Todd Gleason: 00:00

From the Land Grant University in Urbana Champaign, Illinois, this is the closing market report. It's the 21st day of January 2025. I'm Extension's Todd Gleason coming to you today from the Peoria Civic Center where I'm emceeing the Illinois Fertilizer and Chemical Association's annual meeting. Coming up, we'll talk not about the IFCA today, but about the marketplace. We'll do that with Naomi Blohm.

Todd Gleason: 00:23

She's at totalfarmmarketing.com out of West Bend, Wisconsin. Don Day will be here to discuss the weather forecast. He's at Day Weather in Cheyenne, Wyoming. And along the way, we'll look back to an interview that I did with Jacqui Fatka about SAF or sustainable aviation fuel in November at the National Association of Farm Broadcasting Convention, and we'll do all of that on this Tuesday edition of the closing market report from Illinois Public Media. It is public radio for the farming world.

Todd Gleason: 00:54

Todd Gleason services are made available to WIL by University of Illinois Extension. Because I'm at the Illinois Fertilizer and Chemical Association Conference, I do not have the settlement prices for you. However, I do, when I'm talking with Naomi Blum, have the closing price is about 30¢ higher for the soybeans, 4 to 5 higher for the corn, and wheat was up around 18¢. Naomi is now here to talk about these numbers in this first trading day under a new administration. Hi, Naomi.

Todd Gleason: 01:23

What a Tuesday it's been. Actually, what a Friday and a Tuesday it has been. Kind of an interesting MLK inaugural day, holiday weekend, I suppose.

Naomi Blohm: 01:34

Yeah. Absolutely. So trade anticipating uncertainty over the weekend, just not knowing what the new administration was actually going to do yesterday once Trump was sworn in. Traders also keeping an eye on weather in South America where it continues to be a little bit on the drier side for Argentina. But I think today was more about the fact that president Trump did not specifically come out yesterday and call out Canada, Mexico, China by name with specific tariff numbers.

Naomi Blohm: 02:07

Now he did say that come February 1st, Mexico and Canada, we're gonna see some tariff action, but there was no specific rhetoric towards China right off the bat. So traders took that as hope that maybe there would be a delay on a trade war or olive branches being handed out one way or the other. The result was that corn prices rallying up to the $5 area for the May contract and the July contract with soybean prices testing recent highs after that surprise bullish USDA report. We finally following along in the wings, pushing higher, also supported by the cold weather throughout the southern plains. So it has been a very exciting first trading day of the week.

Todd Gleason: 02:53

Does this change any views you have as to the direction of the marketplace?

Naomi Blohm: 02:58

Well, I have to say that, of course, with that USDA report from January, the January WASDE, that definitely put in a cornerstone for this whole marketplace in the whole Q1 of a little bit more of a supportive tone because of the ending stocks coming down for corn, also for soybeans. But what's interesting is that it feels like the fund money, maybe they're just in general coming back into commodities. Commodities maybe have been cheaper, with hopes of interest rate prices eventually going lower. Maybe they're taking money out of some of those higher interest rates, accounts and and bringing it back into commodities or maybe they have a little bit better idea of what's gonna be happening in the world with some of their global connections. But in general, where we are right now, we have overbought corn markets, overbought soybean markets.

Naomi Blohm: 03:49

We've got $5 corn here. This is a major resistance level on multiple reasons for corn futures. So it's gonna take some immediate bullish news to get the market to go higher from here, and soybeans are also approaching another resistance area as well. So it's gonna be touch and go. It's gonna be volatile for the next couple weeks.

Naomi Blohm: 04:09

And I think we're all kind of in this new price discovery point trying to understand where is the demand from here going forward, especially in light of the uncertainty with the new administration and trade and tariffs. And we're trying to get a handle on the weather in South America and how big those crops are or aren't. So it's gonna be a little bit of a shuffling for price movement probably for another week or 2 until we just really have a few more of those pieces of the puzzle better understood for what's coming ahead here for us in these markets.

Todd Gleason: 04:38

You know, a friend of ours called the move in this marketplace a gift that producers should take advantage of, particularly for old crop. Are you of that mind on corn and soybeans?

Naomi Blohm: 04:51

Well, with corn market prices now up near the $5 area for futures and with it being so overbought, funds close to 300,000 contracts long, it will take a significant fundamental reason for prices to go higher than here. I mean, we've rallied almost a dollar now off of the lows from August. So this has been a wonderful unexpected rally again because that January USDA report being such a shocker and supportive, it would make sense for producers to make some cash sales. You know, the one thing in the back of my mind with President Trump really expressing his desire to United States become more self sufficient in energy production, crude oil prices worked lower today The uptrend channel line was broken. So if crude oil prices start to sink lower, my fear is that eventually that trickles over into ethanol.

Naomi Blohm: 05:46

Ethanol prices. If ethanol prices begin to fall because crude oil or gasoline prices are falling, it makes it a little bit less profitable, of course, for some of those ethanol plants. Maybe that weighs on corn price down the road. So just kind of something to be mindful of, and and still uncertainty with, the new administration regarding, Kennedy and how he might want to go after corn use for corn syrup in food. There were some people saying that it might affect about a 1,000,000,000 bushels worth of corn.

Naomi Blohm: 06:20

Now that's something that can't get, in my opinion, implemented immediately because the entire food industry would have to change its recipes, formulas, machinery, but it is something to just be mindful of as well. So bottom line, yeah, sell the corn, make the cash sale. We've had a wonderful price rally here, and it's gonna take some big immediate fresh bullish news to justify prices to go above $5.

Todd Gleason: 06:43

Do you think that we could end up with oversupply of energy?

Naomi Blohm: 06:48

Well, I'm wondering if Trump is gonna use it as a way to undercut Russia. If he said, if we suddenly out produce, Russia and we can sell oil cheaper to India than what Russia has been able to do it, I wonder if he's gonna use that as a trade tactic. I wonder, you know, also if we can overproduce, then we can get that strategic reserve filled back up again. So it's it's gonna be a delicate delicate walk, delicate tight rope to know what's actually gonna be coming ahead here in not only the weeks to come, but the years to come. And we're back to okay.

Naomi Blohm: 07:21

What did he what did he tweet about today? How is the market responding to it? And it it, a lot of just uncertainty is what it feels like.

Todd Gleason: 07:31

Do you wanna make make a first step sale in new crop corn or soybeans or wheat for that matter?

Naomi Blohm: 07:38

Yeah. I think there's some value there. When you look at the December corn chart, we're right up against 460 again, and 460 has been significant resistance for multiple months. And we know that there's gonna be 2 to 3000000 more acres of corn planted is already the industry guess. So if we have 2 or 3 more 1000000 acres of corn planted, that takes that tightness of the 1,500,000,000 bushel carry out away and it kind of lets it swell back up closer to 2,000,000,000 bushels.

Naomi Blohm: 08:09

So definitely take advantage and start some sales here because, again, it'll take some big new immediate news to get it to go higher from these values. So the big news would have to be in the form of weather in South America on that second crop corn. It would have to come from some kind of a weather issue here this spring or summer on the US crop, or we would need some immediate bullish news on the biofuels mandates here in the United States in order to get this corn price to go screeching higher from here.

Todd Gleason: 08:42

Thank you much.

Naomi Blohm: 08:43

Thanks for having me.

Todd Gleason: 08:44

That's Naomi Blum. She is with totalfarmmarketing dotcom. CoBank, as you may know, is one of the largest private providers of credit to the U. S. Rural economy.

Todd Gleason: 09:06

The bank delivers loans, leases, and other financial services to agribusinesses, rural infrastructure, and farm credit customers in all 50 states. It has a vested interest, therefore, in anything that might improve commodity prices. Jackie Fatka follows the biofuels industry for CoBank. Her expertise lies in ag policy, biofuels, trade, regulations, ag labor, climate, smart agriculture and farm management. I spoke with her at the National Association of Farm Broadcasting Convention in Kansas City last November and we took up sustainable aviation fuel, sometimes called SAF or SAF.

Todd Gleason: 09:45

I wanted to know why CoBank, a lending institution, found SAF, a biofuel that can be made from either corn or soybean, so intriguing.

Jacqui Fatka: 09:55

I mean, historically, CoBank has been a a major partner as we've built out the ethanol industry over the years. Obviously, as we look forward towards the next generation of biofuels, renewable diesel is is coming to that picture, but a lot of those renewable diesel plants can also do sustainable aviation fuel. When you talk about the feedstocks that are really viable today for SAF, we're looking at the half a process. So our soybean crushers, we've seen a significant expansion within the soy crush space. And as well as, you know, we've got the livestock partners in there too.

Jacqui Fatka: 10:28

So, you know, a lot of, distaste is sometimes for tallow, but we've got a lot of tallow that we're using some joint ventures here with US companies that we are partnering with, who also have those GVs with Brazil to help bring the tallow in here. So it's it's a big interest to ours. You know, obviously, with commodity prices where they are, everybody's hoping for that SAF to provide that new demand boost. We got a lot of things that have gotta come, together to really see that industry take off.

Todd Gleason: 10:54

When CoBank enters a space like this, is it all through financing?

Jacqui Fatka: 10:58

You know, and I will say my role in the knowledge exchange team at CoBank is to just help research, help provide some of that insight of where the market is today, where it could go, and and what we need to think about as we move forward. And and, again, the feedstocks. Right? I mean, we're not necessarily right now funding any SAF plants, but we're there to come alongside those customers as they're looking at expansion, looking at maybe new opportunities to be in that space.

Todd Gleason: 11:21

When you're looking at that space, of course, you talked about, tallow. However, corn, soybeans, both, would be capable. Which is the primary that you think the, airline industry would be most interested in?

Jacqui Fatka: 11:35

Well, today, really, the production cost of producing a HEPA based sustainable aviation fuel is is a is much less than the alcohol to jet, and that's really why we're seeing all the SAF that is produced today with the HEPA process. You know, there are some pilot plants for alcohol to jet, but, again, we're it's gonna take time. You look back at the ethanol industry, though, it took time for us to improve those efficiencies, improve the over the history of ethanol. It was not economical at the start, but those efficiencies is approved. You know, hopefully we'll get that way with alcohol to jet, because we do have a lot of corn that needs to be used.

Jacqui Fatka: 12:11

So, but again, that's a longer term outlook. We gotta get some of these markets maybe established with the HEFA process today, get those introduction into the the airline space. They they using them using those lower prices, keeping the airlines competitive too because it does cost more for them today.

Todd Gleason: 12:28

So let me make sure I understand this, the difference in those two processes, between FAME, I'm guessing, and the HEPA process within the soybean oil or vegetable oil industries.

Jacqui Fatka: 12:40

Okay. So, the HEPA process uses, same feedstocks as as as FAME. Alcohol to jet is a totally different process, and they have a total different cost structure. And how you process that down to make your final fuel is what's different, and the cost is quite a bit different without getting too far into the weeds.

Todd Gleason: 12:59

Yeah. So just for clarification, the alcohol to jet fuel process is an ethanol process, and the other is a biofuels process. Primarily, we would think about soybeans. FAME is the normal process under which we have produced soy diesel for decades, and then the HEFA process is the process that would be for sustainable aviation fuel. Is it also for renewable diesel?

Jacqui Fatka: 13:25

Yes. And so that HEFA process can toggle back and forth between renewable diesel and SAF. You're seeing more, renewable diesel facilities come online that actually could have half of their capacity renewable diesel, half of it SAF. And, also, too, as the market drives that, they could actually go more towards one than the other. So, say, California market needs more renewable diesel.

Jacqui Fatka: 13:45

They could produce more renewable diesel. If you start to establish SAF, more cup cost competitive, you have states who come in like Illinois who does have a SAF bonus per se, right, with their tax structure, you could see more of those plants shifting towards SAF. Again, the all of those pieces coming together to push maybe more production into SAF.

Todd Gleason: 14:07

The Phillips 66 Rodeo plant in California is, I think, the largest one now, in the United States, maybe on the planet. How important is it to have it in place as a driver for sustainable aviation fuel or renewable diesel for that matter?

Jacqui Fatka: 14:25

You know, I think just just overall as going back to the 3,000,000,000 gallon goal that the Biden administration had, 3,000,000,000 gallons is about 10% of our current, use of aviation fuel. We're at 52,000,000 gallons was our first half of twenty twenty four. That's a drop in the bucket. Right? So we need these bigger plants.

Jacqui Fatka: 14:43

We need something bigger than the the pilot sales. And so you talk about Phillips 66 Rodeo. It's a bigger one. Right? You gotta have more market penetration, and that's where you're gonna start to see that when you see these bigger facilities come online.

Todd Gleason: 14:55

When you look forward with the change of administration, how do you see this playing out? What role do states play, for instance, California, as opposed to the federal government?

Jacqui Fatka: 15:05

You know, California has got their low carbon fuel standard, which is actually a huge reason why we're seeing more renewable diesel than SAF because of the fact that it is more profitable to make renewable diesel. Now they have a 20% cap coming on veg oils that will limit corn and soy or soy oils use in their renewable diesel, but they don't have that cap on SAF. Maybe that pushes a little bit more into SAF and California state. Right? Overall, you know, the federal, we're waiting for 45 z, which is a tax credit that's supposed to go into effect January 1.

Jacqui Fatka: 15:35

With this new Trump administration, do we see that paused? Probably. How long? We'll wait and see. But there is a little more unknowns on the federal level.

Jacqui Fatka: 15:43

So, you know, we might see some states step in. Airlines still have overall goals they're trying to meet. And so, again, market mandates for or, you know, market decisions versus government mandates. We're gonna have to see which one is the greater driver.

Todd Gleason: 15:57

The airlines is actually a market decision based on what they believe the whole of the planet thinks about traveling by air and what those airline travelers want from the airlines.

Jacqui Fatka: 16:10

And you're starting to see some airlines who are actually asking if their customers are willing to pay for their emissions. You're starting to see that at the end of your receipts if you're looking at that. Some are paying for that. I guess, you know, I've heard numbers between 8 12% of of customers today are making a decision of, hey. I'm willing to pay a higher price.

Jacqui Fatka: 16:28

Now are you willing to pay all of that higher price? Maybe not, but maybe fractions of that. You know, airlines, do have their own microscope on them from folks around the world. We may be stepping out of Paris Climate Accord as a country of United States, but these these same, airline companies operate in all these other countries. You look at the EU, they have a 2% mandate.

Jacqui Fatka: 16:48

So any of our airlines who are based here that also the EU, they're gonna be having to abide by those EU rules. We may start making SAF and shipping it over to the EU to help them meet their mandate as well.

Todd Gleason: 17:00

When you look across the regions in the US, where do you expect SAF facilities to be located? Usually, they're colocated with a refiner, a refinery. That would put them on the Gulf Coast, probably on the West Coast, unlike the ethanol industry with which built out right where the corn, was supplied.

Jacqui Fatka: 17:24

You know, really gotta be close to those major airports. Right? A big cost of SAF is getting the SAF from the facility just to the air airport. Right? You know, we look at, Chicago Midway's got a a partnership there to to work with the airline Southwest Airlines.

Jacqui Fatka: 17:40

You gotta get it close to that. But in Minnesota, there's Camelina producers who are producing a crop, sending it to Montana. Montana Renewables is processing it, and then they're sending it back to Minneapolis and Detroit. Somehow, that doesn't seem quite sustainable, so we really probably gotta get some of these facilities, refineries close to those airports that are gonna use the most of it.

Todd Gleason: 17:58

Which brings me back to ethanol. The plants are already located. If you say Chicago, you have the ethanol plant located nearby. I believe there's already a pipeline as well, which is the most efficient way to move this product. Why soybean or vegetable oils rather than alcohol to jet?

Jacqui Fatka: 18:17

It goes back to cost. The alcohol to jet cost, plant producing that final SAF, the costs are just a lot higher. And in in our mind, we think it just doesn't make sense, but the cost, the how to process that down, how to process the the the corn kernel down to what is usable in sustainable aviation fuel is a lot different than what is being used. If you think about it too, soybeans aren't the ones that are being processed into your SAF. You gotta get a soybean oil that's then processed into it.

Jacqui Fatka: 18:46

So those plants have an oil that's already coming in. Something that's a little more processed than, like, your corn corn kernel that would arrive.

Todd Gleason: 18:54

In your crystal ball, when you think about this and the location of those plants near primary hubs, that would put them in Atlanta and Minneapolis and O'Hare for Chicago, New York, likely, LAX. Do you see farmers in those areas or other people building out SAF plants? I don't know whether I wanna call them refineries, but an SAF plant much like they built out the ethanol industry in the, late 2000?

Jacqui Fatka: 19:25

I mean, look at where the Georgia Lanza Jet plan is. Right? I mean, that's that's our first real alcohol to jet one. I mean, the other one that we are pretty far along on is the Gevo one in South Dakota. You know, Lanza Jet's making that choice.

Jacqui Fatka: 19:37

Things that are coming in are are able to come in off the gulf too. You might be able to import in things and but in our minds, we wanna see rural America thrive. Right? So how do we make sure that this is beneficial to all? I think we're gonna have to wait and see.

Jacqui Fatka: 19:50

I don't know if my crystal ball is clear enough to show me that.

Todd Gleason: 19:52

Well, I I I think my what I was asking was whether your crystal ball was telling you that, they're going to have to build a vegetable oil plant for SAF as opposed to alcohol to jet for SAF?

Jacqui Fatka: 20:06

So so the challenge, we do become feedstock constrained with the HEFA process. We have much more potential to make a lot of SAF with our corn versus making a lot of SAF with, say, soybean oil. And so you're more feedstock constrained, which is, again, hopefully, we can get that alcohol to jet cost down so that it can be another really big opportunity like the ethanol industry was to really take that to the next level of the production capacity to produce SAF.

Todd Gleason: 20:38

Jackie Fadka is a lead economist at CoBank specializing in farm supply and biofuels. I spoke with her during the November National Association of Farm Broadcasting Convention. You're listening to the closing market report from Illinois Public Media. It is public radio for the farming world. We're celebrating 40 years on the air, more than 10,000 episodes, some 30,000 interviews.

Todd Gleason: 21:04

Up next, we'll talk about the weather forecast with Don Day. He's at day weather in Cheyenne, Wyoming. In fact, Don, thanks for being with us. What do you have to say about the weather today?

Don Day: 21:18

What a January it's been across the nation east of the Rockies with much, much below normal temperatures and snowfall this week all the way to the Gulf Coast. In fact, there could be snow on the ground before this week's over from Houston to Tallahassee, then into the Carolinas. Snow all the way down to the Gulf Coast. Quite a strong Arctic wave, obviously, and although the Arctic temperatures will ease a bit, overall, the general trend for the lower forty eight states through the rest of the month will be below average temperatures. Snowfall amounts are generally going to be on the light side as when arctic air dominates, you don't have a lot of moisture to work with.

Don Day: 21:59

But we will see a cold end of January, and all indications suggest February will start off that way. So from the plains to the Great Lakes to the Midwest and Corn Belt to the Northeastern United States, the chilly winter season will continue. Down south of the equator, well, rain chances are looking a little bit better for Argentina over the next couple of weeks. Argentina's growing areas of the north have decent chances for at or above average precipitation. The same goes for the southern states of Brazil.

Don Day: 22:30

A little bit further north into Brazil, conditions are a little bit drier, good precipitation expected for Peru with temperatures across the southern hemisphere in the key growing areas of South America likely to run at or a little bit below average, although warming up a little bit in Argentina. But no one's gonna be hot and dry over the next 2 weeks.

Todd Gleason: 22:51

Donde is with day weather out of Cheyenne, Wyoming joined us on this Tuesday edition of the closing market report from Illinois Public Medium. It is public radio for the farming world. From the Illinois Fertilizer Chemical Association annual conference in Peoria. I'm Todd Gleason.