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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.
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The September 11 edition of *Commodity Week*, hosted by Todd Gleason of University of Illinois Extension, examines international grain logistics and the market fallout from the USDA’s September crop production and WASDE reports. Matt Darragh of Kpler begins the program by detailing the severe constriction of Black Sea export capacity caused by escalating conflict between Russia and Ukraine, explaining how damaged deepwater ports, war-risk premiums, and failed ceasefire negotiations have restricted a third of the world's wheat export volume and forced global buyers to seek alternatives in Australia and Argentina. Market analysts Garrett Toay of AgTraderTalk.com and Ellen Dearden of Ag Review then dissect the domestic and international balance sheets. Toay assesses the USDA’s production estimates, highlighting a historic November soybean/December corn spread that faces seasonal correction as harvest ramps up, while anticipating longer-term demand support from domestic crush and the Renewable Fuel Standard. Dearden closes the analysis with a focus on corn, evaluating a reduction in harvested acres, regional yield variations across the Midwest, European import demand following a severe drought, and pricing targets for producers managing on-farm storage versus commercial delivery.
Panelists
- Matt Darragh, Kpler
- Ellen Dearden, AgReview
- Garrett Toay, AgTraderTalk
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Todd Gleason: This is the September 11 edition of Commodity Week.
announce: Todd Gleason’s 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 include Ellen Dearden from Ag Review. She’s in Morton, Illinois. We’ll also be joined by Garrett Toay from Stockton, Illinois, and AgTraderTalk.com. They’ll discuss this morning’s USDA crop production and world agricultural supply and demand estimate reports. But before that, we’ll hear from Matt Darragh. He is with Kpler out of the United Kingdom. I spoke with him pre-report this morning, not about what USDA’s expectations might be, but about the Black Sea logistics and how wheat and corn are moving out of those areas.
Todd Gleason: We’re now joined by Matt Darragh. He is at Kpler in the UK, he’s a grains and oil seeds analyst there. Hi Matt, thank you for taking some time with us today. You and I are talking prior to the USDA report, so we’re going to concentrate on logistics. Let’s first start—and logistics in just one area of the world, the Black Sea. Let’s start just with the importance of that area, Ukraine and Russia in particular, to the grain and oil seeds markets.
Matt Darragh: Yeah, of course. Hi Todd, yeah, thanks for having me on. So obviously, there’s been a lot of disruption across the grain trade, particularly the wheat trade, across the Black Sea following the escalation in conflict between Russia and Ukraine, which kind of started around mid-July. What occurred had been Ukraine had increased its drone strikes across the Sea of Azov in Russia, which impacted the vessel movements there, and it kind of evolved into a much wider attack across not only the vessels in the Sea of Azov, but of course infrastructure as well. That led to a strong retaliation from Russia and ultimately leading to pretty much a loss of export capacity across those kind of three key Black Sea ports for Ukraine, which is Chornomorsk, Odesa, and Yuzhny. And then you’ve also lost the key Black Sea ports for Russia as well, so you’re looking at less operation at the key Black Sea ports for Russia. So that would be Novorossiysk, Tuapse, Taman, and then also the vessels that come out of the Sea of Azov. To try and put a number on it, when you look at the volume of Russian wheat across the global market, it’s about 25% of global wheat trade, and Ukraine is around 10%. In a typical year, it’s around 10% of global wheat trade too. So, we’re looking around about a third of global wheat trade is being impacted by the conflict, by this escalating conflict, and the loss of export capacity that we’re seeing for either of these major exporters.
If we drill down a little bit more and look at the terminals that are being more impacted… we talk about those key three ports for Ukraine in the greater Odesa region. Last year, that accounted for over 90% of Ukrainian grain trade. Ukraine is typically a country which relies heavily upon the volume or the movement of grain out of the Black Sea. It’s not as reliant on the movement of grain overland west into the EU, or that rail or trucking movement. The railing infrastructure there is oriented around a very strong seaborne export campaign. So when we’re looking at those three key sea ports accounting for over 90%, that’s a strong hit on total Ukrainian export capacity.
When we look at Russia as well, we’re seeing that Novorossiysk is about 40% of Russia’s total wheat export campaign on average in a typical year, and then also for the Sea of Azov, it’s around 25% too. So collectively, we’re looking at almost two-thirds of total Russian wheat export capacity is being impacted by this escalation, and where we’re seeing a loss of activity. That’s why the wheat market has been reacting quite sharply to the events that we’ve seen over the recent weeks, but now months, and we’re becoming increasingly sensitive towards any kind of news of peace deals or any ceasefire agreements, which could see a revival of trade out of this key export hub for both Ukraine and Russia.
Todd Gleason: You mentioned peace; the United States and Turkey both have been working through this process. How do you see that proceeding?
Matt Darragh: Turkey has been trying to work on a memorandum or some sort of agreement to at least involve a ceasefire against commercial vessels within the Black Sea. Now, that would be massively important and is one of the factors that the market’s trying to keep an eye on because that’s the big pain point for grain exports out of the Black Sea at the moment. You have a much higher war premium being factored into vessels that are moving grain out of these regions. We’ve had unfortunate incidents where vessels have been struck by attacks from either side, which obviously is leading to a lot of ship owners being quite hesitant, understandably, to move grain from these key export ports. A ceasefire there would perhaps encourage some vessels to pick up grain from these key terminals and therefore see a little bit more grain come out of either Ukraine and Russia.
But we’re yet to see much interest from Russia. Their stance has been a little bit hesitant to really push through with ceasefire agreements at the moment. Of course, we did have some US officials meet with Russia last weekend as well as Ukraine. And we also had President Trump speak to President Putin recently as well. So there’s been a number of developments of the US getting involved as well, trying to broker a peace deal. But one of the challenges that keeps coming up is the territorial dispute and whether there is a concession of land that needs to be granted to negotiate that peace deal, and how does Ukraine feel about that and how does Russia feel about that? It’s a very challenging situation, and unfortunately, while we hear reports that talks and dialogue are positive and constructive and progressive, we’re yet to see much of a material change to the situation. We continue to see Ukrainian strikes on Russian infrastructure, as well as Russian strikes on Ukrainian infrastructure, which is continuing to debilitate the export capacity for either country, unfortunately.
Todd Gleason: To this point, how have the global flows of grain been impacted in the marketplace?
Matt Darragh: As it stands at the moment, Russia has been trying to move some of their grain inland to the Baltic Sea ports. But those sea ports are already quite actively involved in moving coal and fertilizer products. So while there might be some export capacity it can pick up there, we’re only talking maybe 200,000 tons a month. It’s a far cry from what we usually see out of the Black Sea ports, so they can’t really offset that lost export capacity from alternative export hubs. And unfortunately, the same is the case for Ukraine. Ukraine is trying to move grain south to those Danube ports and then barge it out towards the Black Sea, and then there’s a transshipment that takes place typically in the European sea water, just outside of Romania. But ultimately, those volumes again are unable to offset the loss of export capacity that we’re seeing at those key Black Sea deepwater seaports.
Ultimately, this is leading to a constriction of trade from Ukraine and Russia, and the global market has been monitoring the situation very closely, trying to understand how long this could go on for. We saw very low export volumes come out of Russia and Ukraine for August, and now looking into September, we’re not really seeing much of a revival. We are seeing some of those key wheat importers begin to get a little bit itchy when it comes to how long they can wait out until they need to come to market to pick up wheat. For example, one of the more recent tenders was from Saudi Arabia, which was around half a million tons, and that didn’t come to anything. They said they didn’t believe the offers were suitable for them, so the tender wasn’t filled. That acts as a bellwether in the sense that these key wheat importers, which typically don’t usually find their tenders unfilled, are obviously not yet willing to pay at the current price in the market. We also had Pakistan come out with a recent tender, which I think is around 0.75 million tons, so a larger wheat tender, after Pakistan’s long absence from the wheat market. That also acts as a good indicator as to how willing these key wheat importers are willing to pay the higher price we’re seeing.
We do know you’ve got Egypt as well; we’re seeing on the Kpler terminal lower wheat imports for Egypt, but that’s obviously in consideration that they’ve had a larger domestic crop. It’s worth bearing in mind that some reports suggest some of those flour mills in Egypt have seen the rise in wheat be stronger than the rise in flour, and as a result, they’re not in a position to import wheat to then re-export the flour as actively. So that’s also calming the import demand there. We’re seeing some of these key wheat importing destinations, which typically pick up Black Sea grain, be a little bit hesitant to pick up wheat from alternative exporters asking for a higher price. But on the other hand, we are seeing some other countries pick up wheat. Indonesia is already showing a little bit more activity with regards to Argentine wheat, and we’re also seeing a little bit more strength from the Australian wheat export campaign too. So, there is some hesitancy, and some countries are still waiting to see whether we’ll see lower wheat prices in light of perhaps a ceasefire or peace deal between Ukraine and Russia. But there are already some countries, for example in Southeast Asia, beginning to pivot away and look for grain from alternative destinations because they can’t find the supply there and they’re going to the next best option from a price competition point of view.
Todd Gleason: The primary export season for wheat in the Northern Hemisphere generally are the summer and early fall months. Are you concerned that that may not be the case really for Russia and/or Ukraine?
Matt Darragh: Yeah, absolutely. I mean, that’s definitely part of the challenge, is that this situation has flared up around the third quarter of the calendar year, which for both Russia and Ukraine are typically, or seasonally have always been, the strongest quarter of exports for grain. It has coincided at a time when we expected to see a lot of harvest pressure, particularly in the wheat market. It is of a concern because where do you push these volumes to? There’s reports that both Russian and Ukrainian farmers are using grain silo bags to help store this so it doesn’t deteriorate in quality, and you can use those to store grain for up to close to 12 months. The supply is still there, albeit with very depressed ex-farm values. We still have a lot of Russian and Ukrainian grain to export, it’s just that we don’t have the export capacity to move it. Taking a bullish position is risky because if they negotiate a peace deal or a ceasefire and we see a revival of trade out of the Black Sea, that leaves those exposed to what could be quite a strong flush of Black Sea grain. Now I’m not saying there will be a ceasefire or peace deal, we need to keep our eyes on how those develop, but we typically see a big flush of Ukrainian and Russian grain in the third quarter, and we’re yet to see that. That grain is still very much available, but it’s not being able to reach the export market.
Todd Gleason: Thank you much, Matt.
Matt Darragh: Thank you, Todd.
Todd Gleason: Matt Darragh is with the logistics company Kpler. Garrett Toay from AgTraderTalk.com now joins us from Stockton, Illinois, to go through the numbers released by the United States Department of Agriculture at 11:00 this morning and how the trade reacted. Hi Garrett, thank you so much for being with us. Let’s start with the numbers from USDA. Can you tally those things that you thought made a difference?
Garrett Toay: Yeah, well, first things first is there really weren’t very many surprises. You know, corn production came in at 15.8 million bushels, the trade was looking for 15.785, so we were only off by 15 million bushels. Corn yield came in at 178.5, trade was looking at 178.2. So there were no surprises on the production side. Acres, minimal changes. We didn’t get any surprises out of the FSA acres this month like we did last year in August. Similar with soybeans, beans came in a little bit bigger than expected, 4.535 billion bushels versus 4.501 expected. That was on slightly larger acres, 85.9 million versus 85.775 expected. So, small uptick in soybean yield, 52.8 versus 52.5 expected.
Corn carryout actually came in about 40 million bushels higher than expected; they offset a lot of that production cut with a feed and residual cut of 150 million bushels. I think that is just positioning ahead of this stocks report at the end of the month, because the USDA will adjust—in the market’s mind—that 2025 production was overstated, and that is being held in place by that feed and residual number. So they did increase old crop exports by 25 to 3.425 billion bushels. That’s interesting on this corn S&D because they really didn’t make many changes on the world numbers. You obviously have this well-advertised drought in the EU. They actually increased EU corn production by 4/10ths of a metric ton, so it’s 50.6 million metric tons, when you had some private estimates out this week that were as low as 46 million metric tons. If this EU crop number continues to get cut down the road, that means more imports out of the EU, which shifts more export demand to Brazil, Argentina, and the US.
At the end of the day, it was a friendly report. Corn was following beans; beans have been weak all day. The macros, the outside markets, crude’s down three, kind of everything that happened yesterday is being undone today. So corn was down, traded to 4.23 on its lows. After the report, we rallied about 8, 9 cents, and now we’re up a couple cents. But beans have been under pressure all day. They were down 25, 30 cents, rallied back to 13, 14 lower, and now we’re back 28 lower. I will say some of this is a correction in the spreads. Soybeans are a demand story obviously, and soybean oil, and with the rally in crude above $100 yesterday, soybean oil is supported by diesel, which also traded to $5 a gallon for the first time since 2022 yesterday. The spread between November beans and December corn this week traded to the highest level that it has ever been. I would suspect that spread probably corrects between now and into early October as we get into harvest a little bit more full throttle and the propensity for producers to sell beans off the field.
Todd Gleason: So you’re thinking the price of beans will remain under pressure?
Garrett Toay: I think versus corn, yes. Corn will be supported, beans will be pressured here. Right now the spread is about $7.70, and the record for this week was back in 2023 and it was about $8.70. If you look at historical trends, there are two other years where we’ve been like this: 2021, which was coming into that phase one trade deal, and 2022, which also was coming on the heels of the trade deal. Both of those years went from a $7.50 premium down to $7. I think considering pretty gosh darn good prices here in beans, the farmer will reward those rallies especially to shore up cash flow and stop interest, which interest rates keep going up as well. For the near term, considering beans have rallied almost 80 cents, it’s possible that we could give some of that or even most of it back here in the next couple of weeks.
Todd Gleason: Are you of a mind that once we’ve given that back and harvest stops, that beans will again find support, and will that come from the RFS and the crush in the United States?
Garrett Toay: I do. I think we’re caught here between overall bullishness of the ag sector and grains and inflation, and harvest. There’s just a lot of supply coming on the market in the next eight weeks. Once we get past that, you’ll find funds willing to buy this weakness. Beans have been a demand market for a year and a half because of the RFS. I don’t think that corn will see the export program that we’ve seen in years past. We’ve got Argentina kind of undermining us right now because their crop is 6 million metric tons bigger this year than it was last year and that goes all to export. But this Brazilian crop is being used at home; it’s not being exported anymore.
Todd Gleason: Hey, thanks much. I appreciate it a lot. We’ll talk with you again soon.
Garrett Toay: All right, sounds good. Thank you sir. Have a great weekend.
Todd Gleason: You too. That’s Garrett Toay; he is with AgTraderTalk.com out of Stockton, Illinois. Ellen Dearden from Ag Review in Morton, Illinois now joins us to discuss this morning’s USDA reports and how she sees that playing out. Hi Ellen, thanks much for being with us. If it’s okay, I’d like to mostly stick with corn. We can talk a little bit about soybeans if you want. But I would prefer to stay with maize or corn across the globe and certainly here in the United States. USDA managed to find a few bushels less per acre this time around than the last. What did you think of the numbers when you saw them today?
Ellen Dearden: Well, on the domestic side of things, pegging the national yield at 178.5 really kind of falls in the area that the trade has been looking at. I thought the more interesting thing was that we saw harvested acres drop. We saw planted acres up just a hair, but harvested acres dropped below what the trade thought about and below what it showed a month ago. Once that trend starts to reduce the percentage of planted acres into harvested acres, typically that continues. So I would not be surprised to say that the harvested acres at 88.5 might even be shaved on this next report. It takes yield and it takes harvested acres to line up with production. And production did come in at 15.8 billion bushels. That’s large, but it’s not as big as 17 billion bushels a year ago.
Todd Gleason: That harvested acre number drop was not small exactly. It was 100,000 acres, going from 88.6 million to 88.5 million. I would assume most of those probably came out west in the Dakotas I would think, because of the drier conditions and maybe because of silage, more silage being taken as well.
Ellen Dearden: Yes, and I’ve seen some pictures on the internet, of course, you know that’s gotta be true, of folks in North Dakota who were zeroing out, had an insurance claim at a zero on production, so were just mowing that corn off. But I thought it was interesting that only in Iowa did the corn yield go up in the Midwest now. We did see some changes in the periphery in Kansas and Texas and the like, but we really didn’t see much of a change in the Midwest on corn yield, except in Iowa.
Todd Gleason: And so Iowa’s yield is what, 219? Illinois at 209. That was down from 212 or thereabouts, I believe.
Ellen Dearden: Yeah, but you know, so we’re bumping up the corn yield in Iowa, but not seeing that same trend elsewhere in the Midwest.
Todd Gleason: And Nebraska was off, Minnesota down, I suppose Indiana as well. When you think about this in a grander scheme, where do you think corn, between now and the gut slot of harvest, might head?
Ellen Dearden: I would anticipate, based on the December futures—and keep in mind that September futures go off the board on Monday—basis the December futures, we’ll probably bounce between 5.10, which is lower than where we’ve been this week, and probably getting up close to that 5.49 and 3/4 high that we made the 1st of September.
Todd Gleason: Those are good numbers going through harvest given where we are today I would think.
Ellen Dearden: Yeah, I think we’ll spend more time on the bottom side of that than the high side. I thought it was interesting too, Todd, that the EU corn crop, they had it pegged down to 50.6 million metric tons and the imports they bumped up to 23 and a half million metric tons. The EU always exports some corn and imports some corn, but that import is going to be huge this year.
Todd Gleason: What else are you watching in the marketplace, or what else did you see in the WASDE that you thought was important?
Ellen Dearden: I really didn’t see a whole lot. Feed use down a little bit. We’re not seeing ethanol demand for corn bouncing up again. I wonder whether part of that might be because ethanol exports to Canada will be likely cut given the trade war that we’re having, the tit-for-tat tariffs on goods into Canada.
Todd Gleason: Some of the analysts we talked to have begun this week changing their attitudes as to what producers should do with corn. And you mentioned a range for December corn. And that would be going across the scale, what producers should do with not only that corn, but maybe with corn that they have in the bin as well. Have you begun to change your attitude on that at all?
Ellen Dearden: I’ve always been in the idea that we’ve got to store some corn, and I’ve been looking at instances where we’ve got July corn futures up in this 5.55 to 5.65 range. Maybe sell futures there, wait to lock in basis, but that’s for bushels that you can store on-farm. I hate paying elevator charges for storage, it just doesn’t seem to work out in the long pull. But I would think that any kind of bounces, if you’ve got to move more crop at harvest because of your storage configuration, then you probably need to be using any bounces up towards that 5.35, 5.45 range in December corn futures and get those bushels sold.
Todd Gleason: Anything else before I let you go?
Ellen Dearden: Let’s just make a comment on the Brazilian ’25 corn harvest was raised 2 million metric tons, and that was really the answer in the world ending stocks for the ’25 crop being bounced up. World stocks of beans remain rather tight, world stocks of corn getting tighter as we move into the ’26 crop. On the bean side, I can’t get too excited.
Todd Gleason: Why not?
Ellen Dearden: Well, I think we’ve already outstayed our best opportunities for beans.
Todd Gleason: Thank you much, I appreciate it.
Ellen Dearden: Okay, bye.
Todd Gleason: That’s Ellen Dearden. She is with Ag Review in Morton, Illinois. Joined us on this edition of Commodity Week, along with our other panelists, including Garrett Toay of AgTraderTalk.com out of Stockton, Illinois, and from the United Kingdom and Kpler, a logistics company, we were joined by Matt Darragh. You’ve been listening to Commodity Week from Illinois Public Media at willag.org. I’m Extension’s Todd Gleason.