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University of Illinois Ag Economists
Joe Janzen, Nick Paulson, Brittney Goodrich
- on over the scale sales and the beef cattle cycles
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Joe Janzen, Nick Paulson, Brittney Goodrich
- on over the scale sales and the beef cattle cycles
Creators and Guests
What is Closing Market Report?
Celebrating 40 Years | 10,000 Episodes
Established 1985
The Closing Market Report airs weekdays at 2:06pm central on WILL AM580, Urbana. University of Illinois Extension Farm Broadcaster Todd Gleason hosts the program. Each day he asks commodity analysts about the trade in Chicago, delves deep into the global growing regions weather, and talks with ag economists, entomologists, agronomists, and others involved in agriculture at the farm and industry level.
website: willag.org
twitter: @commodityweek
From the land to Grant University in Urbana Champaign, Illinois. This is the closing market report. It is the September 2025. I'm extension's Todd Gleason out of the office for the afternoon. Today, we'll hear from Joe Jansen and Nick Paulson, agricultural economist, members of the FarmDog team, something I recorded at the Farm Progress Show, but that the numbers really haven't changed for as it's related to the price of corn and or soybeans. I think you'll find it of interest as it's related to marketing. And then Britney Goodrich, ag economist also with the PharmDoc team will be here to discuss the beef cattle cycles and how producers should consider it going forward all on this Wednesday edition of the closing market report from Illinois Public Media.
announce:Todd Gleason services are made available to WILL by University of Illinois Extension.
Todd Gleason:Nick Nick and or Joe, when you look back at 2018, 2019, the first trade war, what long term impact has it had on US exports of grain commodities?
Nick Paulson:I mean, we've looked at that quite a bit. One thing I'm pretty confident in saying is that there were short term losses that arguably were compensated well by some of the trade aid that was made through the market facilitation program. But I think some of the long term damages are much more persistent. Long term and they're hard to measure. You know, and there's a saying in business that it's much harder to get a new customer than it is to keep a existing customer happy.
Nick Paulson:And when we're talking about trading commodities, think that applies very very well. I mean, there's a reason why we traded with China. We can trade with other people, but it's gonna be more costly. Because if it wasn't, we would have been doing that in the first place. And so kinda having to reconfigure those supply chains and those trade flows and have it completely offset any losses that we experience with our biggest market for soybeans is just something that I think is it would take a lot of mental gymnastics to talk yourself into that, you know, we came out of it as good or in a better position than we would have been without the trade war.
Nick Paulson:I think another thing about the the timing of the the 18 and nineteen trade disruption was, and and so far similar to what we're experiencing here is like our trade with China is very seasonal. South America supplies during their harvest, which offsets our main supply season during our harvest. And as Joe pointed out, we typically see more commitments to buying some of those twenty twenty five crop soybeans. We haven't seen it yet. We still could.
Nick Paulson:So I think I think what that does is it creates a lot of volatility in the market. There's there is some upside if we can get a trade deal together, but I think there's also some downside if it goes nowhere and completely falls apart and gets worse. So
Todd Gleason:reality on the ground for the day, though, is that this back soybeans up from the Western United States, North Dakota particularly, which is where many of those soybeans are exported to China grown. They have to find a home somewhere. The Mississippi River is the biggest draw. How does the basis back up and into our part of the world?
Joe Janzen:Yeah. We're we're seeing I mean, obviously, though, tremendous basis weakness that is low cash prices for harvest delivery in North Dakota where you have prices a buck 50 under new crop futures. So you're talking about a a soybean price in the low eights. That's not good. And that ripples out.
Joe Janzen:You know, we're seeing maybe a little bit of weakness along the river, more in the neighborhood of say, you know, 20 to 30¢ below normal. We're seeing, you know, reasonably decent basis strength around the crush capacity that we have here in the Midwest. So prices here in Central Illinois are not nearly as far off of, you know, what what we would think of as typical for this time of year, but we're gonna really have to see. We tend to get a lot of basis volatility right around harvest when it, you know, bids need to adjust to bring grain into the supply chain if necessary or to hold it back. And so a lot of those beans up in North Dakota are gonna go into storage.
Joe Janzen:They're going to sit there until we figure the situation out. We'll see I think there's a lot more volatility about what that means for us here in the heart of the Corn Belt given that we have some alternative options for soybean movement when it comes to harvest. Principally that, you know, crush demand, we are and that's becoming more and more tied to our biofuels policy and the demand from renewable diesel. Yet Illinois, with the Ohio, the Illinois, and
Todd Gleason:the Mississippi River is highly dependent on the export market for soybeans. I would suspect that it will show if those beans, even if they're moving, can't move fast enough. Yeah harvest
Joe Janzen:tends to be a time of price weakness because the system is not designed to move the entire crop through the grain handling and transportation system all at once. And so how it it it's the function of price. It's a principally a basis thing. Right? To sort of get the beans from where they are to where they need to be in what the market deems as timely a fashion as possible.
Todd Gleason:Then one final contributing factor might be dry weather going into the fall as particularly if the Mississippi River becomes not unpassable, but low enough that there is a an issue with running full barge tows down the river, and freight rates have to go up.
Joe Janzen:Yes. We've seen that happen maybe more frequently. It seems like this is kind of an every year story now in the last at least the last few since 'twenty two where we had really kind of the biggest impact. So yes, that's going to be an issue. I don't think we're sort of there yet in terms of needing to freak out, but we should we're starting to become concerned.
Todd Gleason:So what do you do if you've not sold enough grain is the question.
Joe Janzen:I I think there's two things. Well, the first one is to realize that, you know, I mean, us you have vaunted U of I experts are are not going to say that we can predict grain prices and tell you, yes, you should definitely wait because I know with certainty that if you just wait until January, prices are gonna be better and everything's gonna be okay. So I think that the the one strategy that sort of that everyone is gonna incorporate into their marketing activities, diversification across time. So we're going to spread those sales out through time. That's going to mean and then the other part is to think about what are your returns to storage.
Joe Janzen:If you do end up saying, hey, I can't price a lot of grain in a market where I've got weak basis, relatively low price levels though we've kind of hung in pretty well especially in the corn market. You know that new crop futures price could have a three in front of it and it's got a four still so like let's you know, take a step back and have some perspective on the situation. In that situation, thinking about, you know, what are those returns to storage? The market is offering a a pretty reasonable carry. I don't know exactly where we're at today.
Todd Gleason:Better for soybeans than for corn.
Joe Janzen:Yeah. And so thinking about, can I make some money storing grain if I have access to a relatively low cost on farm storage? Really factor. I mean I think you're gonna need to move some grain at all times of year if you have a reasonably good sized operation. That's part of that diversification across time story.
Nick Paulson:Yeah. As Joe said, if we knew the answer to that question we probably wouldn't be sitting here. We'd be doing something a lot more fun. Not that this isn't fun. Thanks.
Nick Paulson:And yeah. I mean, I'll I always invoke Daryl Good, You know, best way to make sure you get the average price is to spread your sales out across the marketing here.
Todd Gleason:Well, Daryl and and Joe, you too both said, March, April, May, June, try to market in those months if you can.
Joe Janzen:Well, and, Todd, I like, now you're putting me
Nick Paulson:on the spot and
Joe Janzen:saying, well, you know, you should have sold a whole bunch of grain back in in March, April, May, June. I wanted
Todd Gleason:to, and everybody else did. It just kept going down, and you thought that it was gonna come back. Right? You really did, and it's just one of those years.
Joe Janzen:I I think that the the seasonal tendency is that there is an a tremendous opportunity to price grain on average over the long run-in in the middle of the marketing year. I think everyone needs to make some sales, but they recognizing that you can't make all of your sales at that, you know, seasonal pre harvest low at high. That's that's not a realistic expectation either, and so don't hold yourself to that standard.
Todd Gleason:Any final thoughts from both of you that you wanna talk about?
Nick Paulson:I mean we are pretty negative. It's a beautiful day. It is. I've been here. I've been in the Farm Progress Show where it's not nearly as comfortable sitting here and so that's one thing to be thankful for.
Todd Gleason:It is. That's one thing to be thankful for.
Joe Janzen:I think this show and what's going on here is kind of a testament to the effort that everyone pours into agriculture whether that's from a production standpoint or marketing standpoint. And we have to rely on that. Effort is what will get us through what is a difficult time in terms of farm profitability. But there are some bright spots.
Todd Gleason:It is good to be in the tractor seat is the final word. Thank you both very much. Nick Paulson and Joe Jansen, ag economist from the University of Illinois, thank you for being with us. We appreciate it.
Todd Gleason:That program with the agricultural economist from the University of Illinois recorded at the Farm Progress Show at the end of the month of August. Now let's stay with the ag economist, but this time around, we'll turn to Britney Goodrich. She specializes in livestock and has some information about the beef cattle cycles.
Brittney Goodrich:Yeah. So one of the big ones, that we talk about with with beef cattle in particular is this this cattle cycle. And so I wanna be clear that the cattle cycle is different from, you know, you have annual seasonality where you have patterns that are repeating over, you know, every year where typically in the fall, have lower feeder cattle prices just because you have an increased supply of feeder cattle. We've had long term trends. So, you know, a long term direction over many years.
Brittney Goodrich:And so the trend in the beef cattle industry has been, you know, since the 1970s, beef cattle numbers have really been going down. But one thing, even though the the trend has been downward over time, and and part of that is honestly due to just productivity gains over time. We don't need as many cattle to produce the the amount of meat that is being consumed anymore. But we do have a cyclical pattern that repeats typically it's been every, eight to twelve years, which really just, it comes from the fact that, you know, when when beef is really profitable, producers tend to to increase the the herd size and then the national herd size increases. And then eventually you get to a point where prices start to decrease because you have so many cattle on the market, and then beef becomes beef cattle feeder calves become less profitable.
Brittney Goodrich:And so then producers start to decrease their their inventories. And so you end up every eight to twelve years where you have you start with an expansion, you reach a peak, amount of of cattle for for that inventory cycle, and then it actually, then producers start to decrease the herd size, and and you end up at a a trough is what it's called. So you have this hill looking, shape, which is the the beef cattle, cycle that tends to occur every every few years.
Todd Gleason:I want to explore the cattle cycle as it's related to the inventory because that's really what you're talking a bit about, and you have a slide in a PowerPoint presentation. There are four of these inventory cycles that are below, and I think it's just an easy split point for me, a 100,000,000 cattle head, and four that actually have numbers above that. Now sometimes when the four put the numbers above that on on the low end, they might actually get below that, but they have, the the top side above a 100. Can you tell me about the differences in some of those cycles as compared, for instance, to the one we're in currently?
Brittney Goodrich:Yeah. So, I mean, the a lot of the the, you know, ones that are above that 100,000,000 head cutoff, for the most part, those have been, you know, earlier. So I said that since the about the nineteen seventies, overall inventories have been decreasing for the beef cattle industry. And so earlier on in that, you know, sample nineteen seventies, nineteen eighties, you see beef cattle, the the the cycle peak above that 100,000,000. Then you also on this slide, this slide has a number of of different ones, and I don't think all of them are included in here.
Brittney Goodrich:But you also have some of the more recent years we've been under that 100,000,000 mark. So the the the current cattle cycle that we're currently in, is the 2014 to 2025 cattle cycle. It's below that 100,000,000 head mark. And so those are the more recent times that are falling into that trend. A lot of that is coming, from recent droughts.
Brittney Goodrich:So particularly, the last since about 2021, a big portion of The United States has been in drought like conditions, which just doesn't make it easy to expand, cattle herd sizes because you need that forage, you need corn, soybeans to to feed the cattle. And so, yeah, so a lot of the the I think the ones that are below that 100,000,000 head mark are going to be more recently and and or caused by, some drought like conditions, during that time.
Todd Gleason:So the million dollar question or the $100,000,000 or 100,000,000 inventory cattle question really is, at this point, where are we in the cycle? Are we at the end of the cycle where we're cow calf profitability is negative and it's just really it it is easier to ship a heifer because the price of animals is so high rather than to keep it back to breed, because it's worth so darn much. And Yep. So the inventory just continues to go down.
Brittney Goodrich:We're at the what I would say the end of the previous cattle cycle, but potentially the beginning or we're almost at the rebuilding stage, or the expansionary stage of a new cattle cycle. Producers obviously have been seeing, I mean just record setting prices over the last you know, number of months. And and a lot of that we we've got the lowest, you know, cattle herd size since like the 1960s. So there's not that much that there's not a lot of cattle out there, so that's really driving those prices higher. We haven't seen any expansion, in the cattle herd at this time.
Brittney Goodrich:And so part of that, again, is because we've seen, I mean, I just looked at the drought monitor a little bit ago, here in Illinois, and it looks a lot worse than it did two weeks ago. And so the the drought really prohibits, it makes those those input costs of of keeping cattle, really high. And so then it looks a lot better to just sell those those feeder calves off, not expand your herd size. But it is anticipated that eventually, you know, producers will start increasing these herd sizes again, and we will start to see the start of a new cattle cycle that will be probably starting in twenty twenty six ish.
Todd Gleason:When you look forward into these projections, the inventory of cattle, even as it increases in more profitable levels, is apparently well below where it has been as far back as 2015 and certainly all the way back to 1995. Why is that the case?
Brittney Goodrich:First of all, we've we've seen drought like conditions, for a number of years. There was also the, you know, the 2012 drought, that affected things. And so, that can have a major impact. Up until up until recently, you know, there hadn't it hadn't been profitable to to keep feeder cattle. And and so it just doesn't really facilitate the the herd sizes that we've we've seen in previous years.
Brittney Goodrich:But then also we've had, you know, like I said earlier, we've had increases in efficiency and production efficiency. So now we're getting more beef per per cow that we're processing, and so that, you know, that processing can also play a role. There are also trade issues. So we've seen, in recent years, trade imports. So beef imports have been a lot bigger than beef exports.
Brittney Goodrich:So we're bringing in a lot more beef than we used to. So that decreases the price that domestic producers are seeing. So there are a number of trade issues that have been going on that it remains to be seen if any of these, if the tariffs will help or hurt that situation. But there there's just a lot of different factors that we've seen over this time period that have made it so that our beef cattle herds are are much smaller than than they were previously.
Todd Gleason:So I was thinking maybe about what your closing thoughts might be here. Of course, we have a relatively small domestic cattle herd at the moment that have been putting upside pressure on prices. The markets can always turn lower. That was proved out a couple of weeks ago.
Brittney Goodrich:Yes.
Todd Gleason:I'm wondering how it is that producers might protect themselves against the downside risk at the tail end of this particular cattle cycle.
Brittney Goodrich:Yeah. So that's that's a really good question, and and it's something that I think about a lot. So I mean all signs are pointing to, you know, we have this very small herd size, prices are still going to be strong within the next few years, because it takes a while for us to actually increase that herd size. So I like to to kind of tell producers, know your cost of production for your, you know, your feeder calves. That's really important because it can help you with your marketing decisions so that you're not kind of just waiting around to get the highest possible price.
Brittney Goodrich:You know you're going to make make a profit, you know, selling at a given price. Obviously, hedging in futures and options is an op you know, is is is one alternative to protect against downside risk. Not all producers, especially here in Illinois, are going to be, you know, big enough to make that sort of, you know, upfront investment. And so there is a program called the livestock risk protection program offered. It's a it's a federally subsidized program offered by USDA RMA that basically acts as a subsidized option for producers.
Brittney Goodrich:So you can use that. You can ensure as little as one head if you really wanted to go through the trouble. And you can basically, you know, insure against that downside price risk. So so that's one option that I that I highly recommend producers look into just because it is it's based on the futures market, so it's really just a a subsidized option that that can help provide some protection against that downside risk. And I guess I did wanna, you know, remind folks that we do have this cattle cycle looming out there.
Brittney Goodrich:Right? And so we're at some point, and I if I could tell you when the point was, I probably wouldn't be sitting here talking to you right now. I'd be on my own private island. But there will be a point where producers will respond to the economic extent incentives. They will increase the the national herd size, and then prices will start to decrease at some point.
Brittney Goodrich:At this point, it's looking like maybe 2028, 2029. So it's good to be thinking about that and be prepared as you're making future plans, down the road.
Todd Gleason:Brittany, thank you.
Brittney Goodrich:Yeah. Thank you for having me.
Todd Gleason:That's Brittany Goodrich. She's an ag economist with the PharmDoc team here on the Urbana Champaign campus of the University of Illinois. You've been listening to the closing market report on this Wednesday afternoon. I'm extension's Todd Gleason.