Dec 05 | Commodity Week

Todd Gleason: 00:00

This is the December 5 edition of Commodity Week. Todd Gleason's services are made available to WILL by University of Illinois Extension. Well, welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Matt Bennett from agmarket.net and Ellen Dearden of AgReview.

Todd Gleason: 00:24

Matt is in Mattoon, Illinois, and Ellen is in Morton, Illinois. Stay with us. We'll talk to them individually. Matt will take up the marketplace in great detail with some information as it's related to marketing, and then we'll turn our attention to Ellen who will tell us about the livestock sector, particularly about beef cattle. Matt will touch on that some, but Ellen will flesh that out in ways I think you will find interesting.

Todd Gleason: 00:51

You'll want to stay with us for the whole of the program. We'll do that in just a moment. In the mean space, I do wanna remind you that next Friday on the twelfth, we'll be at the AgriCenter for the Farm Assets Conference. I hope you will join us for the day. It is a fantastic lineup.

Todd Gleason: 01:07

We'll take up all kinds of things related to demand and the future. You won't want to miss that, and we'll discuss, of course the marketplace, but the FarmDoc team and crop sciences will be there too. The cost is just $80 but you really do need to register. That's $80 through the December. It will jump up to a $100 after that.

Todd Gleason: 01:28

And if you happen to walk in at the Agra Center oh, the same thing will happen for the Illinois Farm Economic Summits too. Those are the following week on the fifteenth, sixteenth, and seventeenth in DeKal, Peoria, and Mount Vernon. The PharmDoc team and I will be on the road that week, going into the winter break. You can join us for half day events, all end with your noon hour meal. The cost for them is $80 as well.

Todd Gleason: 01:53

All the details are online and a way to register at willag.orgwillag.org or @farmdocdaily.illinois.edu. Now let's begin commodity week. Matt Bennett of agmarket.net will begin with you. Let's start with just the basics of the fundamentals of supply and demand. Begin with the corn market.

Todd Gleason: 02:19

Lay them out for me as you see them today.

Matt Bennett: 02:22

Yeah. I mean, if you look at, for instance, what's going on this export deal, I mean, we got numbers as of the October this week. And, again, huge export sales for corn. It's something that we've known all along was going on. But whenever you look at that, it certainly calls into question, we're running vastly ahead of the USDA pace.

Matt Bennett: 02:45

That's all there is to it. And so can we maintain that pace? Of course, it's a big question. And, obviously, I don't think we can maintain the pace that we're currently we're currently at. But, you know, this week, we found out, of course, we had another screwworm case.

Matt Bennett: 02:59

So you've gotta assume that even though people have felt Mexico is front loading some of their exports, you know, they're still gonna have a big need for exports as long as they're feeding all those cattle south of the border. So I think exports will probably stay the same for the time being. I don't see USDA make any big adjustments this early in the year. And if they did, I would have to think that if they take exports higher, they're almost gonna have to take feed and residual usage lower. So in all honesty, demand is all kind of dependent upon one another.

Matt Bennett: 03:30

And then of course, you got to think about supply. So the things that could rally this market, of course, over the next few months, it'd be two glaring things as demand's awfully good right now. So what's supply going to do? And so you look at US supply, is yield gonna come down? And I think that the trade is kind of anticipating the yield adjustment lower.

Matt Bennett: 03:52

But the other thing, of course, is gonna be the safrinha crop. So one thing I would point out, Todd, is that if we wanna talk about supply and demand fundamentals, I don't wanna ignore the world. The last WASDE showed, you know, that world production of corn for this marketing year up 55,000,000 tons, but that we were gonna lose about 10,000,000 tons of supply. So actually, demand would outpace that 55,000,000 bushel increase in production by 10,000,000 tons. So you've got record world demand, record US demand.

Matt Bennett: 04:22

As long as you've got that strong demand, what you have is the need to produce. So we're definitely going to be in that position to where if we get a supply disruption, the market should be very reactive. If we don't, we've probably got enough corn to get us by, and it might be, kicking the can down the road again.

Todd Gleason: 04:40

When you tease out the exports, and you talked about the rail going across the border into Mexico to feed the extra cattle that are there because of the screwworm and the closure of the border between The United States and Mexico to those beef cattle being fed here, and the feed and residual number being offset. But I'm wondering whether our export numbers, which we really oftentimes think more about, as being, waterborne, are those keeping pace as well? And are they are they doing as well as as the other side, the the Mexico, our number one outlet?

Matt Bennett: 05:21

You know, we've we've had some Gulf exports. We've had some PNW exports. There's only so much that can go out of the PNW, first of all. As far as The Gulf goes, there's a lot of question marks, you know, as to if we do have a good export program, it's gonna be pretty tough. I mean, most forecasts right now are showing that river levels could be, you know, eight feet below a normal pool.

Matt Bennett: 05:46

And that's definitely not what you want to hear, you know, as you're trying to ramp up the export program as far as beans are concerned, know, and go ahead and get some of this corn exported out. But there's no question that Mexico has been, you know, by far and away our number one destination at this point. So your question is definitely valid. As of right now, we've got some exports, but the lion's share, you know, has certainly been gobbled up out of Mexico now. You know, Colombia bought some corn here this week.

Matt Bennett: 06:16

Sure sure nice to see business other than Mexico. But I think one of the things that's really interesting, Todd, is, you know, there's been some whispers that China might be looking for a little bit of corn due to the flooding that they've had during harvest. They're gonna lose some production. But the other thing is is that there's a big question on quality of Chinese corn. So if and that's a big if, Todd.

Matt Bennett: 06:40

If China would show up to buy corn, it could definitely change the dynamics of this market. There's no question. It should be very supportive if they would step in. Now to what tune they do, I don't know. But by all means, given that the supply right now or that the quality of that crop is just not that great, you've gotta assume that they might be out there hunting for a little bit of good quality corn.

Todd Gleason: 07:03

I suppose part of my question and concern was that if the export market for corn out of The Gulf hasn't been moving very quickly, And I thought maybe it might have been because soybeans weren't moving so that, you know, they would be loading barges and and trying to ship corn instead. If that's not really been pushed, I'm wondering whether we'll be off, as it relates to exports in the coming months. Sounds as if you don't think that'll be the case.

Matt Bennett: 07:33

To be honest, I feel like right now, the pace we've got to this point, the USDA is suggesting that, we'll be 9% ahead of a year ago. We're currently running 31% ahead of a year ago. As far as pace analysis goes, I do not expect that to continue, though, Todd. I wanna be pretty clear on that. Now are we gonna be able to hit the USDA goal this year?

Matt Bennett: 07:56

I feel pretty confident that, with the current state of affairs, that's a very likely scenario. But, again, I don't expect us to keep, shipping corn as quickly as what we have here, you know, over the course of the first four or five months.

Todd Gleason: 08:10

You know, we've been talking a lot about the supply and demand tables. There is a WASD, or World Ag Supply and Demand estimate due out Tuesday, not a crop production report month in November. There will be one in January. That'll be the final. I take it that you don't expect a lot to change next Tuesday, but maybe the change is really to come in January?

Matt Bennett: 08:30

Yeah. I mean, that's the thing is that we're likely to get a pretty big dump of information there, in January. You know, a lot of folks are saying, well, last year, of course, they dropped yield four bushel. Maybe they're gonna do the same thing again this year. It depends on what part of the world you're in on your expectations for that.

Matt Bennett: 08:50

You know, I just did podcast a with with Joe Backelvik this morning. We talked about that a little bit. You know, there's parts of the Western Corn Belt that had wildly better yields than what, you know, than what they had a year ago whereas, of course, a large chunk of Iowa was reporting, you know, good corn, but not as good as a year ago. So Illinois, parts of Illinois, the same type of thing. It's more of a mixed bag, but especially the farther south you get, of course, it got a lot worse.

Matt Bennett: 09:18

But, you know, we we would expect that you'll see some sort of a reduction in yield whenever you get around to January. As far as the December report goes, typically, it's a nonevent, but I've gotta think that there could be some adjustments this year given that the October report was never released. So I've gotta think if there's revisions that they see could be made instead of simply taking the month off, and I hate to put it that way, but it seems like that's what has been done in the past. You know, I I think there's maybe a little better chance they're gonna make some revisions. And, of course, as you suggested, you know, it might be more on the demand side of things.

Todd Gleason: 09:52

The weather forecasters have told us, and I'll switch to soybeans here, but remain with the WASDE this month, that the, soybean crop in Brazil, Argentina, while having suffered through some dry spells, are in pretty good condition. Do you suppose USDA will raise the numbers for total production from both of those nations on Tuesday?

Matt Bennett: 10:14

It's tough to say. You know, we went the whole last marketing year kind of expecting that that would happen from USDA, and they just never really did. I think whenever I look at Brazil, I could certainly make the case. If you look at several of the reports out of Brazil right now, it's indicating that you could be looking at a massive crop. Now Southern Brazil and Argentina are certainly on the drier bias right now, and forecasts don't look all that promising.

Matt Bennett: 10:39

So if we would have some issues in Argentina, the typical protocol, of course, is that soybean meal market could be fairly strong. We've already seen a pretty nice little bounce off the lows that we had there in October. I mean, we were trading down there at COVID type levels in the low 2 seventy's, raced all the way up to over $330 And now we're sitting here around $3.00 $8 to $310 And so but I would say, Todd, if Argentina would stay dry and turn on the warmer biases, lot of people are predicting, that could be somewhat supportive. But, no, I don't really expect the USDA to make a lot of changes on South American production next week.

Todd Gleason: 11:21

Turn your attention to the 26, 27 crop here in The United States. The crops that will be planted in the spring. You've been out probably enough at this point in the winter mating season, really getting kicked off and started. But to get an idea of what producers are thinking about their crop ratios, and what their rotation will look like, what are they telling you about corn and soybean planted acres?

Matt Bennett: 11:45

That's a good question, Todd. You know, three two, three months ago, I would have told you. I thought, you know, and I probably did tell you. I thought corn acres would fall, precipitously. But at this at this stage of the game, I just don't see it happening based on what we're hearing from the ag chem retailer.

Matt Bennett: 12:02

Now there's no doubt that dry fertilizer tonnages were off, but a lot of folks chose, to back off on phosphate, especially where their fertility levels look good. In some cases, they did it just because they couldn't find any black ink with a normal ratio on fertilizer. And so I still think a lot of growers are still going to plant corn, especially in areas in parts of Iowa. Some of the reports out, I saw something from Iowa State this week that suggested the Iowa grower may actually plant more corn this coming year. So if we planted 98 and change this year, I would expect that's going to come down somewhat just simply due to a really high corn year typically correlates to a bit of a switch just because of your corn to beans, beans to corn guys.

Matt Bennett: 12:50

But I don't expect a six or 7,000,000 acre drop. I think you could make a case right now for somewhere in that 94, 95,000,000 acre range, which is certainly enough corn acres. But again, we probably need to be planting a fair amount of corn if this demand is going to be racing like the like we've seen it here. And so it'd be very interesting how it plays out. But, you know, if you had to pinpoint me right now, I'd say corn acres lose maybe three, three and a half million acres and those would go directly towards soybeans.

Todd Gleason: 13:18

Okay, so if you're higher corn acres but demand really good, I don't know what you're thinking about as far as early sales for corn. And then what do you do about soybean sales?

Matt Bennett: 13:30

Yeah, I mean, I'll just go over corn real quick. I mean, one thing that we've talked to growers about for bushels going in the bin is, you know, what's it look like to maybe hedge some four seventy, these 26 corn. This last fall, of course, we had a carry up to 35¢ from these to July. And so if we simply hedged December corn, which I know a lot of people don't have the stomach for those type of margin requirements, but if they did, you know, far as putting bushels in the bin, if you hedged at $4.7 with the thoughts that, you know, when you get carried $30.35 cents, you could work your way into some $5 corn in the bin, and then you're just dependent upon what basis does. You know, as far as 26 beans go, we gotta remember, you know, we're one time here over the last month, you know, we were at a a fifteen month high in the bean market.

Matt Bennett: 14:19

Now you're still looking at nope 26 beans as we speak, you know, at eleven thirteen. And so I know that that's not what it once was over eleven thirty, but that's a heck of a lot better than what most people marketed beans for the 25 crop. And so, you know, you could do the same sort of thing on beans. I know most people that I know don't want anything to do with soybean futures and I don't blame them. It's a volatile deal.

Matt Bennett: 14:46

But if you hedge or maybe even you HTA'd some beans, I don't like the HTA as much, but certainly it doesn't have the margin requirements. But if you hedge somewhere in here, I mean, the carry from Nove to July at one time this last fall got up to 65¢. So that's something that we certainly don't want to ignore. Now, another way of looking at it is, you know, maybe I just put an $11 floor on these beans and to do that, because it's going to be an expensive put option, I may have to sell a call up there at like 12.5 somewhere like that. But you know, if I did that on 20% of my bushels, if my worst case scenario is I got locked into some 12.5 beans, I'm not going to be heartbroken over that.

Matt Bennett: 15:23

So I do think we need to step in here and at least get some marketed ag market as a group. We're actually up to 40%. Most of those are flexible hedges that's got the opportunity to run up to that twelve, twelve fifty level. But by all means, we're trying to get a floor under some of these beans just in case this thing turns south.

Todd Gleason: 15:40

Thank you much. I appreciate it, Matt.

Matt Bennett: 15:42

Oh, absolutely. Thank you.

Todd Gleason: 15:43

That's Matt Bennett. He is with agmarket.net. Ellen Dearden now joins us from AgReview. She is in Morton, Illinois. Hello, Ellen.

Todd Gleason: 15:52

Thank you for taking some time on a Friday morning and for holding off, on recording commodity week with me this week as I was busy, doing some other things Thursday afternoon with you. I'd like to begin with the livestock sector, particularly all the things that are happening in, the beef supply. There's the screwworm, corn going across, the border to Mexico to keep cattle that are being fed out there, being fed. And here in The United States, really high prices, and a constant turn of what the policies might be. Can you talk to me about that sector and how things have been changing throughout the calendar year?

Ellen Dearden: 16:37

Since the October highs, we really have seen a substantial break in the live cattle and the feeder cattle both, but have turned right around and rebounded again. It seems to me that there's been a lot of talk about trying to lower prices for consumers at the beef counter. And how that will play out is really up for grabs. But there's a lot of talk, but not a whole lot of action. I thought it was interesting when Thursday the FDA approved a topical cream for dealing with screw worms.

Ellen Dearden: 17:21

And that could be a game changer because it would be applicable to both beef cattle, but also non lactating dairy cattle. Could be something to really watch how that happens. And if it is a successful product, we may end up seeing the border from Mexico reopen sometime later in 2026. However, we're feeding cattle in Mexico, so we're using corn exported from The US to feed those cattle. So with the number of cattle in North America, in Central America, is probably not down as low as what The US numbers show.

Todd Gleason: 18:13

Yeah. So talk to me about that because what the USDA numbers show are record lows at this point in the size of the herd for decades. And what you're telling me is that this is a border issue and those cattle, it's not that they're not there, they're just not in The United States. How do cattle generally, when the border is open, move across the border and through the feedlots? Are they feeders or cow calf pairs in Mexico?

Todd Gleason: 18:47

What happens generally? Do you know?

Ellen Dearden: 18:49

No, they're feeders. They're not cow calf pairs moving north. What we typically see is rather regular movement of cattle into feedlots both in the Texas Panhandle, Oklahoma, Kansas, and up as far north as Nebraska. We have friends who are in the trucking business who have really seen that business just shut off completely over the last year's time. So I'm pretty familiar with at least what they talk about.

Todd Gleason: 19:26

Right. And so what we're really saying is, and what you're telling me is that the beef cattle herd is there. Why, if that is the case, are beef prices so very high?

Ellen Dearden: 19:39

Beef prices are high because demand is high, and that runs counter to what I think the White House is trying to say, that beef demand is not there, but it is. So we are continuing to see fewer amount of beef, particularly grain fed beef, come into the market and that drives up prices.

Todd Gleason: 20:06

The folks that you talked to in Nebraska and other places, how concerned were they at the closure of the beef processing plant there?

Ellen Dearden: 20:14

They were extremely concerned. They think that it's going to add a lot of cost to move cattle away from Central Nebraska to other places for killing. But also, it's not just that Tyson plant that was closed, but a cutback in the Amarillo Tyson plant to just one shift. And so that, I think, is a huge difference. Cargill and some of the other packers will continue to pick up some of that business, but that leaves a real hole in Central Nebraska.

Todd Gleason: 20:55

Is there concern about where those animals that cannot be processed there might end up and how it would change the feed out of animals? For instance, do they process very many in Mexico, and might this be an option for Tyson and others to open plants or to increase the runs at plants if they have them in Mexico? I'm just not familiar.

Ellen Dearden: 21:23

I'm not familiar with that either, Todd.

Todd Gleason: 21:25

It'll be interesting to follow questions I'll have to ask and find out. Thank you for taking some time on the livestock side. Now let's talk about what this means for producers here in the Midwest who normally would be shipping a great deal of corn to feedlots in Texas, some into Nebraska, of course, and that coming out of Iowa. I'm wondering how you see this impacting basis in our part of the world and across the corn growing states.

Ellen Dearden: 21:58

Over the last couple of years, from Central Illinois West, shipped a lot of corn for feedlot and also for ethanol use. And some of that went down into the Texas Panhandle. With a much better crop this year in the Western Corn Belt than in the last several years. That big movement of corn out of this area, at least around Peoria, has really been cut off and the demand is coming from local ethanol plants and also to The US Gulf.

Todd Gleason: 22:36

And that is where things have really been hopping. The export demand for corn has been really, really good so far this fall.

Ellen Dearden: 22:43

It has been excellent. Excellent.

Todd Gleason: 22:45

How good has it been?

Ellen Dearden: 22:46

It has probably been day in day out 10 to 15¢ better basis than what we have typically seen in this early December time period.

Todd Gleason: 22:58

When you think about what this means going forward into January, February, March, what does it tell you about the marketplace?

Ellen Dearden: 23:04

Well, if we talk about futures on the corn side of things, there's a strong seasonal appreciation of futures prices going here from the December into the February at least. And I think that that trend looks like it could continue this year. How the basis goes is really gonna be very dependent here in the Central part of Illinois on the export markets and whether those continue, particularly into Mexico.

Todd Gleason: 23:37

How far along in their marketing do you suppose producers are, and how long how far long do you think they should be for old crop?

Ellen Dearden: 23:43

If we're talking the corn side of things, I think producers are probably a shy 40% sold. Typically they would be, oh, 50% sold, so I don't think they're very far behind. I don't have any qualms of being 40 to 50% sold at this stage of the game.

Todd Gleason: 24:02

And the soybean?

Ellen Dearden: 24:03

On the bean side of things, I think they're further ahead than that. Probably at 65% to 70% sold. I think we've had an awfully nice bean rally and that the market's saying to me that maybe we're not going to continue to work higher for right now. We did have a big sale reported this morning to China, but the market kind of took that and said, Yeah, show us more. The market continues to be disappointed at the tonnage of sales, particularly to China being made on the bean side.

Ellen Dearden: 24:42

So I'm a little bit more anxious to sell beans in here.

Todd Gleason: 24:46

Secretary Bessence on Wednesday of this week suggested, you know, the 12,000,000 metric tons, will be over the next two, two and a half month period through the February. That would work on the Chinese calendar year instead of our calendar year. May have been a translation function. Who knows? But still only 12,000,000 metric tons by then.

Todd Gleason: 25:08

And I suppose if you're working off their calendar year, you're looking at twenty five million metric tons from March through February 2027 then, possibly. What's your, what's your feeling about how this impacts the marketplace, especially given that those, you know, that that February timeframe really would not belong to The United States normally as it relates to export of soybeans.

Ellen Dearden: 25:35

Yes, this is true. I think the market really wants to just see the sales, get them on the books, and start making some actual shipments. You know, we're really kind of trading blind because our export bookings reports are only up through the October. That's generally a period that The US owns the market, in the bean side of things, and, we still have seen just tepid sales.

Todd Gleason: 26:04

Anything else before I let you go for the day?

Ellen Dearden: 26:06

Just keep watching the river basis. Improvements on the river, shows export business.

Todd Gleason: 26:12

Ellen Dearden is with AgReview. She's in Morton, Illinois. Joined us along with our other guests, Matt Bennett of agmarket.net out of Mattoon, Illinois on this December edition of Commodity Week. You may always find it up on our website at wilag.org. That's willag.org.

Todd Gleason: 26:31

There you'll find not only Commodity Week, but the daily closing market report, our opening market report, and information that comes to you directly from the crop scientist and the agricultural economist, as well as the animal scientist here on the Urbana Champaign campus of the University of Illinois. On Extension's Todd Gleeson. Hi.