Sunday Night:
USDA report is a price neutral event (discussion on video below)
Trade now focused on second half of corn harvest to monitor yields, quality and weights
Biggest impacting news will be movement on US-PRC agreement
Calls are to start the week sideways. Markets are near support and charts need to hold.
Our team discusses the Nov USDA Report and strategy https://register.gotowebinar.com/recording/5314256759140236808
Weekly Comments from Matt Bennett
Good Evening!
I hope all is well in and around your operation. I know from the e-mails I receive that some of you are getting done, while others are having a nightmare of a harvest. With propane shortages and cold weather, it’s been a real bear the farther north a person goes. The ‘perfect storm’ of major propane needs from the ag industry with early bitter cold weather is testing the propane industry like never before. We all knew this was coming, and I know many of you booked plenty of propane in anticipation of this very issue…so it’s tough to stomach when they tell you it can’t be delivered when you need it. I really hope this gets better for you all. On my farm, I finished corn on Thursday…and we have just 5 acres of so of beans in the river-bottom that are ready to cut. The problem is the ground is swampy. While we’ve had cold temperatures, I’m sure we aren’t frozen enough to support our combine…but as I write on Saturday morning, I’ll tell you we’re going to give it a go this afternoon. With the elongated harvest, we’re ready to put this one to bed. We are doing some fieldwork, although some of our ground isn’t quite ready. The forecast, while cold, isn’t showing much for precipitation over the next couple of weeks, so hopefully we can dodge the deer-hunters and get the last of our ground worked before it turns off wet again. Plenty of anhydrous is going on in our neighborhood as well as fertilizer and residual being sprayed. It’s a better feeling heading into the winter with this work completed than the mess we had to deal with this past spring. Again, good luck to those still battling…with almost half of the US corn crop out there, I know there’s plenty of you. Keep in touch if you get a chance on yields and progress. mbennett@AgMarket.Net
Corn and beans both lost ground overall this past week, with the corn market struggling more relatively speaking. Friday’s USDA Supply and Demand report was viewed as negative for beans and neutral to friendly for corn. It was very interesting at 11 am ct when the report was supposed to be released as no numbers arrived and the USDA website said it was ‘down for maintenance.’ Interestingly, someone appeared to have the numbers anyway as corn started rallying while beans struggled…which raises some major red flags to those of us watching these things closely. Regardless, with corn yield dropped from 168.4 to 167, it gave some hope to the bulls…but USDA dropping usage 100 million bushels essentially left carry-out unchanged at 1.91 billion bushels. With world stocks and stocks to usage being cut, it was tough to be bearish based on the report as far as corn was concerned. For beans, no big changes were made with yield staying the same at 46.9, which disappointed the bulls and surprised this guy. With crush being lowered 15 million bushels, carry went up to 475 mb versus 460 a month ago. I have to think January could tell a different story, but those are the numbers for now. The US/Chinese soap opera continued with reports both countries agreed to full rollback of tariffs eventually which President Trump refuted later in the week. I’m not sure when this may end…but Secretary Perdue said late in the week the second round of MFP 2.0 2019 version should be on the way before the end of the year…while I don’t speak for all of us, I’d rather see trade straightened out with less ‘free money’. On Friday, outside markets were a mixed to negative influence with the Dollar index surging while crude was up a bit. December crude closed up 29 cents at $57.44. This was 4 cents off the highs and $1.68 off the lows of the day. Crude oil rallied $1.21 on the week.
CORN – The corn market had a rough week. It’s a good thing the report on Friday wasn’t bearish or it would have gotten even uglier. On Friday, Dec corn closed up 2 cents at $3.77 ¼. This was 6 ½ cents off the high and 4 ¾ off the low. On the week, the corn market lost 12 cents. While the report provided a boost to corn, we couldn’t hold the nice gains that were built right after the report. In all honesty, it depends on how you interpret the report on where a person might stand. While production is lower and could still be trimmed due to 40 million acres of corn still left in the field as of Monday, demand is struggling at the same time. With the USDA trimming exports 50 mb, I can go along with it…I can even see ethanol trimmed 25 mb. However, lowering feed and residual usage 25 million bushels is laughable in my humble opinion. Last year, our feed and residual usage was 5.618 bb, while their forecast for this year is 5.275…with 2% more livestock on feed. The USDA’s forecast for 2020/21 on the baseline projections…get this…is 5.775 billion bushels…or a half a billion more than this marketing year. This will need to work itself out at some point, but I simply disagree with their numbers. While I’m not wildly bullish corn, I’m of the opinion we have support for the time being.
DEMAND – Demand wasn’t all that great once again with poor exports and improved corn usage for ethanol. Weekly export sales were 488 thousand metric tons for this marketing year, around 60k less than a week ago. For next marketing year, no sales were posted, so overall sales were again less than a week ago. The USDA will be making further revisions lower if we can’t get some sales going. Corn usage for ethanol was up by around a million and a half bushels, coming in just under 102 million bushels, according to the Department of Energy’s EIA report. Corn usage for ethanol has gone up for 6 straight weeks…as a plant here and there keep coming back online as margins have improved. We need this trend to continue. Basis continues to be the star of the show, trying to provide the heavy lifting. At option the Dec, my area’s basis was three cents improved. In Decatur, basis narrowed by four cents, moving to 20 over the Dec! On the river in St. Louis, basis was quoted at 21 cents over the Dec, which is a penny better than last week and 33 better than just five weeks ago!
CASH CORN – Cash corn had a rough week as futures losses outweighed the gain on basis in most every area I am aware of. What many of you have found or will find if you go looking is originators want your corn. Please look around if you do business with more than one buyer as posted bids are being pushed every day, according to our network of clients. My farm’s plan is fairly simple. Fill bins of course…and don’t lock that basis in just yet for people like me who also have corn to deliver to the elevator. Those bushels I’m selling across the scale. While I have no issue with some bushels going on a basis contract, I’d rather get the cash in hand and buy calls to re-own the bushels. The main thing for me is I don’t want all my eggs in one basket. IF futures don’t rally, basis will improve to get these bushels bought. So depending on your individual situation, be mindful of this…and if you need help getting your plan in place, reach out to us.
2020 CORN – December 2020 corn didn’t have as bas of a week as the front months. On Friday, Dec corn settled at $4.01, up a penny and a half. This was a loss on the week of 4 ¾ cents. We moved to 20% sold this past Monday at $4.05 basis the Dec. As me and the guys I work with have worked through profitability analysis with our customers, I have found most of them can turn a good profit at this price level. It got me to thinking I should sell a little more corn given how the market has acted of late. It doesn’t mean I’m bearish…but simply that I feel like I should lock in some profitability. I’m still urging producers to start putting costs together with some projections on yield with acreages for 2020…and find out what break-even is looking like. Use the profitability calculator in the AgMarket.Net app to see how your profitability looks in the event you want to make a sale or two. If you need help with a marketing plan for 2020, let us know and we can get you set up. https://www.AgMarket.App/app/
What To Watch For –
On 2019 corn, my farm is 80% sold @ $4.20 basis Dec9 after selling corn across the scale. New ’19 target***must consider local basis.
For 2020 CZ, We went to 20% sold at $4.06. Next target still $4.17. –
BEANS – The bean market had a quiet week overall…and would have settled close to unchanged had it not been for Friday’s poor performance. To close the week, November beans settled 5 ½ cents lower at $9.19 ½. This was 6 ¾ cents off the high and 3 ¾ off the low. Nov beans lost 4 ¾ cents on the week. The bean market seems to have run out of steam. It clearly has been a market ‘needing’ to feed the bull of late. While weather isn’t optimal for the beans still in the field in the US, the lack of a trade deal with China seems to have everything else ‘Trumped.’ I believe we’ll see this Phase I deal completed, but how it comes together remains to be seen. With the political issues our President Trump is having, it’s making it harder to negotiate from what I can tell. There is no doubt the Chinese need this deal…as does the US ag sector. Let’s hope we get it signed soon. The report wasn’t a terrible one but certainly not viewed as bullish. I know some beans in the US have been a pleasant surprise but also realize many have not. I figured they’d shave a bushel or so off of yield…and with over half of the beans harvested when they put the report together, I’d have to think they won’t adjust it a great deal more. I believe they’re too high on yield though. My feelings on beans aren’t as bullish as they’ve been the last couple of months…but I’m not moving forward on any sales just yet. I’d like to see all of this crop harvested and maybe the January report while holding ownership of at least some of my beans.
DEMAND – Soybean export sales were well above last week’s number. With net sales of 1.81 million mt for old crop, we essentially doubled sales from the previous week. For new crop, no sales were recorded so overall levels were over 900k more than sales from a week ago. For basis, improvement was again noted in most areas. Local bids for me are 28 under the Jan, which was 9 cents better than a week ago. Decatur’s basis for cash beans moved to option the Jan, which is another dime improvement on the week when factoring in the move to vs the Jan…Decatur is 36 cents better than a month ago on basis. On the river, basis was quoted at 18 over the Jan, which narrowed by 6 cents…and 56 over the last six weeks!
CASH BEANS – Cash bean bids were steady to better on the week as basis was doing all the work. While bean basis was atrocious early this fall we were surmising it was smart to put beans in storage…even commercial storage. Many of you asked if I was ok when you saw that…? But I felt strongly the carry in the market was asking us to do so. The beans I didn’t have sold going into harvest were all put into storage…and the improvement in basis has more than paid for my storage out to next spring. So…now what do we do as this bean market looks like its plateaued? I think selling beans is more acceptable now than it was before. If I have them in the elevator, be sure to check the bids as the big carry will likely make it better to sell out into January or beyond. Let me know if we can help you sort through all of this. When it comes right down to it, profitability is the name of the game…and analyzing that is something we really enjoy helping producers on.
2020 BEANS – We had a similar week for November 2020 beans. On Friday, Nov ‘20 beans settled at $9.67 ¼, down a nickel. Nov20 beans lost 4 ¾ cents this past week. We remain 15% hedged…and willing to sell another 10% if we get to $9.83. Keep your offers in if you are like me and want to sell a few beans. While this report didn’t help with my $10 bean idea, I still feel like we have a shot at it with any bad weather out of South America. Get a plan in place for 2020…you may be surprised at the price levels you can turn a profit.
As always, be sure to figure break-evens when deciding whether you want to make sales. For figuring your break-evens, I recommend using either the Profitability Calculator on the AgMarket.Net Profitability App https://www.AgMarket.App/app/ to help you get a handle on your budgets and to set your marketing plan for 2019 or 2020. We’d be glad to help, so be sure to reach out.
What To Watch For –
We are 60% sold/hedged (basis APH) at a board-based average price of $9.46SX for 2019.
For 2020, we got my first 15% sale on at $9.60 SX20
**For the strategies I talk about on here, please remember these are the tools I use for my farm. These are not recommendations but merely a way for the reader to see how I approach marketing for my operation. There are tons of good tools out there. For more information on markets, strategies and ways to set up a solid marketing plan, visit our website at https://www.agmarket.net
I hope you have a great week. Please let us know if we can help you in any way.
Matt
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
Bill Biedermann
AgMarket.Net
815-893-7443 o
815-404-1917 c
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