Sunday Night
- Coronavirus is the black swan that the market is dealing with. The virus has spread and we do expect a reaction in the equity markets as major firms begin to restrict unnecessary travel. These types of reports will lean towards slower economic growth but in the big picture all world and central banks are pledging major support. Thus the market needs to get through the fear and the economic trough before strong buyers take advantage of a fear based sell off and hold for the mass manufacturing needed to refill supply lines.
- When it comes to animal feed and human food, there is not much room for disruption. WE have to eat. Bottom line is that if food supply lines run out there is risk of panic and social unrest. That might happen in isolated areas of some countries, or like in IRAN. But not in the US or any other well educated country. Best example is China. During their outbreak, reports were only very isolated areas in China that required military assistance for food distribution and social unrest was never reported – not even on social media. That is not to say we will not get the virus. Everyone is susceptible. But it is a virus and it will pass.
- China begins accepting tariff exempt (well it is really 3%) US imports licenses on our Monday. It will take 2-4 days to approve applications. We expect pork, poultry products, sorghum and meal. We also will not be surprised to see many other commodities requested. Then they have to buy. We will keep you informed.
- S Brazil and Argentina have little to no rain and high temps for the next 2 weeks. We do expect some crop stress in Argentina. WE are not concerned yet but will update as Drew Learner updates his reports
Expect a lower open, but expect markets are in value areas. Any Chinese interest or extended weather adversity in Argentina will be supportive.
Bill Biedermann
Matt Bennett’s Weekly Comments
I hope you had a good week…or at least better than the stock market or our markets. Man, what a rough go it’s been the last few days! As I’ve said, I’m in San Antonio at Commodity Classic with Tif, Toby and Abileen. To be honest, I’m really glad they were along. It would have been even more stressful if I didn’t have the most important people along for the week. Commodity Classic was good regardless of how the markets were acting. The Early Riser session on Thursday had 1,100 people in attendance, which is the biggest group I’ve spoken in front of. I’d say the mood is ok considering all things. While everyone is concerned…for good reason…there is hope as you generally find in the ag community. My kids have thoroughly enjoyed being at the show. It’s been neat to see Abileen meeting all of these people who know who she is! She doesn’t really understand how they know her, but it’s taken both Tif and my breath away a few times to see people who want to meet her. She will have a story to tell someday, even if she doesn’t remember any part of it. Toby simply wanted the ‘free stuff.’ 😊 He of course enjoyed the equipment, but the best part to him was playing a few games, being a part of a magic show and carrying two huge bags of coffee mugs, hats, tumblers and 100 pens to the hotel. Now, we just have to figure out how to get it all home! Thanks to those of you who I got to visit with…I appreciate each and every one of you. Always feel free to reach out whether in person or over e-mail…I enjoy the correspondence. mbennett@agmarket.net
The corn market stunk it up this past week while the bean market fought hard to close with losses that weren’t too bad. Coronavirus is wreaking havoc on our markets at a time we desperately need some good information. While we have many mouths to feed around the world, global panic has set in for many as demand is called into question moving forward. There is no way to predict where we go from here, but I feel we’re getting overdone both with the financial markets and the commodity markets, barring a global pandemic getting out of control. Again, I can’t predict how this turns out, but a person who chooses to step aside in this environment can’t be blamed at all. As far as the outside markets are concerned, the Dow got obliterated this week, dropping about 4,000 points…an awful showing as investors pull money back in droves. The Dollar also backed off, which would normally be supportive…as the index closed just over 98, which is good news as compared to recent tests of 100. Energy markets were also slammed…on Friday, April crude oil closed down $1.83 at $45.26. This was $1.77 off the highs and $1.41 off the lows of the day. Crude lost $8.20 on the week! The chart was as ugly as could be…we have to hope for some stability this coming week.
CORN – The corn market didn’t withstand the onslaught of selling and had a rough showing overall. On Friday, corn made a new low for the move but recovered…a slightly positive indication. March corn closed trade on Friday up two cents at $3.66 ½. This was three-quarters of a penny off the high and 3 ¾ cents off the low. On the week, the corn market lost 10 ½ cents! The corn market saw producer selling pressuring the market as basis contracts had to be sold or rolled…and it appears a good chunk of selling occurred as a general frustration in the lack of a rally contributed to the mood. I haven’t changed my thoughts that cash corn will have value…in fact, as we’ll talk about later, basis is trying to do the work as cash values were supported by basis narrowing. However, talks of huge acreage continue to keep a lid on any enthusiasm for new-crop. Simply put, the corn market hasn’t seen the sun shine for quite some time. With no weather problems in South America just yet and a bean market that isn’t rallying, there doesn’t appear to be much incentive for corn to rally. All hope is not lost here…but we certainly need a turn of events one of these days. I look for cash to stay supported while fall should find support until we get a better idea of what actual acreage and weather looks like.
DEMAND – Demand was mixed this past week with a decrease for exports but an increase in corn usage for ethanol. Weekly export sales were 865k thousand metric metric tons for this marketing year, down about 400k tons from a week ago. For next marketing year, 114k tons in sales were posted. Overall sales were down by close to 300k tons from a week ago. Corn exports have been solid lately…and I would think they’ll stay good until we see the safrinha crop harvested…especially with this drop in prices. Corn usage for ethanol was up on the week…with almost 105 million bushels of corn usage, we were up over a half million bushels, according to the Department of Energy’s EIA report. Basis didn’t make up for the whole futures loss but certainly improved in most areas. My area saw basis narrow two cents, moving to option the March. In Decatur, basis improved a nickel, moving to 25 over the March. On the river in St. Louis, basis narrowed a nickel as well, moving to 27 over the March.
CASH CORN – Cash corn values went down on the week, which is normally expected given the dime we lost on the board. While basis levels in many areas improved a nickel, those are posted bids…and my guess for many is there is some push. Given many processors are struggling to find the corn they are desiring, I’d assume basis will stay strong…even if we get somewhat of a recovery rally. Long-term, I assume prices will stay supported whether futures rally or not. In areas where there is a corn deficit and basis levels are already 50-100 over, I’d expect basis could get even better as those areas try to pull bushels from other areas. IF we see a late spring, my guess remains some areas could see a white-hot basis this summer. If we have a normal spring, I’d be getting all of my bushels priced before we get too far along this summer as a normal spring will likely mean big acres…additionally, I expect a decent amount of shorter-season corn will be planted this year, hoping to take advantage of some early harvest premiums we’re already seeing. Keep tabs on how this spring goes for direction…
2020 CORN – December 2020 corn had a bad week. That’s about all I have to say about that. Dec20 closed on Friday down a half-penny at $3.77. This was a loss on the week of 9 cents. The Dec20 corn average for the month is $3.89, which is 11 cents below a year ago. I still have no urge to sell corn at these prices. IF a person can make it work, I would never argue…but I can’t imagine we won’t see some life in this market, especially with the type of spring most are calling for. These prices are certainly not buying acres, especially if conditions are less-than-ideal. I still prefer being hedged with the chance to eventually roll that hedge to July on stored bushels…and we should be able to do that at 25 to 30 cents…making any $4 hedges a nice $4.30. Regardless, we need to be figuring all 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 my AgMarket app…it will give you assurance of where you are, which certainly helps with marketing decisions. On Saturday, I had a great crowd for my Marketing 101 session at Commodity, where we detailed how to set up a marketing plan. Feel free to go back and watch the webinars Channel and I put together…they were very similar to what I presented in San Antonio. If you need help with a marketing plan for 2020, don’t be afraid to reach out. https://www.agmarket.app/app/
What To Watch For –
On 2019 corn, my farm is 80% sold @ $4.30 basis March20. We will be patient for a New target
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 an interesting week with some body-blows dealt as beans saw double-digit losses during trade on Thursday and Friday while settling with losses well off the lows. It was nice to see some life and buying come into beans even though we lost ground on the week. At the close Friday, March beans had settled down 2 ¾ cents at $8.83 ½. This was 3 ¾ cents off the high and 9 off the low. On the week, beans were down just 7 cents. I saw ‘just’ as beans were under fire and clawed their way to a respectable week, all things considered. Given the bloodbath in the financials and corn seeing double-digit losses, it was nice to see beans holding their ground. As far as the bean market goes, it appears they’re trying to hold their ground. While the big crop from South America looms…and a perception US acreage will be solid, I’m assuming there are many who don’t want to be ‘too short’ IF we see China buy a bunch of US beans. Indications China is seeking to remove tariffs on up to 10 million tons of beans is likely part of the hesitancy of the market to be too bearish. As always, my opinions on beans have everything to do with whether you can make money on your farm or not…that has to be the determining factor as out-guessing bean prices can be a lethal notion. I’m not bearish here…but would certainly not be interesting in speculating on one side or the other.
DEMAND – Soybean export sales were down again from totals from a week ago. With net sales of just 339k tons for old crop, sales were over 150k tons smaller than a week ago sales. For new crop, 22k in sales were recorded so overall levels were around 130k tons lower than a week ago totals. Part of the problem with exports were net cancellations of 176k to ‘unknown’. As far as basis is concerned, it’s still pretty quiet with some small narrowing here and there. Local bids for me are 12 cents under the March, which is three cents improved on the week. Decatur’s basis for cash beans was status-quo, staying at 11 over the March. On the river, basis was quoted at 30 over the March, a penny better than a week ago.
CASH BEANS – Cash bean bids were down on the week although not as much as they could have been. Given the big moves lower we’d seen on both Thursday and Friday, losing a nickel on flat-cash values wasn’t much to get depressed over. My thoughts on cash beans are we should see some support at these levels…but I’m not sure we’ll see near the tightness relatively speaking as we could see in corn. With a big South American crop essentially locked in, it could be tough to see good US exports as South American beans are still beating us with regards to value…as currency continues to hurt US bean values. I don’t want to have a ton of beans left…but I’m not sure I’d want to sell right now after the drop we’ve seen of late. I have no beans left to sell to be clear. If you do have some to get rid of, make sure you get your offers in place in the event the market offers you and opportunity to get some sold at the levels you feel will take care of your needs.
2020 BEANS – November 2020 beans also lost ground on the week. To close the week, Nov ‘20 beans settled at $9.08 ¼, unchanged. Nov20 beans lost 9 ¼ cents on the week. The average for crop insurance is now $9.18, which is clearly lower than the $9.54 we saw a year ago. I don’t feel like these prices we’ve seen are buying bean acres either…but given the ability to plant beans much cheaper than corn, I’ve got to think acreage could stay fairly high. I’m at 85 or so right now…and if we see that acreage with the yields I believe we can raise, I’m assuming total production could be solid, putting carry well over a half-billion bushels again. So…if we’re planting a good chunk of beans in 2020, some risk-management might be smart. I’m not pushing sales down here…but paying close attention to my break-evens as a small rally could possibly pry some sales from my hands. Ultimately, we need to know what price levels you need to make it work in 2020…be sure to reach out if you need help in that regard. We have good tools to assist you.
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 $9.55 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 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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