive month of higher record high month for the for the month of soybean imports. And as a result, this is driving crush in China. And as a result, they have almost a much greater supply of soybean oil themselves, which of which has been is being exported to export markets which will take with one of which is India, where we're seeing elevated Chinese soybean oil exports to India. So as a result as a result of elevated Chinese soybean oil demand, we'll we're seeing that India may not be as present in regard to importing soybean oil from other key export origins such as, you know, such as Argentina or Brazil in light of greater supply from China.
• 18:27
  So there is that challenge there that with regards to how how well The US can yeah. There is the challenge there with regards to soybean oil values off the back of a very well supplied global market.
• 18:42
  Todd Gleason: Matt Darrow is with Kipler and a grains and oilseeds analyst for them. Joined us on our commodity week program, which you can hear in its totality on our website right now at willag.org, willag.org. Matt was joined for the program by Aaron Curtis and Mike Zuzlow. Again, that's up online at willag.org or in your favorite podcast applications right now as commodity week. If you followed agriculture for long enough, you know that livestock producers have a difficult time making sure that they have proper veterinary care for their animals.
• 19:26
  Not that they don't take care of them properly, but just having access to a vet or somebody else that is trained and capable. There are just a shortage of them in the same form that there is a shortage of human doctors in rural areas. Large animal veterinarians aren't around as well. Pork producers in the state of Illinois have a unique program that they're working with community colleges on to develop a way to supplement that. Thank you, Jennifer Tyree, who's the executive director at the Illinois Pork Producers Association for joining me.
• 20:04
  Can you tell me about this program and its impetus?
• 20:07
  Jennifer Tyree: Yes. Absolutely. So, essentially, you think about an apprenticeship and you think of manufacturing jobs. And one of my producers earlier this year said, Jennifer, why don't we have apprenticeship opportunities for livestock industry? And I said, you know what?
• 20:20
  I don't know. So let me find out. And after doing some research working with the US Department of Labor, we found out that we could develop our very own position called a swine animal care technician where it would encourage employees, to hire
• 20:37
  Matt Darragh: How you doing?
• 20:37
  Jennifer Tyree: Community college age students that might be looking to get a little bit more education beyond just coming and working at the farm. They would complete a one year livestock certificate. And then after that, during that, they're working at the farm completing certain competencies. And the goal of this is to develop these employees for long term. We want them to stay at the farm.
• 20:59
  So we ask each student. They get their, tuition covered. Most of their tuition is covered at these community colleges. And then there is a step increase as they complete their competencies. But the goal is to get more employees.
• 21:14
  A lot of our farms are looking for labor. We've been utilizing the TN visa program for a lot of these employees, but this is allowing us to bring our community college kids back to the farm and get them engaged. Or you can also use this program for your existing employees, and you can give them an additional educational opportunity. So you may want have an employee on the farm that wants to better themselves but doesn't wanna leave the farm. This gives them that livestock certificate and gives them a little bit more education and gets them to stay and invest in the farm long term.
• 21:50
  Todd Gleason: It gives them well care kinds of functions Yeah. That they're better able to look at the herd, manage the herd, understand what's happening with the herd.
• 22:00
  Jennifer Tyree: Yes. Animal husbandry is such an important we're we're always wanting to make sure we have the best animal care. Animal welfare is very important. And to your point earlier, it is very hard to get large animal vets on farm. And so for us to be able to give these employees that skill set with these swine animal care technicians, then they're built in and they're invested in the daily care of these animals and making sure that we offer the very best product to our consumers.
• 22:28
  Todd Gleason: For producers who are interested in having employees go through the program or looking for employees that are going through the programs, where do they find them?
• 22:37
  Jennifer Tyree: So they can go to illinoispork.com and look under our youth component, and there is a livestock apprenticeship tab. Currently, we're working with five community colleges. We really have them based regionally. We have ICC in East Peoria. We've got John Wood College.
• 22:52
  We've got Lincoln Land in Springfield, Lakeland in Mattoon, and then Kaskaskia College in Centralia.
• 22:59
  Todd Gleason: Jennifer Tyree is the executive director of the Illinois Pork Producers Association. Join me here at the National Association of Farm Broadcasting Convention in Kansas City.