cw261029

This episode of Commodity Week, hosted by Todd Gleason, features agricultural market analysts Shane Holtorf and Garrett Toay discussing fall harvest progress and current market conditions. The guests report that the soybean harvest is largely wrapping up with average to better-than-expected yields, while corn yields are highly variable and somewhat disappointing compared to early summer expectations. The panel attributes recent drops in commodity prices to the USDA's surprising October crop report—which unexpectedly raised corn yields—and subsequent heavy selling by fund managers, compounded by broader geopolitical events like the Brazilian and upcoming U.S. elections. To navigate these market headwinds, Toay and Holtorf advise producers to avoid panic selling, utilize on-farm storage to lock in market carries, and remain patient for future pricing opportunities.

Panelists
- Garrett Toay, AgTraderTalk.com - Stockton, IL
- Shane Holtorf, Logic Ag Marketing - Alta, IA

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Todd Gleason: This is the October 29 edition of Commodity Week.

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

Todd Gleason: Welcome to Commodity Week I am Todd Gleason. Our panelists for the day include Garrett Toay he is at ag trader talk dot com out of Stockton Illinois and Shane Holtorf joins us from logic ag marketing he is in Alta Iowa. Commodity week is a production of Illinois public media it is public radio for the farming world online on demand at will ag dot org w i l l a g dot org search us out by name in your favorite podcast application commodity week. Now let’s turn our attention directly to the marketplace well almost directly we’re going to talk first with Shane Holtorf because he is in the truck this afternoon I assume are you hauling corn or hauling soybeans today?

Shane Holtorf: Yeah hauling corn today Todd most of the soybeans in our area are pretty well wrapped up as of early in the week.

Todd Gleason: As a reminder Shane is to the west of Dodge City in Iowa thank you by the way for being with us because you are in the midst of harvest did you come out of the combine and get into the truck for this?

Shane Holtorf: No my dad still doesn’t allow me to this day to run the combine so I’m just just running in circles.

Todd Gleason: I am sure almost everybody will have a story like that the one who is either in the combine seat who won’t get out or the one who doesn’t get in the combine seat because somebody doesn’t get out. So tell me about soybeans first in that part of Iowa how were they?

Shane Holtorf: Sure really good. A lot better than expectations. You know I would say generally last year we were in that mid to upper 60s range and we were really hoping to get back to that just given the extremely dry summer and then extremely wet fall. And I would say that we were a little bit better off in this area than we were last year.

Todd Gleason: I will say that in East Central Illinois as we talked to the elevator operator here they were thinking because mostly done almost all done they thought maybe the average would be 79. In this part of the world I think as you go further to the west and to the center of the state might be just even slightly better than that. Garrett Toay how about up where you are?

Garrett Toay: Yeah bean harvest is wrapping up for the most part. I know there’s some guys over in the western part of the county that might be still working on things. But bean yields are average. Around here Southern Wisconsin Northern Illinois either bean yields are really really good or they’re just kind of average. And for us our beans were just about average right about APH maybe slightly lower. You know it was just a it was a weird year. We started out wet and then we were dry and then we were wet again and it was anything but normal or average. So beans are average corn yields are anywhere from slightly down from last year to down 10% from last year. So you kind of all over the place on that as well just kind of depending on the soils and practices.

Todd Gleason: I will say that from this part of the world again East Central Illinois it sounds as if the corn has been a little all over the board. There are places that haven’t been particularly good and sometimes it appears that it’s about planting date and that May corn may have been better than some of the earlier planted corn. The further west you go the better it is likely to have gotten and I know there is a line or at least seems to be a line east and west of Interstate 55 that changes how good the crop is and it is pretty much just a line there. And if you’re on the west side the crop is better than on the east side. I want also to know Shane since you’re in the midst of harvest there and harvest here is 80% wrapped up for corn how far along are farmers in your area and how is the corn crop there?

Shane Holtorf: The corn crop is probably a little bit as expected or maybe even a little bit disappointing from what we were kind of thinking. So those late rains I don’t think bailed us out on the corn crop like they did the beans. So I think we’re going to be below APH but certainly behind last year by probably 10 to 15 bushels.

Todd Gleason: Last year was a record crop?

Shane Holtorf: Close to it for our area yeah. Northwest Iowa the further northwest you went the better it got. So we certainly have a good crop but it’s not going to meet the expectations that we had for it in the beginning of July.

Todd Gleason: Now given all of that Garrett Toay let’s talk about this week and some of the fall off that we’ve had over the past couple of weeks. What’s taking place in your opinion?

Garrett Toay: Well it’s geopolitical events it’s between the Brazilian election we just concluded the Israeli election which potentially could have impacts on the future of the Iranian war and obviously next week we have the US election which could potentially well President Trump will be a likely lame duck regardless it’s just whether he retains power of Congress or we just kind of go sideways moving forward if Democrats take over control of either the House or the Senate or both. But so you’ve got the geopolitical aspects of it. We’ve had with that with the Brazilian election you’ve had a massive collapse in the Brazilian economy and their currency which put soybeans under pressure. But at the same time you’ve got some fundamentals out here. The corn market the wheat market have all had the same trajectory since the October surprise from the USDA. Soybeans have tried to fight the good fight in the face of these headwinds from the feed grains. But at some point these fund managers are getting taps on the shoulder because we’re a dollar off the highs. We still have a rather sticky fund long in soybeans and soybean meal. Soybean meal traded to the 100-day moving average today first time since the August report. So a lot of buying over the last two and a half months that are now potentially underwater and trying to figure out what to do. So it creates a confusing environment for the producer because we set contract highs in December corn in September and since 1975 there’s only been three years that we’ve ever set contract highs in the month of September. We set contract highs for November beans four times and it just doesn’t happen to see a rally in September into harvest. To see a counter-seasonal rally through harvest and then we have for lack of a better term a rug pull by the USDA in October. Now we’re seeing a post-seasonal when we should be rallying we’re falling apart here. So at some point I think ultimately we do find a bottom in this corn market. We’ve definitely seen an uptick in export demand the last two weeks and it’s just a function of where is this fund position going to go. The funds have paired their length in corn they are starting to get a little bit short which is a concern. But this length in the bean market could provide a washout and we’re approaching this magical $12 number. Beans do not like $11 so we’re either going to be $12 or $10. Hopefully this $12 support level holds.

Todd Gleason: So quick question on what you termed as the rug pull is that just the change for you from the September to the October report disregarding the middle report where they made the change but just the change in the up for the corn yield and bringing it back up?

Garrett Toay: Yes I think if you look at the trade range for that October report the range of estimates was 9 bushels an acre and that was second largest for October back to like 2012 which was the drought year. So the market was we had a big fund long and the market was leaning for a big yield reduction in October and the USDA came in and raised yields. And so that’s what I say the rug pull because I think the market just got caught the bias was that it was going to be a bullish report and it absolutely wasn’t. And when we come into this really until the August WASDE there was no really real bullish fundamental story in the corn market. We had underlying inflation bubbling around but we didn’t have a bullish fundamental story and that August WASDE August crop report changed that and that brought a ton of fund money in and they call it tourist money if you will these Wall Street firms or what not they come in and buy commodities but it was short lived and now the US carryout will be tighter than it was at this point last year but the market’s just trying to get themselves right because they got out over their skis a little bit.

Todd Gleason: Okay Shane so I want to ask you on the other side of this on the other side of the Mississippi River in the western part of Iowa in the largest corn producing district in the state of Iowa did you all have the same bias that the Eastern Corn Belt producers had that this crop was a crop that was getting smaller from September to October or did you feel something different?

Shane Holtorf: No I would completely agree with Garrett there. I mean as I kind of mentioned earlier you look at the end of June first part of July we had really really high expectations for this crop made it all the way to essentially late August early September before we had even gotten so much as a sniff of rain and then we wound up with 12 inches of rain or something like that. And so yeah absolutely we essentially watched kind of what we deemed to be a record crop by a long ways just continue to get smaller and smaller.

Todd Gleason: I have a secondary question that goes along with that. Was everybody able to calculate in the acreage change that USDA put in as well? Or did that just get dismissed in the process or missed not dismissed just sort of missed in the process and did it make much of a difference?

Shane Holtorf: From our perspective it was a little bit of a shock especially if you started to look around and figure out you know where that acreage is going to come from you know we sat here in our office ahead of the report and said there’s no way that they’re going to make the changes to the acreage you know where are they going to take it from and lo and behold we found it. So you know I won’t lie it caught us flat-footed and a fair bit of folks that you know we had kind of shared information with I think feel the same. I don’t know Garrett you got something to add to that?

Garrett Toay: Around here early harvest I mean the anecdotal data was pointing to that where there were guys that were starting corn harvest early because we had crown rot and we had other disease issues starting to show up and things of that sort and they didn’t want down corn so they started to get after it that sort of thing. But you know in my position I’m always looking for that thing that may derail that thing and I’ll never forget the morning of the October crop report. I run a private yield network that I have basically every brokerage in the country that submits yield and I turn around and aggregate them and send them back out to everybody. It’s called the old Brophy Yield Network from 15 20 years ago and when Dan retired he turned it over to me. And the morning of the October crop report the one thing is I’m always looking for what could possibly go wrong. And the thing that sticks out to me is that these private yield numbers the aggregate of the total aren’t off that much from last year. And that was kind of my famous last words because you know I shouldn’t ignore the data but I ignored the data because of the underlying bias if you will. But it’s you know you hear that’s the psychology of yield reports is you sometimes you only hear the really good yields because people are bragging sometimes you only hear the really bad yields because of the woe is me aspect of it but if things are generally good you don’t tend to hear it at all you know and that’s kind of where we’re at that’s where we’re at.

Todd Gleason: Okay so then is everybody satisfied at this point given that the next crop report is the last one the crop production report that is is the last one until the January issue that the October numbers are probably pretty solid? Shane do you think that’s the case?

Shane Holtorf: I think that most people have I would say that most people whether they agree with them or disagree with them have come to terms with these are the numbers that are going to be traded. And so how do we manage our risk using these numbers what are we planning for going forward and you know so I yeah generally speaking I would say the large majority of the folks that we work with are probably not in agreement with the numbers that are out there but now what’s the plan B because that’s what we’re going to trade.

Todd Gleason: We’ll get to your plan B in just a second. Are you the same way for the soybean number? Do you think that one will rise into November?

Shane Holtorf: Yeah I would I would tend to think that that yield will rise into November. I honestly don’t think by much given where we came out of the gate but I do see that soybean number ticking up.

Todd Gleason: Garrett?

Garrett Toay: I like Shane said I mean I always say what’s the point of fighting City Hall because ultimately the USDA is the final judge jury and executioner but I don’t know what to expect. You know I mean I think the confidence has been shaken so much in the numbers between the USDA admitting of a calculation error which ultimately we know what that was about I mean with the amount of budget cuts and they basically admitted during the data users meeting that they just didn’t have enough enumerators in the state of Nebraska. And so we kind of we live by that we die by that and so this is the end result is that numbers become less you know depending on what your original belief is of the quality of the numbers become less reliable. So you know I just what I hope doesn’t happen because this will ultimately shake producer confidence as it is is that we had the big yield cut and then we had the yield increase and then we come down and it is what we thought it was sort of thing that kind of scenario. I do think that ultimately bean yields either stay steady or slightly increase I do think I don’t know if corn yields comes back up later in January but my mental aspect is at some point once we find a bottom here which we’ll call it a late harvest bottom that we do rally after the first of the year at some point because at the end of the day this point last year we were looking at like a 2.1 2.1 billion bushel carryout and now we’re looking at 1.6 1.7 1.8. It’s still a tighter scenario. There’s still a lot of geopolitical issues out here. But at the same time thinking between now and then is that these fund managers got long corn and got long these ag markets in a hurry. And then just absolutely got it handed to them what’s going to drive them back to the market? And that I don’t know what that answer is.

Todd Gleason: Okay so last Friday Garrett we had an update if I remember correctly for soybeans it appeared that they might be on the upswing post-harvest at that time. Then we had the election that took place in Brazil. I don’t know if that changed fundamentals in the marketplace and I’m wondering what you think of the losses this week in that context?

Garrett Toay: Well I’m pretty on the record I mean I think that everything is overblown in my opinion my opinion does not matter though. I mean to see such a collapse in the currency a collapse in the stock market when the incumbent won you know. So I mean in reality nothing in Brazil is really going to change over the next four years that hasn’t been the case over the past four years. People are making the argument that Lula promised more social spending and more government spending but if they print more money to do that then that creates inflationary flows which would be bullish ultimately the weaker currency makes the cost of their input purchases become more expensive which in turn tightens the profitability of the Brazilian farmer which could end up being bullish at some point. But the counterpoint to that is oh well with the more liberal government down there they’re going to become closer to China which it is possible. I mean that die has been cast a long time ago since really 2016 when the trade war in the US started so I don’t know if it’s necessarily that closely correlated other than the fact that I do know that China is typically a least cost buyer and whoever’s got the cheapest goods is going to get the business.

Todd Gleason: Okay Shane so I want to bring the fundamentals directly to you on this and we can do corn and soybeans both because as Garrett mentioned an incumbent won in Brazil have things really changed? Does that change fundamentals for domestic usage or crush in the United States for soybeans for the export of soybeans to China the 25 million metric tons which appears to be on pretty good pace at this point whether they can get it all done by the end of the calendar year which I think is the expectation but that whole calendar year marketing year thing still is confusing. And then on the corn side of the marketplace if one of the entities the largest folks on the planet that are competing against us Brazil are using more corn for ethanol why would that not be supportive all to the marketplace?

Shane Holtorf: Right yeah Todd it’s kind of funny you use that term that’s something that we talk about with our customers quite frequently is the fundamentals have not changed and you could argue that on both the bean and the corn side of the plate and Garrett says he holds himself out there I follow him on Twitter and I would agree with him in that light is the fundamentals truly have not changed. And the headlines draw a lot of attention and I feel like that’s where we were on Sunday in the overnight and it was kind of interesting my phone took a ton of calls from Friday after our USDA announcement to Sunday night when the market was down you know beans down 22 cents and corn down I think 6 or 7 it was and the fundamentals haven’t changed. I think there’s two things in my opinion that are hurting this market right now is when we look at the calendar we want to think that harvest should be wrapped up where really we look at the harvest pace we’re right on track and so we’re kind of moving through a glut of selling past price on beans and really really good during harvest. I think we saw just a lot of general farmer selling harvest pressure probably more so than we normally would have in a given harvest and so in my opinion the fundamentals are the same we’re just shifted back and you add on a lot of fund selling over the course of the last two or three weeks and we wound up here.

Todd Gleason: Before I get to plan B with you Shane I want to come back to Garrett. I think on the technical side there are issues and when the funds are driving the boat those can be pretty difficult because movements particularly in the overnight trade can blow through chart positions pretty quickly.

Garrett Toay: Absolutely. I mean and I follow a lot of seasonal charts I like the plot the daily closes of a contract over the course of the basically I go back to 2015. And the one noticeable thing is that we really had for December corn 4.85 was the magic number. And once we got above 4.85 since 2015 there’s only three other years that traded substantially higher and that was 2022 which was the trade war 2021 which was excuse me not the trade war the Phase 1 trade deal and then 2023. And if we don’t trade above 4.85 we typically trade below 4.30. And once we broke 4.85 now here we are a good down day in corn and we’re back to 4.30. Which is 4.30 justified given the stocks to use? In my stock to use a hundred dollar crude seven dollar diesel absolutely not. But that’s the function of the market length and however short the market wants to get in corn because it’s noticeable in the last Commitment of Traders is not only do you have fund length bailing out but you’ve got new shorts and that’s what really concerns me. So but at the end of the day I mean I think that given the stocks to use it would really justify 4.50 4.75 especially if we have beans where they are and outside markets in demand. Like Shane said there’s no change in fundamentals. I mean if there’s a concern about demand it’s from the export side of things because Brazil and Argentina are kind of undercutting us a little bit. Mexico’s imports are running much slower than last year’s pace. But we’ve seen an uptick in demand and I think that given diesel prices with freight where it is globally because of the Black Sea and the Iranian situation that we have a bit of a competitive advantage into Asia off the PNW relative to corn prices out of Brazil.

Todd Gleason: All right Shane what’s the plan B for producers for you?

Shane Holtorf: Yeah I mean our plan B is let’s not panic here. You know we saw the September highs we got super excited so a lot of guys pumped the brakes on making sales. I don’t want to see guys come in here at harvest except this harvest basis and just puke the grain up for a lack of better terms. And so I’ve been talking with guys here is let’s go ahead and be patient let’s take our time look for an opportunity to first sell cash and if we want to open up some upside I’m okay actually doing that here both on the corn and bean side from a low perspective and so maybe doing things a little bit backwards than what we’ve done in years past.

Todd Gleason: How about you Garrett?

Garrett Toay: Well um yeah I agree with the not panicking part. What we’re doing we’re a traditional forward seller and then we look for if we want to I’m not a big fan of buying back or sell to fend unless it’s warranted and given the break-evens for a lot of producers this year you almost have to do something. But what we look at right now or what I’m looking at now is just making sure we get with farmers who have on-farm storage we’re locking in our carries through the forward curve to next year making sure especially considering the collapse in like the Dec/Dec corn spread that traded out to 38 40 even though flat prices pushing these recent lows the new crop corn spreads really aren’t widening that much. So if you’re having corn on the on your farm then we’re locking in those carries so that we don’t lose that if they start narrowing in and if they do start narrowing in then that tells us that flat price is going to rally. I am a little bit concerned about this you know beans don’t like $11 the number they’re either above 12 or we’re sub 11. And so I don’t know what the next year is going to bring. We had some new crop ’27 bean sales at 12.60 12.70 you know 12.55 and above but I’m really kind of concerned about that getting away from us a little bit should this thing decide to just bottom fall out. Beans have been a tricky one all year um just they always are is that just when you think that they’re going to roll over they don’t. They’ve just considering the biofuel policies and the strong energy prices that sort of thing that support the fund long in that relative to corn this is just risk management 101 you know and I’m just back of my mind I’m like if this is October 2027 and beans are 10.50 and I had an opportunity to sell $12 beans I’m just absolutely going to be kicking myself and so that’s that’s kind of the method to the madness.

Todd Gleason: Okay so next week what are the issues you think will be problematic or good for the producer? And I suppose the election is one of them but that might pertain mostly to what happens between the two elections Israel and the United States and what happens in Iran. But you may have different thoughts on that Garrett?

Garrett Toay: I you know at this point we know enough about the Israeli election to know that it probably looks like it’s going to be a gridlock unless the anti-Netanyahu parties which include a segment of the Arab parties coalition together to give the opposition party a majority. But right now the parliament’s in a deadlock. So as far as the US election I mean I don’t the obviously the biggest thing is and we’ve talked about this before is like at the end of the day regardless of the election outcome in the United States what really matters is what does China do? And I don’t think that regardless of the outcome of the election that it really impacts them in any way. They’ve made this commitment of soybean purchases it’s not like if the Republicans win that they’re going to say you know they’re going to buy 25 million metric ton regardless. It’s not like if the Democrats are coming in and now they’re going to have gridlock against President Trump that they’re going to say well we’re not going to buy this or we don’t have to buy this or anything like that. You know I just don’t see any outcome post-election that really impacts trade in any direct in any way sort of thing. So ultimately I mean I think what we have to think about though is if there is a split in Washington is that if we do come into a period of tougher times with high input costs and lower grain prices the propensity to get government bailouts and government aid will probably become less likely.

Todd Gleason: Shane how about you? Next week what’s your worries?

Shane Holtorf: Yeah next week I think the probably my biggest worry is what do the funds decide to do? Do we you know do we continue to sell into this sell-off you know? If we do I think that then we can see you know obviously as Garrett pointed out a couple times an acceleration on beans right through $11. And that’s that’s going to be really hard on the farmer to you know see two plus dollars evaporate you know from a financial side of things. And um so that’s that’s probably the largest concern for me is what comes to this market to to stop you know stop that continuation of the fund selling? And I’m not sure. I’m not sure what does today I don’t think the election probably moves the needle um one way or another. Um as Garrett pointed out I think you know the deal with China is solid and you know one thing that we talked about is you know it seems like today we’ll have a flash sale to unknown and China in the morning and you know that’s exciting we’re continuing to build that export program and then we open up in the morning down six from where the overnight closed. And so try to figure out um you know what it’s going to take to move that needle. So my mind my focus is purely on the funds.

Todd Gleason: Commodity week of course is a production of Illinois public media you may find and listen to the whole of the program anytime you’d like at will ag dot org just search it out by name commodity week in your favorite podcast applications as well. Our thanks go to our panelists this week including Garrett Toay he’s at ag trader talk dot com out of Stockton Illinois and Shane Holtorf joined us from Alta Iowa at logic ag marketing I’m university of Illinois extension’s Todd Gleason.