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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 September 4 edition of Commodity Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Logan Kimmel. He's at Roach Ag out of Naperville, Illinois. John Zanker is here with Risk Management Commodities, a division of Zaner Ag Hedge from Lafayette, Indiana.
Todd Gleason:Mike Suzlog joins us from globalcomresearch.com in Atchison, Kansas. Commodity Week is a production of Illinois Public Media. It's public radio for the farming world online on demand anytime you'd like to listen to us. Let's get started with a list of items that we should discuss today from each of our panelists. Mike Suslow, I think we'll start with you today.
Todd Gleason:What's on your list?
Mike Zuzolo:Well, we still feel like that the corn market is still trying to hold everything together at this point, Todd, but, you know, we're running out of runway with harvest quickly approaching. And we need some support from the soybeans and especially from the wheat here. But I think one good thing about Thursday's close was weather still matters. Crop weather still matters. It seemed like things really changed in terms of short term bias in the trade after the noontime models came out.
Mike Zuzolo:So that's kinda probably where the next thirty days is gonna be something we need to talk about.
Todd Gleason:John Zanker, risk management commodities on your list for the discussion today?
John Zanker:Well, I think the southern rust issue, especially in Iowa, is it might be more than than we previously thought. I've been a little bit skeptical as far as it having a huge impact, but after a conversation here an hour ago with our in house agronomist, I I'm who just got back from Iowa, I'm my concern over that issue is growing, and then, on the other side, for soybeans, jeez, where's China? Least amount of sales on the books since 1999, so and we're running out of time. Something needs to move on that pretty quick.
Todd Gleason:And finally, Logan Kimmel at Roach Ag. What else might we need to take up?
Logan Kimmel:Yeah. Spent last week there, three days at the Farm Progress Show. I had a lot of conversations with folks, I states primarily. So I'd be glad to share my insights on what they're seeing on their crop development here in the latter stages of the growing season. What's changed here maybe a month ago?
Logan Kimmel:Also had a lot of conversations and questions on, hey, what should we be doing marketing wise now on this new crop coming into harvest? A lot of folks sitting maybe undersold. So we have to go over that and conversations I had here last week.
Todd Gleason:Well, let's begin, John Zanker, with you and start with southern rust. An hour ago on Thursday afternoon, you say you had chitchat with an economist, and they're worried, I take it.
John Zanker:Yes. And, of course, social media has been blowing up, and, you know, we often see, maybe some exaggerations from that at times. And, you know, before the derecho and now there's, you know, there's some people starting to say, hey. This may have an impact similar to the derecho. And, before the derecho, most of these things, were overblown.
John Zanker:And, I went out and got a view of the derecho about two days after it happened and, I was about halfway on my journey between Cedar Rapids and Ames and I called back and told Chuck, I said, I think we need to start covering our corn cells now. Whether we're at that point here, I guess one good thing is given the prices that we've had to work with, I can't say I'm overly sold or, you know, highly sold, so at least we have that, but we're not going to know until we have the combines roll and get those numbers back, but I think this may be a problem that might exceed expectations at this point.
Todd Gleason:It'll be interesting to see how that comes out. From the farmer's perspective, it appears at least from the Allendale survey that was released earlier this week, producers aren't terribly worried about southern rust. In fact, their number is not very far off what USDA released in its August crop production numbers, Logan Kimmel. Did you hear good, bad, all those sorts of things when you were talking to producers during the Farm Progress Show last week?
Logan Kimmel:Yeah. Heard a little bit of everything. I think the general consensus though, a lot of folks passing through, felt that, going to be a good crop, no doubt. On the corn they've got a pretty good feel. But I'd say maybe compared to a month ago, maybe not as good as they had thought.
Logan Kimmel:I don't think there was one area, that's going to be a complete disaster. And there certainly were folks that are extremely happy with what they're thinking they're going to be having here in the next couple of weeks. But a lot of folks had mentioned the dryness, that snuck in there at the tail August, missing rains. So they kind of dialed down their expectations of maybe what they had thought at the July. That was the general consensus.
Logan Kimmel:Think the dryness, there was some chatter and I would have to agree with the Southern Rust. I think that's something that, oh boy, you got to keep your eye on that, could develop and be a bigger problem than maybe what we think right now. And that's just from chatter at the show. So again, overall consensus is, hey, my crop is going to be okay. It's going to be good.
Logan Kimmel:Probably not what we were thinking though, three to four weeks, know, ago and that's just a lot due again to the dryness here in August.
Todd Gleason:The land grant plant pathologist throwing the red flags in the air in July on Southern Rust saying that this was a disease that could cause serious issues, Mike Sussolo. How how do you suppose we ought to take this going into the end of the season given what August showed us from USDA, a different kind of picture that we got from the pro farmer numbers, but still a big, big crop. And it's not clear to me how much the disease, they hedged into their final numbers. I did ask that question, but I didn't get a good answer from it. And then, of course, a number from the farmers and the survey from Allendale suggesting, hey.
Todd Gleason:We still have that that August 1 size crop out there or pretty darn close to it. So how do you play this?
Mike Zuzolo:Yeah. To me, Todd, it's a market that has similarities to 2018 and the first Trump administration in the soybeans and the basis, and we're seeing that in, you know, Iowa, Minnesota, the Dakotas anywhere from 90 to a dollar 20 under. I've heard I have not seen it, but I've heard they're getting close to a dollar 50, dollar 60 under in certain parts of the country if it's based upon the Pacific Northwest export market. And so that's one element that we put in the bucket this year. The second element is the disease pressure, whether we're talking about southern rust, which I'm hearing from some people that it's gonna be 10% of their yields.
Mike Zuzolo:Some people think it may be more. And then you introduce the third issue of the tar spot that could that be another 10%, maybe 20. Guys out here a few years ago in Northeast Kansas had 40% hits on their yields because they didn't get on top of it fast enough. I don't think it's gonna be that bad, but and I think the fourth element goes back to what we've been talking about pretty much all summer, and that is this amazing corn demand. And the fact that while private trade guesses are going up right now in both Black Sea wheat and Black Sea corn, I can't see it right now.
Mike Zuzolo:I I mean, I'm just not seeing it in the maps, the soil moisture profile analysis, and and I'm not seeing what the increased warfare and bombing of major ports on the Black Sea, major grain ports this week on the Black Sea again. And so I I think when I put all that together along with The US China trade negotiations, probably not going to get any better between now and the end of the year. Obviously, farmers are already thinking about bins. They're thinking about bagging it. I I would say this is where the basis really comes into play between what you have to get off the combine, reowning it maybe right away in the case of corn, maybe doing it right away in the beans if we stay dry another two to three weeks.
Mike Zuzolo:So I I can't remember a time. I started in November 1995. I can't remember a time where I'm trying to do the best I can on basis and separate futures out of my basis when it comes to the hedging side of the equation for especially off the combine bushels, cash flow bushels.
Todd Gleason:This is where you mentioned corn, soybeans too, running out of time as harvest will be upon us soon, and that gut slot may very well be really bad.
Mike Zuzolo:Yeah. And and and this brings up the issue as well, naturally, we would have thought that soybeans would be dumped very quickly to make room for corn. I think that's probably likely in East Of The Mississippi River, but because of the disease pressure and the basis levels, we may see the exact opposite. And so not only am I gonna have to sharpen my pencil futures and basis wise, I'm gonna be very geographically specific to it too at this stage of the game, and it's not going to be easy. And, unfortunately, what I'm saying right now, let's use 2018 as an example.
Mike Zuzolo:In 2018, we were going lower at this point. After the July, we made a high and we went down into the September, made a low and went trading range essentially after that. Exact opposite last year. We made the big low after the August report, went up into mid September, and then down into November expiration. My mindset is is that we are tracking more like last year, especially if we stay dry.
Mike Zuzolo:That would suggest to me do more hedge to arrives, leave your basis open in the beans even for maybe off the combine sales, and then have to really play a very quick game of locking that basis in as you deliver. So that's something I'm not recommending. I can't recommend that on for compliance on a one to one level, but something to think about.
Todd Gleason:John Zanker, when you think about this and what producers are faced with as they are well behind on their marketing, And again, I'll look back at the Allendale numbers very quickly because they did ask how far that long they were and way behind on both corn and soybeans. I think further behind on soybeans than they are on corn at this point, surprisingly enough. What kinds of things do you think that they should be up to?
John Zanker:Well, we're stuck at this point. If a producer hasn't gotten anything locked in, it's there aren't any really easy answers. Now there are some things that I think that we should not do. Basis contracts, DP, you know, those are things that always look maybe like it's not a bad move at the start, but in a big carry market. Again, what did we do last year?
John Zanker:We ran this market up into early harvest and then had a break, and if you put a basis contract on, typically most producers aren't thinking that they're going to price it on a $10.15, 20¢ rally, they're looking for something bigger, and we get stuck in a carry market, in a big carry market, that 40 under on corn turns into 60 under, and then we've just dug a hole and it's really difficult to get out of. So we're more aligned right now to saying, hey, if harvest, and harvest is starting in this area, certainly in parts of Illinois and Iowa, so take the hit on the basis and then re own it with the idea that we could be into something here that could take this market substantially higher, especially if we have any problems in South America. We just to be prepared for that, but don't throw in the towel completely here with those harvest bushels.
Todd Gleason:So Logan, I know you wanted to talk about this as well, we've had a couple of different options coming forward here, what kinds of things have you been talking with your clientele about?
Logan Kimmel:I guess going back the last couple of weeks here, some of the opportunities that we've seen, one being in the soybeans. And I think when a producer looks at this coming harvest, if you're in a position where maybe you don't want to store, your beans, if you want your soybeans coming off the combine into down price. There has been a little bit better of a market up the last couple of days, in the soybeans that really ran back up to the top end of the channel we've seen all year on new crops. So pricing those beans and using some strength in the bean market, think is not a terrible idea. We had a pretty good reversal here today in the bean market, punching through about three moving averages and closing positive here.
Logan Kimmel:So if we get a move into harvest, we're much better off from where we started the month of August, from a price standpoint on the soy complex, that might be an opportunity for producers to up their new crop soybean sales. On the corn market, it it's traded relatively well since the August 12 report. And I think it's important to, for producers to weigh their options if they're staring at a situation where maybe they don't have enough bin space on farm. Take a look at your basis and what might your storage rates be. It might make sense to get some of those bushels moved on this rally we've had or nice little uptrend we've had And consider extending your coverage and maybe call options out to the spring or summer.
Logan Kimmel:Because I do think you can possibly see a better corn market here going forward into the winter and spring. In the short term though, I think the name of the game is navigating the basis as we come into probably a large harvest and what to do with those bushels that aren't going to have bin space on farm. There has and again, to reiterate, there have been some opportunities in the bean market and also here recently in the corn market that we just find ourselves all summer not with a clear great marketing opportunity. Now we're kind of getting into a market here that feels that you might be able to do something. You might be able to make some marketing decisions and try to catch some swings on the basis that I think could get better here in the winter.
Todd Gleason:Mike Zuslow, you mentioned upfront that weather still matters. I take it that's in The United States. Tell me about it.
Mike Zuzolo:Yeah. I mean, I would say in The United States. I would say in Ukraine. I would even say there's been some pretty terrific flooding in Northern India that could be impacting the the market market there. There has been some pretty significant issues in Argentine weed, including some frost threats.
Mike Zuzolo:There's enough out there, and I would say even in parts of China earlier this year, maybe it's all gone away. But I would say, you know, for me, Todd, when I look at what the trade is trading, and we've talked about this a lot this year, that it seems to me that why was I wanting to go and hedge beans more aggressively than corn or wheat? And it was because I was looking at world supply, world stocks to use versus US stocks and US stocks to use. But the trade was trading the exact opposite of that. I think at some point, they're gonna have to come together.
Mike Zuzolo:And I I suspect that's gonna happen once we know the size of The US crop. And I think that's part of the reason why we're seeing these kind of gyrations. I think it's part of the reason why we're seeing this kind of corn demand. And and I think this is where can it get worse between The US and China in terms of they they continue to not talk and and, you know, basis keeps weakening? I I don't think that's gonna happen, but what would happen if US and China went back to a really high tariff level because Russia is not backing down from Ukraine, and the Trump administration treats China just like they are India right now with buying Russian crude oil and being the biggest buyer of Russian crude oil.
Mike Zuzolo:And I think that's where, again, thinking of the bucket and all the factors and all the things in it, I I still walk away at the end of the day and think there's less downside because the price in corn and wheat have factored in the biggest supplies as opposed to the soybeans in the futures market and to a lesser degree in the basis market. But, you know, I was just looking at the seasonality. And on on September beans closed today, the day we're taping this at 10:33. Last year, was 10:22. And in 2018, it was 08:44.
Mike Zuzolo:This is what you wanna protect against, this kind of a break to the downside. And that's why I bring up the hedge to arrive mindset and the future side of the mindset in the soybeans, even if we stay dry. You know, that way, you're leaving your basis open. If you have tighter yields and and lower pod counts or lower beans per pod, that should be reflected in your local market. Basis is your local weather play, if you will.
Todd Gleason:John, you wanted to discuss China and the fact that they simply have not purchased at this point, but you, I think, gave me a broader number, going back to 1995 or '96 as it relates to total exports of soybeans. Is that correct first? And then how do you see China weathering, this three month, four month period here trying to get to February, and the export market that would be filled by Brazil?
John Zanker:Well, what I was talking about is that new crop sales on the books at zero officially. You know, could there be some cells on there unknown that, you know, potentially, but most people think not. So zero, for the first time since 1999. You know, and I've been you know, Arlen Suderman, I've been worried about this for since winter and talking about it. I have been heavily hedged, 100% hedged in some fashion since winter on soybeans.
John Zanker:Now just starting to wonder you know, how much downside is left, but, with that, what did we do, USDA dropped acreage 2,400,000, that was a game changer, you know, that changed my thought, and I'm sure a lot of other thoughts as well. When I saw the 53.6 yield, I thought that could be the smallest yield we see, and then here we are, another dry August, disappointing August, and that may be the highest we see. Arlen commented today that last year China shipped two fifty million beans in SeptemberOctober. What are we going to do if they don't ship hardly any? I think right now if they just had half of the bushels that they have for a five year average on the books for new crop, we'd have beans over $11 I think the acreage change and the dry August has, you know, made that big of a difference, but the reality is they don't and they may not need to.
John Zanker:They have beans, probably a record, well they bought a bunch of beans from Brazil June, July, August. They have a substantial number of beans booked for September, October, December. They've purchased Argentine meal cargo. Ireland thinks that they could go this year, the balance of this year, without buying any beans. They'd have to dip into the reserves by quite a bit, but if we get to January and there's a good South American crop going, we have a huge problem and the USDA is probably 150,000,000 high, and they've already cut 175 from this past year, so I think the downside is still real, we'll just we'll just have to see how these yields you know, we we we need some yield results, and we can start making some definite decisions at that point.
Todd Gleason:Mike Suzuloy, wanna come back to you because there was something that happened on the world stage that I'm sure you took note of this week, the military parade that she that took place in China. President Xi standing alongside Vladimir Putin and Kim Jong un, from North Korea and a couple of others as well, kind of a united front. Do you suppose that they're ready to stand against The United States, not militarily, but in the trade and global area for influence at this point? Has was that what they were trying to project along with the military power of China?
Mike Zuzolo:Yeah. I mean, I I think this goes in hand in hand with the last couple years and and really the last ten or twelve years in a in a slow motion fashion of Russia and China, especially working with the BRICS to change them into kind of the new east trading and geopolitical alliance, Todd. And I think that was one of the most sure signs that this new alliance is occurring, and there's gonna be a new East and a new West in most probability. The the only big stumbling block that China has right now in Russia and India and and Brazil and the s being South Korea or excuse me, South Africa. The the only stumbling block they have is how much the dollar is still traded in the world currency markets, and they're working pretty feverishly to try and upend that.
Mike Zuzolo:But I think that'll take several years to get done. What they can do though is a lot more trilateral and bilateral trade and and trade in their own currencies and and work with one another, and and that just embeds them more. And this, you know, brings us to 2026 and a lot more questions from clients about what about 2026 hedges? Should I start getting on those? Because is this not going to get any better?
Mike Zuzolo:Well, that's been kinda put on pause because of some of the court decisions on president Trump's tariffs. But I think the 2026 hedges are still very fresh in my mind, in case this situation comes back again. And I think, you know, an $11.20 26 November bean price to me is a pretty good place to start on getting some hedges in place with Brazil getting ready to ramp up and, you know, their new the the new cross rail cross country railroad from Brazil to the Shanque Port in Peru. All these things are coming together.
Todd Gleason:Yeah. Let's turn our attention to, next week's USDA report. Crop production due out on Friday, Logan Kimmel. They'll have a new set of numbers for both corn and soybeans. Will there be many changes, do you think?
Todd Gleason:And this one will include objective yields.
Logan Kimmel:No. I I wonder if if that yield will come down, just based on chatter we've hearing. Have we seen the high watermark, there 188 on the corn 53.6 on the soybeans, just based on how August played out weather wise. So I guess in terms of this report, that might be something to watch for. And jumping back to the last report, I was awfully surprised or pleased to see how the trade reacted to those numbers.
Logan Kimmel:Makes me wonder if you've seen short covering now from the spec funds on corn three weeks in a row. Off of that 188.8 is the market looking for and trading now a lower yield. So coming into next week's report, that might be something to watch, that might be a market mover. You might even see some positioning ahead of that or have been here the last few weeks after the August 12 report.
Todd Gleason:So John, I have to ask, and this goes back to, Mike's comment early on that corn's running out of time. Do you take the next week and make decisions about bushels that you need to run across the scale, whether they're corn and soybeans before this crop production report comes out?
John Zanker:Well, certainly if we run I mean, we're certainly gonna be into some corn here before long, and so we have to make some decisions. And, I'm hoping, but I'm always hoping for a run up into a report, but especially this one, because we we've gotta make some decisions. Some of those have been made, but not enough, so we run this market up, let's say, certainly 15¢ into this report, and we've got to move some corn. We're just gonna be flat pricing it and then and getting some coverage on. So with the idea that we we still have a lot of corn to price, which I wasn't too proud of not too long ago, and so now maybe it's starting to look like that's gonna be okay.
John Zanker:So I I think that the USDA will come down. When I saw the $1.88 1, I said that'll be the biggest that we see, and I've across the Iowa corn crop, Illinois corn crop in the July, Missouri, Indiana. It's the best I've seen, and I've been doing this for forty years. So but and I'm going back out, leaving on Saturday morning to take another trip across to Iowa. So but it's just one of those things.
John Zanker:We're not the the crop scouts will be out for the USDA checking fields and so on, but if you, you know, if you look at the year, that's not gonna tell a story. Are we gonna have 90,000 kernels due to this disease? Are we going to have 65, 70,000? Huge difference between those two levels. So, I think we're not going to pick up all the problems in this report, and, we're certainly gonna be very interested in the October report.
Todd Gleason:Let's get a final word from each of you now. Mike Suzlow, I think we'll begin with you at globalcomresearch.com.
Mike Zuzolo:Yeah. Just to pick up on the last question, Todd, I think where my mind is is if we're rallying into the September report last like last year and beans are helping to support the corn, it it leads us to more of a feed the bull type report, and that means you need good numbers from USDA. So I think this is a good opportunity to hedge, especially if we break above in the corn last week's highs. I show a gap in Dec corn of around 4.32, 4.33 area. I hope we can go chasing that gap heading into that report.
Mike Zuzolo:I think off the combine sales or hedge to arrives or something would be pretty prudent and same with the soybeans if we can get another 20¢ up in the November beads.
Todd Gleason:Logan Kimmel, your final word from Roach Ag.
Logan Kimmel:As harvest approaches, marketing can sometimes get put on the back burner. But I think it's important this year, especially to be paying attention, utilizing opportunities. If the market gives you those, maybe into the next WASDE report, weigh your options. Ask ask your merchandiser, ask your adviser who what what are your options here on storage if you're short on on farm space? What what what is what what is their feel on basis?
Logan Kimmel:I I think it's important to to look at those, consider coverage on any sales here, in flat sales, coverage out to the spring or summer to still keep a little upside, especially maybe in the corn market. And then jumping back, Mike made a good point too. Would keep an eye on the 2026, specifically on the soybeans, just given the geopolitical risk, meeting there with Russia, China, the market might be in an area here on November 2026 or in this zone that could be an initial good sale, for next year's beans. I think that might be an opportunity this fall or winter and start for looking at, 2026 hedges as well.
Todd Gleason:And finally, John Zanker for Spanish milk commodities, your final word.
John Zanker:Well, I've always liked selling premium and, you know, I've not been one for going out and pricing the next year's crop when it was at a big discount to the nearby crop and I still have a portion of that to sell, but we need to keep a real close eye on the developments here in these new crop beans, we're talking about the 26. There's good premium there between this year and next year. Bean acres will likely go up, they could go up sharply. Now if corn yield comes down sharply due to rust, are we going to keep some of those corn acres with with inputs not coming down? Think we could still see a minimum probably of four to 5,000,000 more acres of soybeans, so getting something on close to $11, $10.80 to $11, I don't think that's bad.
John Zanker:We need to be careful about putting all of our eggs in one basket. If we're to get a little bullish corn, we'd be we we need to be careful about not getting too bullish beans at the same time.
Todd Gleason:Commodity Week is a production of Illinois Public Media. You may listen to the whole of the program anytime you'd like at willag.org. That's willag.0rg. Our thanks go to our panelists this week including Mike Souslow, John Zanker, and Logan Kimmel. I'm Illinois Extension's Todd Gleason.