Aug 01 | Closing Market Report
From the Land Grant University in Urbana Champaign, Illinois. This is the closing market report. It is the August 2025. I'm extension's Todd Gleason. Coming up, we'll talk about the commodity markets with Mike Zusalo.
Todd Gleason:He's at globalcomresearch.com out of Atchison, Kansas. We'll hear from Carl Zuloff about the mission creep, which has come into crop insurance and his fears as it's related to that program and then we'll turn our attention to the weather forecast from Eric Snodgrass at Nutrien Ag Solutions and Dagrabill on this Friday edition of the Closing Market Report from Illinois Public Media, it's Public Radio of the farming world.
announce:Todd Gleason services are made available to WILL by University of Illinois Extension.
Todd Gleason:September corn today, four and three quarters lower at three eighty nine and a quarter. December at four ten and a half down three and quarter, and the March at $4.28 2 and a half lower. August soybeans $9.64 up two and a quarter November at $9.88 a penny and a quarter lower, and the bean meal futures up $5.70. Couple of interesting things. Mike Zuzlow, globalcomresearch.com out of Atchison, Kansas, as we looked at the marketplace for the week that were very important tariffs announced by the president last night.
Todd Gleason:August 1 has arrived, and there's also been a to do involving nuclear submarines and Russia. Honestly, Mike, I thought the trade took both of those, particularly the tariffs, really well.
Mike Zuzolol:Yeah. I felt the same way. I mean, I think that, you know, we can say, I think at this point since it's August 1, that we dialed in a lot of what we got from the tariffs. Maybe the one surprise was president Trump moving more aggressively against India on Thursday, and it started really on Wednesday with Russia and moving ahead of the sanctions from fifty days to ten days, when he was on Air Force one. And I think this goes to your first point is that we are moving more aggressively to, it looks like a standoff with Russia, Todd.
Mike Zuzolol:And I think that is one of the things that's most puzzling about the crude oil market and the wheat market to a lesser degree as we closed out the week because they both took a lot of premium off the table as we closed out the week. And and geopolitically, especially given its Russian sanctions on energy and also, financial, sanctions, if you deal with Russia on energy and other commodities, the you would have thought that the trade would have put some extra premium in these markets, especially with these nuclear subs being moved by the president. So that was an anomaly to me. The only thing that would help explain that is your second part about the tariffs and that the fact that it's August 1, and we came in with a really bad unemployment number, not just for July jobs, but June was revised dramatically to the to the bad side, really offset the strong GDP number from earlier this week, and it sent the dollar sharply lower. And I think the this, along with the tariffs in the in Wall Street, helped really break Wall Street down, and that would be the only thing I could think of that would help explain why both the dollar and the crude oil were sharply lower on Friday.
Todd Gleason:And and Wall Street would look forward to September and October over the past ten years have not been good. Historically, they've had tough times periodically, but they have been down months. We're still a month away from that, but I'm Wall Street always in the futures look forward, and I can't imagine they're not thinking about that even if it's just historical context.
Mike Zuzolol:Yeah. I couldn't agree with you more on that. And so, you know, my bottom line mindset after this week is Thursday was end of the month. Friday was end of the week. We had had a very strong change in mindset, I think, by the funds on Thursday, unwinding the soybean corn price action, unwinding the feeder corn spread price action, and coming back in with quite a bit of price action that would suggest the funds were looking a lot better at the grain complex because the trade situation and tariff deadlines were we were right up against it.
Mike Zuzolol:And so I really am surprised by Friday's trade, given the fact that we were so close to getting back above $3.95 on a weekly close in lead month corn. We actually got to $3.96 in a quarter in the overnight markets. Weren't able to stay above even $3.90, though, by the time we closed Friday's trade. So on a weekly chart, we had another week lower, whereas we were on Thursday working a higher weekly corn chart. $3.95 would have gotten us above the lows from three weeks ago, and that, I think, would have done a big a big bit of good.
Mike Zuzolol:And what I'm really trying to say here is the key to me in the trade is consistency and momentum to shift the funds out of their positions. And I think we dabbled in it on Thursday and just kinda threw in the towel on Friday and went back to what we got used to most of the month of July.
Todd Gleason:And is that because there were so many things? Some of it expected, I suppose, the tariffs that were happening today and the trade came to realization after seeing the numbers in print from the White House?
Mike Zuzolol:Yeah. I think that I mean, you could've you could've said a million things almost as far as what happened on Friday to support this shift in trade. But I would also say that one thing that I saw on Thursday was the Paris corn market was up five to 7%. On Friday, it was down five to 7%. It's the August contract.
Mike Zuzolol:It was getting ready to, you know, getting ready to expire on the August 5. I I wanna say that this is just one of those weeks where it looks a lot like funds were positioning for a variety of reasons, and that one Paris corn move on Thursday countered by Friday drove a lot of the decision making. Meanwhile, the fundamentals continue to show Europe tightening in feed grain supplies, Russia tightening in feed grain supplies, Ukraine still looking at a significant drought, not maybe along the lines of 2012 because they did get some relief and some cooler temperatures, but it could become bad, very bad again in the coming ten days. And so I'm I'm gonna hit the pause button when it comes to the analysis on Friday and just let things shake out over the weekend.
Todd Gleason:Yeah. So we'll watch that. And as you, relatively speaking mentioned, I think I've been looking at the December contract. I think you were looking at the lead option, contract low, in December made for corn a couple of weeks ago, and last week traded inside that range. It was an outside up week too, and then not last week, but the previous one.
Todd Gleason:And then this week did not violate that contract low. Again, still inside the range from the previous con when the contract low was made. So I guess we'll have to keep watching that. Is there a different story to be told in soybeans? Did they get weaker this week?
Mike Zuzolol:Yes. Soybeans made more sense to me fundamentally because I felt like it was a lot like August again of last year, late July, early August last year. And we had another piece of news on Friday that a Chinese buyer was going ahead and importing another 30,000 metric tons of Argentine soy meal. It it when you look at nine straight days down in August soybeans, excluding Friday, we went essentially from $10.37 to $9.60. We took 75 plus cents out of this market.
Mike Zuzolol:I think the beans were catching up to the corn, and I think that makes sense because the crop conditions at the early part of the week improved so much for beans. The biggest thing goes back to the trade. I think the trade in hindsight was probably putting extra premium in beans, keeping extra premium in beans until we got another rain, and to see if we could get a phase two trade deal with China, and that didn't happen. And so I think a throw in the towel type mindset happened in the soy complex. That's the bad news.
Mike Zuzolol:The good news is even with that meal report of China buying, what was the leader to the upside on Friday? And that was this August soy meal up $6, and it had bounced off of major lows a couple times this week and really fought back hard. So that's gonna be one of the starting points. $3.95 in corn, and did we make a real low in bee in bean meal, when we come back on Sunday, Monday?
Todd Gleason:We look forward to talking with you next week. Thanks much.
Mike Zuzolol:Thank you, Todd.
Todd Gleason:That's Mike Zuzlow. He's with globalcommresearch.com out of Atchison, Kansas. Joined us on this Friday edition of the closing market report that came due from Illinois public media. It is public radio for the farming world. Don't forget that if you can stay with us for the second half hour, you'll hear our commodity week program.
Todd Gleason:If not, it's up online right now again on the website willag.0rg. I'm University of Illinois Extension's Todd Gleason. We're now joined by Carl Zuloff. He's an emeritus agricultural economist from the Ohio State University. Carl, thank you for being with us.
Todd Gleason:You've penned an article for the Farm Doc Daily website, and folks can find it at farmdocdaily.illinois.edu or on our home site for the radio station at Will Ag, willag.0rg. The title is crop insurance 2025 farm bill and mission creep. Why did you do this?
Carl Zulauf:The the importance of looking, in my opinion, at mission creep in this context, in the context of the crop insurance industry, is that Mission Creep has led to a bigger footprint, yes, but it's also led to, or it is in the process of leading to, a fundamental change in I think the way farmers will use crop insurance. It started out as yield insurance as I've already noted and at the individual farm, but once you get to coverage levels above 75%, you start to move into the range where price becomes much more of a factor. For example, if you just take The US insurance prices, that is the change from the projected price before harvest to the harvest price and you use declines of 25% which would be equivalent to a 75% coverage level. And we can do this quite easily for corn, upland cotton, grain sorghum and soybeans. The highest number of years since 1973 that you've had a 25% decline in the insurance price is 8%.
Carl Zulauf:So at the 75% coverage level, there's very little coverage of price decline. Prices rarely drop that much over the growing season. At 95%, which is the highest coverage level right now, and that's for ECO, the enhanced coverage option, it's about 50% of the year's price declines by at least 5% between the projected price and the price at harvest. That makes insurance, even though they don't insure price directly, they insure it through revenue, but that makes insurance a really potentially useful product from the farmer's perspective for managing price risk at least over the growing season. And I thought this is a very important shift from managing yield to managing price, using it to also manage price over the growing season.
Carl Zulauf:And that's where mission creep becomes really important because it's changing the nature of what the product does or can do.
Todd Gleason:What does that mean for two sets of growers? As we know about 15% use the CME group in some form and the others only market cash, does that mean that those cash marketers are more likely to go ahead and market a crop during that growing season?
Carl Zulauf:I don't think we will know this can go several ways Todd, okay? And I don't think it's hard for me to figure out right now what way it's going to go, okay? I think that one of the things that will happen that will be worth keeping your eye on is what does the private risk management sector, which is the forward contracting sector in part, what do they do in response to what has happened literally in the last three or four years, Todd, where the government either through Congress or through the administration has raised the subsidy rate for these products that have higher coverage levels. And they've raised the coverage level themselves in the case of ECO. So this is something that really is just starting to percolate through farmers thinking.
Carl Zulauf:And it does, how will they use this to manage the price risk? How will they use this to manage the yield risk and the revenue risk? It's going to be interesting to see and then it's going to be interesting to watch how the private sector reacts to these products being available. What will they do for forward contracting? How will they wrap it around insurance?
Carl Zulauf:Maybe that's one way they would do it. So I think we're in a period where farmers have an option to manage price for us that they've not had. It's always difficult to forecast how the private market will react to something that really hasn't had before Todd. Okay. So I'm not trying to break your question, just think it's a difficult one to answer right now.
Todd Gleason:Anything else before I let you go?
Carl Zulauf:I think that's something to really watch. I think it's, I'm really, I've been talking to farmers about this. I would note that this may be just coincidence, but I would be willing to bet that it probably is not. But if we look at the early pattern of buying for the 2025 crop, what farmers bought this year versus what they bought in 2024. The ECO subsidy level was raised to 65% last summer.
Carl Zulauf:This would be the first year that that subsidy rate would be available and therefore would do lower the cost of ECO to farmers. The use of ECO has almost tripled this year versus last year across a wide variety of crops. That's a pretty high adoption rate and suggests that the use of area add up insurance is going to be a factor going forward, whereas it's been a relatively minimal share of the market. And that's consistent with farmers seeing value, but it's also consistent with the notion that they may be seeing it as a way to manage price risk. We'll have to wait and see on that one.
Carl Zulauf:It's a hypothesis.
Todd Gleason:Indeed. Thank you very much. I appreciate it.
Carl Zulauf:Thank you very much, Todd.
Todd Gleason:Carl Zudloff is an agricultural economist emeritus from the Ohio State University. Let's check the weather forecast across the Corn Belt now. Eric Snodgrass is here. Hi, Eric. I usually don't just say we're doing the Corn Belt, but today, that's where I'd like to stick.
Todd Gleason:Let's start with July. It was a warm month, well above average, I think, for temperatures. Can you give me a quick recap? And then, particularly, we might wanna go back and take a look at those last few days where we were hot too.
Eric Snodgrass:Yeah. You know, statistically, this is gonna come in as, like, a top 30 warmest July. So, I mean, as hot as it was, we've had hotter. You know? So it's it's just, you know, it's it's all relative.
Eric Snodgrass:The hottest spots were down in the Southeastern United States. Fact, I was down there earlier this week, and I'll tell you something. My son and I, on Tuesday had a chance to go to the beach in the afternoon after all the work was done and took my, you know, my flip flops off and only had to move about 50 yards to get to the water. And in that short amount of time, given how hot and intense, you know, the the air in the atmosphere, the sun was, we our our feet blistered. We got burned on our feet by the sand.
Eric Snodgrass:So there are places that were hotter. I think the big thing for us, Todd, is how warm the overnight lows were for much of the June and July. And you and I have been talking last couple of weeks about some of the pollination issues that could be there. But, you know, when you when you when you balance that against how much rain we saw, I mean, multiple clusters of storms, the derecho event that happened on Monday that came through parts of Minnesota out of South Dakota into Iowa. Although damage is, I think, right now sparing across major corn acres and soybean acres, but the reality is the atmosphere has been open for rain, and it's made a lot of rainfall, during that, you know, very warm time period.
Eric Snodgrass:So it was hot and it was humid. But, again, that comes back to the warm overnight lows. It's gonna be nice to finally get some drier, cooler air in this weekend, although we're dealing with a lot of wildfire smoke from the fires in Canada, but also a couple large fires in Utah and Arizona. So, yes, July is gonna go down as a hot stormy July, and we have yet to kinda see if we had any major negative impacts on yield. But, Todd, bigger picture, from satellite, NDVI values are still record high across the Corn Belt.
Eric Snodgrass:So hot stormy sometimes gets the job done.
Todd Gleason:Now I thought about opening the windows last night because we went into the mid fifties. However, I checked before I did that to see how humid it was gonna be, and it remained humid overnight. Are we gonna lose that humidity, do you think?
Eric Snodgrass:We will temporarily, which is gonna be nice. But like I said, we're we're trading humidity and heat for really smoky skies. And, you know, my wife texted me. She was, how long is it gonna be smoking in, like, the whole weekend? And she she immediately thumbs down to my response.
Eric Snodgrass:I'm like, hey. You know? We we you know? There there you go. My wife doesn't approve of my forecast, but, no, it's it's it's gonna be with us through the weekend.
Eric Snodgrass:And, the spires in Canada, don't don't forget they've been going for some of them for three months, and, it's been quite, quite a smoky summer across the Upper Midwest.
Todd Gleason:It did make for a beautiful golden hour last night, I must admit. It was it was gorgeous. Yeah. That's that's one of the things that happens. Right?
Todd Gleason:That
Eric Snodgrass:That is right. Yeah. Red sunsets when you that much smoke.
Todd Gleason:So tell me about the next week and what you think August will look like.
Eric Snodgrass:Yeah. We we are going to, come back into some warmer temperatures. So enjoy this weekend. It will warm back up. We're overall I mean, to be honest with you, we're in a bit of a drier forecast, which, that's not bad.
Eric Snodgrass:But, there's still the atmosphere does not wanna give up its chances for storming. And so I would say this about the month of August. I think, you know, we started off cool. It's cool today. We will build back in some heat pretty soon.
Eric Snodgrass:Remember, our peak heating month, you know, is that's our peak month for heat, I should say, is July. So hot in August is a shade different than hot in July. It's a little bit, you know, on the cooler side of historical averages. So long story short, the big question will be, are we able just to keep the moisture rolling, which I think we do? Because beans could use an probably two more good drinks before we get into September.
Eric Snodgrass:And I'm not shutting off the rainfall just yet, so we we do expect to get some moisture back into this system. But I'll tell you this. There is some confusing stuff about late August that we're trying to sort out, and a lot has to do with the tropics.
Todd Gleason:Tell me about it.
Eric Snodgrass:Yeah. So we've had a relatively benign hurricane season so far. Right? I mean, it technically starts on June 1. August, it should really be ramping up with big systems that form out in the middle of the Atlantic.
Eric Snodgrass:But we've got a lot of warm water. What we don't have is the instability, and what we don't have is, you know, the the juicy air down there. Yeah. Believe it or not, even though it's, you know, it's it's it's been the source of our high humidity air, the compared to normal, the tropics could use a bit more moisture. So long long story short, I don't have any reason to tell you that we've got any big systems coming in the next week, and which means we're gonna get through a lot of August, I think, with a relatively capped, you know, start to the hurricane season.
Eric Snodgrass:So watch out for the back half of the hurricane season as we, you know, typically think it's gonna be loaded back half this year given the way it started. And don't forget, Todd, we we've had, 51 different tropical cyclones throughout history, at least what we've been recording of it, that have come through Illinois. So we can get some late season moisture out of an active tropical season, and maybe The Gulf will be open for business, once we get there into the month of September.
Todd Gleason:One final note. Since you talked about September, are you still expecting an early planting season for farmers in Brazil?
Eric Snodgrass:Yeah. It was funny. Matt Bennett and I were talking about this yesterday, and he prefaced the question with, well, the models say it's gonna be wet in October. And if they get wet early in October, it they just go like mad. And he said, what's the chances of the models being wrong?
Eric Snodgrass:And I'm like, Matt, that's a loaded question because you know how terrible the models were for summer. Right? I mean, they blew it. They all predicted major drought in the Midwest all summer long, and none of that ever happened. And I said, well, Matt, right now, see the models going over wet early.
Eric Snodgrass:And he goes, is there a chance it could be too wet down in Brazil? And I said, yeah. Always. So we have to balance that out for South America. You know?
Eric Snodgrass:If they get a just normal start to their monsoon, they will put in huge acres. The crop counter will be opened up wide. But if it's too wet or too dry, one of those, we can compress their crop counter. So I'm just gonna say this. The model looks generous.
Eric Snodgrass:Okay? But the models have been terrible. So let's, let's watch that carefully together.
Todd Gleason:Alright. Thanks much. We appreciate it. Eric Snodgrass is with Nutrien Ag Solutions and Diagrable. Speaking of Matt, if you can stay with us on our home station, you'll hear him on commodity week along with Ellen Dearton and Logan Kimmel.
Todd Gleason:If not, it's up online right now at willag.org, and many of these radio stations will carry it over the weekend. You've been listening to the closing market report from Illinois Public Media online at willag.org. I'm Todd Gleason.
