May 15 | Commodity Week
This is the May 15 edition of Commodity Welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Naomi Blooms. She's at TotalFarmMarketing.com out of West Bend, Wisconsin. Greg Johnson joins us from TGM.
Todd Gleason:That's the elevator. Totalgrainmarketing.com here in Champaign County, Illinois, and Arlen Suderman joins us from stonax.com. He's in Kansas City. Commodity Week is a production of Illinois public media. It is public radio for the farming world online on demand anytime you'd like to listen at willag.org, w I l l a g 0 r g.
Todd Gleason:Let's get a list of items we might want to discuss for the day. Naomi Blohm from totalfarmmarketing.com. What's on your list today?
Naomi Blohm:Well, I'm really keeping an eye on the weather and the rain that is and is not falling. I had some sad clients in Nebraska and parts of Iowa who just are getting missed by this rain that was supposed to hit them today. So just again, the importance of weather watching and seeing what actually transpires over the next twenty four hours.
Todd Gleason:Greg Johnson on your list?
Greg Johnson:Well, we're all focused on the talks between US and China, but I'm curious as to what the impact will be with some of the trade deals when if and when they get done with some of the other countries, namely Japan and India. Will that have an impact on corn and soybean prices? Or does that just mainly provide leverage for The US when when it's finally going to negotiate with China?
Todd Gleason:And Arlen Suderman from Stonax.
Arlan Suderman:Well, my first thoughts were of the China, again, the trade pause or the tariff pause that we got over the weekend, and what does that mean for the chances of getting a more comprehensive trade deal? But we probably have to talk about, the disappointment that led to limit down soy oil prices on this Thursday, with, the RVO rumors going around regarding biomass diesel production.
Todd Gleason:Let's see if you can bring us up to speed on that. This is has to do with '45 z, the EPA. What was the rumor, and why did soy oil plummet so hard?
Arlan Suderman:Well, first of the background is we've had, managed money coming in and trading expectations that we would see an announcement imminently on RVO requirement or the biomass diesel production mandate. And that it would be a good one, and that that would be good for soy oil demand. And that was f fueleded by comments t EPA s secretary Lee Zeldin has made in rerecent weeks, t that we woululd soon haveve an annonouncement, and the g general expectation was thatat we'd have it before mememorial d day. And the expectation is be good. We know that the industry asked for a mandate of 5,250,000,000 gallons.
Arlan Suderman:That would be up from 3,350,000,000 gallons currently, so that would be a massive increase Baseded on e EPA behavior and the formulas theyey follow. We were looking for a number of clososer to 4.4 to 4,600,000,000 gallons, which we still believe is a very strong number. The be the biggest increase in history and would very, very positive, but we'd probably get a sell off and then the market would realize it was good and we'd rally into it. We did get the EPA submitted their recommendations to the White House Office of Management and Budget, which is the next step in the process yesterday. And they didn't say what was in it.
Arlan Suderman:There are rumors out there that it says 4.6, four point six five billion gallons somewhere in that range. We don't know if that's true or not. That's the rumor markets reacting to is a big disappointment that it wasn't the 5,250,000,000.00 that speculative funds wanted to see. The other thing was when Lee Zeldin spoke before a congressional committee on Wednesday afternoon was asked directly when will we hear? And he said, we'll be working on the rules over the next couple of months.
Arlan Suderman:That's really not that much different than what he'd been saying previously, but it was interpreted much differently and was a big disappointment that we may have to wait a while. And so with so much speculative ownership in the market, we saw the big sell off with a limit down move in soy oil pulling soybeans down as well.
Todd Gleason:Greg Johnson, I'll have you turn to the trade deals, and those that have been talked about, particularly with China over the weekend. There is now a ninety day pause. What was the market reaction, and what are you watching?
Greg Johnson:I think the market reaction was probably a little bit more friendly than my reaction. I guess I'm just jaded and and and biased. I could take summer. I I I don't look for a quick resolution. I I hope I'm wrong but China is a notoriously good trade trader.
Greg Johnson:They they they can hold out for deals for a long time and I feel like they don't want, you know, they don't feel like they need to be pushed around. Some of the smaller countries, I think when Trump uses a leverage against them, it works but I'm not sure that's gonna work against China. So I think, you know, I think we can get something worked out, obviously, but I just don't think it's gonna happen any soon. So I think, you know, we could be talking about this for the next two or three months.
Todd Gleason:Carlin, I'll come back to you. I know that you have a unique opinion on this one that I've heard. We used it on the closing market report Thursday afternoon, but I do wanna get Naomi Blooms' thoughts on the pause with China and how she views it.
Naomi Blohm:Well, I feel like the pause with China and actually tying it in with what Arlen was talking about with EPA, in my opinion has a lot more to do with our government and China's government needing to keep an eye on global weather. Because when you look at how we have less planted acres of soybeans in this country, if we don't have a great crop this year, prices run up automatically because of a lower supply. Now, granted, we have this great global supply situation, but that doesn't really fix the situation that could transpire in The United States with a low supply. So I feel like part of this EPA move is a slow roll, just to try to drag their feet a little bit and see what US weather is. Also maybe wanting to see if there's any trade negotiations that come from India.
Naomi Blohm:India has been maybe a little bit more interested in our soybean oil products also. And then I think that also translates also with China again and potentially how much buying they're going to be doing from us in the coming months. So I feel like they all kind of weave together. And then like Arlen was saying, you know, we'll get our answer in a couple months, but my opinion is that it's more tied to weather than anything.
Todd Gleason:And then, Arlen, I'll come back to you. And I know I said unique, but, really, it was just that I knew you had a view on this. Tell tell me about your view as it's related to China.
Arlan Suderman:Well, president Xi Jinping is very popular in China right now because I remember they control the message there. They don't have a media that's presenting both sides. And what they're being told is that The United States for years has been the one with the bad trade practices, the unfair trade practices, and has been the bully in the world. And Xi Jinping is the only world leader with the courage to stand up to the bully. And so he has been very popular, and he's also told Chinese citizens that US has declared war on them.
Arlan Suderman:And so, like, popularity or support for our government rallied during World War two, people willing to sacrifice for the good of the righteous cause. That's kind of the sentiment in China right now. And so he would lose that popularity if he if he is shows some weakness. And I also believe that he thinks that he would have to give up quite a bit more if he were to negotiate a solid deal to meet President Trump's requirements versus just trying to outlast President Trump. And so I am not that optimistic that we're gonna have a quick deal.
Arlan Suderman:I'd agree with Greg on that. And I guess I was encouraged by the fact that we seem to on both sides have trade negotiators who have quickly established some relationship, which is important to the Chinese culture. And that may help. We had 13 face to face visits to get the phase one trade deal. We may be able to do it with fewer this time, but that doesn't mean we're gonna have something within a few months.
Arlan Suderman:I think this is probably gonna carry out. And in fact, state media today had statements in it preparing the citizens of China for a more prolonged drag negotiation process that gets really dragged out.
Todd Gleason:Now I will ask Arlen and maybe one of the two of the others of you will know the answer to this if you do chime in. What is the tariff on imported corn wheat and soybeans going into China for the ninety day period? I did my best to do some calculations. I think it's 2025% through that period, which is 10% plus the, fentanyl portion or that 1015% that they imposed in February. Do you have a better idea, Arlen?
Arlan Suderman:Yeah. The corn within the quota system, which they have, is at 26% right now. Anything beyond the quota would be 90%. So it's still fairly restrictive of U. S.
Arlan Suderman:Corn going in, particularly with Argentina and Brazil having corn available, and it's gonna be cheaper coming out of there because of currency exchange rates.
Todd Gleason:Do you have an idea for soybean?
Arlan Suderman:For soybeans, it is at, 23% currently. Now Sinograin has been periodically taking soybeans. They're basically immune to the tariffs. They put it in reserve, and then when they need it, they can auction it off to crushers.
Todd Gleason:Yeah. That's something we were used to from the first set of the Trump term where sinograin, because it's owned by the communist government, was able to get around using or having to pay the tariffs so they were able to import in a different way. Okay. So given all of that, I'll come back to you now, Naomi. Do you think that China will take advantage of, quote, a lower tariff rate time frame, or is are these tariffs enough to keep them out of the marketplace even through that ninety day period?
Naomi Blohm:Well, building on what Arlen said about sinograin being immune to it, I feel like on this pullback that we had today for prices, it would be an opportunistic time for them to participate and book a little bit more of the new crop. Now granted, they can try to downplay it as much as possible. They still of course are flexing their muscle to say that they don't have to buy everything from The United States. They can buy from Argentina, they can buy from Brazil. But I think that we know and they know that they do need to be able to buy beans from both hemispheres to meet their year round needs.
Naomi Blohm:So on this pullback that the market had today, it might be a great time for them to buy a little bit more, show some effort that they are trying to meet us and we meet them on trade negotiations. And again, lot of it, I think still comes down to weather. It is still drier in portions of China, and they have a lot of summer to get through as well. So I'm hopeful that we see more sales come from China. It would be a great thing.
Naomi Blohm:But, you know, that's one of those wait and see kind of events.
Todd Gleason:Greg, I feel like you might be more skeptical.
Greg Johnson:Yeah. I I think China in the past has waived the tariff on US soybean imports in the past when they need the beans. I just don't feel like they're in any rush to buy beans. South America is going to have a good supply for the next several months. And as Naomi said, China will need to buy soybeans at some point in time from The United States, but that may not be until September, October, November.
Greg Johnson:You know, if if something changes or if they feel like that's something they can concede on since they know they're going to have to buy beans anyway, if that, you know, concludes, you know, wraps up the trade deal, you know, they might do it then, but I don't think they're in any rush to agree to anything. They don't really need to buy soybeans. So I, like I say, I just think this could drag on for months.
Todd Gleason:Harlan, will they be in the market?
Arlan Suderman:I have indicated that I feel like they might make some goodwill gesture purchases that go into the reserve, maybe by sign of grain, but I don't expect anything significant. They do operate off of insecurity, and so they maintain large supplies. But if they wanted to, they could buy zero because USDA, and I think USDA is actually probably underestimating their stocks or stocks for the current year are estimated to be about 44,000,000 metric tons and for the next year, 48,000,000 metric tons, but 44,000,000 metric tons is almost twice what they bought from us as last year. So if they choose to, I think we have to be prepared in our risk management plans for the possibility that they would just shut off purchases. I don't think they will totally shut off, but we have to be prepared for that possibility.
Todd Gleason:Did any of you and I did not reach out to USDA to see what number they were using as it was related to the export figures, in particularly the soybean supply and demand table estimate that they released earlier in the week?
Arlan Suderman:I did not because I don't have a lot of confidence in how USDA puts together its tables for China ahead of time. So I could've got a number from them and wouldn't have had a lot of confidence in it, so I did not. Maybe Greg or Naomi did. I don't
Greg Johnson:No. Do Which number you which what which number?
Todd Gleason:Their export figure for soybeans. USDA used a number. They say they used a number that included what the current policy might be, and I had a question about that too, which current policy says that it is, I suppose, the number that that Arlen gave us, but that it is actually what? It'll be another 24% higher than that, Arlen, at the end of ninety days by current policy? Yeah.
Todd Gleason:Right? So for the whole of the marketing year.
Arlan Suderman:Yeah. USDA has total US soybean exports at at 1,815,000,000.000. And as I look at my world balance sheet, when we know what Argentina's crop size is now, we know what Brazil's crop size is. I don't see any way that we hit an export target that high, even without tariffs, unless there's a trade agreement that forces China to buy more from us than they otherwise would due to economics.
Todd Gleason:Naomi Bloem, what did you think of that export figure?
Naomi Blohm:Well, I did like that the USDA acknowledged that it would most likely be a lower number than the previous year. The twenty four-twenty five marketing year, they have it at 1.85. For this May report for the twenty five-twenty six, they lowered it to 1,815,000,000 bushels. That's the USDA acknowledging the situation. I liked that.
Naomi Blohm:There is probably room for that number to come down. That is something to definitely be monitoring. But I look back at years where we had various exports for when we had big exports with China in 2020 or when we had drought years. I just don't recall exports for soybeans much going below 1.6 or 1,700,000,000 bushels. I'd have to double check that number.
Naomi Blohm:But there is definitely some global demand there. But of course, when we hear news that Brazil continues to expand acreage, that makes you a little bit nervous that that global supply situation could still be kind of just that bearish sentiment hanging over the market for the big picture. But again, USDA acknowledging the situation, I think is a step in the right direction. And then it's gonna just be month by month as we monitor the progression of further discussions and talks and global weather.
Todd Gleason:Greg Johnson, on that note, the corn export figure, I think, was 2,675,000,000 bushels for the new crop. That's a healthy number. What do think of it?
Greg Johnson:This is not a conspiracy theory comment at all. I just think the USDA when you increase production as much as they did, that tends to lead to lower prices and when you have lower prices, you have to have more, you, well, you don't have to but you tend to have more feed, more exports, more of everything. And so that's why I think they increased exports. That's why I think they increased feed usage. But those added exports and added feed bushels come as a result of lower prices.
Greg Johnson:So the numbers on the surface look friendly, but I think it's kind of just a real realization that, we're gonna have a lot more corn and, and we have to get rid of it, and so lower prices will help get rid of that extra surplus of corn.
Todd Gleason:And therein, why is the season's average cash prices at $4.20? And you say that the exports at 2,675,000,000.000 just are because it's affordable and they end up with a 1,800,000,000.0 bushel carryout. What did you think, Arlen Suderman, of that S and D table?
Arlan Suderman:Well, I felt like UST would solve for an ending stocks below 2,000,000,000 and they certainly did, probably a little bit lower than I expected by expecting a 1.8 something out of it. When it comes to exports, it's really going to come down to what kind of growing season Mexico has. Short of a trade deal with China that forces them to buy, I don't see them buying any significant corn from us. In Argentina and Brazil, we already basically know what the size of this year's corn crop is now. They're going to be large, and we tend to be the residual supplier to the world after the world has emptied the shelves in Brazil and Argentina.
Arlan Suderman:The good news is Brazil is rapidly increasing its corn ethanol production capabilities, leaving them less to export. But nonetheless, my export target is several million several hundred million bushels less, assuming that Mexico finally sees an end to the drought and allows them to grow a decent corn crop this year.
Todd Gleason:Yeah. So I had, looked that up just, earlier today, to see when their season runs. They're in kind of the middle of their planting season, but it runs all the way through July now, so they have a long time. It is very, very dry in the areas that they tend to raise the most corn. Your expectation, I suppose, is that they'll have some recovery and end up with a decent crop, or you'll just have to wait it out?
Arlan Suderman:Yeah. I start this time of year assuming that the weather cooperates. And if it doesn't, then that could strengthen my export target going forward.
Todd Gleason:And we have come back to weather, Naomi Bloem. So tell me what you're watching in The United States as it's related to weather. The forecast for next week tell tells us that the storm we saw last night and today in the Dakotas is just kind of round one, but it did miss some places.
Naomi Blohm:Oh, it very much missed places as I would talk to folks in Iowa and Eastern Nebraska. Eastern Nebraska running pivots hard, and one client kind of scoffed. He's like, don't even know why I'm running the pivots. The wind is blowing so hard. I don't even know if this is hitting the ground or not.
Naomi Blohm:And they are just really dry there and they were so hopeful to receive an inch of rain out of the system that went through last night and they got nothing in Eastern Nebraska. Iowa, very similar. One portion of Northwest Iowa I noticed received some rain, but as the storm has tracked throughout the day, it just continues to dissipate. Now checking out the radar right now, finally we've got a little nice circle heading in the Fargo area in North Dakota where they have needed rain, but they are so parched for soil conditions that they are just desperate for a half inch if possible, and maybe they'll get an inch out of this system. So that's something to monitor that Western Corn Belt remains so dry.
Naomi Blohm:And for the USDA, we're using 181 yield, which is absolutely possible. You know, we have that capability, but we still need mother nature to cooperate. And then I've got clients in Ohio who finally, maybe just this week, starting to plant because they had been so wet. So things aren't perfect by any means. And we're also in that seasonal window where usually we get some sort of weather reaction as we start to watch summer weather forecasts.
Naomi Blohm:So as we round out the May and into early June, that's when we'll start to see the forecast for July during pollination. And so we're all going to be really focused on that with the fast planting that did occur in portions of the Midwest. We're going have a crop that is pollinating pretty similar throughout the same week come July. So the summer weather is absolutely something to continue to monitor and just to get the seed out of the ground that just has been planted. We need rain on those fields.
Naomi Blohm:So this system that is going through right now just has to be, totally dissected and we'll see what the weather and the rain totals are tomorrow. I think we'll be trading that information.
Todd Gleason:Arlen, I want to cover one other question that, needed to be answered up front or was asked up front. This was other countries and the trade deals the Trump administration might be trying to tally. Can you start with India and give me an indication of whether a deal with them could be good, bad, what it might mean, and then maybe if you could run down places that you think that really will make a difference.
Arlan Suderman:I do think that we will see more trade deals coming. Britain was a start. I think the fact and I've been asked many times that how good was the Britain One for agriculture and my comment was it's probably not going to have any impact on prices and it really hasn't. But the fact that agriculture was a big feature of it tells me that Secretary Rawlins does have the ear of President Trump and the farmer has Secretary Rawlins here, and I think agriculture will be a part of each of those trade deals. So with India, I think it slowly starts to open the door for products like wheat, perhaps even, some oil, soy oil, some other commodity products, but that's gonna be a tough door to push open.
Arlan Suderman:But even 1,000,000 metric tons of wheat would be fairly significant on our balance sheet if we could get that. Japan, South Korea, we could certainly see more meat going into those markets in addition to grain and oilseeds going there as well. And I think, and I'm cautiously optimistic that we're going to see that happen here hopefully over the next sixty days, but president Trump really needs to start seeing more of those completed and completed soon to maintain any momentum.
Todd Gleason:Secretary Rollins was in the Oval Office when The UK deal was announced. So she does have the year of the president. She was the only agency he had, of course, that was in the Oval Office outside of Commerce and USTR. I wonder though, did it concern you very much that the president mentioned RFK and the idea that The United States might be headed more towards a system not based on science but other items in the way that Europe manages its beef and other agricultural supplies?
Arlan Suderman:Yeah. I think that's that's very concerning. There's a lot of question marks over how that's going to impact US ag policy, and and even as we look at farm bill development going forward, how will that play in and the fact that the small amount of beef that was included in in the deal with Britain still has to be meet the European standards of non growth hormone in involvement, is, I think, a concerning red flag on how that impact may impact future trade agreements.
Todd Gleason:Naomi, did your beef producers mention that to you when you talked to them?
Naomi Blohm:There's always that concern over there. Know, there's there's hope, there's excitement, there's concerns, and it's on their radar. I think when we're looking at the amount of beef that Britain was potentially buying from us, it's not a larger amount, you know, compared to what China has bought. But with any trade deal, there's of course little nuances to be aware of. And yeah, we've definitely been discussing that.
Naomi Blohm:The cattle market, think also keeping an eye on the screw room situation with Mexico, that border situation, we've got high prices, we've got some profit taking happening with the funds. So there's just a lot of very different things happening in the cattle complex right now with a bearish key reversal yesterday and follow through selling today. But then we had news of stronger cash and we had really decent export sales this week in general. So a lot of pieces to that puzzle.
Greg Johnson:I was gonna add one thing about the these trade deals. I think the details are gonna be very important. For example, India currently has 25 to 35% tariffs on most US, commodity products. Corn is as high as 50%. And there was a story I read somewhere this week that India is willing to go to 0% tariffs on US commodities, but they insist on non GMO products.
Greg Johnson:So I I wonder whether, you know, they agree to a deal, but then similar to the beef, you know, oh, we we can't accept it because it's not up to our standards. And so I think the details are gonna be very important when it comes down to, negotiating these trade trade agreements.
Todd Gleason:Yeah. So it was a detail I was going to ask you about as it related to the 700, million dollars in ethanol sales that could be coming to The UK. The UK in 2024 bought about 5 and a half million dollars worth of ethanol from The United States, so not an enormous increase. Of course, it's a dollar based amount and ethanol is not worth as much now as it was a year ago, so maybe that does make some something of a difference. How did the trade take that?
Todd Gleason:Did they did they make those calculations? And it didn't look like it had a lot of an impact in the marketplace as as Arlen already pointed to.
Greg Johnson:No. I I I think you're right. I I really think that the ethanol market is driven by crude oil prices, and right now crude oil trading in the low 60s. It's just hard for ethanol and corn prices to rally when crude oil prices are where they are. So I think the bigger these trade deals all help, obviously, but I think a bigger thing would be as if we could get crude oil prices up a little bit.
Todd Gleason:Alright. So I'd like to get an idea from each of you whether all of the events over the last and we really only have to go back seven days. You have CONAB and USDA out with numbers. You have a China pause that took place over the weekend, the initial, potential trade deal with UK that was announced last week. Did that change your mind in anything as it relates to marketing corn or soybeans?
Todd Gleason:And Naomi, I'll start with you, work through Greg and end up with Arlen.
Naomi Blohm:Yeah. So when you just like step back and look at corn for the past week, Dec corn has been in a a 10 to 15¢ trading range with USDA reports with positive news on a trade deal, with various news on demand and awesome export sales today. So the fact that the market just continues to swirl around a support level on charts to me says, again, and I'm going go back to the weather, we're waiting to see what kind of supply The United States has. We're waiting to see how the trade deals roll out over the next couple of months. And just trying to keep an eye on the production side of it.
Naomi Blohm:Same with the wheat market. Wheat market coming up off the lows after a little bit of a negative USDA report on the global side, but market coming back. And within the past week, we're kind of back right to where we started. Looking at the Kansas crop, we know it's bigger, but there's some disease uncertainty going forward that could still decimate that crop. So we have to keep an eye on that.
Naomi Blohm:Soybeans had some positive reaction after the USDA report and then also on the China trade tariff pause. But when all is said and done, we're back to where we were. So my opinion still is that we're going to be weather watching. Now that the market has absorbed a lot of the short term trade news, we're going to go into the weather market focus and just keep an eye on the daily weather forecast. So this is that time of year where the market can be up big in the middle of the night or down big in the middle of the night if the forecast shifts and changes.
Naomi Blohm:And so as a producer, you're in the window, Mother's Day to Father's Day is a lot of times when you get your best marketing opportunities of summer. So be ready. We've got, you know, four weeks to go where if we get some sort of rally out of this, we want to make sure we're focusing on those cash sales for old crop and new crop both.
Greg Johnson:Yeah, December corn was 4.3 as low as $4.3 back in the fall. We got up to $4.8 in February, and currently we're at 4.4 So we're only $0.10 off the lows. I've been in that $4 low to $5 high trading range all year and I still think we have a chance to see those kind of prices. But as Naomi said, we want to take advantage of those rallies because while corn could go to $5 it could also go to $4 So when we get back up in the upper half of the range, it probably isn't a bad idea to have offers in and get some corn sold. Same thing on beans.
Greg Johnson:November soybeans were 9 December. They got up to $10.7 in February and we're at $10.35 today. So we're a whole lot closer to the top than the bottom in soybeans. So I want to be a little bit and I understand, you know, the acres are down and you know, the the deals that could happen. So, there, you know, there's some positive things in soybeans but again, I think they could have a nine in front of them this fall if you know, if if the right situation develops.
Greg Johnson:So, I I guess I'm still willing to sell rallies and hope hopefully we get a weather rally sometime here in the next thirty to forty five days, and we just need to take advantage of that.
Arlan Suderman:Yeah. I'd like to build off of what Greg said. I you know, and I made my comments about thinking USDA is overly optimistic on corn and soybean exports. But it's so when I look at it, I see if we have normal weather this summer that we do build corn and soybean stocks, which means be defensive in our marketing and really protect the equity we've built in our farms. Having said that, even with that, just a 5% drop in yield from USDA's estimates of 52.5 for soybeans and 181 for corn puts us in a very tight situation requires rationing of that demand.
Arlan Suderman:And so we're we have very narrow window here that tells me that we likely not guaranteed, but the odds are good that we will have a weather scare or weather rally, and we probably need to sell it until or unless we get evidence that it's gonna have a more significant impact on production.
Todd Gleason:Commodity week, of course, is a production of Illinois Public Media. You may listen to the whole of the program anytime you'd like at willag.org. Our thanks go to our panelists this week including Naomi Bloem from Total Farm Marketing, Greg Johnson of Total Grain Marketing, and Arlen Suderman from Stonex. I'm University of Illinois Extension's Todd Gleeson.
