Apr 11 | Closing Market Report

Todd Gleason: 00:00

I'm University of Illinois Extension's Todd Gleason away from the office on this Friday afternoon. However, we do have our April 10 edition of commodity week for you to listen to. Well, welcome to commodity week. I am Todd Gleason. Our panelists for the day include Naomi Bloom.

Todd Gleason: 00:22

She's at totalfarmmarketing.com out of West Bend, Wisconsin. Chip Nellinger is here from Blue Reef Agra Marketing. He's in Morton, Illinois, and Sherman Newland, also from Illinois. He's in Hudsonville, joins us from risk management commodities. Commodity week, of course, is a production of Illinois public media.

Todd Gleason: 00:40

It's public radio for the farming world online on demand at willag.0rg. We have much to to discuss today. I know we'll need to talk about the CONAB numbers. We'll need to talk about the USDA numbers, the WASI or World Agricultural Supply and Demand Estimates. We'll need to talk about tariffs.

Todd Gleason: 01:03

Are there any other items on your list? Naomi Bloom, other things that we should take up?

Naomi Blohm: 01:10

Well, yes, everything that you already discussed today, I kinda wanna take a look at some technical charts on front month corn contracts. They're looking a little bit more friendly if we continue to see some additional news. So if we could, put that into the conversation, that would be fantastic.

Todd Gleason: 01:26

Alright. And Chip Nellinger, what's, what additional things might you have that we should take up?

Chip Nellinger: 01:31

Well, I think weather is starting to, take a little more, influence on the market as well with some of the planting delays to the South And Delta area and looks like the Western Corn Belt is getting off to maybe an okay start here, but they're awful dry and that drought monitor still shows lot of of drought conditions in the Western Corn Belt. They got no gas in the tank as far as subsoil moisture goes.

Todd Gleason: 01:57

And Sherman Newland, how about you?

Sherman Newlin: 01:58

Oh, yeah. I mean, all of the above, of course. Of course, you gotta talk about the tariffs and the outside markets as well and what's going on over there. But, yeah, this weather situation, I think, could get critical for the guys out west. If it holds, it's kind of a pattern.

Sherman Newlin: 02:13

But the numbers weren't overly bad this morning. Little friendly on the corn side, and corn had a nice nice little rally. Hopefully, it can continue.

Todd Gleason: 02:21

Well, let's start actually with the weather, and we'll stay with you for just a moment, Sherman, there in Hudsonville, Illinois. You're about 30 miles west of Terre Haute, Indiana. You're far enough south that you your farm has been subject to a lot of rainfall. How much rain did you get out of this last set?

Sherman Newlin: 02:42

Yeah. I mean, yeah, we're we're South of Terre Haute, Todd, but, yeah, we we got eight and a half inches out of this, in the, you know, in the last week. So we're pretty wet out here on the clay. It'll be, you know, probably a couple of weeks. If it doesn't rain anymore, but they're calling for another half inch of rain or so tonight, so that'll put us back that much farther.

Sherman Newlin: 03:02

But it is supposed to warm up and I think kind of dry out after that. We actually, maybe next week, can get planting up on some of our sandier fields you know, where we got some irrigation. We're looking to maybe do that Monday or Tuesday, plant some soybeans up there.

Todd Gleason: 03:16

Well, I do have a a quick question about this, Sherman. Coming coming from the flatland in the middle of the state of Illinois and the farm and being here in kind of the mucky areas. Eight and a half inches would be not a place where we would be planting next Tuesday at, with the cool temperatures and, unless we had just a double of a wind and really high temperatures. So to the south of, let's say, Effingham in the state of Illinois and other places, how quickly you you must dry out quickly or it just doesn't absorb and it runs off. Is that what happens with the water?

Sherman Newlin: 03:52

Yeah. Yeah. A lot of it. Mean, we were wet before, I mean, I think, and a lot of this ran off, you know. So the ground's a little bit more solid than you think.

Sherman Newlin: 04:02

I mean, it's not fit to work. But there's a lot of slope to some of this ground down here. So and a lot of tile put in. We're actually getting a little bit more put in today. But, yeah, I mean, it's going take some time, that's if we don't get any more rain.

Sherman Newlin: 04:18

I mean, I'd rather have all that rain, you know, when we got it here at the April 1 than at the April, you know, to push it back, you know, back in the May even farther. So, the rain was welcome, but it can stop anytime.

Todd Gleason: 04:29

Chip Nellinger, two percent of the corn had been put into the ground according to USDA in its first weekly crop progress report released on Monday of this week. You're concerned about the dry conditions as well as Sherman, being concerned that is in the Western Corn Belt, though the meteorologists say it's not maybe as bad as the drought monitors are showing us. What are you hearing from producers?

Chip Nellinger: 04:56

Well, think initially, a good open clear window in the West. We've talked to some producers in Iowa and even Northwestern Illinois and they may be able to get in and get some planting activity started even yet this weekend. But remember the dry weather longer term is going to be an issue, but it's going to allow potentially for some quick planting. It could be a little bit bearish initially and offer those guys a quicker planting pace than what we're seeing on the waterlog there is to the South and east. My concern though is when you look at that drought map, it's been pretty consistent for a year.

Chip Nellinger: 05:35

It hasn't really improved in the Western Corn Belt much. They're going to need to get perfectly timed rains because they're not going to have the subsoil moisture profile that's going to support an extended period of dry weather if they get that. So in my mind, that is probably the major reason why we could get some sort of a summer weather rally generated would be because of some sort of a two, three week dry pattern setting up in the Western Corn Belt post planting. But I I do think in the short run, fast planting because they have pretty dry conditions right now could be a little bit bearish and allow for the planting pace to increase pretty quickly in that Western Corn Belt.

Todd Gleason: 06:18

And, turning then to Naomi Bloom, your thoughts on the weather patterns, whether they're here or in Brazil in those safrinha or second crop corn growing areas.

Naomi Blohm: 06:30

Well, I guess my biggest point is that I I don't know that we're going to see, like, just a very rapid pace overall compared to historical years. Things aren't as perfect. I think there's just in general concerns, and so that makes me think that a lot of the corn in The US then could be pollinating later than an ideal time and into more of that intense summer heat here. So we really need to be mindful of a potential weather market. As far as what I'm hearing out of, Brazil and second crop corn production there, it's been a mixed bag of news where, some weeks, I'm just hearing everything is fine, fine, fine, but there's pockets that are drying out, and then the next forecast says it's, turning warmer and drier there, then you go one more day and then things are back to okay.

Naomi Blohm: 07:15

But I guess what I'm not hearing is anything drastically wrong. And I I would say that, the Brazil production numbers released today by Conab echoed that where they raised production just a little bit from the previous month, but not to say it's it's anything outstanding. And and the USDA today made no changes to Brazil production numbers, so a little bit more of a wait and see game there. But I will say, with as neutral as the funds are now in the corn market and as technically friendly as these charts are starting to look again, if we see any weather issues in any capacity, we have the reason for the corn market now to work higher for prices over the coming weeks.

Todd Gleason: 07:58

Well, tell me about that technical picture. It's something you had on your list.

Naomi Blohm: 08:01

Well, If you look at a continuous weekly front month chart of corn futures, We are now back in that uptrend channel for the short term here that we've been holding on to since late August. Five dollars would be the next significant target higher for front month old crop contracts. But also, if you look at that weekly chart, and I just posted it on x for folks who follow me there on Twitter or x, there's an upside down head and shoulders formation potentially forming that if we get some fundamental news friendly wise to justify corn prices to go above $5 futures for those nearby contracts, the upside target points to an additional dollar higher based on the upside down head and shoulders formation. So we're talking $6 corn futures if we can see some friendly news emerge. We're also still in a seasonal window where corn prices have a strong tendency to rally until about the May.

Naomi Blohm: 09:01

So my charting, my opinion is that corn is still friendly here and with the tariff news kind of being, well, just kinda keeping corn out of the picture in the short term here, I think corn's got some potential to run higher yet.

Todd Gleason: 09:19

USDA Chip Nellinger updated their export figures for corn in the supply and demand numbers. They increased it a hundred million bushels this month. Was that expected?

Chip Nellinger: 09:31

Well, think it was partially expected. We've been talking about that for probably the last three WASDE reports that there's enough evidence, on export sales data that, they're too low. And and so we saw that. That was pretty pretty, healthy increase, but I think it's warranted. So I think some of that was in the market, but certainly what it does is, to Naomi's point, the technicals are starting to get in line.

Chip Nellinger: 09:55

The the the drought map still shows show some potential issues there. We've never done a 81, hundred and 80 one and a half trend line yield, ever. So if there ever is some sort of a threat to yields down the road, corn could get really tight on the balance sheet really quickly. And and I think the funds could pile into some longs that challenges the size of their, long position from a couple months ago pretty easily. So the the the fuel's there.

Chip Nellinger: 10:24

We just need the the match to light it. But, yeah, I mean, I I think all things are starting to to line up, that things could get pretty tight because of that, big demand that we're seeing.

Todd Gleason: 10:36

Okay. So Sherman Newland, lots of this depends on old and new crop and where each of them go. I can see it easily enough, in the old crop. You're adding, you know, a hundred million bushel of exports. Ending stocks were down 75,000,000 bushels.

Todd Gleason: 10:52

That feels like a good picture, but the marketplace eventually does turn its real attention to the new crop. So the question is, has it yet, and is that what we're really seeing reflected? Or and and if that's the case, do we already have weather built into the new crop?

Sherman Newlin: 11:11

I I I don't think he had weather built into the new crop. I mean, you you thrown a lot of bearish news at this corn market, and it has held in there and actually rallied, right? So I think, to Chip's point, we argue here about the $1.81 type yield, and we haven't reached that in four years. I mean, it would be nice if they just take a four year average and maybe bump that up a little bit for more realistic goals, but we know that's not what they're going to do. So I think the trade is kind of looking at that as well, that these goals are going be hard to reach.

Sherman Newlin: 11:46

I mean, they're also looking at that Drought Monitor map. I mean, the weather forecasters are saying this July weather could get very dire for the guys in the Western Corn Belt. And I think the trade's got to have some risk built into these prices, and I don't think they have enough of that there yet. And back to the old crop, mean, this old crop, to Nandla's point, I think $6 corn very well could be in the cards, especially if you could get some dry weather in a safrinha corn crop. And that will drag up old corn or new crop corn with it regardless of the acres.

Sherman Newlin: 12:20

I mean, it's too early. I mean, there's some people who been saying, Oh, you're going to switch acres maybe because of all the rain. It's way too early to talk about that. So I'm not arguing with the acreage number, but this yield number, 181 or whatever we're to throw out, is going to be tough to get. But I mean, if we get good weather down the road, who knows?

Sherman Newlin: 12:42

Right? I mean, anything's possible, but I think you go higher before you go back lower.

Todd Gleason: 12:47

Okay. So I wanna ask each of you a question on old crop for an answer for for the crop that producers have left, not a lot to sell for corn that is. USDA making noted that relatively speaking in their WASI report by not changing the season's average cash price today despite the fact that they dropped the ending stocks by 75,000,000 bushels still $4.35. How should producers think about marketing the end of that crop? Do they stair step the rest of it in?

Todd Gleason: 13:25

And along that same tone, do they market new crop at the same time for the same reasons? And I suppose I'll let Naomi start today.

Naomi Blohm: 13:38

My answer is twofold. Part of it would be based on technicals and then also the seasonal timing. So, again, $5 is a pretty significant number to get through for the May contract or the July futures both. But if we can get through five, then it's gonna 25 increment 25¢ increments all the way up potentially to that $6 mark depending on fundamental news. Now the other piece of that would be so I would say, you know, do some pricing near that $5 area because it's a it's a big psychological number to get through, and it's a big technical resistance number to get through.

Naomi Blohm: 14:11

And then from there, yeah, definitely, put some orders in every 25¢ increment higher or look at selling that corn and looking at a reownership strategy with a call option instead. But the other part of this is that a lot of times, your summer high will occur between Mother's Father's Day, so May to June. So really keep that in the back of your mind as well because at some point, the crop for the new crop will get planted and will run out of a weather scare, and then the, selling season take over so two part answer technicals and the seasonal time frame and we'll also want to see if the funds get back into the marketplace on the long side that'll that'll help push a price rally along

Chip Nellinger: 14:57

yeah I think I agree a % with what Naomi just said I I I do think, though, if you held corn this long and beans and or beans, then your, you know, your mindset is I'm playing for a summer summer weather rally anyway regardless of what happens. So but I do think at the same time, we need to be pricing new crop, when that rally comes. So that's oftentimes hard for producers to kinda, you know, do both of that at the same time. But I I think it's very important that, if you do have old crop left, at the same time, if you see that rally, we should be cleaning up old crop. We should be starting, much more aggressively on new crop, as well.

Sherman Newlin: 15:42

Yeah. I mean, I agree with both of what they said. I mean, old crop, mean, depending on, again, I mean, when you need some money, things like that. I mean, if you're holding it for a little bit, I mean, if you could sell some up in this $5 area, that's going to be a tough area to break through. And I would look at buying call options.

Sherman Newlin: 16:04

We've been recommending that now for a few weeks. We've had clients buying some out of the money calls, whether it's for old crop or new crop, both, either one. But I think you've got to come in and do some of that if you've sold a lot of corn or if you've got a lot of new crop on the books sold. I'm not looking to sell new crop here. I mean, our basis isn't good enough, so you're looking at $4.03 0 or four I'm sorry, 4.15 corn for fall.

Sherman Newlin: 16:29

That's not really very attractive, below cost of production. But yes, if we do I mean, I agree with Chip on this one, if we do get a rally in the summertime for that new crop corn, I mean, if we get all these acres planted, I think you still have to, you know, be very aggressive on getting some new crop price.

Todd Gleason: 16:49

Sherman, I'll stay with you. For the soybean supply and demand tables, neither the USDA or CONEB really made very many changes. USDA did make note again this month that its policy is to reflect current trade policy within the world ag supply and demand estimates. Not surprising, I suppose, particularly that nothing changed in the soybean S and D table out of The United States for exports because while China is a large importer of US soybeans, mostly those have either been shipped or sold, one of the two, and they don't sell much, in the rest of the marketing year for the old crop. But it will be that May, new crop WASDE, that could show a real surprise, I guess.

Todd Gleason: 17:38

What do you think that they'll come up with for an export figure or at least how they might adjust it in the month of May for new crop soybeans?

Sherman Newlin: 17:49

You know, I think it kind of depends on, you know, if we see any sales or if we see any cancellations, I mean, coming up. I mean, with what's been going on with China, you would one would kind of expect you would see some cancellations, So I would think you've got to look at it from that standpoint. The carryout may look big. From that standpoint, I mean, they're going to plug in a bigger yield, obviously, as well, which we haven't reached for a little bit. But the new crop carryout could look a little bit larger, in our opinion, because of that.

Sherman Newlin: 18:25

But other than that, you know, it's been kind of amazing to see the beans bounce back the way they have when you with these tariffs we've had and, you know, with China being one of our biggest importers of beans, to see that they, you know, held up and and come back the way they have.

Todd Gleason: 18:44

Chip, you've probably been giving some thought to this and what producers need to think about is it's related to their marketing plans for the new crop or that which is going in the ground this month and next month. What are you telling them?

Chip Nellinger: 18:57

Yeah. Much like like Sherm said, we've been buying a few calls out here out of the money calls to kinda use that summer weather market volatility to sell into and kinda have minimum price contract established at that point in time. Being patient on new crop, I think is very important. Like Naomi said, we're very strong proponents of the seasonal, especially in corn and that would tell you that the highs are out here later this summer towards June timeframe. So be a little bit patient, but be ready to trip the trigger aggressively when we get the rallies and back just quickly on your point before, think that is the biggest factor of the May crop report is what the USDA does with bean demand.

Chip Nellinger: 19:48

I think they slow play it a little bit because they've got a lot of time to figure that out, but, that's going to be the most, suspect part of the bean market going forward is can we hold the demand together on exports anywhere near what it was the last couple of years and with tariff situation in China and Brazil crop that looks not highly likely to me but I think hopefully fingers crossed they slow play that a little bit otherwise we could see a much bigger bean carryout in May on new crop than what the market expects.

Todd Gleason: 20:23

Naomi, what thoughts do you have on the soybean market for new crop?

Naomi Blohm: 20:26

Yeah. Definitely keeping an eye on that export demand going forward. When you look at currently, we are exporting 1,820,000,000 bushels of soybeans, and about half of what we export goes to China. So we're you know, you're looking at potential loss there of, a part of that 900,000,000 bushel number. And do I think China's gonna totally say no to the American soybean?

Naomi Blohm: 20:53

I don't because they do need to be able to buy beans year round from both hemispheres. And so I feel like they will still be buying something from us, but it could be enough where they reduce their purchasing needs from us. And all of a sudden, that reduction in demand helps offset our reduction of production that we're gonna be having this year to make the ending stocks balance sheet, you know, just a little bit more comfortable. So I'm I'm gonna be defensive heading into early to mid May because that May WASDE report, USDA just has that history of putting in a record yield number, everything sound hunky dory, and then, prices have a tendency to fall lower at after that just because of that USDA balance sheet number for the new crop. So, whatever rally we can get out of this in the short term, I think it'll be a good marketing opportunity, heading into early May.

Todd Gleason: 21:55

What problems, Naomi, do the tariffs that remain in place and it's really the reciprocal tariffs that I suppose we have to worry about. But the 10% tariff that has remained in place, and it's hasn't completely been cleared to me, but I believe that China, Canada, and Mexico all have reciprocals in place, and there hasn't been a negotiation yet. What kind of issues do do those three things create?

Naomi Blohm: 22:25

That is my understanding also, also, and I I think it's a little bit of a wait and see. So now we have all of this information out there. The market has already done all of the knee jerk dramatic price reactions, and now it's just gonna boil down to where's the demand actually gonna fall over the next few weeks. And we just have to wait to see how things fall or where the the

Todd Gleason: 22:48

Commodity Week, of course, is a production of Illinois Public Media. It's public radio for the farming world. You may listen to the whole of the program anytime you'd like at willag.org. That's willag.0rg. Our thanks go to our panelists including Naomi Bloom, Chip Nellinger, and Sherman Newlin.

Todd Gleason: 23:05

I'm University of Illinois Extension's Todd Gleason.