Sep 05 | Commodity Week

This is the September 5 edition of Commodity Week.

Todd Gleason's services are made available to WILL by University of Illinois Extension.

Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Matt Bennett

from agmarket.net, Aaron Curtis from Midco, and Chip Nellinger from Blue Reef Agri-Marketing.

They're all here in the state of Illinois. Commodity Week, of course, is a production

of Illinois Public Media. It's public radio for the farming world, online, on demand at

willag.org, W-I-L-L-A-G dot O-R-G. Let's get a list of questions that we probably should answer

during this program. We'll start with you, Matt Bennett of agmarket.net. What have you been

thinking about as it's related to the marketplace? Yeah, of course, we want to talk a little bit

about what the report might look like next week as far as yields are concerned. Clearly, we've got

the USDA numbers.

There are several private numbers and pro-farmer numbers to go over. And then, you know, I guess

one thing I've been thinking a lot about is just the amount of old crop corn that we have sitting

around right now heading into harvest. You know, you're not hearing a whole lot of really no-quick

ship type deals. Drying deals seem to be non-existent, so it'd be the first time in a

while. But just kind of want to talk about some of those things. Aaron Curtis from Midco out of

Bloomington. Your list, please.

These corn is $25.

Off the load. Does that mean anything, Todd? I mean, is this something that maybe corn has a

little more of a constructive story? Or is it the fact that what Matt mentioned, the farmer is kind

of taking the pedal off the gas here on some of this old crop? And maybe that's just a temporary

bounce off the bottom. But curious to talk a little bit about if corn has a little bit of

a constructive story going forward here. And Chip Nellinger from Blue Reef Agri-Marketing

in Morton.

Your list.

Yeah, I think to dovetail both of those guys, you know, the funds, they still have a big short

position, is the big amount of old crop corn and beans, for that matter, but mostly corn

hanging out there, allowing the funds to get out of more short positions, you know, into some

farmer selling. And we're going to wake up one day surprised that the funds are out of most of

their shorts. I think that's going to be a question as well as what these yields are and what the USDA

is going to find on this, as far as the crop report goes next Thursday.

Well, let's take up old crop to begin with and what's happened over the last month as much of this old crop has had to find a home of some sort, whether that has remained in the bin on the farm or whether it's moved into the marketplace. Aaron Curtis from Midco, I know you want to discuss this and hear from the others to begin with, but what really has happened and taken place within the industry itself?

Did all that corn come into the elevator at this point?

No, it's still moving. I mean, you know, the end of August is traditional pricing period, Todd, for making decisions on old crops, especially the stuff that's in the elevator, but some of that has been moved out to say mid-September, late September. So, you know, the old August 30th or 31st date is not necessarily as universal as used to be in terms of making a decision on some of this stuff.

In the elevator, of course, we went into August with a bigger than normal percent. You know, we had folks that still had 20% of old crop corn in the elevator versus average. So, you know, that was a pretty big chunk of corn and obviously the farmer never really got the rally that they wanted over the summer, right? The thing just kind of kept creeping lower all summer. So, we've still got plenty of old crop moving out there. We'd say probably 10 to 15% in some instances.

Yeah.

For the first part of September, especially what it looks like to be a really big crop coming at us.

So, we're still seeing some spot bushels showing up at some of our terminal locations.

Farmers are pitching that stuff and then continue to see some stuff move off the farm.

And we've still got some decisions to make on some grain that's still in the elevator as well.

So, maybe that limits a little bit of this potential advance in the corn price or not, but still some price căms up.

some pricing decisions to go and then when you go to new crop Todd you know five to eight percent of

the new crop bushels have been priced so we'll call that barely nothing so the producer has a

lot of marketing decisions yet to make not only a little bit on old crop but a long way to go on

new crop. Matt Bennett does this jive with what you've been hearing with JSA as it's related to

the amount of old crop corn that is still moving and has yet to be moved in the month of September

maybe into early October? Yeah I mean we continue to hear from folks both sides JSA has talked a lot

about farmer movement you know on some of these smaller rallies that we've seen I mean clearly

we've had a nice little run best run we've had in some time you know and so some of the

farmer actually has been forced essentially into making a decision

on a lot of this grain but as Aaron said I don't think that all that's taken care of yet on the ag

market side you know with a lot of the growers that we talked to and I won't say a lot of them

but you know just this week I talked to someone that had you know 60 percent of their 23 corn

still sitting there and so clearly there's some issues as far as trying to figure out what to do

with those bushels you know and you've got to only assume unfortunately for a grower like that that

not a whole lot of new crop was priced either so clearly there's a lot of new crop that's

going to be going into harvest and so clearly it's been a really tough go you know as far as

what kind of liquidity we've seen drain out of this thing over the last few months so

it's going to be a concern going into harvest I think that space could be a major issue

maybe a little earlier than normal this year and I think the grower is trying to figure out where

they want to deliver bushels first or put them in the bin you know may want to reconsider going to

the elevator first because I think logistical issues could be a major problem here once we

get to that point.

Well I was going to follow up with you on this but I think you answered my question which was

is this a problem for the farmer who has the grain or is it a problem for the whole of the system

and I guess you're telling me it's the whole of the system Chip Nellinger what are you thinking

about the conversation and and the corn that has to be moved yet in the United States and

some of it's found a home clearly it did last year but more of it has to this year.

Yeah I think it's a problem for the entire system I continue to hear too many stories probably

that you know farmers just renewed the you know the anniversary charges at the elevator

on storage and I've heard instances probably more than what is normal of farmers emptying out their

bins to make room for the new crop but taking that corn into the elevator and storing it so my fear

is down the road that those bushels aren't coming out in September or getting priced those are

bushels are in it to probably till post-harvest bounce and we can almost have kind of like a

double harvest so to speak if we don't see much more of a bounce into late winter I'm afraid that

those bushels are really going to hang over us that's not does not mean we can't rally more

but it's really going to hold us back a little bit with all the old crop that's still out there

and what looks like you know whether it's a record by six bushels or three bushels or two bushels

it's a big corn crop out there that we're about to harvest.

Well

what reason do they give for why?

I do think I do think some of it's psychological right the farmer's been paid for about five years

in a row to hold corn beans store it and you get a rally eventually and kind of get bailed out but

I think some of it's a little bit psychological in the markets kind of conditioned people the

last few years that they're going to get paid by storing it if they wait long enough and

time will tell whether that's you know

the case this year or not it looks like with bigger crops and bigger carryouts that

that's an uphill battle.

Back to the issues of hand we have logistical issues in front of us Aaron Curtis how do you

manage that from the elevator system side?

Well you know I was going to go into harvest with a lot more grain on

on site than what we've seen in the last three years right with inverted markets that we've

seen since the fall of 2020 have encouraged grain to move producers been a cooperative in that in

terms of the grain that we've seen in the last three years.

In terms of getting stuff sold so you know last two and a half years we've moved through harvest

right with a relatively empty space for the most part and storage wasn't necessarily much of an

issue I think it's going to be a little more challenging this year I think the the help maybe

is that some of this corn planted is spaced out a little bit you know how we had the round in

April and then we had another round in May so hopefully that helps spread it out just a little

bit obviously.

With 350 corn or 375 corn I think the producer is going to be a little patient on trying to go out

and pay a lot of in-town drying charges for this corn so maybe that offers a little patience too

the weather looks extremely favorable right now it's going to be dry for the foreseeable future

that creates a lot of other concerns in our industry Todd mainly low water but in terms of

harvest right that.

It creates maybe an opportunity for this crop to stay in the field for a little longer and helps

help with that logistic there's definitely going to be some tight spots especially if these yields

in some areas are as big as advertised but hopefully it's spread out enough with some

of these spread out planting dates that helps alleviate a little bit of the issue a little bit

of the you know bottleneck that we may see due to the fact that yields are going to be as big as

look like to be as big as they are.

The bottleneck tends to come I think for for you and the elevator system when the the crop is coming

in quickly on in dry years I suppose good dry falls that have a good yield that is and moisture

content needs to be dried down it's that it's how fast the dryer at the elevator can run more than

anything else I think and then logistically.

Matt Bennett he mentioned something which probably will be a big issue or could if we don't get

rainfall along the river system I have not heard that they have started to restrict barges yet and

how deep the draft might be do you expect that to come anytime soon.

You know they're talking about restricting barges that the Memphis draft levels are going to call for

that well within the next week.

Yeah we certainly don't get some sort of change here we certainly need some rainfall but it doesn't look good you know as far as that's concerned unfortunately and so I do expect that to be a bit of an issue I mean right now we're very competitively priced but you know you start tacking on the fees it's going to take of course with the barges not totally loaded you know and that's going to definitely work against this so but this is typically there are a prime time of course for loading out soybeans.

Yeah.

You know, I think that soybeans might take the bigger hit as far as, you know, working against soybean values.

So, yes, this river system is a concern.

We've got to hope that we get something happen.

I know we had Eric Snodgrass on our Monday webinar last week, and we asked him what his thought process was.

And he was afraid that without, you know, some sort of a tropical disturbance moving up through the Gulf, you know, that we could be in big trouble as far as these river levels go, just based on the forecast he's looking at in the absence of something like that happening.

So, you know, it's a concern, big concern.

I know that Eric will have told your folks.

They told us Friday last week.

He talked to a group of Brazilians last week, late last week.

And they thought, and very, very concerned.

Brazilians and Argentines both in for the Farm Progress Show, that their crop size was going to be really, really big.

And Chip Nellinger, that the Argentines planned on probably putting in more beans because they were expecting to put in, you know, 20 to 30 percent.

I think 17 percent is the number I've really seen bantered around.

Corn acres, based on the issues they've had with disease and insects.

From last, the last harvest season.

How much of an issue is this going to become for soybeans as it relates to the supply on the global stage?

Yeah, that could be a real issue, Todd.

And that's something that really could hang over this market clear into winter.

It's really a concern I've had for quite a while.

Now, maybe some of the support, arguably, in the bean market here with this nice rally we've had is coming from some dry weather concerns out of Brazil.

You mentioned Argentina.

Argentina's dry, but it's still plenty early for them.

I just remember, too, it's like saying it's dry in the United States, right?

The Brazilian growing area stretches from essentially the Canadian border down to the Mexican border and probably wider than our corn belt.

So it's a large area.

They're going to plant probably more acres of beans in Brazil, as you mentioned, quite a bit more in Argentina.

If we have any type of a crop that it looks like we might here into new record high yields.

Yes.

The demand has picked up a little bit, but we're going to end up with beans in the world.

Now, that's several months down the road.

Before you see that, the market breathes a sigh of relief, maybe come January, February, if the weather goes right in the southern hemisphere.

So there is some room and some time for a little bit of a weather scare.

But it could be a real big issue, Todd, on the beans.

And I'm afraid that, you know, big picture that corn and wheat probably look better on the balance sheet.

But if you've got this massive crop.

And massive carryout in the world on beans, it could end up kind of spilling over and keeping maybe some upside potential limited on the wheat and the corn market as well.

So it's a real concern I have going out into winter if the weather straightens out in the southern hemisphere and they start getting some more timely and regular rains.

USDA currently has the soybean ending stocks by the time we get to the fall of next year at 560 million bushels, Aaron.

When we see the crop production report on Thursday of next week, will that number grow?

I think it stays pretty flat in there at this point.

I don't see yields maybe just up a tick.

I think we'll see a little bit of movement in the acres, probably not a lot there, too.

So I'm not looking for a lot of different change on the production side.

I think crush is still going to be a good number that we want to be excited about.

If we're excited about here this next year, that's going to help.

But I guess I don't see a big change in that.

I would say somewhere in the 540 to 560 range is what we see late next week.

So I'm not looking for a big change on the bean side.

Just still a little touch early, right, to get too predictive on beans.

And they've already got a pretty high number historically printed right now.

Chip Nellinger, when you look forward to that WASDE, which numbers will you be watching closely?

I'll try.

I think the yields are probably the biggest issue because this September report is the first time that we get actual field surveys from the USDA.

I am concerned.

I don't think it changes a lot as far as the demand goes on corn or beans, both.

But one thing that does concern me is on total bean demand, USDA has, I think it's around 200 million bushels higher for this year than a year ago.

I think that's suspect.

I don't think that they make a big reduction.

I don't think they make a big reduction lower in September.

But I think over the next six to nine months, they'll eventually have to come down on that.

And that's just going to go right to the bottom line.

Matt Bennett, any discussion points as it's related to those two reports, that is?

Yeah, basically, I think, you know, kind of an amen to what Chip said as far as bean exports go.

It's something that I've been really concerned with for quite some time.

You know, you look at, you know, the balance sheet, how it sits.

You know, you really don't have a whole lot of money.

You don't have a whole lot of room to raise yield in this particular situation unless you're going to just really get this carried out out of control.

It's very concerning, you know, to me to look at the export situation considering what the book is.

I mean, our new crop book is not good, you know, relatively speaking.

So I guess my personal thought process whenever you're looking at this is that, boy, if we would take yield up, it would be a big issue.

Now, I think the dry August is going to factor in.

And so, ultimately, I'm with Aaron.

I don't really think that you're going to take yield up much, if any.

Corn could come down just a little bit, maybe.

You know, I don't think it would be much.

But I've got to think that that August crop report, you know, was awfully solid based on the fact that you had thermal imaging a big part of that report.

And we know with the July weather that everything looked lush and green.

So, yeah, I don't know.

If I had to guess, I'd say maybe corn's off just a shade.

And then look at beans, maybe flat.

Yeah, I don't see a lot of change on the beans, right?

I guess I'm trying to be a little more constructive to what the corn balance sheet could be longer term.

Corn balance sheet ends up coming under 2 billion bushels on balance sheet.

I don't think we print that next week.

But over time, I think that corn maybe has a little bit of a story here moving forward.

I don't want to get too bullish by any means.

But I think when you look at Argentina's crop going to be down.

Because of their insect issues, everybody's going to be planting beans.

In South America, we've got a little bit of a weather concern.

I think yields are still going to be fine here in the U.S.

I maybe take a little bit of a top end here with this last 30 days of overall dry weather throughout the Midwest.

But I like to be somewhat friendly.

The domestic demand situation for corn and exports have an opportunity to be pretty robust.

Here when it's all said and done.

So if we can see carryout slip down into that 1.8 to 1.9 area here, that's not super bearish at 3.90 corn.

So I'm trying to build a little bit of a constructive story longer term on corn.

But I don't think we see a lot of movement next week.

I would expect maybe corn acres come down just a little bit again, Todd, next week.

But I guess not looking for a big change.

I think we'll see a big change on either corn or soybean yields at this point.

Tip Mellinger, when you look out further, can you make a case for the exports to drive down the carryout sometime in the next 12 months?

You're talking corn, Todd?

Yes, yes.

Yeah, yeah.

I agree with both those guys.

Yeah, and I'm not so sure that part of this rally isn't the fact that the markets,

the U.S. State probably did us a favor in August printing a yield.

That's high.

I think the market assumes that that was the highest yield on corn at 183 and change that we're going to see.

And it comes down from there.

I'm not saying they're going to say this next week.

But if it happens to end up in October or by the January report under 180, if it's 178, 179, still a record yield, but not by six bushels,

you get the carryout to where you can kind of build a case that things are a little bit friendly here in corn.

But no, back to my conversation.

I mean, earlier, is there enough old crap out there?

And are the big carryouts in beans going to be something that holds the potential for corn back?

But yes, if we end up at 180 or slightly below for a final yield, I think things look pretty good on the balance sheet for corn.

Again, given all of this, I want to go back and test to see where each of you are, particularly on corn at this point.

We'll do beans in just a moment.

On making new crop sales, Chip Nellinger, what's your take?

Yeah.

Should producers do?

Yeah.

We've been rewarding this rally, Todd.

4-10 December, 4-1⁄4 March are areas that we rewarded on this rally.

If we get up north of 4-32 in the March and approaching 4-16, 4-18 on the December ahead of this report next week, I think you just have to reward it.

I think thinking ahead, thinking like the market thinks, we're assuming.

In my opinion, we're assuming that yields are going down a little bit, that we've traded the biggest yield, and we're digesting that a little bit.

And I think we've let the funds out of a fair amount of positions in here, and they haven't moved the market as much as they normally would because of all the selling from farmers catching up on old crop and new crop.

It's really kind of limited the upside of what you normally would have seen with the fund buying.

With the farmers selling being so below average, you know, at that 5% to 8%, I think the farmer needs to catch up here.

A little bit and get through this harvest period, right, at, you know, a third sold, something in that area.

I'm really interested this year in looking at, similar to a year ago, looking at some minimum price contracts, attaching a call to some cash sales and or buying a call on your own as well.

Just, you know, a little bit of protection to get in case the dry weather continues in South America.

You know, calls are relatively cheap in regard with some of this volatility continue to be fairly low.

But, you know, I like to get kind of caught up to average, I would say, through this harvest period up to around a third of percent and was a little bit of call protection on some of those sales here as we move through that harvest period.

And Matt Bennett, and if you could transition to soybeans as well after you do corn.

Yeah, I mean, I agree with these guys.

I mean, we were fairly aggressive earlier, but, you know, you get calls pretty consistently of growers that are behind.

You know, and so we've been telling them, if you get in the number we kind of picked here for these corn, interestingly, it was around that 417 level, you know, to go ahead and step in and sell some more corn in here.

I think if nothing else, a grower could get, you know, a floor under themselves if they don't want to make a commitment here.

Get a floor under and, you know, give yourself some flexibility.

I'm not bullish by any means, but clearly if the trend on yield.

Is lower, then there's no doubt that it makes a little bit of a story, you know, for corn.

But as Aaron said, it's a little concerning with, or maybe it was chip overwhelmingly large soybean stocks, not only globally, US globally, all of it, you know, and so would that be in the case, you know, it might temper rallies at some point, but if a person needs to make a sale, I'm like Aaron, go ahead and attach a call to it.

Give yourself the opportunity to take off and go and.

Participate sort of a rally.

If that's what it's going to take, you know, to go ahead and make a sale, I think on soybeans, you know, I'm pretty defensive, I guess.

Um, you know, I'm not super bullish porn necessarily, but, uh, you could just call me fairly bearish beans.

Um, uh, obviously we've had a nice little rally in here, but you know, when you look at world stocks over the course of that two year marketing window, the USDA gives us going up about 33%.

As per their forecast, you know, when you look at, for instance, input costs for corn.

Uh, like.

We drive in the Brazilian grower, you know, to another large soybean planting, uh, and maybe not quite as much corn.

You know, it gives me a little bit concerned that if you have any decent weather at all worldwide, uh, you could be looking at significantly lower prices, even in, uh, these depressed prices we've enjoyed here lately.

So, uh, my thought process is, uh, at the very least have a strong floor under these prices, uh, protect yourself.

And, uh, I'm doing so for, uh, both this year and for 25 as well.

Yeah.

Hard to argue with much what Matt said.

I, it's just gonna be, uh, hard to get, I think a sustained rally going in soybeans when the world situation looks like it does.

And us situation looks like it, uh, uh, contributes to that as well.

So, I mean, if you want to get bullish soybeans, you're pretty much, uh, hoping and praying for some sort of Brazil, uh, weather problem in early September.

I know it's been dry, but probably hard to get too, uh, excited about that, uh, maintaining with their rainy season still to come.

So.

I think November beans, uh, you know, it's still 25 cents away, but, you know, that 10 50 area, I think, uh, would be a place to add to sales if you haven't got much on the books here.

And anticipation, I think going into harvest is that a farmer is going to sell beans and, and hold onto some corn.

So I think, uh, you don't want to be left behind on that, uh, that the farmer is an active seller.

So, uh, probably, uh, you know, if you get a continued rally in here, uh, into that 10 50 area, probably, uh, add to some, uh, risk management for soybeans.

Yeah.

I don't have a lot to add to that.

Totally agree.

Uh, last day and two, uh, been selling beans in here.

Um, you know, really kind of the sweet spot to us is North of 10 40, uh, January.

We're there.

Um, I think one thing you can, you know, if you want to be conservative on something, if you want to be bullish on something, make it, make a small sale in corn, be more aggressive on beans.

If you're wrong on beans, especially producers in the high States, they're generally more of a 50 50 rotation.

Uh, you know, if you end up a dollar wrong on some bean sales, it means corn's being drug quite a long ways along with it for the ride and net net your, your total revenues going up.

So, uh, agree with those guys, be more aggressive on beans.

I think you're, uh, imminently right now at some target levels.

And if you continue to rally into the report next week, I think you got to continue to add to those sales on both this year and next year's commodity week is a production of Illinois public media.

It's public radio for the farming world.

You may find.

You may listen to it online on demand anytime you'd like in its entirety or thanks go to our panelists this week, including chip Dellinger at blue reef agri-marketing he's in Morton, Illinois.

Aaron Curtis is at mid co in Bloomington and Matt Bennett is at ag market.net in Windsor, all of them in Illinois.

I'm your by extensions, Todd.