Sunday night calls are 1-4 higher across the board.
USDA Jan report is out and economic value (low) was traded. Now the market is focused on China deal and looking to see the details of the deal later this week. We have heard that several buying groups have or are arriving with the delegation. Cash markets are firm.
For a video review of the report and expected trading ranges, click on this link
https://register.gotowebinar.com/recording/2152717727491703051
NOTE – All AgMarket partners will be traveling this week to meetings.
Bill Biedermann
Matt Bennett’s Weekly comments
I hope all is well for you and yours. I’m writing on Saturday morning after listening to an intense thunderstorm all night. I’m hopeful none of the lightning hit anything on the property, but it sure sounded like it did. Here we are in January getting a thunderstorm…? We’ve also had 3-4 inches of rain already, according to Climate…I don’t even have a rain gauge out as I don’t want to get the thing frozen and cracked. Regardless, I’m happy this weekend as the January report is over and done with! Man, we’ve spent a ton of time worrying about that it seems…and while the report wasn’t all that bad, there are a few head-scratchers indeed. I’ll recap the report and then go over what we usually discuss. mbennett@agmarket.net
US Production Summary
Crop USDA Dec USDA Jan Total Prod Ave Est Range
Corn 168 167 13.69 bbu 13.494 13.030 – 13.701
Soybeans 46.9 47.4 3.558 3.550 3.457 – 3.591
US Ending Stocks 2018/19 (Billion Bushels)
Dec Est Jan Est Ave Est Range
Corn 1.910 1.892 1.753 1.479 – 1.960
Soybeans .475 .475 .432 .310 – .520
World Ending Stocks 2018/19 (Million Metric Tons)
Dec Est Feb Est Ave Est Range
Corn 300.6 297.8 297.3 290.5 – 301
Soybeans 96.4 96.7 95.7 91.7 – 97.5
US Quarterly Stocks Dec 1st 2019/20 (BBu)
Dec 1, 2019 Dec 1, 2018 Ave Est Range
Corn 11.388 11.937 11.511 11.290-11.66
Beans 3.251 3.476 3.186 3.023-3.379
Corn and beans both took the news as bearish initially, but by the end of the day settled higher. Looking at the carry-out levels for both for this marketing year, we saw a disappointing number as corn was barely revised lower by 18 million bushels when the trade expected a big cut…and beans stayed at 475 million bushels with expectations for a 50 mb cut. The thing that likely turned the market is corn seeing quarterly stocks under expectations and big demand…which countered the USDA bringing more corn into this marketing year from last year on top of bigger production for this year. To be honest, it’s hard to believe the changes that were made to increase available supply, but with solid demand, we fortunately have a situation that the trade doesn’t yet see as burdensome. With all of the fervor about this report, at least we didn’t see a terribly bearish reaction. It appears to me the USDA is playing with the numbers a bit much by inflating the previous year’s carry…and keeping production high for 2019, but at the same time I don’t want their job. I feel strongly the stocks won’t come in nearly as high as they suggest for corn particularly. Low test-weights will be an issue for the whole marketing year in my opinion…whether for ethanol or feeding livestock.
The corn and bean market had a fair amount of movement on the week but settled without much fanfare as Friday’s trade saw lower prices before a higher settlement. Heading into the weekend, most talk centered around the US/Chinese deal now that the report has been released. With the signing to be on Wednesday, if nothing else, it’s a step in the right direction. I personally don’t think the markets will have a strong reaction until we see corn, wheat or ethanol shipments occur, as those products haven’t been something we’ve exported to them in the past. As far as the outside markets are concerned, a mixed feel was the case as the Dollar backed off on the close settling lower while crude was also lower. February crude closed down 44 cents at $59.12. This was 66 cents off the highs and 27 off the lows of the day. Feb crude lost $3.92 on the week as tensions in the middle-east calmed down.
CORN – The corn market looked to be heading lower as soon as the report was released which would have cemented a down week…but the market came back, keeping the weekly close in the vicinity of last week’s close. On Friday, March corn closed up 2 ½ cents at $3.85 ¾. This was a penny off the high and 9 ¼ cents off the low of the day. On the week, the corn market lost just a half-penny. In all honesty, losing just a half cent this week as the market waded through what was thought of as a bearish report isn’t all bad. This report highlighted just how strong demand is as supply continues to be inflated. I find it interesting basis is so strong all over the corn-belt when the USDA says we’re going to end up with almost two billion bushels. Again, I look for usage to continue to tighten our situation as we move forward…not to mention the USDA says they’re going to re-survey those states who aren’t finished with harvest yet. I’d imagine some production could get shaved off there as well. I’m not wildly bullish but supportive…I could get bullish if China buys a chunk of corn…but not holding my breath on that either.
DEMAND – Demand wasn’t stellar with exports off sharply while corn usage for ethanol was off a shade but still big. Weekly export sales were 162k metric tons for this marketing year, off by around 400k from a week ago. For next marketing year, no sales were posted. Overall sales were well off of a week ago and quite frankly this is going to have to improve. The USDA was justified in lowering export…espeically if the Chinese don’t buy corn. Corn usage for ethanol was off but was still solid at just over 106.5 million bushels, according to the Department of Energy’s EIA report. This was a decrease of around a million bushels. Basis continues to be strong, which I think is impressive as we get into January as plenty of grain is moving. My area saw basis option the March, which is status-quo on the week. In Decatur, basis stayed at 18 over the March, which is also the same as a week ago. On the river in St. Louis, basis was quoted at 20 over the March, which is four cents better than last week.
CASH CORN – Cash corn was steady on the week with status-quo in most areas. Those areas that had basis narrowing saw better prices though, which is sure nice to see in January. At this point, I don’t think the big rally is in store for now. IF we see a rally, it’s likely to be more of a slower, sustained rally. With that being the case, if a person has corn in storage, I’d be thinking hard about getting it sold. With storage not cheap by any means, I believe other than basis contracts, I wouldn’t have anything in the elevator. Corn at home I’d be selling in increments as I’ve talked about previously. Me personally…I want to keep ownership of corn for a bit…I see old-corn having a much better chance at rallying than new-corn.
2020 CORN – December 2020 corn had a better week than the front months. Dec20 closed on Friday up 2 ¾ cents at $4.02 ¾. This was a rally on the week of 2 cents. When the report was released, we saw Dec go down to $3.95, but fortunately the market responded with a solid close. While I’m not real bullish Dec20, I feel good about making a sale in here. As you know, I’m 30% sold on my farm…but would be willing to sell another 10% at $4.09. The guys on my team at AgMarket.Net all agree as well that we should be managing some of this price risk as the producers we’re working with can make money in here. As I’ve said many times, I continue to urge clients and those who call for advice to have their costs figured and plugged into a profitability spreadsheet with projections on yield with acreages for 2020. The webinar Channel recently had me put together addressed specific strategies for 2020 that could be considered…I hope if you haven’t watched it yet that you’ll get the chance. They will be available for a couple more months. As always, don’t forget to use the AgMarket.Nett app to see how your profitability is shaping up. If you need help with a marketing plan for 2020, let us know and we’ll get you set up. https://www.AgMarket.App/app/
What To Watch For –
On 2019 corn, my farm is 80% sold @ $4.30 basis March20. Hold for now
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 nice week going when we headed towards the Friday report. While beans reacted like corn and headed lower initially, they closed higher, which ensured a higher weekly close. On the close, March beans settled 2 ½ cents higher at $9.46. This was a penny off the high and 10 ½ off the low. On the week, beans were up 4 ½ cents. The report was as uneventful for beans as the corn was eventful. It seemed to me that the USDA spent all their time on corn and decided to let beans alone. I expected to see a cut in production…and the USDA acknowledged there was 2% of the beans still standing as of the report. However, we didn’t see that cut and the USDA left the carry at 475 mb. My gut on beans keeps me more neutral at best for now. With the rally we’ve seen the last few weeks, it’s tough for me to ignore. I’m not saying we’re heading lower from here forward, but if a person can make money, that’s what should be the focus when making decisions.
DEMAND – Soybean export sales were a shade above a week ago levels. With net sales of 355k tons for old crop, sales were 25k more than what we had posted a week ago. For new crop, just 3k in sales were recorded so overall levels were around 40k tons more than a week ago levels. These bean exports also need to ramp up but interestingly, the USDA left them alone. Bean exports are also running behind the USDA goal, so that was in interesting tidbit. As far as basis is concerned, there wasn’t much movement as compared to a week ago. Local bids for me are 17 cents under the March, which is status-quo on the week. Decatur’s basis for cash beans also were status-quo, staying at 8 over the March. On the river, basis was quoted at 18 over the March, a penny better than last week. Bean basis is also solid as we get into January, which is a good sign moving forward.
CASH BEANS – Cash bean bids were steady to higher this past week as March futures were up on the week while basis was steady to better. My thoughts on cash beans aren’t quite as supportive as with corn. I’d be inclined to be getting a few beans sold here and there as well. While I’m not necessarily bearish, I have a tough time getting too bulled up. Given the basis improvements and the futures rally, most are looking at a dollar better flat-cash prices than we saw just a few weeks ago. Given that, I’d have to think a person would want to be moving some beans. Personally, I am 70% sold and will be looking to sell a few more now that we’ve seen the report.
2020 BEANS – November 2020 beans posted a small gain on the week again which was solidified by the close on Friday. To close the week, Nov ‘20 beans settled at $9.74 ¾, up 3 ¼ cents on the day. Nov20 beans rallied three cents this past week and 50 cents over the last six weeks. I am still sitting at 25% sold for 2020 beans and ok sitting there for the time being. Our target is still $9.83 to get another 10% on. With profitability solid at these price levels, I’m inclined to sell more beans before we learn too much about the South American crop…but would like to see if there’s any fireworks around the signing this week. Regardless…we need to have a plan in place, focusing on maximizing our profitability. Call if you want help with your 2020 marketing plan.
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 to any of us. 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 $9.55 Mar.
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 $9.83.
**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 usa know if I can help you in any way.
Matt
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
Bill Biedermann
AgMarket.Net
815-893-7443 o
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