May 22, 2025 • 31 mins
- Dave Chatterton, SFarmMarketing.com
- Joe Janzen, University of Illinois
- Eric Snodgrass, NutrienAgSolutions.com
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Episode Transcript
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Todd Gleason (00:00):
This is the May 22 edition of Commodity Week. Todd
(00:08):
Gleason services are madeavailable to WILL by University
of Illinois Extension. Well,welcome to Commodity Week. I am
Todd Gleason. Today we're comingto you from the Nutrien Ag
Solutions Innovation Center justto the south of Champaign,
Illinois.
Our thanks go to one of ourpanelists, Eric Snodgrass with
Nutrien Ag Solutions. We'll talkwith him in just a minute along
(00:30):
with Joe Jansen, the Universityof Illinois Agricultural
Economist and Dave Chatterton atStrategic Farm Marketing also
from Champaign, Illinois. Let'sget an idea roughly from Joe and
Dave what might be on their listof items they'd like to discuss
for the day. We'll start withyou, Dave.
Dave Chatterton (00:50):
Yeah, Todd. Think a little bit of an
inflection point for the marketshere. We've had a little bit of
a rally. We've gotten past thatthat May WASDE report. We had
the punishment in terms ofprice.
Come off a little bit, but stillnot to a level I think that's
enticing a lot of farmermovement or a lot of excitement
in the marketplace. If you lookat beans in particular, probably
still under the cost ofproduction, particularly for new
crop. And in a pretty toughsituation when it comes to new
(01:13):
crop, we have a time horizon infront of us in the marketplace
where the seasonals turnpositive, particularly for corn,
but the clock is definitelyticking. If we're not going to
get that rally by the June,let's say, we're certainly
starting to turn the the oddsagainst us in terms of a price
rally. So what happens here, Ithink, in the next three to four
weeks in terms of the weatheroutlook, the trade deals are
certainly part of that.
(01:34):
The biofuel guidance and the andthe and the current political
process that gets that's goingon in The US, all in the mix
here in terms of price. But Ithink it's a time to really be
paying attention and tweakingyour numbers here a little bit
and trying to get to a pointwhere I hate to say it, but this
may be a year where it's tryingto just do the best I can on
beans, break even, maybe lose alittle, hopefully make a little,
and then, you know, the theattention to be on corn where
(01:57):
the margins are gonna be.
Todd Gleason (01:58):
And then Joe Jensen, from the University of
Illinois, the things that youwould like to discuss over the
next twenty minutes or so.
Joe Janzen (02:04):
Yeah. I think we're all thinking about to what
extent is the market buildingsome kind of weather premium in
or into price or not. So that'sobviously gonna be a big story,
and that's the seasonal storythat happens at this time of
year, May, June, July. The otherpart, sort of what's and then
the policy uncertainty aroundboth biofuels and international
trade. I think those are the twothings that sort of maybe we get
(02:25):
some resolution on those thingsin the next few weeks, but
probably those are ongoingissues that sort of persist
throughout the rest of thismarketing year.
Todd Gleason (02:33):
And we'll ask Eric Snodgrass some questions as
well. That's why I left you forlast, Eric. But to begin with,
not a question about the weatherfor you, but about this
Innovation Center and whyNutrien decided to site it here
in Champaign County.
Eric Snodgrass (02:50):
Well, I think there's a lot of reasons. One,
we're trying to just be at theepicenter of ag in the middle
part of the country andChampaign accomplishes that. The
second thing is, we wanted tohave a farm at scale to do our
trials and to do all of ourtesting on. We didn't want
something small. We wanted it tobe like what a lot of folks deal
with.
And so, you know, ChampaignCounty has good ground, but
we're on some of the, I guess,more marginal stuff for the
(03:10):
county and that's good. Itallows us to kind of test what a
lot of our growers are gonna beseeing. So it's big, it's two
eighty acres. We haveinteresting waterways, we have
power lines that run through it.So therefore it kind of gives us
a real world glimpse into kindof what we sell.
Todd Gleason (03:25):
And you have access to the University of
Illinois and some really goodpotential employees.
Eric Snodgrass (03:30):
That's right. So the talent pipeline was huge.
The biggest thing that theythought about when positioning
this was that University ofIllinois talent pipeline. If you
go back into the main office andthere there are several of us
with degrees from Illinois, sowe're pretty proud to be here.
Todd Gleason (03:43):
Let's ask you a few questions about the weather.
Dave Chatterton, anything thatyou'd like to know?
Dave Chatterton (03:49):
Well, I I guess I'd like to know what we're
gonna be looking at in the nextthree weeks here. You know,
we're getting ready to go intothat seasonal time period that
Joe and I both mentioned. Youknow, we're we're maybe a little
bit behind in terms ofdevelopment as this cool weather
moves in, but once we come outof that, we're we're gonna move
towards that pollinationreproductive window. And it's
been a I guess, an interestingspring. We we got off to a very
(04:11):
quick start.
Now we're kinda bogging down.The wet areas have stayed wet,
we've got, by our count, around7,000,000 acres still to plant
in Southern Illinois, Indiana,Ohio. You throw in a little bit
more in Kentucky and Tennessee.Starting adding those numbers
up, they don't necessarilychange the narrative, in a big
way in terms of the balancesheet, but they can start to to
do that. And in the meantime,the USDA, you know, we've got
(04:32):
this 2,000,000,000 bushel newcrop carryout projected, but
it's at a one eighty one yield.
Mhmm. A record yield, a yieldthat we've never been able to
achieve in The US. And so Iguess my main question is is
whether they're gonna cooperatein a way based on where we're at
today that allows us to hit thatone eighty one? Or what are the
odds of that? Maybe that's abetter way to say that.
Eric Snodgrass (04:49):
I think the odds of that are small, only because
to get to one eighty one, Ithink I'd have to replicate for
you 02/2009. That was about asperfect a weather as you could
ever ask for, for growing a crophere in this part of the
country. And I don't see that inthe cards. Those areas you
(05:09):
talked about, so the Mid South,Southern Illinois, Indiana,
Ohio, that Ohio Valley, we'reactually probably going to see
quite a bit of prevent plantacres down there because the
timing of the rain has been suchthat they were flooded out
early, then they couldn't get achance to get in and get it
fixed. Know, I mean, MattBennett, we all know Matt, like
still talking to him just abouthow far delayed folks are around
his area, and they're normallydone weeks ago.
(05:31):
We're all wearing jackets today,right? I mean, it's pretty
chilly, so this crop is justsitting there. Maybe it's gonna
get 40 GDDs over the next sevendays, just including yesterday
too. But this is, so this isn'tthe start where the crop just
jumps out of the ground and getsgoing, which then makes you
wonder how will these next threeweeks play out and if we do have
(05:53):
some sort of risk going forward.In other words, is it gonna be a
continual narrative of rainfalldisparity, right?
So we've had mega flooding inplaces and then, I mean, you go
to the northern part of thestate, the rain they just got
was like the first they'd had ina long time. Is that gonna be
the story going forward? Andthen the question I get asked,
which I think is most important,is if you do wanna build a
(06:15):
weather premium into this,something's gotta really get out
there and scare folks. Andthat's either, it's one of two
things, right? It's either toomuch water or not enough.
But I would tell you there's athird part to this, and that's
the heat. We should definitelytalk about that.
Todd Gleason (06:27):
We will. Joe Jansen, you have a question?
Joe Janzen (06:30):
I think, yeah, it's that that heat side and what you
know, where we really mightbuild some premium is in if we
start baking up this, like, cropthat's maybe starting off in you
know, on a shakier foot, if youwill. So let's yeah. Let's talk
Eric Snodgrass (06:44):
about that. Alright. So we have a couple of
strikes against us. I wish wehad a third one. Now when I say
I wish, I'm telling you this inthe perspective of if you would
like to have a big market rallyand you would like to base it on
weather and you want to base iton drought and heat, we're
missing one critical thing rightnow.
(07:04):
Actually, maybe we could saytwo. So here they are. We've got
cold water off the coast ofCalifornia. That's one thing
that normally points toward ahotter drier summer. It's only
there because since winter we'venot had a subtropical jet of any
substance.
The polar jet has alreadystarted its northward shift, but
we've not yet seen cold wateremerge due to its lack of speed
(07:26):
in the winds. We've not yet seenthat cold water emerge. If that
starts showing up the next, wellyou said about 40, then that
tells me that the ocean istelling me that the atmosphere's
lost it. And then we're gonnaridge out in the midsection of
the country and it will get hotand dry. But the other piece
that's working against it isexactly what we brought up a
moment ago.
(07:47):
It's very wet, Oklahoma Texas,Arkansas, Louisiana, you know,
parts of Kentucky, Tennessee,Missouri. Every major major drop
that we've had in the Midwesthas started in the Mid South.
And that's kind of your sink,right? In other words, if you're
going to get Gulf moisture herein summer, you can't have it be
(08:07):
dry to our south. It'll stealthe moisture first.
So to tell you that we're gonnahave an 88 or 12 type situation,
that's off the table at thispoint because the Mid South's
too wet. Now that doesn't meanwe can't have flash drought
scenario going forward, and I'lljust tell you, Mitad, we've been
saying it. We're in the middleof this forty five day
assignment. Right? Watch theGulf Of Alaska.
It will be the kind of the thelitmus test on whether or not
(08:29):
the atmosphere is capable ofgiving problems in midsummer.
And it's kind of the last pieceto fall.
Todd Gleason (08:34):
The hurricane season is about to start. Do we
have any new information thatgives you information about what
happens in the Gulf Of Mexicoand how that impacts the growing
regions in The United States,maybe those Southwestern areas.
Eric Snodgrass (08:48):
Yeah, so right now ocean temperatures in the
Atlantic where these things areborn, they're about two, two and
a half degrees cooler than theywere a year ago. So yes, last
year was hot. Doesn't mean it'snot warm enough to make
hurricanes, but it's starting togive us a little pause on maybe
the thought process that thisupcoming season is gonna be
huge. Now that's a hard that's ahard thing to define because you
(09:08):
get one major hurricane thathits, that and it's a huge it's
a huge event. Right?
And So that's still on thetable. But right now, the
National Hurricane Center iswatching the potential for
tropical development in the EastPacific. And that feels a bit
early, right? It's May, but sureenough, we can do it any time of
year. If we start seeing themcrank over there, that's gonna
be an interesting play againstthis whole drought story we've
(09:29):
got.
Todd Gleason (09:29):
I would be remiss if we did not ask you about the
dry conditions and the very warmhot temperatures in China in the
last week and what impact youbelieve that may have had or is
having on their growing crops.Soybeans, rice, probably more
impacted, I think, than corn.Maybe you can give me an idea
(09:52):
there too.
Eric Snodgrass (09:53):
Well, I mean, it's kind of like here. We can
get hot in May and June and notcare, right? I mean, if the
crop's young enough, it can takeon the heat and it'll be okay.
When I look at the NDVI dataover the Manchurian plane and
the North China plane, it looksfine. Most of where they grow
corn and soybeans right now, youwould not look down from space
and be like, Oh man, they're introuble early.
Things are not looking in goodshape. And then I see the
(10:15):
upcoming forecast, and there'sthis frontal boundary. We call
it the Mayu front. Actually,they call it the Mayu front, and
it sits right on the Yangtze,and it's got tons of rain coming
in on it. So I I'm I'm lookingfor a problem there.
I'll be honest with you, I thinkif we need to find another
problem globally, you may haveto look around the Black Sea
come mid summer, because some ofour longer range models are
trying to hit them with prettydry hot conditions as well.
Todd Gleason (10:36):
Tell me about that, and then we probably
should check-in on the maizegrowing areas of Mexico. Had
been extremely dry. That wouldbe in year two, maybe three for
them. Give me an update.
Eric Snodgrass (10:49):
Yeah. So look at the like three month drought
monitor in parts of Mexico andthat the closer you get to The
US border, we're just gettingdrier and drier and drier. That
bleeds then into parts of NewMexico, Arizona, and Southern
California where they're deepinto drought. You know, but this
is kinda how Mexico runs. Thisis hot and dry, tropical,
subtropical climate, so I don'teven I don't know how to pin it
(11:11):
up against the worry that theseguys brought up at the
beginning, is really over whatis The US crop gonna do going
forward.
So we'll need to watch itcarefully, but if honestly, if
the Central US goes into reallyhot, dry summer conditions,
Mexico's not. They'll end uphaving a strong monsoonal flow,
it'll storm every day, it'llcome all the way up in Arizona,
(11:32):
New Mexico, Colorado, Utah, andso they'll end up getting rain
mid season on that crop whilewe're quite dry.
Todd Gleason (11:38):
I do want to ask a little bit more about Mexico,
the number one importer of UScorn. Their planting season runs
for another two months at thispoint in Mexico, according to
the numbers or the maps that Isee from USDA. So they've got a
lot of time to get a corn cropin. How much have they been
(12:00):
importing from The US at thistime? And what does that tell
you about the potential exportsfor the crop we are putting in
the ground now?
Dave Chatterton (12:10):
Yeah. I think, you know, they've they're the
the number one buyer of US cornand have been for a number of
years now. And their purchasesthis year well above where they
were a year ago, which tells usthat they are suffering from
drought in the old crop or lastyear's crop, and they're trying
to supplement their ownsupplies. When I look at the
drought monitors and some of thethings that Eric mentions, it
looks like the corn areas, thecorn growing areas continue to
(12:32):
run dry. As you mentioned, timecan change that.
But for right now, the demand, Ithink, profile or projection for
Mexico continues to look good,as does corn in general, Todd.
Mean, we have weekly exportstoday that slowed down a little
bit, but they haven't taken theseasonal kind of break that we
would normally expect, and wecontinue to see them, I guess,
over perform. Think year todate, marketing year to date,
(12:54):
we're 28% above where we were ayear ago. USDA is 12 or 13%
above. So we're on pace to seethe pattern that's been in
place.
I think maybe that is somethingthat we should talk about. If
we're not going get weather,we're going have to rely on the
USDA to tighten that balancesheet in order to get price to
react. We're in a very similarsituation with that balance
sheet this year overall. Withthe USDA, think last year, they
(13:14):
started at a 2,100,000,000bushel new crop carryout. This
year, we're at 2,000,000,000.
We're moving know, we've moveddown to this 1.4, one point five
area. So Mexico is a big part ofthat. If Mexico has a better
supply of corn domestically andimport less, we have issues
because ethanol is not growing,political, you know, tailwinds
elsewhere in terms of Canada,the Far East, and certainly
(13:38):
China in terms of if they wouldimport corn are all, you know, a
little bit questionable. We needwe need our big star in the
game. And, I hate to say thedrier they are, the better for
us, but that's that's the longand the short of it.
Joe Janzen (13:50):
Absolutely. Mexico is is a hugely important
customer. We have a tremendousadvantage sitting right next to
them with, you know, all therail access and movement, you
know, ability to move corn inthat direction. The thing I
would be a little bit cautiousabout is that, you know, when
USDA came out with their MayWASDE report, I think they built
in some reasonably healthydemand into that balance sheet
(14:11):
with particularly with theircorn export number. So I think
some of that is already bakedin, the idea that we would move
significant amounts of corn, forexport next year, kind of, you
know, carrying over on what'shappening this year.
I mean, everyone has sort ofbeen surprised to the upside,
then we kept doing that, youknow, month after month. We were
surprised back in December,January, and we continue to
kinda get these periodic sort ofsurprises in exports. So I think
(14:32):
some of that is baked intoUSDA's current projections.
Todd Gleason (14:35):
USDA putting that at 2,675,000,000 bushels. They
also put out a season's averagecash price still of $4.20. The
two must be related, I suppose,because fairly cheap for corn,
moving a lot of it into themarketplace. Are the global
supplies and I know The UnitedStates is just the largest
(14:58):
supplier on the planet, but theglobal supplies enough to move
that much into the export marketat that price.
Joe Janzen (15:06):
Yeah. Think part of the story here is is low prices
spurring some additional demand.Right? We know that at at when
things get cheaper, people buymore. And that's part of the
story.
I think that's the the one thingabout that too, though, I'll
say, and I think this isespecially true on soybeans, is
the as well as the idea that,you know, I don't think anyone's
gonna be motivated to make a lotof early purchases. We're not
(15:27):
gonna see new crop export salesreally showing up in any
significant way even though thisis sort of about the time of
year where we'd start to seethat kind of activity. We
haven't seen a lot of it yet. Wehaven't seen, for example, China
buy any new crop soybeans, fornext year in in any meaningful
way. And part of this is whenprices are low, no one's really
motivated to make sort ofprecautionary forward purchases.
Todd Gleason (15:49):
One more Aggie con kinds of question on in this
area with that that large exportpicture that USDA is talking
about and a carry out at the endof the twenty five-twenty six
season, not being particularlylarge. I'm wondering how much
flex there is in the price offutures over time and how
(16:14):
quickly that makes it move. Isit is it tight enough? This is
what farmers will be thinking orare already thinking that we
have a tight balance sheet. Fromyour perspective, I guess the
question
Joe Janzen (16:27):
really is, do we have a tight balance sheet? On
new crop, the answer is we'renot really there. I mean, we're
well over that 10% stocks to usenumber on new crop that I would
sort of say is kind of maybe thethe knife edge, if you will,
where we can start to start toget some movement. I don't think
we're quite there. Part of thatis, yeah, it's a one eighty one
yield number.
(16:48):
And so when you put that numberdown on the balance sheet, you
get pretty significantproduction. It fills up the
balance sheet pretty quick.
Dave Chatterton (16:54):
Yeah, Todd. I mean, the balance sheet is not
the new crop balance sheet inparticular is not tight. Now
it's close enough to a situationwhere with some problems in
yield or significant problems ofyield, if we got a, you know,
5%, seven %, ten % drop innational yield, we'd have a
different story. The theexportable stocks or the stocks
to use among the globalexporters of corn, if you take
(17:15):
China out of the picture, arestill relatively tight. And it
doesn't take a lot to get thatsituation into an exponential
reaction in terms of marketingprice.
But I think what I would tellyou is if you go back to the and
what the USDA did in terms oftheir demand, we talked about
exports. They're projecting cornexports next year. I think it's
75,000,000 bushels above wherethey were this year, so an
(17:37):
increase again. And I think thetrade would have believed, for
lack of a better term, thosedemand numbers, Todd, without a
much more bearish reaction tothe market. I I think that you
know, our bullish reaction tothe market.
Excuse me. I think that thetrade is a little bit jaded in
terms of where the USDA hasdemand. That's probably balanced
out by where the USDA has yield.And so as we unfold this whole
(17:59):
package, as you said, the timingof that from a farmer's
perspective, very frustratingbecause we're not gonna really
know until we get out until latesummer and early fall.
Todd Gleason (18:07):
So let's go with USDA is right because the supply
and demand table at the end ofthe year is what USDA says it
is. So we're going to work withthat. But I do have some
questions because what they havelaid out to me tells me that
weather is the driving force atthis point. And so we need to
know, no, there aren't anyproblems in Brazil. We need to
(18:31):
know what's happening in Ukraineand the Black Sea, roughly
speaking, some for corn, a lotmore for wheat, with Russia
thrown in it too.
And we've talked about China sofar. So what does the planet
look like at this point for thegrowing regions?
Eric Snodgrass (18:47):
It's kind of funny. So what I hear is you
guys need a supply side shock,and you want it to come from me.
So I I, you know, I so
Dave Chatterton (18:56):
Actually, Eric, I want you to convince China
just buy a couple of blue corn.Okay?
Eric Snodgrass (19:01):
I'll get on the phone. Yeah.
Dave Chatterton (19:02):
Yeah. Be a problem.
Eric Snodgrass (19:04):
So so alright. So so this is why I think there
might be something brewing.Okay? We are we're two years
kinda removed from an El Ninoevent. And after El Nino events,
what the atmosphere tends to dois just kinda give up a lot of
its momentum compared to how itspins.
That's when we tend to build upinto big, big long wave troughs
(19:27):
and ridges. So what's that mean?Well, means what we're dealing
with right now, right? We'regetting these extended periods
of the same type of weather.Now, if that carries into the
middle of summer, if you get onthe wrong side of it, you're on
the wrong side of it, all of asudden it's hot and dry at the
wrong time, and that is apossibility.
I would say this, I don't knowif this is just what people do
(19:49):
just to me, but I've not had afarmer call me yet and say, Man,
things are going great. Justkeep it going. Right? It's
everybody. I don't care ifyou're from Nebraska, if you're
from Northern Illinois, SouthernIllinois.
No one has called me and said,I'm in the garden spot. And
sometimes, you know, people willtell us, Hey, things are off to
a good start. We're doing allright. I don't even know where
it is, and I've been to most ofthe Corn Belt in the last couple
(20:10):
of months. So I think all eyesare gonna be on The United
States.
Now over in the Black Sea, theystarted off with a massive cold
outbreak that just finished, nowthey're hot again, so their
temperatures have beenfluctuating like ours have. NDVI
wise, look at from satellite,things don't look crazy off from
normal. So you can't look overthere from space and go, holy
cow, there's a problem, but it'sso early. We can't do that yet.
(20:33):
Right now, the Indian monsoon isgoing to start early, which more
than likely means much ofSoutheast Asia is going to be
wet.
So maybe this bleeds over intodiscussion on things like palm
oil and all that and throughoutMalaysia and Indonesia. I think
they're going be very, very wetfor the coming several months.
But Todd, you mentioned it.Brazil came off on their second
crop without problems. Wethought we could find some, but
(20:53):
we just couldn't.
And as a result, you know, itlooks pretty darn good right
now. There is a big cold wavecoming into Argentina, but I
mean, who cares? It's fall,right? I mean, it is time to get
cold. I don't think they havemuch of their crop they're gonna
be vulnerable to a frost.
I mean, and they may touch afrost in Cordoba. So it comes
back to the same thing westarted with. I think the world
(21:15):
is watching The United Statesknowing that we've had major
precipitation disparityproblems. We've had, I mean,
drought monitor was really,really amped up on drought to
start the season, double what itwas a year ago. And the seasonal
drought outlooks are really notgood if you're in the Western
Corn Belt.
And that's where all the modelscontinue to put down the risk of
(21:35):
there being problems, but it'sstill, you know, it's July and
August. And what's funny is whenwe get to July and August, all
this May stuff we're talkingabout will be a distant memory.
So it comes back to where westarted, which is this
discussion on time. There'sabout four or five weeks over
which weather is either going tocreate a problem or it's going
to ruin the prospect of wherethese prices could go. And I
(21:58):
think everyone right now iswaiting on a weather narrative.
So what I think is gonna happen,Todd, is people are gonna craft
that narrative, whether it's inreality or not. This is the time
of year where snake oil salesmencome out of the woodwork to tell
you what they think is gonnahappen. And I'm just gonna tell
you from years of experience, wedo not know. It's there's no
clear picture right now as toexactly how this is gonna shake
(22:19):
down in July, but there's riskon the table.
Todd Gleason (22:23):
Speaking of that risk, we should switch supply
and demand tables to soybeans.Tell me about that s and d
table, what you think of it fromUSDA, and how it works with what
you've been looking at at theUniversity of Illinois along
with the FarmDoc team.
Joe Janzen (22:40):
Yeah. I think on this on the bean side, I mean,
we're obviously in a much morefragile state because we have so
many fewer acres, than we havethan we had last year, you know,
we're sort of below typical. Sothat changes the the narrative
completely. I mean, USDA isprojecting a very low level of
stocks to use, and and low levelstocks by the end of the 2526
(23:00):
marketing year. The key picturethere, though, is trade and what
happens with the combination oftrade and biofuels policy.
We've seen a number of sort of,you know, kind of like flash
drops in bean oil prices, onelast Friday, one, last night
into this morning where, yeah,that bean that bean oil market
has just kind of dropped off ona bunch of news about how, you
(23:23):
know, biofuels policy is gonnaimpact the the demand for
soybean oil. And there are a lotjust, I think, a lot more
uncertainty, and that andcoupled with, you know,
relatively tight balance sheetmeans there could be some room
for that market to run at somepoint.
Todd Gleason (23:37):
So we're still working through the RVOs. There
have been paperwork shuffledaround, but it's not clear
exactly what's coming forsoybean oil, renewable diesel in
particular, maybe SAF as well.When you think about soybeans
and what farmers ought to do, doyou think of it as a tight
(24:00):
supply, as as something that canmove with just a little push
along or does it take more?
Dave Chatterton (24:10):
It's going to take a little bit more, Todd. I
think think the trade is very,uneasy about the trade front
that Joe mentioned and just thethe whole political side of
where the particularly the beanoil demand goes. And bean oil
has been the bullish stalwart ofthe the soy complex really up to
this point. We had a limit downmove last week, as Joe said. Had
another strong move down todaybased on the House
reconciliation bill.
(24:30):
Now it goes to the Senate. I'msure it'll get changed. It'll
come back. It'll go back andforth. So really, really hard to
handicap where that's going togo.
In the meantime, we've got thisterror or trade situation with
China that's out there brewing.Based on the carryout that the
USDA printed and a decline yearover year, I think the market,
as I said earlier, would havereacted much stronger if they
(24:51):
bought into that. I think it'svery much a wait and see
attitude. The funds are along alittle bit of a few beans here
as we sit today, but not in abig way. Doesn't just like corn,
doesn't take a huge weatherevent to start affecting that
yield, but that timing on thatis more of July and August for
soybeans.
It's a little bit of a hands offsituation right now. Really kind
(25:12):
of going back to Eric's commentsabout China, I think when you
look at the biggestvulnerability in trade right now
in the CBT or at least in thepaper trade, it's the short in
wheat. And you've got a recordshort in Kansas City wheat.
You've got a very large short inin Chicago wheat. You've got a
Matif wheat that's very short.
And when you take that fundaggregate together, basically,
they're a record short in wheatright now. And if China's wheat
(25:36):
crop China's, I think, domesticwheat stocks have been drawn
down to the order of almost50,000,000 metric tons, or 50,
yeah, 50,000,000 metric tonshere over the last two and a
half years, they're they'retight on their domestic wheat
stocks. If they have to importwheat from someone and and we
get to be in that mix, wheatmight be the canary in the coal
mine here that kinda saves thethe the row crop complex or, you
(25:57):
know, brings some life to therow crop complex.
Todd Gleason (26:00):
I always thought it was oat nose, but maybe it
will be wheat nose in the verynear future. I want to stay with
soybeans for just a second. Theexport market, the numbers that
USDA printed, where where do youthink those numbers should be at
this point? What do you want touse in your supply and demand
tables?
Joe Janzen (26:19):
I there USDA is calling for, I think, it's
1,600,000 bushels or billionbushels of, soybean exports next
year. That's down a little bit,and I think that's probably a a
a pretty good number given sortof what we've seen in the the
tremendous amount of tradeuncertainty. I mean, China's not
buying a lot of US beans, and Idon't expect them to really move
(26:41):
into that market in anysignificant way given the amount
of supply that's coming out ofSouth America that was
harvested, and in in the lastfew months, there's not a huge
need to to source beans from TheUnited States. So we're gonna
have to we're gonna have to waita little bit to get some
confirmation on what new cropsoybean export demand looks
like.
Todd Gleason (27:00):
China has also been behind on sourcing soybeans
from Brazil. Is that concerning?Yeah.
Joe Janzen (27:07):
I think so. I mean, in the sense that it just sort
of pushes back everything andkind of perpetuates the
uncertainty. Absolutely.
Todd Gleason (27:14):
What are your thoughts on this issue?
Dave Chatterton (27:16):
Yeah. You know, the Chinese Chinese soybean
imports have definitely beenlacking. They've been slowing
down their ports a little bit,but I think that's gonna be
picking up, Todd. It looks likethere's a record amount of, you
know, beans that are going onthe water from Brazil in
particular heading to China,that they're going to continue
to build their stocks, buildtheir reserves. Their crush
numbers are getting healthierand getting a little bit better
along the way here.
(27:37):
So I don't think it's asituation where China is going
to have to come back to The UShat in hand for soybeans. To me,
one of the bigger wild cards wetalked about the policy and how
it relates to soybean oil andthe bean crush, but really the
stroke of the pen risk is theother, I guess, I'll call it
bullish risk out here in themarketplace. We've certainly
been on the defensive side ofthat, but if you go on the maybe
(27:59):
the the glass is half full sideof that equation, and the Trump
administration is able to ink adeal that gets China to buy US
soybeans, you know, acquiescingfor access to our capital
markets or imports or howeveryou want to put that. We have a
much different situation. Thatbean balance sheet that Joe was
discussing all of a sudden getsa lot tighter, lot quicker, or
potentially does.
Todd Gleason (28:20):
Let's get a final word from each of you. I'm going
to ask Eric what your final wordwill be. And about June 7 I
believe, is the latest date. Butwe'll start with Joe Jansen, ag
economist at the U of I. Finalword about marketing or what
farmers should be considering atthis time of the year?
Joe Janzen (28:39):
Oh, I think looking for rallies because this is a
time of year when we typicallysee some seasonal rallies in new
crop pricing, and takingadvantage of them is is the name
of the game. And that's truethat's true year in and year
out. And I think this this yearis setting up to be, you know,
that story will play out here inthe next few weeks.
Todd Gleason (28:58):
Dave Chatterton of Strategic Farm Marketing, your
final word?
Dave Chatterton (29:01):
Yeah, Todd, I think Joe's got it pegged. You
know, seasonally, you need to bepaying attention to your
marketing right now, and theseopportunities have some offers
out ahead of the market. Rally'sare your friends here.
Unfortunately, you know, in thewhole barometer of how we're
marketing right now, we stillhave to play a little bit of
defense, you know, more so onbeans than on corn. But you have
to be looking for thoseopportunities and ready to take
them.
I don't think we wanna get tothe end of the summer or or deep
(29:24):
into the summer and have thatsituation that Eric talked about
where all of a sudden a weather,you know, event has not been
conjured up or has notdeveloped, and we don't have
that lift. And all of a sudden,the sellers are starting to come
out into our marketplace. Sotrying to stay ahead of the the
process a little bit, I think,is your best defense right now.
And I know we're not we're notexcited about prices where
they're at. We didn't talk aboutthe government program side of
(29:47):
this and what may be coming downthe road in an MFP or other
types of programs.
I'll save that for anotherdiscussion because that's a
that's a whole another can ofworms. But, you know, keep in
mind that that that particularpoint is out there as well to
kinda supplement your bottomline at the end of the year.
Todd Gleason (30:02):
Eric, if you could conjure up an issue someplace,
that would be good. Otherwise,what is your final word for the
day?
Eric Snodgrass (30:08):
You know, I would just say this. I think we
all feel as though theatmosphere has been in a bit of
a cadence, and it's like to getstuck in certain configurations
and that's a wild card. Regularmovement of the atmosphere where
things are changing more rapidlyis better. The fact that we keep
drawing out these long stretchesof continuous types of weather,
(30:31):
either it's severe weather,maybe it's the drought that
built in Nebraska, or even thestuff in Northern Illinois, we
can't seem to break away fromit. If that kind of cadence
continues, then you will beginto have larger areas where there
are regional disparities inrainfall, and that will start to
peel away at the chance that wecould even come close to 181
crop.
(30:52):
I don't think it's in the cardsright now. But you mentioned
earlier, are we down can we godown or someone did down 10%.
Knocking 20 bushels off of this,I don't see
Todd Gleason (31:00):
that yet either. Commodity Week, of course, is a
production of Illinois PublicMedia. You may hear and listen
to the whole of the programanytime you'd like on our
website at wilag.org, w I l l ag 0 r g, or search us out in
your favorite podcastapplications. Our thanks go to
our panelists this weekincluding Eric Snodgrass, Dave
(31:21):
Chatterton, and Joe Jansen. I'mUniversity of Illinois
Extension's Todd Gleis.
Hi.
This is the May 22 edition of Commodity Week. Todd
(00:08):
Gleason services are madeavailable to WILL by University
of Illinois Extension. Well,welcome to Commodity Week. I am
Todd Gleason. Today we're comingto you from the Nutrien Ag
Solutions Innovation Center justto the south of Champaign,
Illinois.
Our thanks go to one of ourpanelists, Eric Snodgrass with
Nutrien Ag Solutions. We'll talkwith him in just a minute along
(00:30):
with Joe Jansen, the Universityof Illinois Agricultural
Economist and Dave Chatterton atStrategic Farm Marketing also
from Champaign, Illinois. Let'sget an idea roughly from Joe and
Dave what might be on their listof items they'd like to discuss
for the day. We'll start withyou, Dave.
Dave Chatterton (00:50):
Yeah, Todd. Think a little bit of an
inflection point for the marketshere. We've had a little bit of
a rally. We've gotten past thatthat May WASDE report. We had
the punishment in terms ofprice.
Come off a little bit, but stillnot to a level I think that's
enticing a lot of farmermovement or a lot of excitement
in the marketplace. If you lookat beans in particular, probably
still under the cost ofproduction, particularly for new
crop. And in a pretty toughsituation when it comes to new
(01:13):
crop, we have a time horizon infront of us in the marketplace
where the seasonals turnpositive, particularly for corn,
but the clock is definitelyticking. If we're not going to
get that rally by the June,let's say, we're certainly
starting to turn the the oddsagainst us in terms of a price
rally. So what happens here, Ithink, in the next three to four
weeks in terms of the weatheroutlook, the trade deals are
certainly part of that.
(01:34):
The biofuel guidance and the andthe and the current political
process that gets that's goingon in The US, all in the mix
here in terms of price. But Ithink it's a time to really be
paying attention and tweakingyour numbers here a little bit
and trying to get to a pointwhere I hate to say it, but this
may be a year where it's tryingto just do the best I can on
beans, break even, maybe lose alittle, hopefully make a little,
and then, you know, the theattention to be on corn where
(01:57):
the margins are gonna be.
Todd Gleason (01:58):
And then Joe Jensen, from the University of
Illinois, the things that youwould like to discuss over the
next twenty minutes or so.
Joe Janzen (02:04):
Yeah. I think we're all thinking about to what
extent is the market buildingsome kind of weather premium in
or into price or not. So that'sobviously gonna be a big story,
and that's the seasonal storythat happens at this time of
year, May, June, July. The otherpart, sort of what's and then
the policy uncertainty aroundboth biofuels and international
trade. I think those are the twothings that sort of maybe we get
(02:25):
some resolution on those thingsin the next few weeks, but
probably those are ongoingissues that sort of persist
throughout the rest of thismarketing year.
Todd Gleason (02:33):
And we'll ask Eric Snodgrass some questions as
well. That's why I left you forlast, Eric. But to begin with,
not a question about the weatherfor you, but about this
Innovation Center and whyNutrien decided to site it here
in Champaign County.
Eric Snodgrass (02:50):
Well, I think there's a lot of reasons. One,
we're trying to just be at theepicenter of ag in the middle
part of the country andChampaign accomplishes that. The
second thing is, we wanted tohave a farm at scale to do our
trials and to do all of ourtesting on. We didn't want
something small. We wanted it tobe like what a lot of folks deal
with.
And so, you know, ChampaignCounty has good ground, but
we're on some of the, I guess,more marginal stuff for the
(03:10):
county and that's good. Itallows us to kind of test what a
lot of our growers are gonna beseeing. So it's big, it's two
eighty acres. We haveinteresting waterways, we have
power lines that run through it.So therefore it kind of gives us
a real world glimpse into kindof what we sell.
Todd Gleason (03:25):
And you have access to the University of
Illinois and some really goodpotential employees.
Eric Snodgrass (03:30):
That's right. So the talent pipeline was huge.
The biggest thing that theythought about when positioning
this was that University ofIllinois talent pipeline. If you
go back into the main office andthere there are several of us
with degrees from Illinois, sowe're pretty proud to be here.
Todd Gleason (03:43):
Let's ask you a few questions about the weather.
Dave Chatterton, anything thatyou'd like to know?
Dave Chatterton (03:49):
Well, I I guess I'd like to know what we're
gonna be looking at in the nextthree weeks here. You know,
we're getting ready to go intothat seasonal time period that
Joe and I both mentioned. Youknow, we're we're maybe a little
bit behind in terms ofdevelopment as this cool weather
moves in, but once we come outof that, we're we're gonna move
towards that pollinationreproductive window. And it's
been a I guess, an interestingspring. We we got off to a very
(04:11):
quick start.
Now we're kinda bogging down.The wet areas have stayed wet,
we've got, by our count, around7,000,000 acres still to plant
in Southern Illinois, Indiana,Ohio. You throw in a little bit
more in Kentucky and Tennessee.Starting adding those numbers
up, they don't necessarilychange the narrative, in a big
way in terms of the balancesheet, but they can start to to
do that. And in the meantime,the USDA, you know, we've got
(04:32):
this 2,000,000,000 bushel newcrop carryout projected, but
it's at a one eighty one yield.
Mhmm. A record yield, a yieldthat we've never been able to
achieve in The US. And so Iguess my main question is is
whether they're gonna cooperatein a way based on where we're at
today that allows us to hit thatone eighty one? Or what are the
odds of that? Maybe that's abetter way to say that.
Eric Snodgrass (04:49):
I think the odds of that are small, only because
to get to one eighty one, Ithink I'd have to replicate for
you 02/2009. That was about asperfect a weather as you could
ever ask for, for growing a crophere in this part of the
country. And I don't see that inthe cards. Those areas you
(05:09):
talked about, so the Mid South,Southern Illinois, Indiana,
Ohio, that Ohio Valley, we'reactually probably going to see
quite a bit of prevent plantacres down there because the
timing of the rain has been suchthat they were flooded out
early, then they couldn't get achance to get in and get it
fixed. Know, I mean, MattBennett, we all know Matt, like
still talking to him just abouthow far delayed folks are around
his area, and they're normallydone weeks ago.
(05:31):
We're all wearing jackets today,right? I mean, it's pretty
chilly, so this crop is justsitting there. Maybe it's gonna
get 40 GDDs over the next sevendays, just including yesterday
too. But this is, so this isn'tthe start where the crop just
jumps out of the ground and getsgoing, which then makes you
wonder how will these next threeweeks play out and if we do have
(05:53):
some sort of risk going forward.In other words, is it gonna be a
continual narrative of rainfalldisparity, right?
So we've had mega flooding inplaces and then, I mean, you go
to the northern part of thestate, the rain they just got
was like the first they'd had ina long time. Is that gonna be
the story going forward? Andthen the question I get asked,
which I think is most important,is if you do wanna build a
(06:15):
weather premium into this,something's gotta really get out
there and scare folks. Andthat's either, it's one of two
things, right? It's either toomuch water or not enough.
But I would tell you there's athird part to this, and that's
the heat. We should definitelytalk about that.
Todd Gleason (06:27):
We will. Joe Jansen, you have a question?
Joe Janzen (06:30):
I think, yeah, it's that that heat side and what you
know, where we really mightbuild some premium is in if we
start baking up this, like, cropthat's maybe starting off in you
know, on a shakier foot, if youwill. So let's yeah. Let's talk
Eric Snodgrass (06:44):
about that. Alright. So we have a couple of
strikes against us. I wish wehad a third one. Now when I say
I wish, I'm telling you this inthe perspective of if you would
like to have a big market rallyand you would like to base it on
weather and you want to base iton drought and heat, we're
missing one critical thing rightnow.
(07:04):
Actually, maybe we could saytwo. So here they are. We've got
cold water off the coast ofCalifornia. That's one thing
that normally points toward ahotter drier summer. It's only
there because since winter we'venot had a subtropical jet of any
substance.
The polar jet has alreadystarted its northward shift, but
we've not yet seen cold wateremerge due to its lack of speed
(07:26):
in the winds. We've not yet seenthat cold water emerge. If that
starts showing up the next, wellyou said about 40, then that
tells me that the ocean istelling me that the atmosphere's
lost it. And then we're gonnaridge out in the midsection of
the country and it will get hotand dry. But the other piece
that's working against it isexactly what we brought up a
moment ago.
(07:47):
It's very wet, Oklahoma Texas,Arkansas, Louisiana, you know,
parts of Kentucky, Tennessee,Missouri. Every major major drop
that we've had in the Midwesthas started in the Mid South.
And that's kind of your sink,right? In other words, if you're
going to get Gulf moisture herein summer, you can't have it be
(08:07):
dry to our south. It'll stealthe moisture first.
So to tell you that we're gonnahave an 88 or 12 type situation,
that's off the table at thispoint because the Mid South's
too wet. Now that doesn't meanwe can't have flash drought
scenario going forward, and I'lljust tell you, Mitad, we've been
saying it. We're in the middleof this forty five day
assignment. Right? Watch theGulf Of Alaska.
It will be the kind of the thelitmus test on whether or not
(08:29):
the atmosphere is capable ofgiving problems in midsummer.
And it's kind of the last pieceto fall.
Todd Gleason (08:34):
The hurricane season is about to start. Do we
have any new information thatgives you information about what
happens in the Gulf Of Mexicoand how that impacts the growing
regions in The United States,maybe those Southwestern areas.
Eric Snodgrass (08:48):
Yeah, so right now ocean temperatures in the
Atlantic where these things areborn, they're about two, two and
a half degrees cooler than theywere a year ago. So yes, last
year was hot. Doesn't mean it'snot warm enough to make
hurricanes, but it's starting togive us a little pause on maybe
the thought process that thisupcoming season is gonna be
huge. Now that's a hard that's ahard thing to define because you
(09:08):
get one major hurricane thathits, that and it's a huge it's
a huge event. Right?
And So that's still on thetable. But right now, the
National Hurricane Center iswatching the potential for
tropical development in the EastPacific. And that feels a bit
early, right? It's May, but sureenough, we can do it any time of
year. If we start seeing themcrank over there, that's gonna
be an interesting play againstthis whole drought story we've
(09:29):
got.
Todd Gleason (09:29):
I would be remiss if we did not ask you about the
dry conditions and the very warmhot temperatures in China in the
last week and what impact youbelieve that may have had or is
having on their growing crops.Soybeans, rice, probably more
impacted, I think, than corn.Maybe you can give me an idea
(09:52):
there too.
Eric Snodgrass (09:53):
Well, I mean, it's kind of like here. We can
get hot in May and June and notcare, right? I mean, if the
crop's young enough, it can takeon the heat and it'll be okay.
When I look at the NDVI dataover the Manchurian plane and
the North China plane, it looksfine. Most of where they grow
corn and soybeans right now, youwould not look down from space
and be like, Oh man, they're introuble early.
Things are not looking in goodshape. And then I see the
(10:15):
upcoming forecast, and there'sthis frontal boundary. We call
it the Mayu front. Actually,they call it the Mayu front, and
it sits right on the Yangtze,and it's got tons of rain coming
in on it. So I I'm I'm lookingfor a problem there.
I'll be honest with you, I thinkif we need to find another
problem globally, you may haveto look around the Black Sea
come mid summer, because some ofour longer range models are
trying to hit them with prettydry hot conditions as well.
Todd Gleason (10:36):
Tell me about that, and then we probably
should check-in on the maizegrowing areas of Mexico. Had
been extremely dry. That wouldbe in year two, maybe three for
them. Give me an update.
Eric Snodgrass (10:49):
Yeah. So look at the like three month drought
monitor in parts of Mexico andthat the closer you get to The
US border, we're just gettingdrier and drier and drier. That
bleeds then into parts of NewMexico, Arizona, and Southern
California where they're deepinto drought. You know, but this
is kinda how Mexico runs. Thisis hot and dry, tropical,
subtropical climate, so I don'teven I don't know how to pin it
(11:11):
up against the worry that theseguys brought up at the
beginning, is really over whatis The US crop gonna do going
forward.
So we'll need to watch itcarefully, but if honestly, if
the Central US goes into reallyhot, dry summer conditions,
Mexico's not. They'll end uphaving a strong monsoonal flow,
it'll storm every day, it'llcome all the way up in Arizona,
(11:32):
New Mexico, Colorado, Utah, andso they'll end up getting rain
mid season on that crop whilewe're quite dry.
Todd Gleason (11:38):
I do want to ask a little bit more about Mexico,
the number one importer of UScorn. Their planting season runs
for another two months at thispoint in Mexico, according to
the numbers or the maps that Isee from USDA. So they've got a
lot of time to get a corn cropin. How much have they been
(12:00):
importing from The US at thistime? And what does that tell
you about the potential exportsfor the crop we are putting in
the ground now?
Dave Chatterton (12:10):
Yeah. I think, you know, they've they're the
the number one buyer of US cornand have been for a number of
years now. And their purchasesthis year well above where they
were a year ago, which tells usthat they are suffering from
drought in the old crop or lastyear's crop, and they're trying
to supplement their ownsupplies. When I look at the
drought monitors and some of thethings that Eric mentions, it
looks like the corn areas, thecorn growing areas continue to
(12:32):
run dry. As you mentioned, timecan change that.
But for right now, the demand, Ithink, profile or projection for
Mexico continues to look good,as does corn in general, Todd.
Mean, we have weekly exportstoday that slowed down a little
bit, but they haven't taken theseasonal kind of break that we
would normally expect, and wecontinue to see them, I guess,
over perform. Think year todate, marketing year to date,
(12:54):
we're 28% above where we were ayear ago. USDA is 12 or 13%
above. So we're on pace to seethe pattern that's been in
place.
I think maybe that is somethingthat we should talk about. If
we're not going get weather,we're going have to rely on the
USDA to tighten that balancesheet in order to get price to
react. We're in a very similarsituation with that balance
sheet this year overall. Withthe USDA, think last year, they
(13:14):
started at a 2,100,000,000bushel new crop carryout. This
year, we're at 2,000,000,000.
We're moving know, we've moveddown to this 1.4, one point five
area. So Mexico is a big part ofthat. If Mexico has a better
supply of corn domestically andimport less, we have issues
because ethanol is not growing,political, you know, tailwinds
elsewhere in terms of Canada,the Far East, and certainly
(13:38):
China in terms of if they wouldimport corn are all, you know, a
little bit questionable. We needwe need our big star in the
game. And, I hate to say thedrier they are, the better for
us, but that's that's the longand the short of it.
Joe Janzen (13:50):
Absolutely. Mexico is is a hugely important
customer. We have a tremendousadvantage sitting right next to
them with, you know, all therail access and movement, you
know, ability to move corn inthat direction. The thing I
would be a little bit cautiousabout is that, you know, when
USDA came out with their MayWASDE report, I think they built
in some reasonably healthydemand into that balance sheet
(14:11):
with particularly with theircorn export number. So I think
some of that is already bakedin, the idea that we would move
significant amounts of corn, forexport next year, kind of, you
know, carrying over on what'shappening this year.
I mean, everyone has sort ofbeen surprised to the upside,
then we kept doing that, youknow, month after month. We were
surprised back in December,January, and we continue to
kinda get these periodic sort ofsurprises in exports. So I think
(14:32):
some of that is baked intoUSDA's current projections.
Todd Gleason (14:35):
USDA putting that at 2,675,000,000 bushels. They
also put out a season's averagecash price still of $4.20. The
two must be related, I suppose,because fairly cheap for corn,
moving a lot of it into themarketplace. Are the global
supplies and I know The UnitedStates is just the largest
(14:58):
supplier on the planet, but theglobal supplies enough to move
that much into the export marketat that price.
Joe Janzen (15:06):
Yeah. Think part of the story here is is low prices
spurring some additional demand.Right? We know that at at when
things get cheaper, people buymore. And that's part of the
story.
I think that's the the one thingabout that too, though, I'll
say, and I think this isespecially true on soybeans, is
the as well as the idea that,you know, I don't think anyone's
gonna be motivated to make a lotof early purchases. We're not
(15:27):
gonna see new crop export salesreally showing up in any
significant way even though thisis sort of about the time of
year where we'd start to seethat kind of activity. We
haven't seen a lot of it yet. Wehaven't seen, for example, China
buy any new crop soybeans, fornext year in in any meaningful
way. And part of this is whenprices are low, no one's really
motivated to make sort ofprecautionary forward purchases.
Todd Gleason (15:49):
One more Aggie con kinds of question on in this
area with that that large exportpicture that USDA is talking
about and a carry out at the endof the twenty five-twenty six
season, not being particularlylarge. I'm wondering how much
flex there is in the price offutures over time and how
(16:14):
quickly that makes it move. Isit is it tight enough? This is
what farmers will be thinking orare already thinking that we
have a tight balance sheet. Fromyour perspective, I guess the
question
Joe Janzen (16:27):
really is, do we have a tight balance sheet? On
new crop, the answer is we'renot really there. I mean, we're
well over that 10% stocks to usenumber on new crop that I would
sort of say is kind of maybe thethe knife edge, if you will,
where we can start to start toget some movement. I don't think
we're quite there. Part of thatis, yeah, it's a one eighty one
yield number.
(16:48):
And so when you put that numberdown on the balance sheet, you
get pretty significantproduction. It fills up the
balance sheet pretty quick.
Dave Chatterton (16:54):
Yeah, Todd. I mean, the balance sheet is not
the new crop balance sheet inparticular is not tight. Now
it's close enough to a situationwhere with some problems in
yield or significant problems ofyield, if we got a, you know,
5%, seven %, ten % drop innational yield, we'd have a
different story. The theexportable stocks or the stocks
to use among the globalexporters of corn, if you take
(17:15):
China out of the picture, arestill relatively tight. And it
doesn't take a lot to get thatsituation into an exponential
reaction in terms of marketingprice.
But I think what I would tellyou is if you go back to the and
what the USDA did in terms oftheir demand, we talked about
exports. They're projecting cornexports next year. I think it's
75,000,000 bushels above wherethey were this year, so an
(17:37):
increase again. And I think thetrade would have believed, for
lack of a better term, thosedemand numbers, Todd, without a
much more bearish reaction tothe market. I I think that you
know, our bullish reaction tothe market.
Excuse me. I think that thetrade is a little bit jaded in
terms of where the USDA hasdemand. That's probably balanced
out by where the USDA has yield.And so as we unfold this whole
(17:59):
package, as you said, the timingof that from a farmer's
perspective, very frustratingbecause we're not gonna really
know until we get out until latesummer and early fall.
Todd Gleason (18:07):
So let's go with USDA is right because the supply
and demand table at the end ofthe year is what USDA says it
is. So we're going to work withthat. But I do have some
questions because what they havelaid out to me tells me that
weather is the driving force atthis point. And so we need to
know, no, there aren't anyproblems in Brazil. We need to
(18:31):
know what's happening in Ukraineand the Black Sea, roughly
speaking, some for corn, a lotmore for wheat, with Russia
thrown in it too.
And we've talked about China sofar. So what does the planet
look like at this point for thegrowing regions?
Eric Snodgrass (18:47):
It's kind of funny. So what I hear is you
guys need a supply side shock,and you want it to come from me.
So I I, you know, I so
Dave Chatterton (18:56):
Actually, Eric, I want you to convince China
just buy a couple of blue corn.Okay?
Eric Snodgrass (19:01):
I'll get on the phone. Yeah.
Dave Chatterton (19:02):
Yeah. Be a problem.
Eric Snodgrass (19:04):
So so alright. So so this is why I think there
might be something brewing.Okay? We are we're two years
kinda removed from an El Ninoevent. And after El Nino events,
what the atmosphere tends to dois just kinda give up a lot of
its momentum compared to how itspins.
That's when we tend to build upinto big, big long wave troughs
(19:27):
and ridges. So what's that mean?Well, means what we're dealing
with right now, right? We'regetting these extended periods
of the same type of weather.Now, if that carries into the
middle of summer, if you get onthe wrong side of it, you're on
the wrong side of it, all of asudden it's hot and dry at the
wrong time, and that is apossibility.
I would say this, I don't knowif this is just what people do
(19:49):
just to me, but I've not had afarmer call me yet and say, Man,
things are going great. Justkeep it going. Right? It's
everybody. I don't care ifyou're from Nebraska, if you're
from Northern Illinois, SouthernIllinois.
No one has called me and said,I'm in the garden spot. And
sometimes, you know, people willtell us, Hey, things are off to
a good start. We're doing allright. I don't even know where
it is, and I've been to most ofthe Corn Belt in the last couple
(20:10):
of months. So I think all eyesare gonna be on The United
States.
Now over in the Black Sea, theystarted off with a massive cold
outbreak that just finished, nowthey're hot again, so their
temperatures have beenfluctuating like ours have. NDVI
wise, look at from satellite,things don't look crazy off from
normal. So you can't look overthere from space and go, holy
cow, there's a problem, but it'sso early. We can't do that yet.
(20:33):
Right now, the Indian monsoon isgoing to start early, which more
than likely means much ofSoutheast Asia is going to be
wet.
So maybe this bleeds over intodiscussion on things like palm
oil and all that and throughoutMalaysia and Indonesia. I think
they're going be very, very wetfor the coming several months.
But Todd, you mentioned it.Brazil came off on their second
crop without problems. Wethought we could find some, but
(20:53):
we just couldn't.
And as a result, you know, itlooks pretty darn good right
now. There is a big cold wavecoming into Argentina, but I
mean, who cares? It's fall,right? I mean, it is time to get
cold. I don't think they havemuch of their crop they're gonna
be vulnerable to a frost.
I mean, and they may touch afrost in Cordoba. So it comes
back to the same thing westarted with. I think the world
(21:15):
is watching The United Statesknowing that we've had major
precipitation disparityproblems. We've had, I mean,
drought monitor was really,really amped up on drought to
start the season, double what itwas a year ago. And the seasonal
drought outlooks are really notgood if you're in the Western
Corn Belt.
And that's where all the modelscontinue to put down the risk of
(21:35):
there being problems, but it'sstill, you know, it's July and
August. And what's funny is whenwe get to July and August, all
this May stuff we're talkingabout will be a distant memory.
So it comes back to where westarted, which is this
discussion on time. There'sabout four or five weeks over
which weather is either going tocreate a problem or it's going
to ruin the prospect of wherethese prices could go. And I
(21:58):
think everyone right now iswaiting on a weather narrative.
So what I think is gonna happen,Todd, is people are gonna craft
that narrative, whether it's inreality or not. This is the time
of year where snake oil salesmencome out of the woodwork to tell
you what they think is gonnahappen. And I'm just gonna tell
you from years of experience, wedo not know. It's there's no
clear picture right now as toexactly how this is gonna shake
(22:19):
down in July, but there's riskon the table.
Todd Gleason (22:23):
Speaking of that risk, we should switch supply
and demand tables to soybeans.Tell me about that s and d
table, what you think of it fromUSDA, and how it works with what
you've been looking at at theUniversity of Illinois along
with the FarmDoc team.
Joe Janzen (22:40):
Yeah. I think on this on the bean side, I mean,
we're obviously in a much morefragile state because we have so
many fewer acres, than we havethan we had last year, you know,
we're sort of below typical. Sothat changes the the narrative
completely. I mean, USDA isprojecting a very low level of
stocks to use, and and low levelstocks by the end of the 2526
(23:00):
marketing year. The key picturethere, though, is trade and what
happens with the combination oftrade and biofuels policy.
We've seen a number of sort of,you know, kind of like flash
drops in bean oil prices, onelast Friday, one, last night
into this morning where, yeah,that bean that bean oil market
has just kind of dropped off ona bunch of news about how, you
(23:23):
know, biofuels policy is gonnaimpact the the demand for
soybean oil. And there are a lotjust, I think, a lot more
uncertainty, and that andcoupled with, you know,
relatively tight balance sheetmeans there could be some room
for that market to run at somepoint.
Todd Gleason (23:37):
So we're still working through the RVOs. There
have been paperwork shuffledaround, but it's not clear
exactly what's coming forsoybean oil, renewable diesel in
particular, maybe SAF as well.When you think about soybeans
and what farmers ought to do, doyou think of it as a tight
(24:00):
supply, as as something that canmove with just a little push
along or does it take more?
Dave Chatterton (24:10):
It's going to take a little bit more, Todd. I
think think the trade is very,uneasy about the trade front
that Joe mentioned and just thethe whole political side of
where the particularly the beanoil demand goes. And bean oil
has been the bullish stalwart ofthe the soy complex really up to
this point. We had a limit downmove last week, as Joe said. Had
another strong move down todaybased on the House
reconciliation bill.
(24:30):
Now it goes to the Senate. I'msure it'll get changed. It'll
come back. It'll go back andforth. So really, really hard to
handicap where that's going togo.
In the meantime, we've got thisterror or trade situation with
China that's out there brewing.Based on the carryout that the
USDA printed and a decline yearover year, I think the market,
as I said earlier, would havereacted much stronger if they
(24:51):
bought into that. I think it'svery much a wait and see
attitude. The funds are along alittle bit of a few beans here
as we sit today, but not in abig way. Doesn't just like corn,
doesn't take a huge weatherevent to start affecting that
yield, but that timing on thatis more of July and August for
soybeans.
It's a little bit of a hands offsituation right now. Really kind
(25:12):
of going back to Eric's commentsabout China, I think when you
look at the biggestvulnerability in trade right now
in the CBT or at least in thepaper trade, it's the short in
wheat. And you've got a recordshort in Kansas City wheat.
You've got a very large short inin Chicago wheat. You've got a
Matif wheat that's very short.
And when you take that fundaggregate together, basically,
they're a record short in wheatright now. And if China's wheat
(25:36):
crop China's, I think, domesticwheat stocks have been drawn
down to the order of almost50,000,000 metric tons, or 50,
yeah, 50,000,000 metric tonshere over the last two and a
half years, they're they'retight on their domestic wheat
stocks. If they have to importwheat from someone and and we
get to be in that mix, wheatmight be the canary in the coal
mine here that kinda saves thethe the row crop complex or, you
(25:57):
know, brings some life to therow crop complex.
Todd Gleason (26:00):
I always thought it was oat nose, but maybe it
will be wheat nose in the verynear future. I want to stay with
soybeans for just a second. Theexport market, the numbers that
USDA printed, where where do youthink those numbers should be at
this point? What do you want touse in your supply and demand
tables?
Joe Janzen (26:19):
I there USDA is calling for, I think, it's
1,600,000 bushels or billionbushels of, soybean exports next
year. That's down a little bit,and I think that's probably a a
a pretty good number given sortof what we've seen in the the
tremendous amount of tradeuncertainty. I mean, China's not
buying a lot of US beans, and Idon't expect them to really move
(26:41):
into that market in anysignificant way given the amount
of supply that's coming out ofSouth America that was
harvested, and in in the lastfew months, there's not a huge
need to to source beans from TheUnited States. So we're gonna
have to we're gonna have to waita little bit to get some
confirmation on what new cropsoybean export demand looks
like.
Todd Gleason (27:00):
China has also been behind on sourcing soybeans
from Brazil. Is that concerning?Yeah.
Joe Janzen (27:07):
I think so. I mean, in the sense that it just sort
of pushes back everything andkind of perpetuates the
uncertainty. Absolutely.
Todd Gleason (27:14):
What are your thoughts on this issue?
Dave Chatterton (27:16):
Yeah. You know, the Chinese Chinese soybean
imports have definitely beenlacking. They've been slowing
down their ports a little bit,but I think that's gonna be
picking up, Todd. It looks likethere's a record amount of, you
know, beans that are going onthe water from Brazil in
particular heading to China,that they're going to continue
to build their stocks, buildtheir reserves. Their crush
numbers are getting healthierand getting a little bit better
along the way here.
(27:37):
So I don't think it's asituation where China is going
to have to come back to The UShat in hand for soybeans. To me,
one of the bigger wild cards wetalked about the policy and how
it relates to soybean oil andthe bean crush, but really the
stroke of the pen risk is theother, I guess, I'll call it
bullish risk out here in themarketplace. We've certainly
been on the defensive side ofthat, but if you go on the maybe
(27:59):
the the glass is half full sideof that equation, and the Trump
administration is able to ink adeal that gets China to buy US
soybeans, you know, acquiescingfor access to our capital
markets or imports or howeveryou want to put that. We have a
much different situation. Thatbean balance sheet that Joe was
discussing all of a sudden getsa lot tighter, lot quicker, or
potentially does.
Todd Gleason (28:20):
Let's get a final word from each of you. I'm going
to ask Eric what your final wordwill be. And about June 7 I
believe, is the latest date. Butwe'll start with Joe Jansen, ag
economist at the U of I. Finalword about marketing or what
farmers should be considering atthis time of the year?
Joe Janzen (28:39):
Oh, I think looking for rallies because this is a
time of year when we typicallysee some seasonal rallies in new
crop pricing, and takingadvantage of them is is the name
of the game. And that's truethat's true year in and year
out. And I think this this yearis setting up to be, you know,
that story will play out here inthe next few weeks.
Todd Gleason (28:58):
Dave Chatterton of Strategic Farm Marketing, your
final word?
Dave Chatterton (29:01):
Yeah, Todd, I think Joe's got it pegged. You
know, seasonally, you need to bepaying attention to your
marketing right now, and theseopportunities have some offers
out ahead of the market. Rally'sare your friends here.
Unfortunately, you know, in thewhole barometer of how we're
marketing right now, we stillhave to play a little bit of
defense, you know, more so onbeans than on corn. But you have
to be looking for thoseopportunities and ready to take
them.
I don't think we wanna get tothe end of the summer or or deep
(29:24):
into the summer and have thatsituation that Eric talked about
where all of a sudden a weather,you know, event has not been
conjured up or has notdeveloped, and we don't have
that lift. And all of a sudden,the sellers are starting to come
out into our marketplace. Sotrying to stay ahead of the the
process a little bit, I think,is your best defense right now.
And I know we're not we're notexcited about prices where
they're at. We didn't talk aboutthe government program side of
(29:47):
this and what may be coming downthe road in an MFP or other
types of programs.
I'll save that for anotherdiscussion because that's a
that's a whole another can ofworms. But, you know, keep in
mind that that that particularpoint is out there as well to
kinda supplement your bottomline at the end of the year.
Todd Gleason (30:02):
Eric, if you could conjure up an issue someplace,
that would be good. Otherwise,what is your final word for the
day?
Eric Snodgrass (30:08):
You know, I would just say this. I think we
all feel as though theatmosphere has been in a bit of
a cadence, and it's like to getstuck in certain configurations
and that's a wild card. Regularmovement of the atmosphere where
things are changing more rapidlyis better. The fact that we keep
drawing out these long stretchesof continuous types of weather,
(30:31):
either it's severe weather,maybe it's the drought that
built in Nebraska, or even thestuff in Northern Illinois, we
can't seem to break away fromit. If that kind of cadence
continues, then you will beginto have larger areas where there
are regional disparities inrainfall, and that will start to
peel away at the chance that wecould even come close to 181
crop.
(30:52):
I don't think it's in the cardsright now. But you mentioned
earlier, are we down can we godown or someone did down 10%.
Knocking 20 bushels off of this,I don't see
Todd Gleason (31:00):
that yet either. Commodity Week, of course, is a
production of Illinois PublicMedia. You may hear and listen
to the whole of the programanytime you'd like on our
website at wilag.org, w I l l ag 0 r g, or search us out in
your favorite podcastapplications. Our thanks go to
our panelists this weekincluding Eric Snodgrass, Dave
(31:21):
Chatterton, and Joe Jansen. I'mUniversity of Illinois
Extension's Todd Gleis.
Hi.
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