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The October 15 edition of Commodity Week, hosted by Todd Gleason, features agricultural market analysts Naomi Blohm, Chip Nellinger, and Mike Zuzolo discussing current supply and demand fundamentals. The panel explores the potential breakout of crude oil prices amid Middle East tensions and its subsequent impact on inflation, fertilizer costs, and local grain basis. Furthermore, the experts analyze market reactions to recent USDA crop yield reports, the shifting of commodity fund positions away from massive longs, and the importance of monitoring South American weather and the Brazilian Real. The program concludes with updates on delayed domestic winter wheat planting and a recent surge in Class III milk futures driven by holiday cheese demand.

Panelists
- Naomi Blohm, Total Farm Marketing
- Chip Nellinger, Blue Reef Agri-Marketing
- Mike Zuzolo, GlobalCommResearch.com

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Todd Gleason: [Music] This is the October 15 edition of Commodity Week.

announce: Todd Gleason services are made available to WILL by University of Illinois Extension.

Todd Gleason: Well, welcome to Commodity Week. I am Todd Gleason. Our panelists for the day include Naomi Blohm, she’s out of Total Farm Marketing in West Bend, Wisconsin. Chip Nellinger joins us from Blue Reef Agri-Marketing out of Morton, Illinois, and Mike Zuzolo from GlobalCommodityAnalytics.com is in Atchison, Kansas. Commodity Week, of course, a production of Illinois Public Media. It is public radio for the farming world online on demand at willag.org, where today you’ll find a video from John Jones and a series of other folks that joined him about a week and a half ago to discuss fall fertilizer needs. This is across the state of Illinois. You’ve got some time with the rainfall this week maybe to watch that. You can also listen to it in the cab, you don’t really need to see it. There are a few slides in it, but I think you’ll find it of interest, and it’s worth a listen—an hour and 17 minutes about fall fertilizer needs and what producers can do and maybe should do. That’s at willag.org. John Jones is the Extension Soil Fertility Specialist. Now, let’s turn our attention to the commodity markets. We’ll get a list of items that we should discuss. Mike Zuzolo, I’m going to let you go first this time around. What’s on your list this week?

Mike Zuzolo: You know, Todd, I guess I’d like to talk to the others and you about maybe this trade finding a little bit more semblance of supply-demand fundamentals and maybe rebalancing a little bit, and coming in and bringing in the Commitment of Traders report and some of the inflation data to just do a little bit of a round table on where we look here in the next 30 to 60 days for the grains and oilseeds.

Todd Gleason: Chip Nellinger of Blue Reef Agri-Marketing?

Chip Nellinger: Yeah, I would parrot that as well. I think the question is what do we do now based on this kind of shocking USDA report we saw a week ago. What’s the next stage? What are farmers supposed to do with that info? A lot of financial market volatility—how’s that going to affect things? And to Mike’s point, there’s a lot going on out there.

Todd Gleason: And Naomi Blohm from Total Farm Marketing.

Naomi Blohm: Yep, I love what they both said. Building on that, keeping an eye on the funds and the marketplace. A little bit of technical selling, outside markets, and watching crude oil as it’s forming a pennant flag formation with a big breakout looking like it’s going to occur at some point in latter 2026 into early 2027, and how that may affect commodities as well.

Todd Gleason: Okay, since you mentioned that, I had crude on my list. I did not have any of the technicals on it, so tell me about this pennant you’re looking at and which direction do you think it’s going to break?

Naomi Blohm: So, looking at weekly charts for crude oil for the entire part of 2026, ever since we first initially had the Middle East drama begin, crude oil prices have been trading in a sideways pennant flag formation where the high end of the range that starts the top of the downtrend line is over near $120 a barrel, and then the bottom of the uptrend line is down near $70. We are coming into the right-hand side of this sideways triangle pennant flag, and when the market kind of swirls here—we’re in a short-term range where $90 is support and $100 is resistance—but at some point, this is like a caged tiger getting ready to pounce. So when we see these on charts, we don’t know which way the price breakout will be, but what we can measure is that if the market should go higher or lower, we can kind of guesstimate based on this pennant flag how high the price move might be or how low the price move might be. So in this instance, you take the difference between $120 and $70, which is $50. So it points to—again, this is a weekly chart, so we’re looking longer term here in 2027—if news is bullish, friendly, more Middle East drama, things like that, it looks like an upside projection to $150 a barrel, which we have not seen since 2008. Now, on the flip side of this, if things calm down in the Middle East, then what we could see is a price projection lower towards $50. And again, this would be at some point into 2027. So higher or lower, again, we don’t know for sure. The market fundamentals actually dictate which way this ultimately breaks out, but I’m mindful of that from the standpoint of how it might relate to some of our grain commodities, how it might relate to the bushel basket commodity buying theory that some of the fund traders keep an eye on. And I just wanted to put it out there as one of those outside market influences that could affect the grain markets as well.

Todd Gleason: Mike, you know very well that I think of crude oil as the master energy across the planet, and I think of all the commodities as simple energy, whether they be feed, food, or into our tank. I’m going to guess that this is part of what you’re thinking as it’s related to a trade rebalancing discussion and what that might look like. Yours might be more near-term than what next year would be, but I don’t know for sure.

Mike Zuzolo: No, I think you’re spot on, and I don’t think Naomi could have laid it out any better. The godfather of technical analysis, as I see it, the first guy I bought the first book from was John Murphy. He used to be on CNBC, and he talked about the wedges and the pennants and how they’re like a spring, they’re like a coil where you’re gaining more energy as you compress the spring, and it can form trends once that spring releases and that pennant breaks out of a wedge. I think we have one thing that fundamentally would support the idea we could go higher instead of lower if the war does not end and peace is not seen after the midterm elections, and I think it’s the fact that we do not have a supply surplus like we had eight months ago, Todd. And we have a very limited amount of tankers out there that we have versus eight months ago because of them being held up, and insurance rates are still super high too. And so it seems to me that the supply is not only displaced and dislocated, we’ve burned through a lot of it too. And to your point, where are all those economists from nine months ago that said, “Oh, don’t worry, we’re electrified, energy is such a small part of our GDP and the world growth, it’s not going to be that big of a deal”? But that’s where I think in general, to jump on that soapbox for a second, it seems to me that the market is finally realizing again that the supplies of commodities really do matter, especially when you don’t have a Federal Reserve and a globalization base built in. In this type of environment we’re in, again, like the 1980s, late ’70s through late ’80s seems to be playing out.

Todd Gleason: Chip, I’m going to throw some things out. You can follow the oil trail if you want to. I was interested in some things that happened in Saudi Arabia last weekend, of course, or maybe just before that, there was the attack at Riyadh. That was timed, as it happens, to go along with a large gathering of oil executives and a big conference that was taking place this week there. Most of the CEOs from the primary oil companies we recognize—Mobil, Shell, Exxon, BP—did not go because they were expecting to go through Riyadh’s airport, did not show. The head of Aramco, which is Saudi Arabia’s or the Kingdom’s own nationalized oil company, was speaking that week then and was worried about their domestic energy supplies there and how they had been working to redistribute that across solar, natural gas as well, and wind, just for their own stability, and then asking the rest of the world to think about needing to pay for protection in the Middle East. And I think all of this has to play out, Chip, in some way in the marketplace, and this pennant that Naomi has put us onto really seems like it is worth watching.

Chip Nellinger: I don’t disagree one bit. I would argue that the United States has been paying the protection for 60-plus years on that. For the better part, I’d say in the big picture, there are lots of things. I think interest rates are into this discussion as well. But let’s assume for a minute that the breakout is to the upside. And right now I have to assume that, right? Because no matter what you hear about how everything’s under control in the Strait of Hormuz, you know, earlier this week I read that there were I think six attacks on ships, which was the most since the start of the war. So if things are under control, to your point, the attack in Saudi Arabia, it sure doesn’t seem like it’s very calm or under control just yet in spite of the rhetoric out of Washington. So if it is higher, then I have to wonder, is there a second or third-order effect in here, right? Because you’ve already started to see the cracks in the economy because of partly high energy costs, but inflation in general. If we have a push higher to, pick your number, $150, $160, $130 crude oil, whatever that number is to the upside, I’ve got to believe that that continues to just be a huge problem for the world economy. And so then the question becomes, on the one hand, you think, well, that could be wildly inflationary to everything. But, you know, do we start destroying demand because prices are so high that everything we can think about is touched by fuel, right? And diesel and crude oil. Does that start to become a problem to world aggregate demand? So there are a lot of issues with that. I don’t know that any of us can really tell what that could be, but I could see some negative effects to that as well potentially. Maybe initially it’s inflationary and you get a lot of buying coming in following crude oil—historically that’s what happens. But I have to wonder how long, if we go to $150 crude, how long does it have to stay there before you start getting the opposite effect and it really starts wrecking the world economy and overall demand?

Mike Zuzolo: You know one thing that Chip made me think of, Todd, is I’m starting to tell clients and subscribers sticking with that situation of 40 years ago when Ronald Reagan was taking on Japan through the currencies, and we had a lot more support geopolitically. But we had just gotten out of, in the late ’80s, gotten out of dealing with the Soviet Union, but before that happened, we were taking on a lot at that point as well. And it makes me think that Russia and Iran want higher commodity prices. They have no desire to create an environment where you get commodity prices back to where they were because their leverage is the inflation, it is the interest rates on the Western democracies, on the Western economies. And while that’s kind of an out-there type thought, it’s not really when you look at it in the span of the last 60, 75 years.

Todd Gleason: Okay, Naomi, I’ll come back to you. You’ve been listening. What do you think? And I have a question for you after that too.

Naomi Blohm: So listening to this conversation, I agree with many facets of things that are being said. If we do see higher energy prices, if we do have these higher interest rates, it does lag onto the consumer. And I do go back and think about when I studied political science in my undergrad, and you know, if you want to control the people, you have to control the price of food, was one of those things that was taught to us. So, you know, going forward, it’s something where we just have to be ready for either scenario to unfold. Higher energy prices not going to be helping the farmer from the standpoint of input costs still going up even if grain prices are going higher, it probably trickles into some of that fertilizer conversation as well. So I just have a bit of a tone of caution as we head to 2027 and especially as we wrap up elections here and how global counterparts choose to respond to what happens after our midterms.

Todd Gleason: Okay. I do have a follow-up for you. This is probably before breakout of the pennant. Freight rates do have a big impact on basis. They may not diverge from futures, so I’m wondering whether you’re concerned at all that the increasing price of crude oil at the moment will become an issue as it’s related to cash prices for corn and soybeans?

Naomi Blohm: Well, I think you will see that across the Midwest. Here’s an example: a client in North Dakota telling me, you know, I could get this amazing price from a soybean processor because their basis is so strong, but he would have to truck it over an hour to get there. And then we sat down and we did the math to where, okay, now is that actually paying for your fuel price to truck it that far even though they’re giving you this amazing basis? And so the decision then was actually to take the worse basis only five miles away. He didn’t have to pay all the diesel price, and that was a factor for him. So it’s going to affect, I think, local areas with basis, but absolutely it becomes a price issue. And then I think also it’ll go into barge and freight rates that way as well, so definitely something to be watching.

Todd Gleason: Mike, you wanted to ask the other folks on our conversation today some questions along the way. I’d kind of like to get that started. I’ll let you do that. What kind of questions do you have in mind?

Mike Zuzolo: Well, the main thing, I saw Naomi was on with me, and I think we were on the last time together, and I think we were pretty in sync with the soybeans and a little bit nervous/skeptical about the soybean trend and the prices. And it seems like to me at this point, and Chip, please weigh in too, I can’t remember where you were at, but it seems like to me that the biggest factor I’ve been worried about other than the dollar and the interest rates has been the Commitment of Traders report and that massive record net long in meal, and still being above the 2012 net long record in soybeans even though they trimmed last week in their numbers. And I’m wondering if we’re not rebalancing the Commitment of Traders and the funds are moving a little bit to say, okay, corn’s not as negative as we thought it was after the WASDE, and beans aren’t as great as we thought they were as far as upside price. Is that kind of your take or not?

Naomi Blohm: I think you’re definitely seeing it. You’re seeing the funds step out of some of those long contracts. The friendly story from the third quarter is no more for the moment. So fourth quarter here, you’re seeing some reallocation, but you know, I’m curious how much do they sell off? Is it just enough to do a short-term reallocation, or are they actually going to get negative? And I don’t know that they get negative yet because we still have so much of our harvest to really understand, especially on the corn side with yield. And then looking forward into the first quarter of next year, when we have to have a better handle on the crop in South America, and I mean I know that we had the numbers come out today from CONAB with what they thought that their yield numbers might be. And sure, it could be a good crop, but if that El Niño comes in like they’re talking it could, that would really affect production in northern Brazil. And that could really change things around, and we could see the funds come back into the market long again and go right back up to these record levels that they had held. So yeah, you’re right, we have to be watching those Commitment of Traders reports every week.

Todd Gleason: And then Chip, if you want to jump in because you did talk about the USDA reports and wanted to put them into context here.

Chip Nellinger: Yeah, I think today’s action closing down under the 50-day moving average in beans maybe opens a door up for further liquidation. I agree with Naomi. I think sometimes, though, they get exaggerated, right? I wouldn’t think that they’re going to get out of their longs and build a massive net short in the middle of October when historically this is near a low, but they could maybe liquidate more than we think and push this thing further than you think. To Mike’s point, they’ve got a massive long built up in soy meal. I think they did a good job of getting out of a lot, maybe half of their corn longs, and that was met with a massive amount of commercial buying, which is good. I’m just fearful of these money flows that, lacking a story, I go back to like the cattle market, right? For three years the funds loved cattle, had a bullish story, you got bullish headlines, they stayed long, they added on breaks, it was great. A couple of negative headlines here recently over the last few months, longer term the fundamentals are still there. The funds just are done with the cattle market it appears. And so, you know, sometimes what starts as just a little bit of a correction and some evening up sometimes takes on its own life. I’m hoping we don’t get to that point. I think the calendar and all the uncertainty of what Naomi said about the Southern Hemisphere and El Niño, I think also for the time being, the market maybe doesn’t quite—and this is the first time I’ve ever said this—doesn’t quite believe the bean, the corn number yet. Now if they confirm it in November, we might open the door to bigger problems, but it feels to me like the market’s a little bit taking a breather saying, do they have that quite right? Let’s wait till November till we get a little better feel if corn yields really went up almost three bushels from what we expected.

Todd Gleason: Michael?

Mike Zuzolo: Yeah, to add to that, I’m going to stick with the idea that the biggest headwind is probably going to be on the demand side, both investment demand and actual demand. I mean, if we look at the corn export number, 3.3 billion bushels for this year, yeah, it’s down about 130 from last year, but it’s up about 15% from 2024, 2025. All the export numbers are pretty high compared to the last few years. So it’s hard to find more demand, especially not just in exports but also livestock on declining supplies domestically. And so I think the demand side is a lot more of pushing on a string type scenario as far as getting us more to take the carryover down in the grain. So I’m going to say weather and supply are still the primary drivers to future rallies most likely, and if that’s the case, you hedge into weather and supply rallies because they’re the ones that typically will go up for nine months, and then 45 days after the high you’ve lost 50 to 60% of your price action over that nine-month period. That’s very common in the grain markets.

Naomi Blohm: Yeah, so building on that conversation, also reminding farmers out there listening, if you’re storing your grain this winter, everything that they said is so true, and then also add into that seasonal timeframe, traditionally when during winter months we find our peak. And a lot of times that’ll be in between the January WASDE and the February WASDE. And it’s based on information received from both reports, but of course that is the peak timing for a lot of that South American weather that we’re keeping an eye on. So mark it on your calendars now to every day be watching that market between the middle of January, the middle of February. And then sometimes we get that last hurrah in like mid-April also as we start to get a little bit of a last-minute competition for acres and kind of get a better handle on things, what might transpire in the US in the spring. So remember you still have to market your crop, it can’t just sit in your bin forever. So be thinking of opportunities of historically when it might be best to sell what you have in that bin.

Todd Gleason: Mike, how does wheat play through this process? I know that you watch it very closely.

Mike Zuzolo: Yeah, and I know the others do too, but since I’m so close to the hard red wheat country, it is something that I think between the corn and the wheat with it being a feed grain many times throughout the year, Todd, it’s still I think still the leader. The relationship between WTI crude and soft red wheat has gone back to about positive 70% over the last four weeks on a correlation. And I think the other thing that came out this week that made me think, okay, we’re going to be near a freeze on Saturday morning, and we also saw planting in Kansas at 44%, down 12% from average. Oklahoma 28%, down 20% from average. Even soft red wheat country, Ohio 17% versus 26% of average. If this weather’s going to turn cold even with these rains, I think the trade’s backing off the idea that we’re building more acres because the weather changed for us. So when I look at about every metric that I can, wheat is still my leader in terms of the overall price trend, for the corn especially, and I think it’s a big reason why we haven’t seen the US corn come up to and get closer to where the Paris corn is right now.

Todd Gleason: Naomi, a commodity we haven’t talked about that you wanted to discuss today?

Naomi Blohm: Well, you know what, the milk market had kind of an exciting week here if I can really shift gears on you. Class III milk futures have rallied almost $2 in two weeks, which is a big move. Part of it has been that we’ve digested the fact that we have ample milk production, prices got really cheap. All that milk created then plenty of cheese, and cheese prices got really cheap. So we saw a combination of short covering, but we did see end users and people getting ready to buy cheese ahead of the holidays, some of those big companies buying and bidding up the spot cheese market, and that helped propel Class III futures higher. So again, a $2 move in milk is a big deal and we had it, the market was able to get right up to some short-term resistance levels, and then it backed off as the end of Thursday progressed, but it’s welcome news because the milk price was getting too cheap.

Todd Gleason: And Chip, wide open, what commodity would you like to discuss before I let you go?

Chip Nellinger: Well, I think with all this discussion, something that just popped up in my mind is the Brazilian Real currency. I mean, as much as production and weather is going to affect Southern Hemisphere farming practices, the Brazilian Real will as well. And you know, we’ve had some elections down there, at least the first round. The currency really had a move, now it’s gotten back half of what the Brazilian currency lost against the dollar. But I think as this election plays out and the geopolitical framework of Brazil is less than stable, that their currency plays a big role in this too. So I think that’s something we need to watch into the end of the year and the first quarter of next year as well pretty closely.

Todd Gleason: Commodity Week, of course, is a production of Illinois Public Media. You may listen to the whole of our program anytime you’d like on our website, do that at willag.org. Special thanks go to our panelists this week, including Mike Zuzolo, Naomi Blohm, and Chip Nellinger, all of whom decided to have a conversation with each other today, I thank them for that. I hope you enjoyed it. I’m University of Illinois Extension’s Todd Gleason.