September 18, 2025 • 37 mins
Panelists
- Dave Chatterton, SFarmMarketing.com
- Curt Kimmel, AgMarket.net
- Mike Zuzolo, GlobalCommResearch.com
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Todd Gleason (00:00):
This is the September 18 edition of
(00:02):
Commodity Week. Todd Gleasonservices are made available to
WILL by University of IllinoisExtension. Well, welcome to
commodity week. I am ToddGleason. Our panelists for the
day include Mike Zuzlow.
He's a globalcomresearch.com outof Atchison, Kansas. Kurt Kimmel
(00:22):
joins us from agmarket.net inNormal, Illinois. And Dave
Chatterton is here fromStrategic Farm Marketing. He's
in Champaign, Illinois.Commodity Week is a production
of Illinois Public Media.
It's public radio for thefarming world online on demand
anytime you'd like to listen tous at willag.0rg. Let's begin by
(00:45):
getting a list of items thatmaybe we should take up for the
week. I think Dave Chattertonwill start with you today.
Dave Chatterton (00:51):
Yeah, Todd. I mean, we've got a USDA report
behind us now. We're lookingforward here. We've got a a
Trump Chi phone call tomorrow totalk about, know, TikTok. We
don't know that that willinvolve trade, but certainly,
we're still debating yields herein The US.
What the USD will do with thatgoing forward. We're looking at
the the Trump, you know, tradepolicy and what it means for
(01:11):
China and particularly forsoybean imports going forward.
And I think we have to starttalking about Brazil. Know, new
crop bean has started. Rainfalllooks like it's starting to pick
up there.
The monsoon looks like it'scoming in just in time for what
will be a favorable plantingseason. We had Conava today
which is the Brazilian versionof the USDA talking about, you
know, harvesting a record cornand soybean crop in the country
(01:32):
here for the twenty five, twentysix crop years. So, you know, I
think the supply side versus thetrade war is still the debate
here in the trade.
Todd Gleason (01:41):
Mike Zuzlow on your list.
Mike Zuzolo (01:43):
Yeah. I think Dave set that up really well. I'd I'd
only add two common themes thatI continue to monitor at this
point, Todd, and that is themajor driver this week seems to
have been the Federal Reserve,both before the announcement and
after the announcement. And Ithink it's a bigger narrative
that the weaker dollar and goingdown to a forty three month low
after the Fed news came out hasreally done a lot in the idea
(02:06):
that maybe we do have acommodity demand low in this
marketplace given how robust ourexports are. The second thing
would be it just seems likebetween the rapid harvest, the
yield comments, even the weeklychart technicals and the gap
that we left this year after theSeptember went off the board and
December took over as leadmonth, still looks a lot like
(02:28):
September.
So wondering if that can't bemaybe something we can tap into
as we head into the end of themonth and like last year going
into October, find some higherhighs in the corn market or not.
Todd Gleason (02:40):
Anything top of mind for you, Kurt, that hasn't
been listed yet?
Curt Kimmel (02:44):
Oh, boy. We got a two day seminar there. But the
only other thing I'm kindainterested in to see what Mike
Dave kinda think is we're gonnaprobably get a government
payment here sometime ranginganywhere from 50 to a $100 an
acre. And what would be thefarmer psychology with that
payment coming is gonna be ableto wait for that payment store
(03:04):
sale? That's kind of themindset, looking forward here
with optimism or hope that mighthappen?
Todd Gleason (03:10):
Let's start with that just to see what everybody
thinks about it. Of course, USDAhas been discussing the
secretary, Rollins, thepossibility of a payment more
loudly this week, somewherebetween 50 and a $100. And it's
likely to come much soonerrather than later. What impact
do we suppose that might have onthe marketplace? Dave
(03:34):
Chatterton.
Dave Chatterton (03:35):
Yeah. Todd, I mean, certainly the drumbeat is
happening. And I think if youkind of look at maybe the bigger
negotiating scheme here, it youknow, I think the administration
or the Trump administration iskind of, you know, foretelling
or shadowing that they'rewilling to exchange a direct
payment to farmers in in lieu ofhaving China come back to The US
(03:56):
ag market and particularly forsoybeans. If you look at the
Chinese imports and apply thetariff year over year at this
20% level, which is we'll callit the the fentanyl tariff,
you're talking about a$90,000,000,000 plus or minus
income into the US Treasury. Bycomparison, if China agreed by
some reason to purchase, let'ssay, an amount of beans equal to
(04:17):
what they did last year in that22, 22,500,000 metric ton range,
you're talking something that'smore like a $9,000,000,000, you
know, purchase of beans.
So, you know, you put yourselfin Trump's shoes tomorrow,
90,000,000,000 on one sideversus a 9,000,000,000, you
know, receipt on the other. Ithink you take the 90 and you
you pass some of that along tothe farmers. So, that's
(04:38):
essentially what I think byBrooke Rawlins and by the head
of the, you know, thecongressional, the the house and
the senate ag committees areboth talking about this relief
program and as Kurt mentioned,you know, we don't know exactly
what form it's going to take. Wedon't know exactly the timing
but it looks like it will be outthere. What that does is, I
think, enables farmers in a lowprice environment to hold more
(04:59):
grain off, to create better cashflow, and to maybe weather some
of the the higher input costs aswe look forward to next spring.
But for the direct impact onfutures, I don't I don't
necessarily think it's bearish,but I don't know that it gives
us a big lift here just at theat at this particular point.
Todd Gleason (05:14):
Mike Zuzolo, your thoughts?
Mike Zuzolo (05:16):
Only thing I'd add is I would hope my wish would be
you take a third of that andtake on those higher fertilizer
prices that we're probably goingto just have to eat at this
point. Take a third and work onyour crop insurance, but also
take a third and get into yourmarketing and hedging analysis
and structure your profitabilityin the very beginning of the
(05:37):
year. And I say thatspecifically, Todd, because
we're still dancing around tenseventy five, $10.80 on November
26 beans, the closer we get to$11 the more beans cash flow,
but it also means probably in mymind, and I'd be interested in
what the other guys think, butalso probably means more bean
acres in '26. So I don't see theBrazilians going hard after
(05:58):
corn. I think they're going togo more aggressively after
soybeans both in terms of theirown costs and fertilizer prices
plus what China's wanting to buyfrom them.
And so, you know, theoreticallywe could have a very large
supply of soybeans around thisworld, especially if our yields
don't get hit as much here inthis crop as we think they
(06:19):
probably could be.
Todd Gleason (06:20):
Okay, Kurt. Follow-up on what we've been
discussing, but I'd also like totake up that November bean
contract for next year. We didhave a listener write in and
wondered whether what he wasseeing in the charts for
November beans and uptrend couldbe continued and if there was
(06:40):
any possibility that you mighthave some upside potentials. But
start off with, what your yourquestion was, really. What
happens if there is a 50 to a$100 payment?
Curt Kimmel (06:52):
Yeah. It's, something we've been visiting
about here. I mean, theadministration's did a great job
kinda promoting it as far asstalled trade talks is costing
The US producers. So there inreturn, some type of help
coming. But just a short survey,the mentality or the mindset
that we're kind of seeing isstore and ignore.
(07:17):
So it kind of tells me thatinitially air producers are
thinking store or hang on to it,use the cash to pay fertilized,
do other bills, and kind of hangon to cash grain, which means
we're going to probably havemore cash grain to move after
the first of the year here. Asfar as the November soybean
chart goes, we've got a lot ofdifferent things in progress.
(07:45):
You can read it quite a fewdifferent ways, but this
continues to stall out here atthe upper end of the trading
range for November beans. Reallyto get something going here, we
need to move above this $10.7But we've got, you can develop a
little bit of a channel, anupward channel. We need to hold
the early September lows.
(08:06):
The two on the bean chart, ifyou want to get bullish, you can
kind of build a sloppy head andshoulders bottom, which suggests
if we start moving above $10.6$10.7 and all of a sudden we can
challenge that $11 resistancehere. So the chart points are
gonna be real critical hold theearly September lows here, Todd.
Todd Gleason (08:27):
Indeed. Anything, Mike, to follow-up on that
because you started thatcommentary with me?
Mike Zuzolo (08:31):
Yeah, a couple of things. I think the person that
I really follow a lot when itcomes to administration taking
seriously is Senator Grassley.He's kinda like the Pat Roberts
of the twenty first century.Whatever he says is gonna be
taken seriously by anybody inthe White House. And he came out
and said this week that, youknow, for farmers, you're
looking at an all time high interms of fertilizer prices
(08:53):
relative to the grain prices.
And so I do think that we'regoing to move and see something
done by USDA. But that reallydoes open us up to more
susceptibility on the cashversus the futures market. And
that's what's been so difficultfrom a standpoint of us and our
industry managing those twomarkets that have really kinda
separated themselves out. And Ijust think, you know, more
(09:16):
direct payments in light of thetariffs is gonna just gonna keep
the futures and the basis so farseparated from one another and
make it more difficult.
Todd Gleason (09:24):
And if history is any indication, I think, Dave
Chatterton, when these paymentscome, particularly at this point
after we've had some inflation,it's quite likely that the input
side will try to recoup some ofthose, I would think. Does that
bother you very much? And do yousuppose that farmers need to
(09:45):
consider really where that moneyis going to end up going?
Dave Chatterton (09:49):
Yeah. Todd, think it opens up a much larger
debate and really the, frameworkof that if you want to just cut
to the core is that thegovernment payments that are
made to farmers are basically aconduit that go right back into
corporate shoes, whether it'sequipment, whether it's inputs,
whether it's seed, you know,pick your poison, you know,
(10:09):
farmers are spending money, youknow, to to do that. I think at
this particular point, we needto kind of not lose sight of the
fact that, you know, margins onthe farm, even with some
improvement in prices here andmaybe yields kind of being
hopefully a little bit betterthan expected, not record in in
many cases and and not, youknow, as good as they once could
have been but those payments aredesperately needed. If you look
(10:31):
at what's happened here withthis Todd and really put it into
perspective. If you're in anarea that got rain and you have
good yields and prices areimproving, you're sort of
yielding your way into a smallprofitable situation at least on
corn and getting there on beans.
Here's a situation where youdidn't get a lot of rain and
your yields are somewhatquestionable or maybe below EPH.
The situation's really gettingworse for you because you have
(10:52):
less grain to sell. You do havea higher price but you're losing
out on all the the you know, thearc and the PLC type payments
that would be coming in, ECOtype payments that would be
coming in at the end of the dayon a profitability grid, you're
actually going backwards alittle bit. So, those payments
are needed and certainly,they're going to go back out.
They're not going to stay in thefarmer's hands very long, I
(11:13):
would say.
I think my bigger concern isthat we've had this detachment
that Mike mentioned andfertilizer prices, nitrogen, P
and K are are great examples ofthat where if you look at those
as a ratio to corn, they're atlevels that look very high
compared to their current cornprice but I think, you know,
dealers, producers, whatever youwant to call it, are going to be
able to maintain those levels aswe put money in in the farmer's
(11:36):
pockets and they they they goahead and purchase those high
priced inputs. So, what it meansis probably more acres. I might
disagree just a little bit andthink that we might not have
quite as many bean acres nextyear. Farmers are a little
financially healthier. Theymight they might stick with some
corn, but in doing so, moreinputs going into that crop.
You're have stronger yieldpotential next year, and you
(11:58):
kinda make this supply problem.I don't I don't wanna say worse,
but it continues to carry itdown the road a little bit.
Todd Gleason (12:05):
Yeah, Mike. So that that was my going to be my
follow-up question, but I wouldlike you to consider that as
well. If the payments come in,and they simply go into things
that producers need to put in acrop next year, and they pay for
more inputs, that's more supply.It seems like it's a circle that
(12:27):
that might not work very well.
Mike Zuzolo (12:29):
Yeah, I agree. And I think one of the things that
I'm trying to battle here onthis side of the Corn Belt is I
probably am hearing more clientssay that they don't want to
plant hard red wheat in hard redwheat country, but I think I've
had more clients in Illinois andIndiana call me this fall and
talk to me about planting moresoft red wheat than I have in
(12:50):
the last five years and askingme where they I think prices can
get to in the new crop and youknow assuming that's going to
come at the expense of corn.That that's that works into the
the idea too. And some of thatgoes back to the double crop
beans not performing hardly atall. It's South Of I-seventy and
Route 50.
(13:11):
So it's up in the air right nowin my mindset. I just feel like
the rotation and the cost ofproduction, it feels a lot
heavier in the farmers' mindsthan it did last year at this
time if you ask me.
Todd Gleason (13:22):
So they're suggesting they're going to
double crop soybeans or are theyfar enough north that that's not
the idea?
Mike Zuzolo (13:29):
The exactly. They're far enough north. That
is not the idea now because theyjust have not been happy with
their yields.
Todd Gleason (13:35):
And so in Illinois, and some other places
further to the South where, softred winter wheat has grown, you
don't follow-up after cornsimply because there is a
disease problem. That's not thecase if you're further to the
North, but generally speaking,so that that would take corn
acres out of out of therotation. It was something I was
(14:01):
thinking about too, Kurt Kimmelwas what acreage might look like
next year because we have somany, something like 90,000,000
harvested acres for corn, nearlya 100,000,000 planted this year,
80,000,000 harvested acres forsoybeans that there ought to be
a lot of soybeans going in theground next year. Do you suppose
(14:21):
with a little extra cash intheir back pocket that farmers
really would put more acres ofcorn in the in I know Mike's
making an argument for wheat,soft red, but that's about a lot
of acres probably in the stateof Illinois.
Curt Kimmel (14:34):
Well, what we're hearing on yield results thus
far, you know, there's some 80bushel beans coming out of the
field that only received, youknow, three quarters of one inch
of rain since August 1. So withthe mindset that these bean
yields are holding in thereversus what we're hearing corn
with the different moving partsand problems with corn, I think
(14:57):
you can probably lean that way.But as Mike said, the rotation
kind of favors beans somewhat.But on the other side of the
corn, though, I know you gothigher inputs. Right now, these
26 corns, what, four sixty twos,four sixty three, we're close to
where we were a year ago.
Even with the higher inputs, youlook at the spread between
(15:19):
twenty five and twenty six,they're paying up as much as
$0.40 here to make sure we havesome acres. So yes, there's
gonna be more bean acres, but Ithink guys are gonna probably
hang in there on corn. But nextreport, we're gonna have more
(15:39):
acres in general. That's the bigkey here is we're just finding
more acres every report thatcomes out.
Todd Gleason (15:45):
And before we leave this kind of topic, Dave
Chatterton, one of the thingsthat Daryl Good would talk about
is if something causes you tomake a change in your acreage
mix, when you make that change,particularly if it's related to
(16:05):
the price, in the followingyear, that you should at least
sell that many bushels or acresgoing forward so that you have
that part covered. Is thatsomething you talk to producers
about?
Dave Chatterton (16:20):
Yeah, Todd. I think it goes exactly to the
point we've been talking about.If we see this, let's say, at
minimum four to 6,000,000 acre,you know, migration out of corn
into soybeans and we'll leavethe the weed and that that whole
conversation aside for a second.You know, to to Kurt's points,
the general rotation of highcorn acres plus I think some
financial, you know, difficultyon the part of of the the small
(16:42):
and mid sized farmer to tofinance next year is going to to
force more bean acres and indoing so, if we don't have a
China export program and we'regoing to have more bean acres on
our on our balance sheet nextyear as a as an individual farm
operator. You have to startthinking about that and with
that November bean contract,we'll call it $10.80 or as a
round number today but certainlywith the use of a structured
(17:05):
contract, a one by two or somekind of a, you know, a non
traditional contract with yourlocal elevator or you can get an
$11 $11.10, $11.15, $11.20 flooron a portion of that production
and to to your point, I think ifyou're going to plan on those
additional acres next spring,you you definitely don't want to
end up in the same battle thatwe've been fighting this year in
(17:27):
these sub $10 you know, type ofnumbers.
So, you know, I think it worksto your benefit to have a floor
under at least that first 10 or20% going forward and if those
end up being your worst sales at$11 or $11.10 or $11.20, I can
live with that as far as my Pand L and my banker can live
with that. But if we're $9.50next fall, obviously we're in
(17:49):
the risk management business,and we can't rule that out if
China buys zero beans and if ifBrazil if CONAB is right in
Brazil, has another record cropwith acreage up another 3.7%, I
think, what they called ittoday.
Todd Gleason (18:01):
Yeah, Mike. So when you talk to producers on
both sides of the corn belt, onewho's thinking about giving up
winter wheat, the other who'sthinking about putting winter
wheat in. Are are you talking tothem about pricing out those
changing acres too?
Mike Zuzolo (18:16):
Yeah. I am. And and, you know, I would love it
if we could get the wheat andthe and the, soft red wheat,
especially in the crude oilmarket to continue its recent
pattern. And this goes back tothe currencies, goes back to our
strong demand on a four weekbasis. Those two futures markets
are running at about a 95, 96%positive price relationship.
(18:37):
And I think it is large part dueto the strength of the emerging
markets, due to the weakness inthe dollar and those emerging
markets in their currenciesgoing up. The Brazilian currency
just made a new fifty month highright before the Federal Reserve
comments. I think offshoreChinese currency is at an eleven
month high at this point. And Ithink the Mexican pesos right up
(19:00):
there at about a one year highas well. This all adds to the
idea of the weekly export sales.
Wheat was a little bit softer,but overall, very nice export
sales again on Thursday. I wouldhope we'd get to $6 in both hard
red July and soft red July andwouldn't wanna let them slip
back below that, Todd, withoutgetting some risk management
done on the protection on thedownside.
Todd Gleason (19:22):
Kurt Kimmel, coming back to this season, what
have you been hearing aboutyields across the Midwest?
Curt Kimmel (19:28):
Just highly, highly variable according to whether
you had tar spot, rust, heavyground, light ground. Iowa
particularly, if you didn'tspray, there's stories of maybe
an 80 bushel hit. If you sprayedonce, you've only got a 50
bushel hit. If you sprayedtwice, maybe a 30 bushel. I've
(19:52):
heard a new saying, swimming andrest.
So it's an issue in some areasthere. On the flip side I've
heard some better than last yearyields too. So we'll see how we
move along here. Bean wise itseems like bean yields are
fairly good for the most part.Avoided the white mold, stem
(20:17):
rot, so beans kind of held inthere.
And it's going to be quiteinteresting to see how the last
part goes, particularly the onesthat really suffer due to this
dry August and September.
Todd Gleason (20:30):
Dave, can we take up the Trump Xi TikTok trade and
whether that might actually comeup with some kind of
agricultural agreement. I can'timagine it would be a trade
agreement, probably some kind offramework, but or maybe, and
(20:52):
this has been done in the past.There would be a set of numbers,
goals for getting sales done. Doyou suppose that could happen
tomorrow or over the weekend?
Dave Chatterton (21:01):
Yeah, Todd. I don't you know, I guess the
first rule when we when we talkabout Trump and then you throw
in China, nothing's off thetable. Anything can happen, and
you don't wanna rule anythingout. That said, I think the odds
are are are highly favoring thatwe probably don't get a
comprehensive trade dealerframework at least tomorrow or
this week. I think the idea ishere is that if enough common
(21:23):
ground can be found in this calltomorrow and it moves beyond
TikTok into some other areas of,you know, rare earths and and
hopefully trade and hopefullyagricultural purchases that we
have a framework for the two ofthose leaders to meet personally
whether it's in Beijing inOctober or later in November in
South Korea at the Apex Summit.
At that point, I think it takesthe two of those guys getting
(21:44):
together face to face to reallyget a phase one type of
agreement in place. If our mathis correct on that, you know, if
I look at, if you look at thebuying window for China of US
soybeans, you know, they're ourlargest soybean buyer. Let's
just say they take 60%historically of our beans or 65,
but that window is verycompressed between, let's say,
(22:06):
mid September and mid January.At this point, even if even if
the issue is solved tomorrow,you still have, you're talking
probably you've lost September,October, and probably close to
half of November. It's gonnatake you four to five, maybe six
weeks to get a ship, you know,in place and loaded headed to
China.
So you're talking you're outinto November at this particular
(22:29):
point. So at best, that wouldleave China maybe buying half of
what they would traditionallybuy from The US and I'm not
saying that that can't happenbut China's you know,
negotiating stance to this pointhas been very consistent in the
fact that they're willing to buyUS ag products only if Trump
(22:51):
withdraws the 20% tariffs thatthat I referred to earlier as a
fentanyl tariffs. And in thatcalculation, as I said, those
tariffs are generating90,000,000,000 in revenue to the
US Treasury. The cost of of thatof losing China's soybean
business for the entire year ata at a full rate is around
9,000,000,000. So, but again, Ithink the writing is on the wall
(23:11):
here that the plan from theadministration is to take part
of the 90 and use that toreplace the nine in some form of
an MFP or an emergency ad hocpayment to The US producer.
You could certainly be wrongabout that, Todd, but that's the
the tea leaves as I see themcurrently.
Todd Gleason (23:28):
Mike Souzil, you watch these macroeconomics very
closely in trade policy as well.How do you view it?
Mike Zuzolo (23:35):
I can't add anything better than what Dave
just said except that when itcomes to a common denominator in
this relationship, it really isRussia, and it really is China
and Russia coming together. AndI think from the very beginning
of his campaign in the secondterm, running for president,
president Trump made a very bigpoint about the previous
(23:56):
presidents allowing Russia andChina to hook up together both
trade wise and geopolitically,and that was a huge mistake. And
so now the common denominator isRussia, and China is
backstopping Russia right now.And when you look at what
president Trump is asking Europeto do in terms of throwing a
(24:17):
100% tariffs on China and onIndia so that they would stop
buying Russian oil, you see thatMexico is putting 10 to 50%
tariffs on China in their importof goods, especially because of
the car situation. I you know,it just doesn't seem like to me
that we have politically thereasoning to go and and match up
(24:38):
and meet and make a trade dealright now between these two
countries because is the tradedeal going to give us the
ability to negotiate peacebetween Russia and Ukraine?
And I just feel like that's kindof a bridge too far that China's
not only not willing to do that.They probably don't mind that we
have this on our plate rightnow. So that's kind of how I see
(24:58):
it right now, Todd. I I thinkhonestly, after this weekend,
I'll I'll be putting outsomething to the clients and
subscribers about maybe the ideathat The US China relationship
could be going off the rails ifwe don't see some something come
together here very, very soon,and that puts more pressure on
the domestic biofuel demand.
Todd Gleason (25:17):
Speaking of rails, Mexico still has not gotten a
trade agreement, Kurt Kimmel,with The United States. They're
on pause as well. I don't recalltill when at this point.
However, they are trading andpurchasing corn. I'm wondering
whether that continues to begood, and if you think it will
(25:39):
be maintained during the newcrop marketing year.
Curt Kimmel (25:44):
Yeah, I think it will and I think it's going to
stay very strong. Several thingsto look at, the extra feed
usage, feeder cattle and soforth. But two, the unknown or
the not talked about feed usagein Mexico is they've got a huge,
huge pet, lots of pets to feed,and they see a lot of growth in
(26:07):
the pet industry. And they lookforward to a lot of consumption
of incorporating grain in petfood. So, you know, until Mexico
can figure out another way toimport green into their country,
I I think we're still good atcontinuing to see Mexico as a
buyer as they stepped up todayand bought another 110,000 tons
(26:28):
of US corn.
Todd Gleason (26:29):
Brazil, also, one of those places that they could
purchase from Dave Chatterton.As you mentioned, Conab coming
out with, some thoughts thatthey may have record corn and
soybean crops again in thecoming year. Is that based on
extra acreage or hectares, fromthat nation?
Dave Chatterton (26:50):
Yeah, Todd. I mean, planting year over year is
up in their eyes 3.7%. So you'vegot the extra the, you know, the
ground there. They're lookingfor favorable, I think, you
know, fertilizer and inputsituations despite the currency.
And you know they're looking atwhat looks like a you know a non
threatening weather pattern atthis point.
Now that can all change. We're along way from landing that
(27:10):
soybean crop. It's just early inthe planning process and
particularly in Central AndNorthern Brazil but guys are
getting started and if, youknow, just to remind folks, I
mean, it's it's important notonly that it early planning
maximizes the soybean yield butit also is the most favorable
outcome for the second crop orthe safrinha crop on corn which
is the important one in terms ofproduction and exports. They're
(27:33):
able to get that corn inquicker, get it, you know, get
it harvested and get throughpollination before the dry
season enters and and have thebest yield opportunity to do
that. You know, plenty ofcompetition coming down the road
and I think if you put that interms of what, you know, Kurt
was commenting about and you'regoing towards Mexico.
I mean, traditionally, Mexicohas dipped their toe in the
(27:53):
water with the Brazilian cargohere or there but haven't really
found a way to solve that. Idon't know that they still have
the infrastructure there, butunlike China, Todd, Mexico faces
no tariffs in terms of importingSouth American soybeans. If you
look at what happens to The USgoing to China, Brazil right now
is, we'll call it, a dollar, youknow, there's a dollar to and
(28:16):
20¢ per bushel premium to USoffers on a five to five basis.
China continues to take SouthAmerican beans because a 23
effective 23% tariff on USsoybeans is $2.50 a bushel. So,
it works and it makes some senseeconomically.
Mexico doesn't face that issue.So, for whatever the case might
(28:37):
be in terms of whether it's cornor whether it's soybeans, if
those values, you know, are atparity or they're at a discount,
those numbers will start to be,you know, start to be calculated
and there there's always theopportunity for that business. I
agree with Kurt. I don't thinkthings are changing in a hurry
here, but I think it'sdefinitely a a slow burn in the
back pocket that needs to bemonitored here.
Todd Gleason (28:57):
Okay. Mike Sizzlow, I wanna come to you.
There are two class questions,that I want you to take up.
We'll get to both of them. Butfirst is, that you kind of think
and you've been talking aboutthis for a while, that this
market looks a lot like lastfall's market, meaning there was
a fairly early low and weclimbed in through October or
(29:19):
thereabouts.
There was a setback, I think, inSeptember. Can you tell me what
you're thinking today?
Mike Zuzolo (29:24):
Yeah. I think it's steady as she goes right now,
Todd. The next step here is aswe close out this week, to to
reject filling the gap in theweekly corn chart and it's
interesting to note that lastyear in September after the
September crop report we gappedhigher. We did not fill that gap
until July. It took a wholeanother ten months for the
(29:48):
market to come all the way backdown and fill that three ninety
four gap in that chart, threeninety four, three ninety five
gap from last year.
And so what my ideal scenariowould be is that wheat, crude
oil, soybeans, especially withthe wetter harvest bias as far
as potential to lose some cropsin the fields with some
(30:10):
extremely heavy rainfall totalsbeing shown on some of the
models right now, that thesemarkets would not want to dare
try and go back and fill thegaps from where September went
off the board and and theyreject that lower level like
they did last year at at thattime and that gave us another
couple weeks of up move And bythe October 1, had made kind of
(30:31):
our harvest or pre harvest highand then the market had to set
back some. So that's what myideal scenario would be. But
again, as I said, between therapid harvest early, this
weather setting in the yieldcomments, I'm hearing the same
thing that Curt is hearing. Theonly thing I would add is that
I've got clients near me thatare a third done with corn at
(30:52):
this stage and their yields aregood. And they're almost as good
if not as good as last year,which somewhat surprises me but
remember, USDA's got Kansas atfive.
4% better than last year.They've still got Illinois at a
percent better than last year.Indiana, three and a half
percent better than last yearand and Ohio almost 10% better
(31:13):
than last year. I'm not seeingit right now. And so I'm hoping
the trade reacts that way aswell and keeps this momentum to
the upside going.
Todd Gleason (31:22):
Finally, I'll stick with you one last time,
Mike, because you wanted to talkabout the Federal Reserve just a
bit. Maybe Dave or Kurt willwant to follow-up about the
interest rate drop this week,and the signal that there might
be more to come before the endof the year means what to the
commodity markets?
Mike Zuzolo (31:39):
We don't know yet, but it's it's a concern right
now because the reaction sincethe report came out and the fact
that the Fed policy only did a25 basis point cut, seems to me
to be a little bit of a letdown.And going into the Fed, the
market, the CME Fed tool that wecan all use as far as what the
bond markets are pricing in hadlike a 94% likelihood on
(32:03):
Wednesday, a 70% likelihood forOctober and a 65% likelihood of
more cuts of a quarter point inDecember. And so I would really
like to see that dollar toresume its downward move its
downward trajectory and notbreak above a major trend line
of resistance that we testedearlier this month. That would
(32:23):
disrupt that commodity demandlow mindset that I've been
keeping in my in my analysis,Todd.
Todd Gleason (32:29):
Kurt Kimmel, let's turn our attention to our final
word for the day. What do youhave to say?
Curt Kimmel (32:35):
Well, we'll go off of days 9,000,000,000 of if you
give a farmer $1, he'll spendtwo. So there's $18,000,000,000
$18,000,000,000 coming back intothe economy. Then on Mike's corn
version there, yeah, the chartslook fairly good. Our technical
analyst, says we've a hammerbottom in the charts,
(32:59):
particularly long term chartswith a monthly reversal to the
upside. South America is goingbe real important.
I believe we're going have aweather market there because
they're fairly well sold out andeverybody's going to be buying
out South America. Then lastly,if we see Chinese premier and
Trump get together October 31,is it gonna be a trick or
Todd Gleason (33:20):
a treat? We'll find out then, I suppose. Dave
Chatterton, your final word forthe day?
Dave Chatterton (33:25):
Well, let's ask Kurt what the moon phase is
gonna be on Halloween, and we'llget the trick or treat settled,
you know, settled right here andnow. But, you know, good
comments from everybody. I Ithink a couple of different
things. One is that, you know,to me, these these yield cuts
can be important to the market,but I don't think they're the
reason to sustain rally. I thinkfor the market to sustain a
rally at this particular pointon the future side, you need the
(33:47):
yield cuts to come in place, butyou also need a trade deal with
China or something that createsadditional demand.
When I look at the corn balancesheet and the USDA having
already filtered in recorddemand on just every corn line
we have, whether it's feed,whether it's ethanol, whether
it's exports. I just don't see alot of room to go up there. I
think if we get the yielddecline tied that that that
(34:10):
we've been talking about to adegree here, what you're going
to find is a situation thatbecause of the additional acres
that we found from the Junereport to where we are here in
the September report, it's threeand half million additional corn
acres kind of win the day overyield decline. So, in other
words, you know, if you cantake, if you use the USDA's
yield, you need about a seven.Three bushel cut per acre from
(34:32):
the current USDA yield numberjust to kind of get back to the
zero point of adding those acresinto the balance sheet.
If you take our number which iscloser to 180 that we're using
in house, you still need a aseven, you know, a bushel type
of a yield decline to get thereand it's just, you know, it it's
a big ask to do that. So, I Ithink the key here is asking
yourself, what is the recipe forsustaining a rally and do we
(34:55):
have that on the table andunlike last year where the yield
cuts were were taking were alittle bit of a surprise. I
don't think they are this year.I think people are looking for
the USDA to come down on theiryield inputs when we get into
the subsequent reports here inOctober, November, and the
final. So, we'll we'll see howthat goes.
One quick word on the cashmarket here. I think commercials
(35:15):
are a little bit disappointed intheir receipts today than to
pick up on a comment that Mikemade. I'm gonna have some guys
that are done with bean harvestthis weekend in Central
Illinois. And as you mentioned,you know, he's got guys that are
that are moving right along incorn. And every commercial out
there on the book, I think, camein with empty bins, saw big
carries in the marketplace, andwas anxious to to, you know, buy
at a very cheap basis.
(35:36):
And, you know, 35 under theDecis, 70 under the July type of
a deal and and, you know, andand and play those carries. I
think what they're finding isthat because of the farmers
reluctance to sell because ofthe potential for this emergency
payment maybe because yieldsbeing off a little bit from
where they once were, you know,projected to be. Farmers isn't
anxious to sell bushels as theythey might have been or take
(35:58):
them to town and so we've seensome basis pushes which is a
little unusual at this point inharvest but don't settle for the
posted basis. If you need tomake a false sale, don't don't
be afraid to go out there andnegotiate a little bit and see
what see what can happen. It'svery variable from market to
market, but certainly, thecommercials wanna make sure they
come out of harvest full inlight of the carriers that are
in the marketplace.
Todd Gleason (36:18):
And finally, your final word, Mike Zuzolo.
Mike Zuzolo (36:21):
Yeah. Just real briefly to dovetail what Dave
was talking about for what we'redealing with out here with being
80 under in soybeans here inNortheast Kansas and that going
all the way to a buck 55 underin North Dakota. I think in
certain parts of this corn belt,we really do have to separate
the cash from the futures, thebasis from the futures. And so
(36:41):
if we don't get a trade dealwith China and if we curb bean
yields, I could see where thefutures market would be holding
too much of a premium, the basismarket being way too wide. So
that might be something to thinkabout here in the next week or
two and design a marketing planaround that.
Todd Gleason (36:58):
Commodity week, of course, is a production of
Illinois Public Media. You maylisten to the whole of the
program anytime you'd like atwillag.org, willag.0rg. Our
thanks go to our panelists thisweek, including Dave Chatterton
from Strategic Farm Marketing,Kurt Kimmel of agmarket.net, and
Mike Suslow withglobalcomresearch.com. I'm
(37:19):
University of IllinoisExtension's Todd Gleeson.
This is the September 18 edition of
(00:02):
Commodity Week. Todd Gleasonservices are made available to
WILL by University of IllinoisExtension. Well, welcome to
commodity week. I am ToddGleason. Our panelists for the
day include Mike Zuzlow.
He's a globalcomresearch.com outof Atchison, Kansas. Kurt Kimmel
(00:22):
joins us from agmarket.net inNormal, Illinois. And Dave
Chatterton is here fromStrategic Farm Marketing. He's
in Champaign, Illinois.Commodity Week is a production
of Illinois Public Media.
It's public radio for thefarming world online on demand
anytime you'd like to listen tous at willag.0rg. Let's begin by
(00:45):
getting a list of items thatmaybe we should take up for the
week. I think Dave Chattertonwill start with you today.
Dave Chatterton (00:51):
Yeah, Todd. I mean, we've got a USDA report
behind us now. We're lookingforward here. We've got a a
Trump Chi phone call tomorrow totalk about, know, TikTok. We
don't know that that willinvolve trade, but certainly,
we're still debating yields herein The US.
What the USD will do with thatgoing forward. We're looking at
the the Trump, you know, tradepolicy and what it means for
(01:11):
China and particularly forsoybean imports going forward.
And I think we have to starttalking about Brazil. Know, new
crop bean has started. Rainfalllooks like it's starting to pick
up there.
The monsoon looks like it'scoming in just in time for what
will be a favorable plantingseason. We had Conava today
which is the Brazilian versionof the USDA talking about, you
know, harvesting a record cornand soybean crop in the country
(01:32):
here for the twenty five, twentysix crop years. So, you know, I
think the supply side versus thetrade war is still the debate
here in the trade.
Todd Gleason (01:41):
Mike Zuzlow on your list.
Mike Zuzolo (01:43):
Yeah. I think Dave set that up really well. I'd I'd
only add two common themes thatI continue to monitor at this
point, Todd, and that is themajor driver this week seems to
have been the Federal Reserve,both before the announcement and
after the announcement. And Ithink it's a bigger narrative
that the weaker dollar and goingdown to a forty three month low
after the Fed news came out hasreally done a lot in the idea
(02:06):
that maybe we do have acommodity demand low in this
marketplace given how robust ourexports are. The second thing
would be it just seems likebetween the rapid harvest, the
yield comments, even the weeklychart technicals and the gap
that we left this year after theSeptember went off the board and
December took over as leadmonth, still looks a lot like
(02:28):
September.
So wondering if that can't bemaybe something we can tap into
as we head into the end of themonth and like last year going
into October, find some higherhighs in the corn market or not.
Todd Gleason (02:40):
Anything top of mind for you, Kurt, that hasn't
been listed yet?
Curt Kimmel (02:44):
Oh, boy. We got a two day seminar there. But the
only other thing I'm kindainterested in to see what Mike
Dave kinda think is we're gonnaprobably get a government
payment here sometime ranginganywhere from 50 to a $100 an
acre. And what would be thefarmer psychology with that
payment coming is gonna be ableto wait for that payment store
(03:04):
sale? That's kind of themindset, looking forward here
with optimism or hope that mighthappen?
Todd Gleason (03:10):
Let's start with that just to see what everybody
thinks about it. Of course, USDAhas been discussing the
secretary, Rollins, thepossibility of a payment more
loudly this week, somewherebetween 50 and a $100. And it's
likely to come much soonerrather than later. What impact
do we suppose that might have onthe marketplace? Dave
(03:34):
Chatterton.
Dave Chatterton (03:35):
Yeah. Todd, I mean, certainly the drumbeat is
happening. And I think if youkind of look at maybe the bigger
negotiating scheme here, it youknow, I think the administration
or the Trump administration iskind of, you know, foretelling
or shadowing that they'rewilling to exchange a direct
payment to farmers in in lieu ofhaving China come back to The US
(03:56):
ag market and particularly forsoybeans. If you look at the
Chinese imports and apply thetariff year over year at this
20% level, which is we'll callit the the fentanyl tariff,
you're talking about a$90,000,000,000 plus or minus
income into the US Treasury. Bycomparison, if China agreed by
some reason to purchase, let'ssay, an amount of beans equal to
(04:17):
what they did last year in that22, 22,500,000 metric ton range,
you're talking something that'smore like a $9,000,000,000, you
know, purchase of beans.
So, you know, you put yourselfin Trump's shoes tomorrow,
90,000,000,000 on one sideversus a 9,000,000,000, you
know, receipt on the other. Ithink you take the 90 and you
you pass some of that along tothe farmers. So, that's
(04:38):
essentially what I think byBrooke Rawlins and by the head
of the, you know, thecongressional, the the house and
the senate ag committees areboth talking about this relief
program and as Kurt mentioned,you know, we don't know exactly
what form it's going to take. Wedon't know exactly the timing
but it looks like it will be outthere. What that does is, I
think, enables farmers in a lowprice environment to hold more
(04:59):
grain off, to create better cashflow, and to maybe weather some
of the the higher input costs aswe look forward to next spring.
But for the direct impact onfutures, I don't I don't
necessarily think it's bearish,but I don't know that it gives
us a big lift here just at theat at this particular point.
Todd Gleason (05:14):
Mike Zuzolo, your thoughts?
Mike Zuzolo (05:16):
Only thing I'd add is I would hope my wish would be
you take a third of that andtake on those higher fertilizer
prices that we're probably goingto just have to eat at this
point. Take a third and work onyour crop insurance, but also
take a third and get into yourmarketing and hedging analysis
and structure your profitabilityin the very beginning of the
(05:37):
year. And I say thatspecifically, Todd, because
we're still dancing around tenseventy five, $10.80 on November
26 beans, the closer we get to$11 the more beans cash flow,
but it also means probably in mymind, and I'd be interested in
what the other guys think, butalso probably means more bean
acres in '26. So I don't see theBrazilians going hard after
(05:58):
corn. I think they're going togo more aggressively after
soybeans both in terms of theirown costs and fertilizer prices
plus what China's wanting to buyfrom them.
And so, you know, theoreticallywe could have a very large
supply of soybeans around thisworld, especially if our yields
don't get hit as much here inthis crop as we think they
(06:19):
probably could be.
Todd Gleason (06:20):
Okay, Kurt. Follow-up on what we've been
discussing, but I'd also like totake up that November bean
contract for next year. We didhave a listener write in and
wondered whether what he wasseeing in the charts for
November beans and uptrend couldbe continued and if there was
(06:40):
any possibility that you mighthave some upside potentials. But
start off with, what your yourquestion was, really. What
happens if there is a 50 to a$100 payment?
Curt Kimmel (06:52):
Yeah. It's, something we've been visiting
about here. I mean, theadministration's did a great job
kinda promoting it as far asstalled trade talks is costing
The US producers. So there inreturn, some type of help
coming. But just a short survey,the mentality or the mindset
that we're kind of seeing isstore and ignore.
(07:17):
So it kind of tells me thatinitially air producers are
thinking store or hang on to it,use the cash to pay fertilized,
do other bills, and kind of hangon to cash grain, which means
we're going to probably havemore cash grain to move after
the first of the year here. Asfar as the November soybean
chart goes, we've got a lot ofdifferent things in progress.
(07:45):
You can read it quite a fewdifferent ways, but this
continues to stall out here atthe upper end of the trading
range for November beans. Reallyto get something going here, we
need to move above this $10.7But we've got, you can develop a
little bit of a channel, anupward channel. We need to hold
the early September lows.
(08:06):
The two on the bean chart, ifyou want to get bullish, you can
kind of build a sloppy head andshoulders bottom, which suggests
if we start moving above $10.6$10.7 and all of a sudden we can
challenge that $11 resistancehere. So the chart points are
gonna be real critical hold theearly September lows here, Todd.
Todd Gleason (08:27):
Indeed. Anything, Mike, to follow-up on that
because you started thatcommentary with me?
Mike Zuzolo (08:31):
Yeah, a couple of things. I think the person that
I really follow a lot when itcomes to administration taking
seriously is Senator Grassley.He's kinda like the Pat Roberts
of the twenty first century.Whatever he says is gonna be
taken seriously by anybody inthe White House. And he came out
and said this week that, youknow, for farmers, you're
looking at an all time high interms of fertilizer prices
(08:53):
relative to the grain prices.
And so I do think that we'regoing to move and see something
done by USDA. But that reallydoes open us up to more
susceptibility on the cashversus the futures market. And
that's what's been so difficultfrom a standpoint of us and our
industry managing those twomarkets that have really kinda
separated themselves out. And Ijust think, you know, more
(09:16):
direct payments in light of thetariffs is gonna just gonna keep
the futures and the basis so farseparated from one another and
make it more difficult.
Todd Gleason (09:24):
And if history is any indication, I think, Dave
Chatterton, when these paymentscome, particularly at this point
after we've had some inflation,it's quite likely that the input
side will try to recoup some ofthose, I would think. Does that
bother you very much? And do yousuppose that farmers need to
(09:45):
consider really where that moneyis going to end up going?
Dave Chatterton (09:49):
Yeah. Todd, think it opens up a much larger
debate and really the, frameworkof that if you want to just cut
to the core is that thegovernment payments that are
made to farmers are basically aconduit that go right back into
corporate shoes, whether it'sequipment, whether it's inputs,
whether it's seed, you know,pick your poison, you know,
(10:09):
farmers are spending money, youknow, to to do that. I think at
this particular point, we needto kind of not lose sight of the
fact that, you know, margins onthe farm, even with some
improvement in prices here andmaybe yields kind of being
hopefully a little bit betterthan expected, not record in in
many cases and and not, youknow, as good as they once could
have been but those payments aredesperately needed. If you look
(10:31):
at what's happened here withthis Todd and really put it into
perspective. If you're in anarea that got rain and you have
good yields and prices areimproving, you're sort of
yielding your way into a smallprofitable situation at least on
corn and getting there on beans.
Here's a situation where youdidn't get a lot of rain and
your yields are somewhatquestionable or maybe below EPH.
The situation's really gettingworse for you because you have
(10:52):
less grain to sell. You do havea higher price but you're losing
out on all the the you know, thearc and the PLC type payments
that would be coming in, ECOtype payments that would be
coming in at the end of the dayon a profitability grid, you're
actually going backwards alittle bit. So, those payments
are needed and certainly,they're going to go back out.
They're not going to stay in thefarmer's hands very long, I
(11:13):
would say.
I think my bigger concern isthat we've had this detachment
that Mike mentioned andfertilizer prices, nitrogen, P
and K are are great examples ofthat where if you look at those
as a ratio to corn, they're atlevels that look very high
compared to their current cornprice but I think, you know,
dealers, producers, whatever youwant to call it, are going to be
able to maintain those levels aswe put money in in the farmer's
(11:36):
pockets and they they they goahead and purchase those high
priced inputs. So, what it meansis probably more acres. I might
disagree just a little bit andthink that we might not have
quite as many bean acres nextyear. Farmers are a little
financially healthier. Theymight they might stick with some
corn, but in doing so, moreinputs going into that crop.
You're have stronger yieldpotential next year, and you
(11:58):
kinda make this supply problem.I don't I don't wanna say worse,
but it continues to carry itdown the road a little bit.
Todd Gleason (12:05):
Yeah, Mike. So that that was my going to be my
follow-up question, but I wouldlike you to consider that as
well. If the payments come in,and they simply go into things
that producers need to put in acrop next year, and they pay for
more inputs, that's more supply.It seems like it's a circle that
(12:27):
that might not work very well.
Mike Zuzolo (12:29):
Yeah, I agree. And I think one of the things that
I'm trying to battle here onthis side of the Corn Belt is I
probably am hearing more clientssay that they don't want to
plant hard red wheat in hard redwheat country, but I think I've
had more clients in Illinois andIndiana call me this fall and
talk to me about planting moresoft red wheat than I have in
(12:50):
the last five years and askingme where they I think prices can
get to in the new crop and youknow assuming that's going to
come at the expense of corn.That that's that works into the
the idea too. And some of thatgoes back to the double crop
beans not performing hardly atall. It's South Of I-seventy and
Route 50.
(13:11):
So it's up in the air right nowin my mindset. I just feel like
the rotation and the cost ofproduction, it feels a lot
heavier in the farmers' mindsthan it did last year at this
time if you ask me.
Todd Gleason (13:22):
So they're suggesting they're going to
double crop soybeans or are theyfar enough north that that's not
the idea?
Mike Zuzolo (13:29):
The exactly. They're far enough north. That
is not the idea now because theyjust have not been happy with
their yields.
Todd Gleason (13:35):
And so in Illinois, and some other places
further to the South where, softred winter wheat has grown, you
don't follow-up after cornsimply because there is a
disease problem. That's not thecase if you're further to the
North, but generally speaking,so that that would take corn
acres out of out of therotation. It was something I was
(14:01):
thinking about too, Kurt Kimmelwas what acreage might look like
next year because we have somany, something like 90,000,000
harvested acres for corn, nearlya 100,000,000 planted this year,
80,000,000 harvested acres forsoybeans that there ought to be
a lot of soybeans going in theground next year. Do you suppose
(14:21):
with a little extra cash intheir back pocket that farmers
really would put more acres ofcorn in the in I know Mike's
making an argument for wheat,soft red, but that's about a lot
of acres probably in the stateof Illinois.
Curt Kimmel (14:34):
Well, what we're hearing on yield results thus
far, you know, there's some 80bushel beans coming out of the
field that only received, youknow, three quarters of one inch
of rain since August 1. So withthe mindset that these bean
yields are holding in thereversus what we're hearing corn
with the different moving partsand problems with corn, I think
(14:57):
you can probably lean that way.But as Mike said, the rotation
kind of favors beans somewhat.But on the other side of the
corn, though, I know you gothigher inputs. Right now, these
26 corns, what, four sixty twos,four sixty three, we're close to
where we were a year ago.
Even with the higher inputs, youlook at the spread between
(15:19):
twenty five and twenty six,they're paying up as much as
$0.40 here to make sure we havesome acres. So yes, there's
gonna be more bean acres, but Ithink guys are gonna probably
hang in there on corn. But nextreport, we're gonna have more
(15:39):
acres in general. That's the bigkey here is we're just finding
more acres every report thatcomes out.
Todd Gleason (15:45):
And before we leave this kind of topic, Dave
Chatterton, one of the thingsthat Daryl Good would talk about
is if something causes you tomake a change in your acreage
mix, when you make that change,particularly if it's related to
(16:05):
the price, in the followingyear, that you should at least
sell that many bushels or acresgoing forward so that you have
that part covered. Is thatsomething you talk to producers
about?
Dave Chatterton (16:20):
Yeah, Todd. I think it goes exactly to the
point we've been talking about.If we see this, let's say, at
minimum four to 6,000,000 acre,you know, migration out of corn
into soybeans and we'll leavethe the weed and that that whole
conversation aside for a second.You know, to to Kurt's points,
the general rotation of highcorn acres plus I think some
financial, you know, difficultyon the part of of the the small
(16:42):
and mid sized farmer to tofinance next year is going to to
force more bean acres and indoing so, if we don't have a
China export program and we'regoing to have more bean acres on
our on our balance sheet nextyear as a as an individual farm
operator. You have to startthinking about that and with
that November bean contract,we'll call it $10.80 or as a
round number today but certainlywith the use of a structured
(17:05):
contract, a one by two or somekind of a, you know, a non
traditional contract with yourlocal elevator or you can get an
$11 $11.10, $11.15, $11.20 flooron a portion of that production
and to to your point, I think ifyou're going to plan on those
additional acres next spring,you you definitely don't want to
end up in the same battle thatwe've been fighting this year in
(17:27):
these sub $10 you know, type ofnumbers.
So, you know, I think it worksto your benefit to have a floor
under at least that first 10 or20% going forward and if those
end up being your worst sales at$11 or $11.10 or $11.20, I can
live with that as far as my Pand L and my banker can live
with that. But if we're $9.50next fall, obviously we're in
(17:49):
the risk management business,and we can't rule that out if
China buys zero beans and if ifBrazil if CONAB is right in
Brazil, has another record cropwith acreage up another 3.7%, I
think, what they called ittoday.
Todd Gleason (18:01):
Yeah, Mike. So when you talk to producers on
both sides of the corn belt, onewho's thinking about giving up
winter wheat, the other who'sthinking about putting winter
wheat in. Are are you talking tothem about pricing out those
changing acres too?
Mike Zuzolo (18:16):
Yeah. I am. And and, you know, I would love it
if we could get the wheat andthe and the, soft red wheat,
especially in the crude oilmarket to continue its recent
pattern. And this goes back tothe currencies, goes back to our
strong demand on a four weekbasis. Those two futures markets
are running at about a 95, 96%positive price relationship.
(18:37):
And I think it is large part dueto the strength of the emerging
markets, due to the weakness inthe dollar and those emerging
markets in their currenciesgoing up. The Brazilian currency
just made a new fifty month highright before the Federal Reserve
comments. I think offshoreChinese currency is at an eleven
month high at this point. And Ithink the Mexican pesos right up
(19:00):
there at about a one year highas well. This all adds to the
idea of the weekly export sales.
Wheat was a little bit softer,but overall, very nice export
sales again on Thursday. I wouldhope we'd get to $6 in both hard
red July and soft red July andwouldn't wanna let them slip
back below that, Todd, withoutgetting some risk management
done on the protection on thedownside.
Todd Gleason (19:22):
Kurt Kimmel, coming back to this season, what
have you been hearing aboutyields across the Midwest?
Curt Kimmel (19:28):
Just highly, highly variable according to whether
you had tar spot, rust, heavyground, light ground. Iowa
particularly, if you didn'tspray, there's stories of maybe
an 80 bushel hit. If you sprayedonce, you've only got a 50
bushel hit. If you sprayedtwice, maybe a 30 bushel. I've
(19:52):
heard a new saying, swimming andrest.
So it's an issue in some areasthere. On the flip side I've
heard some better than last yearyields too. So we'll see how we
move along here. Bean wise itseems like bean yields are
fairly good for the most part.Avoided the white mold, stem
(20:17):
rot, so beans kind of held inthere.
And it's going to be quiteinteresting to see how the last
part goes, particularly the onesthat really suffer due to this
dry August and September.
Todd Gleason (20:30):
Dave, can we take up the Trump Xi TikTok trade and
whether that might actually comeup with some kind of
agricultural agreement. I can'timagine it would be a trade
agreement, probably some kind offramework, but or maybe, and
(20:52):
this has been done in the past.There would be a set of numbers,
goals for getting sales done. Doyou suppose that could happen
tomorrow or over the weekend?
Dave Chatterton (21:01):
Yeah, Todd. I don't you know, I guess the
first rule when we when we talkabout Trump and then you throw
in China, nothing's off thetable. Anything can happen, and
you don't wanna rule anythingout. That said, I think the odds
are are are highly favoring thatwe probably don't get a
comprehensive trade dealerframework at least tomorrow or
this week. I think the idea ishere is that if enough common
(21:23):
ground can be found in this calltomorrow and it moves beyond
TikTok into some other areas of,you know, rare earths and and
hopefully trade and hopefullyagricultural purchases that we
have a framework for the two ofthose leaders to meet personally
whether it's in Beijing inOctober or later in November in
South Korea at the Apex Summit.
At that point, I think it takesthe two of those guys getting
(21:44):
together face to face to reallyget a phase one type of
agreement in place. If our mathis correct on that, you know, if
I look at, if you look at thebuying window for China of US
soybeans, you know, they're ourlargest soybean buyer. Let's
just say they take 60%historically of our beans or 65,
but that window is verycompressed between, let's say,
(22:06):
mid September and mid January.At this point, even if even if
the issue is solved tomorrow,you still have, you're talking
probably you've lost September,October, and probably close to
half of November. It's gonnatake you four to five, maybe six
weeks to get a ship, you know,in place and loaded headed to
China.
So you're talking you're outinto November at this particular
(22:29):
point. So at best, that wouldleave China maybe buying half of
what they would traditionallybuy from The US and I'm not
saying that that can't happenbut China's you know,
negotiating stance to this pointhas been very consistent in the
fact that they're willing to buyUS ag products only if Trump
(22:51):
withdraws the 20% tariffs thatthat I referred to earlier as a
fentanyl tariffs. And in thatcalculation, as I said, those
tariffs are generating90,000,000,000 in revenue to the
US Treasury. The cost of of thatof losing China's soybean
business for the entire year ata at a full rate is around
9,000,000,000. So, but again, Ithink the writing is on the wall
(23:11):
here that the plan from theadministration is to take part
of the 90 and use that toreplace the nine in some form of
an MFP or an emergency ad hocpayment to The US producer.
You could certainly be wrongabout that, Todd, but that's the
the tea leaves as I see themcurrently.
Todd Gleason (23:28):
Mike Souzil, you watch these macroeconomics very
closely in trade policy as well.How do you view it?
Mike Zuzolo (23:35):
I can't add anything better than what Dave
just said except that when itcomes to a common denominator in
this relationship, it really isRussia, and it really is China
and Russia coming together. AndI think from the very beginning
of his campaign in the secondterm, running for president,
president Trump made a very bigpoint about the previous
(23:56):
presidents allowing Russia andChina to hook up together both
trade wise and geopolitically,and that was a huge mistake. And
so now the common denominator isRussia, and China is
backstopping Russia right now.And when you look at what
president Trump is asking Europeto do in terms of throwing a
(24:17):
100% tariffs on China and onIndia so that they would stop
buying Russian oil, you see thatMexico is putting 10 to 50%
tariffs on China in their importof goods, especially because of
the car situation. I you know,it just doesn't seem like to me
that we have politically thereasoning to go and and match up
(24:38):
and meet and make a trade dealright now between these two
countries because is the tradedeal going to give us the
ability to negotiate peacebetween Russia and Ukraine?
And I just feel like that's kindof a bridge too far that China's
not only not willing to do that.They probably don't mind that we
have this on our plate rightnow. So that's kind of how I see
(24:58):
it right now, Todd. I I thinkhonestly, after this weekend,
I'll I'll be putting outsomething to the clients and
subscribers about maybe the ideathat The US China relationship
could be going off the rails ifwe don't see some something come
together here very, very soon,and that puts more pressure on
the domestic biofuel demand.
Todd Gleason (25:17):
Speaking of rails, Mexico still has not gotten a
trade agreement, Kurt Kimmel,with The United States. They're
on pause as well. I don't recalltill when at this point.
However, they are trading andpurchasing corn. I'm wondering
whether that continues to begood, and if you think it will
(25:39):
be maintained during the newcrop marketing year.
Curt Kimmel (25:44):
Yeah, I think it will and I think it's going to
stay very strong. Several thingsto look at, the extra feed
usage, feeder cattle and soforth. But two, the unknown or
the not talked about feed usagein Mexico is they've got a huge,
huge pet, lots of pets to feed,and they see a lot of growth in
(26:07):
the pet industry. And they lookforward to a lot of consumption
of incorporating grain in petfood. So, you know, until Mexico
can figure out another way toimport green into their country,
I I think we're still good atcontinuing to see Mexico as a
buyer as they stepped up todayand bought another 110,000 tons
(26:28):
of US corn.
Todd Gleason (26:29):
Brazil, also, one of those places that they could
purchase from Dave Chatterton.As you mentioned, Conab coming
out with, some thoughts thatthey may have record corn and
soybean crops again in thecoming year. Is that based on
extra acreage or hectares, fromthat nation?
Dave Chatterton (26:50):
Yeah, Todd. I mean, planting year over year is
up in their eyes 3.7%. So you'vegot the extra the, you know, the
ground there. They're lookingfor favorable, I think, you
know, fertilizer and inputsituations despite the currency.
And you know they're looking atwhat looks like a you know a non
threatening weather pattern atthis point.
Now that can all change. We're along way from landing that
(27:10):
soybean crop. It's just early inthe planning process and
particularly in Central AndNorthern Brazil but guys are
getting started and if, youknow, just to remind folks, I
mean, it's it's important notonly that it early planning
maximizes the soybean yield butit also is the most favorable
outcome for the second crop orthe safrinha crop on corn which
is the important one in terms ofproduction and exports. They're
(27:33):
able to get that corn inquicker, get it, you know, get
it harvested and get throughpollination before the dry
season enters and and have thebest yield opportunity to do
that. You know, plenty ofcompetition coming down the road
and I think if you put that interms of what, you know, Kurt
was commenting about and you'regoing towards Mexico.
I mean, traditionally, Mexicohas dipped their toe in the
(27:53):
water with the Brazilian cargohere or there but haven't really
found a way to solve that. Idon't know that they still have
the infrastructure there, butunlike China, Todd, Mexico faces
no tariffs in terms of importingSouth American soybeans. If you
look at what happens to The USgoing to China, Brazil right now
is, we'll call it, a dollar, youknow, there's a dollar to and
(28:16):
20¢ per bushel premium to USoffers on a five to five basis.
China continues to take SouthAmerican beans because a 23
effective 23% tariff on USsoybeans is $2.50 a bushel. So,
it works and it makes some senseeconomically.
Mexico doesn't face that issue.So, for whatever the case might
(28:37):
be in terms of whether it's cornor whether it's soybeans, if
those values, you know, are atparity or they're at a discount,
those numbers will start to be,you know, start to be calculated
and there there's always theopportunity for that business. I
agree with Kurt. I don't thinkthings are changing in a hurry
here, but I think it'sdefinitely a a slow burn in the
back pocket that needs to bemonitored here.
Todd Gleason (28:57):
Okay. Mike Sizzlow, I wanna come to you.
There are two class questions,that I want you to take up.
We'll get to both of them. Butfirst is, that you kind of think
and you've been talking aboutthis for a while, that this
market looks a lot like lastfall's market, meaning there was
a fairly early low and weclimbed in through October or
(29:19):
thereabouts.
There was a setback, I think, inSeptember. Can you tell me what
you're thinking today?
Mike Zuzolo (29:24):
Yeah. I think it's steady as she goes right now,
Todd. The next step here is aswe close out this week, to to
reject filling the gap in theweekly corn chart and it's
interesting to note that lastyear in September after the
September crop report we gappedhigher. We did not fill that gap
until July. It took a wholeanother ten months for the
(29:48):
market to come all the way backdown and fill that three ninety
four gap in that chart, threeninety four, three ninety five
gap from last year.
And so what my ideal scenariowould be is that wheat, crude
oil, soybeans, especially withthe wetter harvest bias as far
as potential to lose some cropsin the fields with some
(30:10):
extremely heavy rainfall totalsbeing shown on some of the
models right now, that thesemarkets would not want to dare
try and go back and fill thegaps from where September went
off the board and and theyreject that lower level like
they did last year at at thattime and that gave us another
couple weeks of up move And bythe October 1, had made kind of
(30:31):
our harvest or pre harvest highand then the market had to set
back some. So that's what myideal scenario would be. But
again, as I said, between therapid harvest early, this
weather setting in the yieldcomments, I'm hearing the same
thing that Curt is hearing. Theonly thing I would add is that
I've got clients near me thatare a third done with corn at
(30:52):
this stage and their yields aregood. And they're almost as good
if not as good as last year,which somewhat surprises me but
remember, USDA's got Kansas atfive.
4% better than last year.They've still got Illinois at a
percent better than last year.Indiana, three and a half
percent better than last yearand and Ohio almost 10% better
(31:13):
than last year. I'm not seeingit right now. And so I'm hoping
the trade reacts that way aswell and keeps this momentum to
the upside going.
Todd Gleason (31:22):
Finally, I'll stick with you one last time,
Mike, because you wanted to talkabout the Federal Reserve just a
bit. Maybe Dave or Kurt willwant to follow-up about the
interest rate drop this week,and the signal that there might
be more to come before the endof the year means what to the
commodity markets?
Mike Zuzolo (31:39):
We don't know yet, but it's it's a concern right
now because the reaction sincethe report came out and the fact
that the Fed policy only did a25 basis point cut, seems to me
to be a little bit of a letdown.And going into the Fed, the
market, the CME Fed tool that wecan all use as far as what the
bond markets are pricing in hadlike a 94% likelihood on
(32:03):
Wednesday, a 70% likelihood forOctober and a 65% likelihood of
more cuts of a quarter point inDecember. And so I would really
like to see that dollar toresume its downward move its
downward trajectory and notbreak above a major trend line
of resistance that we testedearlier this month. That would
(32:23):
disrupt that commodity demandlow mindset that I've been
keeping in my in my analysis,Todd.
Todd Gleason (32:29):
Kurt Kimmel, let's turn our attention to our final
word for the day. What do youhave to say?
Curt Kimmel (32:35):
Well, we'll go off of days 9,000,000,000 of if you
give a farmer $1, he'll spendtwo. So there's $18,000,000,000
$18,000,000,000 coming back intothe economy. Then on Mike's corn
version there, yeah, the chartslook fairly good. Our technical
analyst, says we've a hammerbottom in the charts,
(32:59):
particularly long term chartswith a monthly reversal to the
upside. South America is goingbe real important.
I believe we're going have aweather market there because
they're fairly well sold out andeverybody's going to be buying
out South America. Then lastly,if we see Chinese premier and
Trump get together October 31,is it gonna be a trick or
Todd Gleason (33:20):
a treat? We'll find out then, I suppose. Dave
Chatterton, your final word forthe day?
Dave Chatterton (33:25):
Well, let's ask Kurt what the moon phase is
gonna be on Halloween, and we'llget the trick or treat settled,
you know, settled right here andnow. But, you know, good
comments from everybody. I Ithink a couple of different
things. One is that, you know,to me, these these yield cuts
can be important to the market,but I don't think they're the
reason to sustain rally. I thinkfor the market to sustain a
rally at this particular pointon the future side, you need the
(33:47):
yield cuts to come in place, butyou also need a trade deal with
China or something that createsadditional demand.
When I look at the corn balancesheet and the USDA having
already filtered in recorddemand on just every corn line
we have, whether it's feed,whether it's ethanol, whether
it's exports. I just don't see alot of room to go up there. I
think if we get the yielddecline tied that that that
(34:10):
we've been talking about to adegree here, what you're going
to find is a situation thatbecause of the additional acres
that we found from the Junereport to where we are here in
the September report, it's threeand half million additional corn
acres kind of win the day overyield decline. So, in other
words, you know, if you cantake, if you use the USDA's
yield, you need about a seven.Three bushel cut per acre from
(34:32):
the current USDA yield numberjust to kind of get back to the
zero point of adding those acresinto the balance sheet.
If you take our number which iscloser to 180 that we're using
in house, you still need a aseven, you know, a bushel type
of a yield decline to get thereand it's just, you know, it it's
a big ask to do that. So, I Ithink the key here is asking
yourself, what is the recipe forsustaining a rally and do we
(34:55):
have that on the table andunlike last year where the yield
cuts were were taking were alittle bit of a surprise. I
don't think they are this year.I think people are looking for
the USDA to come down on theiryield inputs when we get into
the subsequent reports here inOctober, November, and the
final. So, we'll we'll see howthat goes.
One quick word on the cashmarket here. I think commercials
(35:15):
are a little bit disappointed intheir receipts today than to
pick up on a comment that Mikemade. I'm gonna have some guys
that are done with bean harvestthis weekend in Central
Illinois. And as you mentioned,you know, he's got guys that are
that are moving right along incorn. And every commercial out
there on the book, I think, camein with empty bins, saw big
carries in the marketplace, andwas anxious to to, you know, buy
at a very cheap basis.
(35:36):
And, you know, 35 under theDecis, 70 under the July type of
a deal and and, you know, andand and play those carries. I
think what they're finding isthat because of the farmers
reluctance to sell because ofthe potential for this emergency
payment maybe because yieldsbeing off a little bit from
where they once were, you know,projected to be. Farmers isn't
anxious to sell bushels as theythey might have been or take
(35:58):
them to town and so we've seensome basis pushes which is a
little unusual at this point inharvest but don't settle for the
posted basis. If you need tomake a false sale, don't don't
be afraid to go out there andnegotiate a little bit and see
what see what can happen. It'svery variable from market to
market, but certainly, thecommercials wanna make sure they
come out of harvest full inlight of the carriers that are
in the marketplace.
Todd Gleason (36:18):
And finally, your final word, Mike Zuzolo.
Mike Zuzolo (36:21):
Yeah. Just real briefly to dovetail what Dave
was talking about for what we'redealing with out here with being
80 under in soybeans here inNortheast Kansas and that going
all the way to a buck 55 underin North Dakota. I think in
certain parts of this corn belt,we really do have to separate
the cash from the futures, thebasis from the futures. And so
(36:41):
if we don't get a trade dealwith China and if we curb bean
yields, I could see where thefutures market would be holding
too much of a premium, the basismarket being way too wide. So
that might be something to thinkabout here in the next week or
two and design a marketing planaround that.
Todd Gleason (36:58):
Commodity week, of course, is a production of
Illinois Public Media. You maylisten to the whole of the
program anytime you'd like atwillag.org, willag.0rg. Our
thanks go to our panelists thisweek, including Dave Chatterton
from Strategic Farm Marketing,Kurt Kimmel of agmarket.net, and
Mike Suslow withglobalcomresearch.com. I'm
(37:19):
University of IllinoisExtension's Todd Gleeson.
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