May 30 | Closing Market Report

Todd Gleason: 00:00

From the Land Grant University in Urbana Champaign, Illinois. This is the closing market report. It's the May. I'm Todd Gleason. Coming up, we'll talk about the commodity markets with Mike Zuzlow and the weather with Eric Snodgrass.

Todd Gleason: 00:12

If you can stay with us for the whole of the half hour, you will hear from Alan Brugler, Chip Nellinger, and Shane Holtorf as well. And along the way, I'll update you on land sales in Illinois, even one in Iowa, and some information about the Trump administration's tariffs during this Friday edition of the closing market report from Illinois Public Media.

announcer: 00:33

Todd Gleason services are made available to WILL by University of Illinois Extension.

Todd Gleason: 00:38

In Chicago, corn futures finished 2 to 4¢ lower. Beans were off 10 to 11¢, and wheat futures finished about a half lower to a penny and a half higher for the day. Mike Zuzula, GlobalComm Research dot com out of Atchison, Kansas now joins us to take up what's been kind of a dismal week in the commodity markets. Mike, thanks for being with us. I suppose we should start with soybeans, maybe soybean oil.

Todd Gleason: 01:06

Can you lay out what you think might be taking place there? There's all kinds of policy issues related to biodiesel and trade and other places.

MIke Zuzolo: 01:16

Yeah. I think Washington has not given the trade enough concrete news at this point. And as a result of that, Todd, the last couple of weeks, we have seen bean oil turn into bitcoin in terms of how violent and volatile the trade has been. And Friday was no exception with fresh news from Washington that they are looking at the credits. They're looking at extending the refinery waivers.

MIke Zuzolo: 01:45

This all just suggests to the market, though, especially the bulls who have bought on expectations of a policy improvement and update, that we are going to have to string these things out. And I think the 3% to 4% decline in bean oil on Friday is just indicative of no one knows where the policy is going to be. And I think because it was the end of the month as well, the policy bulls just jumped out of the market and got out of their market longs to flatten themselves out. Why? I think and I talked to a newswire about this on Friday mid session, and they had heard the same thing.

MIke Zuzolo: 02:27

You may have heard the same thing. It seems as though a couple of weeks ago, when a lot of the NAFB people were in Washington and interviewing key policymakers. It felt like there was going to be some news breaking about the policy. And now that it's been a couple of weeks and it hasn't broken, I think the trade is suggesting to themselves maybe it's wrapped up in this new bill that has passed the House but is now just getting started in the Senate, and we may not hear anything until after the August recess in September. That's all conjecture.

MIke Zuzolo: 03:02

That's all shooting from the hip from my desk. But that's kind of how I see it. But regardless of why, or when, the market clearly has been trading almost every news headline in bean oil. And it's just made the soybeans overall much more vulnerable to shocks to the upside, shocks to the downside, all the while South America's harvesting. And all the while, U.

MIke Zuzolo: 03:25

S. Weather has, net net, improved pretty nicely on both sides of the corn belt for the past two weeks, essentially.

Todd Gleason: 03:32

And the president bringing one of those shocks to the soybean market, I assume this is part of why soybeans were down a dime today, by suggesting that, hey, China has not met the agreed upon requirements from the Geneva conference, and I'm gonna do something about it. He didn't say what, but that he would. So I suppose traders were not looking kindly at that as we went into the weekend either.

MIke Zuzolo: 04:02

Yeah. It's interesting because the trade continues, and we're now, what, since the February Beef House meeting that you put on, we are now that many months into not just looking at President Trump's policy at face value. And once again, we see it again this week. He did it to the European Union last week when trade negotiations were going well. He's doing it to China this week.

MIke Zuzolo: 04:26

Why should we be surprised? And this just goes to the bigger picture that I told clients, because we are so close in terms of price and the time of year that we were back in 2018 with November futures, almost the exact same price in November futures, and in that year, we slid below $9 By the time we got to early mid July, we lost about $1.5 in price in thirty five, forty days. Because of that and because of the tariff talk that you're bringing up, rightfully, and also the South American crop seasonality coming on the world markets and also my feeling that we have a pretty good shot like 2018 to not get as much demand from China, whether it's because of their economy or whether it's because they buy more from Brazil or maybe it's because of the HPAI in Brazil. Who knows? But we have the makings, I think, of a weakening demand base as we see South American crop come on.

MIke Zuzolo: 05:25

And that's pretty much what happened in 2018 at this time of year. And so when you see something like this happening and you think that that's a possibility and some of the fundamentals are there, even if you're below the cost of production, even though you hate to make the recommendation, I sat back this week and last week and said to myself, what if I don't make this recommendation and prices slide? What will clients think of me then? And so I put hedges on. I did 100% of APH at the beginning of this week with only bought puts to leave my upside almost completely open in the cash market.

Todd Gleason: 05:57

Yeah. Corn slid that year, it appears to me, the lead option weekly chart down to $3.42 and a half as well. That was by mid September. And at this time of year, the end of the month of May, it was, I don't know, at $4 or thereabout. Yeah.

Todd Gleason: 06:17

Right around that. So it also slid that year. Do you see corn sliding as much potentially if soybeans go as far as they did the last time around?

MIke Zuzolo: 06:27

It will not help but get sucked down with the beans, in my opinion, Todd. So the only difference between corn and beans, and it's a big difference, is the world supplies. Because we have that record high world supply ending stocks number in beans, we have very tight world supply ending stocks in corn. And I think that makes a difference this time around versus 2018, as does, I think, the world supply of wheat. But net net, your point is still well taken.

MIke Zuzolo: 06:56

I'm starting with the beans, hoping I'm wrong. And if I'm wrong, not only do I have a lot of beans left to sell in the cash market, I also haven't really done anything in the corn. And so I'm just taking the worst of the two scenarios and saying, I've got to do something with one of them. But what we really need next week now is a counter seasonal wheat led rally. And those crop conditions and what's happening in other parts of the Northern Hemisphere, I.

MIke Zuzolo: 07:22

E. The Black Sea and China, their wheat belts, they still have issues. But you're really pushing on a string. You're really going against the seasonals, trying to bet on the wheat market being able to rally as you get into harvest in the Northern Hemisphere. Having said that, we've got a lot of rain in Oklahoma.

MIke Zuzolo: 07:41

And as I said, we've got these other hot spots around the rest of the world. But I think that's where the corn could be eased as far as the pain they may it may have to endure if the wheat holds up well and that dollar stays weak.

Todd Gleason: 07:54

Thank you much, Mike. I appreciate it. You too. Thanks, Todd. Yeah.

Todd Gleason: 07:57

That's Mike Zuzula at GlobalComResearch.com out of Atchison, Kansas. In today's agricultural news, the court system has upended the Trump administration's primary tariff policies, a three judge panel, Reagan, Obama, and Trump appointed, at the Court of International Trade has ruled president Trump does not have the power to levy tariffs under the law used to impose the April two liberation day ten percent tax or the currently paused reciprocal tariffs. A second federal court ruled against the president's emergency tariffs on imports too, calling them unlawful. Both courts say congress, not the president, has authority to impose tariffs, and that the Trump administration's use of a 1977 emergency action law is executive overreach. The rulings were both stayed by a federal appellate court until it can review the cases sometime in June.

Todd Gleason: 08:55

During last night's PBS NewsHour, businessman, celebrity investor, and regular member of the show Shark Tank, Kevin O'Leary, said the judicial view of the president's executive order imposing tariffs are not unexpected.

Kevin O'Leary: 09:10

The courts are telling you through these decisions that not so fast, Bubba Louie, as they say. You gotta go through a process, and that's exactly what's happening.

Todd Gleason: 09:22

The court action will play out, says O'Leary. But really, with president Trump, it's about the signal in the endgame rather than the noise being made related to the on again, off again tariffs.

Kevin O'Leary: 09:33

The signal he's sending out since the beginning, since his first mandate, since his first term, is he's not happy with the trade situation worldwide vis a vis access to US markets, and he wants to balance them. Clearly, what Trump is doing here with the 17 countries, the EU, Britain, India, Japan, Canada, Mexico, is a set of new trade terms. And I think we're gonna get kind of to a reciprocal 10%. That's my own assumption. I'm investing that way.

Kevin O'Leary: 10:01

And so far, the markets have rewarded me for taking the long view.

Todd Gleason: 10:06

China is a different story as it relates to the president's trade policies, says Kevin O'Leary. He made his comments during the PBS NewsHour on Thursday evening. On a related but different note, because TPA or trade promotion authority granted to presidents expired in 2021, any trade deal the president strikes will be subject to congressional changes. TPA, when in place, narrows congressional oversight of trade deals to simple up or down votes. Without it, congress can filibuster and or amend free trade agreements presented by the president.

Todd Gleason: 10:43

Let's stay in Washington DC, and with Trump administration policies, the National Corn Growers Association responded to the Making America Healthy Again Committee or MAHA Commission's report, which raised unfounded questions about the safety of pesticides. The NCGA released a report speaking to the economic impact of widely used technologies like atrazine and glyphosate. NCGA chief economist and Illinois farmer Christa Swanson who authored the report says one of the central tenets to producing crops is controlling pests that when left unchecked can reduce corn yields sometimes up to 70%. She also says the safety and efficacy of pesticides have been repeatedly tested and documented for decades. Glyphosate and anthracene have been registered as US pesticides since 1974 and 1958 respectively.

Todd Gleason: 11:39

And finally today farmland sales in the state of Illinois this spring have been limited but vice president at Murray Wise Associates Elizabeth Straum, in this week's MWA Illinois Land Review found on YouTube, said it remains an interesting marketplace.

Elizabeth Strom: 11:54

What we are seeing is that there is definitely not a lot of farmland on the market. We're seeing a typical story of supply and demand. And because of that lack of supply, the sales that we've been seeing have been, what I would call, you know, stable to also strong. As you read through the data and the MWA land review, there's been some sales that are at $1,718,000 per acre. And even in Iowa, we saw one go for 22,000, which we haven't seen that number in in quite some time.

Elizabeth Strom: 12:25

As we look forward, landowners are that are thinking about selling are kind of just staying put for the most part right now, just because of the uncertainty in the crop markets and also the tariff story, keeps changing, you know, every day.

Todd Gleason: 12:39

Strom says more farms are expected to be listed this fall, increasing market volume. You're listening to the closing market report from Illinois Public Media online on demand at willag.0rg or in your favorite podcast applications. Our theme music is written, performed, produced, in courtesy of Logan County, Illinois Farmer, Tim Gleeson. Eric Snodgrass from Nutrien Ag Solutions and Daggerbil joins us to take a look at the weather forecast and the growing regions across the planet, Eric. But I think we probably wanna stay right here in The United States.

Todd Gleason: 13:22

Let's begin with a review of the month May. Kind of a different month, fairly rainy in some parts of the Midwest, the Corn Belt particularly, into the East and down to the Delta regions.

Eric Snodgrass: 13:36

Yeah. But what's interesting is if you look at a few key states north to south, they have entirely different precipitation patterns. So Illinois, north to south, drier North, wet South. Missouri, drier North, very wet South. Indiana, very dry North, very wet South.

Eric Snodgrass: 13:52

In fact, I I caught myself, although I hope I don't get in trouble for it, but I've I've kinda nicknamed the Mid South the Gulf Of The Mid South. Right? And and it's it's been so much wet weather and so much more still to come that the soils are so saturated that it is evaporating water into the lower atmosphere in a very similar way that oceans do. Right? So we have a question.

Eric Snodgrass: 14:14

Did this May, which was so wet from the Red River Valley of the South through the Ohio River Valley. So that's Texas and Oklahoma, you know, all the way to, you know, to to to Ohio and Pennsylvania. Is that strip of really, really wet conditions, which has been incredibly problematic, right, that we're way delayed in planting in the Eastern Corn Belt. We have to replant, prevent plant throughout the delta. Okay.

Eric Snodgrass: 14:36

Is that what does that mean for summer, though? Right? So we we should think through that. But the other side of May that I won't forget was how much severe weather we saw. Right?

Eric Snodgrass: 14:44

I mean, I know it's been a little more benign here lately, but Texas just had some massive supercells rip through there. I don't know if you saw the videos from Austin, Texas the other day. You and I have a mutual friend that lives down there, Bill Chapman. He sent me a video of just baseballs pummeling his house. It's the second time he's gonna have to have his roof replaced in the same year.

Eric Snodgrass: 15:04

So just thinking about all of this, what does it mean, I think, for later? And the top thing for me, Todd, is, you know, parts of the Midwest were drier in May. I just mentioned Northern Illinois, so was parts of Iowa. But I still think that Northern Illinois and Iowa are the garden spots right now for the major corn crop that we're trying to raise here in The United States. And those are the same areas that I think we have risk on later, but that's, of course, later.

Todd Gleason: 15:28

Well, let's talk about not too much later because June starts in just a few days here, couple of days.

Eric Snodgrass: 15:35

Right.

MIke Zuzolo: 15:35

What do you think the

Todd Gleason: 15:36

June will look like?

Eric Snodgrass: 15:37

Well, I can tell you it's not gonna look like the second half. And the first half has got some increased Pacific jet stream momentum, which means we just had a system that came through. Right? We're gonna go into a quieter weekend into early next week, but by the time we get to next Tuesday, Wednesday, thankfully, the temperatures start to recover, and then we get into a situation where we're gonna be watching for some heavier rain midweek next week. And then again, that following weekend, there's another storm system.

Eric Snodgrass: 16:03

That would be like June, what, June. So we still have two more systems in the next ten days alone. But the heat that's coming in, we do need, Todd. We're about 250 GDDs behind where we were a year ago right now if you planted on the same day. Right?

Eric Snodgrass: 16:18

And that deficit, especially with that very cold Memorial Day weekend, was it's the wrong time to be cool. You you wanna pack heat into a crop right now. So to tell you temperatures are recovering early next week is good. They're gonna start recovering today with some sunshine, but, we need actually to put in quite a bit of heat into this crop into the month of June given how cold Memorial Day weekend was.

Todd Gleason: 16:40

You mentioned that the back half won't be much like the front half in your opinion. What does the back half of June feel like to you?

Eric Snodgrass: 16:46

Yeah. Well, my opinion's being formed based off of some stuff that's happening in the Indian Ocean and the Pacific Ocean. There's a big, I'm sorry for the nerd speak here, but convectively coupled Kelvin wave. And what that means is a rapid movement, yeah, of of of the MJO. Okay?

Eric Snodgrass: 17:01

So it's really zipping across its phases. It's energized this more active time period we're gonna see at the June. And I think it just backs off and falls apart after about June 1415, which means the June, what I will be watching is where is the Bermuda High? Where's the Pacific High? Some of the longer range guidance lets them drift away from The United States, the Pacific High West Of The US, the Bermuda High to the North and East Of The US.

Eric Snodgrass: 17:29

And long story short, that could build in better chances of getting hotter, plains, Midwest at the June, and a better chance of going drier at that time. And here's what'll happen, Todd. Not a whole lot of folks are gonna complain about it while it's happening. It's when it gets to June 25 to June 30 that we're all going, okay. Okay.

Eric Snodgrass: 17:51

Okay. We needed the heat. The crops are okay. We had good soil moisture, most of us, but we need rain. Bring in bring back in the storms.

Eric Snodgrass: 17:58

And here's the big question, Todd, for summer. I still think that there's gonna be some sort of a Central US ridge. If that Central US ridge is in Montana, we get ridge riding thunderstorms, and we set you know, we we bust bins in terms of yield. If that ridge is in Minnesota, which there is a chance that it could be, then all of sudden, we start to build in a weather premium in the market, and it hits right about pollination. So there you go.

Eric Snodgrass: 18:24

I I think all of that is still yet to be watched. And as you know, we're in the middle of this assignment. And I'm a tell you, right now, the ocean temperatures in the Gulf Of Alaska have been warming up over the last week. That is a signal that summer will be hot and stormy. If those waters cool off in the next twenty five to thirty days, then we have another story to make, and I think that the June may start to do that.

Eric Snodgrass: 18:48

That would be a risk of hotter, drier conditions here in summer.

Todd Gleason: 18:51

Well, I I'm voting for yeehaw. Let's go Montana.

Eric Snodgrass: 18:54

Yeah. They're they're not. I was just talking to some Montana folks this morning, and they're like, hey. We've got pockets of drought that if we continue to make these happen, all those big Canadian wildfires we've been seeing. Have you seen those lately, Todd?

Eric Snodgrass: 19:05

The big Yes. Yeah. Those will start going back to the Western United States. And in that case, when the West typically gets hot and starts to burn, we tend to have bumper yields here. So I say we're just we're we're we're we're walking on the knife's edge right now, trying to see on which side of it we fall.

Eric Snodgrass: 19:22

And I think the next thirty days are gonna be most telling. June is that critical month where the seasonal pivot in the pattern takes shape. And is it gonna be hot and stormy, or is it going to be hot and dry? That's the question for this year.

Todd Gleason: 19:34

We'll ask you more questions next week.

Eric Snodgrass: 19:36

Alright. Sounds good, Todd.

Todd Gleason: 19:37

Eric Snodgrass is with Nutrien Ag Solutions and Agribal joined us on this Friday edition of the closing market report that came to you from Illinois Public Media. Do visit our website at willag.org, w I l l a g 0 r g. We're celebrating forty years of the closing market report. Thank you for listening today. Commodity week is coming up next.

Todd Gleason: 19:58

Our panelists, if you can stay with us for the whole hour, you'll hear all of that program. Otherwise, up online now include Alan Brugler, Chip Nallenger, and Shane

Eric Snodgrass: 20:07

Holtorf.