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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
This is the November 6 edition of Commodity Week. Todd Gleason's 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 Greg Johnson.
Speaker 1:He's with TGM. That's Total Grain Marketing here in Champaign County, Illinois. Logan Kimmel joins us from Roach Ag in Naperville, Illinois. And Sherman Newland is here from Risk Management Commodities. That's a division of Zaner Ag Hedge.
Speaker 1:He is out of Hudsonville, Illinois. Thanks much for being with us, to each of you. Let's get some information from you about what we should discuss for the day. Sherman, let's begin with you. What's on your mind?
Speaker 2:Well, have been quite a few things in news here recently, haven't there? I mean, obviously, it's the big bean rally. What should producers be doing with it? You know, can we continue the rally, or is this thing over with? Are we going to see a pullback?
Speaker 2:You know, and then we got the crop report next week. We got to deal with that and see what that comes out with. So there's a lot of things that are coming up, you know, that producers need to be aware of and maybe take advantage of some of these opportunities.
Speaker 1:Logan Kimmel at Roach Ag on your list.
Speaker 3:Yeah. I think, top of the list would be, just what Sherman said, opportunities that we see available to producers now that you've had a nice rally led by the beans. What does that look like for bushels that maybe weren't marketed versus a month ago and what you can be doing up at these levels even after today, as well as starting to sit down and possibly look at some twenty twenty six ideas and strategies given the rally we've had there as well.
Speaker 1:And from you, Greg Johnson at TGM.
Speaker 4:Well, in addition to what Sherman mentioned on the USDA crop report next Friday, I think another government report that has not been released due to the shutdown is the commitment of traders report and I think the market is kind of, you know, feeling its way around, you know, to have the the has the managed money which was short prior to the government shutdown. Have they bought back their positions? Have they gone long? We really don't know for sure and I I think that uncertainty helps us in a way. It leads to higher highs on days when the when there's good news.
Speaker 4:You know, it it can lead to lower lower prices on, you know, exaggerated lows on days when we have some negative news. But I think that's one thing that the market has not quite figured out yet. And then the other thing is the Supreme Court is taking up, hearings on, whether, Trump has the authority to, impose all these tariffs in nonemergency situations, or is this really an emergency? And so what impact would that have if the Supreme Court rules one way or the other, on whether those tariffs are, in the in the Trump wheelhouse, as far as, his ability to put those on other countries? So I think those are two things that we should talk about as well.
Speaker 1:USDA, of course, was set or should have been set on Monday to release the world agricultural supply and demand estimates along with the November crop production report. It will be released instead on Friday, the fourteenth next week. And then the commitment of traders has not been released, and I don't think that's on the list of items that will be coming out from USDA USDA unless I've not unless I've simply missed it. Greg, is am I correct in that?
Speaker 4:You are correct. And like I say, that leads to, quite a bit more, I think, uncertainty in the marketplace.
Speaker 1:With higher highs and lower lows, we'll get to that in a moment. I will remind you that coming up in the month of December, if you visit our website at willag.org, willag.0rg, you will find a way right now to sign up for the December 12 farm assets Conference to be held in Bloomington. This is part of the PharmDoc team conference series over the week or over the winter months. A full day's event. You can find all the details for it.
Speaker 1:The cost is $80. Registration is available today at willag.org for it and along with the Illinois Farm Economic Summits, which will take place across the state. We'll start with farm assets December 12 on a Friday, and then on Monday, we'll be in DeKalb with the Illinois Farm Economic Summits. We'll move to East Peoria on Tuesday that week. And on the December 17, we'll be in Mount Vernon.
Speaker 1:You can sign up for any or all of those at w I l l a g dot o r g. So let's pick up where we left off. You were talking about higher highs and lower lowers lower lows, Greg. The move on Thursday was pretty sharp, though certainly not near a, full move for any single day, potentially. Do you think that it, was exacerbated by the lack of the ability of of folks to know where traders are committed?
Speaker 4:Yes. I I I think so. And I think the other thing is what's the interpretation of the framework trade agreement that The US and China signed? Depending on who you listen to, the interpretation could mean that China has to buy 12,000,000 metric tons this year and 35 each of the following subsequent three years or there's a clause in there supposedly that says, if the market price is conducive, which means some people think that means if South American beans are cheaper than China does not have to buy the beans in those quantities from The US. So obviously two different interpretations with huge, two huge different price forecast.
Speaker 4:If China has to buy those beans, sure feels like we could go higher. If China is only gonna buy beans if they're cheaper than Brazil, maybe they don't need to go a whole lot higher at this point.
Speaker 1:Sherman Newlin, as we heard during the closing market report on Thursday afternoon even with the losses on Thursday, soybeans in Brazil were still 20¢ below those of The United States. Is this of a concern for you?
Speaker 2:I mean I mean, well, China went out and bought 20 cargoes of beans for December here just a day or two ago. I mean, so yeah, I mean, to Greg's point, to me, you can't make China buy necessarily. They may say they're going to do something, but I think you have to watch what they do. And so far, we really haven't seen them come in and do a lot of buying. And I think that's part of the reason we sold off today.
Speaker 2:The market had a big run up. Hopefully producers took advantage of that. And technically we're getting pretty overbought. And you throw on top of that what's going on with SCOTUS and what was going on in some of these other markets that concerned, like the stock market was selling off quite a bit today. There's all kinds of worries that's going on about what might happen with these tariffs.
Speaker 2:So I just think the selloff was just probably due. I mean, is the selloff over with? That's hard to say, but I sure do hope producers took advantage of some some of this big run up.
Speaker 1:Logan Kimmel, if they did not take advantage of it or full of advantage of it, and they're looking at a 26 or 28¢ loss in the marketplace, should they still consider something?
Speaker 3:Yeah. Mean, I think one trend change here is this, the volatility we've seen step into the bean market and the swings in price. And then due to a couple of things, One, I mean, there has to be rotations here in the money flow, COT reports that we're not getting. But I think that's largely part of the dollar rally we've seen on the board, at least in the bean market, causing gaps and down twenty six set days. So if you're a producer and we see swings maybe back to the upside and you haven't done anything on this rally on your bean crop that maybe you got put in town to store or start paying some bills here for inputs.
Speaker 3:This might be the opportunity to get caught up and increment up your percent sold on the bean market given the trend change that we've had. We kind of busted out of a year and a half sideways, just go market right up to the top end of that. So if you've been waiting to sell, this would be the area, that probably overbought, but that sometimes presents opportunities if you're holding on to cash grain to get some of that marketed after a dollar rally in the beans.
Speaker 1:Greg Johnson, over the last two weeks, did producers and maybe longer than that actually, manage to make additional bean sales, or did they stay pat?
Speaker 4:No, I think they've done a pretty good job of making some sales on this rally. The question is, what percent, you know, if they were basically 0% sold prior to this rally, the first month of harvest, the price was still around $10 and the DP charges, the carrying charges were pretty prohibitive. So I think a lot of people decided to sell beans across the scale at $10 rather than pay those storage charges. And obviously in hindsight they wish they would have held on, but I think a fair amount of beans got sold at $10 and then when we hit $11 cash, I think farmers did a good job of selling beans there as well. So percentage wise, you know, we may be 50% sold now on soybeans.
Speaker 4:And if a farmer is 50% sold, maybe he wants to wait and see how this all plays out or at least have offers in, because at this point, with so much uncertainty, could beans go 50¢ higher? Yes. Could they go a dollar lower? Yes. So, with that kind of a range and that kind of uncertainty, maybe you just revert back to, am I making money at a certain level?
Speaker 4:If I can get $11 beans sold and I grew 75 bushel beans, that's $800 an acre gross. And if that pays the bills, you know, we can't try to predict the high of the market. That's just gonna be impossible in this kind of a scenario. So maybe you just go back to locking in a profit and, and moving on down the road.
Speaker 1:Sherman Newlin with the Center West Of Brazil teetering on the place by which they might move into dry conditions that impact them. I mean, they have been dry, but they've not been impacted really yet. How do you talk to producers about making soybean sales, if that's what you want to do, that is?
Speaker 2:Right. I mean, yeah, we're see if they end up having a weather problem down there or not. I mean, acres are going to expand. I I think their crop was bigger last year than what everybody thought, because they're still exporting beans for December. So that's a big cushion that they're going to have.
Speaker 2:And I think you have to look at it that way. The acreage expansion that they're having, the yields that they've been getting, yes, can we get a weather scare rally? Absolutely. But, you know, I agree with Greg. I think you've got to have some orders in up there for, you know, old crop soybeans, you know, at certain levels and just be happy with those levels because we're a dollar something off our lows.
Speaker 2:And, you know, a lot of beans, I think, did get sold over the scale because there weren't, you know, a lot of hope that we could go up here this much, even though there's still it's better than it was, but it's still not what I would call highly profitable levels, but it is better than where it was at, because I think a lot of farmers, at least in my part of the world and parts of Illinois, didn't have the best yields for soybeans. So that makes it even harder. I know everybody wants to get as much as they can for their soybeans, but we have to be realistic and know that maybe China won't come through with this buying. Maybe the market sells off because we don't see any sales. So I think taking advantage of this, whether you're buying puts or making some cash sales, I think you have to do something here because we could fall back down $0.04 0 or $0.60 There's a gap down there that could get filled.
Speaker 2:And then we just kind of maybe consolidate until we see what what China does do.
Speaker 1:We'll come back and talk about that more. There are gap gaps there, either one or two, depending on which chart you're looking at on soybeans. Greg Johnson, I do wanna talk about harvest time sales going into harvest. In general, most of those that we talked to were thinking, well, the marketplace is telling you you probably ought to if you if you need money after harvest, to market corn, as opposed to soybeans. Also in the same breath saying, we understand that soybeans are probably gonna be sold across the scale.
Speaker 1:How well did producers do at that time in selling corn?
Speaker 4:I think farmers were a little bit more tight fisted when it came to the corn marketing. We saw much more beans percentage wise sold in the fall, and I think I've heard that from other locations as well. The corn, there's just a little bit more fundamental reason to be friendly corn. The export demand, weekly export numbers continue to be very good. We know that ethanol demand export wise and domestic usage is very strong.
Speaker 4:And then as Sherman mentioned, you know, the will the USDA lower the corn yield in Iowa specifically and for The US in general next Friday. So, there's three reasons right there why and and and the fourth reason is Sherman mentioned too that Brazil is planted more beans. Well, they're planting more beans. That means they're planting less corn and here in The US, I really believe that we'll see an increase in corn acre in in bean acres next spring here in The US and that means less corn acres. Very similar to 2013, 2014, the last time we had a high input costs and low corn prices, we had 95,000,000 acres of corn planted in 2013.
Speaker 4:We only had 90.5, 4,500,000 less acres of corn in 2014. So the market did respond, the farmers did respond to the market signals of high input costs and low corn prices. And I'm not predicting a 4,500,000 drop in corn acres, but it could be a sizable decrease in corn acres. So for all those reasons, I think farmers are a little bit more willing to hold on to corn and see what happens as we get, you know, get through, see what the weekly exports are, see what that USDA yield number is next Friday, and, you know, continue to see if input costs stay high on corn or not.
Speaker 1:Logan Kimmel, how has Rocha Ag been managing their corn sales through, the harvest season?
Speaker 3:Yeah. We've been, incrementing, here, as as the markets present some opportunities. And just to kind of add to Greg's points, which I think are all valid. One other thought we've kind of talked to producers about corn, but also beans would be the 2026 marketing. Having an increment sold at these levels now, like on the beans for example, if we do see an acreage shift like that play out, the November 26 new crop soybean contract did spend some time above 11.
Speaker 3:So if you felt this year with the lack of opportunities maybe undersold, if you're making your first sale up at these prices and that's your worst one for next year on your bean crop, it might be worth getting a start leaving yourself some room. But that's just another idea, getting a stake in the ground there for the new crop soybeans. I think when we look at the corn as folks, most guys found bin space and are hanging tight here looking for the basis to come around, the futures to come around. I think right now we've ran into a little resistance on the old crop corn, at least on the technical standpoint. Two hundred day moving average.
Speaker 3:The October highs, it seems like this four fifty on the March has been an area that's served as resistance. So making some sales up here wouldn't be a bad idea on old crop corn. Looking for the market to, get a catalyst to get above this resistance. And I think as mentioned before, if that happens, having target orders in to make old crop sales, but also on 2026, that might be a good market to do that, given how much, how volatile swings we've had off headlines. If you have open orders you sit down, this is a good time of the year to maybe sit down and look at your budgeting.
Speaker 3:What levels can you make money? What levels would you have orders in to make those sales? I think this is a good time of the year to sit down and put a plan together to do so.
Speaker 1:I wanna follow-up with you for just a bit, Logan, because if producers have been listening to the program here, from Illinois Public Media, the closing market report and Commodity Week, both they have likely heard many analysts say soybeans don't spend much time in $11. When they go across $11, they manage to move fairly quickly, usually to 12 or maybe not. So the question then is what fundamental reasons do you support making $20.26 cash sales or sales of some sort, even on paper for those soybeans, maybe even for some corn, and are there downside objectives that you would use with a producer to say this is the risk that you have at this point?
Speaker 3:Yeah, I mean there could be a number of catalysts as we head into the winter. One most recent would be increased China demand. We haven't really seen that. There's been chatter of it. No signed deal yet.
Speaker 3:But, you throw a weather problem in South America, that could be a reason to propel beans, up through that $11 level to the 12. Certainly, I would think if there was a drought in South America, that'd be achievable. If a producer is is worried about that, there's there's opportunities to still keep your upside on the board after taking off risk in the cash market. So if you get a better and bigger market, maybe beyond this $11 to $12 range, There's still ways to participate in that with maybe having a call option behind a sale. But I think it is important as the markets there's been a trend change here in the beans especially, to remind producers that as we've seen a dollar rally, it's usually a good spot to consider doing some marketing.
Speaker 3:And again, if you want to have that upside still for weather event this winter, or increased Chinese demand, there's still ways to manage that. But cash sales, I think, are important along the way.
Speaker 1:Sherman Nuland, as you've been getting some new and different kinds of analytics coming from Zener AG Hedge, what are you hearing from them about the Brazilian crop, the size of that crop, what it means to prices at the CME Group?
Speaker 2:Well, I mean, yeah. I mean, like I said earlier, I mean, Brazil is going to have a lot more acres. They increase. Right now, if they have the size of crop that some are predicting, I mean, it's going to put a lot more, just a lot more beans out into the world, right? And they've really taken over.
Speaker 2:So I think that's going to be weighing on this market without some sort of weather scare. China has been going down there buying all their beans. They don't have to buy beans from us the way it looks, honestly. If they come here and buy some, okay. But the numbers that you're talking about aren't any more than what they have been buying in the past, which has been way down from where they were just a few years ago.
Speaker 2:So it definitely helps. But if they don't come back in and buy, then, you know, that's definitely going to weigh on this market, especially with the size potential of what Brazil is going to be coming with. So I think, yes, there is upside potential. I mean, but I think it's going take some sort of weather scare or something, either here next summer or there in South America, to push us significantly higher. You guys were talking a little bit about, you know, what are we going do for next year?
Speaker 2:I, personally, am going to be more corn, next year. It does work out better for me. You can get a better yield with corn. Potentially, the last three years in a row, we've had a drought in August that has just decimated our soybean crop in a lot of places. So I think a lot of guys are going to look at this and say, Yeah, inputs are high, but I can still do better with corn regardless because 60 bushel beans and $10 price doesn't work on my farm.
Speaker 2:So I think there's that out there that guys are going be looking at. I do think there will be an increase in bean acres. I don't think the guys out west are going to plant, you know, corn on corn. They hit a home run this year. They got corn, and they had some good grain out there.
Speaker 2:So a lot of places had some really good yields that typically don't get. But I don't think they're going to, you know, do that. So I do see an increase in corn acres or I mean, a decrease in corn acres, but probably not to the degree that some may be thinking.
Speaker 1:Greg Johnson, can you take up soybean crush for me and what demand looks like domestically in The United States? And if you could, and I don't know that you have read or thought very much about the article that the PharmDoc team has written on what US EPA has done over the last six months with three different decisions that they believe could push demand for soybean oil from 5,000,000,000 to 7,500,000,000 gallons, and and what that really kind of might mean for the marketplace. They also have not written their implications, and I know enough about this that those implications may not be as strong as what that that 40 or 50% increase sounds like. So have you gotten any thoughts or read any more about those kinds of things in domestic usage?
Speaker 4:Yes. The the crush numbers are definitely going up domestically, you know, due to the government policies. The incentive is to, you know, produce as much renewable biodiesel here in The US as possible. The other thing is The US has also stopped paying the dollar per gallon used cooking oil. So so China and other countries cannot get paid for exporting their used cooking oil here.
Speaker 4:So that means that the domestic users here have to use US produced biodiesel. So that is also helping the crush numbers out here. So for a variety of reasons, crush numbers are definitely going to be stronger. Now the question is, has the USDA lowered the export number enough? They raised the crush number but they haven't they've lowered the exports a little bit but you know, do do they really think China's going to buy all those beans this year?
Speaker 4:In which case maybe that export number is pretty close to being accurate, or will that export number have to come down, which will offset some of the bullishness of the crush numbers?
Speaker 1:It will be interesting to see in the Friday WASDE Nick WASDE next week whether USDA changes the export figures. They will accommodate the 12,000,000 metric tons. I suppose, I guess, that's considered a policy in place. Logan Kimmel, have you, developed at Roach Ag a balance sheet for next week and its predictions?
Speaker 3:Yeah, I think the biggest, you know, numbers to look at obviously are going to be the yield. And, you know, given what the spreads have done, the strength here in the market, I wonder if the corn yield comes down. Big question is how much? What effect did the late to August dryness, have and as well as disease pressure. Folks we're talking to, I think have alluded to maybe the corn crop in certain areas not being as good as maybe they thought at middle of summer.
Speaker 3:The beans, tough to tell. But that's what I would look for is possibly a slightly reduced corn yield and soybeans is a little more of a toss-up. That might stay pretty well where it's at, from our our opinion here.
Speaker 1:Sherman, your balance sheet picks for next week?
Speaker 2:Yeah. I you know, you saw a lot of numbers come out this week. Stones and and some of the others still in the mid-180s. We're not going be that high. I think we're going to be 182, maybe 182.5 on corn.
Speaker 2:Know, I think, like Logan said, I think the guys in the West are hurt, and Iowa especially. And Illinois, I think, needs to come down as well. But, you know, I don't think a 182 or three is out of the question. Beans, again, that one's little bit tougher. I mean, personally, I think it needs to be closer to 52, but I think, you know, you're probably going to see something closer to 53 on the yield as far as that goes.
Speaker 2:So I don't know if you're going to, you know, from what I understand, you know, they're taking the same measures they've always taken to come up with these numbers. You know, the plot data, the yield data, the surveys are all going to be handled like they've always done. So, hopefully, you know, whether it is whether you like the numbers or not, that's what we're gonna have to trade.
Speaker 1:And, Greg Johnson, if you've got some WASTE figures for me, that'd be great. If not, and or your final word for the day.
Speaker 4:Yeah. USDA is using one eighty six point seven. I agree with Sherman that maybe eventually we get to one eighty two. I just don't think they'll do that all in one fell swoop. So I I could see them trimming two, two and a half bushels off of the corn estimate and maybe a half a bushel taking that from 53 and a half down to 53 and then eventually maybe if the crop really isn't there, adjusting those numbers downward later on.
Speaker 4:But for one month, I think two, two and a half bushels is a pretty significant move. So I guess I'm not looking for, the the five bushel drop yet all in one fell swoop, but I think I wouldn't be surprised if we see that eventually.
Speaker 1:With that, we'll wrap things up. Thank you very much. You've been listening, of course, to Commodity Week from Illinois Public Medium. It is public radio for the farming world. Our thanks go to our panelists for the day.
Speaker 1:They include Greg Johnson at TGM here in Champaign County, Illinois. Logan Kimmel of Roach Ag out of Naperville, Illinois, and Sherman Newlin of Risk Management Commodities, a division of Zinger Ag Hedge out of Hudsonville, Illinois. I'm U of I Extension's Todd Gleason.