Sunday night markets area called weaker as the spread of the COVID19 continues to put pressure on the stock market futures as well as the energy complex. Present Trump extended his social distancing guidelines to April 30th as the novel coronavirus continues its spread throughout the country. Gold is finding strength on safe-haven buying. The USDA will release the 2020 acreage and March 1 grain stocks report Tuesday. Corn futures are expected to continue to be on the defensive due to the drop in demand for US ethanol. Soybean futures have been supported by concerns about South America export logistics due to the virus. Support has also been founded on concern about the drop in US DDG supply helping domestic soymeal demand. Wheat continues to find support on increasing demand for flour as people continue to eat at home due to the social distancing.
Here we are in the most bizarre time in many of our lives. With many people homebound and some still able to go to work, normal life the last couple of weeks hasn’t been so normal. Life around our place has been much different as well. While our county hasn’t even had one confirmed case, we’re still be cautious in the event it would spread in our rural area. While Tif is a stay-at-home mom, she does all the running typically. Her car hasn’t moved but once in two weeks…that’s never happened since we’ve been married. We still have only been to the store once in the last two weeks as we were pretty much ready for this…and we’re taking this opportunity to clean the freezers out. Speaking of that, having 6 people eating three meals a day at home…mercy, that’s a lot of food. On my front, I’ve been going to the office when I absolutely have to have some piece and quiet. Recording webinars and a couple of the radio programs I do have necessitated me heading to town. We’ve also been trying to get equipment ready as there’s some indication we could dry out after this weekend’s storm system goes through. With our ‘shop’ being the same building as my office, it works out pretty good for me, but the interesting thing is how sheepish we’ve all become towards seeing others. I kinda want to keep my distance just in case…it’s really bizarre, but hopefully this will all be a distant memory before too long. I have a feeling it’s going to change quite a bit about some habits we all have as well as some of the ways we do life moving forward. Either way, I’m ready for 2020 to focus on something else…something positive. Keep me posted on fieldwork if you’re lucky enough to roll…I appreciate any feedback. email@example.com
There is once again plenty to talk about with regards to our markets. With both corn and beans gaining on the week, the market still had a dead feeling to it. The excitement we’d seen the previous week in the bean market has subsided for now and corn simply is struggling to put any sort of rally together at all. With the implications from CV and how it is destroying energy demand along with the OPEC issues has some money hesitant to be placed into anything. While commodities have typically been a safe haven, we haven’t necessarily seen that this time. There’s quite a bit of unrest in seeing how this affects global consumption, whether it be the obvious cut in oil or something more complicated like food. As I said earlier, we’re consuming a ton of food, and I can only assume many others are seeing the same trend. How this plays out over the long haul will be quite interesting. The DOW reversed this week as the stimulus package was anticipated and then announced at $2 trillion! The June DOW eased going into the weekend, settling 911 points lower on Friday at 21,437…a rally of 2,500 points. The Dollar, on the other hand, also reversed, giving back the gains we saw the previous week. He Dollar settled at 98.53 on the index, down 4.5 points on the week…another huge move. Energy markets are understandably still on the defensive. On Friday, May crude oil closed down 76 cents at $21.84. This was $1.60 off the highs and 96 cents off the lows of the day. Crude lost another $1.80 on the week.
CORN – The corn market got off the mat and posted a small weekly gain after a couple of tough weeks. On Friday, May corn settled at $3.46, down 2 ¾ cents. This was 4 cents off the high and 3 ½ off the low. On the week, the corn market rallied 2 ¼ cents. This corn market seems reluctant to head up or down after the big sell-off. With the uncertainty with regards to total demand and a report coming on Tuesday, it appears the big money is in wait and see mode. With the report on Tuesday likely bringing large acreage to the table with guesses in the 94-million-acre range…and quarterly stocks unlikely to be friendly enough to support, it might be hard to see corn rally in the short-term. A potentially wet spring could possibly get a rally in corn going, but after last spring and our ability to still raise a respectable crop, I wouldn’t expect too much. My hope is usage already shows up to be strong from the livestock sector as feeding low test-weight corn is something I’ve felt would gobble up plenty of bushels all along. Long story short…this corn situation isn’t anything like what we were assuming just one month ago…we have to be flexible, stay on our toes and be ready to adapt when we see the market move like it has.
DEMAND – Demand was solid on the week with huge export sales offsetting the loss once again in production from the corn usage for ethanol. Weekly export sales were 1.8 million metric metric tons for this marketing year or almost a million tons more than the total from a week ago. For next marketing year, 83k tons in sales were posted. Overall sales were up by almost a million tons. Corn usage for ethanol was down on the week…with just under 100.5 million bushels of corn usage, we were down by 3.5 million bushels, according to the Department of Energy’s EIA report. Basis continues to widen as elevator systems adjust to how much our demand outlook is changing. My area saw basis widen six cents, moving to 18 under the May. In Decatur, basis was quoted at a nickel under the May, which is a dime wider than a week ago. On the river in St. Louis, basis was status-quo at 22 over the May. While we need basis to hang in there, it’s unlikely with ethanol grind moving lower pretty-much every day.
CASH CORN – Cash corn values dropped in many areas again on the week. While we saw a small rally on the board, basis continues to plummet as demand from ethanol plants is vanishing rapidly. It highlights just how important our ethanol industry is to the US producer when we see 5.6-5.7 billion bushels was supposed to be used for ethanol this year…if you cut 300-600 mb from that, it’s not easy to replace. I am trying to get a handle on how much corn will be fed as DDGs exit the rations. I’m still of the opininon low tw corn will have an impact…but at this point, thoughts we’ll see carry run well below USDAs 1.892 bbu have faded. I could still see it potentially below, but not at 1.5 or under like I previously thought. Given all this, there is still risk to the down-side. Be cautious with this report if you have a ton of unpriced bushels. A person can buy a June put within a dime of the market and sell a call 25 cents higher for next to nothing. While most of us would be happy to be capped at $3.80 July, most can’t stomach any move lower yet…call if you have questions or need help with a plan. I’d be glad to assist you.
2020 CORN – December 2020 corn also gained slightly on the week. With a close on Friday at $3.64 ¼, CZ20 was down 3 cents on the day. On the week, we were up a penny. With a spring price at $3.88, we’re still 24 cents below the insurance average. While we’re still early in the growing season and the market typically offers a rally at some point, I understand some of you feeling quite anxious with the markets where they’re at. It’s tough to sell at $3.65 for about anyone I know…and find black ink without a heck of an assumption on yield. Yes, we know we can raise a big crop these days, but if you sell down here assuming that type of yield and you’re wrong, it could be catastrophic. Selling more at these prices if you have corn sold higher is fine if you can make it work on your operation…but I’m not selling any right now. Again, for those who like having courage-calls as a part of your plan, there’s some good deals currently as compared to what these calls have been bought for the last couple of years. I’d stick with an August short-dated to cheapen it from a Dec…and get you through pollination. 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 profitability calculator or 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/
BEANS – The bean market continued its solid run and continues to out-perform the corn market. At the close Friday, May beans were up a penny and a quarter at $8.81 ½. This was 7 ¼ cents off the high and 6 ¼ off the low. On the week, beans were up 19 cents…and 32 over the last two weeks. This bean market started out the week in solid form, showing some bull-spreading that continued to be attributed to the hot soybean meal market. While meal backed off into the weekend, prices were still in the low to mid-$320s…an area we haven’t seen much of in some time. While weather in South America is mostly a non-issue, some concern remains with regards to Argentine production, which could continue to support the meal and cash bean market. The big issue holding bean prices back is what’s held us back for some time…currency. The Brazilian Real continues to plummet, which negates the Dollar’s move lower. While we need Chinese business…and plenty of it, the timing may not benefit us (assuming they honor Phase I agreements) as long as the Real makes Brazilian beans cheaper on the world market. Most assume the Chinese will re-stock on beans and bean meal which should keep demand for beans strong. IF this indeed the case, given US and world supplies, a person can make a better case for a bean rally than one for corn. Now…IF the USDA says we’re planting 85 million acres or more of beans, it could dampen any enthusiasm, but overall, there’s certainly some talking points for bean bulls. Let’s hope this next week is the third week in a row we see a bean rally.
DEMAND – Soybean export sales were solid this week, much improved from a week ago levels. With net sales of 904k tons for old crop, sales were over 270k tons higher than a week ago. For new crop, just 500 tons were recorded so overall levels were around 200k tons higher on the week. With China back to buying beans, the hope is they’ll load up on some US beans at a time of year we generally don’t see that happen. As far as basis is concerned, a bit of improvement was noted in some areas while others were stagnant to a bit wider. Local bids for me are a dime under the May, which is an improvement of three cents. Decatur’s basis for cash beans however, widened a nickel, moving to a dime over the May. On the river, basis was quoted at 27 over the May, which is two cents wider than last week.
CASH BEANS – Cash bean bids were again improved on the week, even as some basis levels widened a bit. With the solid rally on the board, cash beans have come back to life. With this being said, we have a report on Tuesday after a nice recovery rally. I don’t necessarily think the report will be bearish, but at the same time, selling an increment after a rally is generally good business. My gut tells me quarterly stocks will be friendly to beans but I’m a bit concerned about acreage possibly being a big number. Overall, I expect outside influences to possibly affect the market more than this report…and that’s saying something with how large this report generally is. All in all, my best advice is to sell in increments at profitable levels. If you want to talk positions or strategy, please let me know. I’d be glad to help you in any way possible.
2020 BEANS – November 2020 beans posted a nice rally on the week, following along nicely with front month futures. On Friday, Nov ‘20 beans settled at $8.76 ¾, up 2 ¼ cents. Nov20 beans rallied 16 cents on the week. Nov beans are trying to get closer to the spring insurance price at $9.17, but at 40 cents under, they’ve got a way to go. I’ve had plenty of questions on whether I think beans go back above $9…and my opinion is there’s a strong likelihood they rally up to and over $9 pretty easily. Generally, we see a strong bean rally or two every marketing year…and while there’s plenty of question marks with our current situation, bean demand has stayed pretty strong. My best advice again is to have your offers in ahead of time. With how fast these markets trade at times, the most effective way to lock some of these prices in is generally to target the levels you want to lock in and get your offers in place. 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