Todd Gleason: 00:00

This is the March 27 edition of Commodity Week. Todd Gleason 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 Dave Chatterton from Strategic Farm Marketing.

Todd Gleason: 00:20

We'll hear him at the end of our program along with Kurt Kimmel of AgMarket.net and Greg Johnson from TGM. That's total grain marketing. Commodity Week is a production of Illinois Public Media. It's public radio for the farming world online on demand anytime you'd like to hear us at w I l l a g dot o r g. That's willag.org.

Todd Gleason: 00:42

Let's start with our conversation between Greg Johnson and Kurt Kimmel. I asked Greg how things had changed in the commodity markets, particularly corn, since the month of January.

Greg Johnson: 00:55

From January 11 crop report, it was a very friendly report. The markets went up. Farmers remember their marketing strategy the previous year, which was to hold on to it too long. They did they made that determination not to hold on to it too long this year. The January 11 crop report gave them that opportunity to get grain sold and they've done a good job of getting old crop corn sold from mid January to mid February on that rally.

Greg Johnson: 01:24

Farmers are probably 80% sold on old crop corn versus typically maybe two thirds beans the same way they're 80%, eighty five % sold on old crop beans versus two thirds normally. So the farmers did a very good job of selling old crop corn and beans on that rally. Combine that with the fact that the funds were big buyers of corn after that January 11 crop report. The funds got as long as 1,800,000,000 bushels of corn on paper. So that was responsible for a big part of the rally.

Greg Johnson: 01:57

But then, when the Trump tariff talk started, I don't know if that was the cause of it, but it was about that time frame, The funds decided that, maybe it was time to lighten up on that long position. And now instead of being long 1,800,000,000 bushels, they're along only about a half a billion bushels. So they've sold off 1,300,000,000 bushels of corn on paper and that has caused the market to drop 60 some cents since, that mid February high. So as a result of that, farmers have been light sellers of old crop corn and beans, ever since the market, sold off, and, they have not gotten very much new crop corn and beans sold either at this point.

Todd Gleason: 02:36

Well, let's stay with old crop for just a second, Kirk Kimmel. When you think about those numbers, and oftentimes we will hear the phrases like, well, it's now in strong hands as opposed to weak hands, the commercial hands as opposed to the farmer hands, and the market's probably going to go against them at some point. Without a weather rally, do you think that that's possible?

Curt Kimmel: 03:01

Well, I'd say 100% of the participants are 100% sure we're going to have a drought this year so that's been the catalyst to be optimistic longer term. But yeah, there's just a lot of uncertainty in front of us. To go along with that producer selling that Greg mentioned there is there's still a lot of that grain to be moved yet. There's logistics issues. Talking for our commercial side, GSA, you take North Of The St.

Curt Kimmel: 03:31

Louis, there's still a lock issue there and there's a tsunami amount of grain when they come down the river. So South Of St. Louis, we've been pretty good bids and some pretty good transportation. There's other logistics reasons because a lot of it's been sold, like Greg said, and now it's a matter of moving it and finding the right home. But we're in a situation now where the tariff talk, grain moving, it's going to take some weather.

Curt Kimmel: 03:57

If weather would kick in and the funds would turn back to the buy side, I think we could have some significant up. But it's going to take some weather or some solution to the tariff issue because Mexico is our largest buyer of corn and that's been the fear. But I think for this current marketing year, new crop year, they're gonna go ahead and take it because it's they need they need that corn because they're facing a major drought themselves.

Todd Gleason: 04:20

It feels like that the weather would have to come sooner rather than later for a real market rally to happen, and it would have to come in the safrinha crop in Brazil. That means it really needs to take place in the next fifteen, maybe twenty days before the dry weather would normally come in anyway. So a lack of rainfall, low rainfall, no rainfall. I'm not sure that that's what's going to happen there. What are we hearing about those twenty day periods?

Curt Kimmel: 04:53

Well, that was the concern that corn going in late, it'd be subject to that drier weather later on. But as far as the forecast goes, they've been receiving some timing rains and they're fairly decent shape here. But, you know, the weather can change in a heartbeat. So South American weather is starting to go to the background in through here. Argentina's getting some rain there, so that's kind of moving to the background.

Curt Kimmel: 05:17

To get the big catalyst, it's going to have to be U. S. Weather. And that's still sixty to ninety days out because as of right now, if you look what happened, in October '80 percent of the Corn Belt was dry. In February, March '60 percent was dry or drought concerns.

Curt Kimmel: 05:38

Now only about 20% is. So there's been some spotty rains. You look at that drought monitor, there's still some dark red there that will be an issue if they don't receive some moisture later on the growing season. Kinda feels like we can get the crop in, get it up, but if the weather takes place, it's gonna be later on in July. So if you're gonna have some replacements or some courage calls on, you might wanna have them further out instead of up front here because it's gonna take time to dry things out.

Curt Kimmel: 06:06

Now if you look at my weather source, it's a clear picture that we're gonna be hot and dry, but it's gonna be West Of The Mississippi. Now East Of The Mississippi, we're gonna be hot, but we're gonna have some rain.

Todd Gleason: 06:17

Well, we'll pay attention to your weather source, and I know you'll tell us about that each and every Monday on the Closing Market Report. I do want to stay with old crop for for just a moment. If this is a weather driven market or will need to be a weather driven market normally they are by the time we get sixty to ninety days out, so we're talking into May, June, July normal sorts of time frames what does that tell you about marketing of old crop, particularly because producers are so far along? Will they be willing at this point just to shut the bin doors and risk what's left to that marketplace?

Greg Johnson: 06:58

That seems to be the attitude today. I try to remind people that we've gone up a dollar in the May corn futures from the harvest lows. We were $4.14 at the low. We went all the way up to $5.18. So we had a dollar rally.

Greg Johnson: 07:11

Now we've given back $0.65 of that rally. So I tell farmers, remember this selloff because the next time we get another run up, how did you feel when it went down $0.65 Not very good. So have offers in place. The goal is to be in the upper half of the range. With this zero six five dollars sell off, we're slightly in the bottom half of the range.

Greg Johnson: 07:33

So I'm not encouraging farmers to sell anything at this point. But keep in mind that if we do get back up in the upper half of that range, it's probably not a bad idea to sell because a lot of acres are going to get planted. If you if we don't have that weather scare that everybody seems to be certain that we're going to have, we could have sub $4 corn again this fall. So have your targets in place. I think the goal is to be in the upper half of the price range.

Todd Gleason: 08:00

What is the price range for old crop corn and then we can transition to new as well?

Greg Johnson: 08:05

The low price on May corn was $4.14. The high is $5.18. So the average is $4.66. So, that's the midpoint. Today, we're at $4.5 We're $0.16 below the midpoint.

Greg Johnson: 08:16

So, as long as we're below the midpoint with the whole growing season ahead of us, I'm not too worried about making sales. If we get above that midpoint of $4.66 say we get back to $4.75 4 point 8 0 dollars you have to take a strong look at getting some corn sold at those prices.

Todd Gleason: 08:32

And basis movement is expected to go in which direction over the next two months?

Greg Johnson: 08:36

Basis should improve. The farmers sold a lot of grain in January, February that caused the basis to collapse. So we're still much weaker than what we normally are. But we've seen an $0.11 basis improvement in the last thirty days in the corn market. I think we'll continue to see that kind of basis improvement, point five to $0.10 a month, which will more than offset the storage and interest.

Greg Johnson: 08:56

So basis levels will get better. So that'll help the cash price out as well.

Todd Gleason: 09:00

So from your opinion then, basis improving, you want to be above the midpoint, have the orders in and don't pull them?

Greg Johnson: 09:09

Don't don't pull them. No, people, you know, always had that tendency to pull them. And I say, leave them in. And if it keeps going higher, you've got all the new crop corn to sell. But old crop corn, especially when you figure in interest cost, it costs money to hold on to corn.

Greg Johnson: 09:23

In the good old days three, four, five years ago when interest rates were 1%, there wasn't much of a penalty to hold on to corn into the summer. This year, it has to go up quite a bit to cover the interest cost into the summer. CIC,

Curt Kimmel: 09:37

cancel if close. Yeah, Greg's dead on there. What we've done is we've moved a lot, but we've put some replacements on some calls because when you look forward in here, when you do get some strength, it's going be weather driven. Hopefully it will be a scare. But the problem is, guys look out their back window and that's the hardest rally to sell.

Curt Kimmel: 09:58

This winter, couldn't see the actual weather here in The U. S. It's more Southern Hemisphere. But yeah, you've got to have some type of plant like Greg said, have some orders in, do some call options here so it gives you some courage. And you want to do these options now because as you get in the growing season, if we do have some weather concerns, volatility is going to go up.

Curt Kimmel: 10:18

You want to buy stuff now instead of $1 higher.

Todd Gleason: 10:21

The range on new crop, you said, was 4.3 to $4.8 so much narrower, not a very wide range. So I'm wondering,

Curt Kimmel: 10:33

on the top end of that range, do producers need to be marketing there too for new crop corn? We feel so. But the simple thing right now is to do some price floors and leave your side open. You know, we've come in and defended, you know, 4.5 and $4.7 in through here. So if the market does go higher, you got the flexibility to make some cash sales when you know or when you're comfortable with your bushels.

Todd Gleason: 11:00

So there is a big difference between old crop and new crop on on the average price as well. Producers are going to think about that. Again, remind us of those two averages and then what your expectations for new crop corn might be at this point.

Greg Johnson: 11:14

Okay, the harvest low on December futures was $4.3 We hit $4.8 at a high, so the average is $4.55 Today we're at $4.44 1 more number to keep in mind, the February crop insurance average was $4.7 Most people don't like to sell below the February crop insurance average this early in the year until they're sure they've got a crop. I guess I'm okay with that too. So, 4.7 might be a good target. We're at $4.44 today. So, you know, we're talking about a $0.25 rally, which sounds like a lot today.

Greg Johnson: 11:45

But if the funds come back in, if we have any kind of weather problems, if the acres aren't as big as what everybody's is estimating, 25¢ isn't a lot to ask about ask for in a corn rally.

Todd Gleason: 11:56

Just as a reminder, that's a $4.70 December futures contract price, So that's where your aim is minus the basis. When you talk to producers about where they are on their marketing today or the plan in general, are they behind for the new crop sales?

Curt Kimmel: 12:16

Yeah, yeah. They did a great job on old crop, but new crop is struggling. It's like, Okay, I'll get rid of the old and I'll wait and see what happens to the new. But Greg pretty well summed it up there. They're probably 10 to maybe 20% priced on that.

Curt Kimmel: 12:31

Now a lot of them do have some price floors to take the edge off, but physical sales are behind here.

Todd Gleason: 12:37

So there are a couple of things that are coming up that will influence the new crop tremendously, and the marketplace is now ready to turn. I'm very positive given the number of old crop bushels that have been marketed in corn towards new crop almost entirely. The USDA reports due out Monday at 11:00, both the grain stocks numbers and the prospective plantings report. The prospective plantings acreage number is large from USDA at 94,000,000 acres and even bigger from the trade, not by a lot on average, but there are some trade numbers that are fairly large, including the one from AgMarket.net.

Curt Kimmel: 13:20

Yeah, we're at 95.39 on the corn. Yeah, it's hefty. The GSA elevator survey getting some numbers across the Midwest. And two, the team did a lot of meetings this winter, particularly out in Denver, the Commodity Classic. It's just a huge amount of producers with behavior of corn.

Curt Kimmel: 13:42

Part of that is due to rotation. We were behavior of corn, our beans last year, so we're going behavior of corn this year. But cotton acres, maybe a million acres there. But two, another thing that can even roll over into the grain stocks report is the Kansas guy out West, this Milo sorghum. There is zero sales on the books.

Curt Kimmel: 14:01

The export market is zero. China just walked away from it. And so those guys could be switching to corn. Now what you do with that sorghum and milo out there, I don't know if you can blend it into ethanol, but it could be into feed usage here. So as we move forward here, the true corn feed usage could be a little lower due to kind of competition out there, but we'll see.

Todd Gleason: 14:21

That'll put a tag into the demand side of the supply and demand tables. When you think about the grain stocks numbers, and we talked about this a bit during the closing market report on Wednesday of this week, it really is an accounting of the off farm stocks. And then the feed and residual number or on farm stocks really are is what is more difficult to get a handle on. Shouldn't be very much left, I would think, on the farm still.

Greg Johnson: 14:51

No, I think you're right. The average trade guess is going to be 8,100,000,000 bushels of corn on hand versus last year's 8.35. So a couple of hundred million bushels less. That reflects, I think, increased farmer selling, better demand. Mexico is still dry.

Greg Johnson: 15:10

They've been our biggest buyer of corn. So I think there's some reasons for, you know, better demand, which translates into a lower ending stocks number. And we probably need a lower ending stocks number to offset that higher planted acreage number in corn.

Todd Gleason: 15:23

What does JSA use for its soybean acreage figure again this year?

Curt Kimmel: 15:29

Well, the egg market team's at 82.75. We feel the switch is gonna be from beans to corn, so soybean acres are gonna be lower. So when you use trend line yield and try to keep that demand up there, that supply demand balance sheet could be quite a bit tired. Particularly now, if you start wheeling away on one, two bushels to the acre and try to keep demand the same, could tighten that ending stocks on beans from $3.40, 3 80 million down below 300 down in that two fifty million bushel carryout. It's going to

Todd Gleason: 16:06

hinge on weather. Does it matter so much, given the number of bushels that actually in The United States are exported out of The US, that this supply gets you know, sixty, seventy, 80, 90 million bushels tighter from one year to the next, when it's above two fifty million or at that 300,000,000 mark anyway?

Greg Johnson: 16:30

If it was if we were talking about corn, yes, because we have to ration out that demand over a twelve month period. With soybeans, no. We only have to ration out that shortage if it turns out to be a shortage for six months. And then guess what? Brazil's just going to plant that many more acres and they'll have the production in the second half of the year.

Greg Johnson: 16:47

So we want to be cognizant of South America. And so, if that acreage number is low, lower than what we expect or lower than what the average trade guess is, we should see a little bit of a rally. But again, we want to take advantage of that rally because South America can come online and we only have to ration this out for six months, not twelve.

Curt Kimmel: 17:07

Yeah. When you look forward here a little bit here in this week's trade, soybean oil took off like a bottle rocket. We saw Thursday morning's export sales report, weekly export sales report continued to show strong bean oil sales. So we're back to crushing for the product here. If bean oil can help the complex, it should.

Curt Kimmel: 17:28

So there's a lot of things to watch here

Todd Gleason: 17:30

as we move forward. Any final word from each of you? Kurt Kimmel, I'll start with you.

Curt Kimmel: 17:34

Well, on this corn acreage, it's going to be high, but you got to remember, if we're going to have a large corn acreage, it's going be hard to achieve trend line yields because we're going to have a lot of ground that's not quite as productive come in line. Once we get past next Monday here, that's the top line. Now the key for the next marketing year is figuring out what that bottom line is going to be.

Todd Gleason: 17:58

And Greg Johnson from TGM Total Grain Marketing, your final word?

Greg Johnson: 18:02

There's a lot of uncertainty when it comes to policy. You know, the one another reason beans rallied this week was because there's some rumors that there's going to be some incentive in the renewable biodiesel segment of the market, which would help soybeans out. Anybody's guess is as good as mine on that. I don't think it's been completely worked out. But I guess my point is with that uncertainty comes opportunities.

Greg Johnson: 18:28

And we're certainly right now below the midpoint in soybean prices. November beans are probably $0.10 to $05 below the average price that we've seen so far in the last six months. But if we get some friendly numbers, whether it's out of the acreage report or out of some policy decisions, we should see a rally in beans and we probably need to take advantage of that.

Todd Gleason: 18:48

That's Greg Johnson. He's with TGM at totalgrainmarketing.com in Champaign. Kurt Kimmel is with agmarket dot net out of Normal, Illinois. We were also joined by Dave Chatterton for our commodity week program. He's with Strategic Farm Marketing.

Todd Gleason: 19:05

Here's that conversation. Dave Chatterton, why don't you and I begin with some of the policy functions that are happening in Washington DC. Of course, the president imposing a 25 tariff on auto imports that appears to be on parts and autos and all kinds of things. So details are a little sketchy at this point. How does this impact the way the trade is thinking retaliatory tariffs might be put into place.

Dave Chatterton: 19:38

Yeah, Todd. I mean, I don't see the trade in any way or fashion seeing, you know, the activity that we have as being bullish here. The the the speed and the scope of which these tariff announcements are coming is really a little bit mind numbing and really, really hard to get your hands around it in a macro sense in terms of how it specifically affects grain prices and what that means for positioning of large funds or the big commercials in the marketplace. And it creates and heightens that level of uncertainty. I think that just flows trade volume, drives capital to the sidelines, and, you know, people just stay on the side here a little bit.

Dave Chatterton: 20:12

And I think we've seen that reflected in our markets here. We've been able to kinda hold on to this $4.50 and $10 level in corn and beans respectively, but, you know, the market feels a little bit heavy and, you know, we're adding in on top of that. Of course, we've got when you look at policy, we've got the USDA, you know, out or NASA with their quarterly stocks and planning intentions next week. But we also got word yesterday, Todd, that that the Trump administration has asked biofuel groups, to work together with the oil, you know, industry to, quote unquote hash out a new deal going forward on the country's biofuel policy, and that follows the the clashes that Trump had in his first administration over the RFS. And, you know, there's been a few meetings supposedly that have taken place, not a lot of progress yet, and still, I guess, more uncertainty, 45z, in in the policies that we've been kind of dragging forward going back to the Biden administration.

Todd Gleason: 21:04

And so when you think about that, can those two groups get together and hash something out? And it I don't know what that means is it references the current legislation which remains in place. It doesn't sunset and it gives EPA most of the power at this time. I think there could be all kinds of issues that are pretty thorny, which might be involved. But do we suppose that there is some direction there yet?

Dave Chatterton: 21:35

I don't think so, Todd. I mean, pretty thorny is probably the nicest way we can say that. I think there are a lot of varying opinions and a lot of different interest groups on all sides of this from, you know, green green diesel people to the oil to the small refinery and everything in between. And so I guess that's all in play. Supposedly, there have been a few meetings that have taken place here.

Dave Chatterton: 21:56

There's been a little bit of common ground. There's been a little bit of disagreement, but really no moving forward with the ball, if you will. And it appears that, you know, the industry is gonna seek to raise the RVO for the green diesel in a in a substantial fashion, and, you know, that would utilize a larger share of capacity, but really no agreement on the 45 z, going forward. And I think there's been some talk on the oil side of the complex from what I understand of just, you know, scrapping that and going back to what we had, which I don't know if that's a win for agriculture in any sense or form. But really, I think trying to, you know, predict what's going to happen is really, like I said, it just heightens this level of uncertainty and where are we going to be and kind of leaves us in the lurch and things tend to slow down and grind to a little bit of a halt in that type of a situation.

Todd Gleason: 22:40

Okay. So once we turn our page next Monday and we'll begin to get more clarification on these policy things in the future, I suppose. But after the USDA reports, I suppose if they come in as the trade expects, what happens in the marketplace?

Dave Chatterton: 22:59

Well, I think you're on to, you know, what are the tariff announcements gonna be on on Wednesday of next week and what do they mean? And then really what the biggest factor is gonna be is weather. And, of course, you know, we're getting ready. We've got a little bit of bean seed in the ground here in parts of Illinois, you know, but it really the planning campaign is gonna get started here, you know, as we turn the page into April and and look at the middle of the month. So certainly weather planning conditions and, of course, you know, early and good planting weather and warm weather is going to, you know, just feed this narrative of more and more and more corn acres and, you know, kind of the race to the race to the top in terms of acreage and the bottom in terms of, I guess, price projections, that they go along with that.

Todd Gleason: 23:38

What are you advising producers to do, with old crop at this time? Many had thought that the marketplace was beginning to feel more bullish to corn. I don't know that that's what you're telling me will be the case.

Dave Chatterton: 23:52

Well, yeah, you could certainly make an argument that corn can be bullish here. I mean, if you look at the stock situation, particularly among the world's exporters of corn, it doesn't take much of a problem to, you know, a three or 5% yield decline in Brazil or in The US here this summer creates a tight situation. But right now, with the demand kind of the unknown of the whole thing and and trade policy hanging out there, I think you have to be defensive, Todd, and we're a seller of rallies here. And, you know, this new crop number has been kind of able to hang around in these futures or these 25 futures around that four fifty level. We've slipped below that as we're talking today.

Dave Chatterton: 24:27

But, you know, I think we have to look out there with some some idea of, you know, unfortunately, these aren't the prices that we had, you know, two and three and four years ago, but, you have to play a little bit of defense here. And, you know, we just don't know what's going to happen. I think the assumption here is that if we get anywhere near this 95 or 96,000,000 acre number that's being whispered in the trade, and we have normal weather, normal yields, that we're going to see lower prices this fall. And, you know, we can't account for a 2012 type of a situation that can certainly be in play. But, you know, it's a it's a tough bet in terms of marketing.

Dave Chatterton: 25:01

So I think you have to be a disciplined seller here. Keep your offers in front of the market and be willing to accept some small wins here.

Todd Gleason: 25:08

So producers, when they look at this, they hear you say, December corn at $4.50. That gives me something in the $4.10, $4.20 range for cash? Probably. Mhmm. They're not likely going to be very happy about that.

Dave Chatterton: 25:19

No. They're not. And I'm not I'm not happy about it either, but, we are where we are. And that doesn't mean we can't see a $5, you know, type of a handle this summer in in terms of the futures market. I think the idea is to have a plan and to have some offers out there ahead of those markets so that when we get there, Todd, there's not the question of, hey.

Dave Chatterton: 25:37

You know? Oh, are we gonna rally more? And, We've got a crop scare, and I I never wanna you know, I'm not gonna have a crop. And, you know, we go through that psychological process, I guess, or, you know, almost a yearly with producers where, look, you know, we almost always do have a crop. You've got crop insurance to back up these sales.

Dave Chatterton: 25:54

You need to be, you know, taking profit when you can see it. So I think the idea here is just have that plan and have enough discipline to be willing to accept those levels. It's a tough argument to make it, you know, to make a case for December corn much above that $5 mark without a severe weather event here in The US this summer. And we're watching what's happening in Brazil with their safrinha crop, but so far so good in that regard.

Todd Gleason: 26:17

How should producers leverage the crop insurance to think about these early season sales at much discounted prices to that $5 December number.

Dave Chatterton: 26:27

Yeah. I mean, a great safety net. We saw a number of producers step up their coverage levels through ECO or through different types of products and strategies that that put them in a little bit better position. And, you know, we need to keep that in mind. That should give you some confidence to go ahead and make those sales at least up to your APH or close to that level as you go through the process here.

Dave Chatterton: 26:45

I'm not saying, hey, sell everything if we hit four fifty, but, you know, continue to nibble at that if we get the opportunity and be ready for those summer, you know, potential weather scares, you know, if and when they develop here.

Todd Gleason: 26:57

Commodity Week is a production of Illinois Public Media. You may hear the whole of the program anytime you'd like it willag.org. That's WILLAG.org. We were joined by Dave Chatterton of Strategic Farm Marketing along with Kurt Kimmel from AgMarket.net and Greg Johnson of Total Grain Marketing on University of Illinois Extensions, Todd Gleason.