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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
Panelists
- Shane Holtorf, Logic Ag Marketing
- Chuck Shelby, RMCommodities a Div of Zaner
- Ted Seifried, Zaner Ag Hedge
Todd Gleason: This is the April 9 edition of Commodity Week. Todd Gleason services are made available to WILL by University of Illinois Extension. Well welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Shane Holtorf. He's at Logic Ag Marketing out of Alta, Iowa. Chuck Shelby is here from Risk Management Commodities in Zionsville, Indiana. And Ted Seifried is with Zaner Ag Hedge. He is in Chicago, Illinois. Commodity Week, of course, a production of Illinois Public Media. It is public radio for the farming world online on demand at willag.org. Our theme music is written, performed courtesy of Logan County Illinois farmer Tim Gleason. Let's get a list of items that maybe we should take up for the day. I think, Chuck Shelby, I'll start with you in Lafayette, Indiana.
Chuck Shelby: Well, we're headed towards the planting time, and I know there's a lot of farmers that are chomping at the bit to get going, but the moisture we received in the drier areas of the subsoils is much appreciated.
Todd Gleason: What should we take up, Shane Holtorf of Logic Ag Marketing?
Shane Holtorf: I think it'd be good to just visit, you know, today's report was kind of a nothing, but last week we set our initial expectation on corn and bean acreage that we're going to see for the year. Chat through that. And I think we'll discuss the elephant in the room of our ongoing conflict with Iran as well.
Todd Gleason: And finally, Ted Seifried, your list.
Ted Seifried: Yeah, I love the list that's been laid out in front of us already. But from the report today, the USDA didn't change the soybean carryover domestically, but they did make some changes within the balance sheet. I think it's interesting to talk about that and how should we look at that going forward. I also kind of want to talk about the numbers that we're hearing out of Argentina for their corn crop production versus what the USDA reiterated to us today.
Todd Gleason: Okay, so let's start there. I want to talk about this morning's USDA report. What were the numbers that changed in the soybean S&D table?
Ted Seifried: Yeah, I mean, so the USDA increased crush, but they took that away from exports. And, you know, I think we've been calling for a little while now that, hey, the USDA really could or should increase crush. I'd say some of us have been saying they need to decrease exports as well. But there has been this hope that the market's been holding out that this additional 8 million metric tons that China was, quote unquote, considering would support that export number and get us to the USDA's target. I think the USDA showing us that capitulation of sort of finally doing both of those things to me is a little bit bearish because while it feels like this was a rip the band-aid off, this is probably where we need to be on crush, it feels like a different story for exports that they might just be starting to stair step into lowering the exports. And so for me, while that domestic balance sheet was unchanged at 350 million bushels, if I'm reading between the lines, I feel like the USDA is telling us that that number could go higher if there isn't this big turnaround and we do start to see signs of Chinese buying or the Chinese wanting that additional 8 million metric tons.
Todd Gleason: Yeah, to clarify, you know, 350 million bushels is the ending stocks. 35 million bushels was the change in both the exports and the crush. Not a terribly big change. I am interested to hear though, and I'll follow up with you, Ted, on this one. You said stair step, how much further down do you think that can go?
Ted Seifried: I mean, so here's the thing. When Trump mentioned that China was considering an additional 8 million metric tons, we had a sharp rally really driven by the funds. And now we are trading at values that are quite a bit higher than Brazil and have been for some time. You look at export sales this past week at what, 295,000 metric tons. That's not going to get us to the USDA's target. I'm worried that we could lose another 50 to 75 million bushels off of the current USDA's estimate by the time all is said and done if China doesn't come in and start buying. And even if they do, I think that takes away business from the rest of the world. In my mind, it's really difficult to get an export number higher than what the USDA showed us today, even after that 35 million bushel reduction. I think that is very much dependent on more Chinese business. If it doesn't happen, again, somewhere between 50 and 75 million bushel I think is still at risk on that balance sheet.
Todd Gleason: Okay, both Chuck and Shane, you can take this up. But I want to talk about the new crop and roll these kinds of changes into that and what that might mean going forward, particularly as it's related to the little chat that we want to have about acreage. So, Shane, I'll start with you. You are in the Iowa Western district, it's central west, I believe. And it is the largest corn production district in the state. Will there be acreage shifts there at all towards soybeans in your part of the world?
Shane Holtorf: You know, it's a good question. When we think back to this initial conflict in Iran, I think everyone's gut reaction after they watch fertilizer prices jump fairly drastically is, wow, look out for the shift to bean acreage. And as I've started to put feelers out among our customer base and seed dealers in our area, it certainly doesn't feel like we're going to see a big shift from the corn acres to the bean acres. You know, I was initially thinking that corn was kind of the belle of the ball and beans had a little bit of doom and gloom, and I'm, you know, I'm still honestly kind of shocked at how well beans have hung in here the last couple days. But, yeah, by and large, I don't think we're going to see a large shift in acreage in our neck of the woods.
Todd Gleason: And then Chuck, because you are kind of in the bean belt, I think most people would understand that is the case. If they know the Lafayette, Purdue, that part of Illinois and Indiana very well. Will there be a shift for you? And what is the general mix? Is it a 60-40 in favor of beans year in and year out where you are or 55-45 or something like that?
Chuck Shelby: It's 55-45 to 60. And, you know, we work with customers in Ohio, too, which they tend to do better on beans than like beans. So, I don't know, from the people I've talked to and some of the people we farm for in our area and parts of Illinois, I see a shift that occurred afterwards. Seed dealers have told us that. And then also there's guys who side dress who hadn't purchased their nitrogen or guys delayed because they're waiting for the bridge payment. So in my mind, in the east anyway, I think there is a shift that's going on. We certainly haven't been helped by any of the, you know, fertilizer's not come down. And anhydrous isn't too bad, you can still get it $200 more a ton, so some guys are switching, but in our area I think there is some switching, but interesting when you tie back to the price of beans, I mean it continues to stay up there and exceed the December corn price and I don't know, guys want to ignore that, but it looks like right now the bean price is, you know, sticking in there and the corn price continues to drift lower.
Todd Gleason: And I would bet that those who have not put the nitrogen on have dry fertilizer on from the last fall that they're just going to carry into the next year, right? And that would be the highest price of all the fertilizers probably that they would have to deal with.
Chuck Shelby: Well, a lot of guys on the, you know, potassium and MAP and DAP side are maybe probably just going to skip that. But it's really the side dress guys who are struggling with their, what method are they going to go? I mean, they can go anhydrous, but 28 and 32 is still sky high compared to what they could have bought it back, you know, last winter.
Todd Gleason: Okay, so I do want to discuss the acreage a bit more with each of you. I'll come back to you Ted when you look at this acreage. What do you think we will see in June or how shifts might take place in the United States?
Ted Seifried: Yeah, so I, you know, I kind of agree that corn is always going to be that belle of the ball. And so some of the bigger acreage shift numbers that we've heard when we're talking about high price fertilizer, two to three million acres. I just, I have a hard time seeing that. I think we're going to try to plant corn as much as we normally do. I think the real risk for corn is weather, as it always is, but this is a year where if we do start to see these planting delays, which by the way, if you look at the next two-week forecast, we have some really sloppy weather in some places. Right through the heart of the corn belt. I mean, they're talking two to three inches in central Iowa or a big portion of Iowa for that matter. But if you get that combination of planting delays and, you know, the high price fertilizer issues, that's where corn I think really starts to lose some acres. Because we are going to plant corn on the acres that we have inputs down on. We know that. Even if we didn't pay these high prices that we have right now, because of these high prices, those acres are going to stay corn. But any of the swing acres, it's not going to be like a 2019 where we're still planting corn in June. Then we are absolutely going to switch to soybeans. So it's gonna be weather driven as it is every year, Todd. But this year even more so, we're gonna be very sensitive to planting delays when it comes to corn planting and again, if you get that double whammy, that's when you're gonna see that bigger shift from corn acres into soybeans.
Todd Gleason: Shane, there is always this old adage that says if farmers are planting corn and the weather is good, they will continue to plant corn. Gary Schnitkey, actually ag economist from the University of Illinois the last couple of weeks, and I'd have to go back to find this, but during one of the webinars I was hosting with him, said that there was actually statistical evidence that this was true. However, many producers, I think including you, have both a corn and soybean planter running at the same time. Do you think that has changed things and is it likely that corn acres would go up just because weather might be good?
Shane Holtorf: Well I think if we look back to what happened last year, you know, we got a decent chunk of the crop in early in the west and I think that held true. You know, guys got wrapped up with corn early, the weather was decent in some spots and like well shoot I might as well just keep going. I would argue that this year is much different just due to what Ted had talked about. You know, I've got some producers that are generally just creatures of habit and they probably have never purchased fertilizer in the fall and they've never paid attention to what they've paid in the spring because it works. And I think that those guys are probably going to go and they're going to plant their corn acres, but you know the ones that concern me are you hear still of pockets of you know hey I picked up 500 acres or 1,000 acres and it doesn't have anything on it. Well those decisions are a lot harder to make. And so I think that you're going to see those acres kind of stick to that, you know what makes sense, stick to beans for sure rather than push that corn on corn where the economics have probably helped that in the past. And so I would guess that this year you're going to see people tend to hold serve a little bit more than what they have in the past.
Todd Gleason: Yeah, there is evidence too, Shane, that farmers, in fact, are creatures of habit as it's related to their production. And all the kinds of things that they might do. And this was interesting also in a recent webinar, asking them to just try it on one field doesn't work. But if you can convince them to switch the whole farm over, everything, they're more likely to do that. So just an interesting aside. So Chuck, when you think about this, as it's related to marketing, and you talked about the higher price of soybeans, what is it that you're urging producers to do at this point? For instance, are we making old and new crop soybean sales still?
Chuck Shelby: Most producers are out of beans. They're old crop anyway, there are some left. But farmers have done a pretty good job and have moved those out. On the new crop, I mean it is up to a level that's a lot higher than last year. It offers opportunity to come in and, you know, make some sales that are, you know, I guess if you had a good yield, it's profitable. And back to Ted's point, the concern of is USDA off, are the funds on the wrong side of it, we saw what happened when the funds bought in earlier and then they decided to jump out, we saw a dramatic drop in beans. So, I like selling beans, you know, whether you do forward sales, hedge to arrive, put options or whatever, because I think there's some risk there. Especially as we go forward, if we get a few more acres and then if the Chinese don't come around and buy. So, favorite thing to sell right now would be new crop soybeans.
Todd Gleason: I do want to talk to both you and Shane a little bit about things on the ground as well. You mentioned rainfall, actually you mentioned moisture, so I'm thinking you're worried still about subsoil moisture levels in your area. Is that the case, Chuck?
Chuck Shelby: Yeah, we've been fortunate. I mean, if we went back a month, I was extremely concerned. You look at the drought monitor map, we were in the red in a lot of Illinois. So these rains are really a blessing even though, you know, we're held out of the field. So that going to go a long ways to really helping the crop if we get into some dry spells down the road. Maybe we get some more next week, so I'd say, you know, we've come back and replenished the subsoils, but I don't think it's as good as it was last year, but certainly has helped and gives you confidence to, you know, maybe plant that corn that was a concern earlier, you know, it was really dry down deep. So at this point, you know, I guess most farmers are pleased to get the rain and, you know, it'll get out there and we'll get it done. It always gets done. It's just, you know, how wet's it going to be in the next two weeks.
Todd Gleason: So Shane, historically over the last several years there have been some really dry conditions in your part of the world. Are they better or worse today than they have been?
Shane Holtorf: Yeah, last year was kind of an anomaly where we had a super wet spring into early summer and then it just shut off as we progressed towards fall. We got a big snowstorm a little bit before Christmas and then it completely shut off until February. A couple light flurries, nothing big, and then shut off again until about last week. We got two inches of rain and it was much needed. The ponds didn't fill up, everything soaked right up. And so we've got small chances about every third day in the forecast, and I think guys are chomping at the bit to get out there, but this rain is, you know, as long as it keeps coming like it is, definitely isn't gonna hurt anything. I think we've got a soil profile to fill up unlike last year.
Todd Gleason: Is there concern, Shane, and I'll ask you first, but Ted, you may know as well, to the west and north of you in parts of the Dakotas at all?
Shane Holtorf: Yeah, that's certainly a much different story. You know, the Dakotas and Nebraska are in a much different situation than we are. And even the further west you go in Iowa, starts to get into the early stages of drought. We're sitting here with quote-unquote white on the drought map, so we feel pretty good. But yeah, if you get into Eastern South Dakota and Central Nebraska, things aren't quite as exciting for them in the terms of having some of these rains to fill up that soil profile.
Todd Gleason: Before we turn our attention to the impact of war and what that might still be on the marketplace, I do want to take up some of the international side of things. You were wanting to discuss Argentina, particularly their corn crop, Ted. What is it that you're concerned about?
Ted Seifried: Yeah, so the USDA once again left their corn production at 52 million metric tons here today. We've seen a number of different estimates from a number of different agencies giving us higher numbers. The Brazilian number on Argentina today came out at 57 million metric tons compared to our 52. The one that really concerns me though is the Rosario Grain Exchange has said 67 million metric tons. That's a 15 million metric ton difference from where the USDA is and where the Rosario Grain Exchange is. And the Rosario Grain Exchange is justifying their number by yes, good yields, weather has improved since the middle of February, right in time for corn and the corn yields are really good. You hear that sort of echoed throughout South America about Argentina's crop. But where the Rosario Grain Exchange differs is they're saying that their planted acreage, their corn planted acreage, ended up being 400,000 hectares higher than what was initially expected. That's a 4% increase. And if that sounds familiar, Todd, it's because it is. That's exactly what happened in our growing season last year where when we saw crop insurance registrations, the planted acreage of corn ended up being 4% higher than what we said we planted. Well, if that is actually the case, and Argentina has 15 million metric tons or even 10 million metric tons more than what the USDA is saying, or even 5 million, obviously the bigger the number the more of an impact it will have on the global balance sheet and our balance sheet. But if that Argentinian crop is a lot bigger than what the USDA is saying at 52 million metric tons, oh boy, that could be a problem. That I think is currently a bit of a dark cloud that's hanging over the corn market. I would really like to see the USDA address that and at least give some commentary on that. Because then I think we can start to move on from it. And by the way, if their crop does increase by a significant amount, let's say 60 million metric tons, that'd be 8 over where the USDA is at right now. That's not necessarily going to affect this current crop balance sheet. We have very strong exports, we're talking about a crop that's not even close to being harvested yet. Or is getting closer to being harvested. But it's not going to be a main competitor of ours for this marketing year. It could really affect next year's balance sheet. It could really affect next year's exports based on more global competition.
Todd Gleason: It'll be interesting to wait and watch and see how that turns out. Do you think USDA will develop a set of numbers that's higher in the May world ag supply demand estimate? Will it wait till June? July?
Ted Seifried: It seems very likely that they are waiting to get more information on this. Again, the Rosario Grain Exchange is the only one that's citing that major increase, that 4% increase in acreage, corn acreage in Argentina. I think the USDA is really just trying to wrap their head around it. Because let's be honest, the USDA still doesn't really understand why our corn acreage increased 4% from our planted acreage survey to the actual final number. So I think this is something that they really are wanting to take their time with. They may have that ready for us by this next report. And this next report is a really big one because it's their first glance at a new crop balance sheet. So they really want to try to have all their ducks in a row from our old crop perspective and from the global production perspective. So I think there will be a big push within the USDA to really get this figured out and have it for this next coming May report. But whether they're able to do that, whether they're able to kind of decipher the clear picture between now and then or not is a great question.
Todd Gleason: Chuck, what kind of working numbers do you have for the new crop figures for corn and soybeans, particularly for corn once we get into May?
Chuck Shelby: To me it looks like we could lose a million acres, you know, from where USDA was and put a million more on the soybean side. The bottom line is, I mean whatever USDA's trend line yield is going to be, we're going to end up with a carryout real similar to where we are, around two billion bushels. So at the end of the day, you know that's why prices are probably in a similar price zone here. As we move deeper into the growing season and do acres change and what's the weather going to be, so. The one thing we know for sure on corn, the demand has been really excellent and you know these kind of prices stimulate the demand and you know that's a positive going forward. We've chewed through this old crop pretty well. Farmers still moving it but I think a lot of guys have done moving old crop corn until they get into the field and plant more, so I don't know, corn's kind of priced where it was last year. It may just stay there for a while and see, you know, surprise last year with the acreage that June and then we go from there. Soybeans, if you pick up a million acres, you know, it kind of throws the balance sheet in a bigger number and then to Ted's point, I mean, I think that's really important. If that, if Trump and Xi don't get along or we don't get some more demand, we're going to end up growing that carryout and then that can be a real problem I think for beans going forward. They can look a lot worse than what they do now and then you have to worry about what the funds are going to do if they bail on us here again. You know, we saw it last time it went to 70, 80 cents to a dollar. So. All those are down the road. I think the unknowns of planting and the market will kind of hold together here as we move into the, you know, next six weeks. But as usual we get into June and we know the acres and the weather looks good. It's going to be challenging for the market to find a reason to rally.
Todd Gleason: The corn soybean ratio, crop insurance, coverage at 95% also plays into this, Ted, I think.
Ted Seifried: Yeah, and I'm going to help Chuck out a little bit here on this one, because for Zaner Ag Hedge, I'm the one that plays around with the balance sheets. So we know what the USDA is going to use for that production number next month. Because we know that their trendline yield is going to be a 183 and we know that their acreage is going to be 95.338. We can argue till we're blue in the face about how those numbers should change or could change. But for this report, we know that they're going to come with a 15.980 billion bushel crop. And if I compare that to what they had said on outlook, and I, look, anytime I make a change on production I am compelled to make some or at least look at some revisions on the demand side of things and to Chuck's point in doing all of that, it comes out very close to a 2 billion bushel crop for corn. However, the number that we're we've been using internally for Zaner for our planted acreage number is almost three million acres less than what the USDA has had out there. And by the way, a lot of that is based on the longer term forecast of a fairly wet planting season for the eastern half of the corn belt. If I do that, though, that working balance sheet that I'm using for corn, or that has kind of been passed around internally at Zaner, I'm at a 1.896 billion bushel carryover for corn. And honestly, that's not terrible. You know, I mean it's an improvement from the 2.127 billion bushel carryover that we saw again from the USDA for this current crop. So I just, I see the corn situation improving. It's not getting worse. And a lot of that really depends on what happens with yield, right? If we end up with a 180 national average yield, oh boy, pretty quickly we're going to start talking about a 1.5 billion bushel carryover in corn. I'm also going to say that, you know, demand has been really stout. The one wonderful, wonderful thing that we have, or that we can take away from a 17 billion bushel crop last year, is that we've really, really built our global market share in exports. We've really, really built up our domestic demand for feed and residual and ethanol. And, you know, if you want to slow that demand, it has to be done with price, right? You have to price ration demand. So if there was an acreage number lower than that 95.4 that the USDA said on planting intentions, and if there is a yield lower than that 183 that they're using for trendline, and you start cutting into that almost 16 billion bushel crop and push it down closer to a 14 billion bushel crop. Excuse me. Price is going to have to be the function that really slows that demand down. So that would be a pretty friendly scenario for corn, I think.
Todd Gleason: So, Shane, if there's anything you want to talk about as it's related to the May WASDE, the acreage, that's great. Otherwise, I do want to hear your thoughts as it's related to the impact continuing, probably into 2027 is my guess, of the war in Iran.
Shane Holtorf: I think Ted painted a really, really good picture there. I like the way they went through it and it's kind of funny. He pulls out their anticipated, or the number that they've been using, it drew my attention when I was looking through the poll ahead of the report as well, and we talked internally about being in line with their numbers, so appreciate that from Ted's perspective there. You know, the one piece I'll add before we move on to the effects of the war is, if we think, you know, not to beat a dead horse here, but talking about the price of fertilizer and some of the decisions being made here, you know, I do wonder a little bit about a game of diminishing returns. If we cut back, you know, I sat down on my own operation and you look at, you know, the gold level recommendation or the silver or the bronze, and you start to pencil some of that out. And, you know, I scaled back what I was going to put on this year is more of a maintain than an add. And so it just depends on a lot of those decisions, but, you know, we could see a little bit of a game of diminishing returns if we start cutting into that fertility a little bit.
Todd Gleason: Let's take some time now to wrap up your thoughts for the day. Chuck Shelby, I think I'll start with you. You're of course at Risk Management Commodities. It's a division of Zaner.
Chuck Shelby: We certainly are in volatile times as producers. You know certainly in the next six weeks a lot of things are going to impact us but heading in there and focusing on planting the crop and as always we're going to hope for a really good one in everybody's area.
Todd Gleason: Shane Holtorf of Logic Ag Marketing, your final thoughts for the day?
Shane Holtorf: Yeah, I would echo a lot of what Chuck said. We're going to get busy in the field, but now's not a time to take our eyes off of potential opportunities here. You know, we're going to see volatility and I think that volatility needs to be rewarded in these markets. So when you push the button to engage the auto steer, I think it's important to sit down, know your costs, and be ready to act upon them.
Todd Gleason: I like that. Zaner Ag Hedges, Ted Seifried, your final thoughts.
Ted Seifried: Yeah, quick note on the fertilizer situation, that might be a much bigger problem for 2027. And if this doesn't get resolved in the relatively near future, that's when we could potentially have a big problem for corn acres. But in the meantime, you gotta be very excited about what corn demand has been doing. We have weather risk in front of us. I think the funds got a little bit too long, a little bit too early, and maybe for the wrong reason, because you can't put raw corn in a gas tank. So it's nice to see that the market's kind of correcting that a little bit, or it feels like it. We haven't confirmed that on a commitment of traders report yet. But I think corn's set up for a more seasonal year this year. I think we do see higher highs when it comes into the heart of the growing season, I should say. For soybeans it's not as rosy of an outlook. It's tough. It's all politically driven and it's very difficult to anticipate where that's going to go. So I think if I'm choosing one or the other to be more aggressive on marketing right now, I think it's more soybeans.
Todd Gleason: Commodity Week is a production of Illinois Public Media. We may find and listen to the whole of the program any time you'd like on our website. The address is willag.org. That's willag.org. Our thanks go to our panelists this week, including Chuck Shelby, Ted Seifried, and Shane Holtorf. I'm University of Illinois Extension's Todd Gleason.