Good Morning!
t’s deer season in my part of the world and many others. So, if you’re a hunter, good luck. I’ve never been much of a hunter as my dad was in the elevator business and we never hunted. To be honest, many hunters have been faced with a dilemma this weekend as the ground is finally getting fit to run anhydrous and maybe even do some tillage. With what looks like a clear forecast through Thanksgiving, it appears some will get the opportunity to get fall work done they didn’t think they’d get to just a few days ago. My son Beau gets home this weekend, so he’s hoping to run the ripper. I told him he may get lucky after all and get the chance to get over a few acres. When I was his age, I couldn’t get enough groundwork, and I’m sure glad he’s the same way now-as I am not as hopped up on it as I used to be. Having him home for 9 days is sure going to be nice. I know some of you are blessed with family coming home as well. Enjoy and stay in tough. mbennett@agmarket.net
The corn and bean markets went in different directions this past week. While the losses in corn weren’t drastic, bean gains were good, especially for this time of year. The reversal of fortunes the bean market has had since the November report have been substantial. Given good weather in South America and talks of big US bean acreage in ’22, it’s been quite an impressive move. Lending a hand has been strong soybean meal prices as well as an unwinding of long corn or wheat/short bean spreads that had been fashionable for the last several weeks. Additionally, outside markets were negative this past week. The US Dollar saw Dec close .486 higher on Friday at 96.028. We rallied .900 on the week & 1.711 in two weeks! The DOW retreated, settling at 35,549, down 262 on Friday-a loss of 464 on the week. December crude oil settled at $75.94, down $2.47 on Friday-a loss of $4.85 on the week. The administration talking about tapping the Strategic Petroleum Reserve, oil was retreating heading into the weekend.
CORN – The corn market had some ups and down this past week with the end result single-digit losses. On Friday, December corn settled down 2 ¼ cents at $5.70 ¾. This was 5 ¼ cents off the high and 2 ¾ off the low. Dec corn lost 6 ½ cents on the week. With the corn market, we’ve run out of bullish fodder for the time being. While it’s not necessarily a bearish situation, seeing crude take a hit wasn’t helping corn, even in the midst of strong ethanol margins and demand. Additionally, the bean market breaking out above resistance in many cases would be accompanied by a similar move from corn, but that wasn’t meant to be as traders weren’t ready to add to longs to that degree. While the corn market didn’t fare as well this past week, it doesn’t necessarily change my thoughts. Relative to soybeans, I see some opportunity. With the fall anhydrous run less than normal in many areas of the corn-belt and talks of $1/unit this spring, I’m not sure how easy we get to 90 million acres yet. There will be some serious jockeying this winter into spring and I just don’t see bean prices gaining much more on corn. As far as strategies go, the main thing is to have your rear-end covered just in case we see a black-swan event. Boycotting the Olympics, regardless of how one feels about it, likely causes major issues on the US export front, so I want to have risk managed and profit locked in just in case.
DEMAND – Demand this past week was mixed with lower exports but corn usage for ethanol was up. Export sales for this marketing year were 905k mt, which was down 100k tons from last week’s number. Sales of 140k tons were posted for next year’s crop, so overall sales were quite similar to a week ago levels. Corn usage for ethanol was up by 2 million bushels…according to the Department of Energy’s EIA report. We posted just under 108 million bushels of corn usage for the week. Posted basis levels were still improving in many areas. My local basis was two cents improved-with a posted bid of a dime under the Dec. In Decatur, basis was posted at 30 over the Dec-status-quo. On the river in St. Louis, basis was posted at 23 over the Dec, 15 cents improved on the week.
CASH CORN – With cash corn, we lost some ground on the board but basis is trying to bridge the gap. When we see basis improving this time of year, it’s definitely a good sign-especially right after producing a record crop. I’ve had several e-mails or calls on whether we should move forward with sales. In all honesty, it’s tough to argue with, considering some of the basis pushes we’ve seen. With many $6+ cash bids across the corn-belt, we’re looking at solid profit margins in most if not all situations. I see the chance for better prices ahead, but at the same time, the bird in hand looks awfully attractive to begin with. I haven’t sold any more out of the bin, but we’ll likely do so when $6 net is the case. IF you’re thinking like me, get an offer or two in. Selling incrementally at big profit margins is a wise way to sell this crop. Again, don’t ignore strong basis combined with a lack of carry-they’re trying to get your corn bought. As always, we should look at profit margins when putting these plans together. The AgMarket app is a great way to track and monitor your situation. I highly recommend using this tool. https://www.agmarket.app/app/
2022 CORN – December 2022 corn was moving higher as spreads were working in the favor of new-crop. CZ22 closed the week at $5.54 ¼, which was up 5 ¾ cents on the week. ’22 corn didn’t rally like ’22 beans, which is a bit of a surprise to me, but we certainly didn’t lose any ground. As I talk to producers, a common thought is we can’t make money with $1,300+ anhydrous, even at $5.50+ on the board. While that may be the case in some areas where production isn’t expected to be big, I’m sure not finding that to be the case. Please plug your numbers in before making any rash decisions as a person can certainly make great money with this current situation. Part of the problem we see is many see ’22 profit margins well below ’21 profit margins. Heck yes that’s the case…’21 profit margins were record for many as we saw low input prices, big yields and big prices. That’s not normal-what a great situation, but let’s see it for what it is and move on to ’22. Believe it or not, barring ’21 profit margins, this coming year could be the most profitable for many in years-so let’s do the math, make our decisions and have our marketing plan ready to support what we’re doing. As far as the ratio on fertilizer to corn is concerned, it takes several bushels. I’ve got it at 53 bushels of corn to pay for N, P & K. This is 18 bushels more than what we needed a year ago. As always, manage risk based on profit margins-while much has changed for this ’22 crop, there’s still plenty of profit to latch onto.
What To Watch For –
For 2020, 100% sold averaging $4.75 (not including re-ownership gains) ***must consider local basis.
For ’21, 60% of actual production, 70% of APH: 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
Bought Dec22 $5.50/4.50 p spread & sold 6.50 call for <20 cents
**lifted these positions**
BEANS – The bean market had a nice week with buyers active, pushing up over some resistance levels. To close the week, January beans settled at $12.63 ¼, down 2 cents. This was 14 cents off the high and 7 ¼ off the low. January beans rallied 19 cents on the week and 57 in two weeks. This bean market climbed over resistance this past week as post-report buying continued. While the bean situation isn’t necessarily wildly bullish, buyers were 
getting caught up as the fund long in beans hadn’t been near as impressive as the fund long for corn. South American weather continues to be benign with most calling for a big 1st crop in Brazil, and with that crop seeing harvest start in this calendar year, caution is warranted for anyone trying to get too bullish. At the same time, now that resistance has been broken through, there’s a chance for more follow-through buying and a strong likelihood this bean market has its low in place. As we all know, the bean market is violent in nature, so trying to outguess it isn’t for the faint of heart. With that being said, locking in bean income on old or new beans and owning some calls makes great sense. It’s how we’ve approached our marketing plan, and I’m sure happy with it so far. It’s nice to be talking about $12+ beans for sure as we approach these conversations-let’s just make sure we’re covered in the event this market falls apart.
DEMAND – Soybean export sales were solid and a bit above a week ago levels. Net sales of 1.383 million tons was almost 100k higher than last week’s levels. We saw a net cancellation of 7,800 tons for new-crop sales, so overall sales were about 70k higher on the week. Basis was mixed this past week. Local bids for me were posted at 26 cents under the Jan-status-quo in my area. Decatur’s basis for cash beans was a nickel over the Jan-a dime improved on the week. On the river, basis is 26 over the Jan, which was 8 cents improved.
CASH BEANS – Cash beans saw the board rally and basis improve in many areas as well. Typically, we don’t see basis improve along with a rally, but we’ll certainly take it. As the bean market has rallied sharply off of the pre-report lows, my instinct would tell me to sell some beans, but I don’t have any beans left. So, my focus is what to do with my re-ownership strategies. Given we busted through resistance, I am going to give this bean market some time to see how things play out. I took little risk in those strategies, so it makes sense to me to give it some time and see how much the funds want to push this bean market. IF we saw issues develop with the South American crop, there’s no doubt we’d see some buying in short order. If we don’t see that develop, I’d say a sideways to lower theme could unfold eventually. We’ll know a great deal more as we see how weather in the Southern Hemisphere unfolds. For those with beans in the bin, definitely shop them around and let your buyers know what you have and what price you’re looking for. With basis improving, set your price high-you can always come down, but going up is a bit of an issue.
2022 BEANS – November 2022 beans had a nice week as well, surging higher early in the week before cooling off. Nov22 settled the week at $12.50 ½, up a penny and three-quarters on Friday. We rallied 10 ¼ cents on the week. ’22 beans had the toughest time getting through $12.50 before this past week. Multiple attempts had been thwarted before finally seeing a close above this level. However, we saw the bean market cool off late in the week and we were back at this $12.50 level again. My thoughts on new beans are that it’s tough to not sell some. There’s been years we would have given our right arm to see $10 beans, let alone $12. I know, I know input costs have changed, but beans aren’t quite as beholden to those costs as corn is. Also, we have to remember the market could care less whether any of us make money. Therefore, when big-time profits are present, it’s not a bad idea to latch onto as much as possible when we have the opportunity.
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 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 2021 or 2022. We’d be glad to help, so be sure to reach out.
What To Watch For –
For 2021, we’re 100% protected through fall sales with calls in place to re-own.
For the 2022 crop we’re 50% hedged at $12.53. 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% ’21@$11.60 SX21, 10%@$12, 20%@$12.75, 10%@$14.35, 25%@$12.85 30% @$12.30
*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
*Bought dec SD $13 call back for a half-penny & sold March SD call for 15 cents
Bought July $12.60/14.60 c spread & sold $11.00 put. Also sold Mar SD 22 $13 call for 22 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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