- Gerald Mashange, University of Illinois
From the land to Grant University in Urbana Champaign, Illinois, this is the closing market report. I'm University of Illinois Extension's Todd Gleason out of the office for the afternoon. Coming up, we'll talk about the commodity markets with Ben Brown. He's at the Food and Agricultural Policy Research Institute, an agricultural economist with University of Missouri Extension. We'll discuss in detail corn and soybeans and how he views those two marketplaces.
Todd Gleason: 00:29And then we'll turn our attention to a ratio I think you'll really be interested in as it's related to the health of farms in Illinois and the agricultural economy. We'll do that with ag economist Gerald Mashangi. He is with the Farm Doc team on the Urbana Champaign campus of the U of I.
announce: 00:47Todd Gleason's services are made available to WILL by University of Illinois Extension.
Todd Gleason: 00:57Ben Brown, agricultural economist at the University of Missouri with Extension and FAPRI, the Food and Agricultural Policy Research Institute Institute in Columbia now joins us. Hey. Thank you much. I appreciate it, Ben. Can we talk about exports at the moment?
Todd Gleason: 01:14Of course, we had the world agricultural supply and demand estimates out. USDA still says corn exports are really good, but I'm wondering what they really look like in comparison to previous times historically, the kinds of things that you as an ag economist might be most interested in.
Ben Brown: 01:33Sure. Yeah. Absolutely. Let's start with corn here because you mentioned that in USDA last Friday, it did increase the, the twenty five, twenty six market year corn exports a 100,000,000 bushels. That puts us over 3,000,000,000 bushels of corn exports, an all time record.
Ben Brown: 01:51And I generally, I think this fits into the theme that we've been talking about for the last, let's just say, sixteen months of a very strong, very impressive corn exports. Countries all around the world are looking for corn because we've seen a range of policy developments go into place, whether that be, you know, increased domestic use for for ethanol for, you know, name the country. Right? Like, it's not just The United States, but a lot of these other countries have also increased their their biofuel, policies to to increase corn corn utilization. And so, we've seen that this last week, of data.
Ben Brown: 02:27And the egg the ag export inspections have been trickling out even through the or through the the government shutdown. Gosh. Pandemic. Government shutdown. Through the government shutdown, because these are paid by fees, at the terminals by companies.
Ben Brown: 02:42And so there is a public element, but, they were able to keep this going using private dollars. And so these are up to date. As of this last week, we saw almost 81,000,000 bushels of corn export, that was above all pre report expectations, that was above the previous week's volume of of almost 60,000,000 bushels, that was well over double, the volume this time last year of 34,000,000 bushels. And so the corn exports, have have been very strong. The sales data that we have now, and of course now we're starting to get caught up a little bit on the ag export sales data, certainly suggests that these corn shipments are, or at least the increase in corn exports for the current marketing year is justified, and and that's been a very strong use category for our corn balance sheet.
Todd Gleason: 03:32When you think about this going forward into the coming months, does it mean much higher prices? USDA only raised the season's average cash price, and it was based on, you know, what the stocks to use ratio is like by 10ยข to $4. But, clearly, producers hear over and over and over that exports are good, and for them, that means in combination with what they may or may not believe is the actual record yield that USDA came out with, that they'll just continue waiting to make sales if they can.
Ben Brown: 04:08Yeah. So, you know, there is a lot of attention and debate being put on this national average corn yield. You know, 186 bushels per acre is seven bushels more than than our previous record. Given all the challenges we saw, I I understand skepticism, by farmers. You know, USDA did put a, you know, a note in the top of the report Friday that said, you know, they don't have as much data as what they typically do, for these these estimates.
Ben Brown: 04:37My guess is that's not as much about some of the crop supply numbers as it is about some of the macroeconomic data that feeds into the demand side of the equation. That's just a pure, you know, guess, know, speculation on my side. But producers remember last year that when we got around to January, a pretty sizable reduction in our national average corn yield based on the December 1 corn stock. So we're getting pretty close here in a couple weeks. USDA will go out and survey elevators and farmers in terms of how much supply they have in storage, and that could dictate how much reduction or change in yield that we see come January, but I think I'll summarize all this by saying what we have today and what the numbers suggest is those are 18,300,000,000 bushels of corn to be used.
Ben Brown: 05:27That's the supply, a very large supply of US corn. And it is part of that is, you know, we're we have a lot of corn to ship places, and and thankfully, it is being shipped places. And so you could kinda look at two ways. One, exports are very strong. The second way is, well, we have a lot of corn, so we gotta find somewhere to do with it.
Ben Brown: 05:48Thankfully, you know, it's finding a home in in some of these export locations.
Todd Gleason: 05:52What's your assessment of soybeans?
Ben Brown: 05:54You know, on the soybean side, USDA lowered, their soybean export, estimate and, you know, 51,000,000 excuse me. Excuse me. They lowered it 50,000,000 bushels, from from the September estimate. And when we look at the export shipments that we've seen, you know, we've only got a cumulative shipments of US soybeans of about 370,000,000 bushels. That's a 174,000,000 bushels short of the seasonal pace we would normally see to hit the current export target, which again, the current target was reduced.
Ben Brown: 06:25And so we keep building, a pretty pretty sizable deficit in the soybean picture. The market rallied on expectations that China would buy soybeans and specifically 12,000,000 more metric tons here in 2025. Over the weekend, we got some news that, hey. Maybe it's not happening in 2025. Maybe it happened sometime in the spring, which then drew into question of does that count for this year?
Ben Brown: 06:45Does that count for the 25,000,000 bushels that they're supposed to buy in in 2026? And then there was conversation around, well, we haven't actually signed a deal yet. Hope to sign a deal later this year. So there's a lot of uncertainty and unknowns, I think, when it comes to to soybean trade. And and the fundamentals right now just suggest that that we're building quite a bit of deficit, and USDA's reduction in soybean exports was was justified by the data.
Ben Brown: 07:13In fact, you could ask you know, argue that they should have made a bigger reduction and increased ending stocks even more.
Todd Gleason: 07:18That will not be good going forward if the January would happen to show that.
Ben Brown: 07:23Yeah. It would it would, you know, balloon, I think, that ending stocks to use and and put pressure on our our soybean cash prices. Like I said, right now, the the market's rallied on the expectations that China will buy soybeans, and and I certainly think that they will buy some, you know, and and potentially all what they've they've asked for. It's a relatively, you know, short term, solution. The the trade deal that was struck between The United States China left many of the structural problems, long term structural problems, unresolved.
Ben Brown: 07:53And so, you know, if we saw The United States or China kinda go back and revisit some of those issues, You know, it could lead to some some downside risk to soybean prices. And and right now, you know, I think we've baked in a lot of the the current quantities that have been reported. So I actually think when it comes to to The US Chinese trade deals or truce or, you know, reduction intention, whatever you wanna call it, I actually think there's a little bit more downside risk now than upside in the soybean market.
Todd Gleason: 08:21Yeah. Recalls the first Trump administration where the phase two agreement, never did even kick off, that would have been the structural issues that you're talking about and never were put into place. Phase one was not fully implemented by China and The United States. That would have been the purchases. And this time around, we're still waiting.
Todd Gleason: 08:44Anything else before I let you go?
Ben Brown: 08:46Well, I would just add, you you mentioned the structural issues. I was also talking even broader, even outside the agate industry. Right? So, like, you know, The United States would really love China to reform its state owned enterprise model to a more private, you know, capitalistic model. You know, there's differences over Taiwan and who actually, you know, controls Taiwan.
Ben Brown: 09:07There's there's issues over IP, intellectual property theft. Those are those are things that were largely left out but remain big dividing points between the two countries and and potentially could lead to a a scruff up that, you know, right now both countries are are digging in on on export controls of whatever their product is. For for China, that's, you know, rare earth minerals. For The United States, that's, you know, needed capital into the space and, you know, access to our consumer market.
Todd Gleason: 09:37Hey. Thanks much. I appreciate it.
Ben Brown: 09:38Thanks, Todd.
Todd Gleason: 09:39Ben Brown is an agricultural economist at the University of Missouri with extension and FAPRI, the Food and Agricultural Policy Research Institute in Columbia. We thank him for joining us here on the closing market report that comes to you from Illinois Public Media. It is public radio for the farming world online on demand at willag.org. That's willag.0rg. There, you can register today for the farm assets conference and or the Illinois farm economic summits.
Todd Gleason: 10:08All the details are available online. You could also do that at farmdocdaily.illinois.edu. It's the way the winter meeting season kicks off for us in a big way from campus, the ag economist, the crop scientist on the road with me in mid December starting the twelfth day. That's a Friday with the farm assets conference, a full day event at the Agra Center in Bloomington, Illinois, followed up by the Illinois Farm Economic Summits on the following Monday, the fifteenth, the sixteenth, and the seventeenth of Wednesday in DeKalb, Peoria, and Mount Vernon. Agricultural economist, a member of the PharmDoc team on the Urbana Champaign campus of the University of Illinois.
Todd Gleason: 11:02Gerald Mashonky now joins us to discuss a couple of articles he's written for the PharmDoc team in the last couple of weeks. One of them on the Federal Reserve, the other one on net farm incomes. You can find them online at pharmdocdaily.illinois.edu. Thanks for being with us, Gerald. Let's get started.
Todd Gleason: 11:23I want to start with the Federal Reserve article. There are a few questions there. First, why did you explore agricultural credit conditions
Gerald Mashange: 11:32in
Todd Gleason: 11:33the state of Illinois and across the Midwest?
Gerald Mashange: 11:35Thanks, Todd. I think what we're really seeing across the board is that they are deteriorating credit conditions, and I think it's quite important for lenders and producers to get an understanding of what their state looks like, but generally overall, what across the Midwest credit conditions are being reported as. I think what the data is showing is that when it comes to loan demand, you're seeing a little bit of softening there. But I think you're also seeing an uptick and a deterioration in repayment rates as well. And what we tried doing in our article is because we're focusing a lot more for Illinois and Illinois producers, we have to consider the districts that Illinois falls into.
Gerald Mashange: 12:16And with the data looking at it, especially from the figures that we, presented as well, you can see that Illinois actually falls into two Federal Reserve districts. That is the Federal Reserve Bank of Chicago and the Saint Louis Federal Reserve.
Todd Gleason: 12:30The crux of the matter here, as you pointed to in your answer, is repayment law rates, I believe. Can you tell me what that means and if there's a difference between the two reserves? And in in Illinois, roughly speaking, that's the difference between counties and what we would determine as Southern Illinois, generally speaking, and the upper two thirds of the state.
Gerald Mashange: 12:52Absolutely. So what you're seeing is that starting from 2021, you're seeing that loan repayment rates have been trending lower. And because we're using a diffusion index, all it's really saying is it's serving ag lenders and getting an idea of whether or not credit conditions compared to a year ago are the same, if they're better or if they're worse. So if you look at figure four in the article, what you do see is that it is trending down lower. And quite frankly, it's been trending lower for quite some time now.
Gerald Mashange: 13:24But you did see in the 2025 that there was an uptick. But overall, the trend is lower. Now when you compare the two districts, they're fairly similar. It's just that with the Chicago district based off the server results there, you're seeing that it's slightly higher than it is for the Saint Louis District.
Todd Gleason: 13:45How do interest rates play into the broader scope of this agricultural economy and what the Federal Reserve is seeing?
Gerald Mashange: 13:52I think when you think about how farm incomes have trended lower and how many producers are struggling, when it comes down to them trying to get additional capital, so short term loans, intermediate loans, etcetera, what comes into play now is considering how the balance sheet looks like. And I think what you can also see is because you're also having cash flow issues and liquidity issues as well, you can see that when it comes to collateral requirements, we also did present that you're seeing that they're now tighter credit conditions, being imposed on borrowers. Borrowers.
Todd Gleason: 14:28I want to have you define a couple of things for me who used a term liquidity. I'm wondering what that means. And then the other word is capital, and this will be related to the second article, of course, but transitioning from the Federal Reserve article to that. So first, define liquidity for me.
Gerald Mashange: 14:49Okay. So when we think about liquidity, this is really short term cash, and we're thinking about how much cash you're gonna have available within the next twelve months. And typically, the way we think about that is considering the word working capital. So when it comes to liquidity, there's many ratios or measures you can use. So in our last PharmDoc article, what we focused on was working capital.
Gerald Mashange: 15:12And the way we define working capital is current assets minus current liabilities. Overall, the more liquid you are, the better off you're gonna be. And in instances where you don't have enough cash on hand, this is where the operating notes comes in. This just gives you additional cash from the lender to purchase inputs and other inputs for your production for your farm.
Todd Gleason: 15:34So as you just explained, and I think I want some further explanation, you use those two definitions and those two sets of terms, to set about, evaluating the financial health of Illinois grain farms. There was one more function that you looked at, an outside evaluation firm. Can you tell me how that played into the article that you've written?
Gerald Mashange: 15:56Absolutely. So when we track liquidity, it's just really important just to think about all the different ways you can measure it. So in that particular article, we're looking at working capital relative to gross farm income. So starting off with working capital, that's simply gonna be current assets minus current liabilities, and we're gonna divide that by gross farm income. Now the reason why we wanna do that is we wanna be able to standardize farms and be able to compare and understand how they are performing.
Gerald Mashange: 16:30And what's nice about this compared to just using a working capital value is working capital is a dollar denominated metric, whereas working capital to gross farm returns, that's just simply a ratio. Now what's also great about that is we can use the Farm Financial Scorecard and get an idea of the quality of that ratio. So as you saw in the article, what we're seeing is at least at the median, that ratio is still fairly strong for grain farms in Illinois. However, in 2024, it actually did fall by about 10%.
Todd Gleason: 17:07So what does that trend? And I don't know whether '24, as one year is the start of a trend, but maybe you can tell if it's trend tell us if it's trending lower or longer than that and what that might mean to a grain farm in the state of Illinois and things that it should be watching.
Gerald Mashange: 17:26Okay. So I think that really does defend depend on the actual grain farm. But when we're looking at the median, what we're doing is we're taking for every single year that we have, we are looking at all grain farms, and we wanna see what the grain farm in the middle of that sample is performing like. So when we show the median, we're saying that this is the typical grain farm at the middle of that distribution and this is what it looks like. You're going have grain farms that are actually performing much better.
Gerald Mashange: 17:57So about 50% of grain farms are going to have ratios that are much better than what we reported, and about 50% are going to have ratios that are worse than what we reported. In terms of the trend, when we're looking at this data from 2019 up until 2023, the median working capital gross farm returns was actually trending positive, was actually moving upward. It was only that in 2024 that it finally fell. But if you look at the underlying components that make up the working capital to gross foreign returns ratio, you have working capital, which is current assets minus current liabilities. And if you look at that, really the reason why we saw working capital grow that much from 2019 up until 2023 was just that we had strong grain prices.
Gerald Mashange: 18:50And what that does is that the ending values of inventory, they actually will go up with strong grain prices. Right? But if you look at those individual components, you can see that starting in 2023, you see current assets falling. So as current assets is falling, you're also seeing current liabilities slightly move up and that's gonna constrain working capital. So it makes working capital less and you're seeing that in the data.
Gerald Mashange: 19:19If you look at gross farm returns, you're seeing that from 2022 up until 2024, that's also been trending lower. So when you put all that together, it partly explains why in 2024, we saw median working capital to gross farm returns go down a little bit lower. In in summary, what that really says is that liquidity at the median is deteriorating. And I think what we're gonna wanna do next is just to take a look at farms that are on the lower end and just see the overall distribution of farms that have worse liquidity conditions and just get an understanding of how large that issue is. We've had a lot of questions coming in from readers and particularly lenders just trying to have a better understanding of what liquidity conditions look for our producers.
Todd Gleason: 20:13Is this something you will be taking up soon and that you'll be talking about on the winter meeting season?
Gerald Mashange: 20:18Yes. I will absolutely be talking about this again. I think this is a really, really important topic. As you can as you know, this is really, really challenging times for producers, particularly soybean producers. Also, just thinking about the policy uncertainty that we have at the current moment and just also thinking about the current Fed conditions as well, thinking about interest rates.
Gerald Mashange: 20:42Ideally, we want cost of borrowing to come down, but just looking overall at state of the economy right now, I think the tricky thing that the Fed is trying to navigate is fighting inflation, but at the same time, supporting labor. So when it comes to interest rates, again, we all want lower borrowing costs. But the thing is, the most important thing we have to combat is inflation. So I think the big question is going into December and at least the first few months of 2026, try to get and hoping that the Fed's gonna be able to finally arrest inflation and slowly bring down, interest rates for everybody.
Todd Gleason: 21:22Gerald Mashangi is a member of the PharmDoc team. You may read more from him on the PharmDoc Daily website at pharmdocdaily.illinois.edu. He's an agricultural economist. If you'd like to search out those articles, it may be easiest to search by his last name, Mashange, m a s h a n g e, looks like machinege or Mashange. You can check that out easily enough again at farmdocdaily.illinois.edu.
Todd Gleason: 21:52His next article in this series will be posted December 12 as it happens. That's the date of the farm assets conference in Bloomington. More on that in a moment. And then the following week, Gerald will be out on the winter meeting season along with myself and the FarmDoc team for the Illinois Farm Economic Summits. You can catch up with us in DeKalb and Peoria as well as Mount Vernon.
Todd Gleason: 22:18That's the fifteenth, the sixteenth, and December 17. Again, all the details for the winter meetings are on our website at willag.org, willag.0rg, or on the PharmDoc website under events at pharmdocdaily.illinois.edu. The cost is $80. They all include the noon meal, the farm assets conferences in Bloomington. Again, that's on Friday, December 12.
Todd Gleason: 22:44It's the full day event and includes the crop scientists. The others will be on the road with just the agricultural economist. I think you should go to both. Get yourself registered today. Do it right now at willag.0rg.
Todd Gleason: 22:58Even listening to the closing market report from Illinois Public Media. It is public radio for the good of all. I'm University of Illinois Extension's Todd Gleeson.