Last week I started by commenting how interesting a time this is. This past week has been one of the more bizarre weeks of our lives. With much of the US supposed to be quarantine and confined to their homes, the ag community isn’t quite the same. If you have livestock like we do, not much has changed with that routine. Most of us are trying to get equipment ready to farm as well. If it were dry enough, there’d be plenty of tractors rolling around here as most like to plant around the first of April. It appears Ag will have one of the exemptions on going to work…thank goodness. I can’t imagine someone, even the government, telling us farmers we can’t go to the field when conditions are right. While the weather hasn’t cooperated, we’re getting to where we can roll when it’s time to go. With 2 ½ inches of rain this past week and more chances this next week. I sure hope this year’s weather treats us better than last year did. Yes, Ag will have a little different take on this whole situation. I’m sure we’re like many of you in that we haven’t been out in public this past week…heck I haven’t even been going to my office much. As I’ve mentioned before, my main concern is not bringing this Coronavirus home as we’re not sure our daughter could fight it off as well as most people. We are taking every precaution we can to keep it out of this house. With that being said, we’ve got four kids getting cabin fever. Yes, we’ve had them outside and working/doing chores…but they are itching to see friends and get off the property. The tough part is they don’t really get it…they don’t understand what the big deal is. My personal opinion is this time in all of our lives is a great time to spend together. This is a great time to grow closer as a family as we aren’t so busy. How many times have we all said we’re too busy or tired of being tired. 😊 This is such a great opportunity to spend quality time with family and rest up a bit. I hope you get that opportunity. I also hope you get the opportunity to get in the field soon, for those of you who haven’t been able to yet. Take care and stay in touch. Please reach out if you need an ear as well…I know this is a stressful time and I’d be glad to chat any time. firstname.lastname@example.org
There is certainly plenty to talk about this week when it comes to markets. Shockingly, it’s not all bad. With corn, we took a hit this week for sure as the first three days of the week were pretty much a bloodbath. While corn and beans both rallied on Thursday and Friday wasn’t too bad, corn still lost ground on the week. The bean market on the other hand, was able to rally, taking advantage of a unique opportunity. With South American issues with CV causing issues as soybean meal ports and plants, demand appears to potentially be shifting to the US. Additionally, the fiasco in the energy markets is likely idling many ethanol plants in the near future, so many look for meal to replace DDGs in some rations moving forward. As we’ll talk about this weekend, a ton was going on…and plenty with regards to outside market influences. The DOW again plummeted on the week, seeing wild volatility as the market continues to take the direction overall of selling off. The June DOW settled down almost 1,000 points on Friday at 18,883. The DOW lost over 4,000 points on the week as investors try and guess where the low might be…and take almost all of the gains away since President Trump took office. The Dollar surged this week as it was viewed as a safe-haven for people to invest in…we settled over 103 on the index, up sharply from last week’s close at 98.7. Energy markets were beat up big-time. On Friday, May crude oil closed down $2.27 at $23.64. This was $4.85 off the highs and $1.25 off the lows of the day. Crude lost major ground again on the week but settled well off the $20 level it was probing mid-week. We’re less than half the price we saw just three weeks ago…rough go on the energy markets.
CORN – The corn market took body blows the first three days of the week, tried to regroup on Thursday but settled with sharp weekly losses overall. On Friday, May corn settled at $3.43 ¾, down a penny and three-quarters on the week. This was 13 cents off the high and a penny and a half off the low. On the week, the corn market lost 21 ½ cents…and 32 cents in the past two weeks. Corn had a sharp rally going on Thursday, up about 20 cents at one time before giving back half of its gains. Friday saw double-digit gains as well, but buyers were likely hesitant to push too hard going into a weekend with so much uncertainty. The energy markets have done corn no favor with ethanol prices dipping to just below $1…down 22 cents this past week alone. Margins have plummeted, putting plants in a situation where many are going idle, likely performing summer maintenance now while this mess hopefully works into a better situation. On a positive note, the Chinese bought US corn…finally. However, we need a steady dose of good information to counter this ethanol situation….as ethanol has been gobbling up over 5 ½ billion bushels of the corn we’re producing. I’m a bit concerned about corn prices in 2020, but at the same time, could see cheap prices curing cheap prices. Either way, 2020 is a year we need a plan to lock in base hits as what we’re seeing now is too much red ink. Do the numbers so you appreciate better numbers when they show up…and let’s have a plan in place.
DEMAND – Demand was off but reasonable this past week with a decrease for both exports and in corn usage for ethanol. Weekly export sales were 905k metric metric tons for this marketing year or a half-billion tons less than the total from a week ago. For next marketing year, 56k tons in sales were posted. Overall sales were down substantially but still respectable. Corn usage for ethanol was down on the week…with just under 104 million bushels of corn usage, we were down by a million bushels, according to the Department of Energy’s EIA report. Basis was widening as elevator systems continue to adjust to how both energy markets and CV might affect them. My area saw basis widen eight cents, moving to 12 under the May. In Decatur, basis was quoted at a nickel over the May, which is a dime wider than a week ago. On the river in St. Louis, basis was a nickel wider at 22 over the May.
CASH CORN – Cash corn values dropped substantially on the week due to the loss in both futures and most widening their basis. The cash corn market is a different game at this point. It’s certainly not all bad…but when ethanol, which we depend on heavily for corn demand, is suddenly quite unprofitable on the spot market, it changes everything. While I expect energy prices to rebound at some point, it’s tough to know when or get too excited when people aren’t driving nearly as much due to CV. Ethanol plants aren’t posting bids in many areas and only want contracted corn in many situations as well. I would expect many will go idle with negative margins but remain hopeful we see them back online as we get past the uncertain times we’re in. On the bright side, I expect livestock to consume corn in many rations where DDGs get cut out. We can’t forget how low test-weight corn feeds as well. I expect disappearance to surprise the market on quarterly stocks due to this test-weight issue…but we may not see near the usage we once hoped for as ethanol grind slows significantly. The only bushels I’d keep around would be good quality bushels that might see some demand later on…but moving out of corn and for those expecting a rally, replacing on paper might be the best way to go. It looks like tough sailing for corn with the ethanol industry on the ropes. Let’s have a plan in place for exiting this corn though keeping in mind we saw prices a solid ten cents higher than we closed the week. Rallies aren’t impossible…they just aren’t a given or likely to last as long as we’d like.
2020 CORN – December 2020 corn had a tough week as well. With a close on Friday at $3.63 ¼, we were unchanged on the day. On the week, we were down 9 ¾ cents. With a spring price at $3.88, we’re now 25 cents from the average just less than a month ago. I find it easier to talk new-crop as we must remember we’re quite early in the marketing year yet. I would like to have more than 30% hedged as many of you would, but this year has been a tough one to navigate for sure. For those who buy courage-calls as a part of their marketing plan, it’s generally good to do so in depressed markets. While volatility has these values in calls pumped up a bit, there’s no doubt this is a depressed market. I see no reason to beat ourselves up right now…few have planted a kernel of corn, so I’ll give this market a little time before pushing any sales at levels lower than I had targeted. As always, it’s important to figure your costs and get an idea of what you need out of your marketing plan in 2020. 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. Wait for new ’19 target
For 2020 CZ, up to 30% sold at $4.05. Next target for me and my farm is $4.09.
BEANS – The bean market got off the mat and fought this past week to gains that few were able to post. At the close Friday, May beans were up 19 ¼ cents at $8.62 ½. This was 2 ¼ cents off the high and 17 off the low. On the week, beans were up 13 ¾ cents. This bean market was struggling along with corn to start the week but found solid footing on Thursday and followed through on Friday. While we had weekly losses coming into the trading session, Friday ensured gains on the week due to the big rally. I’ve said for a while beans were oversold, but it’s tough to swim up-current…and the bean market needed some good news to turn the tide. Giving support is this surging soybean meal market. With May closing at $325 and $11 higher than July, there’s obviously a ton of demand for meal right now. With thoughts meal could replace some DDGs in rations and Argentina having issues due to CV, meal could continue to show strength. I’ve talked about this many times before, but strong meal prices can lead beans to a rally…and that can help corn find its way as well. Hopefully this is the case moving forward.
DEMAND – Soybean export sales were solid this week, much improved from a week ago levels. With net sales of 632k tons for old crop, sales were over 300k tons higher than a week ago. For new crop, 70k tons were recorded so overall levels were over 375k tons higher on the week. With China buying US beans this week, the hope is there’s more to come. As far as basis is concerned, a bit of improvement was again noted. Local bids for me are 13 cents under the May, which is an improvement of two pennies. Decatur’s basis for cash beans narrowed a nickel, moving to 15 over the May. On the river, basis was quoted at 29 over the May, which is six cents better than last week’s basis.
CASH BEANS – Cash bean bids were solidly higher this past week. While the board rallied on the week, we saw basis also improve. This is mostly due to demand for cash being strong…which is a spillover from demand for soybean meal in the here and now. If a person has beans, selling increments in a rally makes good sense. I’m not sure I’d sit on my hands on all my bushels…as we’ve seen some dark days of late. We need to sell rallies if we’re going to get any benefit from them. With that being said, if you have beans, I know you likely don’t want to be too aggressive…but keep in mind your farm’s profit margins. Ultimately, that needs to be what helps you make the decision you make.
2020 BEANS – November 2020 beans didn’t rally but didn’t lose much ground this past week. On Friday, Nov ‘20 beans settled at $8.60 ¾, up 12 ¼ cents. Nov20 beans lost 3 ¾ cents on the week. New beans were certainly supported by the demand for cash beans and bean meal. With the spring insurance price at $9.17, we are now almost 60 cents under. While I expect beans to see support in here, keep in mind bean acreage in the US could grow if producers get spooked by the lack of profit margins for corn. I don’t want to sell down here…and still feel good about getting back to and over $9 at some point but having a plan for what we do with those prices is imperative. These markets are obviously moving fast with all of the craziness in the world. Have your plan put in action by placing your offers now. Selling in increments at profitable levels is a great strategy. If you can’t find black ink, be patient as it again is early in the year.
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.
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