Apr 10 | Commodity Week

Todd Gleason: 00:00

This is the April 10 edition of commodity week. Well, welcome to commodity week. I am Todd Gleason. Our panelist for the day include Naomi Bloom. She's at totalfarmmarketing.com out of West Bend, Wisconsin.

Todd Gleason: 00:18

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. It's public radio for the farming world online on demand at willag.0rg.

Todd Gleason: 00:40

We have much 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. Are there any other items on your list?

Todd Gleason: 00:58

Naomi Bloom, other things that we should take up?

Naomi Blohm: 01:02

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

Todd Gleason: 01:18

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

Chip Nellinger: 01:23

Well, I think weather is starting to, take a a little more, influence on the markets as well with some of the planting delays to the to the south and and Delta area. And looks like, the Western Corn Belt is getting off to, you know, maybe an okay start here, but they're awful dry, and that drought monitor still shows a 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: 01:49

And Sherman Newlin, how about you?

Sherman Newlin: 01:50

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

Sherman Newlin: 02:05

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

Todd Gleason: 02:13

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: 02:34

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 will be probably a couple of weeks. That's it, but it doesn't rain anymore, but they're calling for another zero five inches of rain or so tonight.

Sherman Newlin: 02:52

So that'll put us back that much farther. 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: 03:07

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 devil 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 must dry out quickly or it just doesn't absorb and it runs off. Is that what happens with with the water?

Sherman Newlin: 03:44

Yeah. Yeah. A lot of I mean, we were wet before, I mean, think, and a lot of this ran off. So the ground is a little bit more solid than you think. I mean, it's not fit to work.

Sherman Newlin: 03:56

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 gonna take some time, that's if we don't get any more rain.

Sherman Newlin: 04:10

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 mud even farther. So the rain was welcome, but it can stop anytime.

Todd Gleason: 04:21

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: 04:47

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

Chip Nellinger: 05:27

It hasn't really improved, in the Western Corn Belt much. So they're gonna need to to get perfectly timed rains because they're not gonna 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: 06:10

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

Naomi Blohm: 06:22

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 U. S.

Naomi Blohm: 06:39

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. But I guess what I'm not hearing is anything drastically wrong. And I would say that the Brazil production numbers released today by CONNAB echoed that where they raised production just a little bit from the previous month, but not to say it's anything outstanding.

Naomi Blohm: 07:25

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: 07:50

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

Naomi Blohm: 07:53

Well, absolutely. 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. Dollars '5 would be the next significant target hire 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.

Naomi Blohm: 08:43

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

Todd Gleason: 09:11

USDA, Chip Nellinger updated their export figures for corn in the supply and demand numbers. They increased it 100,000,000 bushels this month. Was that expected?

Chip Nellinger: 09:22

Well, I 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 to Naomi's point, the technicals are starting to get in the line.

Chip Nellinger: 09:47

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: 10:16

We just need the lat the 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: 10:28

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: 10:44

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: 11:03

I I I don't think you 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: 11:37

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, I mean, this old crop, to Nayamala'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.

Sherman Newlin: 12:07

And that will drag up old corn or new crop corn with it regardless of the acres. I mean it's too early. I mean there's some people have 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 throw out, is going to be tough to get.

Sherman Newlin: 12:30

But I mean, if we get good weather down the road, who knows? Right? I mean, anything's possible, but I think you go higher before you go back lower.

Todd Gleason: 12:38

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?

Todd Gleason: 13:14

Do they stair step the rest of it in? 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: 13:30

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 going to be zero two five 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, do some pricing near that $5 area because it's big psychological number to get through and it's a big technical resistance number to get through.

Naomi Blohm: 14:03

And then from there, yes, definitely put some orders in every $0.25 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 Day and 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 seasonals take over. So two part answer, technicals and the seasonal timeframe. And we'll also want to see if the funds get back into the marketplace on the long side.

Naomi Blohm: 14:46

That'll help push a price rally along.

Chip Nellinger: 14:49

Yes. I think I agree 100 with what Naomi just said. 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, do both of that at the same time.

Chip Nellinger: 15:21

But 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: 15:34

Yes. 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. But and I would look at buying call options.

Sherman Newlin: 15:56

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.

Sherman Newlin: 16:16

So you're looking at four three zero or four I'm sorry, 4.15 corn for fall. That's not really very attractive, below cost of production. 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 be very aggressive on getting some new crop priced.

Todd Gleason: 16:41

Sherman, I'll stay with you. For the soybean supply and demand tables, neither the USDA or CONNAB 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: 17:30

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: 17:40

I think it kind of depends on 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 that 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: 18:16

But other than that, it's been kind of amazing to see the beans bounce back the way they have with these tariffs we've had and 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: 18:36

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: 18:49

Yeah. Much like much 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 a a minimum price contract, established at that point in time. Being patient on new crop, I think, is very important. Like, Naomi said, we're we're very strong, proponents of the seasonal, especially in corn, and that would tell you that the highs are out here, you know, later this summer towards June timeframe. So be be a little bit patient, but be ready to trip the trigger aggressively when we get the rallies.

Chip Nellinger: 19:28

And, you know, back just quickly on your point before, I I think that is the biggest factor of the May crop report is what the USDA does with bean demand. I think they slow play it a little bit because they've got a lot of time to figure that out, but that's gonna 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 much bigger bean carryout in May on new crop than what the market expects.

Todd Gleason: 20:14

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

Naomi Blohm: 20:17

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're looking at potential loss there of part of that 900,000,000 bushel number. And do I think China is going to totally say no to the American soybean?

Naomi Blohm: 20:45

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 going to be having this year to make the ending stocks balance sheet, just a little bit more comfortable. So I'm going to 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, making everything sound hunky dory, and then prices have a tendency to fall lower 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: 21:47

What problems, Naomi, do the tariffs that remain in place and it's really their cyclical 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: 22:17

That is my understanding 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 going to boil down to where's the demand actually going to fall over the next few weeks.

Naomi Blohm: 22:34

And we just have to wait to see how things fall, or where the pieces of the puzzle end up. And so in the wait and see moment, that's when we can start trading weather instead. But then we'll be watching. We'll be watching to see if our export demand has been affected at all by any of the trade and tariff issues. So every Thursday morning on those weekly export sales, that's what the traders are going to be watching.

Naomi Blohm: 23:00

And they're going to be looking line by line at which country bought what. And on the export inspections on Monday morning, we're going to see where we are shipping our products to. And then we can start to develop a little bit of a pattern from that, which will ultimately affect prices and demand.

Todd Gleason: 23:16

Chip, I assume you'll be watching corn shipments to Mexico, ethanol shipments to Canada?

Chip Nellinger: 23:22

For sure. All of the above. And I think it is very much a wait a wait and see at this point. That's my understanding as well is even though we've got a a ninety day pause, there are some tariffs that still remain, maybe just a little bit lower than what was initially put there on some of these countries. I think the great hope is and, you know, maybe some telegraphing from some of the the tweets today is that there are gonna be some agreements forthcoming by a lot of different countries.

Chip Nellinger: 23:52

Probably not China right away, but a lot of different countries. So I think if the dominoes start falling that way, that gets the market a little more comfortable that things are maybe gonna get back to quote unquote normal again. So I think it's as much an unknown to anyone. Nobody can predict that, you know, especially me. I I I don't even wanna begin to to try to predict that, but it will cause volatility in the short run.

Chip Nellinger: 24:19

But hopefully, it ends up being, you know, some sort of agreements that gets the market a little more comfortable that we're gonna stop some of this volatility, especially in the financial markets.

Todd Gleason: 24:30

There remains an awful lot of uncertainty in the marketplace, Sherman. The the commodity markets actually have been, at least the grains and the oilseeds, have been fairly steady in the face of those. Outside markets, other markets have not. The Dow has been all over the place, the S and P five hundred moving, bonds apparently were one of the reasons that the pause was put into place. How much concern do you have with them?

Sherman Newlin: 24:59

Yeah. I mean, the outside market. I mean, you're right, though. I mean, the grains and our ag commodities have held up really well other than the livestock markets. They've held up really well in the face of everything that's going on because, I mean, a lot of it's money flow, right?

Sherman Newlin: 25:13

I mean, you getting margin calls in some of these other markets, and they're having to get out of those, but they've got to put money somewhere. And sometimes the grain markets, the way they look right now, is maybe a good place to put money. I mean, you also have the dollar sharply lower here, has been and continues to go lower. So that may help out our exports a little bit. But you got the crude oil market reacting pretty negatively to everything that's going on as well.

Sherman Newlin: 25:43

And that comes back around and may hurt our bean oil market and our corn market because ethanol margins right now are not very good at all. We had an EIA number that showed the ethanol numbers were down a little bit last week. I think a lot of that, though, was from maintenance being done at the plants. But yes, the outside markets have been really wild. I hope they do settle down here at some point in time.

Sherman Newlin: 26:06

But you're right. They were talking about the other night before you reduced the or paused the tariffs was the treasuries. I mean they were selling off, which was going to increase our interest rates. So that is concerning how that all plays out. And like Chip says, we don't we don't know how a lot of this is gonna play out.

Sherman Newlin: 26:29

Can't pretend to know, but, hopefully, it will get back down to normal here one of these days.

Todd Gleason: 26:34

We'll watch wide eyed, I believe. So let's get a final word from everybody. I think Sherman Newlin will let you start. What is your final word and advice for producers today?

Sherman Newlin: 26:45

Yeah. I mean, I think we went over pretty well today. I I think the corn market does have some upside to it. The funds are not near as long as they're worth, so there's plenty of room for them to come back in. So reowning some of the bushels you sold or out there in some call options, I think, is a very good idea.

Sherman Newlin: 27:04

But right now, they're not overly expensive, plus that gives you the comfort to make some sales later on down the road. But this is a market that we're going to have to be watchful of. And I still think the weather ends that June, July time frame, if it holds true to what they're forecasting, I think we could have a market that could be quite a bit higher later on down the road.

Todd Gleason: 27:26

Chip Dallinger of Blue Reef Agra Marketing, your final word for the day?

Chip Nellinger: 27:30

Yeah. I I think it's important to, as a producer, stay calm. You know, don't get too caught up in this volatility in the in the tweets and the and and the fake news and the real news of of what's happening right now. Consider into your plan some strategies that allow you to, lock downside price risk in on a rally, but maintain some ownership. That can be calls like like Sherman said, or that can be on a rally buying some puts.

Chip Nellinger: 28:02

But I think it's important because under the wrong weather conditions here and the drought map is showing some some warning signs right now, you could get a balance sheet on corn and beans both that is very, very tight. And in spite of tariffs or no tariffs, that's gonna have its own, you know, issues if we see that, and that's gonna affect prices in a friendly way. So you wanna maintain some ownership in some way, shape, or form and try to get past the, the negativity and the volatility of this short run tariff news.

Todd Gleason: 28:34

And finally, Naomi Bloom of Total Farm Marketing. Your thoughts?

Naomi Blohm: 28:38

Yeah. Twofold. One, I'm definitely still quite friendly to old crop corn. But just because we're friendly to old crop corn doesn't mean that you can just either think prices are gonna go higher and you're gonna go off to the field and get planting. You've gotta keep an eye on those markets every day.

Naomi Blohm: 28:53

And, as Chip just said, we're just really needing to be mindful of the potential knee jerk reactions that these markets can still have with various tweets or various headlines that come across. See that volatility. And so don't just put a position on if you're buying a call option, really already be thinking about what would be a potential profit order with it. Or if all of a sudden the market turns lower, where is the point that you're going to be stepping out, thinking about where you're going to be placing those forward contracting cash sale opportunities and also, yes, being mindful and ready about when you're going to start protecting unpriced bushels in a few weeks here when we start to get into that seasonal time timeframe of a summer price high. So I think marketing just really needs to be top of mind.

Naomi Blohm: 29:44

I know that you guys are going to be busy in the fields, but this is going to be, I think maybe one of those opportunities that could just come and go quick and only the folks who are really dialed in and focused on marketing are gonna be the ones that are able to take advantage of it.

Todd Gleason: 30:00

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 Blohm, Chip Nellinger, and Sherman Nuland.

Todd Gleason: 30:17

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