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CMR FAC | Grains Outllook · Closing Market Report

• 0:00
  Todd Gleason: From the Land Grant University in Urbana Champaign, Illinois, this is a special edition of the closing market report, presentations from the twenty twenty five Farm Assets Conference, the Grains Outlook. I'm University of Illinois Extension's Todd Gleason. You know, in his presentation, University of Illinois agricultural economist Joe Jansen detailed several key predictions and market drivers for the '25, '26, and 2627 corn and soybean marketing years. Here's how Joe Jansen put it together.
• 0:32
  Joe Janzen: I'm gonna talk a little bit about just sort of setting up the day by talking about where we are at with grain markets right now. I was tucking my son into bed last night. He's seven years old. His grandfather farms both of his grandfathers farm, but didn't grow up in a farm. And he and I said he said, what are you gonna do tomorrow?
• 0:53
  Why do you have to go to Bloomington? And I said, well, I'm gonna go talk to farmers about, like, you know, about their decisions about selling corn and soybeans. And he said, I thought corn season was over. And I said, well, I think some of these farmers still have some corn to sell. And I don't know, show of hands, I mean, still has corn or beans to sell from 2025?
• 1:15
  Not surprising. I the the data that we see suggests that that indeed, most farmers have have some corn and beans to sell, that they they didn't it didn't all get sold across the scale at harvest. So we have something to talk about, which is the the corn and bean markets. I usually start by talking about how we've got to where we're at today in terms of price. So this is just showing nearby corn and soybean futures prices, where they've been over the last year, since last fall.
• 1:45
  Right? And that kind of helps us. It doesn't tell us where we're going into the future, but it at least tells us sort of how did we get to the point that we're at because all of the things that we're gonna talk about in terms of sort of the supply and demand factors that are important to price in the next six months to a year. All of those things kind of depend how they affect the market depend on where we're at today. I think the thing to sort of highlight here is one, the relatively narrow range in which prices have traded over the last year.
• 2:16
  So you can see corn price has really kind of been right around where it is right now. So the March futures price in around $4.50, been there for a long time. This market has kind of grinded sideways. Some wiggles here and there but has grinded sideways for most of the last year. The bean market we've seen maybe a little bit more volatility, in particular this run up in prices that we saw in the October up into prices that actually look pretty good.
• 2:48
  Prices that a lot of people wish they had sold grain had had more more of a if that rally had occurred a few weeks earlier, right when we were right in the heat of harvest season, that would have been a little bit better timing. But that's what happened. And I think the the difficult part is these, you know, maybe slight rallies that we've seen in the last month and a half are, you know, maybe they're the result of news. Maybe there's a a China export demand story there. But there's also just sort of this like, we got through harvest pretty quickly, and there is typically sort of a post harvest rally.
• 3:27
  Right? Once the once the combine stop rolling and we and grain gets put in the bin, the market's gonna reward people who pull that out a little bit earlier than than they might otherwise. And so the two things are kind of coincidental, and I wanna kinda keep that in the back of our mind as we think about where might the market go from here. The other thing that I look at beyond sort of where we're at on price, a corn price right around $4.50 on the board, soybean price just under that $11 level. And we wanna think about basis and spreads.
• 3:58
  Because they're really kind of the primary signal that the market has to think about, you know, should we pull some of this grain out of the bin now or should we should we wait until later? So this graph is just showing corn and soybean calendar spreads. Just the difference between the nearby and the more deferred futures price. When this thing gets very negative, that's a really a signal that like the market is incentivizing a lot of storage. And that's what we saw going into harvest was the market kind of saying, yes, there is a big US corn and soybean crop, and we're gonna incentivize you to hold some of that out into the new year.
• 4:37
  And then with this rally in October coming coming sort of into and and really through harvest and on the in the corn case. And then maybe really that part of that post harvest, maybe sort of kind of China soybean rally that we saw in October. These spreads have deteriorated substantially. So the market I think is much more uncertain about do we want to kind of like incentivize storage or or kind of hold some of that grain off the market. And I think that's maybe a missed opportunity in a sense that, you know, you might be sitting on grain right now.
• 5:18
  You're thinking about should I sell it today? And the market is saying, well, don't hold on to it too long. The other thing we look at is basis. That's really sort of saying like what's happening specific to our local geography with respect to price. So this is just showing cash prices, right, relative to the nearby futures contract.
• 5:38
  So they're not directly comparable to what we've seen which is all about sort of pricing for now for sort of that post harvest period. This is really cash prices, what they were like at last harvest, what they were like at this harvest. We saw again sort of that typical seasonal basis low in September as we went into harvest. Kind of maybe arguably saw that sort of that a rally in basis maybe a little bit sooner than we like because harvest progress was relatively rapid this year. And so now we're kind of in a I would say that the basis signal is not necessarily any different than we sort of think of post harvest.
• 6:14
  It maybe just came a little bit sooner than it would because harvest progress was relatively rapid. And processors and other folks in the supply chain really did need to kind of pull some supply into the grain handling and transportation system a little bit earlier than they would otherwise, and price is the signal that they're gonna use gonna use to do that. So that's where we've come to. Now we move into the the part of the marketing year where really supply is kind of factored into price. We've seen the sort of like that post harvest rally in in price and basis.
• 6:50
  It's really gonna be a demand driven market. And I always think it's kind of helpful to kind of really kind of to to level set to think about like what is the composition of US corn and soybean demand. It's really the same four slices of the pie, just in different proportions. So kind of the two big domestic pieces are are animal feed, that's the green slices here. So that's soybean meal in the case of soybeans, sort of what we call animal feed, is all the ways that corn gets used for feeding.
• 7:26
  Those are a big part of the pie. And we're going to think a little bit about what's happening with the livestock sector and demand there. Bio fuels is another piece of this. The growth in the last few years has been all in this piece that soybean oil used for bio fuels. But it's important to remember that that slice is a relatively small slice of the pie because every bushel of beans is only about 20% oil and we're using roughly half of the oil that we produce.
• 7:56
  Here in The United States, we use about half of it for bio fuels. Now that that proportion is expected to increase. I think some of that's built into pricing already. We'll talk about that. And then the big one, the sort of the big wild card, the one that we kind of maybe think about the most in terms of its impact on price because it is much more flexible.
• 8:14
  These first two pieces, the feed piece and the biofuels piece tend not to move a lot. They tend to be what economists would call relatively inelastic. They don't aren't very sensitive to price. We use about the same amount of of corn for for ethanol no matter no matter the price, year to year. And that export piece is really the flex piece that kind of thinks about, if we have a big corn crop in The United States as we think we do, how are we going to use that up?
• 8:41
  This export piece for corn is growing and we'll talk about how that's built into the overall supply and demand balance. This export piece for soybeans is shrinking. We give this talk even two years ago. That slice of the pie would be substantially larger. And we'll sort of talk about how big might that slice be this year and next.
• 9:00
  Okay. So let's talk a little bit on the feed side. I think the big story there is about when will The US livestock herd begin to grow again. This is sort of a long term view on that, just the size of the overall US cattle herd. We saw that, you know, cattle herd shrank into 2014, prices got really high, we rebuilt the herd, then we've had drought and other issues that have caused a substantial reduction in overall cattle inventories.
• 9:31
  That is expected to sort of really kind of it maybe hit bottom. The number as of January 1 was 86,700,000 cows and calves in The United States as of 01/01/2025. USDA's expectation is that their recently released forecast for overall cattle numbers was that number is basically expected to be flat in January '26. And everyone is kind of looking for signals of a cattle herd rebuild. The way that we would see that potentially is a reduction in the number of cattle on feed as heifers get retained to build the the herd.
• 10:09
  Right? We've actually seen the number of cattle on feed be remarkably stable in spite of overall reductions in the size of the herd. So we've kind of fed had about 12,000,000 animals on feed as of November 1. The most recent data suggested that the November 2025 number was like a slight reduction. So maybe this is a signal that we're getting some of this retention and maybe a boost in feed demand into 26 as the herd grows.
• 10:40
  But this is kind of complicated by our trade situation where we should be, you know, typically we're bringing animals across the border from Mexico into The United States to be fed here. That isn't happening because of some of the trade issues and disease issues or pest issues in the livestock sector. And so that number actually fell in November, people are saying that's not necessarily a strong indicator of a herd rebuild. So I think overall in terms of what its impact on grain prices, people my take is that we're certainly not in the stage where we're gonna see dramatic growth in that that corn for feed number or the the, you know, domestic meal demand number happening in the next six months to a year. It's probably gonna take longer than that.
• 11:28
  On the biofuel side, I think this is a the the picture is relatively strong. We're, you know, processing about levels of or producing levels of ethanol that are very similar to sort of where we were in that pre COVID maximum level. Maybe some slight increases above that, but you know, overall the the the ethanol production, the the orange bars here looking really strong, and we're growing the blue bars which are renewable diesel. What this is doing is really kind of increasing oil's value of the crush. So in the last five years we've really seen a shift in the soybean sector away from sort of meal as the primary demand driver and towards oil.
• 12:13
  So now the value of a soybean is between say 35 to 50% oil and you know corresponding percentage coming from meal. And this thing is getting much more volatile. And so that's the thing I sort of think about going into next year is that there's I think strong potential for ethanol or for biofuels demand in the soybean sector. Scott Irwin, my colleague is gonna talk to you about that. But it's creating maybe a little bit more volatility than it than it did pre 2020 when this share was relatively stable.
• 12:50
  Okay. Got to talk about trade. And there's this idea I think that maybe the trade war is is cooling off. We certainly haven't seen the level of sort of tariff tip for tat that we saw back in the spring, particularly around what what was called liberation day and the huge raft of US tariffs that was announced in April. You have both secretary Bessen, the treasury secretary, secretary Rollins saying, you know, we are right on track.
• 13:17
  Everything is going well. That China is in the perfect cadence according to secretary Bessent in terms of its purchases of US soybeans. I think everyone should be right to be, you know, somewhat skeptical of those claims, and I'll show you the data to suggest why. So maybe the trade war is cooling off, but it's cooling off to a place where, you know, where there is a there has been a substantial, and I think, you know, persistent decline in US soybean export demand. We see that in the data on Chinese customs data where we look at soybean imports from all destinations.
• 13:59
  We can get data on what's going on with Brazil. We're seeing China is importing more soybeans than ever. Right? Highest levels of monthly soybean imports into China that we've seen certainly in recent memory. None of that's coming from The United States.
• 14:15
  So these bars which are typically in September, October, November start to ramp up have been zeros. We're gonna see something in December, we just don't have the data yet. The ships are on their way. But the number is gonna be really small. And we see that in our soybean export sales pace.
• 14:34
  The green line here is showing where what we're doing in terms of soybean export business to date relative to previous years. We are substantially below. There's just no sort of beating around the bush. We just are substantially below where we would normally be in terms of soybean exports. And China has to be the culprit.
• 14:54
  These little vertical lines here are what we know about Chinese soybean purchases to date. So we can think of that 25% of the business is basically gone. I don't see how it comes back because we're moving into a part of the marketing year. Right? We're right into December, January where basically our soybean export business drops off precipitously.
• 15:14
  A lot of that is built into the current USDA WASDE forecast level for soybean exports. But I'm even worried about getting to that level. If we continue on this pace, sort of what the typical pace looks like, we get somewhere closer to more like $141,400,000,000.0 bushels and that's that's substantially below. Alright. Corn export sales, totally the opposite.
• 15:40
  Corn export business has been incredibly strong. I think part of that is a function of relatively low prices and the big US corn crop that we've seen, a lot of that's baked into USDA's current S and D tables as well. The last sort of wild card here is what does happen to trade policy. The the tariffs that we imposed on many countries back in the spring could be ruled invalid by the US Supreme Court. That's something a case that they heard back in November and will rule on in the New Year.
• 16:11
  But it looks like we could see a substantial amount of, you know, trade policy uncertainty going forward into the new year. It's not over yet. The other part is the big Brazilian crop that's coming, and Todd's told me I only have a few minutes. So I'm just gonna really quickly say, what's happening to ag production in Brazil? It's only going up.
• 16:31
  We expect record crops for soybeans, 6,500,000,000 bushels expected in 2026. That would be a new record. So the global balance sheet is filling up as well. I think the other sort of headwind in terms of a potential Is there any upside in the soybean market? Is we're gonna see a swing back towards bean acres in 2026.
• 16:57
  Right? We planted 98,000,000 acres of corn, 81,000,000 acres of beans when we're usually much closer to an even split between those two. Yes, we do plant more corn acres than beans, but it's usually much closer than it was in '25. Price signals are not necessarily strongly encouraging that, but at least they're swinging back towards more bean acres. I think that's also built into sort of, you know, the limits on on soybean price upside.
• 17:26
  Okay. So this is what this does to the balance sheet. We expect which sort of this is USDA's balance sheet. We're at stocks to use levels that are consistent with a corn price at the farm gate are right around $4. And I I don't see any reason to deviate from that.
• 17:45
  If anything, I think USDA might in fact reduce its yield estimates going forward. That they're they're still at a very high estimate for yield that a lot of people in the trade think is is too high. But I think we'll see corresponding reductions in use that keep us around the price levels that we're at. That's the story. Think that we've seen corn prices grind sideways.
• 18:09
  And I don't see any reason to expect to deviate from that in the next six months or so. Long run, USDA is building in a healthy level of production. 95,000,000 acres is their their corn acreage estimate for '26. That might be high, but even if you reduce that number, you're still looking at, you know, pretty substantial carryout. They have pretty optimistic expectations for feed use, for ethanol use going forward into 2026.
• 18:37
  We're gonna remain at, I think, you know, stock levels that would be burdensome that keep corn prices in that $4 range. We are gonna see this swing back to more bean acres in '26, that's going to fill up the bean balance sheet. I think there's some reason to be maybe skeptical even of the export number that USDA has for soybeans, given the story that I told you about where we're at with China trade headwinds. Okay, what does this all mean for farmer marketing? Through I said, we're gonna talk about, you know, decision that farmers have to sell corn or beans over the next six months and the decision to sell twenty twenty six beans.
• 19:15
  We're gonna talk well, how should we think about this current situation in terms of farmer marketing? On old crop, think, you know, one thing that we're looking at is, you know, do we indeed have I've heard lots of anecdotal evidence of higher than usual on farm corn inventories or corn inventories in the farmer's hand. We're gonna see, you know, we'll get some data on that from USDA in January, but what we also typically see is that January 1 is a day when people pull a lot of grain or begin to pull grain out of bins. That deteriorating carry in the corn market kind of diminishes some of our risk management options. What we think of in terms of being able to sell some of that crop and capture some of the the gains to storage that might exist in the near.
• 19:58
  Would that carry the the time to do that unfortunately seems to have passed. The other part is that we've got these ad hoc payments that Nick's gonna talk to you about. I think the one thing that our research has shown is they allow farmers to buy a little bit of time, and that maybe kind of well, it eases a cash crunch on the farm. It may enable some like poor marketing decisions. Kind of limiting farmers willingness to kind of take what the market is giving them now and not maybe manage some of that price risk.
• 20:29
  On the new crop, price ratios were promoting a return to beans. But these early price levels, I mean we saw new crop futures right around $11, a little bit below that now. But those levels tend to be pretty fragile. We have moved off of these harvest lows. And so some the the story that I would tell there is that it's really hard to sort of think about, to what extent this sort of post harvest, maybe export news driven rally, how much of it was that, and how much of it just was high inventories being held held back by The US farmer, and the market needing to rally to pull some of that grain into the into the supply chain.
• 21:10
  How much is that China trade optimism driving the soybean rally? Well, I think the last couple days have suggested maybe a lot some a good portion of that was was maybe some misplaced optimism. The current volatility in in calendar spreads suggest, you know, some potential for price volatility in in 2026. The market the situation is much less certain with that that again, volatility and spread suggesting we're not sure we we're not sort of slamming the brakes on marketing and saying, you know, hold as much as you can. So I think that puts the farmer in maybe a slightly more precarious position.
• 21:48
  And then the one thing, and I I delved into this a little bit, but I think we could talk about it for a much longer time and I'll I'll I'll just sort of put the thought out there, is that farmer marketing may be complicated by, you know, some pretty substantial post harvest inventory coupled with the ad hoc support payments that we're seeing. The danger there is again that the the payments allow the farmer to hold that grain right up until harvest, and, you know, all that supply has to gonna come to market at one point in time, and that's likely to lead to, you know, relatively poor pricing in that sort of, let's say, May to July marketing window when you got to get ready for the crop that's coming in 2026. So I think that the question for the farmers really, what price signal do you need? And I think we've seen a pretty strong price signal here in the last month, particularly on with the rally in beans is think about what you need to pull grain out of bins and into the supply chain, and what's gonna make that happen not in that sort of May to July time frame, but what what would it take to get you to do that in the in the January to to say March time frame.
• 23:00
  I'll be around for questions. Thank you very much, guys.
• 23:02
  Todd Gleason: Joe Jansen is an agricultural economist at the University of Illinois. You've been listening to the closing market report from Illinois Public Media.
• 23:49
  Joe Janzen: Hi.