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Jan 15 | Commodity Week · Commodity Week

• 0:00
  Todd Gleason: This is the January 15 edition of Commodity Week.
• 0:08
  announce: Todd Gleason services are made available to WILL by University of Illinois Extension.
• 0:14
  Todd Gleason: Well, welcome to commodity week. I am Todd Gleason. Our panelists for the day include Logan Kimmel at roachag.com. He's out of Naperville, Illinois. Jim McCormick is here from agmarket.net in Barrington, Illinois.
• 0:26
  And Mike Zusolo joins us from Atchison, Kansas at globalcomresearch.com. Commodity Week is a production of Illinois public media. It's public radio for the farming world online on demand at willag.org. Mike Zusolo, let's get a list of items. We'll start with you of things that we should discuss today.
• 0:46
  What are you thinking about?
• 0:48
  Mike Zuzolo: A very welcome Thursday close heading into the end of the week, Todd, with the soybeans posting an outside week higher, new two week high after making new two week lows after WASDE numbers. I'd like to break that down a little bit.
• 1:04
  Todd Gleason: And Jim McCormick on your list.
• 1:06
  Jim McCormick: Probably need to talk about the balance sheet adjustments that the government made on, on the corn and, the carryout feed and residual and what that may mean down the line.
• 1:15
  Todd Gleason: And Logan Kimmel.
• 1:17
  Logan Kimmel: Yeah. After going, over all the numbers, with the report here from Monday, I think it's a good opportunity to talk about expectations in the marketplace going forward for producers on what to be doing with the remaining old crop they have and start looking at some new crop ideas.
• 1:34
  Todd Gleason: Let's begin with the Monday report. It was an interesting report related to both the crop production and the WASDE figures or world agricultural supply and demand estimates along with the winter wheat numbers and the grain stocks. Mike, I I want you to run through the winter wheat planted acreage numbers for me if you could really quickly and give me a quick assessment of that, and then we'll get into the meat of those reports that took place on Monday.
• 2:04
  Mike Zuzolo: Yeah. You bet. 33,000,000 acres all winter wheat, Todd. The trade was pretty much, on the low end of that number. In other words, they were thinking 32.4.
• 2:14
  So while it's a a lower number as a whole over the last five years, it was still above the average trade guess, so that kinda put some different tint on the reaction in the market. Hard red wheat stayed pretty even with last year at 23.5. SRW, the same 6.14 right there with last year. We did lose some in white wheat with no surprise there with the Upper Midwest Plains issues that we've had weather wise. They came in at 3.36.
• 2:43
  Since the report came out and those water those winter wheat members have been digested, it's really the trade I think has really gone back to what's happening over in the Black Sea and what's happening with the crude oil market. They didn't even really look at the fact that winter wheat, drought issues on Thursday when we got the weekly update are still posting 19% above a year ago, and we're looking fourteen days out in hard red wheat belt country with very little precip coming off 60 degree temperatures heading into twenty, thirty degree temperatures. So still a lot of weather, I think, to trade in that wheat.
• 3:17
  Todd Gleason: Let's turn your attention to the balance sheet adjustments. Jim McCormick, I know the one thing that we have been talking about all week long is the 1,300,000 acres adjustment for harvested acreage. It was upped by that much by USDA. That pushed total production over 17,000,000,000 bushels for corn. How do you look at that number and evaluate it as it's related to marketing plans?
• 3:45
  Jim McCormick: Well, there's no doubt about it, Todd. You look at that number, it definitely surprised the market. You saw also an upward revision in yield, slight adjustments to last year's crop. The reality is you're pushing your crop over 18,500,000,000 bushel supply. I know, Todd, there's some people don't like the number.
• 4:03
  Some people don't believe the number. I view the number as kind of how you're going to have to watch an official officiating the NCAA football game Monday night. You may not like that holding call, but if they make the holding call, that's the call you got to go with. This is a number we're working with right now. And if the trade is under their perception, we've got a huge supply of corn unfortunately, an oversupply compared to the current demand.
• 4:29
  Export sales have been phenomenal. Ethanol is there, but unfortunately we've done such a good job producing this crop. We are going to have a burden of supply. That feed number, Todd's the number that makes me really, really worried. I just think unfortunately the government does what it does.
• 4:43
  Big yield, big feed and residual number, but that number just looks like it's a sore thumb to me and that feed residual is overstated in that carry out, which is over 2,200,000,000. I think it essentially creates closer to two five as we go through the marketing year, and that is gonna be a wet blanket on any kind of rallies we try to attempt.
• 5:02
  Todd Gleason: Wow. That is a big number. I'll come back to you on that in just a minute. I do wanna give Logan Kimmel a chance to hear his reaction too to those numbers and how you have evaluated them over the ensuing three to four days, from the corn or the soybean side.
• 5:20
  Logan Kimmel: Yeah. No, Jim. Spot on there. Very good points. Clearly the trade was thrown off guard on that.
• 5:28
  And I think another, I guess concern on top of those numbers is just the amount of unpriced old crop corn on farm that whether that be on basis, it's going to get rolled or just eventually sold over the course of six months. I think that might have more pressure on any sort of rally in the corn market on old crop specifically. You had a market for four months that maintained a range and held on breaks due to the strong demand. But I think what we found out despite that, is just the massive supply. My fear would be that setting the tone here for maybe the next two to three months until we have another catalyst or potential catalyst to reverse that trend.
• 6:24
  You throw the spec funds, who were fairly well on the sidelines going into that, and more likely than not taking a short approach, here going forward using that information. As Jim said, the numbers are what they are and if you don't agree with them, you do have to understand that I think that the trade is going to use those going forward.
• 6:45
  Todd Gleason: Mike Souslaw, if you could put two things into context for me. Jim talked about the feed residual number. It did go up by a 100,000,000 bushels. That means consumption went up a 100,000,000 bushels. However, when you look at the season's average cash price, USDA, despite this 2,200,000,000 bushel carryout, a 200,000,000 extra bushel put into that ending stocks from December to January, raised the season's average cash price by a dime to $4.10 from $4.
• 7:19
  So that either says they believe an awful lot of corn got sold at a much higher price. Well and or that an awful lot of feed, that extra 100,000,000 bushels is actually going to create a lot of demand, one of the two. And I'm wondering how you can square those things.
• 7:39
  Mike Zuzolo: Yeah. I can't square the feed. I think Jim, you know, nailed that with the idea that the feed and residual is a leftover number. Yeah. They put feed, but then there's the residual, and it's the it's what's whatsoever leftover in the bucket to make the carryover number.
• 7:52
  I think there's a third option here, Todd, and that could be that the exports are not going to back down. And I think this is where what Logan talked about and Jim talked about. I'm gonna run right in between and try and and and find a hole here with the idea that if those Illinois and Iowa numbers are too high, which I still think they are because of the fact that the yield reductions were not enough to explain a lot of the ground pile losses, and Iowa's 97.4 harvested to planted number is way out of whack. Illinois' 98.2 harvested to planted is way out of whack, and Nebraska's 97.2 harvested percentage to planted is way out of whack. I think we're going to find out relatively quickly through the spreads and through the cash price with Illinois being the epicenter whether USDA's number is right or not.
• 8:48
  And I I I find it very interesting that we saw Thursday's export sales very strong, but then we saw a lot of purchases in beans and corn, and Saudi Arabia's out there for over a half a million metric tons of wheat. Is that war fear? Are they discounting the WASDE report? I think we really gotta keep our heads up right now.
• 9:08
  Todd Gleason: Do you think it will be a basis fix in this case? I think that's what you're telling me. Or will it be the futures markets that manage to to suss out what this crop size really is?
• 9:19
  Mike Zuzolo: My running assumption right now is that after the commodity index buying from the record high precious metals prices, once that gets done here in the first couple weeks of January, the futures market will be more of a fund selling market mindset than the cash. And as you say, the basis will be the keys to whether that crop is really out there in the corn or not.
• 9:43
  Todd Gleason: Okay. So Jim McCormick, given that, and I don't know whether that would be your expectation for futures to, I guess, drive sideways to lower maybe. I don't know whether that's what Mike if you can correct me if I'm wrong on that. And then the basis would have to do the work, but it's still gonna have to do the work at a lower level. Is that right?
• 10:04
  Jim McCormick: Well, I think it's gonna be a bit challenging, Todd. You know, The next ninety days is going to get really interesting. The one tweet you saw a lot on Monday was the bridge payment loan was just wiped out in one minute of the trade of the market going down on Monday. Now it's going to be a situation with where we're sitting at March corn at $4.2 East corn trading here at $4.5 but that 4.2 corn, I think Logan put it out, 65% of this corn sitting on farm, how much of it is unpriced? Our commercial guys are telling us somewhere around 50% to 55% of the corn markets unpriced.
• 10:44
  The real question I think in the next ninety days is going to be up to the banker. You got a lot of guys trying to finance the 2026 crop. We've got a balance sheet that got really ugly really quick despite how strong as Mike pointed out the export pace has been. So the question I think in the cash market is going to be, is the banker going to force the producer to sell more aggressively the next ninety days of the crop that's in the bin because he doesn't want to finance the 26 crop when he's got half of last year's crop on price. I can say that it's just too much risk with the balance sheet.
• 11:18
  If they're forcing that farmer to sell the grain to generate revenue, the basis isn't going to have to do any lifting, it's going to stay soft. If the farmer can hold a lot tight and the banker doesn't panic and this cash market continues, we'll have to see the basis improve to keep that river market flowing because these exports have been phenomenal and so far they remain very strong here.
• 11:39
  Todd Gleason: Okay, so Logan, on the flip side of that, agricultural economists prior to the release of this USDA report would say of the bridge payments, do not use that to make sure that you can hold on to the old crop corn, that it's best to go ahead and make sales. I think, actually, most of our analysts were in the same boat at that point. Should they, at this point, use the bridge payment in a different way? The bank still knows it's gonna come, but I guess depends on when debts are due or when when they have to make a payment, whether it's a land payment or something else, and, unless that check comes faster than we expect, I think by the February, so it's a month and a half away still. It seems like it could be a rough forty five days, I guess.
• 12:35
  Logan Kimmel: Yeah. And I think, you brought that up. I believe the last time I was on here, the announcement had just came out and we discussed that a little in detail. And and I it's going to be different from operation to operation, but generally speaking, I think we're in an environment right now of, from a marketing standpoint of you got to live to see another day here, whatever you got to do. It's not good markets where a lot of operations are in a tough spot, due to the high input cost and low prices.
• 13:08
  So I think, when we look at the amount of old crop on price, payments coming in or not, you still got to market what you have left. And I think you can now look at this old crop situation here in the corn and look for areas that if the market were to rally to, might be areas that you want to let go of some of that old crop to start paying some bills. You've got a zone that the market traded for four months. I'm guessing in this March corn area in 4.3 to $4.35 you're probably going to hit some resistance there. That might be areas for producers to put together a plan and lighten up on what they have left here throughout the next few months.
• 13:54
  But I agree the next ninety days are going to be interesting just with now the next big thing being any South America weather. But ultimately planting and growing seasons here. How to navigate that with what you have left, I think it's important to sit down and put a plan together because we saw how quick these markets can change here on Monday. And we're dealing with such low prices year after year here now for a few years, it's certainly something you want to be on top of and have a plan in place.
• 14:27
  Todd Gleason: So Mike, I think the producers, particularly with corn, a twofold problem. They have half of a crop left to sell. They have a new crop in corn to market at some point, and there's a lot of time left, but that crop just changed dramatically in value potentially if particularly if Jim McCormick is right, and we see a 2,500,000,000 bushel number for the old crop carryout by the time we get to the fall. How how do producers how are you talking to producers about both of those crop years and what they should really be thinking? It's hard to sell two crops at one time, especially at a low price.
• 15:08
  Mike Zuzolo: You're right. But I do think that there is a window here with the corn and the beans. We've just made the highest level of new crop beans compared to new crop corn since early December on that bean corn ratio. And I think if I were in the shoes of the farmer right now, which we all three, four actually Utah because you have farm ground, all four of us are kind of in those shoes. I would go to the banker and the financial lender and say, I'm ready to lock in new crop beans to help finance my 2026.
• 15:43
  Give me more room to maneuver on my old crop corn as a result of that because I can lock in a profit. And that's what was so impressive on Thursday. What I mean by that is if you have any old crop beans left and you know, let's say USDA is right. So you should have 70 bushel beans and 220, 240 bushel corn after the report. And so you're looking at $700 plus of revenue in old crop beans and nine fifth $909.50 in in old crop corn.
• 16:11
  You're not that far away to go ahead and let go of more beans in the old crop. Let more beans go away in the new crop. Why am I saying that? Because the way the USDA report was structured, beans actually got the worst report. We lost 60,000,000 bushels in exports, and we gained 3,000,000 metric tons in Brazil crop.
• 16:30
  And there's really no weather in Brazil right now to lean on, whereas there is weather in Argentina and the corn crop to lean on. So I really see the idea that what we're finishing out this week with is beans leading the market higher with the worst report of all, when it comes to both The US and and global ending stocks. So if the if the corn's gonna go lower, my bet is it's gonna be because of beans. So get a get ahead of the beans. Get get profitably sold in the new crop beans, and try and buy some time in the corn.
• 17:01
  Todd Gleason: Tim McCormick, if, the news stories are correct, most of what happened on Thursday in the soybeans was based on the Trump administration expectations to set blending quotas for biofuels sometime by the March. And most, I think, are thinking that the administration would put in volumes, that are close to the 5,600,000,000 gallons, that they have proposed, maybe as low as 5.2, but at least in a range that would be supportive of soybeans. Is this where producers should should actually say, look. I've I've got beans as Mike has said that I I can make it through, the spring at least by by making some sales, forward sales that is, and get myself in a position where I'm not completely leveraged by the time I get to the fall.
• 18:03
  Jim McCormick: I agree with Mike. I mean, the beans rallied today on the on the you know, the charts look a bit better on the beans. He's right, it was a very bearish report, bean oil is leading us up. It was a very impressive day on the bean, although it is interesting Todd, how the market reacts. The number pretty much came out at the high end of what the government already said they're proposed and they acted like it was something above and beyond, but you got the positive news.
• 18:25
  And I agree with Mike. I mean, I've been telling our clients, look, it's been a very ugly week on Monday, but you still got the Argentina weather to go. You still have the Brazilian safrinha crop to go. You still have our crop to go. The world corn supply Todd is at ten year lows.
• 18:41
  So I mean a 100% agree with Mike. If I got to try to calm my banker down, calm my fiscal nerves down, I move the beans because you got a wall of beans coming from Brazil. And our guys tell us they've bought China's bought about 12,000,000 metric tons of beans. I would argue the buys Todd were all political buys. It wasn't an economic buy.
• 19:03
  Brazil will sell the beans cheaper to the Chinese so they may be done, but that corn story could change if any one of these countries, any one of us, Brazil, Argentina have a problem with that tight world supply of corn. And you already seen an incredibly strong export number. That number keeps up. You hopefully will at least get a rally to get corn back to the high end of the near term range. So I'd be moving the beans and trying to hold on to the corn, but I'd be realistic if you can get corn back up near 4.5 Spot corn could not get over $4.5 since the June with what was a one five carryout.
• 19:37
  You're now staring at two two carryout in the face that could grow even more by late summer potentially. You gotta respect that, but I think like Logan said, $4.35, four forty five to $4.50, you wanna sell it and then maybe use options if you wanna play the what if we turn hot and dry this summer.
• 19:53
  Todd Gleason: And Logan, how are you thinking about marketing of old and new crop soybeans still?
• 19:57
  Logan Kimmel: Well, I think just to kind of explain to reiterate, on this new crop, it's still early in the ballgame. I know we talked about how bad things look here after this report and the concern on old crop. But I think on the new crop, have to be optimistic if the market is presenting opportunities. And I agree 100% in the beans. Maybe implement that in your marketing strategy and give this old crop some new more time.
• 20:27
  Because I think if you see positive headlines come out from here today, you start getting a little more chart support on this November contract new crop beans. And we start visiting some prices, maybe we saw there throughout December on the way down. I think that would be a prudent thing to accomplish in your marketing is having a plan and use strength in a market that you can go out and sell forward to get sales in the books and a stake in the ground. That would go for new crop corn as well. We've got a lot of time, if we have some weather, this spring or summer, you might have more opportunities down the line, given how strong our demand is.
• 21:12
  It's just right now getting from A to B from now until planting. You got to look for opportunities that you can take advantage of and give yourself a little more time. If you want to implement options after a sale, you most certainly can do that. There's tools to do that. But I think having a plan this time of the year is a good marketing move.
• 21:32
  Todd Gleason: Hey Mike, one of the things that came out earlier in the week that I have not seen follow-up on was related to Iran and the President of The United States saying that any nation trading with Iran would have a 25% export or tariff, put on the exports coming into The United States. I'm wondering how the Chinese might view that over time, and if it would be imposed upon that nation. I'm guessing that both Russia and China are the targets of the 25% tariff.
• 22:11
  Mike Zuzolo: Yeah. I I think that was a big deal. And the market saw that. I don't like you said, I don't think they really followed up with it because of the drinking news through a fire hose, but it was very quick to be seen in the bean market as potentially priced bearish and negative because of China's reaction. China was all over the Asian press, saying that The US was, doing wrong by doing this and and and instilling their, you know, their weight behind things inappropriately.
• 22:40
  At the same time, we saw the cattle market really get excited with the idea that Brazil would be in the same camp as China and be hit, and therefore, beef couldn't get in here to this country as cheap. So I I tell you, Todd, in 2026 for me, I just have to because of what we talked about a minute ago with the financial side of the equation. I just have to build into my risk plan that China will continue to disappoint us on ag trade because we see geopolitically, president Trump economically and foreign policy wise continue to take pages out of Ronald Reagan's playbook, the Latin American blockade. Reagan did that in '86. By '80 by '89, Noriega was gone out of Panama.
• 23:25
  This is going back towards the higher inflationary time periods of the seventies, eighties, and early nineties. So negative China, positive inflation is kinda my general mindset.
• 23:37
  Todd Gleason: How do you, put that into context with China as it's related to next falls exports to China? Are they at zero, at half where they are like this year, or will they make the 25,000,000 metric tons?
• 23:57
  Mike Zuzolo: I I don't I'm not forecasting 25. I think they themselves on total are still down below 100. I would be surprised if we could break 20 in the in our marketing year for China. I think it goes back to the wheat and the crude oil historically are the best inflation plays after precious metals. And look what they've done this week.
• 24:18
  They've ripped the doors off the bull rocket at this point, and, you know, you're looking close to a $100 silver now.
• 24:24
  Todd Gleason: In our marketing year, you mean the current marketing year at 20, so 12 plus another eight by the time we get to the end of the marketing year, or you're looking at 20 for the following market?
• 24:32
  Mike Zuzolo: Thanks for correcting me. I would say 20 in addition to eight. And and, yeah, in addition to eight. So I'm I'm saying four from the past marketing year and then maybe another 2022, something like that.
• 24:46
  Todd Gleason: Okay. Alright. So, what else do we need to take up, Jim McCormick? What's what's kinda been on your mind? What a producer's been asking you?
• 24:55
  What are they really worried about?
• 24:57
  Jim McCormick: Well, right now, I mean, what they're really worried about is how they're gonna make money. I mean, honestly, it's a hard, we're in a hard situation right now where we're at. I've been telling constant clients, it's mid January. There's a lot of water to get under the bridge. The China deal, it could change in our heartbeat.
• 25:23
  I'm very skeptical about the 20,000,025 million dollars whatever it was for the next three years, Todd. My guess is we're gonna have to read it'll be part of a renegotiation when it's all said and done. I mean, look what's going on with Venezuela. Venezuela was selling China a lot of crude oil. Trump essentially told Venezuela you can't sell it.
• 25:41
  How does China handle that potentially? I I just think in general, this is all gonna get renegotiated, but that's gonna add to the volatility. I do think you're gonna have opportunities, and I've just tried to counsel farmers to not panic on report days. You gotta let the dust clear and kind of see where it's at. We are very dry here in the Eastern Part of the Midwest.
• 26:03
  We'll see what happens, how this all plays out. And the game plan right now is to figure out the best of your ability, what your costs are, where you need to market grain. And that way you have a decision to be made so you can make the economic decisions to pull the trigger and try to take some of the emotion out of it because it's going to be a very emotional year because you're going to feel the pressure if I don't sell it right, we end up with a trend line yield. History says prices are going to go a lot lower, but you also, know someone's going to scream drought in the Eastern Corn Belt, especially as dry as we are in the parts of Illinois and Indiana. And especially our producer where your listeners are here in Illinois, it's going be very hard to sell it if it's very warm and dry in Champaign per se.
• 26:49
  So I look for a lot of volatility this year, but the game plan now is to try to come up a game, you know, an idea of where you want to market grain so you can execute it if that opportunity presents itself.
• 27:00
  Todd Gleason: Logan Kimmel, look forward to the prospective plantings report that would be survey numbers coming from the USDA, but even before that, the annual USDA event that'll take place in February, they'll drop some numbers in, kind of our first chance to see what they really have in mind. I well, maybe the second because they would have put them out in November or early December as well. I don't recall whether they did that or not for acreage. What do you think, the spread might be for corn versus soybean acres?
• 27:30
  Jim McCormick: Oh, it's a tough call.
• 27:32
  Logan Kimmel: I mean, I think, you guys wanna spend the money and plant corn versus beans. Taking a look at these new crop prices, I'm probably guessing still there's more corn. You know, that can change with these new crop prices having changed quite a bit since Monday. That's kind of our thoughts leaning towards more corn.
• 27:56
  Todd Gleason: Yeah, so still in that probably 94, 95,000,000 acres. Suppose, I don't know, Mike Zuzlow, these would be numbers you would look at too.
• 28:05
  Mike Zuzolo: Yeah. I mean, I do think that in your part of the country, you probably see more corn. But I do think we need to remember back in '17 18 bean acres were 89, 90,000,000 acres. And the bigger those corn acres got these last few months, the more potential bean acres along with the problems in cotton country and LDP in cotton country this year. This is not boding well for small bean acres.
• 28:34
  And so that's another piece of the puzzle, I think, that you you diversify into not holding both crops because it does look like there it could be a race to the bottom as far as if you're fiscally strapped soybeans look really good. And a lot of producers the last two years in a row have been pretty happy with their bean yields, compared to their corn from generally speaking, from what I've heard.
• 28:56
  Todd Gleason: Let's get a final comment from each of you now. Jim McCormick from agmarket.net. We'll start with you today.
• 29:03
  Jim McCormick: Well, definitely was a tough, report we had earlier in the week. The bean market seems to maybe pull a bit of a double bottom in. We've got some positive news from the government potentially on renewables. I don't panic producers out there, but be ready to sell this rally at least near term is my recommendation.
• 29:20
  Todd Gleason: Logan Kimmel from roachag.com.
• 29:23
  Logan Kimmel: Grain producers, keep your head up. Livestock producers, specifically hogs, we've seen a massive rally here in these summer months North of 107 on June and July. Got an opportunity to lock in some cheap feed. Maybe take a look, you see these summer hog markets move North Of 110, layering the floor. We've seen what could happen in the grain markets.
• 29:45
  You've caught up to the cattle now. And if you've hogs coming off here this summer, keep an eye on some, June and July contracts.
• 29:51
  Todd Gleason: And finally, Mike Zuzlow, globalcomresearch.com.
• 29:55
  Mike Zuzolo: Yeah. I like what Logan just said. I just hit the 95 mark on April hogs. That's, our hedge target to get something done, Todd. Also, as you talked about in the cattle, USDA did raise production for red meat by about 1.4% for 2026 commercial red meat production in the report.
• 30:12
  So they're seeing bigger production, not less production. So big heads up there for q three and q four.
• 30:19
  Todd Gleason: Commodity week, of course, is a production of Illinois. Public media, it is public radio for the farming world online on demand at willag.org. Our thanks go to our panelists. They include Jim McCormick, Mike Suzulow, and Logan Kimmel. You have a great week.
• 30:33
  I'm University of Illinois Extension's, Todd Gleeson.