Subject: Sunday Night Call and Matt Bennett’s Weekly Comments
Sunday night calls are steady to lower. Lower calls on good planting progress and another packing plant shutting down against increasing demand expected in grains.
Macro – Everyone will be watching US numbers in GA, TN, TX as go back to work flags are flying. Most in any large town continue safety protocol and distancing.
- Continued evaluation about the negative price move in crude and how that affects the macro function of the markets.
Micro –
- China started buying last week. Along with Mexico should result in good export sales this week. China’s corn and soy market hitting new highs and importing cheap US and S American product is simply a good trade.
- Expected to hear huge planting progress for both corn and beans
- N Korea Leaders status still unknow. More missile tests are expected in weeks to come.
- Russia officially shut down all new sales of old crop grain exports
- JBS closes a slaughter plant in WI but PA and CO reopen.
Bill Biedermann
MATT Bennett’s Weekly Comments
I hope all is well around your place. As I write on Saturday morning, I see plenty of you in the corn-belt getting a good amount of rain. We halted progress on Wednesday as we were forecasted to get a couple inches of rain possibly. So far, we’ve only had a half-inch total. While it appears this system could continue east and change that, it seems like my area has been missing all of the big rains. We actually need some rain. We took a bit of a risk when we parked the planter as the ground was working like a dream…but we also took a risk by working the remainder of our ground. If we had missed this bit of rain we already had, the way the wind was blowing, we wouldn’t have had any moisture at all. The corn I planted almost three weeks ago now is up or coming up. It’s a bit of a relief as it was indeed cold after we planted it. The beans we planted that week are also up. All in all, we’ve been quite fortunate here in that the cold temperatures didn’t bite us, we didn’t get a big, cold rain and we’re almost done for the spring. While 2020 has been a real jerk in most ways, planting conditions are far superior to 2019…this much is for certain. At home, my wife has been working the kids and myself getting projects done. To be honest, I’ve been excited to go to the field here lately as she’s working me harder at home! 😊 In all honesty, this quarantine deal has provided for opportunities to get a ton of stuff done we’re normally ‘too busy’ to do. We put a huge garden out this past week, planted some trees and shrubs and have cleaned out the garage. It certainly has been nice to get all this done. Last thing on a personal note is the stay-at-home policy here in Illinois was extended to June 1st. While we have a ton of cases around Chicago, particularly Cook county, downstate it’s been a different story. Yet, one of our ‘rules’ is that I can’t take more than one person on our boat. So, the 4 kids that live with us every day can’t go if we go to the lake. I find that bizarre…but it’s a minor inconvenience. My real concern in the areas that continue to be shut down is how many businesses will cease to exist when this is all over with. I want to be clear in that I am not saying the governments are making the wrong decisions…I don’t want that job. It’s a tough deal though, especially in rural areas…and it’s certainly causing challenges for businesses that are completely out of their control. Let’s hope we see this improve soon. Shoot me your questions and any progress reports. mbennett@agmarket.net
Th corn market lost ground on the week, but certainly rallied well off the lows we saw on Tuesday as the markets were in a freefall. The bean market was essentially unchanged, so, all in all, the week wasn’t terrible by any means. Factors moving the market are of course talk of demand adjustments due to Covid-19. With how the energy markets have been impacted, it’s sent shockwaves through the ag industry. South American weather continues less than ideal, but the main issue there is the Brazilian Real continuing to plummet, keeping them cheap on the world market. The US Dollar, on the other hand, closed the week wat 100.4, a rally of 60 points on the week. The DOW had another decent week, closing at 23,658, a rally of 500 points. Energy markets were wild on the week. With May going off the board, we saw a $50+ move before going off the board…and plenty of money changed hands during that time. June crude oil settled the week at $17.18, up 68 cents on the day. This was 79 cents off the highs and $1.64 off the lows of the day. June crude lost $7.96 on the week! I hope we see stability soon, but I’m not betting on it by any means.
CORN – The corn market had a wild week. May corn settled on Friday at $3.15 ¾, down 3 ½ cents. This was a nickel off the high and 2 ¾ off the low. On the week, May corn lost 6 ½ cents. July corn settled at $3.23 and is becoming the lead month as May prepares to go into expiration over the next couple of weeks. The corn market held long-term support on Tuesday as traders were nervous we were about to see a plummeting of prices. While there isn’t a great deal of bullish info to talk about, the market was plenty oversold already and didn’t have the firepower to make a move like that just yet. I’m not saying we will, but we’ve seen prices fall big-time as we go into expiration for Dec and March corn previously…and it wouldn’t surprise me if we saw that for May. I’m not super bearish…but not too bullish either, especially as we see ethanol plants continue to go off-line. There’s a ton of moving parts, so the hope is we’ll see some life at some point…but for now, focus is on demand loss and a potentially large crop in 2020.
DEMAND – Demand fell off a bit this past week. This past week exports were off on an overall basis as net cancellations for next marketing year showed up. Weekly export sales weren’t bad for old-crop at 726k metric metric tons for this marketing year… 180k off of last week though. For next marketing year, net cancellations of 55k tons in sales were posted. Overall sales were down quite a bit on the week but again more than what is needed to keep pace with the USDA goal. Corn usage for ethanol was down again but only by around a million bushels this time. With just 0ver 55.5 million bushels of corn usage, we are running behind the amount needed to reach USDAs goal by over 40 mb per week, according to the Department of Energy’s EIA report. This will require a further adjustment in the S & D balance sheet in upcoming reports. Basis improved a bit in some places, trying to get a few bushels pryed from producers hands. My area saw basis narrow a nickel, moving to 15 under the May. In Decatur, basis improved a nickel as well, moving to a nickel over the May. On the river in St. Louis, basis was a penny improved at 22 over the May.
CASH CORN – Cash corn values were mostly flat to down on the week. With basis attempting to help, it wasn’t enough as we lost a little more ground with futures than we gained on basis. I’m hearing in the western corn-belt basis has firmed more than in my part of the world as producers are tight-fisted with grain that has plummeted in value. It’s hard to outguess where prices may go…it’s tough to argue for a rally with ethanol plants shutting down…as we use a third or more of the year’s corn with ethanol alone. However, rumors China is interested in buying up to 20 million tons of corn got some excited this past week…that’s almost 800 million bushels! While this would help a ton, I’m not sure it would spur a big rally just yet as the demand lost due to ethanol is likely to be in excess of this amount…and we can’t forget when it comes to the Chinese situation, don’t celebrate until the boats are unloaded and the check clears. My main advice is to know a concrete plan…if you’re not going to sell just yet, have a cheap put to get you through the next month or two. If you’re selling, you might buy a cheap call or bull-call strategy in the event we whipsaw higher. While I can’t argue for a rally with current conditions, it’s when no one expects it sometimes that we see a big move.
2020 CORN – December 2020 corn also moved lower on the week. CZ20 closed on Friday at $3.36 ¾, we were down 2 cents on the day. On the week, Dec was down 6 ¾ cents. Dec is 52 cents below the spring price. 85% of the spring price is $3.30, which gives a person some support on their insured bushels. We are in a tough spot with Dec corn…IF you choose to sell corn now, you have to bank on a PLC payment and either a big yield or prices staying this low or lower, which would propagate a big crop insurance payout. However, if you sell down here and the market goes higher…if you have no risk managed of said move, it could be catastrophic. Unless you’re low-cost enough to be able to sell in here at a healthy profit, I’d be cautious in making sales without a good plan in place in the event we turn higher. IF we can see a 30-40 cent rally, I’m going to have some more corn sold for my farm as the sales we’ve already made would average nicely. IF we end up with a full stand, I’ll be ready to move on a sale IF we rally. As always, we have to be ready and know what prices work for us, so plug your numbers into the AgMarket app. Doing so will help you quantify your situation…and simplify your marketing plan. If you need help setting up your plan for 2020, it’s never too late to get ahold of us. https://www.agmarket.app/app/
What To Watch For –
On 2019 corn, my farm is 80% sold @ $4.30 basis May20. New ’19 target***wait for now.
For 2020 CZ, up to 30% sold at $4.05. Next target for me and my farm is $4.09.
BEANS – The bean market was quiet on the week in comparison to the corn market. At the close Friday, May beans were down 7 cents at $8.32 ¼, erasing gains we’d seen heading into the last day of the week. This close was 11 ½ cents off the high and 4 ¾ off the low. On the week, May beans were down a quarter of a penny. July beans settled the week at $8.39 ½, off a couple pennies on the week. This past week was a significant improvement from the way the market performed the previous week. While beans couldn’t find a bid anywhere, we finally saw some bottom-pickers come into the market, seeing value in an oversold situation. While we see ample world supplies of beans and the Brazlian Real continues to plummet, the US bean supply and demand balance sheet remains snug moving forward. IF we don’t see a big jump in acres, we’re going to need a big yield in 2020 to keep stocks to usage ratios from dropping too low. While I’m supportive to beans, the stark reality is if we can’t get the corn market to stabilize, it’s going to be tough to see a big bean rally…at least from my vantage point.
DEMAND – Soybean export sales were up a bit this past week. With net sales of 345k tons for old crop, sales were up exactly 100k tons over what we saw a week ago. For new crop, just 500 tons were recorded so overall levels were around 40k tons in excess on the week. As far as basis is concerned, not much movement was noted. Local bids for me are 15 under the May, which was a couple cents wider on the week. Decatur’s basis for cash beans didn’t change, staying at a dime over the May. On the river, basis was quoted at 30 over the May, which was two cents improved. The river was likely due to talks of Chinese purchases and potentially more to come.
CASH BEANS – Cash bean bids didn’t do much at all this past week. I don’t have much new info when it comes to old beans. I have been thinking for some time we’d see old beans gain on new beans. That doesn’t mean we rally, but my thought has been any Chinese purchases…let alone big ones…would spur an old-crop rally. Now, it again complicates things a big with the issues we see in the corn market, but at the same time, there are some reasons we could see strength. As always, your marketing plan for beans should be dependent only on your ability to lock in a profit. I only ask you to make sure you know what your plan is moving forward…and to have some offers in. IF we get a bean rally, it is likely to be volatile and fast as it generally is. Let us know if we can help you in any way.
2020 BEANS – November 2020 beans had a rough week in comparison to new-crop. On Friday, Nov ‘20 beans settled at $8.41 ½, down 6 ½ cents. Nov20 beans lost 9 ½ cents on the week. Nov beans are now 76 cents under the spring insurance price. To get to 85% of the spring price, however, we’d need to dip to $7.80! It’s nowhere near the level in comparison to spring price we see in the corn market. I still think we could see a rally in new beans eventually…but I also expect to see more than 83.5 million acres when the June 30th planted acreage report comes out. With profit margins on beans more palatable for many producers than corn, I’d assume there will be some switching in areas. I also hear of cotton coming to beans in the delta and southern states. My gut on new beans tells me to be patient. Overall, the name of the game is profit, so if you can lock some in, it makes sense to do so. I doubt many can, but if you can, that’s great. If you need help with your 2020 marketing plan, it’s not too late. Feel free to reach out.
As always, be sure to figure break-evens when deciding whether you want to make sales. For figuring your break-evens, I recommend using 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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