Good Morning!
What a week this past week has been! I know several of you wrote, texted or called me indicating you were running hard in the field. We were going as hard as could be. With rain forecasted for the weekend, we wanted to wrap up as many beans as possible. We made great progress, so I shouldn’t complain-but I have a story for you anyway. Our ‘furthest from home’ farm had 380 acres of beans this year and since we can generally cut 150 or so a day, I urged my dad to agree we’d go cut them on Wednesday to Friday with rain on Friday night/Saturday in the forecast. I was in place to definitely get that farm done but as I finished up Thursday night, a sensor went off on my machine for the clean grain elevator. Friday morning we found the auger that shoves the corn/beans into the tank broke! This was the first year in my career we ran a ‘new’ combine as we bought a demo machine this past fall. We got the combine back together on Friday and I started running at 2 with an outside chance to still finish. However, the elevator closed at 7, we had no bin to go to, and they were good enough I ran out of room. We went home Friday night with 20 acres left and it rained. 😊 Murphy’s law I suppose. But you know what, we got a ton done this week, no one got hurt and it’s still early October. Please be safe out there. I know once a person starts, they want to get done-but safety first always. Have a great week and keep me posted. mbennett@agmarket.net
The corn and bean markets were heading in different directions this past week. With the bean crop appearing to grow larger while corn results have been more mixed in nature, many feel it’s a tale of two different crops. The report on Thursday was bearish but more-so for beans than corn as the trade missed the stocks number by over 40%. While I expected corn stocks to be smaller than the September USDA carry-out number, at 1.236 given our usage is still extremely tight. We were at pipeline stocks coming into fall indeed, maybe even for beans. This week’s market action made quite a bit of sense. I’m not saying I liked it, but it wasn’t a surprise. Outside markets were mixed in contribution. The US Dollar saw Dec close .193 lower on Friday at 94.047. However, we rallied .712 on the week. The DOW was backing off, settling at 34,167, up 30 on Friday-a loss of 507 for the week. November crude oil had another good week, settling at $75.88, up 85 cents on Friday an $1.90 on the week.
CORN – The corn market saw some buying on the week. December corn settled up 4 ¾ cents on Friday at $5.41 ½. This was 3 ¾ cents off the high and 9 ½ off the low. Dec corn rallied 14 ¾ cents on the week. The most impressive thing I saw from the corn market in a long time happened this past week. With stocks as of September 1st set from the USDA at 1.236 bbu, the trade was caught off-guard. With average trade guesses under 1.2 bbu and my team’s estimate clear down at 998 mbu, the trade initially reacted negatively. However, after we got over the shock, corn clawed back to small losses on Thursday and were up on Friday. This is a strong indication, right here in the middle of harvest, that this corn market has good support. While I don’t expect a huge rally in the absence of Chinese buying, I’m not sure this market is over by any means. I haven’t made any big adjustments other than an incremental sale on ’22 crop which I’ll detail later. I still think storage pays on ’21 crop.
DEMAND – Demand this past week wasn’t too hot with stagnant exports and corn usage for ethanol off a bit. Export sales for this marketing year were 370k, which was down about 3k from last week’s poor number. No sales for next marketing year were posted. Corn usage for ethanol was off about a million bushels…according to the Department of Energy’s EIA report. We posted just under 93 million bushels of corn usage for the week. Posted basis levels were a function of how much harvest was going on for sure. My local basis was status-quo-with a posted bid of 28 under the Dec. In Decatur, basis was option the Dec or a dime improved. On the river in St. Louis, basis was posted at 25 under the Dec, 16 cents wider than a week ago.
CASH CORN – With cash corn, we’re starting to see some basis improvements already, which is another sign of how tight we were coming into harvest. With some end-users popping basis as producers go to cutting beans, it’s apparent they don’t have what they feel comfortable with just yet. Harvest isn’t generally a time we see basis improvements-not until we’re at least halfway finished. However, this isn’t a normal year. In some areas, huge yields are the norm while others are seriously disappointing. It will have a big impact on basis in both sets of areas. My thoughts haven’t changed. While I didn’t get my huge corn rally, we still rallied about 15 cents this past week. Basis also improved in some areas, so my thoughts of getting $5.50 cash if I’m going to get more sales on don’t seem dead just yet. Don’t forget you can lock in great prices in a whole host of ways. I’d be glad to chat with you about some of th options for doing so. Be sure to reach out if you want some help putting together your plan to market either this year’s or next year’s crop. As always, we should look at profit margins when putting these plans together. The AgMarket app or the profitability calculator from the Channel website are great ways to track and monitor your situation. I highly recommend using one of these tools. https://www.agmarket.app/app/
2022 CORN – December 2022 corn had a great week, outpacing the cash by a good margin. CZ22 closed the week at $5.31 ½, which was up 26 ¾ cents on the week. This ’22 corn situation is an interesting one. From my vantage point, it’s tough to get too bearish ’22 corn when fertilizer has doubled while we see the corn crop so-so. All the while, producers are talking about big bean yields. If we look at $100 cotton or $7.40 July wheat, everyone and their brother is begging for acres. It stands to reason the crop that costs the most to put out might struggle to get the acres it’s hoping for. I still want to monitor what we’re able to sell to get our fertilizer paid for, especially as people are locking in and applying their dry. Right now, I’m looking at it taking about 47 bushels of corn to pay for N, P & K. This is still 12 bushels more than what we needed a year ago. My fertilizer program will be different than last year as I went super heavy due to cheap dry a year ago. For ’22, be sure to run the math. We’re now up and over $5.30, which for many in the I states gives a person $5 corn out of the field. I wouldn’t ignore that too much, especially if you’re paying for inputs already. That’s why I sold another 5% on Friday at $5.30. While I think corn will be steady to stronger, I like selling in increments at profitable levels.
What To Watch For – For 2020, 100% sold averaging $4.75 (not including re-ownership gains) ***must consider local basis.
For ’21, 20% sold at $4.10, 10% at $4.39, $5, $6.35, $6.05 & $5.60 **of APH
For ’22, we sold 10% at $5.23 basis Dec22
– Strategies I’ve employed or considered.
Straight hedge Dec21@ $4.05, $4.14, $4.39, $5, $6.35, $6.05, $5.60 – 10% of APH on each sale
*Expectations for above-APH yield lead me to believe I’m(at most)60% on actual production
*Bought May SD $4.30 calls at 11 cents & sold for $1.20
Bought Dec $4.50/3.90 p spread & sold $5.70 call for 12 cents 10% of APH
*Bought Aug SD $5.75 call at 30 cents & sold at 9 cents
Straight hedge Dec22 – 5% @ $5.15 & 5% @ $5.30
**lifted these positions**
BEANS – The bean market didn’t see any buyers show up as the bears took control of the bean complex. To close the week, November beans settled at $12.46 ½, down 9 ½ cents. This was 15 ¾ cents off the high and 4 ½ off the low. November beans lost 38 ½ cents on the week. This bean market looked weak after the report came out. With the average trade guess on soybean stocks as of September 1st at 174 mbu, it was quite the shock to see the USDA at 256 mbu. This was a huge miss. However, as with corn, I’ve got to think our pipeline is a little bigger than the trade thinks. There’s no doubt with the additional storage we’ve seen built over the last few years, we have a bigger pipeline that we used to so stocks of 256 and stocks to use around 6% isn’t exactly burdensome. Ultimately, the bean market has a dilemma to deal with. Given this bean crop in the US appears to be growing, many are stepping in to sell this thing as supply is quite likely to grow. However, usage in the world is likely to remain strong, so demand should keep supplies from getting out of hand. The main thing that could support this bean complex very well may be the strength in corn and wheat. Maybe beans hang in there to an extent due to the strength in the other big two. Either way, I think we should all be locking in our worst-case scenarios on beans-there’s too much money there to ignore, in my humble opinion.
DEMAND – Soybean export sales were up a bit from a week ago. Net sales of 1.094 million tons was up from a week ago by 100k tons. We saw 8k of new-crop sales show up, so overall sales were again about 100k in excess of a week ago. Hopefully, bean sales will be stronger than this moving forward, but at least we’re seeing some decent sales. Basis was stable this past week. Local bids for me were posted at 35 cents under the Nov-status-quo on the week. Decatur’s basis for cash beans was a nickel under the Nov-a nickel improved. On the river, basis is 32 under the Nov, which widened 11 cents.
CASH BEANS – Cash beans are losing some ground of late. While we’ve talked for a long time about selling the beans you don’t have contracted across the scale, I also understand the hesitancy. It seems beans can rally a buck or more when we least expect it. However, if we’re snubbing our nose at $12.50 beans, I’m not sure that’s a wise decision. Heck, last year beans had already rallied quite a bit off of their August lows, but the price a year ago for me was around $2 lower than what I can currently spot them for across the scale. For my farm, I’ll be selling the ones I didn’t contract and keeping some ownership on paper. If you’re harvesting beans above your APH, it’s tough to look at that net income and walk away from it, at least from my vantage point. Even after a 38 cent drop in the bean market, we have Nov beans almost $12.50-that’s a luxury we’re enjoying here in 2021, but there’s no guarantee that will be the case forever. Again, if this US bean crop grows according to the USDA as I assume it will-expecting a rally for the next few weeks could make a guy disappointed.
2022 BEANS – November 2022 beans also lost some ground but not near as much as the nearby. Nov22 settled the week at $12.39 ¾, down 4 cents on Friday. We lost 14 ½ cents on the week. I talked last week about getting more aggressive on ’22 beans. I think it’s wise, even after another drop in prices. If we look at what profitability looks like at these prices as compared to the prices we received over the last 5 or 6 years, it’s tough to scoff at. My gut feeling is bean prices will find support somewhere in here, but IF they’d drop to $11 or under as many are calling for, we’d all be kicking ourselves for not being more aggressive. I’d plug your costs into the profitability calculator and see where you’re at. Profit margins at APH yields are still quite impressive at these levels. I also want to encourage you to run the numbers with the yields you’re seeing this year if they are indeed over APH. While I wouldn’t base my budgets on them, we have to admit the yields we’ve been enjoying these last few years have been quite impressive. With that being said, I know not everyone has been blessed with big yields. Some strategies or making sales isn’t much fun when you don’t feel confident about yields. There are tools we can use though-which can help the producer lock in a floor and still participate if the market rallies. Let me know if you would like some info or advice. I’d be glad to help.
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 Channel website or 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. I’d be glad to help, so be sure to reach out. http://www.channel.com/Markets/Pages/Profitability-Calculator.aspx
What To Watch For –For 2021, we’re 75% protected through fall sales with calls in place. We’re 50% hedged at $12.53 for the 2022 crop.
Strategies I’ve employed or considered.
*Bought Nov21 $9.80/8.80 put spread & sold $11 call for 14 cents 10% exited at 52-cent loss
*Bought Nov21 $10.40/9.40 put spread & sold $11.40 call for a nickel 10% Exited at 31-cent loss
*Bought Nov21 $11.60/10.20 p spread & sold $13 call for 18 cents 20% Exited at 18-cent loss
Sold 10% of ’21 at $11.60 SX21, 10% @ $12, 20% at $12.75, 10% at $14.35 & 25% @ $12.85
*Bought Aug SD $12 calls for 32 cents. Sold for $1.74
Sold 20% of ’22 at $12.60 basis SX22
Bought July $13.40/15.40 c spread & sold $11.40 put. Also sold Dec SD 22 $13 call for 6 cents
Hedged 30% of ’22 with buying a $12/10 put spread & selling a $14 call. Net cost ten cents.
**Lifted these positions**
**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://agmarket.net
I hope you have a great week. Please let me know if I can help you in any way.
Matt
815-665-0462 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
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