Sunday Night Calls
Calls are lower
Last week started weak and stabilized mid to late week. We believe the same pattern my occur again. The reason is that the market is still fearful of more ethanol demand destruction. Then traders realize how cheap markets are (sub 3.00 cash). No farmers are selling, feed demand is strong….and when we get rumors about China like mid last week, traders step in but very small and only to test the water. Traders are taking this week by week. Traders are also watching the stock market for stability and a go back to work announcements. If the economy starts to show confidence, we suspect we would see a very fast bottom to all cheap commodities. We are not saying you would see a big rally right away. But we would be a notch up and not be making new lows.
Bill Biedermann
Good Morning!
I hope you’ve had a great week! Our week was a good one for sure. Yes, we got back in the field and planted some corn and beans…mostly beans. Yes, the temperatures are less-than-ideal. However, the storm system that came through much of the corn-belt only produced three to four tenths of rain for us. In all honesty, we were hoping for a rain but not ‘too much’. It was exactly what we would have asked for in a cold spring given how dry we were starting to get. Given all of the corn we planted early on has sprouted and we planted mostly beans this week, I feel good about this rain not impacting us negatively. IF the weather verifies, we should have corn up by this time next week. We’re looking at temps in the mid-60s with overnight lows in the mid-40s with a couple of highs around 70 forecasted. On the farm front, things are good. This Covid-19 thing though…I’m glad I’m not calling the shots on this deal. However, Illinois announced no school for the rest of the year, and it doesn’t appear businesses are going to be open for a bit. I’m quite concerned about the mental health of those who have a livelihood at stake. In ag, we have plenty of them, especially given the destruction of demand and processing plants going off-line in the livestock industry. Fortunately, it appears a package focusing on ag is about to be put through worth $19 billion. It appears much of this is to shore up livestock, but I’m afraid it won’t be enough for everyone. There is give and take in everything…but shutting the country down is going to be especially hard on some sectors and livestock and ag overall appears to be one of those. This is a tough time for many Americans…and my hope is we get this country moving soon…especially if the experts are right and the worst of this deal is behind us. I hope you and your family are healthy and ready for this spring. Please keep me posted on progress. Also, please make sure and watch the videos Channel has put together of Larry Adams and I talking markets. They’ve been well-received so far. Also feel free to shoot us some questions. mbennett@agmarket.net
Th corn and bean markets were on the struggle bus this past week. Given the demand implications surrounding ag at the present time, buyers weren’t active at all. We saw beans slump back towards some lows for the move while corn had the lowest daily and weekly close we’ve seen in years. Given the economy essentially being shut down, I can’t accurately project when this turns around…heck none of us can at any point but especially not in this case. With some questions around the weather in South America and around spring weather in the US, I’d assume we could see support in here before long. However, big money won’t get to buying ags until they have a story to buy. Given our stocks situation in corn, that likely doesn’t happen for a bit. Outside markets were mixed as the Dollar closed the week at 99.8, showing a small rally on the week. The DOW had a good week as investors perked up on news news of positive treatment news for Covid-19. With a close at 23,159, we closed more than 500 points higher on the week. Energy markets struggled as the market again doesn’t see the moves from OPEC cutting production having near enough impact in the next few months. May crude oil settled the week at $18.12, down $1.75 on the day. This was $2.10 off the highs and 81 cents off the lows of the day. Crude lost over $5 on the week on the May contract. With June settling at $25.14 and carry in the market, it appears most expect the situation to improve over the next few months.
CORN – The corn market had a rough week, continuing to move lower with an absence of buyers. May corn settled on Friday at $3.22 ¼, up 2 ½ cents. This was 3 ¼ cents off the high and 2 ¾ off the low. On the week, May corn lost 9 ½ cents. I’ve been talking this week about how this corn complex is changing for this marketing year. We’re certainly losing demand for ethanol as we’ll look at in a minute…but we’re also feeding a ton of corn. I fully expect feed and residual usage for corn to be much greater than what has been forecasted. How we come in at the end of the day is anyone’s guess, but mine is that the 2.092 the USDA came up with for April will be too high. The May report is likely to be a rough one…and I think the trade will be expecting it. However, as we see adjustments to the demand structure, we must realize we have a ton of livestock eating low test-weight corn. With corn the cheapest feed-grain in the world and US corn the cheapest on the world market, the market appears to be doing its job. I don’t have all the answers…but getting demand going in some areas while others struggle is a good thing as we likely keep that demand going once people start driving again. Don’t get too down on this corn market…while I don’t see a huge rally anytime soon, there will be one at some point. Be ready when we get it.
DEMAND – Demand again isn’t all bad. However, this past week exports were off from the huge totals of the previous week while ethanol demand continues to plummet. Weekly export sales were solid at 907k metric metric tons for this marketing year…while this is half of last week’s totals, it’s over twice what we need to see to keep pace with the current USDA goal. For next marketing year, 63k tons in sales were posted. Overall sales were down substantially on the week but again solid for this time of year. If we can continue to outpace the USDA projections, we’ll keep chipping away at this carry growing out of control. Corn usage for ethanol was down sharply again on the week. With just under 56.5 million bushels of corn usage, we were down by around 11 million bushels, according to the Department of Energy’s EIA report. In three week’s we’re down 45 million bushels in usage! This isn’t good obviously…and is likely not remedied soon as no money for this industry was in this bailout package. We need people to get to drivng…and flying again. The latter is unlikely anytime soon. Basis doesn’t have much reason to improve unfortunately. My area saw basis status-quo, staying at 20 under the May. In Decatur, basis was quoted at option the May, which was also unchanged. On the river in St. Louis, basis was four cents wider at 21 over the May.
CASH CORN – Cash corn values weren’t improving by any means this past week. With the market continuing to slide, basis wasn’t helping at all. Given ethanol bids have been pulled or widened substantially, that’s filtered out all over the corn-belt. We can’t blame these guys for what they’re doing…and shouldn’t envy them whatsoever as they’re in a tough spot. As people ask me what the prospects are for a better basis, I ask if they have anyone feeding livestock in their area. If you do…or if you’re close to a river where export business would prop up bids, you could see some basis pops there. Otherwise, the incentive to bid to get your corn isn’t what it was. Call me crazy, but I don’t want to sell right now…I have very little old corn left but if yours is in the bin, you might catch a bid and hopefully a rally. We’re entering into a time of year when we are more likely to see a rally as May and June are two of the top three months for rallies historically. Now…it might be a dime or a quarter…not a dollar…so do the math and have offers in now at levels you can live with.
2020 CORN – December 2020 corn also moved lower on the week. With CZ20 closing on Friday at $3.43 ½, we were up 2 ½ cents on the day. On the week, we were down 7 ¼ cents. I still see Dec corn as I have for some time. I personally am not interested in selling here. While I’ve changed my targets in my head as I don’t see a rally of the magnitude I did before, I’m not sure we get those chances before the May report anyway. I see a flat at best markets into this next report…but a chance at some life IF we see planting delays and more importantly an actual acreage shift. If the June 30th report shows us backing off of corn acres…and I feel confident we’ll see disappearance impressive on the quarterly stocks report, we could get this market stable if not prone to a summer rally. Again, I’m not expecting a big move, but a move back to $3.75 or above would be a big move considering all things. As always, we have to be ready and know what prices work for us, so plug your numbers into 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 us. https://www.agmarket.app/app/
What To Watch For –
On 2019 corn, my farm is 80% sold @ $4.30 basis May20. Wait for further advice
For 2020 CZ, up to 30% sold at $4.05. Next target for me and my farm is $4.09.
BEANS – The bean market had a rough week, with losses piling up going into the weekend. At the close Friday, May beans were down 4 ¼ cents at $8.32 ½. This was 9 ¾ cents off the high and three-quarters of a penny off the low. On the week, May beans were down 31 cents. This past week the bean market couldn’t find a bid anywhere. While we didn’t see sharp losses for the most part, we just couldn’t get anything going. With the world situation on beans ample and the Chinese continuing to buy Brazilian beans, it’s made it tough for us to see a rally. IF the Chinese actually plan to honor their commitment, they’re going to need to start buying US beans in short order. The biggest issue is ours are more expensive due to currency. Now for the positive…the soybeans supply and demand balance sheet looks way better than the one for corn. Plugging in the 83.5 million acres with a trend-line yield likely gets us a small carry, contrary to what we’ll see for corn. The bottom line right now is it’s tough to see a bean rally with feed-grains struggling so much. It may take patience, but I could see some strength unfolding in this bean market at some point. As we’ve been saying, just know how you want to handle it if it happens.
DEMAND – Soybean export sales weren’t anything to brag about this past week. With net sales of 245k tons for old crop, sales were less than half of what we saw a week ago. For new crop, 60k tons were recorded so overall levels were around 400k tons lower on the week. As far as basis is concerned, little movement if any was noted. Local bids for me are 13 under the May, which was unchanged on the week. Decatur’s basis for cash beans didn’t change either, staying at a dime over the May. On the river, basis was quoted at 28 over the May, which was also status-quo.
CASH BEANS – Cash bean bids tanked this past week as the losses on the board were in no way mitigated by basis levels. With the export market not helping out and the soybean meal market cooling for the time being, no big incentive to boost bids was present. I know from feedback that few people have old beans. IF you do, make sure you know what you’re going to do if given the opportunity at a rally. With how fast this bean market moves, it would be wise to have offers in place now. While I’m not sure I’d want to sell beans right now, everyone is different. If you think these prices will work for what you have in mind, selling a few may make sense. As far as I’m concerned, I have to think there will be some better opportunities.
2020 BEANS – November 2020 beans had a bad week as well, taking it on the chin after some positive price action of late. On Thursday, Nov ‘20 beans settled at $8.51, down 3 ½ cents. Nov20 beans lost 24 ¾ cents on the week. Nov beans are now 66 cents under the spring insurance price. While this could be viewed as support on further deterioration, these prices by no means get many people excited about making a bunch of money. Now…will we see a shot at $10 beans this year? Right now, it doesn’t look likely, but I wouldn’t rule anything out. I still believe we have a shot at $9 and above as it doesn’t appear to me we have any weather premium in the market at all. As I’ve said previously though…I feel like bean acres could grow a fair bit, so if you do get a rally before the June 30th acreage report, I’d have offers in place. We have to have a plan for how we’re going to market this year, especially given how tight margins are. If you need help with your marketing plan, just get ahold of me at your convenience.
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. http://www.channel.com/Markets/Pages/Profitability-Calculator.aspx
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.
Matt
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
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