Sunday Night Calls

 

From ADMIS:

Crude oil prices may also be on the defensive after Russia/OPEC have delayed talks to lower production until
Thursday. Combination of lower demand as virus spreads and increase OPEC production could weigh on
prices. Saudi Arabia exchanged angry words over the weekend. POTUS is threatening oil import tariffs if non
US producers cannot agree to reductions.

Supply Demand report Thursday. Average trade guess for US 2019/20 corn carryout is 2,004 mil bu with a range of 1,792-2,150. USDA March
guess was 1,892. Key will be USDA estimate of ethanol use and exports.
Average trade guess for US 2019/20 soybean carryout is 430 mil bu with a range of 385-475. USDA March
guess was 425. Key will be USDA estimate of exports.
Average trade guess for US 2019/20 wheat carryout

 

Matt Bennett’s Weekly Report 040520

 

We are in the first part of April and so far, our spring in my area is much improved from 2019.  We planted some sweetcorn on Friday but we’re waiting to see what the weather does before we get too aggressive otherwise.  IF our forecast continues to show chances of rain, given our temps are still fairly cool, I’m assuming we’ll start by planting beans.  We can plant a ton of beans quickly as we run both planters.  On the other hand, if we get a window this next week…which should happen if we miss Monday’s rain, I may plant corn with one and beans with our smaller bean planter. One good side-affect of this CV fiasco we’ve all been dealing with is I have plenty of help.  Beau can’t go to college due to Illinois being on lockdown, so we have an extra hand. I may even teach my 15-year-old daughter to work some ground as it’s never been easy to do before with school and sports. My family hasn’t gone anywhere in three weeks, other than a couple of car rides and rides on our UTV. I never thought I’d see my kids so excited to simply go on a ride. Tif has kept us quarantined in order to hopefully not get exposed. I know there are likely those who feel we’re being extreme but when you see a kid go from healthy to lucky to be alive in a matter of a couple of days…due to a virus, it changes your perception. We’re taking every precaution. I hope this thing is over with soon, but it sure seems like it’s going to take a while yet. If you haven’t caught it yet, Channel posted a video of Larry Adams and I talking markets after the USDA report. We’re going to be doing this for a few weeks to hopefully connect with everyone as best we can. Please let me know if there’s any questions you’d like us to tackle…and let me know if you’re lucky enough to get started.  mbennett@agmarket.net

This past week is one we’d just as soon forget with regards to both corn and bean markets.  With the Planting Intentions and Quarterly Stocks Report out on Tuesday, the USDA threw some big corn acres at us while seeing both corn and bean stocks sharply lower from a year ago. The stocks situation would generally stabilize markets, but this past week, it was anything but the case.  Both posted sizable weekly losses, which is tough to take after seeing some stabilization last week.  The bean market, which looked poised for a breakout to the upside, saw intense selling come in towards the end of the week, mostly due to talks export markets for beans and bean meal were opening back up in South America.  One thing is for sure…we need to see the value of the Dollar back off a bit from the strength we’ve seen, especially in relation to the Brazilian Real.  The Dollar closed the week at 100.67, which was up over 2 points on the week.  The DOW backed off from the recovery rally we’d seen last week and settled on Friday at 20,957…down about 500 points for the week.  Energy markets however provided some spark as crude attempted on Thursday and Friday to bounce.  On Friday, May crude oil closed up $3.68 at $29.00. This was 13 cents off the highs and $5.48 off the lows of the day.  Crude rallied $7.16 on the week after several weeks of getting hammered.

CORN – The corn market had one good week but then returned to its old self. With buyers on the sidelines and farmer selling reported, May corn settled on Friday at $3.30 ¾, down 2 ¾ cents.  This was 7 ¾ cents off the high and 2 ¾ off the low.  On the week, May corn lost 15 ¼ cents.  This corn market looks weak as can be.  On both Thursday and Friday, corn tried to rally, but saw prices evaporate into the close. With crude rallying $9 then China buying corn being announced, you’d have thought corn could get something going.  However, the industry is quite spooked by the demand destruction we’ve seen with a shutdown of much of the US.  With people not traveling and eating out, the entire system has been thrown out of whack. While it’s easy to be bearish when the market is getting beat up, I struggle to see a rally in the short run. Given the April and May USDA reports are likely to be bearish due to demand adjustments and the likelihood we see planters roll in April, the trade is going to assume corn acres get close to this 97 million whopper of a number we saw this past week. The problem, given amply stocks currently, is plugging that acreage number into a Supply and Demand balance sheet at trend-line yields. It’s early…so don’t lose hope, but I’m not super friendly in the short-term situation unless we can see crude continue to rally and China continue to buy…and Brazil have some weather issues. Over the long run, anything is possible. If our exports are robust due to low prices and US producers back off of acreage due to lack of profit margins, we could see a rally later on…so don’t lose sight of how early in the marketing year we are.

DEMAND – Demand overall is still fading even with exports remaining fairly strong.  Weekly export sales were 1.07 million metric metric tons for this marketing year or over 700k tons lower than a week ago.   For next marketing year, just 20k tons in sales were posted.  Overall sales were down by almost 800k tons from the previous week…but these totals are still solid.  Corn usage for ethanol was down sharply on the week…with just under 84 million bushels of corn usage, we were down by almost 17 million bushels, according to the Department of Energy’s EIA report. While we hope this situation stabilizes, it’s going to take quite a rally in crude to see that happen.  Basis isn’t helping the cause as elevator systems aren’t near as excited to buy corn as they were just a few weeks ago. My area saw basis status-quo, staying at 18 under the May.  In Decatur, basis was quoted at a nickel under the May, which didn’t change on the week. On the river in St. Louis, basis was four cents improved at 26 over the May.

CASH CORN – Cash corn values dropped everywhere once again on the week.  With the big drop on the board, many times at this point in the marketing year we see basis help a bit as end-users want to see corn continue to move.  Right now, it’s tough going for the cash holder of corn. Given the quality of the corn crop, I have a hard time seeing many able to hold onto corn into summer. With how things look, it would take quite a bit of patience to see that strategy pay off…but as I said earlier, anything is possible. My gut tells me corn will get fed much heavier than anyone thinks as it replaces DDGs in rations and test-weight affects how much needs to be fed. This will offset some of the loss in demand from ethanol grind. I remain hopeful the Chinese continue to buy corn as they’ve now made two purchases…IF they’d buy old corn from us, this balance sheet for old crop may surprise some folks later on. Right now, the assumptions we have make carry levels looks burdensome. I’d bought a put and sold a call this past week like I mentioned…it may still be a smart option if someone has a ton of old crop. Either way, have a plan for your strategy as there’s still plenty of potential for corn to move lower.

2020 CORN – December 2020 corn also had a rough week.  With a close on Friday at $3.50 ¾, CZ20 was up a penny on the day.  On the week, we were down 12 ½ cents. With a spring price at $3.88, we’re now over 37 cents below the insurance average. For those who ‘bought up’ their insurance to 90%, it may interest you that we’re at 90% of the spring price.  IF we dip substantially, which is certainly possible, I’d consider buying some corn as a person is certainly insulated once the market goes safely below the level of insurance they bought. I could see Dec corn moving close to $3 IF we plant anywhere close to 97 million acres. While I hope it doesn’t, it’s tough to argue against that possibility.  As a producer, I see no reason to make sales now…it’s early. We may have to store a ton of this 2020 crop and that’s ok. It’s a long marketing year.  Regardless, we have to know what our situation is…so as always, plug your numbers into the AgMarket.App…it will give you assurance of where you are, which certainly helps with marketing decisions. If you need help with a marketing plan for 2020, don’t be afraid to reach out.  https://www.agmarket.app/app/

What To Watch For –

On 2019 corn, my farm is 80% sold @ $4.30 basis March20.

For 2020 CZ, up to 30% sold at $4.05.  Next target for me and my farm is $4.09.

 

BEANS – The bean market ended the run we’ve seen of late and struggled this past week.  At the close Friday, May beans were down 4 ½ cents at $8.54 ¼. This was 10 ¼ cents off the high and 3 ¾ off the low.  On the week, May beans were down 27 ¼ cents. This bean market had benefited from South American issues getting beans and bean meal offloaded, and while all issues haven’t been worked out, we found out this past week the Brazilians had a record month of bean shipments!  Given the currency situation, it’s making US beans tough to sell. With Argentina getting beans harvested, they’re likely to be putting bean meal on the world export market more regularly IF they can keep their workers working. Given coronavirus, it’s certainly thrown a monkey wrench into the system. Given the 83.5 million acres of beans projected, my gut is that number is set to grow due to the issues with corn profitability…so we’re in need of some good news and soon. We need China to buy US beans…and honor their commitment. However, I’m not going to hold my breath.

DEMAND – Soybean export sales were solid this week, again improved from a week ago levels.  With net sales of 958k tons for old crop, sales were over 50k tons higher than a week ago.  For new crop, 114k tons were recorded so overall levels were around 260k tons higher on the week. As far as basis is concerned, not much help was noted as basis was stagnant in most areas. Local bids for me are a dime under the May, which was status-quo on the week. Decatur’s basis for cash beans didn’t change as well, staying at a dime over the May.  On the river, basis was quoted at 28 over the May, which is a penny improved on the week.

CASH BEANS – Cash bean bids plummeted with the drop in board prices. With basis providing no help, cash beans were trending lower. Similar to holders of cash corn, cash bean holders are in a tough spot. While I could see some areas seeing a push here and there with stout bean crush numbers of late, it may be tough to see any big rally if China doesn’t step in and buy a bunch of beans.  Our exports have been solid the last couple of weeks, but there’s no doubt we need to see quite a bit more where that came from. Cash bean holders need to know their exit strategy. If we got a run to $9 May, there’s no doubt in my mind that’s a solid sale in this timeframe. If a person wants to hold on longer, they could hope for a summer rally, but again, that will be dependent on export demand. Given China gobbles up most of the beans and bean meal, we’re obviously counting on them to honor their Phase I commitments…and remain hopeful enough of them are old crop to help our balance sheets for this year.

2020 BEANS – November 2020 beans, just like everything else, struggled this past week.  On Friday, Nov ‘20 beans settled at $8.61 ½, down a penny and a half. Nov20 beans lost 15 ¼ cents on the week. Nov beans are 56 cents under the spring insurance price, which is tough to take this early in the year. While bean profit margins are no ‘home-run’, a person has to think about the decision on what to plant. Given huge bean yields in the US the last few years, many producers know they can raise great beans and do so without putting nearly as much money into putting them out. I do expect bean acreage to be larger than the 83.5 ma the USDA put out…but also still see a good shot we see $9 Nov beans again. Make sure you know what you’re going to do if we are indeed blessed with that rally.  My best advice again is to have your offers in ahead of time. If you need help with your marketing plan, just get ahold of me at your convenience.

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 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 –

I am 70% sold/hedged (basis APH) at a board-based average price of $9.64SH for 2019.  I’ll consider selling more old beans with a rally to $9.00 May.

For 2020, I’m up to 25% sold at $9.63 average basis SX20.  I’d be willing to sell more on a rally to $9.40.

**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 my website at https://www.agmarket.net

I hope you have a great week.  Please let me know if I can help you in any way.

Matt

217-273-1133 – Work

@chief321 – Twitter

mbennett@AgMarket.Net – E-mail

 

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