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Established 1988
Commodity Week is a weekly wrap-up of the CME Group grain markets with analysis and guest interviews. The program is generally recorded Thursday afternoons and posted online by 7:00 p.m. central. It airs on WILL AM580 during the 2:00 p.m. hour each Friday. Commodity Week is a production of University of Illinois Extension and Illinois Public Media. Like the daily Closing Market Report, it is hosted by University of Illinois Extension Farm Broadcaster Todd Gleason.
website: willag.org
twitter: @commodityweek
cw260820
In this August 20th edition of Commodity Week, our panel—Dave Chatterton, Brian Stark, and Greg Johnson—evaluates the market's transition from a weather-induced, supply-driven rally to one heavily dependent on post-harvest demand. With recent excessive rainfall in Central Illinois and Indiana compounding earlier moisture stress, the panel anticipates corn and soybean yields will fall short of the USDA's optimistic August estimates, keeping local crop sizes challenged but far from a total disaster. As the trade awaits final figures from the Pro Farmer crop tour, attention is shifting toward demand wildcards, notably strong U.S. export shipments favored over Black Sea logistical uncertainties, and the potential for Chinese purchasing behavior to shift amid tariff negotiations. With producers currently undersold on new crop, our experts emphasize the need to actively scout fields to assess true yield potential, manage early harvest space by moving soybeans, and execute defensive pricing strategies for bushels that cannot be stored. They also note that current price levels present a strong opportunity to lock in profitable margins not just for this fall, but into the 2027 crop year.
Panelists
- Dave Chatterton, Strategic Farm Marketing
- Greg Johnson, Total Grain Marketing
- Brian Stark, The Andersons
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Todd Gleason: This is the August 20 edition of Commodity Week.
announce: Todd Gleason services are made available to WILL by University of Illinois Extension.
Todd Gleason: Well, welcome to Commodity Week. I am Todd Gleason. Our panelists for the day are Dave Chatterton, he’s with Strategic Farm Marketing. Brian Stark joins us from The Andersons, and Greg Johnson is here from TGM, that’s Total Grain Marketing. Commodity Week of course is a production of Illinois Public Media. It is public radio for the farming world online on demand at willag.org. Let’s get a list of items that we should talk about for the week. I know each of you are likely to have the Pro Farmer crop tour on the list. However, and we can take up what the tour has found, those numbers won’t be released until 1:30 on Friday afternoon. And we will have heard them in our closing market report when we talked with Lane Akre about the national number that Pro Farmer puts together. So that’s on the list, I’m sure. But Dave Chatterton, what else is there?
Dave Chatterton: Well yeah, Todd, I think to your point, it’s been a supply focused type of a week and the action that we’ve had in the market this week and the upside that we’ve gained over the last couple of weeks, I think primarily tied to the idea that yields are coming down and you know, USDA started that way in their August report. I think the Pro Farmer numbers generally lean to a point where there’s some implication that USDA may have further work to do in that, and we can debate that. But that supply side debate of the market is going to pretty quickly come to an end, and we have to transition from what’s been a supply-driven type of a rally here pre-harvest to what will be a demand-driven rally we hope post-harvest. And I think there’s some things to talk about there, the Chinese demand for what’s going on there. I think we continue to load a lot of corn and see reflections of the Black Sea. I think there’s, you know, the idea that potentially we could have a problem with El Niño in South America this winter. So that demand thing side of the marketplace I think is the next place that we’re going to see the trade focus.
Todd Gleason: Brian Stark of The Andersons, on your list this week?
Brian Stark: Yeah, I think focus obviously at your most at-risk bushels this fall. I think the grower always at this time of the year, we’ve been known to see the typical capitulation. The market obviously is, Dave highlighted, has given kind of a supply-driven rally. We don’t want to rest on complacency, so executing a good plan for the harvest bushels you have to move during fall and where the best strategies are to take place relative to cash basis is certainly important.
Todd Gleason: And Greg Johnson from TGM.
Greg Johnson: I agree with Dave that pretty soon we are going to be shifting to the demand side of the equation. But before we do, I’d like to throw out there one more supply related issue, and that’s the recent 10 to 15 to 20 inches of rain that have gone through Central Illinois and Central Indiana. Typically, rain and storms in an isolated area are not enough to affect the overall yield, to affect the markets. I’m just wondering, was this a big enough area and a severe enough area, what kind of impact will it have on the production in those two states and on the national yield?
Todd Gleason: Since this is a question you have, do you have an answer for it?
Greg Johnson: Well, I think if you combine it with what Pro Farmer is kind of telling us that the yields are not as good as what it looks like from the road. And when I say that, I don’t mean to imply that it’s a disaster by any stretch, but if farmers had 240 bushel corn last year and it looks every bit as green and healthy as it did last year, I think they could be surprised when they won’t find 240 bushel corn out there, when they might find 225 bushel corn out there. Again, not a disaster, but probably lower than what USDA is estimating for Illinois anyway. I don’t want to speak for Indiana, but here through Central Illinois I think it’s less. And then the soybeans, boy 67 bushels for the state of Illinois. When the record was 64 last year and a couple years ago 64, can we really hit 67 with all this rain in Central Illinois? You know, will we have disease problems, will that lead to lower bean size? I’m just wondering, I guess I’m curious to see what everybody else thinks, but 67 seems a little high or a little optimistic, and I think I probably would have agreed with that a month ago, but I’m not sure I agree with that now.
Todd Gleason: Greg, would you venture a guess at the Illinois statewide number?
Greg Johnson: Last year, the state was 214.
Todd Gleason: Correct.
Greg Johnson: The year before was 217.
Todd Gleason: Uh-huh.
Greg Johnson: I guess I would say it’s probably 210. I don’t think we’re as good as we are last year. I think it’s, again 210 is not a disaster. It’s probably the fourth biggest crop we’ve ever had, but it’s just not as big as what USDA is using and it’s not as big as what I think it looks like from the road.
Todd Gleason: So you’re down 2 bushels from the 212 in the August crop report. The crop tour was, I want to say at 184 for the tour itself. There is an historical differential, a handicap on that. It’s a plus four and a half or 4.6 bushels. Let’s call it 189, 190 from the tour. That’s a big difference, by the way, from the 212 that USDA is using. And that also is not the final number that we’ll get from Mr. Akre when we talk to him during the closing market report either. I probably should get a statewide number from them for Illinois as well. But we’ll see how that gets pushed into it. I’m interested as Greg was in Brian and Dave’s thoughts on the size of the crop just in Illinois. Brian, if you want to talk about Indiana because you travel at least through to Logansport from the Champaign area every week, what do you think that crop looks like?
Brian Stark: Well, I think it between Champaign and till you get to Lafayette, the crop obviously looks a little bit more challenged. And then when you get east of Lafayette until you get to Logansport, and then it kind of changes again. The corridor just to the northeast of Clymers/Logansport is the area Greg described that had 16 to 18 inches here over the past week to eight days. And obviously rivers full. I think most of the growers we talk to, it’s too early to tell on impact, and I think a lot of agronomists are not got experience with excessive moisture in August, this is generally a springtime event. But I think most of the customers we talk to is more of a quality risk at this point. I think the excessive moisture getting into the husks, you know, and then also stalk quality, what’s the harvestability going to be like. That may be more of a yield impact, but I would like to touch on, you know, Greg’s point of what these excessive rains done in August. I want to point back to the listeners to remembering a lot of the same areas that have received these heavy rains in August were overly saturated in the month of June. And so I think a lot of the challenges that Pro Farmer and some other scouting that has been done are finding with maybe, like Greg said, not a disaster, but maybe lesser than last year, is due to some of the challenges we had in the month of June with excessive moisture, roots not having to dig near as deep. And then you’re seeing more 14 to 16 around in counts versus the 18 to 20. So I would say maybe a little more bearish than Greg in Illinois, I think you’re probably somewhere between 205 and 210 as a state. Indiana is currently pegged two bushels higher than last year. I think that’s too high. I don’t think anybody we’ve talked to feels like their crop is better than last year, certainly not a disaster on the corn side, but that I would say that the government’s probably at least a few bushels too high, maybe that’s closer to a 200 state yield in Indiana than 206 knowing that they were 204 last year. So I think the crop in general is smaller, but I don’t know if it’s necessarily driven based on the August heavy precipitation as much as it is the double whammy of having a heavy rain front in the month of June.
Todd Gleason: Dave, you want to chime in with your thoughts on the size of the crop just in Illinois or other places?
Dave Chatterton: Yeah, well, thanks guys. I guess I get to take the price a little bit but you know, we’ve been, I guess, trying to beat this drum for a while, Todd, and I think it’s just been a challenging weather year for the crop to Brian’s point on a number of different fronts. And I think with corn, particularly in our part of the world and these areas that we’re talking about that got, you know, 8, 10, 12 plus inches here over the last, you know, 10 days or two weeks, the denitrification and the nitrogen loss that got started earlier in June with those wet conditions certainly wasn’t helped by the rains that we’ve had. And we’ve seen pollination problems, we’ve seen tip back, we’ve seen, you know, ear rot, we have seen, you know, disease in leaf blight and anthracnose and just different things. And all those kind of together, none of those on their own are really a terrible factor, but all put together, it’s had its weight on the crop here, Todd. And we’ve been in the fields pretty much every day here and trying, trying to look, and I think the message here that I would send to the producer is get out and check your fields because whatever you’re budgeting, I think you may need to maybe roll that back a little bit. We’re finding problems when we get out there. So to cut to the chase, our Illinois corn number is 203. USDA as you mentioned is 212. We’ve been at 203 really for a number of weeks now. We ticked our bean number up this week in Illinois. We’re at 63 versus the USDA at 67. And again kind of, you know, a little bit more, maybe optimistic on beans than what we are on corn. If you take that up to the national level and you kind of did the math on the conversion for Pro Farmer, but if I take and granted, we did not have all the Pro Farmer numbers under, you know, to evaluate at this point, but the data to date, when I look at it and kind of run the numbers, points me to coming out at a US corn yield probably near like a 176 or 177. And if you again apply the differential to that, that would put a USDA yield probably a little closer to a 179 to 180. We’re sitting currently in our shop 179 on national corn yield. On beans we’re at 52, versus 53 for the USDA. So I guess that’s the bottom line, we definitely see some challenges in the corn harvest here coming up and not just in Central Illinois where these heavy rains have been, but in a number of parts of the belt.
Todd Gleason: I’m going to stay with you for a second and then turn back to managing this risk with Brian and Greg after that. But you did mention that you believe there will be a demand-driven rally or thinking that may be the case. But also in the same prospect, farmers at this point thinking, well, if I have a supply-driven rally, how much more do I have to the upside if any? What happens between now and my harvest time? And particularly, timing is an issue because it will be related to basis and harvest lows if we have a low yet to come, who knows, but maybe you can talk about some of those things.
Dave Chatterton: Yeah Todd, I mean that’s the correct question to ask in the right way to be framing it up and looking at it. You almost have to break your marketing into two segments. You have an issue of what you’re going to need to move at or during harvest and that you can’t store, that you don’t want to pay commercial storage or DP or basically rent storage on, versus what you can, you know, what you can defer. And when you look at those bushels that have to move between now and harvest, there’s definitely a few deals to be had in terms of the basis that we’re seeing offered, particularly the later in harvest or if you can get out to November with soybeans for example. So, you know, make sure you’re talking, evaluating those choices as you go here. You know, the idea of the supply-driven market kind of now needing to translate to the demand-driven is to your point, is that we’ve rolled this stone around. It’s not new news in the market anymore. It may be a little bit lower than what the USDA is, but the USDA took, you know, an aggressive step in their August report by bringing in their objective yield data and lowering their yield. And so the idea that yields are going to go significantly lower at least in the next couple of months, we’re getting to the end of that story, I guess if I’ll put it that way. And so that doesn’t mean we don’t have a little more upside potentially in the marketplace, but we’ve gotten up, tested these June and July highs both in corn and soybeans, and you know, we’re going to find a little bit of resistance at that level. I think to get much beyond that Todd, you have to flip that switch and you have to start talking about where is demand. And it’s a good story, you know, it’s a strong story. I’m not saying that we need to be afraid of that, I just, you know, we need the market to take that up and there are some certainly some bullish things about that story, particularly if China holds to true to a 25 million metric ton total, particularly if we continue to see things, you know, drag on, you know, logistically and execution-wise in the Black Sea. So, you know, flipping that switch in between now and harvest like I said, a little bit more defensive between now and harvest and a little bit more opportunistic beyond that harvest.
Todd Gleason: Greg Johnson, I want to stay with China for just a moment with you because I’m wondering, given what the President has been up to this week as it’s related to Iran in particular, and China does import a bulk of its oil from Iran and Russia, but Iran plays deeply in their economy. The President wanting to put economic pressure on Iran, that will put economic pressure of course on China at the same time. Will they be willing to play ball when we get to September, and will they buy? Is it just a maybe? It seems like there’s so many things on the world geopolitical stage that it is just a maybe.
Greg Johnson: Yeah, you hit it right on the head. Oil prices probably take center stage if I’m President Xi of China, I’m, you know, they’ve been buying more oil from Russia since they’re not able to get it through the Strait of Hormuz. I think they’re up 5% this month from where they were a month ago out of Russia. So they’re definitely trying to originate more oil because that’s crucial to their manufacturing economy. When it comes to the United States, China exports so much commercial products into the United States. It’s in the trillions of dollars. If they can work out something with President Trump to say the tariffs are going to remain at 10% and not go up to 20 or 30%, they may be willing to use some of that 17 billion dollars that Trump talks about that China promises to spend on US commodities, non-soybeans. That maybe China will buy some corn. They might buy, you know, cattle, hogs, other things, but it could be some corn. So that’s just one more wild card out there that we have to kind of factor into the equation. So for all those reasons, you know, it kind of feels like the uncertainty is friendly and not bearish because it’s the wild card. What happens if, and I’m not saying that it will happen, but I think the traders and the funds, they have to ask themselves that question, what happens if China comes in? Because China does not come in and buy US corn very often, but when they do, it’s not an insignificant quantity, it’s a pretty large quantity. So just that fear, that threat, that wildcard that China could come in, might give us a chance to sell corn a little bit higher than what we might otherwise think.
Todd Gleason: Brian, do you think that will be enough to keep prices up during harvest?
Brian Stark: Yeah, ironically Greg and I just talked about this yesterday in another meeting, but I think he’s absolutely right. China is a wild card that could potentially yield friendly, but we also know the tit-for-tat that President Trump has used with tariffs in the past, could create a scenario where we don’t get that initial demand surge. And how would the market react? And I think that ties into, you know, knowing what your percent sold is, Dave’s point of getting out looking at your fields, so you can help manage the risk. I think for the growers, and there’s probably not many that are 40 to 50% sold, but I think especially those that are, minimum price strategies are the way to tackle this market to create a floor as the supply-driven rally that has gotten us up to Dave’s point close to some of the spring and early summer highs. I mean we’re only 14 cents away from the recent high in September corn, normally this time of the year where we get to the end of August into the crop year, producers hanging onto old stock ended up having to throw in the towel, and now we’ve got an opportunity to take advantage of that as we go forward. But for the grower that hasn’t done much forward marketing on new crop, I think they have to start with the bushels they can’t store on farm and selling flat price as the market is giving us opportunity makes some sense and kind of easing into it. But as they advance sales, I like the minimum price approach to create floors but to give upside to Greg’s point for China to potentially come in and give another bullish demand catalyst, but also while recognizing that that might not come to fruition as quickly as we’d like. And we want to make sure we have some sort of protection on those unsold bushels and not miss an opportunity that we’ve reached levels now that are probably above cost of production for most growers.
Todd Gleason: So Dave, coming back to you on this. It really is about timing. A drought normally, a weather market would have been much earlier in the season, it would have folded really fairly quickly too. This time around, that’s it’s later, it’s something different, and timing is still going to be important for the producers. How do you help them manage it?
Dave Chatterton: Yeah Todd, I mean the timing of the market is certainly… we have a counter-seasonal rally on our hands typically as you mentioned we make those highs and then away we go. I think we’re in a little different situation this year because of, if you widen the scope a little bit, we’ve had a pretty good drawdown in global wheat stocks, we’re having a drawdown in global corn stocks, our carryout use to ratio globally in corn is at a point that it hasn’t been really since the early 2000s. And all of a sudden, I think global buyers are starting to take notice of this. So that goes to back to the point of supply focus now shifting over to demand focus. Doesn’t mean we don’t get a soft spot in terms of board pricing between now and harvest because we’re certainly not going to run out of supply between now and then. But I think some of the grain buyers that are out here and the originators realize that it’s going to be a very competitive environment, there’s going to be less bushels out there to compete for. So it’s a mix of, you know, making sure you’re watching both fronts, the basis and the board price to do that. But at this particular point, I mean if you, to Brian’s point, I mean if you look at D’s corn here today at 503, we went up and checked that summer high at 506 and a half today, didn’t quite get through it, maybe we will, maybe we won’t, but if you’ve been waiting for a chance to sell corn and you’re not caught up whether that’s on forward sales to deliver after harvest or whether that’s on your harvest sales, I think you need to be, you know, pretty cognizant of just stepping on the gas pretty quickly to get that done because things can change very quickly. We’ll have a number of other private and co-op type tours that are coming in here in the next couple of weeks. My anticipation would be that they kind of confirm what we’re seeing from Pro Farmer, but that’s not necessarily a given. And so, you know, I think you need to, you need to be paying attention to your marketing here in the short term and be very proactive.
Todd Gleason: Greg, can you talk about space in the elevator at this point and if anything has changed in your mind as it’s related to what you’ll need to have available and how you will allocate it?
Greg Johnson: Yeah, if you would have asked… and you did, you asked me this a month or two ago, and I was worried about space because at that point in time China had not been purchasing US beans and we were anticipating having to hold on to quite a few bushels of soybeans in the fall if we weren’t able to export them down to the Gulf and overseas. Things have changed in the last six weeks. China has really come in and bought beans, and so we think there’s going to be a fall soybean export program, and if that’s the case, that’s great for us, that’s great for our farmers because the more beans that we can ship out of here, that’s more space that we have allocated to corn. And we won’t have to put corn on the ground quite as early as what we would have otherwise. So bottom line is that’s encouraging for basis levels. So both corn and soybeans, the soybeans will move down the road early and the corn if farmers want to store corn and elevators want to store corn to capture the carry, there’s going to be more space available so it shouldn’t be as expensive. Now it’s still going to be expensive. You know, the interest costs alone have gone up, storage costs are going to be about the same as last year, but when you figure storage and interest, it’s going to be, you know, it’s not going to be cheap to store corn. If you have your own bins, that’s one thing, but if you’re paying the elevator, you might want to try to get those bushels sold ahead of time rather than pay commercial storage. And I think Brian mentioned this too, farmers in general are less than 20% sold on new crop corn. So, you know, this rally at some point in time will be met with farmer selling. And so I, you know, I’m very, you know, I think corn prices can work higher based on all the demand scenarios that we’ve talked about, but keep in mind that farmers are very undersold and they’ve been undersold the last couple of years, and I understand why. We haven’t had, you know, very attractive prices for very long. You know, those five dollar prices we had back in the spring lasted for all of about a day and a half. So I understand why farmers haven’t sold much, but I guess my point is at some point in time the farmers will start selling corn and if somebody’s not there on the other side to take it, as fast as we’ve gone up, we could give back a fair chunk of that at some point in time.
Todd Gleason: Dave Chatterton, what haven’t we talked about that you think is important for producers to understand?
Dave Chatterton: Yeah Todd, I’m glad we talked about China and just one quick point on that. I think there’s some… there is a little smoke in that situation. It is a transactional swap, but at the same time, we’ve seen the subscription rates to the amount, you know, the percentages that are sold versus what’s being offered out of the reserve in China have been very good, they’ve been between 75% and 85%. The prices on those have each gone also gone up each week, which is an indication that their market is getting stronger and that their crush margins are improving. So I think that just helps grease the wheels of this transactional, you know, 25 million metric ton total that we’ve talked about and you know, if you look at the pace that we’re at, you know, we’re at I don’t know, call it around 8 million metric tons in our new crop book between China and unknown, you’re about a third of the way there and you’re roughly on a pace that gets you to that 25 million metric tons by the end of the year. So let’s hope that that continues. I think if you switch the card over Todd and we haven’t talked a lot about corn demand, but I think a couple of things there. And it starts with me with the exports. Typically this time of year, we would look at our export shipments or inspections and see them starting to trail off. South America would be discounting their corn due to their harvest, they’d be coming in and stealing, you know, stealing some of the business. We’d be trailing off getting ready for harvest and getting ready for kind of to go into our bigger period. But corn export shipments whether that’s out of the Gulf or off the coast continues to remain very high and we’re continuing to see very strong demand on the export side when we necessarily didn’t expect it here. Now that’s an old crop issue, but it carries over as the carry-in stocks, you know, going into next year. And I think we’re seeing a couple of things happen. One, I think when you look at what’s happening in Brazil, Argentina has a record corn crop and certainly they’re going to be competitive, but in Brazil they’ve upped both their ethanol usage dramatically in the last few years as well as their feed usage. Both of those numbers are expected to increase again in the coming year and really that’s a long-winded way of saying they’re using more of their corn domestically and they’re exporting less and that creates additional market share opportunities for US corn going forward. I think you kind of compound that with what’s going on in the Black Sea and some of these execution problems of getting, you know, feed grains out of the Ukraine in particular, getting wheat out of Russia. But the knock onto that is I think we’re seeing buyers who have optional origin cargoes and would typically be, do I execute out of South America, do I execute out of the US or do I execute out of the Black Sea, very much afraid or very much tentative on trying to get a boat into the Black Sea. And so they’re saying let’s load that in the US. I know I can get it on the boat, I know I can meet my timing and do what I need to do. And I think all these things continue to kind of add up to maintaining the strength in corn demand that we’ve seen that we’ve kind of become accustomed to here over the last number of months.
Todd Gleason: Greg and Brian, how far along are farmers on soybean sales?
Greg Johnson: I think they’re a little bit farther along on soybean sales because they can make money at 11 and 12 dollars. So I would say they’re probably 20, 25% sold on beans whereas corn it’s more like 15% corn.
Brian Stark: Yeah, I wouldn’t argue with Greg’s numbers. I think that’s probably pretty close. They’re probably a little further along on the bean front.
Todd Gleason: Dave Chatterton of Strategic Farm Marketing.
Dave Chatterton: Yeah Todd, I mean, I think to Greg’s point, let’s make farming fun again and you know, all of a sudden we’re back to that $5, $12 level where our P&Ls on a breakeven level are back in the black and it looks like it could be a positive year. Keep in mind that the late season rally that we’re having right now is not going to be a big knock on your upcoming ARC or PLC payment. Now that payment’s for 2025 but because the marketing year average price is heavily weighted and we’re in the last stages of that, this late rally isn’t going to have a big effect on that. So we’ve got that, you know, coming in our pocket as well. If you have bushels that need to move ahead of harvest, you have a decision to make and that’s sell or pay storage or DP. And I think in that situation, you know, you need to be proactive here and have a plan. If you get some bushels sold, I think our producers, Greg or, you know, Todd, are in the more, I don’t know that they necessarily feel undersold, I think they feel a little bit oversold if anything and they’re talking about buying calls and call spreads and things that they can do to continue to participate in the market beyond those fall sales. So, you know, I guess there is that element in the marketplace as well. But I think, you know, we talk in our shop about to producers in terms of marketing grain of being either defensive or offensive. And it’s kind of like a scale or a meter or a dial that goes back and forth and right now we’re leaning that a little bit much more towards the optimistic side or the offensive side than we have in quite a while to Greg’s point. And that doesn’t mean fall asleep at the wheel, that doesn’t mean don’t take profit when it hits your targets, but what it does mean is hey, you know, let’s take a realistic look, let’s have some offers maybe above the market and working and look to add that little bit extra on while we’re there. One quick thing I would say is too, is don’t fall asleep on 2027 at this particular point as we’re talking today. Dec 27 corn 508, Nov 27 beans 1195. So, you know, above 5 and above 12 on those numbers is something that you may want to start to consider whether it’s options or HTAs or minimum price contracts for next year to kind of keep yourself in the game. We don’t know the necessarily the fertilizer and the input story just yet, but we know historically those are numbers that put us in the black.
Todd Gleason: Commodity week of course is a production of Illinois Public Media. May find and listen to the whole program anytime you’d like at willag.org. Our thanks go to our panelists this week including Brian Stark, Greg Johnson, and Dave Chatterton. I’m University of Illinois Extension’s Todd Gleason.