- Aaron Curtis, MID-CO.com
- Shane Holtorf, LogicAg.com
- Collin Watters, ILCorn.org
This is the April 24 edition of Commodity Week.
Collin Watters: 00:08Todd Gleason services are made available to WILL by University of Illinois Extension.
Todd Gleason: 00:14Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Aaron Curtis. He's at Midco in Bloomington, Illinois. Shane Holtharf joins us from Logic Ag Marketing.
Todd Gleason: 00:24That's LogicAg.com online. He's out of Alta, Iowa. And Colin Waters is here from the Illinois Corn Growers Association in Bloomington, Illinois. Commodity Week, of course, is a production of Illinois public medium. It's public radio for the farming world online on demand at willag.0r Shane and Collin are both new to commodity week, though we have talked to them over the past few years in different capacities.
Todd Gleason: 00:52But let's have them introduce themselves. Shane Holtor from LogiCag Marketing. Tell me about yourself and maybe a little bit about conditions on the ground in Iowa at this point too, where you are located.
Shane Holtorf: 01:05As you said, my name is Shane Holtorf, based out of Alta, Iowa, which is kind of about a hour south of Minnesota border, hour east of the South Dakota Nebraska border, and right on Highway 20. I'm one of the founders of Logic Ag Marketing. We're a full service commodity brokerage, grain marketing advisory business, and then we do quite a bit on the livestock side as well. And, yeah, conditions here are interesting. It really depends on where you're at.
Shane Holtorf: 01:40We've had a really good run of planting the last ten days. Most guys that I've talked to have have made some really good progress. Now we've set out here. Last night, some rain came through. Two nights ago, some rain came through.
Shane Holtorf: 01:55And so we're getting some much, much needed rain to sideline everyone here.
Todd Gleason: 01:59And Colin Waters, you're at the Illinois Corn Growers Association in Bloomington. You're a logistics specialist. Can you tell me about your job and background, please?
Collin Watters: 02:09Sure. Yeah. My name is Colin Waters. I'm the director of exports and logistics at Illinois corn. So, basically, I focus on market development activities, trying to build foreign demand, and then also other logistics issues that we face in in exports.
Todd Gleason: 02:27Well, let's talk about logistics up front. I know you have probably answered many questions about the port phase, and the changing structure of them. Can you outline what it means for corn exports in your opinion as released earlier this week by the Trump administration?
Collin Watters: 02:46Yeah. The the the revised proposal is certainly not as bad as as the initial proposal, but there will be additional costs in the system. So the revised proposal basically calls for any ships that are empty that arrive, there wouldn't be any fee on them. But any other imports by a shipping company that is Chinese controlled or the boat is of Chinese origin, there would be a fee assessed. And so really, biggest concern is that those fees will ultimately be passed on and covered by all the business activities, right?
Collin Watters: 03:44So even though the export side is seemingly exempted, I still feel like those fees are going to have to get paid by somebody. And so those rates are more than likely to get shared between both the imports and exports. So that has the potential to raise costs and and potentially make The US, you know, just less competitive from a price perspective.
Todd Gleason: 04:15Can I delve into that just a little bit? Because the the the bulk carriers, if they come in empty, will be exempt. And you're suggesting, I believe, that across the whole of the import export that the carriers will just simply levy the tax, relatively speaking, somewhat equally to everybody who's using the services?
Collin Watters: 04:41Yeah. Yeah. And that's and and I guess that's my that's my biggest concern, right, is that we don't know how how a business will handle those those fees. But presumably, they'll be able to spread those costs out over all of their activities. And they instead of just putting adding some kind of a surcharge on whatever the imports are.
Collin Watters: 05:09That's still very much up in the air. There's other we have some other questions about proposal still. So hopefully, in this next comment period and the next hearing, we'll be able to get some more clarity because I don't think that there's anybody out there that would oppose reinvigorating the shipbuilding industry in The United States. I think that that's a really critical thing that we need to do. We have face the Pacific and the Atlantic Oceans.
Collin Watters: 05:43We have a huge navy, and we really should be very good at building ships. But the approach, it seems a little bit disjointed, too. We don't necessarily know what these fees how they will be spent, right? So will that revenue just go to the treasury and just help pay down the debt or something like that? Or will it actually be reinvested in shipbuilding?
Collin Watters: 06:13The way that it's been kind of proposed, it looks a lot like it's just simply disincentivizing Chinese ships from entering U. S. Ports. And that's a I guess, it's one approach, but it would be really nice to see the whole package. What is the big plan to basically encourage an industry that is more or less absent in The United States.
Todd Gleason: 06:43Aaron, would you have a question you'd like to ask of Colin about the export markets or logistics in any form?
Aaron Curtis: 06:51Yeah, Colin, I appreciate the update on the port fees. We agree on this standpoint, in terms of less severe than what it could have been. And obviously one hundred and eighty days out, maybe hopefully something changes before then. But back to the big topic of tariffs, Colin, the corn market has been pretty well held up. Of course, tariff news hasn't really infected the corn too much, especially with the pauses to both our neighbors in Canada and Mexico.
Aaron Curtis: 07:20Do you expect those pauses to continue as we continue to move forward or any concerns with tariffs with our neighbors, especially with Mexico being such big buyer of U. S. Corn here the last couple of years.
Collin Watters: 07:34Yes, definitely. That's absolutely right, Aaron. I mean, it's not even a contest. The Mexican market is by far the largest corn market for The U. S.
Collin Watters: 07:45And then I would also say that Canadians are really important on the ethanol side. They're the largest importer of U. S. Ethanol. So these are both things that are really, really critical to corn prices in this corn demand period.
Collin Watters: 08:03So yes, it's hard to say. I think that there's a lot of folks that would make an argument that what the approach has been so far has been kind of prep the USMCA review, which is scheduled for next year. But I think there's kind of an assumption, maybe, and that's a hate to assume, but there is this kind of background, maybe thought that this is posturing for future USMCA negotiations. And if that's the case, then I would certainly hope that this pause has then kind of continued. But I do think that it's also important to remember that we still have 10% tariffs on everybody, right?
Collin Watters: 09:00So it's kind of a misnomer out in the press. Like the way that just we talk about it as well, there's a pause. There's been a pause on the really, really severe tariffs for the most part outside of China. But now we have a global 10% tariff, which is really a huge increase over what we've traditionally had. So those costs are going to start creeping into just about everything, right?
Collin Watters: 09:32And I think that that's one of the reasons why you see a lot of skittishness, I guess, in the financial markets, too. It's that there's you know, the the bond market and, you know, the, and just the the dollar, it seems like people are, the the world is kind of moving away from US assets.
Todd Gleason: 09:55Yeah. Bruce Sherick reminded folks during the closing market report on Thursday afternoon, that that 10% tariff means there's 10% less money everywhere to spend.
Collin Watters: 10:09That's right. And
Todd Gleason: 10:10that that that will just slow down everything across the board. Shane Holthorff, do you have a question exports or logistics that you'd like to ask?
Shane Holtorf: 10:22Yeah. From the logistics perspective, know, Colin, I I don't envy you trying to wade through all of the tariff conversation and how that is is having a huge impact. You know, mine is is we look out to fall here. We've got 95,000,000 acres tabbed, expecting a big corn crop. As we look from a logistics perspective, are we prepared to be able to export that large of a corn crop?
Shane Holtorf: 10:50How are things looking on the river with all of the obviously, it's a lot of time, but with the extra rainfall here this spring?
Collin Watters: 10:59Yes. The river system is definitely it looks like it's coming off. It's crested now, right? And so I'm cautiously optimistic that things will be okay. The last weather outlook that I saw, and this is months out, so it's a little bit like throwing darts.
Collin Watters: 11:24But there's fairly good odds for a hot, dry summer. So I'm not 100% sure which way to be concerned. It feels like we either have a flood situation or a drought and low water. But I guess I'm remaining cautiously optimistic this year. I do think that it's I suspect it's going to be a big crop just because even if it does get hot and dry, I feel like over the last few years, we've seen this dryness that seemingly doesn't it doesn't have as big of an effect as it used to.
Collin Watters: 12:13Like I remember talking just a couple of years ago, I guess I was in Iowa talking to guys that are saying, Oh, man, this is going to be just miserable, and it ended up being a record. So yes, I'm cautiously optimistic that the logistics are going to work out. And hopefully, everything is going to be kind of hitting on all cylinders. And hopefully, these prices kind of kind of, hopefully, we can drive demand so these prices can move up a little bit.
Todd Gleason: 12:42On that note, Shane, I'd like to talk a little bit about conditions on the ground with you. If I remember correctly, there were two items that stick in my mind, that you are located within an hour, relatively speaking, of eight ethanol plants, and very close to a couple of them, so that basis levels are always pretty good in your part of the world, if I remember. Right? And then that two years ago, last fall, there was a short crop that really just carried over into the area for last fall. Are basis levels still really strong in your part of the world?
Shane Holtorf: 13:25Yeah. Basis levels, they're strong now, and so, you know, the best opportunity oddly enough for basis was around harvest time. We were seeing ethanol plants deep in the harvest, still posting a 60 over the Dees, you know, and it didn't trail off after we got harvest started, and we started to see that really, really soften up once we got into November, December, January, and basis actually was down to zero or even a negative at some spots, which is pretty unusual for us in this neck of the woods. Now we're starting to see a really good firm up again, you know, 15 to 20 over at a lot of these places. And so, you know, ethanol obviously is is helping that.
Shane Holtorf: 14:13We have a ton of feed demand in the area too. And so, yeah, we're we're back to it strengthening here.
Todd Gleason: 14:21Were corn farmers active sellers in February?
Shane Holtorf: 14:24Yeah. So that was that was part of the deal is not only in February, but, you know, around the harvest time too with such as oddly, aggressive basis at harvest time. There were there were a lot of farmers, that just pushed it out the door. You know, a lot of the storage programs around here changed, and there was much you know, a a lot of minimums put into place for what you were paying on storage. So between, you know, October, November, to avoid storage programs, there was a decent push out the door.
Shane Holtorf: 14:58And then again in February, when we kind of crested those recent highs, a lot more was pushed out the door. You know, it doesn't feel like in our general area, there's a lot of corn in the farmer's hands that would typically be in their hands this time of year.
Todd Gleason: 15:14Aaron, I'm working something here for Illinois. Can you, in the Midcoast system, feel that Western Part of The United States keeping the supplies there, for domestic usage and not being moved towards the river or towards and they probably move towards the, the the feedlots, but maybe not towards the river for export market. And does that make a difference in this part of the world?
Aaron Curtis: 15:43Yeah, so what we watch out of Iowa, right, is some of the UP markets that travel through the middle part of the state and travel down into the Hereford and export markets. And those markets have been still relatively weak just because there's so much more corn this year out in the West than there was, say, a year ago, right, that what Jane kind of alluded to. So those markets have been a little bit, call it doggy versus some of the other rail markets we're seeing, BN markets that head out of Illinois and go out into Hereford and Mexico as well have been weaker compared to the last couple of years. So that's kept a little more of that corn back here in the state. The river has been fairly firm.
Aaron Curtis: 16:24We've talked about a pretty strong export program. So it's been holding into some small overs here for the most part through the last few weeks. Southeast rail market, which goes down into the hog and chicken feeders has been relatively strong here the last couple of weeks. Some of those folks are starting to add to some of their coverage levels and the Indiana, Ohio, Michigan crop was smaller this last year than what it was previous years as well. It's Illinois is obviously in kind of a unique spot where we still have we're the largest exporter of corn by any state and typically by a large amount.
Aaron Curtis: 17:04So we can move a lot of different directions, but we are seeing that pull from the Southeast starting to pick up here over the last few weeks, seeing some processor markets here in Illinois starting to perk up a little bit. Shane mentioned the amount of grain that's already been sold by the farmer. We estimate anywhere between 1520% is left, which is a typically fairly low amount here for April. So lot of that corn is in commercial hands. So the end user has to bid up a little bit more to get that out of those commercials hands.
Aaron Curtis: 17:36So we are seeing basis in general here over the last six weeks or so, a little firmer Todd.
Todd Gleason: 17:42Colin, can you give me some data points about the Illinois corn crop and how much of it is actually exported out of The United States?
Collin Watters: 17:50Yeah. So that's, I don't know. In terms of kind of just on average in generalities, it's about half of the crop leaves the state. And like Aaron had mentioned, you know, there's what by rail, we can reach every corner of The US. So so depending on the on the year, you know, it it could be the South seed lots in the Panhandle or whatever.
Collin Watters: 18:17But on average, in general, it could be 60% to 70% of the corn that leaves the state would be destined for exports. So so we we use 30% as kind of a rough guess, but that is that's still, you know, by far, the the the largest export origin.
Todd Gleason: 18:40And do you know Mexico, of course, the number one destination for US corn. But is most of that pulled out of Kansas, Iowa, the Dakotas, or does it follow the train lines from Illinois?
Collin Watters: 18:56Yeah. There's actually quite a bit of business at Illinois. It's depending on where you're at and what what rail line, you know, you're you're closest to. You know, there's there's quite a bit of crane that moves out of Central Illinois, Western Illinois that moves into just directly into Mexico. So it depends on the it just depends on costs and availability and everything in terms of transportation, freight costs and availability of crane.
Collin Watters: 19:26So yes, there's a natural tendency for kind of the Southern or, I guess, the Southern Plains, I'm including Nebraska there, to be very active in the Mexican market. Illinois, seems like it's been ramping up too. There's more and more business into Mexico direct from Illinois.
Todd Gleason: 19:49Shane, on the ethanol plants, the ethanol shipped from there goes to where? You're close enough, relatively speaking, to the border. It might go to Canada, I suppose. And is there much worry in your area?
Shane Holtorf: 20:04Yeah. So that's been, you know, twofold the worries. You're correct. A good majority of it does end up in Canada. And so there's a lot of worry on what that market is going to hold as well as we've seen the energy markets get pretty volatile throughout this tariff perspective.
Shane Holtorf: 20:22And what does that do to ethanol's competitiveness here? And so that's
Collin Watters: 20:29kind
Shane Holtorf: 20:29of been our worry as we've seen basis start to firm up with these ethanol plants is, do we hold out for more in play chicken with this tariff market, or are we starting to take these bids that have firmed up and given us a nice gift back here?
Todd Gleason: 20:45Colin, I'll come back to you. The 10% tariff, which you reminded us about again upfront, How much of an issue do you think that will be for US Corn Producers?
Collin Watters: 20:56It's really, really difficult to say. I mean, obviously, that if if you, you know, if you rely on, anything that's coming from overseas, you're going to be paying more for it. But remember that tariffs will artificially inflate domestic prices as well, right? So the domestic producer, the only rational thing for him to do is to raise his prices to basically meet the foreign, the tariff number. So even if you are just you're getting everything from home, chances are that's gonna there's an inflationary there's support there, right?
Collin Watters: 21:39So it's really, really difficult to pin it down and say this is the number that's going to be the main effect. But obviously, costs will be going up. And then the other side of the coin is the retaliation. Obviously, the right now, with China, we're in kind of a de facto embargo situation. With 125% tariff on U.
Collin Watters: 22:10S. Goods coming into China and 145 plus percent tariff on Chinese goods coming into The U. S, it's there's no way that, that makes any sense. And so that in that situation, we that's pretty evident, right, that we in that retaliation, you just lose a market. And I think that you'll see that soybeans are going to feel that.
Collin Watters: 22:37But this is a Brazilian window now anyway. So I don't I think that that's probably why the bean prices have been somewhat stable. But anybody who's in the beef, pork, poultry export world would probably say this is not going to be good because the Chinese are it's like the third largest export market for poultry, beef and pork. And oftentimes, those what we're shipping to China is the variety meats, stuffed chicken paws. So we don't there's not a big market for chicken feet in The United States.
Collin Watters: 23:24There's a significant market in China. So those exporters, those processors, they're going to their margins are going to get hit, and it's going to take time for that to kind of filter back to the corn farmer. But I can imagine a scenario where that happens. So anyways, I don't know. I hope that the ninety day pause on all of the other significant tariffs continues or that there's some deals worked out.
Collin Watters: 23:55But honestly, I'd love to see that tariff number get back to a low single digit, if not zero, because I think we've we in agriculture understand the benefits of trade, and we've been very, very successful in in exports. And, man, it's it's kind of like, you know, watching a lot of hard work kind of just get washed away here. So trying to stay optimistic.
Todd Gleason: 24:26Aaron and then Shane, both I'd like you to address new crop and what your concerns are as it's related to the May 12 World Ag Supply and Demand Estimates, which will have the first S and D tables for both corn and soybeans.
Aaron Curtis: 24:43Well, the corn in each stocks number is going to print pretty large compared to where we're at today. We keep tightening up the old crop situation as exports has continued to be pretty impressive here for old crop. So you're talking about a number probably within shouting distance of 2,000,000,000 bushels, if they put a weight adjusted trend line yield, which is north of 180 on that acres number. So the outset that looks a little bearish based on $4.5 corn. I think beans probably could be a little constructive though, because the inverse of corn of course is that less bean acres.
Aaron Curtis: 25:22The question for both, I think is what the USDA says about demand, what they say about bean demand with tariff dispute right now with China, our biggest customer, how do they measure that here in May when they're typically not much of a buyer on new crop until late summer, early fall? And then exports on corn at 2,500,000,000 bushels this year, do you expect that to back up? I would say probably a little bit because part of the drive from Mexico has been smaller crops the last two years. And if they have better weather that might temper some of that enthusiasm. But the acres outset, just putting an acres number and putting in a balance sheet looks bearish to corn and maybe a little constructive to beans.
Aaron Curtis: 26:10But I think the demand numbers, it's going to be early of course in May, but that's probably going to get some conversation on how the USDA places unknown on the tariff.
Todd Gleason: 26:19And Shane, your thoughts on that May report?
Shane Holtorf: 26:21Yes, as we look forward to the May report, I think the nail was hit on the head there. If you plug in 181 bushel yield on top of 95,000,000 acres, we have a monster corn crop with potential for looming demand. We've all talked about a lot of what ifs on here, I think we could say that every year. But with this, the tariff talk aside, it feels like we've opened ourselves up to a lot more of those what ifs. You know, if ethanol can stay strong and we continue to build that export program on corn, while we're definitely, you know, staring down the face of a large crop, if we have any sort of hiccups, I think we've got some opportunity during the summer.
Shane Holtorf: 27:09But ultimately, think it plays out that we're going to have a very big crop. On the soybean side, he said it as well, we're going to rob a little bit of that soybean acreage away. Probably depends on what the next two or three weeks bring, you know, down in the Delta. If we can continue on that the plan to plant corn or if we start to rob some of those acres away and put them to beans, I I think while he mentioned the, you know, the bean market is fairly constructive, that could be, you know, kind of the one concern that would be a little destructive in my eyes. You know?
Shane Holtorf: 27:49And so I think we're gonna have a, you know, very, interesting and challenging year post this report just given the fact that I you know, I think we're gonna have some pretty lofty expectations, especially on the corn market moving forward after this report.
Todd Gleason: 28:05On on this topic, Colin Waters, I would like to know what your perspective is. USDA has clearly indicated it will use whatever tariffs are in place when it's putting the supply and demand tables together for corn. That would include that 10% tariff across the board. And you have to think about all the exports, not only of corn, but ethanol. What do you suppose they'll do?
Collin Watters: 28:33Well, I don't know that they're going to I don't know that it's going to affect the corn and ethanol markets all that much. I have a feeling that it's going to be more of a bean issue, to be honest, because what they're going to be looking at is the tariffs that are in place because they get into the hypotheticals. They just take whatever it is and or they that's what they say. And the corn world, at least, right now, only major retaliation is from China, right? So Chinese have been they've made this very, very clear over a very long time.
Collin Watters: 29:20They want to be self sufficient in corn, wheat, rice. They don't mind being an importer of soybeans. So they've made a concerted effort to increase their yields and increase their productive capabilities of those other cranes. And they've been pretty successful so far. So I don't know that the Chinese will necessarily be huge corn buyers going forward.
Collin Watters: 29:50I think they'll just be kind of dependent on conditions each year. On the bean side, that's going to be different. And I would suspect USDA will take the existing tariffs or some number into account when they come out with the new report.
Todd Gleason: 30:12And then finally, Colin, any final word from you? And thank you for reminding me that it's not the tariffs that we have imposed from The United States on other countries, but the tariffs that would be retaliatory on The United States from them that will be impacting that WASDE, your world agricultural supply and demand estimate. Your final word, Colin?
Collin Watters: 30:30Yeah. I I I think the the only thing that I might leave folks with is, you know, it it actually deals with the the the the shipping fees. It's something that's kind of been in the background. It's this proposal that was put out by the U. S.
Collin Watters: 30:49Trade Rep's Office. So it feels like it hasn't gotten a lot of press in kind of the mainstream news. It's gotten some press in the ag publications, but it's something that I think that we all need to be paying really, really close attention to because theoretically, it can change here in the next month or so during the comment period of the hearings and so forth. But I'm very concerned about anything that will basically hamper export demand because it is really the one it's the one tool in kind of the toolbox farmers to alleviate that supply and drive price. So if we start adding more costs into the system, there are other exporters in the world that would gladly take that business.
Collin Watters: 31:46So so, yeah, I guess, encourage people just to kinda pay attention. And if anybody has any questions, reach out to the Illinois corn office.
Todd Gleason: 31:54That's Colin Waters. He's with the Illinois Corn Growers Association out of Bloomington, Illinois. Shane Holtorf is with us as well. He's with Logic Ag Marketing. That's LogicAg.com online out of Alta, Iowa.
Todd Gleason: 32:07Shane, your final word for the day?
Collin Watters: 32:09Yeah. You know, I I
Shane Holtorf: 32:10think we talked enough about how we've got a large crop looming on on both sides, and and we've got, you know, some technical weakness in the corn market. You know, we look at the the global competition is a little bit stirred up here. US weather has been really, really good so far despite some heavy rains throughout. And so we've we've got no weather premium, really, so to speak, into this market. And the US Farmer, I I think, is prepared to plant the crop pretty quickly.
Shane Holtorf: 32:41And so on the corn side, you know, look for those opportunities early on to price and on the bean side, you know, go back to the closing comments about China here. You know, we can we can speculate a lot on what's going to happen and, you know, the opportunities for our market if China decides to shop elsewhere. You know? And so I I think that we've gotta just watch and see what happens. I know it's not a a great perspective.
Shane Holtorf: 33:11We've got crop insurance in place to cover some of of that risk ahead of, you know, this fall. And so be patient, but be prepared.
Todd Gleason: 33:20And finally, Aaron Curtis from Midco out of Bloomington, Illinois. Your final word for the day.
Aaron Curtis: 33:24Well, Todd, the US balance sheet on corn and the world balance sheet, fairly constructive, so it continues to offer support to old crop corn. The farmer has been pretty aggressive on selling old crops. Not a lot left percentage wise, would revisit that crop market on old crop if we retest July corn around $5 or so. So keep paying attention to that. New crop corn would pull out the fifteen year seasonal on these corn and suggest that between now and say June 15 is typically a good time of year to add some sales especially since most of the country hasn't sold much new crop at this point.
Aaron Curtis: 34:05So probably add to your marketing plan here for new crop in this next two month period. And I agree with Shane, not a lot of weather premium in the market right now. If we, decide to put a little bit of that in over here the next few weeks would, probably increase your percentage of new crops sold here over this time frame.
Todd Gleason: 34:24Commodity Week is a production of Illinois Public Media. You may listen to the whole of the program anytime you'd like online on demand at willag.0rg. Our thanks go to our panelists today including Aaron Curtis, Shane Holtorf, and Colin Waters on University of Illinois Extension's Todd Gleeson.