Todd Gleason: 00:00

This is the March 13 edition of Commodity Week. Todd services are made available to WILL by University of Illinois Extension. Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Aaron Curtis from Midco.

Todd Gleason: 00:19

He's out of Bloomington, Illinois. Logan Kimmel is here from Roach Ag. That's roachag.com. He's at Naperville, Illinois. And Mike Zuslow from GlobalcomResearch.com is here too in Atchison, Kansas.

Todd Gleason: 00:32

Hello to all of you. Let's get a list of the items that maybe we should discuss for the day. Mike, I think I'll kick things off with you. It's been a busy week. What's top of mind for you?

Mike Zuzolo: 00:44

Yeah. You know, it's interesting. It seems like when we've been able to get away from the tariff talk, we've been able to find some good supply demand fundamentals and, just wondering if it's worth talking about as far as whether they're gonna stick around or not.

Todd Gleason: 00:57

Okay. We'll do that. Logan Kimmel, anything on your, list to discuss for the day?

Logan Kimmel: 01:02

Yeah. I think with the, uncertainty and volatility in the markets, and the most recent sell off in the grains, might be a good time to talk through and implement some market plans for some producers as we come into the next three to four month window when usually, markets provide opportunities for folks.

Todd Gleason: 01:25

And Aaron Curtis from Midco.

Aaron Curtis: 01:27

Well, Todd, it was nice to actually talk about some fundamental news on Tuesday. Now it only lasted about three minutes with that crop report because there wasn't much change, but what do we expect from the end of the month crop reports, which we assume will bring more volatility with acres and grain stocks? So, what are some expectations as we look forward to that here at the end of the Well,

Todd Gleason: 01:48

let's do start with supply and demand tables. Mike, I think I will come back to you. There were was a USDA report on Tuesday. The Rosario Grain Exchange brought some numbers out from Argentina this week. And on Thursday morning, Brazil, released, through CONAB, its set of numbers for production of corn and soybeans this season there.

Todd Gleason: 02:13

What'd you find the most interest in them?

Mike Zuzolo: 02:15

I'm glad you framed it that way, Todd, because you could have looked at WASDE report with USDA not changing US corn or bean exports at all and only cutting wheat exports 15,000,000 as we didn't feed the bear. Think many of us and I'd be encouraged to hear what Aaron and Logan have to say about this as well, I was very relieved not to see a big change in reduced demand on the export front because USDA was going to talk about the tariffs at the WAOB. But the trade the next day clearly felt like it was we didn't feed the bull. We've got South American crop coming, and it doesn't matter what the tariff news was, even if it was friendly. We are going to take these prices lower, you know, and led by the soybeans with the corn willingly participating.

Mike Zuzolo: 03:02

That brings us to the Rosario and the Conab numbers. We saw a distinct shift again, back to well, maybe we are tighter in South America. Maybe we can't put South America to bed yet. And if we can get some legs on this, especially with that Rosario corn number going down to 44,500,000 metric tons versus USDA's fifty million metric tons for corn. If we could get some legs on this, especially with farmers not wanting to sell right now, not needing to sell, don't think.

Mike Zuzolo: 03:32

I think it might be a really good opportunity to kind of Logan's point to get some marketing done.

Todd Gleason: 03:36

Aaron, as you think about the supply and demand figures, what do they mean to you as a grain elevator operator?

Aaron Curtis: 03:43

Well, I think it's going to be interesting to see what the quarterly stocks report says at the end of the month because obviously December through January and even most of February basis has been relatively weak and that's been a function of this the extreme active farmer selling we saw. We went from roughly 30% sold from the producer to 75% in about six weeks. Obviously, that had a negative impact on basis. So we are starting to see some things start to tighten back up a little bit, starting to see some improvements. Now the producer is largely out of the markets.

Aaron Curtis: 04:17

We started to see a few isolated markets start to perk back up a little bit. We've got a large book, a little over 800,000,000 bushels of corn still in undelivered sales that need to source at some point here through the spring. So still a little bit optimistic on basis here moving forward now the producers largely sold, but interesting to see what that stocks number says at the end of the month to get us a feel on if there's some opportunities for basis to really get interesting later this summer. But back to the crop reports, I think the interesting thing for me is just when you take China out of the world situation, you got a stock to use ratio for world court under 10% and that's relatively tight. And think that's helped lead to some of this rally we saw in East Jan and doesn't leave a lot of room for any issues with both the second corn crop and the big acres that we have coming in The U.

Aaron Curtis: 05:13

S, it just doesn't leave a lot of room for air if we have any sort of weather issue here in The U. S. So a couple of crop couple of world crop numbers that we're going to have to watch pretty closely here in regards to stocks to use overall for the world side. So it could get kinda interesting here.

Todd Gleason: 05:30

I think, Logan, that I'll just roll that right into the marketing plans over the next three to four months that you were thinking about from broach ag. How do farmers take advantage of what may be a period of both volatility and higher prices? And do you really think that's going to be the case?

Logan Kimmel: 05:49

Well, I I think the volatility and uncertainty is gonna persist through through our markets into the spring and summer. It seems like, the tariff talk and negotiations change on a daily basis. And I think that's going to move the markets. But going back to the balance sheets, like on the corn for an example, when you look at the global numbers and even here domestically, not necessarily needing to be a weather, or crop failure, but even a crop scare this spring or summer could get our markets moving back higher to where if most folks are out of old crop, but looking at some new crop ideas, that might be better opportunities ahead to where, you you look at where our February crop insurance prices came in. Most years, you find yourself at those or above those levels between now and the end of the growing season.

Logan Kimmel: 06:50

So if that presents itself and folks, are are staring at some not so attractive new crop cash prices right now, having a marketing plan, in place that you can take action on if we do get opportunities maybe due to weather, between now and the July, I think, would be this is a good time to do that, before planting. Folks got a little time now to sit down and input that in place, here for the next four

Todd Gleason: 07:21

Mike Zuzlow, I'll come back to you as it's related to supply and demand. We talked about corn. We talked about soybeans. Wheat, however, is an interesting one. You're closest there to the wheat country, located in Kansas.

Todd Gleason: 07:37

Dry conditions there. Dry conditions in wheat country in Argentina, I believe, and dry in Russia, Ukraine, and France too.

Mike Zuzolo: 07:48

Yeah, and you know, as we talked about at the at the all day outlook meeting, Todd, on the corn panel, my firm belief remains that the wheat still is the overall leader to the upside. One of the best things that happened Thursday was that we saw export sales really come on up over 80% from the four week average and above the highest trade estimate, which was really nice to see. So that weaker dollar and that three month high in the Russian ruble against the dollar seems to be doing some good heavy lifting for us in this tariff environment we're in. But the reason I think the wheat market needs to go to the upside is because of the weather and because of those nations that you're talking about that have a vulnerable crop. The trade just doesn't see a vulnerable crop because we're coming off of Australia's harvest which was better, India's harvest which ended up being much better at the early stages of the estimates coming from bureau.

Mike Zuzolo: 08:45

But this is where I think the wheat market and the wheat corn spread is doing a lot of good things right now with wheat gaining on corn still below $1 on the soft red minus the corn. But if we could see in thirty days, the wheat market gained $60.70 cents, which on the forecast that I'm looking at, and this is kind of an oddball thing to say, but I'll put it out there for the other guys to maybe talk about too, if they want to. I've been doing this since 1995. And the reason I say it is because, you know, we're running like six or seven weather models right now, whether you're paying for it or whether you're looking at it on your own, which I do a combination. But, Todd, I've never seen the weather models in this much agreement for the rest of March and most of April in terms of a very dry slot for the hard red wheat belt and the Western corn belt of Nebraska, South Dakota and part of North Dakota heading into mid April, heading into the primary corn planting time period.

Mike Zuzolo: 09:39

So that to me, if we can't rally the wheat on, you know, 80 degree temperatures right here, right now in Northeast Kansas, hitting record highs right now in dry conditions and more dryness to follow, I don't know what's gonna do it honestly because I I still think the soybeans have a weight to them that that's gonna keep the corn kinda trapped at times.

Todd Gleason: 09:59

Yeah. So that's where I was gonna follow-up. And I'm gonna stay with you, but everybody else can jump in on this Because you did mention that soybeans, and a second time you said that this is the weight in the market. So is it that we need to gain 60 or 70¢, or is it that corn and soybeans need to lose in the marketplace?

Mike Zuzolo: 10:20

Yeah, my sense is is that we need to lose more in the beans. I don't look for that in the short term because the trade is already talking about more corn acres, less bean acres. But what I will say is today for clients, I put out a midday update and said, let's pull our November hedges, let's move them to July, with the idea that if we've got this big South American crop coming, and we've got a weakening basis, and we've got a real uncertain trade relationship with The US and China. Let's just save some money, so to speak, by doing more in the short term in the what would be old crop for us, but new crop for South America.

Todd Gleason: 10:57

Aaron, can you jump in here and maybe include what you think the grain stocks report might look like or the acreage report for that matter?

Aaron Curtis: 11:04

Yeah. I think, the general perception on the acres, of course, is, you know, anywhere between three and five million higher. Saw what the USDA Ag Outlook Forum did. We're starting to see a little bit of corn growing in the ground here in parts of Illinois. So that's going to be key here continuing to move forward on terms of if we get this big increase in acres or not, Todd.

Aaron Curtis: 11:27

I think last fall in some parts of the Midwest wasn't as advantageous for a fall field work as maybe somewhat like. We did have a late window there. We got caught up in some areas, but there is quite a bit of spring work that needs to happen in order to get to a 94 plus million corn acres. So we need to continue to have a pretty advantageous fall. I think some of the economics on corn aren't adding up that great for some folks.

Aaron Curtis: 11:54

But I think the big kicker for the corn acres this year is the fact that the competing commodities are even worse. So cotton, rice, some of those areas in the Southern Midwest just not add enough to favorable for farmers to plant. So corn is an alternative there. So I think that's where we're going to see a lot of the biggest increases. Now the Delta area continues to be extremely wet.

Aaron Curtis: 12:16

They're going to get extremely wet here over the next few days again. So that might limit some of the early activity and sway some acres at some point. But I think right now we're looking for that increase if the spring weather cooperates. Grain stocks is going to be interesting just because obviously the January corn yield was down considerably versus what the USDA was back in November and what the market expected. So we'll be looking to see if that shows up in the corn stocks report.

Aaron Curtis: 12:47

Is there really less corn out there than what we thought back in December versus some of those yield reductions that the USDA told us in January. So like I said, hopefully shed a little bit more light on what's available to the end user here as we move into spring and summer.

Todd Gleason: 13:03

Just for some clarification on that point, that number should be pretty good if, much of the corn, and you'll have to correct me, was sold by producers as it been delivered as well, and so the tally should get better on the off farm side. We'll have a pretty good accurate counting, I would think.

Aaron Curtis: 13:22

Yeah. Typically, that's that's right. I mean, you know, the in transit stuff is always a challenge, Todd, because how much of it's moving, in any given day, right, to get a real accurate estimate right. But the fact that producer has been a large mover of grain up at this point should help solidify some of those numbers being that it's in commercial hands.

Todd Gleason: 13:43

Yeah. Was thinking it's like 8,700 different grain elevators and commercials holding spots. That's first points of sale that they'll be tallying. And if farmers have moved it by, I guess, the March, and I don't know whether that will have been the case, we should see a much larger on off farm number, and a better tally. So Logan Kimmel, as you're thinking about this, how how do you hear from how what are you hearing, I'm sorry, from the clientele base at Roach Ag as it's related to their expectations for plantings this seasons, and what does that mean in acreage and the kinds of things Roach Ag is thinking as for totals for corn and soybean?

Logan Kimmel: 14:30

Yeah, pretty well in line with the previous comments. I think as you look to some of the fringe areas, the corn new crop pricing makes a little more sense versus some other markets like the cotton or areas that can switch. So I think that that would be to be expected here come at the end of the month when looking at new crop prices. It's interesting watching the spread between new crop corn, new crop beans at up 2.23 right now. So I think that's where a large focus is in terms of marketing is the new crop.

Logan Kimmel: 15:13

We've found that a lot of folks, so just jumping back to the old crop, it's in throughout January, into February was a pretty good spot. And I do think a lot of bushels did end up moving there, out of the farmer's hands. And we saw that in the spreads on the futures as well. The March spread, spending a lot of time there at the February about $0.15 with basis weakening. So I think that was an indication that there was cash grain moving, end users were having their needs met.

Logan Kimmel: 15:49

And, I think, the price reflected that with a nice steady rally to give the farmer an opportunity to make old crop sales.

Todd Gleason: 15:58

Mike, the March grain stocks report can move the marketplace. What are your expectations?

Mike Zuzolo: 16:04

Well, that's a tough one because we really have to be right up against then those April tariffs, Todd. The trend so far early in these days of the new tariff world we're in is the trade will back away from worrying about tariffs unless they get some fresh headlines. And as we talked about at the top of the show, more supply demand fundamentals and weather. But as we get towards the March and we get some more hog information, we get those green stocks information. We also got to throw on top of that what is going on with the tariffs.

Mike Zuzolo: 16:37

Would say trying to wedge that together with what I'm seeing right now in the currency markets is that three month high in the ruble, I think has been in part due to the idea by the trade that Russia and Ukraine and the peace and ceasefire there was going to happen. I'm nervous now at this stage of the game that Russia is not going to do a ceasefire. And we're going to have a lot more volatility in the currency markets. And that tends to mean that the dollar becomes a safe haven buy. That ultimately, if you ask me one question about 2025, what's going to make or break us in a variety of areas and almost like a faceted area like a diamond, that dollar is really set up to move us with China, move us with Brazil, and especially with the wheat market and this wheat leadership mindset move us with the Russia Ukraine situation.

Mike Zuzolo: 17:29

So we may gain some gains in the commodity sentiment by a rally in the energies in crude oil, but I'd much rather have the dollar going lower with the tariff news and ideas that we weren't going to have any disruptions in terms of trade. I was shocked this week to see Odessa get attacked and a grain ship in the Port Of Odessa get hit and the trade didn't care anything about it. And I think there was because we had some other things to look at.

Todd Gleason: 17:57

On that note of the dollar, Aaron Curtis, I was thinking about this earlier today and broached the subject with Matt Bennett just a bit as it's related to sort of the risk on, risk off kind of function in the marketplace as it's related, to the dollar, and safe havens like gold and the metals and some of the commodities. Do you see that taking place very much in the marketplace? And what does it does does that provide support, or does it does it push the market lower? Which side of this if even if I'm on the right track at all, what what happens in the marketplace?

Aaron Curtis: 18:37

Yeah. I think in general, weaker dollar is gonna be supportive to commodities. I mean, that's, typically, what we learn in, Econ one zero one. Right? So I think that's, generally supportive.

Aaron Curtis: 18:47

You know, on a day to day basis, at least in the last couple weeks, I don't know if corn and beans have cared a whole lot. I think obviously we've slowed down the tariff news a little bit in relation to where it matters the most today and that's Canada and Mexico. So I think the markets been more interested in that news, just the fact that everything's been paused for a little while. And I think they're hopeful that just because of the important relationship between the three of us in North America that something gets solved relatively quickly there. And anytime we paused it now for the second time, that gives hope that something will get alleviated.

Aaron Curtis: 19:26

But in terms of the day to day action of the dollar, it definitely hasn't played too much lately. And I don't know from a producer standpoint if it matters today, Todd, because the producer is largely sold on old crop, and, it's gotten extremely quiet. And I don't think the producer is gonna do much, unless this market rallies.

Todd Gleason: 19:48

Okay. So on the tariff front then, Logan, a couple of things did happen this week. The the president imposed tariffs on aluminum and steel on the European Union. The European Union said, well, on April 1, we'll impose tariffs on The United States, and we're gonna ramp those up through the thirteenth of that month. They include both corn and soybeans.

Todd Gleason: 20:16

Did the market care very much about this?

Logan Kimmel: 20:19

I think a little bit. But I also think the tariff talk negotiation, I mean, is part of the playbook. And I think it's going to continue. It seems like we're on a month by month basis now extending out. And think, yes, the market does take note of these headlines.

Logan Kimmel: 20:42

I think it to me, probably when when we look at the tariff talk, threats, it would be a big concern if there were further imposed tariffs or implemented tariffs with Mexico just because the large amount of corn that that we're exporting and and they're buying. You'd like to see that stay in place. And and then when it comes to China with soybeans primarily looking at new crop, That's where I think you could see the biggest market movement going forward is tariff talks regarding Mexico and China for new crop soybeans, and then obviously Mexico with our corn.

Todd Gleason: 21:28

So coming back to you then, Mike Zuzlow, on the tariff front, there is a tit for tat that is happening with the EU, the president today saying, you know, if you're going to put a tariff on our Kentucky bourbon, we're going to raise a tariff 200% on all alcohol imports that are coming in from Europe. I I know it's a tit for tat. This is a small area, but it it does raise the specter. And to to Logan's point, we've known about we've known about the March deadlines. We've known about the April deadline.

Todd Gleason: 22:12

I haven't heard anything about a May deadline yet. Nothing's been pushed back. I don't think past April 1 either.

Mike Zuzolo: 22:19

No. In fact, president Trump before the close today, I should say on Thursday, said that he was still stuck on doing the reciprocal tariffs on April 1. I I felt like the last sixty minutes of trade in this market felt that and and especially Wall Street. As a side note, I'll come back to your question, Todd, because this is on my list. But Wall Street now believes in the tariffs.

Mike Zuzolo: 22:40

They know that they're real now. And Wall Street is starting to look like a mini 02/2008 and a mini run for the fire exits type look to it. That's also weakening the dollar. And so I think that is shifting some of the burden back into what's happening on Wall Street versus LaSalle Street. And I noticed this week that the Paris corn price now at the Matif futures is 25% higher than where we are at the Mercantile Exchange as of midweek.

Mike Zuzolo: 23:08

So LaSalle Street's done a very good job on the futures market of accepting the tariffs and seeing President Trump and his administration taking it at face value. Going back to your major point, your major question is the key I think here for me continues to be the first one hundred days of President Trump's administration with the tariffs in general, but especially with China and getting a trade agreement that includes agriculture commodities, has been whispered about, talked about. But my sources are telling me everything is stuck at lower levels right now as far as negotiations. And so my mindset is we've got a clock ticking. We've got about forty five days to get this straightened out.

Mike Zuzolo: 23:57

Otherwise, we have to assume once the planners roll, if we don't have a deal, it's going to be harder to get a deal. I think that's the mindset I have just in a risk management mindset, but also truly believe that based upon the history and historical evidence of tariffs and what happens when tariffs get embedded.

Todd Gleason: 24:17

So so I I think and let me see if I can summarize it. You're telling me, that the CME group in ag said, the president said he's gonna do tariffs, and he's gonna do tariffs. LaSalle or and then New York didn't quite believe it, but they're coming to that belief, and they you're adding to that if we can't get China done in the first hundred days. By the time we get this planet, then things are really gonna be rough.

Mike Zuzolo: 24:43

It could be tough, I I I'm really taking at face value his threat president Trump's threat of 60% tariff with China. I I truly have to bake that into the cake at some point, especially if Brazil has a 165 to 170 soybean crop, and we don't have the dollar just plummeting. That's where the dollar really matters is getting us on a competitive footing to make China think twice about, okay, is there enough weather out there? And is the is the dollar weak enough that the tariffs insulate or were insulated from this tariff threat? And that that's only gonna last so long, because we're gonna know whether we have a drought pretty soon, and we're gonna know what the South American crop supply is pretty soon.

Todd Gleason: 25:26

Alright. So I'll come back to Aaron Curtis. Do we need to take the president at his word, and do you need to plan for it?

Aaron Curtis: 25:34

Obviously, I think we have to be cognizant of what you say, right? Especially when it regards Mexico and Canada today, right? I think as we move towards April 1 and this pause kind of winds up, what happens at that point? I think that's going to probably be a little more proof in the pudding on what may influence some of the ag trade here between our neighbors. So that's going to be considerably important, not only the weeks ahead, but the months ahead as well.

Aaron Curtis: 26:03

So I don't know if you get too concerned about every single true social post that he puts out there. But how these trade relations happen with the neighbors, I think, is hopefully over the next three to four weeks, we have some clarity there. And hopefully there's a solution that benefits The U. S. And the trade partners, our neighbors anyway, and continue to see our ag economy continue to support it.

Aaron Curtis: 26:32

Because I think longer term, obviously, Canada and Mexico continue to be key trade partners that we wanna continue to work at work some agreement out with.

Todd Gleason: 26:43

Logan Kimmel, anything to add on this subject? And if not, we're ready to begin our final word for the day.

Logan Kimmel: 26:49

Yeah. I think 've covered a lot in regards to the grains. One other thing I'm just having folks look at or keep an eye on is with these tariff talks and volatility we've seen primarily since the February, there's been a lot of money flow that's mostly come out of some markets, the grains, financials, crude oil, energy markets. But one thing to keep an eye on for any folks out there with livestock is the cattle market. There's still a healthy amount of long positions held by managed money.

Logan Kimmel: 27:30

That as the fundamentals remain strong right now and have been, if you do start to see money flow come out of that sector, you've been on a pretty strong bull market here for the cattle. We started to see some money flow come out of the hogs and they had a rough day here today. So that's one thing just to keep in the back of our heads here is markets have experienced a lot of volatility, uncertainty and money flow coming out. That would be one market that I don't think we've seen just yet. And for folks with cattle or hogs for that matter, something to be mindful of.

Todd Gleason: 28:06

Mike Suzolo, your final word for the day?

Mike Zuzolo: 28:08

Todd, there's been a little bit of improvement in China the past month or so, but the really serious data, not much improvement, and they're still very much struggling with deflation. And that's part of the big reason why I think either the President of China and the President of The United States are going to come to an agreement relatively sooner. They're kind of going to get baked into their position. So that's a real crucial element here as we get close to April 1.

Todd Gleason: 28:31

And finally, Aaron Curtis from Midco, your final word.

Aaron Curtis: 28:35

Yeah, just a reminder that on the world situation on corn, it's fairly constructive. I think it continues to offer a little bit of support here to this corn market until we know more about both the Brazil Second corn crop and the early planting intentions and or spring weather here for our expected higher corn acres. So seasonally, we tend to see corn market try to recover into this April, early June timeframe and very little new crop has been sold at this point. So sharpen up your risk management pencil here as we hopefully get a little bit of a spring rally with some of these concerns about the world balance sheet to offer some opportunity to to add to those risk management plans here this spring.

Todd Gleason: 29:19

Commodity Week, of course, is a production of Illinois Public Media. It is public radio for the farming world online on demand anytime you'd like to listen to us at willag.org. There you'll find our agricultural programming as well as information from the farm doc team, the crop scientist, the animal scientist here on the Urbana Champaign campus of the University of Illinois. Our thanks go to Aaron Curtis from Midco out of Bloomington, Illinois. Logan Kimmel of Brochag Marketing, he's in Naperville, Illinois.

Todd Gleason: 29:49

And Mike Zuzla, GlobalComResearch dot com out of Acheson, Kansas. I'm Extension's Todd Gleason.