May 09 | Closing Market Report
From the Land Grant University in Urbana Champaign, Illinois, this is the Closing Market Report. It is the ninth day of May '20 '20 '5. Happy birthday, well, to me. I'm 61 today. Thank you for listening to the closing market report today.
Todd Gleason:We'll talk with Mike Suslow. He's at GlobalComResearch.com out of Atchison, Kansas, and we'll hear from Eric Snodgrass at Nutrien Ag Solutions. If you can stay with us for the whole of the hour, we'll also take up commodity week with risk management commodities, John Zanker and Bill Lapp of Advanced Economic Solutions. It's a great program for this Friday. You have a great afternoon, and be safe out there in the fields today and if you're traveling the back roads of Illinois, Indiana and the rest of the Midwest, keep an eye out for those farmers in slow moving vehicles.
announcer:Gleason services are made available to WILL by
Todd Gleason:Mike Suzalowis with GlobalComResearch.com out of Atchison, Kansas always joins us on a Friday to talk about the marketplace. Hello, Mike. Thank you for being with us today. I want to take up a little broader context. Can we discuss the weekend this weekend's US China meeting about trade and how you think the market has been handling that to this point and the expectations maybe of some beginnings of a resolution there?
Mike Zuzolo:I'm glad you started the conversation there, Todd, because with the WASDE report next week, this week's trade with the beans gaining on the corn so substantially on what I think is probably the idea that The U. S. And China trade relations are thawing with their talking over the weekend and also on Friday hearing that President Trump is thinking that maybe 80% tariffs on China is the right spot, but he's leaving it up to the Secretary of Treasury for the final number. Those things, I think, have helped unwind the long corn, short bean mindset to the point where November beans are back close to that 10.4 level, 10.35 dollars 10 point four zero level, pretty key resistance. And we've seen also a situation where the bean corn ratio coming back to 2.34% is actually the best level in favor of the beans since November of last year.
Mike Zuzolo:And this is very interesting to me, would be the word, I think, because this WASDE report with the USDA giving us fresh supplydemand numbers based upon current tariff levels could be quite a shock. And I don't think I'm the only one thinking that. I've got a 5.77 carryover for 2526 beans using a 50.3 yield and pulling 25% out of the tariffs out of the exports from 2425 because of the tariffs. And that's not out of the range of estimates. In fact, I'm not above the highest range of estimates.
Mike Zuzolo:The Reuters trade range and I don't think a lot of people know this because it came across very strange. The lowest trade guess on the Reuters trade estimate is $2.06 $7 the highest is $6.75 You're talking about a $400 plus million bushel low to high number, but that didn't show up on the average trade guess when it was published. The average is $3.62 on the Reuters. So it's a very interesting close that we're having this week because we are seeing an improvement in sentiment. But by the same token, we could turn around next week and theoretically be hammered with a very large carryover number that, you know, could be a hundred and 50,000,000 above what is seen as the average trade guess right now.
Todd Gleason:Yeah. So many of those numbers are a few of them were where you are in that $3.77 to $4.10, 4 20, but that $6.75 was way out on the outlier side. A big number, but also a scary number that you have to recognize, and that's I think what you're trying to tell us that, you did to some extent and then drop back the export of US soybeans by 25%. So WASDE will be an interesting number to look at on Monday. Will the trade will it react to it?
Todd Gleason:I I just I feel like half of me says it might, and half of me says it may not. I I don't know whether it can dismiss that kind of number or not. What do you suppose?
Mike Zuzolo:Yeah. This is where I think it goes back to the the trade price action since midweek and and this buy beans, sell corn change and also take the wheat down even lower in Europe, pressuring the Chicago prices, which in turn pressure the corn prices as well. A familiar story, unfortunately. My sense right now, based upon some of our colleagues AFB going to Washington and also some of the colleagues that I have in Chicago and other trade areas, Asia news suggesting this as well, that we could get an Indian trade deal this weekend, and I think that would do a world of good in softening a blow by USDA in a great big fat ending stocks number for 25, 20 six soybeans because then all of a sudden you can say, look, China, it can be easily replaced by India when it comes to the demand, especially long term demand. And I would say especially when it comes to energy, aviation fuel, biodiesel and especially ethanol.
Mike Zuzolo:So a big piece of the puzzle ahead of next week's report to me, I'm not expecting any trade deal to be done between U. S. And China. I hope I'm wrong, but what I really would like is an Indian trade deal between The U. S.
Mike Zuzolo:And India that the commodity markets see as a real change, a game changer in terms of solidifying that demand out there, not just for 'twenty five'twenty six, but for 'twenty six'twenty seven. So that's kind of where I'm laying the groundwork with clients and subscribers. I can tell you a week and a week and a half ago, I've been very plain spoken with my clients. I've tried to keep copy down because of the planting progress. I've just continued to hammer.
Mike Zuzolo:Soybeans and cattle are where I really want to be in terms of hedges by the time we get to the May. We're there. Cattle have made new highs. Feeders made new all time highs Thursday. Tried to go after it even on Friday.
Mike Zuzolo:And this bean rally, I think I'm gonna take advantage of in that putting a floor price underneath me and then decide whether I need to pull hedges at the end of next week.
Todd Gleason:So I I wanna discuss some of this Indian trade possibilities. You pointed to energy side, so ethanol, aviation fuel, sustainable aviation fuel, maybe as well. India does raise vegetable oils both in terms of canola or rapeseed and soybeans, will there be a market for soybeans there or is it that the market is for things that come out of the corn products?
Mike Zuzolo:Yeah, great question. Two answers on that. I was told five or six years ago by the head of my clearing firm that India is the new China in terms of a new commodity demand level, a new commodity super cycle potential. Many of us have been waiting for that. We've got a so that's part number one.
Mike Zuzolo:Part number two is we've got a leader in Modi now that wants to elevate the lower middle class into a burgeoning middle class, not unlike what China did after their WTO entry in 02/2001. This could be the ideal position and scenario and time for Modi to strike a deal with President Trump in The U. S. Unfortunately, the Pakistani Indian threats between each other and Kashmir could also add to the flavor of doing a big U. S.
Mike Zuzolo:Trade deal because of defense weaponry. And that's been talked about as well. So I think we've got a situation on our hands where we could make lemonade out of lemons when it comes to The U. S.-China trade situation because India comes on board. And it really does, I think, then put China in more of a defensive posture.
Mike Zuzolo:The problem right now and why I'm focusing so much on India, I should probably say, is because what I'm hearing in Asia right now is South Korea has got an election for President early June. They really don't want to strike a deal until after that election. And Japan has been going back and forth with The United States. It came out late this week that they wanted to take reciprocal tariffs down to zero. The U.
Mike Zuzolo:S. Said, no, nothing doing, and we're still hung up on automobiles. And so it looks like early June is our best case scenario or late May or best case scenario for Japan at this point. So I think the trade's gotten to the point at the end of this week. U.
Mike Zuzolo:K. Is a great trade deal we're starting, but they really want to see something out of Asia right here, right now.
Todd Gleason:Does it concern you all that the 10% baseline was included in the specifics of the potential trade deal that, will be signed at some point in the future between The United States and The UK?
Mike Zuzolo:No, not so much. I don't know all the details yet, and I think they're still working those out, Todd, but I do think that the beef sector took the news very well. I think that was part of reason why the live cattle market was able to go up another leg on Thursday after that was announced. I think the one missing key here is we just haven't seen the ethanol sector really take hold of any good news at this point. And I think that's probably one of the things that maybe is to your point, that I'm still thinking that what I've seen so far is net net, we should get more ethanol into The UK as far as imports.
Todd Gleason:Yeah. It looks like maybe we could get a third or as much as half, again, what we've been producing and shipping to them based on the numbers that that that were announced out yesterday in my own calculations, and those very well could be wrong. Anything else that we need to talk about before I let you go for the day?
Mike Zuzolo:Yeah. I would say one of the things we left off the table this week in the trade is the weather. They're betting on the come with Ukraine, which is under a significant drought. And the Ag Ministry in Ukraine made note of that on Friday with their planning progress numbers. And we also are hearing now that China is buying Canadian and Australian wheat.
Mike Zuzolo:They're buying potentially French and Ukrainian feed barley. They've got a substantial drought in the wheat plains of Henan Province specifically and kind of the epicenter. These things really matter a lot. But I'm thinking right now because of the trade things you and I talked about, they're being overshadowed. But in thirty days from now, with our own Western Corn Belt, which I just talked to a producer in Northwestern Missouri right before we jumped on the air together, he's starting his pivots up.
Mike Zuzolo:And so this is very early to be drawing down water right now in this part of the country. So I think weather is a big, big situation after we get past next week's trade talks and next week's USDA numbers if we still have these hot spots.
Todd Gleason:Thank you very much, Mike. We'll talk with you again next week.
Mike Zuzolo:Thanks for having me, Todd. Have a great weekend.
Todd Gleason:You too. Mike Suzalo is with GlobalColumnResearch.com. He is in Atchison, Kansas. Let's check now the weather forecast with Eric Snodgrass on this Friday afternoon. Hi, Eric.
Todd Gleason:Thank you very much. I hear you've been traveling out west. How are things going for you today?
Eric Snodgrass:Well, you know, the trip out West was interesting because I left Illinois, which I knew I was leaving them in some drier conditions or warmer conditions, at least in the central and northern part of the state. We'll talk more about the southern part in a second. Then I flew over parts of Iowa, which they have enjoyed a much longer stretch of drier weather. And then you get over to Nebraska, and it's bad in terms of how dry it's been. But it was raining like mad up against the front range.
Eric Snodgrass:So I was out there for two days of the trip. Was out there. It was raining. And it was just funny because everybody kept coming up to me. I was like, this is not what it's supposed to be like right now.
Eric Snodgrass:We usually don't we don't have this. And I said, well, let me tell you what's going on. We have had a jet stream displacement issue for about two, three weeks now. The jet is actually way, way, way up in Canada. But what it's doing is underneath it, we're just leaving these lingering cutoff lows.
Eric Snodgrass:So even in the forecast coming up, but this has already happened in early May, we've had under that ridge really warm temperatures, really dry conditions. I mean, we've already had the Dakotas and Eastern Montana well into the nineties. They're gonna go back there Saturday and Sunday, while I've got Texas to Louisiana to the Southeast struggling to get out of the sixties. Now talk about a flip flop, right, in the pattern. But that's what it's been.
Eric Snodgrass:And so this this pattern, like, example, you know, we in our chat before we jumped on on air here with about Matt Bennett. So Matt Bennett's in Southern Illinois. That dude has called me every day, text me like, when are you gonna shut this rain off? I can't take another drop. And then I'll talk to a guy in Northern Illinois, Henry County.
Eric Snodgrass:I was chatting with a guy. And he's sitting there going, I don't even have pivots running. We've got such dry conditions. And in Northern Illinois last night, they got pretty chilly. We had clear skies, light winds, strong radiational cooling, temperatures dipped down there in the low thirties.
Eric Snodgrass:Wisconsin, lower Michigan hit a frost. I don't think it was damaging. They didn't spend long. It was just touched right before sunrise. By the end of the day today, the temperature's gonna be back up in the seventies in those areas.
Eric Snodgrass:So, you know, it's been a very interesting spring, and I just wanna make a point about this. This has been a year where I would say the spring precipitation disparity has been very high. So Northern Illinois versus Southern Illinois or think Nebraska versus Oklahoma. I mean, Oklahoma just finished its wettest on record thirty day stretch in parts of the Red River Valley. And I've got spots in Oklahoma or excuse me, spots in Nebraska, like Kearny, Nebraska, right there in the center on I-eighty that is currently having its third driest spring.
Eric Snodgrass:And those data go back to 1893. So this is how the country's shaping up right now. And I feel like everyone's saying, hey. Just, can we just even this out? Can you give me what you have extra, and and that'll help?
Eric Snodgrass:And, unfortunately, the atmosphere doesn't work that way. It's not very equitable.
Todd Gleason:No. It's not. So, locally, I know Matt's called you. I know yesterday when we talked to him, he had 80 acres of corn to plant, and Matt generally is pushing fast and hard usually when the first one's done, because he's in the part of Southern Illinois where you can run faster. So those guys are really behind.
Todd Gleason:What does their weather forecast look like for the next week? I the folks in Iowa and other parts going west, even the upper two thirds of Illinois have been moving pretty quickly, and I don't think they're worried. But parts of Southern Illinois, Indiana, and Ohio really are.
Eric Snodgrass:Yeah. And and I so the forecast is thankfully drier. Like, it's not as as crazy as it has been for those folks. And remember how cold and wet last weekend was. You're gonna get the polar opposite of it this weekend.
Eric Snodgrass:It's gonna warm up, clear skies, it's gonna be it's gonna be beautiful. But it's interesting to say that because Matt's gonna have another problem. And you know this and everybody listening knows this. What happens after you have all that rain, and then all of a sudden you warm things up and dry it out? You've got a crust on that field that if your crop hadn't planted, it's got to punch through, or you've got to work it to get the new crop in.
Eric Snodgrass:And so I'm concerned about what's going on in Southern Illinois. And yeah, Matt goes, yes, but can I tell you this about Matt? He texted me this morning, and he goes, man, is all this drought talk still on? Because if you look out your back window and you're like, Eric, come on, dude. It is so wet.
Eric Snodgrass:We're way above average on precip. I haven't done anything. He's like, you kind of make it sound like there's risk of drought this summer. Where is it? And I'm like, well, first of all, Matt, it's not you.
Eric Snodgrass:I'm not talking about the Illinois problems. I'm talking about West Of The Mississippi. And so what's amazing is amidst all of this, we still have a narrative going out there in May. The rest of May is gonna tell us how that narrative is gonna go for for drought risk in the Central Plains, Northern Plains, maybe Upper Midwest.
Todd Gleason:What does the second half of part of May look like across the country?
Eric Snodgrass:So there is there are signals that we are not done with our, you know, thunderstorms. So in 2023, starting today, in 2023, on May 9, it stopped raining until June 28 in Champaign. Right? None of that. That's not what's going on this year.
Eric Snodgrass:Dryer stretch now, but we do see storms returning. We see flow returning. It's not a dire situation without more moisture. But most long range forecasts are looking at the Central Plains with massive question marks because one of our most reliable models, the ECM WF, is dry there. Some analogs are wet.
Eric Snodgrass:And we're sitting here going, if this goes one way or the other, then I can finally answer Matt's question. If it goes drier in the Central Plains in May, we already know June, July, and August get hot there anyway. So if you don't have that May push, you have problems. If the models are wrong and the analogs pan out, then we just push the drought discussion deeper into July and August rather than front loading, you know, pollination with it. But there is still strong evidence, Todd, that we have got a drought problem.
Eric Snodgrass:I'm just gonna give you an assignment if you don't mind. Okay? Okay. I want you to do this. There are many places that you can access ocean temperatures.
Eric Snodgrass:One of my favorite well, first of all, my favorite's on my own website. You can go there and look at it agweather.com, a g - dubex Com. Find it. Okay. If you don't like my site, go to tropical tidbits.
Eric Snodgrass:And I want you to watch the Gulf Of Alaska because right now off the Baja of California, it's cold. If the Gulf Of Alaska in the next forty days goes cold, then I would tell you that our drought risk for July and August goes up. If it doesn't, then we straddle this risk thing until something drops. But that would be the double whammy effect if we've already got cold water off the Baja and then we complement it with cold water in the Gulf Of Alaska. That combination, historically, only one time have we ever had cold water in all those places and not had some sort of drought problem.
Eric Snodgrass:And that was back in 1972. So there you go. That's the that's the test that I wanna well, that's the assignment. The test comes when we get to July.
Todd Gleason:Oh, well, by then, I will have forgotten about the test, so you might have to remind me.
Eric Snodgrass:That's right. Hey. I used to do that all the time, Todd. Fifteen years as a professor, I know how to remind students of tests.
Todd Gleason:Oh, well, thank you. I'll make sure I do it. Thank you. I I look forward to that. Is there anything new out of the National Weather Service or NOAA as it's related to the summertime?
Eric Snodgrass:Not yet. We're still waiting on their latest update, but they've been pretty clear that ENSO neutral, so neither La Nina or El Nino will be the name of the game. They are the most aggressive agency on picking up on the fall return of La Nina versus going over to, you know, maybe weak El Nino this winter. And I agree with them on that. I think that's that's that's pretty good.
Eric Snodgrass:I will say this about Noah. We had a very interesting problem with their flagship model this week. They're they're called the GFS, their their flagship model. It went from an average skill score in the 92 to 93 percentile down to the low seventies, and we have no idea what happened. Of course, we question, you know, all of the chaos around Noah just as a, hey.
Eric Snodgrass:Is this what what's gonna happen? But it recovered. So we're still scratching our heads a bit on some of the stuff going there and gonna continue to watch out for those folks carefully over the coming weeks and months.
Todd Gleason:Out of that, and I suspect you looked at this, did the Google AI models skill set and I don't know whether they even have one. Did that drop as well?
Eric Snodgrass:The European and the AI, okay, which is also European, they did drop, but they only dropped about five to 8%, whereas Noah fell off almost 25%. But it's all recovered, Todd. So I you know, last two days, we're back closer to good skill scores again. And so it was it's a head scratcher. We did hear though of another closing of a Noah resource.
Eric Snodgrass:The entire division of what's called UCAR has been furloughed. So we're gonna lose the support of that over the coming weeks, which is very troublesome for me.
Todd Gleason:What does UCAR do?
Eric Snodgrass:So they are one of the biggest distributors of data. So there are numerous apps that have where you get radar data. Right? So a lot of folks Sure. They they pull that from the UCAR data distribution system.
Eric Snodgrass:Now on their website, they said that that system is online. It's gonna continue to run. But when they're furloughed, should there be any problem with it, you do not have the engineers in place to go fix problems. That's the issue. So it's kind of like the I don't know.
Eric Snodgrass:I think back to when I was a kid, I used to jump on the back of the cart and ride it. And then sometimes you accidentally let go and the card just goes, and you hope to God it doesn't hit another car. Well, they've had to jump off the back. And so it's gonna keep going. The hope is that it just keeps going without causing any problems.
Todd Gleason:Alright. Hey. Thanks much. We'll talk with you again next week.
Eric Snodgrass:That's it. Sounds good, Todd. Thanks.
Todd Gleason:Eric Snodgrass is with Nutrien Ag Solutions and Agrabelle joined us on this Friday edition of the closing market report that came to you from Illinois public media. It is public radio for the farming world online on demand at willag.0rg. If you can stay with us for the whole of the hour today, you'll hear all of our commodity week program. If not, it's up online right now at willag.org.
Eric Snodgrass:Todd Gleason 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 Bill Lapp. He's with Advanced Economic Solutions out of Omaha, Nebraska, where he specializes in the food ingredient side or the end user side of the agricultural marketplace. We'll talk with him in just a few moments but we'll start with John Zanker who is with Risk Management Commodities out of Lafayette Indiana.
Todd Gleason:John Zanker now joins us. He's with Risk Management Commodities out of Lafayette, Indiana. We'll be entering his forty fifth year in the business next week. Congratulations to you, John. Thanks for being with us today too.
Mike Zuzolo:Well, it's nice to be here.
John Zanker:Just just to be here.
Todd Gleason:You know? Well, just being here is always good. It really is.
John Zanker:And now she threw the forty five years thing in. I've been yeah. It's, it's been a fun ride for the most part, and, we'll see how this year turns out.
Todd Gleason:John Zanker is with Risk Management Commodities out of Lafayette, Indiana. He joined us on our commodity week program along with Bill Lapp with Advanced Economic Solutions out of Omaha, Nebraska. It's a great program. You can hear all of that up on the website right now at willag.org, and many of these radio stations will carry it over the weekend. Thank you for listening to commodity week and the closing market report on this Friday afternoon.
Todd Gleason:I'm University of Illinois Extension's Todd Gleason.
