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The Closing Market Report airs weekdays at 2:06pm central on WILL AM580, Urbana. University of Illinois Extension Farm Broadcaster Todd Gleason hosts the program. Each day he asks commodity analysts about the trade in Chicago, delves deep into the global growing regions weather, and talks with ag economists, entomologists, agronomists, and others involved in agriculture at the farm and industry level.
website: willag.org
twitter: @commodityweek
From the land grant university in Urbana Champaign, Illinois, this is the Closing Market Report. It's the 6th day of September 2024. I'm extension's Todd Gleason. Coming up, we'll talk about the commodity markets with Mike Zuzolo. He's at GlobalCommReserch.com out of Atchison, Kansas. We'll hear from Gary Schnitke again today. This time around, we'll talk about the crop insurance program and how some producers are actually using it as just a flat out payment program, or that's the way it appears and what might need to be done in the current farm bill debate. And then as we wrap up our time together, we'll discuss the agricultural weather forecast with Eric Snodgrass. And if you can stay with us for the whole of the hour, you'll hear our Commodity Week program too here on Illinois Public Media. It is public radio for the farming world.
Narrator:Todd Gleason services are made available to WILL by University of Illinois Extension.
Todd Gleson:December corn today settled at 4 06a quarter, 4a half lower. The March at 4.24 and a half down 4 3 quarters. And May at 4.35 and a half down 4 and a quarter cents. November soybeans at $10 a nickel, 18 and a half lower. The January at 10.22 and a half down 19. And the March at 10.36 and a half down 19¢. Bean meal a dollar 60 lower. The bean oil off a dollar 48, and soft red winter wheat today 8 and a half cents lower at 5.86 and a half. The hard red at 5.77 and a half down 11 and a quarter. Mike Zuzla, globalcomresearch.com out of Atchison, Kansas is here on a Friday afternoon. Hi, Mike. Thanks for being with us. Tell me about what I think was a pretty interesting week in the trade. There's a difference between how things ended up on the weekly charts as opposed to the daily charts as well. Lots of things happening. Can you give me your assessment?
Mike Zuzolo:Lots of things happening, more getting ready to happen. And I think we're starting to come into more focus on what really is driving this market and has been driving this market between what you just said, Todd, where we started this market rally, I e in the wheat complex versus where we ended this market this week with the soybeans once again leading us lower, soy complex leading us lower. And I think this is where to put it very plainly in a short amount of time, this market is suggesting pretty strongly that the wheat is a bridge between supply demand fundamentals, which overall are improving. Demand is coming up in new crop corn and bean export sales reports 2 weeks in a row now. Wheat supplies are starting to taper because of weather and because of, aggressive selling by other countries, but it's also the bridge to the outside markets and the macro commodities. And just to give you an idea of what happened this week in the crude oil market, we're now at the lowest price since May in WTI. It was one of the worst weeks since last October in price action, and that's even though our supply, our stocks on a weekly basis by the Department of Energy showed us at the lowest number since October 1st, the 1st week of October on supplies. And I think the wheat reflects both of those very well, both the supply demand fundamentals and the macro commodities. Copper also big break to the downside. So I really think the wheat stopped going higher, and that helped allow the soybeans to drop again because the negative supply demand fundamentals they carry versus the grains and have carried versus the grains. The latest being Canada and China and the antidumping duties that China is expected to put in place on Canada. I suspect that became a headline again in the minds of a lot of vegetable oil traders because ice, canola oil was the one leading the show to the downside, soybean oil following very readily.
Todd Gleson:Yeah. On the idea that tariffs when put on by China can cause, and does cause Chinese importers not to purchase from whatever country those are, those oilseeds are coming from. That would reflect back on, the Trump administration, in 2018. I do wanna talk about the the soybean daily trade. Around $25, which isn't that unusual, I suppose. However, it was an outside day down day for soybeans, as you said. Soybeans leading things lower today.
Mike Zuzolo:Yeah. Very rough day, and we needed to keep a $10 handle on the September. And I'd call the attention of the listener to where we're at in May beans versus November 25 beans. Those May beans are almost the same price as November 25. That's either because we've built in a drought in the southern areas of South America and Brazil, or we have not built an enough premium in the new crop because the new crop November 25 should have a bigger premium against the May. So I'm very curious and nervous about the European model turning wetter on the deferreds or the longer run models 10 days plus out. We'll see if that holds, and we'll see if the GFS joins that for Brazil next week. That could be as important as the WASDE report, in my opinion. And I would also, you know, kinda conclude what you just said to wrap everything together is the Federal Reserve policy and this beginning of the, cutting of rates is playing havoc in our commodity markets nowhere more than in livestock, especially since the summer grilling season. So I would say the Fed coming out on 17th 18th is every bit as important as the WASDE report when it comes to the commodity trend and whether we're done going down in the wheat or not and therefore done going down in corn and beans.
Todd Gleson:If they make the cuts, will we go further down in your opinion then?
Mike Zuzolo:I think they need to do at least a 25 basis point cut and then say there is more coming before December. And if they don't do that, I'm be very nervous, especially given the election and especially given the fact that the Chinese official currency hit a 15 month low this week against the US dollar that the dollar would then become a safe haven bid again. And and the currency market, forex market would run towards the dollar again right in the heart of our harvest. So it it is a tough macro situation still even though the supply demand fundamentals are improving in corn and wheat especially.
Todd Gleson:Tell me about the corn market from your perspective.
Mike Zuzolo:My perspective on the corn is the earliest crop is going to be the best crop that we have lost some bushels because of the variability, here in the United States. I I think there are several major players out there in the world that have issues with supply, and it one could be China. And I'm I'm digging into that right now, but I think Brazil and Ukraine are there. China could be next, and that's something I wanna be talking to clients about. I I think corn has the best fundamentals to it as long as wheat doesn't hold it down. Yeah.
Todd Gleson:Like soybeans, corn in the daily chart posting an outside down day, but its weekly numbers really look good from last week to this week.
Mike Zuzolo:It's an excellent point. And unlike the soybeans, the both the soft red soft red wheat and the corn were able to not only take out their August highs on the monthly charts. They were able to challenge their July highs earlier this week, whereas the beans were pinned down with their August highs as resistance. So, again, a technical indicator of maybe the beans not being the strongest out there like some had started to kinda feel like they were when we hit mid week stride.
Todd Gleson:Anything else before I let you go?
Mike Zuzolo:Well, I think the biggest thing to watch is is what we do here on Sunday night and Monday. The South American weather models mean a lot, but so do the the currencies. They're they're driving the whole bus. Hey. Thank you much. Thanks, sir. Mike Zuzilo is with Globalcomresearch.com. He's in Atchison, Kansas.
Todd Gleson:This is the Closing Market Report. Our theme music is written, performed, produced in courtesy of Logan County, Illinois farmer, Tim Gleason. We're now joined by Gary Stuttig, agricultural economist, member of the FarmDoc team here on the Urbana Champaign campus of the U of V. He, along with Carl Zulaw from the Ohio State University have penned an article for the FarmDoc Daily website. It's entitled Crop Insurance as a Payment Program. Thank you, Gary. I appreciate you taking some time with me. Crop insurance is an interesting function, and not often thought about as a payment program, but we're in the midst of a farm bill policy legislation season. I suppose that's why you and Carl decided to take this up.
Gary Schnitkey:Yeah. Exactly right. And there's and there's been a number of proposals in the farm bill, mainly revolving around SCO and ECO. One of the things that those proposals would do would be to take the premium support or the percent of payment that, the government pays, lowering farmer paid premium from 60%, 65% up to 80%. So as we set as army sets, their premium, they calculate what the payment would be. And now if this proposal went through, 80% of that would be paid by the federal government and 20% from the by the farmer. So, presumably, farmers would net quite a bit from those programs. So I take it you went back
Todd Gleson:and looked to see how the, crop insurance program payments have changed over the decades or tracked them to see whether they actually cover just the, the crop insurance coverage areas or whether farmers were getting everything back out of them and where that happened across the Midwest or or the nation, I suppose, and across a whole series of commodities.
Gary Schnitkey:Yeah. So just the first thing we did was we looked at premium support per acre and what that was doing, and that has been growing over time. And of the crops that we looked at, and we looked at pretty much all the major crops, and all the major program crops, the number one crop in terms of premium support per acre or what the federal government pays is cotton followed by peanuts. So those are though and those those 2, in particular, cotton, have grown. Cotton has grown a lot because of Stacks, which is a program that looks a lot like, what is being proposed for SEO. And, again, just to give you a feel for that, that's roughly $70 an acre for cotton. And, a similar number for for corn would be in the $25 range, so considerably higher. We make that point because, much of the per acre support goes to southern traps rather than corn and soybeans. And corn and soybeans and soybeans has a relatively low amount. And then when you look at those, those premium sport relative to economic cost, cotton is up there with a with a with a very high premium sport relative to total production cost. So this is just continuing this argument of who gets what in this farm bill. And, as we're looking at crop insurance, you know, more of the premium support is going to cotton and rice and peanuts, and less so corn and soybeans.
Todd Gleson:So I have a follow-up question on this, and it's a question, that you pose in the middle of this article. Again, it's on the FarmDoc Daily website. It says, has the US crop insurance program become a payment program that also provides growing season risk coverage? Or does it remain an insurance program that makes payments triggered by a covered risk event? This is the question you think that policy, folks may need to answer. And my knowledge of how that happens is that you and your land grant colleagues from across the whole of the Midwest will be called to Washington DC, and they'll ask you a bunch of questions. Do you think they will follow-up with you?
Gary Schnitkey:So yeah. So and and again, if you're looking at this as a payment support program, most corn and soybean pro farmers in the Midwest don't think of it that way. They think of it as a risk management. If you get outside of the Midwest and go some other places, it is actually more of a payment or it's a payment program. So, the question then is, should it be? And if we if this is the direction, we'd have to think of some different ways of doing that because it benefits the riskier crops.
Todd Gleson:So is it that outside the Midwest, crop insurance feels more like ARC or PLC?
Gary Schnitkey:No. It's in outside of the Midwest. It is thought more of as a payment program.
Todd Gleson:Just a strictly payment program, not even in the in the risk management form or ARC or ARCA PLC. Oh, that's a wholly different kind of thing.
Gary Schnitkey:And again, that's something that Midwest farmers should think about.
Todd Gleson:Okay. Well, I suppose they will. And we'll be watching for follow ups, I'm sure, from you and your colleagues on the FarmDoc daily website. I appreciate it, Gary.
Gary Schnitkey:You're welcome.
Todd Gleson:Gary Schnicki is an agricultural economist here on the Urbana Champaign campus of the University of Illinois. Let's check-in, as always, on this Friday afternoon with Eric Snodgrass. He's at Nutri Solutions in Daggerbel. Hi, Eric. Thanks for being with us. It looks to me like we're gonna have a cold shot after a little warm weather here in our part of the world. I guess, maybe across the bulk of the Midwest.
Eric Snodgrass:Yeah. So it's it's kind of a neat setup, Todd. So there was this front that passed us, last night. Some folks in Illinois got a little bit of rain. I don't know about you, but I saw a little bit of wet conditions out of my lawn this morning, but it wasn't much almost almost not measurable in some measurements. So so here's the deal. We have a trough that started off life, behind this front that's been way up there in in Northern Canada, and it's gonna settle over the great lakes. It's gonna get there late today. And by tomorrow morning, we're gonna be feeling the presence of a large area of high pressure on the backside of it. And that's usually the recipe for getting clear skies, calm nights, and just watching the temperature just bottom out. And so the concern is on Saturday morning, again, on Sunday morning, and a little bit on Monday morning, we're gonna have some cold temperatures. We're talking lows in the forties and parts of the upper Midwest lows in the thirties. And I think there's gonna be a part of Minnesota, Wisconsin, and Michigan that's gonna see their first frost. Now how uncharacteristic is of that? You know, not it's not. I mean, Northern Minnesota, Wisconsin, and Michigan, they can get frost this time of year, but to see our temperatures bottom out like that's got me you know, it's got my my ears perked up. We've been watching it all week to see how cold it's gonna get. Problem is once that goes through, the next big system, it's way out in the western United States, and we get into a much drier pattern after that. So we warm back up, but the risk now is after we talk about the cool weekend is back over dry.
Todd Gleson:I think, Eric, that you and I had this discussion earlier, in the month of August about the really hot weather, in the western United States. And if that pushes to the north, that cold spills down. Is that what happened here? And how likely is that to repeat itself over time?
Eric Snodgrass:Yeah. That that's a great question. So here here's the the the short of it. You're absolutely right. So if you build a ridge of heat into the west, especially if that ridge makes it all the way through British Columbia clear to Alaska, then, yes, we have major risk of of a cool down. But the event that's going on right now, which has put up all these heat advisories, the heat watches and warnings in the west, plus all the extensive wildfires that are going on in the Pacific Northwest right now. It's it's temporary. So in other words, I don't see it lasting. You said, is it gonna go on repeat? I don't think it is. In fact, most evidence suggests that the Western United States breaks this heat wave midweek next week, a deep low builds in, and then keeps building into the Gulf of Alaska. So what does that mean? That means we go back over mild by, like, next Tuesday, Wednesday, and we probably keep mild air around well past through the middle of the month, maybe even to the end of the month, which then gets us back to our normal conversation of having our 1st frost event somewhere in the middle of October. So, the corn belt needs this. We need more heat on this crop, especially in the northwest corn belt as you and I've been talking about for a while. So, no, I'm not concerned about a a repeat every week of a big cool down across the Great Lakes at this point, which is good. That's actually good for the crop overall.
Todd Gleson:What do you see for the month of September?
Eric Snodgrass:Well right now everything is pointing toward dry, and that's partly spurred on by this recent resurgence in La Nina. But, overall, the pattern is just not conducive to be bringing in a lot of moisture. And this has been a a tough forecast for September because you and I have been talking about for for months that we need to watch September as a month where you can get tropical moisture into this area. There's one model, just one, that late next week is attempting to take moisture that's today in the Bay of Campeche, move it through the Gulf of Mexico, hit the lower Mississippi River Valley, and get into the Ohio Valley. And that is an area right now that is praying for a hurricane. We are very dry throughout the Mississippi Valley. We're very dry in the Ohio Valley. In fact, the whole Missouri Valley is dry too. Now because it's September, it's not nearly a big of a discussion point as it would be if it was July and that was the scenario, but the soil moisture throughout those same basins is quite low too. So I'm watching the artificial intelligence model. That's the main one that all week long keeps teasing at a big push of moisture to the eastern corn belt. Not us, but the Ohio River.
Todd Gleson:We'll see if it's learned anything. Given given that, we really do need to talk about river levels, particularly at Memphis, which would, have a large part of the water flowing through that area come out of the Ohio River Valley. It's below well, it's it's just in really dire need, I think, at this point.
Eric Snodgrass:It is. You know, earlier this week, I was in Bettendorf and right on the river, and it was interesting just to look at how low the levels even were there. Just what's so interesting is that the whole upper Midwest was so wet all spring and summer yet the river, you know, that just tells you how dry the soils were going into this. Right? The soil has taken all that water.
Eric Snodgrass:It's not giving us a big flood stage problem on the Mississippi. Well, now here we are at the end of the summer, and it's gotten quite dry. I just named off all the basins that are dry. And at Memphis where you're past where the Missouri meets the Mississippi and the Ohio comes in, it's currently at, approaching 7 feet below low stage, and that could be problematic as we go forward.
Todd Gleson:Do you know when barge traffic there might become impeded because of low water levels?
Eric Snodgrass:Yeah. So for the last 3 years, every time that that river's approached 10 feet below low stage at Memphis, we started to see restrictions on traffic. And this is, this is important because we're gonna be looking to get grain out on that river and fertilizer back up on that river. And to see these low levels and a dry forecast for September overall, is kind of the wrong direction. So could we be heading back into that, you know, river traffic restriction type environment? I think there's the possibility of that going forward.
Todd Gleson:Hey. The next thing I I wanna take up and I feel like the ocean has put its fingers in its ears if it has them metaphorically and said, la la la la la la.
Eric Snodgrass:Singing La Nina. Right? I I think it's it's trying. You know? This has been interesting. We've we've finally in the last few weeks seen the trade winds pick up, and that's what a La Nina is. The trade winds have picked up, and we're starting to get this signal that lining is gonna be around this fall. So then last night, we had the new long range data that just came out from the European model. It comes out on the 5th every month. And when it would just release this new forecast, it really went against the same trends it had a month ago, which were to suppress line unit. Now the new trend is it's more aggressive. So overall, anybody that's listening to what I just said, this is a good thing. Now in fall, we tend to be a bit drier. That's not. But once we get into winter, La Nina, if it takes over, tends to give a lot of Mississippi Valley and Ohio River Valley rain and snow, so we get a lot of moisture. And we also tend to at times get really good and cold. We didn't get cold last winter because we had El Nino. Well, this is pointing toward a better situation for us late fall into winter to actually get some legitimate winter conditions in which our crops and our ground love. So it's it's a good forecast for us overall in the near term.
Todd Gleson:Finally, South America, we've heard about this all week. Your experience with the Argentines and Brazilians, I heard about that a couple of times on the air Yeah. Throughout the week as you've been talking about it. What's changed, if anything, this week for South America?
Eric Snodgrass:Not too much. I would just say that if the La Nina does come in, the stronger it becomes, the bigger the drought risk is in Argentina. But La Nina's tend to produce quite a bit of rainfall in Brazil's serrata, which is where the majority of the crop is grown in Brazil. So the monsoon has not started yet. It's still not going, but there's a pretty good chance that as we move forward, once we get past, I would just say the 3rd week of September, monsoonal rains begin to return. And if they do return early, that would be early. Okay? If they do return and October rains are good, they're gonna plant their crop very, very fast. I did get a chance to talk with a couple of other, kind of global ag economists. In fact, I was with Dan Bossy earlier this week, and I asked him again because I've heard numbers from Arlen Suderman, even Matt Bennett and I have chatted about this.
Eric Snodgrass:And, Dan said that he thinks expansion on acreage this year is only gonna be about 1%. So I've heard a lot of the 1 to 2% range, which is less than half of what it's been for the last 4 or 5 years. So we're gonna have to balance out the increased acreage with the weather issues to see if, you know, Brazil is able to produce another absolutely massive crop. And right now, it looks like they will be able to.
Todd Gleson:Thank you much. Yeah. You bet. That wraps up this edition of the closing market report from Illinois. Public media is public radio for the farming world online on demand at willag.org where you can listen to right now Commodity Week, or if you can stay with us for the whole of the hour, you'll hear it on our home station. Otherwise, many of these radio stations always carry it over the weekend. Commodity Week, it's our weekly look at what's happened in the world of agriculture. I'm Todd Gleason.