Sunday Night Comments 09/22/19
The coming week is met with mixed bag of influences. The US weather continues negative as warm weather is forecast with no freeze in the near term. The S American weather is friendly with no relieving rains in the forecast and planting is delayed by some farmers. The trade will be dealing with Quarterly stocks in another week and most in the cash market believe stocks are smaller as reflected by the strong cash markets and lack of available movement. US – China news over the weekend may just be PR spin but both sides said progress was made and Sr level talks will take place despite the lower level talks that ended abruptly after Trump made it clear he wants a complete deal or no deal (that could be positioning also – thus it is very hard to really know what is taking place). Harvest activity will kick in full swing on early or drought hit crops. That could include a lot of IL acres. We should know trend of yield potential very soon. We expect bean yield will be surprisingly poor based on our aerials and ground crew checks. Market calls are mixed. Look for technical direction.
Technical Comment: Bean failure at resistance could retest support but it will be bought. Corn failed at short term down trend but possible developing head and shoulder bottom project up to fill the gap.
And Now – From Matt Bennett
Good Morning!
I hope all is well for you and yours. Around my place we are getting close to harvest. With a few guys in the field locally getting into some corn, it’s making the rest of us a bit stirred up. The guys in my area are picking 20-26% corn as there were a couple of drying deals in the area. I don’t believe I had any corn that dry or we would have done the same…but on a good note, the weather looks to hold with some warm temperatures for at least the next couple of weeks. Given we have some beans to cut, by the time we get into the corn, we should have some around 20 I’d think. While I would have told you a month ago we’d be lucky to get much done by the middle of October, at this point, if the weather holds, we’ll get quite a bit done by then. Things are changing fast…both corn and beans. Yields I’m hearing are quite variable. While some clients of mine are talking solid corn yields, I haven’t heard a person tell me yields are better than a year ago. I assumed early yields would be better than later yields…and I’m assuming that’s still the case, but based on what I’m hearing on yields, the drop-off will hopefully be slight in nature. Please continue to send yields as you get rolling. I appreciate the feedback a great deal. mbennett@AgMarket.Net
The corn market held together on the week but beans weren’t able to follow suit. With see-saw action in the corn market, we didn’t see a ton of change overall. However, in beans, talk of ASF showing up in South Korea and US/Chinese talks sputtering kept a lid on prices. With President Trump stating he doesn’t need a trade deal with China to get re-elected, it casts some doubt on how good of a position we are in as far as negotiating is concerned. Reports the Chinese were in search of a partial trade deal sounds good to ag producers, but it appears Trump isn’t interested in anything but a complete deal. The bean market had shown life of late as talk continued around the US crop potentially getting smaller. However, dry weather in Brazil seems to be breaking at a time when demand continues to suffer several body blows. It’s a tough time to be a bean bull. Heading into the weekend, outside markets likely had a bearish impact as the Dollar was strong while energy prices were quiet. On Friday, November crude was up 20 cents at $58.39. This was 85 cents off the highs and 46 off the lows of the day.
CORN – The corn market was up, down and all around this past week. While gains early in the day Friday gave way by the close, we still gained some ground on the week. On Friday, December corn closed at $3.70 ¾, down two cents. This was 3 ¾ cents off the high and 2 ¼ off the low. On the week, the corn market gained two cents. While corn looked prepared to continue last week’s little rally at times, obstacles prevented that from happening. With ASF in South Korea spooking the bean meal market and given how big of a corn customer they are, corn lost momentum. While early yields aren’t necessarily blowing anyone away, the market doesn’t seem to be paying too much attention. I believe the market thinks production could slip lower, but at the same time, given demand issues, it’s tough to get bulls excited. As we move closer to harvest, I’d think the quarterly stocks report could provide some support as I’ve felt the USDA was heavy on old-crop stocks all year. Only time will tell, but for now, I’m not making additional sales.
DEMAND – Demand wasn’t too shabby on the week with exports as big as we’ve seen in a while, while corn usage for ethanol was soso. Weekly export sales were 1.46 million metric tons for this marketing year, which about a million tons more than a week ago. For next marketing year, 65k in net sales were posted, so overall sales were a million mt higher than a week ago. Corn usage for ethanol was lower on the week, coming in at 100.5 million bushels, according to the Department of Energy’s EIA report. As far as basis is concerned, there was a bit of weakening as harvest got underway. At a dime under the Dec, my area’s basis was off by a nickel. In Decatur, basis widened by a nickel as well, moving to a dime over the Dec. On the river in St. Louis, basis was quoted at six cents under the Dec, which is three cents improved as compared to last week. It’s unlikely basis will improve much now that harvest is underway.
CASH CORN – Cash corn had an ok week with slight gains on the board offset in many areas by wider basis levels. While quick-ship bids and drying deals were a thing this past week, I don’t look for that to last long as warm weather thoughout the corn-belt is calming some of the fears of the entire crop having to be dried. I still believe the June corn will be lucky if it all makes it, but the percentage of bushels susceptible to major test-weight issues isn’t what it once was. Many of the early yields are off from expectations with major drops in yield in areas like central Illinois. Yes there’s good corn out there, but compared to last year, it’s off by quite a bit generally speaking. In fairness, we had a huge crop last year…but it makes you wonder if yield will have to come down again in October. On my farm, I’m going to deliver contracted grain first, fill bins and hope we’ve seen a rally by the time I have to choose sell versus store. The fall is still young and there’s plenty to learn yet.
2020 CORN – December 2020 corn didn’t perform as good as Dec19. On Friday, Dec corn settled at $4.02, down 3 cents. This was a loss on the week of 4 ¾ cents. There certainly has been some interest in selling Dec20, but at the same time I know many are hoping with a harvest rally we’ll see better opportunities. I think that’s possible, but for me getting that first sale on at a profitable level is key. IF the rally happens, I’ll have plenty more to sell. While I think acreage in 2020 could be rather large, barring an unexpected rally in the bean market, I’m not ready to get terribly aggressive just yet. I had talked last week about selling at $4.17, but upon looking at my break-even for 2020, I believe it’s a good place to get started on my marketing plan. My next target will now be $4.17 for another 10%.
What To Watch For –
On 2019 corn, I’m 55% sold @ $4.31 basis Dec9. New ’19 target will be at $4.04.
1st sale for 2020 CZ hit at $4.07 for 10%.
BEANS – The bean market had a rough go of it this week as bullish news wasn’t hitting the wires by any means. To close the week, November beans settled 10 ¼ cents lower at $8.82 ¾. This was 10 ¾ cents off the high and 2 off the low. Nov beans lost 16 cents on the week. This bean market gave back some of the big gains from the previous week. While I’m not sure we would have had the same type of week as we did just a week ago when we gained 40+ cents, it certainly would have been a better week if we hadn’t had the ASF news as well as the continued frustration around the US and China trade situation. With a Chinese delegation in the US who had planned on visiting Montana and Nebraska farms, apparently talks broke down before they could go visit those farms. Again, it seems the Chinese want a partial trade deal as a way to work towards the complete deal. With President Trump and his team not on the same page, talks continue to falter. Don’t expect any big bean rally if we can’t get some of these trade issues worked out. I am hopeful we see that happen soon, but I’ve been in that camp for several months now and not much has changed.
DEMAND – Soybean export sales were again quite large…biggest we’ve seen in some time. With net sales of 1.73 million mt for old crop, we saw an increase of well over a half-million tons. For new crop, no sales were recorded. Overall levels were again over 500k larger than a week ago. For basis, some weakening was noted as harvest got underway. Local bids for me are 48 under the Nov, which widened four cents…and eight over the last two weeks. Decatur’s basis for cash beans also widened…by three cents, moving to 23 under the Nov. On the river, basis was quoted at 32 under the Nov, which narrowed by a couple pennies from a week ago.
CASH BEANS – Cash bean bids took a hit this week with most of that coming from the move lower in the futures markets. With harvest getting started in some areas of the corn-belt, a few beans started moving, which likely aided in basis weakening a bit. While many of the yields I’m hearing aren’t all that impressive, I’d hope the late-summer rain would make for decent beans, even those planted late. Now, it’s tough to plant beans in June and expect yields anywhere near April or May planted…but I think later beans will be decent. My gut though, given early yields, is that we could end up (maybe safely) sub-45 on US bean yield. Given that, many would be counting on a rally I’m sure…however, it’s tough to ask for a rally given what we have going on currently with regards to demand. With half of the US bean crop in recent years going to export, it’s been tough on the producer seeing exports cut like they have. Long story short, I am staying where I’m at on bean sales, but will reward the market with rallies up to and over $9.16 SX.
2020 BEANS – We had an off week for November 2020 beans as well. On Friday, Nov ‘20 beans settled at $9.40 ¼, down 7 cents on the day. Nov20 beans lost 13 cents this past week. While we’re 20 cents below my first sale, I know many have called or e-mailed about selling $9.50 beans. I personally think it’s a smart move, but of course would like to know the producer can definitely make that price work on their farm. Most every farm I’ve looked at can make money with beans at $9.50, so putting in an offer might be something to consider on 2020 beans.
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 Channel website or the AgMarket.Net Profitability 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. http://www.channel.com/Markets/Pages/Profitability-Calculator.aspx
What To Watch For –
My targets for cash beans are $9.16 & $9.41 basis the Nov. I’d have offers in now to take advantage of any rally unfolding. I am down to 50% sold/hedged (basis APH) at a board-based average price of $9.50SX for 2019.
For 2020, I got my first 15% sale on at $9.60 SX20.
Matt Bennett
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
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