This week:
USDA report Friday. – should see beans supported
US- China trade progress – should see increased perception China wants a phase 1
S American weather- high expectations for good rains this week.
Matt Bennett’s weekly report:
Good Morning!
I had my least productive week of the harvest season this past week as my remaining fields are pretty much saturated. With a brief try at it on Monday and finding out we were a bit sloppier than expected, the rain and snow the rest of the week ensured we couldn’t do much. As I write on Saturday morning, I’ll tell you my plans are to try and harvest some over the weekend. It appears we have a solid stretch of good weather coming up, so we’d like to test the waters and see if we can knock out 40 or 50 acres. As most of you likely know, a big factor on who can run first in these situations has to do with what tillage was done this past fall. Since the two farms we have left to harvest haven’t been ripped in quite some time, I’d think we could stay on top and get through the fields, but we’ve had 4+ inches of rain in the last week…and saturated fields the first of November aren’t generally something that goes away too quickly. The moisture of the corn we’ll be in should be around 22% and given I don’t have bins I can put it in, it will head to town. While I’m sure there will finally be some lines at the elevator on late harvest, we won’t be able to run a grain cart and progress will I’m sure be slow enough for our trucks to keep up. What a year 2019 has been? For some of you guys, it’s been every bit or more challenging than it has for me. As you get back in the field, please be safe…it sure is easy to try and make up for lost time. When I get in a hurry, that’s when I usually tear something up or get myself hurt. Be safe and keep those updates headed my way if possible. mbennett@AgMarket.Net
Corn and beans both showed slight gains on the week after two weeks of losing ground. While trade was boring enough to put a guy to sleep this past week, I’ll take gains over losses any chance I can get. With the talk on the US/Chinese trade deal continuing to show progress, traders seemed less intent on selling corn and beans. While the planned signing of Phase I is somewhat unclear with Chile cancelling the APEC meeting, both the US and China appear to be ready to sign the deal. It appears the Chinese will be buying commodities they essentially knew they’d be buying anyway with some assurances those purchases would be from the US. Any chance of a Phase II agreement happening soon appears unlikely…but we’ve seen progress for sure. Weather was also supportive this past week as a decent chunk of the corn-belt didn’t get much done. It will be interesting to see the progress report on Monday evening, especially as traders consider we’re now in the month of November. On Friday, outside markets were a positive influence with the Dollar index weak and struggling to stay above support while crude was in rally mode. December crude closed up $2.05 at $56.23. This was a dime off the highs and $2.16 off the lows of the day. Even with Friday’s gains, crude lost 40 cents on the week.
CORN – The corn market had another boring week…but at least it was a boring week with positive gains. On Friday, Dec corn closed down three-quarters of a penny at $3.89 ¼. This was 2 ½ cents off the high and 3 off the low. On the week, the corn market rallied 2 ½ cents. While there isn’t a plethora of information to drive the corn market, one would still like to see more volatility than we’re seeing. With several attempts at lower moves this past week, we saw futures come back and close with minimal change in either direction. The work is being done with basis, which is certainly interesting. With basis levels staying strong and improving in most areas, those moves are coinciding with some firms calling for the US corn crop to grow on this November report. While nothing would surprise me…and I’ve been pleased to hear some big corn yields for some of you, yields are all over the board. I’m not sure we’ll know a final yield for some time…and with the crop coming out of the field so late, production and quality losses will be likely. This is precisely why some of these end-users are paying up for good corn. While I’m not bearish, I feel strongly we need to have a plan of attack for this market. I’d be glad to help you or direct you to one of the guys on my team if you need a hand getting your plan in place.
DEMAND – Demand was improved, but again nothing to write home about. Weekly export sales were 549 thousand metric tons for this marketing year, around 50k more than a week ago. For next marketing year, no sales were posted, so overall sales were less than a week ago. For reference sake, we’d need to be exporting more than 800k tons per week if we’re going to export what the USDA has forecasted. If they don’t pick up soon, we can expect a downward revision, which will only raise our carry-out. Corn usage for ethanol was up by around a half-million bushels, coming in just under 100.5 million bushels, according to the Department of Energy’s EIA report. Corn usage for ethanol is also running shy of what the USDA goal would necessitate. Now let’s get to something fun to talk about…basis. We again saw improvement in many areas, which is nice to see when futures markets are stagnant. At three under the Dec, my area’s basis was two cents improved. In Decatur, basis narrowed by six cents, moving to 16 over the Dec! On the river in St. Louis, basis was quoted at 20 cents over the Dec, which is twelve cents better than last week and 32 better than a month ago! Corn basis continues to try and buy bushels as the producer remains tight-fisted.
CASH CORN – Cash corn had a good week overall, especially for the thick of harvest. With small gains on the board, we saw solid gains in many areas on basis. I know many of you have written basis contracts or sold corn across the scale. I have sold across the scale on those bushels being delivered to the elevator as well. At this point, those of us hoping for a rally in futures will likely need to be patient. Barring a big surprise on the November USDA report, it’s tough to assume we’ll see a large-scale rally without some major improvement in demand. For my final push on bushels, I asked the elevator for a push on basis and he pushed 8 cents! Don’t be afraid to ask. I will keep ownership of those bushels with an at-the-money call…which month a person wants to buy is up to them, but I’d like to spread my risk out by owning some March, May and July calls. If you have filled your bins as we suggested, shop around when you start coring. This basis push thing is not to be ignored.
2020 CORN – December 2020 corn didn’t have the same week as the nearby with a small loss. On Friday, Dec corn settled at $4.05 ¾, unchanged on the day. This was a loss on the week of 2 cents. I am still sitting at 10% sold with offers to sell more corn if we rally to $4.17. A person should certainly have offers out there, especially in and around the USDA reports, which can be volatile as we all know. The main thing at this point is to start putting your costs together with some projections on yield with your acreages for 2020…and find out what your break-even is looking like. If you can print good profit at these price levels, I wouldn’t sit on my hands. Use the profitability calculator or the AgMarket.Net app to see how your profitability looks in the event you want to make a sale or two. https://www.agmarket.app/app/
What To Watch For – My final average for 2018 corn was $4.01 basis CN9 plus the gain from the calls I purchased to keep ownership (Net 31 cents). On 2019 corn, I’m 65% sold @ $4.28 basis Dec9. New ’19 target will be at $4.04. I’m currently pricing corn across the scale due to strong basis. 1st sale for 2020 CZ hit at $4.07 for 10%. Next target $4.17. – Strategies I’ve employed or considered. Straight hedge of Dec ’19 corn at $4.06 then $4.18, $4.39, $4.59, $4.72 & $3.90(65% total) Bought March ‘20 $3.80 call for .12 to re-own sold bushels Hedge of Dec20 at $4.07 (10%) Offer to sell another 10% at $4.17
BEANS – The bean market had a quiet week as well and also participated in a small rally. On Friday, November beans ensured a weekly gain, settling 7 ½ cents higher at $9.24 ¼. This was 2 ¼ cents off the high and 9 ¼ off the low. Nov beans rallied 4 cents on the week. The bean market continues to watch closely what is going on with trade news between Trump and Xi. IF we see Phase I signed and with solid figures to go on, it should be supportive to the bean market. Also supporting the market should be harvest weather. With US weather less than ideal for wrapping up bean harvest, field losses are a concern. How will this impact final yield? That’s the big question, and while the USDA is likely to take a stab at figuring it out in November, I’m not sure they’ll know near enough to get us there just yet. I see the January report as getting closer yet but likely not the final number. It will be next September before we know. Given the uncertainty, I believe the best avenue for producers is to market according to their break-even levels. There is plenty of good going on for the bean situation, but at the same time I believe we need to look at what we’ve already gained. There are no guarantees the gains we’ve seen will stick around forever.
DEMAND – Soybean export sales were well above last week’s poor number. With net sales of 944k mt for old crop, we essentially doubled sales from the previous week. For new crop, no sales were recorded so overall levels were around 475k more than sales from a week ago. For basis, improvement was again noted in most areas. Local bids for me are 37 under the Jan, which was three cents improved when factoring in the carry. Decatur’s basis for cash beans moved to option the Nov, which is a dime improvement on the week. On the river, basis was quoted at 12 over the Jan, which narrowed by 7 cents…and 50 over the last five weeks! It’s interesting that some processors are versus the Nov while some have moved to the Jan. Be sure to check your originator’s situation…with a 12-cent carry from Jan to Nov, it’s something to pay attention to.
CASH BEANS – Cash bean bids improved pretty much everywhere on the week. With a small gain on the board, the bump from basis in many areas helped make it a good week. I’ve been kinda bullish beans for a while. I know many of you have checked on me to make sure I was feeling ok. ? Heck it was actually the right thing to do though. Am I bullish right now? That’s a good question, but my general response to that is to take advantage of the rally we’ve already seen…and stay in the game on as many bushels as you can, keeping risk minimized. I think there’s a reasonable chance we see this marketing year’s carry-out adjusted to sub-400 mb on the November report, so that would certainly be supportive. I want to keep ownership of beans myself…but ignoring a cash price rally of over a dollar would be unwise. I’ve always said a rally isn’t a rally unless it’s rewarded. If you want help locking in some of this rally while keeping the upside open, let me know. I’d be glad to help.
2020 BEANS – We had a nice week for November 2020 beans as well with decent gains posted. On Friday, Nov ‘20 beans settled at $9.72, up 2 ¼ cents. Nov20 beans rallied a nickel this past week. I remain 15% hedged…and willing to sell another 10% if we get to $9.83. Keep your offers in if you are like me and want to sell a few beans. With that being said, I still feel like we’ll get a shot at $10 for the first time in a while…and I’ll be rewarding a move like that handsomely if it happens but feel like we should be selling some in the meantime.
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 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.
What To Watch For –
60% sold/hedged (basis APH) at a board-based average price of $9.46SX for 2019. Hedging and options strategy gains in 2019 have been substantial.
For 2020, I got my first 15% sale on at $9.60 SX20.
**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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