August 1, 2025 • 23 mins
- Mike Zuzolo, GlobalCommResearch.com
- Crop Insurance Mission Creep
- Eric Snodgrass, NutrienAgSolutions.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Todd Gleason (00:00):
From the Land Grant University in Urbana
Champaign, Illinois. This is theclosing market report. It is the
August 2025. I'm extension'sTodd Gleason. Coming up, we'll
talk about the commodity marketswith Mike Zusalo.
He's at globalcomresearch.comout of Atchison, Kansas. We'll
hear from Carl Zuloff about themission creep, which has come
(00:21):
into crop insurance and hisfears as it's related to that
program and then we'll turn ourattention to the weather
forecast from Eric Snodgrass atNutrien Ag Solutions and
Dagrabill on this Friday editionof the Closing Market Report
from Illinois Public Media, it'sPublic Radio of the farming
world.
announce (00:41):
Todd Gleason services are made available to WILL by
University of IllinoisExtension.
Todd Gleason (00:46):
September corn today, four and three quarters
lower at three eighty nine and aquarter. December at four ten
and a half down three andquarter, and the March at $4.28
2 and a half lower. Augustsoybeans $9.64 up two and a
quarter November at $9.88 apenny and a quarter lower, and
the bean meal futures up $5.70.Couple of interesting things.
(01:07):
Mike Zuzlow,globalcomresearch.com out of
Atchison, Kansas, as we lookedat the marketplace for the week
that were very important tariffsannounced by the president last
night.
August 1 has arrived, andthere's also been a to do
involving nuclear submarines andRussia. Honestly, Mike, I
thought the trade took both ofthose, particularly the tariffs,
(01:30):
really well.
Mike Zuzolol (01:31):
Yeah. I felt the same way. I mean, I think that,
you know, we can say, I think atthis point since it's August 1,
that we dialed in a lot of whatwe got from the tariffs. Maybe
the one surprise was presidentTrump moving more aggressively
against India on Thursday, andit started really on Wednesday
(01:53):
with Russia and moving ahead ofthe sanctions from fifty days to
ten days, when he was on AirForce one. And I think this goes
to your first point is that weare moving more aggressively to,
it looks like a standoff withRussia, Todd.
And I think that is one of thethings that's most puzzling
(02:14):
about the crude oil market andthe wheat market to a lesser
degree as we closed out the weekbecause they both took a lot of
premium off the table as weclosed out the week. And and
geopolitically, especially givenits Russian sanctions on energy
and also, financial, sanctions,if you deal with Russia on
(02:37):
energy and other commodities,the you would have thought that
the trade would have put someextra premium in these markets,
especially with these nuclearsubs being moved by the
president. So that was ananomaly to me. The only thing
that would help explain that isyour second part about the
tariffs and that the fact thatit's August 1, and we came in
(02:58):
with a really bad unemploymentnumber, not just for July jobs,
but June was reviseddramatically to the to the bad
side, really offset the strongGDP number from earlier this
week, and it sent the dollarsharply lower. And I think the
this, along with the tariffs inthe in Wall Street, helped
(03:21):
really break Wall Street down,and that would be the only thing
I could think of that would helpexplain why both the dollar and
the crude oil were sharply loweron Friday.
Todd Gleason (03:30):
And and Wall Street would look forward to
September and October over thepast ten years have not been
good. Historically, they've hadtough times periodically, but
they have been down months.We're still a month away from
that, but I'm Wall Street alwaysin the futures look forward, and
I can't imagine they're notthinking about that even if it's
just historical context.
Mike Zuzolol (03:50):
Yeah. I couldn't agree with you more on that. And
so, you know, my bottom linemindset after this week is
Thursday was end of the month.Friday was end of the week. We
had had a very strong change inmindset, I think, by the funds
on Thursday, unwinding thesoybean corn price action,
unwinding the feeder corn spreadprice action, and coming back in
(04:14):
with quite a bit of price actionthat would suggest the funds
were looking a lot better at thegrain complex because the trade
situation and tariff deadlineswere we were right up against
it.
And so I really am surprised byFriday's trade, given the fact
that we were so close to gettingback above $3.95 on a weekly
(04:36):
close in lead month corn. Weactually got to $3.96 in a
quarter in the overnightmarkets. Weren't able to stay
above even $3.90, though, by thetime we closed Friday's trade.
So on a weekly chart, we hadanother week lower, whereas we
were on Thursday working ahigher weekly corn chart. $3.95
would have gotten us above thelows from three weeks ago, and
(04:59):
that, I think, would have done abig a big bit of good.
And what I'm really trying tosay here is the key to me in the
trade is consistency andmomentum to shift the funds out
of their positions. And I thinkwe dabbled in it on Thursday and
just kinda threw in the towel onFriday and went back to what we
got used to most of the month ofJuly.
Todd Gleason (05:21):
And is that because there were so many
things? Some of it expected, Isuppose, the tariffs that were
happening today and the tradecame to realization after seeing
the numbers in print from theWhite House?
Mike Zuzolol (05:34):
Yeah. I think that I mean, you could've you
could've said a million thingsalmost as far as what happened
on Friday to support this shiftin trade. But I would also say
that one thing that I saw onThursday was the Paris corn
market was up five to 7%. OnFriday, it was down five to 7%.
(05:57):
It's the August contract.
It was getting ready to, youknow, getting ready to expire on
the August 5. I I wanna say thatthis is just one of those weeks
where it looks a lot like fundswere positioning for a variety
of reasons, and that one Pariscorn move on Thursday countered
by Friday drove a lot of thedecision making. Meanwhile, the
(06:20):
fundamentals continue to showEurope tightening in feed grain
supplies, Russia tightening infeed grain supplies, Ukraine
still looking at a significantdrought, not maybe along the
lines of 2012 because they didget some relief and some cooler
temperatures, but it couldbecome bad, very bad again in
(06:40):
the coming ten days. And so I'mI'm gonna hit the pause button
when it comes to the analysis onFriday and just let things shake
out over the weekend.
Todd Gleason (06:48):
Yeah. So we'll watch that. And as you,
relatively speaking mentioned, Ithink I've been looking at the
December contract. I think youwere looking at the lead option,
contract low, in December madefor corn a couple of weeks ago,
and last week traded inside thatrange. It was an outside up week
too, and then not last week, butthe previous one.
And then this week did notviolate that contract low.
(07:11):
Again, still inside the rangefrom the previous con when the
contract low was made. So Iguess we'll have to keep
watching that. Is there adifferent story to be told in
soybeans? Did they get weakerthis week?
Mike Zuzolol (07:23):
Yes. Soybeans made more sense to me fundamentally
because I felt like it was a lotlike August again of last year,
late July, early August lastyear. And we had another piece
of news on Friday that a Chinesebuyer was going ahead and
importing another 30,000 metrictons of Argentine soy meal. It
it when you look at ninestraight days down in August
(07:48):
soybeans, excluding Friday, wewent essentially from $10.37 to
$9.60. We took 75 plus cents outof this market.
I think the beans were catchingup to the corn, and I think that
makes sense because the cropconditions at the early part of
the week improved so much forbeans. The biggest thing goes
back to the trade. I think thetrade in hindsight was probably
(08:11):
putting extra premium in beans,keeping extra premium in beans
until we got another rain, andto see if we could get a phase
two trade deal with China, andthat didn't happen. And so I
think a throw in the towel typemindset happened in the soy
complex. That's the bad news.
The good news is even with thatmeal report of China buying,
(08:31):
what was the leader to theupside on Friday? And that was
this August soy meal up $6, andit had bounced off of major lows
a couple times this week andreally fought back hard. So
that's gonna be one of thestarting points. $3.95 in corn,
and did we make a real low inbee in bean meal, when we come
back on Sunday, Monday?
Todd Gleason (08:50):
We look forward to talking with you next week.
Thanks much.
Mike Zuzolol (08:53):
Thank you, Todd.
Todd Gleason (08:54):
That's Mike Zuzlow. He's with
globalcommresearch.com out ofAtchison, Kansas. Joined us on
this Friday edition of theclosing market report that came
due from Illinois public media.It is public radio for the
farming world. Don't forget thatif you can stay with us for the
second half hour, you'll hearour commodity week program.
If not, it's up online right nowagain on the website willag.0rg.
(09:25):
I'm University of IllinoisExtension's Todd Gleason. We're
now joined by Carl Zuloff. He'san emeritus agricultural
economist from the Ohio StateUniversity. Carl, thank you for
being with us.
You've penned an article for theFarm Doc Daily website, and
folks can find it atfarmdocdaily.illinois.edu or on
(09:46):
our home site for the radiostation at Will Ag, willag.0rg.
The title is crop insurance 2025farm bill and mission creep. Why
did you do this?
Carl Zulauf (10:02):
The the importance of looking, in my opinion, at
mission creep in this context,in the context of the crop
insurance industry, is thatMission Creep has led to a
bigger footprint, yes, but it'salso led to, or it is in the
process of leading to, afundamental change in I think
(10:22):
the way farmers will use cropinsurance. It started out as
yield insurance as I've alreadynoted and at the individual
farm, but once you get tocoverage levels above 75%, you
start to move into the rangewhere price becomes much more of
(10:43):
a factor. For example, if youjust take The US insurance
prices, that is the change fromthe projected price before
harvest to the harvest price andyou use declines of 25% which
would be equivalent to a 75%coverage level. And we can do
this quite easily for corn,upland cotton, grain sorghum and
(11:05):
soybeans. The highest number ofyears since 1973 that you've had
a 25% decline in the insuranceprice is 8%.
So at the 75% coverage level,there's very little coverage of
price decline. Prices rarelydrop that much over the growing
season. At 95%, which is thehighest coverage level right
(11:30):
now, and that's for ECO, theenhanced coverage option, it's
about 50% of the year's pricedeclines by at least 5% between
the projected price and theprice at harvest. That makes
insurance, even though theydon't insure price directly,
(11:53):
they insure it through revenue,but that makes insurance a
really potentially usefulproduct from the farmer's
perspective for managing pricerisk at least over the growing
season. And I thought this is avery important shift from
managing yield to managingprice, using it to also manage
(12:18):
price over the growing season.
And that's where mission creepbecomes really important because
it's changing the nature of whatthe product does or can do.
Todd Gleason (12:29):
What does that mean for two sets of growers? As
we know about 15% use the CMEgroup in some form and the
others only market cash, doesthat mean that those cash
marketers are more likely to goahead and market a crop during
(12:49):
that growing season?
Carl Zulauf (12:51):
I don't think we will know this can go several
ways Todd, okay? And I don'tthink it's hard for me to figure
out right now what way it'sgoing to go, okay? I think that
one of the things that willhappen that will be worth
keeping your eye on is what doesthe private risk management
(13:14):
sector, which is the forwardcontracting sector in part, what
do they do in response to whathas happened literally in the
last three or four years, Todd,where the government either
through Congress or through theadministration has raised the
subsidy rate for these productsthat have higher coverage
(13:35):
levels. And they've raised thecoverage level themselves in the
case of ECO. So this issomething that really is just
starting to percolate throughfarmers thinking.
And it does, how will they usethis to manage the price risk?
How will they use this to managethe yield risk and the revenue
(13:59):
risk? It's going to beinteresting to see and then it's
going to be interesting to watchhow the private sector reacts to
these products being available.What will they do for forward
contracting? How will they wrapit around insurance?
Maybe that's one way they woulddo it. So I think we're in a
(14:20):
period where farmers have anoption to manage price for us
that they've not had. It'salways difficult to forecast how
the private market will react tosomething that really hasn't had
before Todd. Okay. So I'm nottrying to break your question,
just think it's a difficult oneto answer right now.
Todd Gleason (14:39):
Anything else before I let you go?
Carl Zulauf (14:41):
I think that's something to really watch. I
think it's, I'm really, I'vebeen talking to farmers about
this. I would note that this maybe just coincidence, but I would
be willing to bet that itprobably is not. But if we look
at the early pattern of buyingfor the 2025 crop, what farmers
(15:07):
bought this year versus whatthey bought in 2024. The ECO
subsidy level was raised to 65%last summer.
This would be the first yearthat that subsidy rate would be
available and therefore would dolower the cost of ECO to
farmers. The use of ECO hasalmost tripled this year versus
(15:31):
last year across a wide varietyof crops. That's a pretty high
adoption rate and suggests thatthe use of area add up insurance
is going to be a factor goingforward, whereas it's been a
(15:52):
relatively minimal share of themarket. And that's consistent
with farmers seeing value, butit's also consistent with the
notion that they may be seeingit as a way to manage price
risk. We'll have to wait and seeon that one.
It's a hypothesis.
Todd Gleason (16:09):
Indeed. Thank you very much. I appreciate it.
Carl Zulauf (16:11):
Thank you very much, Todd.
Todd Gleason (16:12):
Carl Zudloff is an agricultural economist emeritus
from the Ohio State University.Let's check the weather forecast
across the Corn Belt now. EricSnodgrass is here. Hi, Eric. I
usually don't just say we'redoing the Corn Belt, but today,
that's where I'd like to stick.
(16:33):
Let's start with July. It was awarm month, well above average,
I think, for temperatures. Canyou give me a quick recap? And
then, particularly, we mightwanna go back and take a look at
those last few days where wewere hot too.
Eric Snodgrass (16:48):
Yeah. You know, statistically, this is gonna
come in as, like, a top 30warmest July. So, I mean, as hot
as it was, we've had hotter. Youknow? So it's it's just, you
know, it's it's all relative.
The hottest spots were down inthe Southeastern United States.
Fact, I was down there earlierthis week, and I'll tell you
something. My son and I, onTuesday had a chance to go to
(17:09):
the beach in the afternoon afterall the work was done and took
my, you know, my flip flops offand only had to move about 50
yards to get to the water. Andin that short amount of time,
given how hot and intense, youknow, the the air in the
atmosphere, the sun was, we ourour feet blistered. We got
burned on our feet by the sand.
So there are places that werehotter. I think the big thing
for us, Todd, is how warm theovernight lows were for much of
(17:30):
the June and July. And you and Ihave been talking last couple of
weeks about some of thepollination issues that could be
there. But, you know, when youwhen you when you balance that
against how much rain we saw, Imean, multiple clusters of
storms, the derecho event thathappened on Monday that came
through parts of Minnesota outof South Dakota into Iowa.
Although damage is, I think,right now sparing across major
(17:51):
corn acres and soybean acres,but the reality is the
atmosphere has been open forrain, and it's made a lot of
rainfall, during that, you know,very warm time period.
So it was hot and it was humid.But, again, that comes back to
the warm overnight lows. It'sgonna be nice to finally get
some drier, cooler air in thisweekend, although we're dealing
with a lot of wildfire smokefrom the fires in Canada, but
also a couple large fires inUtah and Arizona. So, yes, July
(18:13):
is gonna go down as a hot stormyJuly, and we have yet to kinda
see if we had any major negativeimpacts on yield. But, Todd,
bigger picture, from satellite,NDVI values are still record
high across the Corn Belt.
So hot stormy sometimes gets thejob done.
Todd Gleason (18:27):
Now I thought about opening the windows last
night because we went into themid fifties. However, I checked
before I did that to see howhumid it was gonna be, and it
remained humid overnight. Are wegonna lose that humidity, do you
think?
Eric Snodgrass (18:40):
We will temporarily, which is gonna be
nice. But like I said, we'rewe're trading humidity and heat
for really smoky skies. And, youknow, my wife texted me. She
was, how long is it gonna besmoking in, like, the whole
weekend? And she she immediatelythumbs down to my response.
I'm like, hey. You know? We weyou know? There there you go. My
wife doesn't approve of myforecast, but, no, it's it's
(19:03):
it's gonna be with us throughthe weekend.
And, the spires in Canada, don'tdon't forget they've been going
for some of them for threemonths, and, it's been quite,
quite a smoky summer across theUpper Midwest.
Todd Gleason (19:14):
It did make for a beautiful golden hour last
night, I must admit. It was itwas gorgeous. Yeah. That's
that's one of the things thathappens. Right?
That
Eric Snodgrass (19:22):
That is right. Yeah. Red sunsets when you that
much smoke.
Todd Gleason (19:25):
So tell me about the next week and what you think
August will look like.
Eric Snodgrass (19:29):
Yeah. We we are going to, come back into some
warmer temperatures. So enjoythis weekend. It will warm back
up. We're overall I mean, to behonest with you, we're in a bit
of a drier forecast, which,that's not bad.
But, there's still theatmosphere does not wanna give
up its chances for storming. Andso I would say this about the
month of August. I think, youknow, we started off cool. It's
(19:52):
cool today. We will build backin some heat pretty soon.
Remember, our peak heatingmonth, you know, is that's our
peak month for heat, I shouldsay, is July. So hot in August
is a shade different than hot inJuly. It's a little bit, you
know, on the cooler side ofhistorical averages. So long
story short, the big questionwill be, are we able just to
(20:12):
keep the moisture rolling, whichI think we do? Because beans
could use an probably two moregood drinks before we get into
September.
And I'm not shutting off therainfall just yet, so we we do
expect to get some moisture backinto this system. But I'll tell
you this. There is someconfusing stuff about late
August that we're trying to sortout, and a lot has to do with
the tropics.
Todd Gleason (20:30):
Tell me about it.
Eric Snodgrass (20:31):
Yeah. So we've had a relatively benign
hurricane season so far. Right?I mean, it technically starts on
June 1. August, it should reallybe ramping up with big systems
that form out in the middle ofthe Atlantic.
But we've got a lot of warmwater. What we don't have is the
instability, and what we don'thave is, you know, the the juicy
air down there. Yeah. Believe itor not, even though it's, you
(20:51):
know, it's it's it's been thesource of our high humidity air,
the compared to normal, thetropics could use a bit more
moisture. So long long storyshort, I don't have any reason
to tell you that we've got anybig systems coming in the next
week, and which means we'regonna get through a lot of
August, I think, with arelatively capped, you know,
start to the hurricane season.
(21:12):
So watch out for the back halfof the hurricane season as we,
you know, typically think it'sgonna be loaded back half this
year given the way it started.And don't forget, Todd, we we've
had, 51 different tropicalcyclones throughout history, at
least what we've been recordingof it, that have come through
Illinois. So we can get somelate season moisture out of an
active tropical season, andmaybe The Gulf will be open for
(21:35):
business, once we get there intothe month of September.
Todd Gleason (21:37):
One final note. Since you talked about
September, are you stillexpecting an early planting
season for farmers in Brazil?
Eric Snodgrass (21:46):
Yeah. It was funny. Matt Bennett and I were
talking about this yesterday,and he prefaced the question
with, well, the models say it'sgonna be wet in October. And if
they get wet early in October,it they just go like mad. And he
said, what's the chances of themodels being wrong?
And I'm like, Matt, that's aloaded question because you know
how terrible the models were forsummer. Right? I mean, they blew
(22:06):
it. They all predicted majordrought in the Midwest all
summer long, and none of thatever happened. And I said, well,
Matt, right now, see the modelsgoing over wet early.
And he goes, is there a chanceit could be too wet down in
Brazil? And I said, yeah.Always. So we have to balance
that out for South America. Youknow?
If they get a just normal startto their monsoon, they will put
in huge acres. The crop counterwill be opened up wide. But if
(22:28):
it's too wet or too dry, one ofthose, we can compress their
crop counter. So I'm just gonnasay this. The model looks
generous.
Okay? But the models have beenterrible. So let's, let's watch
that carefully together.
Todd Gleason (22:41):
Alright. Thanks much. We appreciate it. Eric
Snodgrass is with Nutrien AgSolutions and Diagrable.
Speaking of Matt, if you canstay with us on our home
station, you'll hear him oncommodity week along with Ellen
Dearton and Logan Kimmel.
If not, it's up online right nowat willag.org, and many of these
radio stations will carry itover the weekend. You've been
listening to the closing marketreport from Illinois Public
(23:02):
Media online at willag.org. I'mTodd Gleason.
From the Land Grant University in Urbana
Champaign, Illinois. This is theclosing market report. It is the
August 2025. I'm extension'sTodd Gleason. Coming up, we'll
talk about the commodity marketswith Mike Zusalo.
He's at globalcomresearch.comout of Atchison, Kansas. We'll
hear from Carl Zuloff about themission creep, which has come
(00:21):
into crop insurance and hisfears as it's related to that
program and then we'll turn ourattention to the weather
forecast from Eric Snodgrass atNutrien Ag Solutions and
Dagrabill on this Friday editionof the Closing Market Report
from Illinois Public Media, it'sPublic Radio of the farming
world.
announce (00:41):
Todd Gleason services are made available to WILL by
University of IllinoisExtension.
Todd Gleason (00:46):
September corn today, four and three quarters
lower at three eighty nine and aquarter. December at four ten
and a half down three andquarter, and the March at $4.28
2 and a half lower. Augustsoybeans $9.64 up two and a
quarter November at $9.88 apenny and a quarter lower, and
the bean meal futures up $5.70.Couple of interesting things.
(01:07):
Mike Zuzlow,globalcomresearch.com out of
Atchison, Kansas, as we lookedat the marketplace for the week
that were very important tariffsannounced by the president last
night.
August 1 has arrived, andthere's also been a to do
involving nuclear submarines andRussia. Honestly, Mike, I
thought the trade took both ofthose, particularly the tariffs,
(01:30):
really well.
Mike Zuzolol (01:31):
Yeah. I felt the same way. I mean, I think that,
you know, we can say, I think atthis point since it's August 1,
that we dialed in a lot of whatwe got from the tariffs. Maybe
the one surprise was presidentTrump moving more aggressively
against India on Thursday, andit started really on Wednesday
(01:53):
with Russia and moving ahead ofthe sanctions from fifty days to
ten days, when he was on AirForce one. And I think this goes
to your first point is that weare moving more aggressively to,
it looks like a standoff withRussia, Todd.
And I think that is one of thethings that's most puzzling
(02:14):
about the crude oil market andthe wheat market to a lesser
degree as we closed out the weekbecause they both took a lot of
premium off the table as weclosed out the week. And and
geopolitically, especially givenits Russian sanctions on energy
and also, financial, sanctions,if you deal with Russia on
(02:37):
energy and other commodities,the you would have thought that
the trade would have put someextra premium in these markets,
especially with these nuclearsubs being moved by the
president. So that was ananomaly to me. The only thing
that would help explain that isyour second part about the
tariffs and that the fact thatit's August 1, and we came in
(02:58):
with a really bad unemploymentnumber, not just for July jobs,
but June was reviseddramatically to the to the bad
side, really offset the strongGDP number from earlier this
week, and it sent the dollarsharply lower. And I think the
this, along with the tariffs inthe in Wall Street, helped
(03:21):
really break Wall Street down,and that would be the only thing
I could think of that would helpexplain why both the dollar and
the crude oil were sharply loweron Friday.
Todd Gleason (03:30):
And and Wall Street would look forward to
September and October over thepast ten years have not been
good. Historically, they've hadtough times periodically, but
they have been down months.We're still a month away from
that, but I'm Wall Street alwaysin the futures look forward, and
I can't imagine they're notthinking about that even if it's
just historical context.
Mike Zuzolol (03:50):
Yeah. I couldn't agree with you more on that. And
so, you know, my bottom linemindset after this week is
Thursday was end of the month.Friday was end of the week. We
had had a very strong change inmindset, I think, by the funds
on Thursday, unwinding thesoybean corn price action,
unwinding the feeder corn spreadprice action, and coming back in
(04:14):
with quite a bit of price actionthat would suggest the funds
were looking a lot better at thegrain complex because the trade
situation and tariff deadlineswere we were right up against
it.
And so I really am surprised byFriday's trade, given the fact
that we were so close to gettingback above $3.95 on a weekly
(04:36):
close in lead month corn. Weactually got to $3.96 in a
quarter in the overnightmarkets. Weren't able to stay
above even $3.90, though, by thetime we closed Friday's trade.
So on a weekly chart, we hadanother week lower, whereas we
were on Thursday working ahigher weekly corn chart. $3.95
would have gotten us above thelows from three weeks ago, and
(04:59):
that, I think, would have done abig a big bit of good.
And what I'm really trying tosay here is the key to me in the
trade is consistency andmomentum to shift the funds out
of their positions. And I thinkwe dabbled in it on Thursday and
just kinda threw in the towel onFriday and went back to what we
got used to most of the month ofJuly.
Todd Gleason (05:21):
And is that because there were so many
things? Some of it expected, Isuppose, the tariffs that were
happening today and the tradecame to realization after seeing
the numbers in print from theWhite House?
Mike Zuzolol (05:34):
Yeah. I think that I mean, you could've you
could've said a million thingsalmost as far as what happened
on Friday to support this shiftin trade. But I would also say
that one thing that I saw onThursday was the Paris corn
market was up five to 7%. OnFriday, it was down five to 7%.
(05:57):
It's the August contract.
It was getting ready to, youknow, getting ready to expire on
the August 5. I I wanna say thatthis is just one of those weeks
where it looks a lot like fundswere positioning for a variety
of reasons, and that one Pariscorn move on Thursday countered
by Friday drove a lot of thedecision making. Meanwhile, the
(06:20):
fundamentals continue to showEurope tightening in feed grain
supplies, Russia tightening infeed grain supplies, Ukraine
still looking at a significantdrought, not maybe along the
lines of 2012 because they didget some relief and some cooler
temperatures, but it couldbecome bad, very bad again in
(06:40):
the coming ten days. And so I'mI'm gonna hit the pause button
when it comes to the analysis onFriday and just let things shake
out over the weekend.
Todd Gleason (06:48):
Yeah. So we'll watch that. And as you,
relatively speaking mentioned, Ithink I've been looking at the
December contract. I think youwere looking at the lead option,
contract low, in December madefor corn a couple of weeks ago,
and last week traded inside thatrange. It was an outside up week
too, and then not last week, butthe previous one.
And then this week did notviolate that contract low.
(07:11):
Again, still inside the rangefrom the previous con when the
contract low was made. So Iguess we'll have to keep
watching that. Is there adifferent story to be told in
soybeans? Did they get weakerthis week?
Mike Zuzolol (07:23):
Yes. Soybeans made more sense to me fundamentally
because I felt like it was a lotlike August again of last year,
late July, early August lastyear. And we had another piece
of news on Friday that a Chinesebuyer was going ahead and
importing another 30,000 metrictons of Argentine soy meal. It
it when you look at ninestraight days down in August
(07:48):
soybeans, excluding Friday, wewent essentially from $10.37 to
$9.60. We took 75 plus cents outof this market.
I think the beans were catchingup to the corn, and I think that
makes sense because the cropconditions at the early part of
the week improved so much forbeans. The biggest thing goes
back to the trade. I think thetrade in hindsight was probably
(08:11):
putting extra premium in beans,keeping extra premium in beans
until we got another rain, andto see if we could get a phase
two trade deal with China, andthat didn't happen. And so I
think a throw in the towel typemindset happened in the soy
complex. That's the bad news.
The good news is even with thatmeal report of China buying,
(08:31):
what was the leader to theupside on Friday? And that was
this August soy meal up $6, andit had bounced off of major lows
a couple times this week andreally fought back hard. So
that's gonna be one of thestarting points. $3.95 in corn,
and did we make a real low inbee in bean meal, when we come
back on Sunday, Monday?
Todd Gleason (08:50):
We look forward to talking with you next week.
Thanks much.
Mike Zuzolol (08:53):
Thank you, Todd.
Todd Gleason (08:54):
That's Mike Zuzlow. He's with
globalcommresearch.com out ofAtchison, Kansas. Joined us on
this Friday edition of theclosing market report that came
due from Illinois public media.It is public radio for the
farming world. Don't forget thatif you can stay with us for the
second half hour, you'll hearour commodity week program.
If not, it's up online right nowagain on the website willag.0rg.
(09:25):
I'm University of IllinoisExtension's Todd Gleason. We're
now joined by Carl Zuloff. He'san emeritus agricultural
economist from the Ohio StateUniversity. Carl, thank you for
being with us.
You've penned an article for theFarm Doc Daily website, and
folks can find it atfarmdocdaily.illinois.edu or on
(09:46):
our home site for the radiostation at Will Ag, willag.0rg.
The title is crop insurance 2025farm bill and mission creep. Why
did you do this?
Carl Zulauf (10:02):
The the importance of looking, in my opinion, at
mission creep in this context,in the context of the crop
insurance industry, is thatMission Creep has led to a
bigger footprint, yes, but it'salso led to, or it is in the
process of leading to, afundamental change in I think
(10:22):
the way farmers will use cropinsurance. It started out as
yield insurance as I've alreadynoted and at the individual
farm, but once you get tocoverage levels above 75%, you
start to move into the rangewhere price becomes much more of
(10:43):
a factor. For example, if youjust take The US insurance
prices, that is the change fromthe projected price before
harvest to the harvest price andyou use declines of 25% which
would be equivalent to a 75%coverage level. And we can do
this quite easily for corn,upland cotton, grain sorghum and
(11:05):
soybeans. The highest number ofyears since 1973 that you've had
a 25% decline in the insuranceprice is 8%.
So at the 75% coverage level,there's very little coverage of
price decline. Prices rarelydrop that much over the growing
season. At 95%, which is thehighest coverage level right
(11:30):
now, and that's for ECO, theenhanced coverage option, it's
about 50% of the year's pricedeclines by at least 5% between
the projected price and theprice at harvest. That makes
insurance, even though theydon't insure price directly,
(11:53):
they insure it through revenue,but that makes insurance a
really potentially usefulproduct from the farmer's
perspective for managing pricerisk at least over the growing
season. And I thought this is avery important shift from
managing yield to managingprice, using it to also manage
(12:18):
price over the growing season.
And that's where mission creepbecomes really important because
it's changing the nature of whatthe product does or can do.
Todd Gleason (12:29):
What does that mean for two sets of growers? As
we know about 15% use the CMEgroup in some form and the
others only market cash, doesthat mean that those cash
marketers are more likely to goahead and market a crop during
(12:49):
that growing season?
Carl Zulauf (12:51):
I don't think we will know this can go several
ways Todd, okay? And I don'tthink it's hard for me to figure
out right now what way it'sgoing to go, okay? I think that
one of the things that willhappen that will be worth
keeping your eye on is what doesthe private risk management
(13:14):
sector, which is the forwardcontracting sector in part, what
do they do in response to whathas happened literally in the
last three or four years, Todd,where the government either
through Congress or through theadministration has raised the
subsidy rate for these productsthat have higher coverage
(13:35):
levels. And they've raised thecoverage level themselves in the
case of ECO. So this issomething that really is just
starting to percolate throughfarmers thinking.
And it does, how will they usethis to manage the price risk?
How will they use this to managethe yield risk and the revenue
(13:59):
risk? It's going to beinteresting to see and then it's
going to be interesting to watchhow the private sector reacts to
these products being available.What will they do for forward
contracting? How will they wrapit around insurance?
Maybe that's one way they woulddo it. So I think we're in a
(14:20):
period where farmers have anoption to manage price for us
that they've not had. It'salways difficult to forecast how
the private market will react tosomething that really hasn't had
before Todd. Okay. So I'm nottrying to break your question,
just think it's a difficult oneto answer right now.
Todd Gleason (14:39):
Anything else before I let you go?
Carl Zulauf (14:41):
I think that's something to really watch. I
think it's, I'm really, I'vebeen talking to farmers about
this. I would note that this maybe just coincidence, but I would
be willing to bet that itprobably is not. But if we look
at the early pattern of buyingfor the 2025 crop, what farmers
(15:07):
bought this year versus whatthey bought in 2024. The ECO
subsidy level was raised to 65%last summer.
This would be the first yearthat that subsidy rate would be
available and therefore would dolower the cost of ECO to
farmers. The use of ECO hasalmost tripled this year versus
(15:31):
last year across a wide varietyof crops. That's a pretty high
adoption rate and suggests thatthe use of area add up insurance
is going to be a factor goingforward, whereas it's been a
(15:52):
relatively minimal share of themarket. And that's consistent
with farmers seeing value, butit's also consistent with the
notion that they may be seeingit as a way to manage price
risk. We'll have to wait and seeon that one.
It's a hypothesis.
Todd Gleason (16:09):
Indeed. Thank you very much. I appreciate it.
Carl Zulauf (16:11):
Thank you very much, Todd.
Todd Gleason (16:12):
Carl Zudloff is an agricultural economist emeritus
from the Ohio State University.Let's check the weather forecast
across the Corn Belt now. EricSnodgrass is here. Hi, Eric. I
usually don't just say we'redoing the Corn Belt, but today,
that's where I'd like to stick.
(16:33):
Let's start with July. It was awarm month, well above average,
I think, for temperatures. Canyou give me a quick recap? And
then, particularly, we mightwanna go back and take a look at
those last few days where wewere hot too.
Eric Snodgrass (16:48):
Yeah. You know, statistically, this is gonna
come in as, like, a top 30warmest July. So, I mean, as hot
as it was, we've had hotter. Youknow? So it's it's just, you
know, it's it's all relative.
The hottest spots were down inthe Southeastern United States.
Fact, I was down there earlierthis week, and I'll tell you
something. My son and I, onTuesday had a chance to go to
(17:09):
the beach in the afternoon afterall the work was done and took
my, you know, my flip flops offand only had to move about 50
yards to get to the water. Andin that short amount of time,
given how hot and intense, youknow, the the air in the
atmosphere, the sun was, we ourour feet blistered. We got
burned on our feet by the sand.
So there are places that werehotter. I think the big thing
for us, Todd, is how warm theovernight lows were for much of
(17:30):
the June and July. And you and Ihave been talking last couple of
weeks about some of thepollination issues that could be
there. But, you know, when youwhen you when you balance that
against how much rain we saw, Imean, multiple clusters of
storms, the derecho event thathappened on Monday that came
through parts of Minnesota outof South Dakota into Iowa.
Although damage is, I think,right now sparing across major
(17:51):
corn acres and soybean acres,but the reality is the
atmosphere has been open forrain, and it's made a lot of
rainfall, during that, you know,very warm time period.
So it was hot and it was humid.But, again, that comes back to
the warm overnight lows. It'sgonna be nice to finally get
some drier, cooler air in thisweekend, although we're dealing
with a lot of wildfire smokefrom the fires in Canada, but
also a couple large fires inUtah and Arizona. So, yes, July
(18:13):
is gonna go down as a hot stormyJuly, and we have yet to kinda
see if we had any major negativeimpacts on yield. But, Todd,
bigger picture, from satellite,NDVI values are still record
high across the Corn Belt.
So hot stormy sometimes gets thejob done.
Todd Gleason (18:27):
Now I thought about opening the windows last
night because we went into themid fifties. However, I checked
before I did that to see howhumid it was gonna be, and it
remained humid overnight. Are wegonna lose that humidity, do you
think?
Eric Snodgrass (18:40):
We will temporarily, which is gonna be
nice. But like I said, we'rewe're trading humidity and heat
for really smoky skies. And, youknow, my wife texted me. She
was, how long is it gonna besmoking in, like, the whole
weekend? And she she immediatelythumbs down to my response.
I'm like, hey. You know? We weyou know? There there you go. My
wife doesn't approve of myforecast, but, no, it's it's
(19:03):
it's gonna be with us throughthe weekend.
And, the spires in Canada, don'tdon't forget they've been going
for some of them for threemonths, and, it's been quite,
quite a smoky summer across theUpper Midwest.
Todd Gleason (19:14):
It did make for a beautiful golden hour last
night, I must admit. It was itwas gorgeous. Yeah. That's
that's one of the things thathappens. Right?
That
Eric Snodgrass (19:22):
That is right. Yeah. Red sunsets when you that
much smoke.
Todd Gleason (19:25):
So tell me about the next week and what you think
August will look like.
Eric Snodgrass (19:29):
Yeah. We we are going to, come back into some
warmer temperatures. So enjoythis weekend. It will warm back
up. We're overall I mean, to behonest with you, we're in a bit
of a drier forecast, which,that's not bad.
But, there's still theatmosphere does not wanna give
up its chances for storming. Andso I would say this about the
month of August. I think, youknow, we started off cool. It's
(19:52):
cool today. We will build backin some heat pretty soon.
Remember, our peak heatingmonth, you know, is that's our
peak month for heat, I shouldsay, is July. So hot in August
is a shade different than hot inJuly. It's a little bit, you
know, on the cooler side ofhistorical averages. So long
story short, the big questionwill be, are we able just to
(20:12):
keep the moisture rolling, whichI think we do? Because beans
could use an probably two moregood drinks before we get into
September.
And I'm not shutting off therainfall just yet, so we we do
expect to get some moisture backinto this system. But I'll tell
you this. There is someconfusing stuff about late
August that we're trying to sortout, and a lot has to do with
the tropics.
Todd Gleason (20:30):
Tell me about it.
Eric Snodgrass (20:31):
Yeah. So we've had a relatively benign
hurricane season so far. Right?I mean, it technically starts on
June 1. August, it should reallybe ramping up with big systems
that form out in the middle ofthe Atlantic.
But we've got a lot of warmwater. What we don't have is the
instability, and what we don'thave is, you know, the the juicy
air down there. Yeah. Believe itor not, even though it's, you
(20:51):
know, it's it's it's been thesource of our high humidity air,
the compared to normal, thetropics could use a bit more
moisture. So long long storyshort, I don't have any reason
to tell you that we've got anybig systems coming in the next
week, and which means we'regonna get through a lot of
August, I think, with arelatively capped, you know,
start to the hurricane season.
(21:12):
So watch out for the back halfof the hurricane season as we,
you know, typically think it'sgonna be loaded back half this
year given the way it started.And don't forget, Todd, we we've
had, 51 different tropicalcyclones throughout history, at
least what we've been recordingof it, that have come through
Illinois. So we can get somelate season moisture out of an
active tropical season, andmaybe The Gulf will be open for
(21:35):
business, once we get there intothe month of September.
Todd Gleason (21:37):
One final note. Since you talked about
September, are you stillexpecting an early planting
season for farmers in Brazil?
Eric Snodgrass (21:46):
Yeah. It was funny. Matt Bennett and I were
talking about this yesterday,and he prefaced the question
with, well, the models say it'sgonna be wet in October. And if
they get wet early in October,it they just go like mad. And he
said, what's the chances of themodels being wrong?
And I'm like, Matt, that's aloaded question because you know
how terrible the models were forsummer. Right? I mean, they blew
(22:06):
it. They all predicted majordrought in the Midwest all
summer long, and none of thatever happened. And I said, well,
Matt, right now, see the modelsgoing over wet early.
And he goes, is there a chanceit could be too wet down in
Brazil? And I said, yeah.Always. So we have to balance
that out for South America. Youknow?
If they get a just normal startto their monsoon, they will put
in huge acres. The crop counterwill be opened up wide. But if
(22:28):
it's too wet or too dry, one ofthose, we can compress their
crop counter. So I'm just gonnasay this. The model looks
generous.
Okay? But the models have beenterrible. So let's, let's watch
that carefully together.
Todd Gleason (22:41):
Alright. Thanks much. We appreciate it. Eric
Snodgrass is with Nutrien AgSolutions and Diagrable.
Speaking of Matt, if you canstay with us on our home
station, you'll hear him oncommodity week along with Ellen
Dearton and Logan Kimmel.
If not, it's up online right nowat willag.org, and many of these
radio stations will carry itover the weekend. You've been
listening to the closing marketreport from Illinois Public
(23:02):
Media online at willag.org. I'mTodd Gleason.
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