June 18, 2025 • 31 mins
Panelists
- Dave Chatterton, SFarmMarketing.com
- Brian Stark, AndersonsGrain.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Todd Gleason (00:00):
This edition of Commodity Week was recorded
(00:02):
Wednesday, June 18. ToddGleason's services are made
available to WILL by Universityof Illinois Extension. Welcome
to Commodity Week. I am ToddGleason. You can find our
programming online atwillag.0rg.
That's willag.org. Today, we'rejoined by Brian Stark of The
(00:25):
Andersons and Dave Chatterton ofStrategic Farm Marketing. Let's
talk about marketing a crop in abig crop year, generally
speaking, and what that reallymeans for a producer as we make
our way into the end of themonth of June. I think there's
(00:46):
more time maybe for soybeans aswe usually think of it as an
August crop, but corn we thinkof as a June, July crop going
through pollination, running outof time on old crop, I suppose,
and looking forward to new crop.In these big crop years, how
does Stark, the marketplacegenerally act?
Brian Stark (01:10):
I think the first thing each producer needs to
look at, obviously, if you'resitting in an area where your
crop looks fantastic, you'reright. Seasonally, we tend to
see corn rally through the Julyor have that opportunity. We're
not seeing that currently. Sothe first step has to be where
is my crop insurance guaranteeversus where my production is.
(01:30):
And I think looking at that as arevenue based decision will help
insulate potentially somedecision makings the producer
has to make.
We also have to pay attention tothe outside macro market and the
fund composition. The funds area 150,000 contracts shortened
corn. So while it may be prudentto advance sales here, when we
(01:52):
get a rally if we do over thenext two to three weeks, we
wanna look at those and analyzewhere our rev our revenue return
is and make decisions based on anet positive return if we expect
better than APH yields.
Todd Gleason (02:06):
So you walked right into a place that I think
you'll be comfortable, DaveChatterton, as it's related to
calculating what your cropinsurance might cover,
particularly if you have ECO,maybe SEO as well, but ECO
involved in that. I'm sure yourshop has talked some about these
(02:28):
numbers. How do producers usethat to their advantage?
Dave Chatterton (02:33):
Yeah. Todd, it's been a very unusual year in
the sense that we haven't reallyin corn particular, we have not
had the opportunity to see amarket or to market or to hedge
or to make forward sales at alevel above that spring crop
insurance guarantee price incorn. Now beans, you know, we
have and we are just slightlyabove that, but it hasn't been
by any any big margin. When yougo back and look historically,
(02:53):
we've got twenty five years ofdata, and, basically, there's
only one other year that that'shappened for corn. There was one
year for beans, one year forcorn.
We we've checked the box inbeans, but we haven't done so in
corn. The incentive to marketgrain here when you're below
that crop insurance guaranteebecomes less and less and less,
I think, at this particularpoint of the crop year. Brian's
very, very right in theseasonals. If you haven't really
(03:15):
started to rally by about theJune 20, the the odds quickly
turn against you. But havingsaid that, you don't know what
you don't know.
And we know there's a lot of II'll call it headline risk in
terms of geopolitics, in termsof maybe a trade deal gets cut
with China or someone elsethat's beneficial to the grain.
So selling here at a low leveland and then seeing the market
(03:37):
rally, you're out your cropinsurance claim, you're reducing
or eliminating your ARC and PLC,payments, and then you're stuck
with a lower grain price. Youhave to be careful of the timing
of what you're doing. You needto be aware of your logistics
and what you need to move in thefall and when you need to pull
that trigger as your cropinsurance coverage, you know,
whether it's MP, ECO, whateveryou've chosen is going to expire
(03:59):
in October. So your put or ifyou will, your revenue guarantee
is done at the October.
So you have to have a plan todeal with that, but you have to
be careful here of howaggressive you wanna be in
marketing. And, you know, we'rean advocate of forward sales. We
always wanna stay ahead of thegame, but this is a very, I
think, defensive, you know,market that we're dealing with
here at the moment.
Todd Gleason (04:19):
So let's deal with new crop in that end of the
October time frame, whichprobably puts us coupled with
the grain that has to go acrossthe scale and a decision needs
to be made at that point. Whatare producers weighing today? I
think
Brian Stark (04:36):
the biggest thing is trying to anticipate or
forecast what that percentage oftheir crop is in these areas
that look very good this earlyin the game that if we do get a
sudden short term rally in thenext three weeks, how much do I
need to market above APH that Icannot store and farm? Those are
your most at risk bushels. Thoseare the ones we would advocate
(05:00):
taking chips off the tabletoday. I agree with Dave. You
have to be very careful with thefund composition, obviously,
geopolitical issues, but there'svery little incentive to be more
aggressive for the bushelsselling them today that you can
store on farm because you'll beable to buy yourself a little
more time and see how the cropand the demand evolves.
(05:20):
If you look at the balancesheet, we're still very tight
going into this new crop year,and we still need to get through
pollination. And if you believethe government's forecast, which
some would argue maybe thedemand factors are a little too
high for the twenty five, twentysix year, there's still what the
market has to trade today, andthe carryout even with the one
(05:40):
eighty one yield is stillprojecting a $1.07 5,000,000,000
carryout, which is notcumbersome. So there should be
some opportunities, betteropportunities as we go forward,
but we have to focus and bedisciplined if we do see a rally
in the next month to take someof the risk off the table for
those bushels we can't store onfarm.
Todd Gleason (06:00):
Can you clarify kind of the formula formula
you're thinking about as to thebushels that need to be sold? Is
that crop insurance coverage intotal? So 85% or 80% plus the
ECO up to 90 or 95 times thecrop insurance value Mhmm. Times
(06:28):
what? Above APH.
I don't understand how thatworks. So are you drastically
reducing the number of bushelsyou're thinking that has to be
marketed in that case? Or is itthose bushels above APH only
times the 85? What what does theformula look like?
Brian Stark (06:52):
I think you have to look at that. You're right. It's
it's a combination of APH, 85%of your APH times the spring
price. So your 15% is certainlywhat you have to consider.
That's your deductible, right,unless you have an ECO product
that raises that value.
So that goes into the equationas well. But the higher your
(07:12):
expected yield is, the morebushels you're gonna have to use
coming down, from the springguarantee to market. But I look
at it as this, not just theinsurance, but, yes, that
expires at the October from arevenue put perspective. But I
think your most at risk bushelsare really the bushels you can't
store on farm. What I'm tryingto say is, yes, the formula, you
(07:36):
can manipulate that based onwhat your actual yield is gonna
be because it lowers your priceguarantee, your price floor with
the higher bushels.
But it's really what can I notstore on farm? So if your APH
and your expected yield is gonnabe higher than APH, it's gonna
raise the amount of bushels youhave to market now.
Todd Gleason (07:53):
Okay. I'm going to ask you a question that I should
know the answer to and that I
Brian Stark (07:56):
can ask Gary Schnitke about. But in can you
go to the PharmDoc website anduse the calculators to come up
with a set of numbers for this?Yes. That would be a great spot
to to look and calculate youryour actual guaranteed bushels
of what you need to considermarketing right now.
Todd Gleason (08:16):
How do you talk producers through that, Dave?
Dave Chatterton (08:19):
Well, you know, it's different for every
producer, Todd. And I think, youknow, we've done a good job of
kinda covering the ground, Brianhas so far of of where we're at.
I mean, keep in mind that you'rethere's two elements in that
crop insurance guarantee. One isyield and one is revenue. And
what we're gonna do in the fallis take your your count to
revenue.
In other words, we're gonna takeyour actual yield on your farms
(08:39):
as a composite in most cases orenterprise unit. Take that times
whatever that fall price averageis. And if that number is below
the the the revenue guaranteethat was calculated in the
spring, you've got a claim.Okay? That doesn't take care of
the bushels that you need tologistically move at harvest.
I think you need to be thinkingabout basis in terms of what it
means. Is it going to get worse?Is it going to get better? And
(09:00):
as this crop potential lookslike it's getting better and
better and better, we'recertainly not looking at a basis
situation in the fall that'sgoing to be, bullish or friendly
or, you know, where we canexpect a lot of appreciation.
So, you know, two elements here.
You need to watch that basis ifyou have to deliver in the fall.
Try and decide in time when'sthe best opportunity for me to
(09:20):
lock that in. That can beseparate from what you do on
futures or flat price. The twocombined are gonna get you the
best possible result that youcan get. So it's not don't do
anything.
It's not don't have a plan orstick your head in the sand
until October, but it's it'slet's pull the levers here in
the order that they need to bepulled and and work what we can.
Todd Gleason (09:38):
Let's talk through some of the fundamentals because
the Andersons cover so much ofthe Eastern Corn Belt,
particularly in Ohio where youare headquartered. I'm wondering
what you're hearing aboutSouthern Indiana, maybe parts of
Southern Illinois, but certainlyIndiana, Ohio will be inside of
(09:58):
your bailiwick. What is the whatis the
Brian Stark (10:00):
company and and the elevator system across those
states telling you? I think thedelayed and the excessive rain
we've seen, you could take itfrom basically South Of I 70,
from Illinois, Indiana, Ohio andgo down into the Delta was
inundated with rain, and a lotof that crop, was delayed in
being planted. You could evenquestion if we lost or saw some
(10:23):
switching of corn acres tobeans. I think Ohio is coming
off a crop specifically lookingjust at that state where they
did not have a very good corncrop last year. It appears today
that's one of the states in theEastern Corn Belt that
potentially could be belowexpected state yield production,
and that certainly, bodes wellfor a stronger eastern type corn
(10:46):
basis that we're seeing in oldcrop today spilling over into
new crop down the road.
So I think right now, if youwanna look at a potential
problematic spot, it is thefarther east you go. You could
even stretch that intoPennsylvania and New York, where
those are much smaller marketsof production for corn, but
areas that are probably gonnalose some acres. You could also
(11:07):
look in the Upper Northwest inthe Dakotas. There is some spots
that make it very cumbersome tojust think that here in a couple
weeks, I guess, ten days, we'regonna see, you know, potentially
are we gonna see still95,000,000 acres, or do we lose
some of those acres to soybeans?Time will tell.
But I think the other thing onthe other side of the coin,
producer needs to realize is insome of those lower producing
(11:31):
yield states, we may lose acres,but does that help support the
national yield higher becausesome of the other states maybe
picked up some additionalacreage like Iowa in the West
where they were dry early duringthe spring? Let's talk a
Todd Gleason (11:44):
little bit about Iowa and going to the West, East
Of The Mississippi River.Strategic farm marketing has
historically had a largepresence in portions of those
areas, and you sometimes meet ona weekly basis during the
growing season to talk aboutwhat this looks like. What have
you been hearing from thoseoffices across the Western Corn
(12:04):
Belt? Yeah, Todd.
Dave Chatterton (12:05):
It's not that they're they're not without
problems, but I think theopposite of what Brian said,
those crops tended to go inearlier. I think they have the
yield potential to hopefullykinda make up for what we're
seeing in Ohio, parts ofIndiana, Southern Illinois,
etcetera. So not that there areextreme differences here, but if
you look at the the weekly cropratings, if you look at the
planning progress, you know,there's a few issues here and
there. There always are. But thegen the general viewpoint of the
(12:27):
crop in Missouri, Iowa, SouthernMinnesota, the Dakotas, Nebraska
still continues to be prettypositive.
And, you know, it's a very mucheast to west basis situation.
We've got customers in Ohioright now seeing ethanol plant
bids at 60 over on corn.Decatur's eight over tonight,
and I've got guys in Nebraskacloser to options. So, I mean,
(12:49):
it runs the gamut of of are wegoing to be able to pull that
corn, you know, to the east viathe the the spreads? But I
think, you know, the bettercrop, if you will, this year is
is in the Western Corn Belt.
Todd Gleason (13:02):
Once the producers started planting corn and or
soybeans in those areas, becausethey were dry up front, did they
plant more corn acres? Did youhear that from them? And when
you look out to the end of themonth at the acreage report, as
Brian alluded to, will they showup, And are they offset
(13:22):
somewhere else, or will theyjust show up as more acres?
Dave Chatterton (13:25):
Yeah. Todd, on the margin, I think they did get
a few more corn acres. Is thatgonna be a big difference? I
don't think so. At the end ofthe day, we would expect corn
acres to come down, you know,not necessarily in the June
report, but probably more likelyin the September report by maybe
three to 500,000.
If we have a strong yieldpotential at or above trend,
that's really a rounding erroralmost in terms of what it means
(13:45):
to the bottom line or to to tobottom line carryout. So
something that we'll watch,something that we'll tweak. But
there are a few prevent plantacres out there. And at the end
of the day, prevent plant acrestend to take away from soybeans.
In other words, if a farmer or aproducer is going to declare
prevent plant, they're they're99% of the time gonna do that on
corn where it's a more valuableclaim.
(14:06):
So, you know, at least on paper,I don't see a big slippage in
those corn acres.
Todd Gleason (14:10):
I know we won't get this to this until we get to
September where we see some earcounts, but our producers in the
Western Corn Belt talking abouttheir plant populations and
emergence being good, better,great.
Dave Chatterton (14:25):
Off off the charts in a lot of cases. And,
you know, almost all the cornthat went in the ground in those
areas came up. Good stand. We'vehad very little in the way. You
know, the weather has beencooperative.
We've had very little in the wayof rain, hail, wind comments to
date. Now we had some wind comethrough come through our part of
Central Illinois today, and itlooks like maybe we're gonna
escape okay. But so far, sogood, on those respects. And,
(14:48):
you know, it just it looks likethe potential there is something
that folks are excited about.
Brian Stark (14:52):
I wanna turn your attention to the announcement
that US EPA made last week onFriday, the renewable volume
obligations. Talk a little bitabout what that means to the
ethanol industry. It simply, Ithink, said we're gonna hold at
15,000,000,000 gallons, andthat's where we generally always
(15:12):
are. And sometimes we produce abit more and sell a bit more
than that, mostly based on theexport market, and sometimes we
don't. I think the biggesttakeaway, for us is or the
ethanol industry as a wholesimply what we were talking
about, here earlier that whenyou increase the usage of
soybean oil and crush a bean foroil, you produce a stronger or
(15:38):
40% increase based on theinitial announcement of soybean
meal.
And I think that does have animpact potentially to margins,
in corn, from a feedingperspective as well as DDG. So I
think that is the one thing inthe market that's gonna be
interesting just to watch forthe ethanol side of part of a
crush is the product side andhow much DDGs remain
(16:00):
competitive, in in cheap feed,with with soybean meal here
moving forward.
Todd Gleason (16:05):
Of course, this is an announcement. There is a
common period that really needsto be finalized but would be put
in place for the twenty sixthcalendar year, I think starting
January 1. That means it shouldimpact what takes place for the
new crop. Have you thought muchabout what that really means as
it's related to, I guess,suppressing the price of corn?
Brian Stark (16:31):
Yeah. I mean, it certainly could have a negative
impact. I think just as I wasmentioning, I think the meal
component I mean, feed usage isa huge component of corn demand.
And I think, obviously, anincrease in meal, coupled with
DDGs, now you have a multipleline competing product, and it
should be very, good for thelivestock producer, with
(16:52):
potentially cheaper alternativesto consider here moving forward.
So maybe that helps expand, youknow, some of our livestock,
numbers here moving forward,which, you know, will have to
remain to be seen.
But I do think that, certainlycould have a another detrimental
negative influence on corn pricehere longer term, as it competes
(17:13):
for a demand. So you did find apositive a way that was for the
livestock sector.
Dave Chatterton (17:19):
Yeah. Todd, I think when you know, maybe I'll
shift the focus just to shade,and I think what we're talking
about is at at this point in thecrop here, the the trade is not
focused on old crop stocks forcorn. I mean, we have enough
corn. You can see that in thebasis. We're gonna get by the
new crop.
It may be a little bigger, alittle smaller crop, few less
acres, a few more acres. We'llwe'll get to the end and and
figure that out. What the tradeis focused on, I think, is the
(17:41):
growth year over year and theprojected carryout for corn from
this year to next year. Andwhether it's 1.8, whether it's
two point o, whether it's 2.2,the government and the USDA has
a very aggressive corn exporttotal on their new crop balance
sheet. Most people are highlysuspect of that, including
ourselves.
That doesn't mean that exportsstop or they're gonna be
(18:02):
terrible. Just means the USDAhas a very high bar for them and
likely could come up short. Youcouple that, I think, with what
Brian is, you know, ishighlighted here. And certainly,
when you look at what what'shappened here with with the RVO
and what it means to soybeancrush domestically in The US, it
is not bearish. We are going tosee we've seen a capacity build
out in the biofuels industry.
(18:23):
We're gonna see that capacityget used under this proposed
legislation assuming that itcomes to fruition. And in doing
so, we have cheap wheat andcheap meal competing with corn
or DDGs in this case in a feedration, that just again, it's
you know, if you look at our twobiggest demand line items of a
(18:44):
demand on the balance sheet,you're talking about the ethanol
industry and feed. Well, feedlooks like, you know, one of
those two has to give a littlebit, and then we go to the
exports and certainly those looka little squishy. So I think the
bet on the street, if you will,or the in the analyst market,
the CBT Chicago market, is thatthat carry out figure for corn
is actually creeping higher andthe yield ideas that we've just
(19:05):
talked about here in The US onlyadd to that.
Todd Gleason (19:08):
Do you think that as you understand the RVO at
this point that it is
Brian Stark (19:17):
well, how net positive is it for the soybean
market as opposed to the cornmarket? How net positive might
it be for the soybean market atthis time? Oh, that's a a good
question. I think it overall,trying to quantify that is a
little bit of a challenge. Butas we've seen over the past few
sessions since Friday, beanshave been up three percent.
(19:40):
You know, oil has been up 30plus percent. I think from those
two components, it is friendly.And to Dave's comments, I mean,
if if corn is potentially atrisk of losing some demand, as
friendly as this could be foroverall bean demand outside of
the weight of meal and trying tofigure out how to offload the
meal products since itrepresents 80% of of your crush,
(20:03):
I think you could see a shift ofor incentivized for producers in
the The US Corn Belt to startconsidering planting more beans,
and the bean growth opportunityin acreage starts to shrink some
of the the corn, which we alltalk about in Central Illinois
and Indiana as corn being king,maybe that sentiment's gonna be
shifting a little bit based onthe market signals for this
(20:25):
robust new demand. We looked atthat similarly, and
Todd Gleason (20:30):
you can jump in on this as well, Dave. But we did
watch that that bean marketexpand, particularly as China
needed more beans and beforeBrazil became the number one
exporter of beans. So it it'snot something that producers
haven't dealt with. It just hasa component within it that
suppresses the marketplace.
Dave Chatterton (20:52):
Yeah. I mean, I see the RVO as a positive for
beans. What we need is, youknow, if you look at a long term
chart of our exports, you know,we've been losing market share
globally, and we've beenexporting fewer and fewer beans.
Now we're in a situation we'rein a I'll call it a trade war
with China. How that resolves, Idon't know.
But anything that that enhancescrush in domestic use of
soybeans is a positive for thebean market. I think it's a bean
(21:15):
versus corn issue, and it's anacreage issue that that may
develop over time. It it'scertainly, you know, less
friendly outright beans than itis the bean oil, and it's
certainly, you know, bearish tothe meal component. But that's a
crush issue. It's notnecessarily a flat price bean
issue.
So it is supportive of beanprices. And if you wanna paint
the most positive light of that,and we talked about, you know,
(21:38):
are there positive things outhere? If you can couple that,
I'll call it added demand ordemand incentive domestically on
the crush side with thepotential, and I'll I'll capital
p potential of a trade deal withChina where they acquiesce to
buy US grains and and soy as away of accessing The US
marketplace, they have a prettypowerful situation in beans
(22:00):
going forward. Now that's a whatif on a what if, but I I think
what's happened with the RVOhere is certainly supportive. It
it shifts, I think, the producerif I were a producer, my mindset
would be shifting a little bitto maybe leaning on a few more
bean acres as I look forwardinto next year.
Todd Gleason (22:15):
And finally, I I wanna take up the issues in the
Black Sea, the war betweenRussia and Ukraine, the issues
in The Middle East, the warbetween Iran and Iraq. We're
recording on Wednesdayafternoon, we don't have, for
most people who are listening tothis on one of the radio
stations, information that tookplace over the intervening forty
(22:39):
eight hours. But I do wanna taketake a larger look at that and
discuss how the world might dealwith both Russia and Iran if
they were to institute moresanctions against each as
opposed to what an active hotwar might mean and how that
(23:03):
would impact the marketplaceover time. So and it it may or
may not include China,particularly as it's related to
Russia. But if the world were toimpose sanctions on Iran, which
produces oil, and that wasunable to get through, and they
(23:24):
were to impose sanctions onRussia.
And if China were to agree to dothat as part of some kind of
trade agreement, What impactdoes that have on the
marketplace, and how does itchange the situation?
Brian Stark (23:38):
Well, I think certainly we've seen that,
reaction a little bit in theprice of crude oil here over the
last few days as things haveescalated over in The Middle
East. And I I didn't look hererecently, but yesterday, I think
oil was around $75 a barrel. Ithink, obviously, the higher
that goes, that certainly, spursa little bit better demand for
(23:59):
ethanol, and I think that'spositive for the corn front. In
turn, you can look at what thewheat market did today. The
first market we see reactanytime these geopolitical
issues come up seems to bewheat.
Wheat tends to be the leader inthat. And I think fundamentally,
the demand and the endingcarryout, I don't think is
driving the meat wheat actionright now. It's simply the macro
(24:20):
influence of of fear. And Ithink, you know, from that
perspective, wheat obviouslycould be something that leads
the rest of
Dave Chatterton (24:27):
the
Brian Stark (24:27):
market higher as it's been known to do in the
past.
Dave Chatterton (24:32):
Yeah. You know, Todd, start with the oil real
quick. I mean, Russia is a topthree exporter, US, Saudi
Arabia, Russia. It's a veryimportant, you know, and that's
without the shipping orlogistical issues that may or
may not develop in the BlackSea. You throw Iran into that
situation, obviously, not a hugeexport of oil, right around
1,800,000 barrels per day.
But certainly, if they upset theapple cart in terms of shipping
(24:53):
logistics, military operationsin The Gulf, we have a much
bigger situation. You have theStrait Of Hormoz where 20% of
all oil every day, you know, allthe all oil demand goes through
on a daily basis. So if we if welose those, certainly, we have
an issue. But to you know, thebigger point here is wheat
(25:14):
remains the canary in the coalmine. And to Brian's point,
funds are heavily short wheat.
They they covered some prettyaggressively today. We had a
$26.07 cent move in in wheattoday or 25¢ move in wheat. And
I think that's the issue. Youlook at the wheat that's
produced and exported by Russia,Ukraine, Iran being a huge
importer of wheat, andcertainly, there's a lot of
(25:35):
moving parts in that situation.The unknown right now, the first
thing that they're gonna do iscover those shorts or cover a
bigger portion of those shortsas we go forward.
I think that's what happenedtoday as we've led into what is
a pseudo holiday weekend or ashort trading, you know, a less
populated trading day on Friday.Having said that, like I said, I
think, you know, that's wherethe the those are the two
biggest elements, the oilcomplex, the wheat complex. And,
(25:57):
certainly, if wheat's gonna gohigher, it's gonna be a benefit
to the row crops here that wehave.
Todd Gleason (26:02):
Important to watch those developing functions.
OPEC, of course, started in1960, I believe. Iran, one of
the founding members along withIraq, Saudi Arabia there, You
already mentioned as one of thethree largest producers of crude
oil on the planet. It andRussia, which is a member of
(26:22):
OPEC plus, about equal in thesize of their daily output along
with The United States. 41% ofthe oil on the planet is
produced by OPEC plus.
That includes Venezuela, butthose Middle East and Russian
countries primarily. I thinkSaudi Arabia is an important
(26:44):
player in this as it relates towhat happens on the world stage.
It'll be interesting to see howthat all plays out.
Dave Chatterton (26:52):
I think you're right, Todd. And look at what
has Saudi done here of late. Inthe last two OPEC meetings,
we've had outsized increases inproduction. They're adding
production at a time when,excuse me, oil prices have set
back at least until late here.And they're doing so and I'm not
saying there's any coordinationthere or that they that they
knew what was happening orworking with The US, but
certainly they're bringing moreoil onto the market under the
(27:15):
guise of we want to protect ourmarket share.
I think the important thing isIran is exporting somewhere
around 1,800,000 barrels ofcrude per day. Saudi Arabia is
closer to 12, but the sparecapacity within OPEC plus, which
is 80% Saudi Arabia, is probablyclose to five to 6,000,000
barrels per day. So lose two,will the others make up for
(27:36):
that? I would argue that theyprobably will, and I think
they've shown their hand andthat they're that they're
willing to do that and take thatmarket share if it's available.
I don't know how it turns out,but I think the oil situation is
more of a logistical or atransport situation.
If there's a problem in thestraight Hormos, you know, at
its narrowest point, it's about20 miles wide. The navigation
channel is about four mileswide. So even a country that may
(27:59):
have lost a lot of its militarycapability in the sense of of
the war that or the thedestruction that's happened
inside of Iran could probablystill do something in a four
mile corridor, and it's a veryimportant shipping channel to do
that. My fear here is that thelonger that this goes on and
that, that military action istaking place and people are
(28:20):
getting killed inside of Iran,the more I don't know if
desperate is the right term theybecome become, the more they get
backed into a corner, I thinkthe less rationale they're gonna
put behind their response andthe more danger we have of an
issue that that grows wider, ifyou will.
Todd Gleason (28:34):
Let's wrap up now. We'll get a final thought from
each of you as it's related tothe commodity markets. Brian
Stark of the Andersons. I'llstart with you for the day.
Brian Stark (28:43):
I think the biggest thing I want producers to
recognize, we haven't spent alot of time talking about old
crop because the season's aboutover. But to Dave's point, corn
basis is extremely strong in theEastern areas of Indiana and
Ohio. I think, obviously, wehave not seen that same strength
in Illinois. That's been kind ofan interesting dichotomy. We've
seen the spreads kind ofcollapse here, over the past
(29:06):
couple of weeks, in a very tightcarryout scenario because the
river seems to have a wellsupplied market.
That's been an interestingdynamic. I think basis strength
certainly needs to be paidattention to. On the flip, we
look at the soybean market,which ironically saw quite a bit
of volatility in old crop basiswith a large end user
(29:26):
essentially fading to new cropbids prior to the RVO
announcement last Friday, givenpoor crush in the past, six to
eight months, and it'sinteresting to see how the rest
of the market reacted. So Ithink the question or the
comment that I want everybody torecognize, the next sixty days,
ninety days, whether it's macro,whether it's fundamental,
(29:49):
there's gonna be a lot ofvolatility. And I think
producers need to be willing toact when the market gives them a
good opportunity, whether thatbe old or new crop.
Todd Gleason (29:57):
Dave Chatterton of strategic farm marketing, your
final word?
Dave Chatterton (30:01):
Yeah. I think I'll pick up where Ryan left
off. You hit the nail on thehead. The next sixty days are
gonna be very important for themarket in general in terms of
price. We've done a good job oftalking about old crop, but
let's not forget about new cropas well.
When we look out there, we'vegot some carry in this
marketplace, and we'reapproaching a level that, I'll
say, $4.75 on new crop corn,$10.90, $11 on new crop beans,
(30:23):
or maybe, you know, $5.50, $5.60on that new crop wheat are all
generally profitable for anumber of producers. So I know
we're struggling with theremainder of old crop here.
Let's not forget about new cropas and especially as it relates
to crop insurance that there aresome opportunities out there for
26. You know, don't this is anenvironment where we're playing
(30:44):
defense in terms of marketingand staying ahead of the game
and looking at levels that youcan identify as profitable are
important. Those are some of thegood things that we can make out
of the market today and andthings that you can concentrate
on.
Todd Gleason (30:55):
Commodity week is a production of Illinois Public
Media. This program was recordedon Wednesday, June. Our thanks
go to Strategic Farm Marketing'sDave Chatterton and Brian Stark
of The Andersons. You can alwayslisten to the whole of the
program anytime you'd like onour website at willag.org.
That's willag.0rg.
(31:17):
Or search it out by name in yourfavorite podcast applications.
Look for commodity week. I'mUniversity of Illinois
Extensions, Todd Gleason.
This edition of Commodity Week was recorded
(00:02):
Wednesday, June 18. ToddGleason's services are made
available to WILL by Universityof Illinois Extension. Welcome
to Commodity Week. I am ToddGleason. You can find our
programming online atwillag.0rg.
That's willag.org. Today, we'rejoined by Brian Stark of The
(00:25):
Andersons and Dave Chatterton ofStrategic Farm Marketing. Let's
talk about marketing a crop in abig crop year, generally
speaking, and what that reallymeans for a producer as we make
our way into the end of themonth of June. I think there's
(00:46):
more time maybe for soybeans aswe usually think of it as an
August crop, but corn we thinkof as a June, July crop going
through pollination, running outof time on old crop, I suppose,
and looking forward to new crop.In these big crop years, how
does Stark, the marketplacegenerally act?
Brian Stark (01:10):
I think the first thing each producer needs to
look at, obviously, if you'resitting in an area where your
crop looks fantastic, you'reright. Seasonally, we tend to
see corn rally through the Julyor have that opportunity. We're
not seeing that currently. Sothe first step has to be where
is my crop insurance guaranteeversus where my production is.
(01:30):
And I think looking at that as arevenue based decision will help
insulate potentially somedecision makings the producer
has to make.
We also have to pay attention tothe outside macro market and the
fund composition. The funds area 150,000 contracts shortened
corn. So while it may be prudentto advance sales here, when we
(01:52):
get a rally if we do over thenext two to three weeks, we
wanna look at those and analyzewhere our rev our revenue return
is and make decisions based on anet positive return if we expect
better than APH yields.
Todd Gleason (02:06):
So you walked right into a place that I think
you'll be comfortable, DaveChatterton, as it's related to
calculating what your cropinsurance might cover,
particularly if you have ECO,maybe SEO as well, but ECO
involved in that. I'm sure yourshop has talked some about these
(02:28):
numbers. How do producers usethat to their advantage?
Dave Chatterton (02:33):
Yeah. Todd, it's been a very unusual year in
the sense that we haven't reallyin corn particular, we have not
had the opportunity to see amarket or to market or to hedge
or to make forward sales at alevel above that spring crop
insurance guarantee price incorn. Now beans, you know, we
have and we are just slightlyabove that, but it hasn't been
by any any big margin. When yougo back and look historically,
(02:53):
we've got twenty five years ofdata, and, basically, there's
only one other year that that'shappened for corn. There was one
year for beans, one year forcorn.
We we've checked the box inbeans, but we haven't done so in
corn. The incentive to marketgrain here when you're below
that crop insurance guaranteebecomes less and less and less,
I think, at this particularpoint of the crop year. Brian's
very, very right in theseasonals. If you haven't really
(03:15):
started to rally by about theJune 20, the the odds quickly
turn against you. But havingsaid that, you don't know what
you don't know.
And we know there's a lot of II'll call it headline risk in
terms of geopolitics, in termsof maybe a trade deal gets cut
with China or someone elsethat's beneficial to the grain.
So selling here at a low leveland and then seeing the market
(03:37):
rally, you're out your cropinsurance claim, you're reducing
or eliminating your ARC and PLC,payments, and then you're stuck
with a lower grain price. Youhave to be careful of the timing
of what you're doing. You needto be aware of your logistics
and what you need to move in thefall and when you need to pull
that trigger as your cropinsurance coverage, you know,
whether it's MP, ECO, whateveryou've chosen is going to expire
(03:59):
in October. So your put or ifyou will, your revenue guarantee
is done at the October.
So you have to have a plan todeal with that, but you have to
be careful here of howaggressive you wanna be in
marketing. And, you know, we'rean advocate of forward sales. We
always wanna stay ahead of thegame, but this is a very, I
think, defensive, you know,market that we're dealing with
here at the moment.
Todd Gleason (04:19):
So let's deal with new crop in that end of the
October time frame, whichprobably puts us coupled with
the grain that has to go acrossthe scale and a decision needs
to be made at that point. Whatare producers weighing today? I
think
Brian Stark (04:36):
the biggest thing is trying to anticipate or
forecast what that percentage oftheir crop is in these areas
that look very good this earlyin the game that if we do get a
sudden short term rally in thenext three weeks, how much do I
need to market above APH that Icannot store and farm? Those are
your most at risk bushels. Thoseare the ones we would advocate
(05:00):
taking chips off the tabletoday. I agree with Dave. You
have to be very careful with thefund composition, obviously,
geopolitical issues, but there'svery little incentive to be more
aggressive for the bushelsselling them today that you can
store on farm because you'll beable to buy yourself a little
more time and see how the cropand the demand evolves.
(05:20):
If you look at the balancesheet, we're still very tight
going into this new crop year,and we still need to get through
pollination. And if you believethe government's forecast, which
some would argue maybe thedemand factors are a little too
high for the twenty five, twentysix year, there's still what the
market has to trade today, andthe carryout even with the one
(05:40):
eighty one yield is stillprojecting a $1.07 5,000,000,000
carryout, which is notcumbersome. So there should be
some opportunities, betteropportunities as we go forward,
but we have to focus and bedisciplined if we do see a rally
in the next month to take someof the risk off the table for
those bushels we can't store onfarm.
Todd Gleason (06:00):
Can you clarify kind of the formula formula
you're thinking about as to thebushels that need to be sold? Is
that crop insurance coverage intotal? So 85% or 80% plus the
ECO up to 90 or 95 times thecrop insurance value Mhmm. Times
(06:28):
what? Above APH.
I don't understand how thatworks. So are you drastically
reducing the number of bushelsyou're thinking that has to be
marketed in that case? Or is itthose bushels above APH only
times the 85? What what does theformula look like?
Brian Stark (06:52):
I think you have to look at that. You're right. It's
it's a combination of APH, 85%of your APH times the spring
price. So your 15% is certainlywhat you have to consider.
That's your deductible, right,unless you have an ECO product
that raises that value.
So that goes into the equationas well. But the higher your
(07:12):
expected yield is, the morebushels you're gonna have to use
coming down, from the springguarantee to market. But I look
at it as this, not just theinsurance, but, yes, that
expires at the October from arevenue put perspective. But I
think your most at risk bushelsare really the bushels you can't
store on farm. What I'm tryingto say is, yes, the formula, you
(07:36):
can manipulate that based onwhat your actual yield is gonna
be because it lowers your priceguarantee, your price floor with
the higher bushels.
But it's really what can I notstore on farm? So if your APH
and your expected yield is gonnabe higher than APH, it's gonna
raise the amount of bushels youhave to market now.
Todd Gleason (07:53):
Okay. I'm going to ask you a question that I should
know the answer to and that I
Brian Stark (07:56):
can ask Gary Schnitke about. But in can you
go to the PharmDoc website anduse the calculators to come up
with a set of numbers for this?Yes. That would be a great spot
to to look and calculate youryour actual guaranteed bushels
of what you need to considermarketing right now.
Todd Gleason (08:16):
How do you talk producers through that, Dave?
Dave Chatterton (08:19):
Well, you know, it's different for every
producer, Todd. And I think, youknow, we've done a good job of
kinda covering the ground, Brianhas so far of of where we're at.
I mean, keep in mind that you'rethere's two elements in that
crop insurance guarantee. One isyield and one is revenue. And
what we're gonna do in the fallis take your your count to
revenue.
In other words, we're gonna takeyour actual yield on your farms
(08:39):
as a composite in most cases orenterprise unit. Take that times
whatever that fall price averageis. And if that number is below
the the the revenue guaranteethat was calculated in the
spring, you've got a claim.Okay? That doesn't take care of
the bushels that you need tologistically move at harvest.
I think you need to be thinkingabout basis in terms of what it
means. Is it going to get worse?Is it going to get better? And
(09:00):
as this crop potential lookslike it's getting better and
better and better, we'recertainly not looking at a basis
situation in the fall that'sgoing to be, bullish or friendly
or, you know, where we canexpect a lot of appreciation.
So, you know, two elements here.
You need to watch that basis ifyou have to deliver in the fall.
Try and decide in time when'sthe best opportunity for me to
(09:20):
lock that in. That can beseparate from what you do on
futures or flat price. The twocombined are gonna get you the
best possible result that youcan get. So it's not don't do
anything.
It's not don't have a plan orstick your head in the sand
until October, but it's it'slet's pull the levers here in
the order that they need to bepulled and and work what we can.
Todd Gleason (09:38):
Let's talk through some of the fundamentals because
the Andersons cover so much ofthe Eastern Corn Belt,
particularly in Ohio where youare headquartered. I'm wondering
what you're hearing aboutSouthern Indiana, maybe parts of
Southern Illinois, but certainlyIndiana, Ohio will be inside of
(09:58):
your bailiwick. What is the whatis the
Brian Stark (10:00):
company and and the elevator system across those
states telling you? I think thedelayed and the excessive rain
we've seen, you could take itfrom basically South Of I 70,
from Illinois, Indiana, Ohio andgo down into the Delta was
inundated with rain, and a lotof that crop, was delayed in
being planted. You could evenquestion if we lost or saw some
(10:23):
switching of corn acres tobeans. I think Ohio is coming
off a crop specifically lookingjust at that state where they
did not have a very good corncrop last year. It appears today
that's one of the states in theEastern Corn Belt that
potentially could be belowexpected state yield production,
and that certainly, bodes wellfor a stronger eastern type corn
(10:46):
basis that we're seeing in oldcrop today spilling over into
new crop down the road.
So I think right now, if youwanna look at a potential
problematic spot, it is thefarther east you go. You could
even stretch that intoPennsylvania and New York, where
those are much smaller marketsof production for corn, but
areas that are probably gonnalose some acres. You could also
(11:07):
look in the Upper Northwest inthe Dakotas. There is some spots
that make it very cumbersome tojust think that here in a couple
weeks, I guess, ten days, we'regonna see, you know, potentially
are we gonna see still95,000,000 acres, or do we lose
some of those acres to soybeans?Time will tell.
But I think the other thing onthe other side of the coin,
producer needs to realize is insome of those lower producing
(11:31):
yield states, we may lose acres,but does that help support the
national yield higher becausesome of the other states maybe
picked up some additionalacreage like Iowa in the West
where they were dry early duringthe spring? Let's talk a
Todd Gleason (11:44):
little bit about Iowa and going to the West, East
Of The Mississippi River.Strategic farm marketing has
historically had a largepresence in portions of those
areas, and you sometimes meet ona weekly basis during the
growing season to talk aboutwhat this looks like. What have
you been hearing from thoseoffices across the Western Corn
(12:04):
Belt? Yeah, Todd.
Dave Chatterton (12:05):
It's not that they're they're not without
problems, but I think theopposite of what Brian said,
those crops tended to go inearlier. I think they have the
yield potential to hopefullykinda make up for what we're
seeing in Ohio, parts ofIndiana, Southern Illinois,
etcetera. So not that there areextreme differences here, but if
you look at the the weekly cropratings, if you look at the
planning progress, you know,there's a few issues here and
there. There always are. But thegen the general viewpoint of the
(12:27):
crop in Missouri, Iowa, SouthernMinnesota, the Dakotas, Nebraska
still continues to be prettypositive.
And, you know, it's a very mucheast to west basis situation.
We've got customers in Ohioright now seeing ethanol plant
bids at 60 over on corn.Decatur's eight over tonight,
and I've got guys in Nebraskacloser to options. So, I mean,
(12:49):
it runs the gamut of of are wegoing to be able to pull that
corn, you know, to the east viathe the the spreads? But I
think, you know, the bettercrop, if you will, this year is
is in the Western Corn Belt.
Todd Gleason (13:02):
Once the producers started planting corn and or
soybeans in those areas, becausethey were dry up front, did they
plant more corn acres? Did youhear that from them? And when
you look out to the end of themonth at the acreage report, as
Brian alluded to, will they showup, And are they offset
(13:22):
somewhere else, or will theyjust show up as more acres?
Dave Chatterton (13:25):
Yeah. Todd, on the margin, I think they did get
a few more corn acres. Is thatgonna be a big difference? I
don't think so. At the end ofthe day, we would expect corn
acres to come down, you know,not necessarily in the June
report, but probably more likelyin the September report by maybe
three to 500,000.
If we have a strong yieldpotential at or above trend,
that's really a rounding erroralmost in terms of what it means
(13:45):
to the bottom line or to to tobottom line carryout. So
something that we'll watch,something that we'll tweak. But
there are a few prevent plantacres out there. And at the end
of the day, prevent plant acrestend to take away from soybeans.
In other words, if a farmer or aproducer is going to declare
prevent plant, they're they're99% of the time gonna do that on
corn where it's a more valuableclaim.
(14:06):
So, you know, at least on paper,I don't see a big slippage in
those corn acres.
Todd Gleason (14:10):
I know we won't get this to this until we get to
September where we see some earcounts, but our producers in the
Western Corn Belt talking abouttheir plant populations and
emergence being good, better,great.
Dave Chatterton (14:25):
Off off the charts in a lot of cases. And,
you know, almost all the cornthat went in the ground in those
areas came up. Good stand. We'vehad very little in the way. You
know, the weather has beencooperative.
We've had very little in the wayof rain, hail, wind comments to
date. Now we had some wind comethrough come through our part of
Central Illinois today, and itlooks like maybe we're gonna
escape okay. But so far, sogood, on those respects. And,
(14:48):
you know, it just it looks likethe potential there is something
that folks are excited about.
Brian Stark (14:52):
I wanna turn your attention to the announcement
that US EPA made last week onFriday, the renewable volume
obligations. Talk a little bitabout what that means to the
ethanol industry. It simply, Ithink, said we're gonna hold at
15,000,000,000 gallons, andthat's where we generally always
(15:12):
are. And sometimes we produce abit more and sell a bit more
than that, mostly based on theexport market, and sometimes we
don't. I think the biggesttakeaway, for us is or the
ethanol industry as a wholesimply what we were talking
about, here earlier that whenyou increase the usage of
soybean oil and crush a bean foroil, you produce a stronger or
(15:38):
40% increase based on theinitial announcement of soybean
meal.
And I think that does have animpact potentially to margins,
in corn, from a feedingperspective as well as DDG. So I
think that is the one thing inthe market that's gonna be
interesting just to watch forthe ethanol side of part of a
crush is the product side andhow much DDGs remain
(16:00):
competitive, in in cheap feed,with with soybean meal here
moving forward.
Todd Gleason (16:05):
Of course, this is an announcement. There is a
common period that really needsto be finalized but would be put
in place for the twenty sixthcalendar year, I think starting
January 1. That means it shouldimpact what takes place for the
new crop. Have you thought muchabout what that really means as
it's related to, I guess,suppressing the price of corn?
Brian Stark (16:31):
Yeah. I mean, it certainly could have a negative
impact. I think just as I wasmentioning, I think the meal
component I mean, feed usage isa huge component of corn demand.
And I think, obviously, anincrease in meal, coupled with
DDGs, now you have a multipleline competing product, and it
should be very, good for thelivestock producer, with
(16:52):
potentially cheaper alternativesto consider here moving forward.
So maybe that helps expand, youknow, some of our livestock,
numbers here moving forward,which, you know, will have to
remain to be seen.
But I do think that, certainlycould have a another detrimental
negative influence on corn pricehere longer term, as it competes
(17:13):
for a demand. So you did find apositive a way that was for the
livestock sector.
Dave Chatterton (17:19):
Yeah. Todd, I think when you know, maybe I'll
shift the focus just to shade,and I think what we're talking
about is at at this point in thecrop here, the the trade is not
focused on old crop stocks forcorn. I mean, we have enough
corn. You can see that in thebasis. We're gonna get by the
new crop.
It may be a little bigger, alittle smaller crop, few less
acres, a few more acres. We'llwe'll get to the end and and
figure that out. What the tradeis focused on, I think, is the
(17:41):
growth year over year and theprojected carryout for corn from
this year to next year. Andwhether it's 1.8, whether it's
two point o, whether it's 2.2,the government and the USDA has
a very aggressive corn exporttotal on their new crop balance
sheet. Most people are highlysuspect of that, including
ourselves.
That doesn't mean that exportsstop or they're gonna be
(18:02):
terrible. Just means the USDAhas a very high bar for them and
likely could come up short. Youcouple that, I think, with what
Brian is, you know, ishighlighted here. And certainly,
when you look at what what'shappened here with with the RVO
and what it means to soybeancrush domestically in The US, it
is not bearish. We are going tosee we've seen a capacity build
out in the biofuels industry.
(18:23):
We're gonna see that capacityget used under this proposed
legislation assuming that itcomes to fruition. And in doing
so, we have cheap wheat andcheap meal competing with corn
or DDGs in this case in a feedration, that just again, it's
you know, if you look at our twobiggest demand line items of a
(18:44):
demand on the balance sheet,you're talking about the ethanol
industry and feed. Well, feedlooks like, you know, one of
those two has to give a littlebit, and then we go to the
exports and certainly those looka little squishy. So I think the
bet on the street, if you will,or the in the analyst market,
the CBT Chicago market, is thatthat carry out figure for corn
is actually creeping higher andthe yield ideas that we've just
(19:05):
talked about here in The US onlyadd to that.
Todd Gleason (19:08):
Do you think that as you understand the RVO at
this point that it is
Brian Stark (19:17):
well, how net positive is it for the soybean
market as opposed to the cornmarket? How net positive might
it be for the soybean market atthis time? Oh, that's a a good
question. I think it overall,trying to quantify that is a
little bit of a challenge. Butas we've seen over the past few
sessions since Friday, beanshave been up three percent.
(19:40):
You know, oil has been up 30plus percent. I think from those
two components, it is friendly.And to Dave's comments, I mean,
if if corn is potentially atrisk of losing some demand, as
friendly as this could be foroverall bean demand outside of
the weight of meal and trying tofigure out how to offload the
meal products since itrepresents 80% of of your crush,
(20:03):
I think you could see a shift ofor incentivized for producers in
the The US Corn Belt to startconsidering planting more beans,
and the bean growth opportunityin acreage starts to shrink some
of the the corn, which we alltalk about in Central Illinois
and Indiana as corn being king,maybe that sentiment's gonna be
shifting a little bit based onthe market signals for this
(20:25):
robust new demand. We looked atthat similarly, and
Todd Gleason (20:30):
you can jump in on this as well, Dave. But we did
watch that that bean marketexpand, particularly as China
needed more beans and beforeBrazil became the number one
exporter of beans. So it it'snot something that producers
haven't dealt with. It just hasa component within it that
suppresses the marketplace.
Dave Chatterton (20:52):
Yeah. I mean, I see the RVO as a positive for
beans. What we need is, youknow, if you look at a long term
chart of our exports, you know,we've been losing market share
globally, and we've beenexporting fewer and fewer beans.
Now we're in a situation we'rein a I'll call it a trade war
with China. How that resolves, Idon't know.
But anything that that enhancescrush in domestic use of
soybeans is a positive for thebean market. I think it's a bean
(21:15):
versus corn issue, and it's anacreage issue that that may
develop over time. It it'scertainly, you know, less
friendly outright beans than itis the bean oil, and it's
certainly, you know, bearish tothe meal component. But that's a
crush issue. It's notnecessarily a flat price bean
issue.
So it is supportive of beanprices. And if you wanna paint
the most positive light of that,and we talked about, you know,
(21:38):
are there positive things outhere? If you can couple that,
I'll call it added demand ordemand incentive domestically on
the crush side with thepotential, and I'll I'll capital
p potential of a trade deal withChina where they acquiesce to
buy US grains and and soy as away of accessing The US
marketplace, they have a prettypowerful situation in beans
(22:00):
going forward. Now that's a whatif on a what if, but I I think
what's happened with the RVOhere is certainly supportive. It
it shifts, I think, the producerif I were a producer, my mindset
would be shifting a little bitto maybe leaning on a few more
bean acres as I look forwardinto next year.
Todd Gleason (22:15):
And finally, I I wanna take up the issues in the
Black Sea, the war betweenRussia and Ukraine, the issues
in The Middle East, the warbetween Iran and Iraq. We're
recording on Wednesdayafternoon, we don't have, for
most people who are listening tothis on one of the radio
stations, information that tookplace over the intervening forty
(22:39):
eight hours. But I do wanna taketake a larger look at that and
discuss how the world might dealwith both Russia and Iran if
they were to institute moresanctions against each as
opposed to what an active hotwar might mean and how that
(23:03):
would impact the marketplaceover time. So and it it may or
may not include China,particularly as it's related to
Russia. But if the world were toimpose sanctions on Iran, which
produces oil, and that wasunable to get through, and they
(23:24):
were to impose sanctions onRussia.
And if China were to agree to dothat as part of some kind of
trade agreement, What impactdoes that have on the
marketplace, and how does itchange the situation?
Brian Stark (23:38):
Well, I think certainly we've seen that,
reaction a little bit in theprice of crude oil here over the
last few days as things haveescalated over in The Middle
East. And I I didn't look hererecently, but yesterday, I think
oil was around $75 a barrel. Ithink, obviously, the higher
that goes, that certainly, spursa little bit better demand for
(23:59):
ethanol, and I think that'spositive for the corn front. In
turn, you can look at what thewheat market did today. The
first market we see reactanytime these geopolitical
issues come up seems to bewheat.
Wheat tends to be the leader inthat. And I think fundamentally,
the demand and the endingcarryout, I don't think is
driving the meat wheat actionright now. It's simply the macro
(24:20):
influence of of fear. And Ithink, you know, from that
perspective, wheat obviouslycould be something that leads
the rest of
Dave Chatterton (24:27):
the
Brian Stark (24:27):
market higher as it's been known to do in the
past.
Dave Chatterton (24:32):
Yeah. You know, Todd, start with the oil real
quick. I mean, Russia is a topthree exporter, US, Saudi
Arabia, Russia. It's a veryimportant, you know, and that's
without the shipping orlogistical issues that may or
may not develop in the BlackSea. You throw Iran into that
situation, obviously, not a hugeexport of oil, right around
1,800,000 barrels per day.
But certainly, if they upset theapple cart in terms of shipping
(24:53):
logistics, military operationsin The Gulf, we have a much
bigger situation. You have theStrait Of Hormoz where 20% of
all oil every day, you know, allthe all oil demand goes through
on a daily basis. So if we if welose those, certainly, we have
an issue. But to you know, thebigger point here is wheat
(25:14):
remains the canary in the coalmine. And to Brian's point,
funds are heavily short wheat.
They they covered some prettyaggressively today. We had a
$26.07 cent move in in wheattoday or 25¢ move in wheat. And
I think that's the issue. Youlook at the wheat that's
produced and exported by Russia,Ukraine, Iran being a huge
importer of wheat, andcertainly, there's a lot of
(25:35):
moving parts in that situation.The unknown right now, the first
thing that they're gonna do iscover those shorts or cover a
bigger portion of those shortsas we go forward.
I think that's what happenedtoday as we've led into what is
a pseudo holiday weekend or ashort trading, you know, a less
populated trading day on Friday.Having said that, like I said, I
think, you know, that's wherethe the those are the two
biggest elements, the oilcomplex, the wheat complex. And,
(25:57):
certainly, if wheat's gonna gohigher, it's gonna be a benefit
to the row crops here that wehave.
Todd Gleason (26:02):
Important to watch those developing functions.
OPEC, of course, started in1960, I believe. Iran, one of
the founding members along withIraq, Saudi Arabia there, You
already mentioned as one of thethree largest producers of crude
oil on the planet. It andRussia, which is a member of
(26:22):
OPEC plus, about equal in thesize of their daily output along
with The United States. 41% ofthe oil on the planet is
produced by OPEC plus.
That includes Venezuela, butthose Middle East and Russian
countries primarily. I thinkSaudi Arabia is an important
(26:44):
player in this as it relates towhat happens on the world stage.
It'll be interesting to see howthat all plays out.
Dave Chatterton (26:52):
I think you're right, Todd. And look at what
has Saudi done here of late. Inthe last two OPEC meetings,
we've had outsized increases inproduction. They're adding
production at a time when,excuse me, oil prices have set
back at least until late here.And they're doing so and I'm not
saying there's any coordinationthere or that they that they
knew what was happening orworking with The US, but
certainly they're bringing moreoil onto the market under the
(27:15):
guise of we want to protect ourmarket share.
I think the important thing isIran is exporting somewhere
around 1,800,000 barrels ofcrude per day. Saudi Arabia is
closer to 12, but the sparecapacity within OPEC plus, which
is 80% Saudi Arabia, is probablyclose to five to 6,000,000
barrels per day. So lose two,will the others make up for
(27:36):
that? I would argue that theyprobably will, and I think
they've shown their hand andthat they're that they're
willing to do that and take thatmarket share if it's available.
I don't know how it turns out,but I think the oil situation is
more of a logistical or atransport situation.
If there's a problem in thestraight Hormos, you know, at
its narrowest point, it's about20 miles wide. The navigation
channel is about four mileswide. So even a country that may
(27:59):
have lost a lot of its militarycapability in the sense of of
the war that or the thedestruction that's happened
inside of Iran could probablystill do something in a four
mile corridor, and it's a veryimportant shipping channel to do
that. My fear here is that thelonger that this goes on and
that, that military action istaking place and people are
(28:20):
getting killed inside of Iran,the more I don't know if
desperate is the right term theybecome become, the more they get
backed into a corner, I thinkthe less rationale they're gonna
put behind their response andthe more danger we have of an
issue that that grows wider, ifyou will.
Todd Gleason (28:34):
Let's wrap up now. We'll get a final thought from
each of you as it's related tothe commodity markets. Brian
Stark of the Andersons. I'llstart with you for the day.
Brian Stark (28:43):
I think the biggest thing I want producers to
recognize, we haven't spent alot of time talking about old
crop because the season's aboutover. But to Dave's point, corn
basis is extremely strong in theEastern areas of Indiana and
Ohio. I think, obviously, wehave not seen that same strength
in Illinois. That's been kind ofan interesting dichotomy. We've
seen the spreads kind ofcollapse here, over the past
(29:06):
couple of weeks, in a very tightcarryout scenario because the
river seems to have a wellsupplied market.
That's been an interestingdynamic. I think basis strength
certainly needs to be paidattention to. On the flip, we
look at the soybean market,which ironically saw quite a bit
of volatility in old crop basiswith a large end user
(29:26):
essentially fading to new cropbids prior to the RVO
announcement last Friday, givenpoor crush in the past, six to
eight months, and it'sinteresting to see how the rest
of the market reacted. So Ithink the question or the
comment that I want everybody torecognize, the next sixty days,
ninety days, whether it's macro,whether it's fundamental,
(29:49):
there's gonna be a lot ofvolatility. And I think
producers need to be willing toact when the market gives them a
good opportunity, whether thatbe old or new crop.
Todd Gleason (29:57):
Dave Chatterton of strategic farm marketing, your
final word?
Dave Chatterton (30:01):
Yeah. I think I'll pick up where Ryan left
off. You hit the nail on thehead. The next sixty days are
gonna be very important for themarket in general in terms of
price. We've done a good job oftalking about old crop, but
let's not forget about new cropas well.
When we look out there, we'vegot some carry in this
marketplace, and we'reapproaching a level that, I'll
say, $4.75 on new crop corn,$10.90, $11 on new crop beans,
(30:23):
or maybe, you know, $5.50, $5.60on that new crop wheat are all
generally profitable for anumber of producers. So I know
we're struggling with theremainder of old crop here.
Let's not forget about new cropas and especially as it relates
to crop insurance that there aresome opportunities out there for
26. You know, don't this is anenvironment where we're playing
(30:44):
defense in terms of marketingand staying ahead of the game
and looking at levels that youcan identify as profitable are
important. Those are some of thegood things that we can make out
of the market today and andthings that you can concentrate
on.
Todd Gleason (30:55):
Commodity week is a production of Illinois Public
Media. This program was recordedon Wednesday, June. Our thanks
go to Strategic Farm Marketing'sDave Chatterton and Brian Stark
of The Andersons. You can alwayslisten to the whole of the
program anytime you'd like onour website at willag.org.
That's willag.0rg.
(31:17):
Or search it out by name in yourfavorite podcast applications.
Look for commodity week. I'mUniversity of Illinois
Extensions, Todd Gleason.
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