Grain calls are mixed to lower. SN is near 8.49. CN is near 3.18. WN is near 5.16. CRB Commodity Index bounced off contract lows as the US and Europe try to reopen the economy after 6-8 weeks of the homestay. June Crude also bounced from $10 to near $20. Resistance is near $25. Economies need to get back to pre-virus levels to push commodity prices higher. Last week. Soybean futures were supported by new China buying. Some feel this was for crushers and not increase reserves. Increase tension between the US and China could slow new sales. Corn futures continue to be on the defensive due to a drop in US corn demand and good US 2020 weather. 65- 70 pct of the US corn crop should be planted by May 10. Wheat trade is mixed. Wheat prices have dropped on improving Europe and Black Sea region weather. Talk of lower US 2020 HRW crop and higher SRW could support KC futures versus Chicago.
Jim McCormick
Matts Weekend comments
Good Morning!
I hope things are running smoothly for you and yours. I am writing on Saturday morning, and our game-plan for the day is to head to the lake. I know I talked a bit about this last week, but in Illinois until the end of May, we are ‘ordered’ to not have more than two people on our boat. The fine we’ve been told is $1,000! So, I could load the six of us in our enclosed car and go to the lake. However, once we get there, only two of us at a time are ‘allowed’ to ride in an open-air boat together. Is that the craziest nonsense you’ve ever heard? So, we have checked with the authorities, and it appears it’s unlikely we will get in trouble, so long as it’s only our family on the boat. But…if I get thrown in the county, I’m counting on some of you for bail money. 😊 On the weather front, we are drying out nicely, but have an 80% chance for showers and thunderstorms here Saturday night into Sunday morning. IF we don’t get any rain, we’ll likely get back into the field by Wednesday. I only have a couple of short days to finish up, but in all likelihood, given the rain we’ve had, I’ll be spotting some ponds in at the very least. Heck, I’m not sure I’ve got a good enough stand on our sweetcorn to leave it…but the rest of our corn is either up or should be up by Monday. Our beans came up as well, but are a bit water-logged, so some heat and a few dry days wouldn’t hurt a thing. I know many of you are already done, and I’m glad for you. I’ve had quite a few of you tell me your ground was working like a dream. It seems fairly consistent and reminds me of 2012. Maybe that’s what we need? Shoot us your questions and any progress reports if you’re willing and able.
The corn market lost ground again while beans were able to post a small rally. With a nice rally on Thursday, both markets healed up a bit but were unable to keep that excitement going to close the week. President Trump is mulling levying tariffs or, in essence, sending a bill to the Chinese for their role in the Covid-19 situation, which is undoubtedly weighing on especially the markets we care about most in the ag world. Given our hope all along would be Phase I purchases essentially providing support, those prospects appear to be on shaky ground for the time being. The weather in Brazil and Argentina continues to concern some, with dryness potentially making an impact if it continues. Talks of not being able to float bigger vessels up the river in Argentina is impacting how quickly they can ship grains out…which could certainly help US exports. As far as outside markets are concerned, the US Dollar backed off this past week, settling on Friday at 99.1, down 1.3 on the week. The DOW was strong for most of the week but was down 611 points on Friday, settling at 23,619. We closed just 39 points off of last week after trading up over 24,500 at one point. June crude oil almost doubled the low prices we saw early in the week, settling on Friday at $19.69, up 85 cents, which was 79 cents off the highs and $1.62 off the lows of the day. June crude rallied $2.51 on the week.
CORN – The corn market had another eventful week. With significant losses early in the week and two solid attempts to take May corn under long-term support at $3, the market held and closed with smaller losses. May corn settled unchanged on Friday at $3.11 ½, which was on the high and 3 ½ cents off the low. On the week, May corn lost 4 ¼ cents. July corn settled at $3.18 ½ and will be what everyone is bidding off of now that May is going into delivery. We are going to keep an eye on May corn, though, as my hunch is, we could see fireworks as we go into delivery. We’ve seen that with Dec and March corn and given the issues we currently see in the corn market, it would be understandable if we finally broke through that $3 support.
I hope we don’t, but it could be tough to hold, especially going into the May report next week, which is mostly expected to be quite bearish. I have hope for corn longer-term, but certainly, see the issues with demand lingering for some time. People not driving or flying for an extended time certainly creates issues for energy products, and in our case, products are grown for energy. Keeping a lid on prices, for the time being, could also be the rapid pace of planting. My expectation is the progress report on Monday will show over half of the corn crop in the ground. When we see such a rapid pace for corn planting, we typically don’t lose many acres. While I know profitability could play a significant role this year, I’m not too sure we’ll lose as many acres as once thought. The last thing we need is 95+ million acres…but I think we’ll end up getting it. A calculated plan must be in place here in 2020. I’d like to help if I can, but be sure to know your insurance situation and every USDA program there is. You might want to sign up for the Whip Plus program at FSA, which is based on last year’s production. I’m not saying you’ll get anything, but it’s worth finding out if you’re eligible. Let me know if I can help.
DEMAND – Demand wasn’t bad overall this past week. This past week exports were quite large for both old and new-crop. Weekly export sales were 1.356 million tons, which was over 600k tons more than a week ago. 340k tons were posted for this next marketing year, so overall sales were up by 900k tons! Let’s hope this continues, and we can at least add some demand to the balance sheet as we lose it in others like ethanol. Ethanol, corn usage was down once again this week by 2.5 million bushels. With right at 53 million bushels of corn usage, we continue to run pace needed to reach USDA’s goal by well over 40 MB per week, according to the Department of Energy’s EIA report. Basis didn’t move much as we move to bids versus the July. My area saw basis essentially status-quo with a bid 23 under the July. In Decatur, basis might have lost a penny on the move with a bid of four under the July. On the river in St. Louis, basis didn’t fluctuate, posting 15 over the July.
CASH CORN – Cash corn values were again down on the week. With the basis not doing much at all, producers are praying for some sort of rally to get rid of some of this corn. While my hope is we won’t take the corn market below $3, I’m holding my breath for a bit on that one. My best advice on corn is to keep some cheap protection if you’re going to hold on. If you want to sell, you might consider buying a call that will get you through pollination. I’m not looking for a big rally in corn, but I wasn’t expecting the rally we were blessed with last year either. Conditions aren’t near as ripe for that kind of rally this year, but at the same time, we’re oversold at this point with funds pushing on a 200k contract short position. The bottom line is we shouldn’t try to get cute with this market as it could be unforgiving. I’d be glad to help you with a plan, so be sure to reach out if you need help.
2020 CORN – December 2020 corn didn’t fluctuate much overall this past week. CZ20 closed on Friday at $3.36 ¾, down a half-penny on the day. On the week, Dec was unchanged. Dec is still 52 cents below the spring price. 85% of the spring price is $3.30, and 90% is $3.50. I wrote a piece for Farm Futures blog about ‘protecting’ your insurance claim with a limited risk hedge. If this market falls back much more, I’ll likely sell a put well below $3 and buy a call below where my insurance coverage would come into play. I’m at 90% this year, so buying a $3.40 call would make sense if I can get the strategy to cost me 10 cents or less. My goal will be to not spend over a nickel. A position like that would be marginable IF you take off and move lower, but a person who bought the insurance must realize they can use the insurance to manage a ton of risk in a situation like this. I can’t imagine picking 250+ bushel corn this fall and collect crop insurance, but being below $3 corn this October would make that possible. I can’t see it happening and want to manage the risk of a move higher without sticking my neck out too far. Otherwise, I’m not making sales at this point, but if you want more clarification on a strategy like this, please reach out. As always, we have to be ready and know what prices work for us, so plug your numbers into the profitability calculator or 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 the AgMarket.Net team. https://www.agmarket.app/app/
BEANS – The bean market had a nice week, bolstered by the big up move on Thursday. At the close Friday, May beans were down 3 cents at $8.47 ¼. This close was 3 ½ cents off the high and 4 ½ off the low. On the week, May beans were up 15 cents. July beans settled the week at $8.49 ½, up a dime. As mentioned before, Thursday was a great day in the bean market. With talks of potentially 8-10 cargoes of beans being sold to the Chinese and an oversold condition, buyers came to life. With gains approaching 20 cents, the hope was the fervor would continue to close the week. Selling off a bit on Monday verified some of my thoughts, which centered on profit-taking and evening up on the last day of the month Thursday. I continue to look for a little better bounce in the bean market. While I’m not bullish, there is no doubt that IF we saw, continued export business show up, we’d likely see a very strong bean market. The supply and demand balance sheet for beans is much more snug than for corn, so any export business we aren’t expecting would be a huge shot in the arm. Unfortunately, crush margins have backed off significantly, so the need for that export business to give us some upward movement is quite important. Overall, I expect the May 12th S & D report to be neutral beans. Price movement over the next few weeks will no doubt be centered on planting progress and weather. IF weather continues to be good for most, it likely limits bean acreage gains, which certainly could keep hopes for a rally alive.
DEMAND – Soybean export sales were huge this past week. With net sales of 1.08 million tons for old crop, sales were up almost 700k tons over what we saw a week ago. For new crop, 105k tons were recorded so overall levels were around 800k tons in excess of last week. As far as basis is concerned, not much change was noted on the move to bids vs the July. Local bids for me are 19 under the July, which was a couple cents wider. Decatur’s basis for cash beans weakened a nickel or so, moving to three over the July. On the river, the basis was quoted at 28 over July, which was essentially status-quo.
CASH BEANS – Cash bean bids didn’t improve a ton this past week as basis weakened a bit in some areas. With a gain on the week of a dime on the July contract, most holders of cash beans likely aren’t impressed. If a person has held on this long, I’d probably give it some time to see if we see continued Chinese business and a pop in the market. Seasonally, we typically see some strength for corn and beans in May and June. Yes, this year is a different type of year, but the likelihood we see markets perform better than they have over the last several weeks certainly has a reasonable chance. Again, I’d be patient for the time being, but it’s always in the producer’s best interests to market based on their individual operation. Make sure you know what you can live with, make a plan, and stick to it.
2020 BEANS – November 2020 beans had a solid week overall. On Friday, Nov ’20 beans settled at $8.55, down 2 ¾ cents. Nov20 beans rallied 14 ½ cents on the week. Nov beans are now 62 cents under the spring insurance price. Again, to compare to the corn situation…to get to 85% of the spring price, we’d need to dip to $7.80! We aren’t near low enough to employ the same type of risk-management on beans as we can with corn. I’m holding off on selling new beans as well. While I’m not super-bullish, I’m certainly supportive for now. I’d like to see the May report and how the USDA handles supply and demand for this upcoming crop. I think the carry-out number could be a little lower than many are assuming. As always, base sales on your farm’s situation and make sure your marketing plan is up-to-date and put in place. If you need help with your 2020 marketing plan, 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. I’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
There are tons of good tools out there. For more information on markets, strategies, and ways to set up a solid marketing plan, visit our 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
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