Sunday Night calls
Coronavirus takes second fiddle as Saudi Arabia announces a trade war in Crude oil by ramping production 10-12 mbpd in an attempt to get the world to pressure Russia to comply with OPEC request to cut production.
This is a 2 edge sword:
1.The deflationary impact of crude falling below 30 is commodity bearish. Obviously the world oil producers do not want <30 crude so how long will this last before world oil producers hit Russia with ultimatums. Thus we see this as a negotiating tactic on Saudi to get their way. Until this is reconciled or the markets find support on this bearish news, it will be bearish.
2. Obviously this is contrary to US fed policy for 2.5 % inflation. This is also a negotiating play out of the Trump Play Book. However, the uncertainty of how long this rout will last is creating a risk off environment in the midst of CorornaVirus. We would have to suspect US Fed and other world banks will be fast to make sure of liquidity and possibly even lower rates again. If however Russia comes into cooperation, then the low could be pt in quickly and this will end up being a significant opportunity for long term ownership. Can you imagine owning energy at under 30?
Our company suggest talking to your broker as each client is individually unique and this situation is very unique. We are all taking calls tonight
Bill Biedermann
I hope all is well in your part of the world. In mine, we’ve actually had about three days in a row of nice weather. While we aren’t as fortunate as some of you who are working ground already…or planting beans in western Illinois, as I saw on Twitter…we’re hopeful the good weather will stick around for a bit. I’ve heard from a good chunk of you who felt you could get in the field this coming week if weather cooperates. For us however, we have a 100% chance of rain for Monday into Monday evening. Then the rest of the week, we’re looking at 30-50% chances. I’m really hoping that isn’t right. Regardless, it’s supposed to be 60+ here on Sunday, so the itch is officially here. Now I don’t know about you all, but we don’t have all our equipment ready yet! It wouldn’t take long to get rolling, but this weather has snuck up on us a bit. The earliest you’d usually catch me planting is April 1st most years, so it would appear we have some time yet. However, in 2012, we did plant corn in March as that spring was so beautiful and warm, we were struggling to sit around and watch everyone else roll. Heck, maybe I should just drag the planter to town on Monday just for fun? Ha, no another issue I have is I’m not quite done speaking yet. This coming week I’ll be in Kansas and Iowa before stopping off in Des Moines to record Market to Market on Friday. While I’m in the short rows, I still have a bit of travel to get out of the way this month. Let me know how you’re doing…and if you get rolling, I’d love to hear how it’s going. Good luck this spring and stay safe! mbennett@agmarket.net
The corn market had a better week than the bean market, reversing roles from the previous week. While the first three days of the week were fun to see with a nice rally unfolding, Thursday and Friday reminded us just how hard it is to get our markets going right now. While come stress on Argentina’s crop have been noted, it hasn’t been near enough to get anyone hitting the buy button just yet. The size of the Brazilian bean crop is known to be large…we just don’t know how large…probably a record. With Coronavirus not going away just yet, the market is still fearful of just how bad it might get. As far as the outside markets are concerned, the Dow rebounded a bit from the woodshed beating it received the previous week. Rising overall to 25,789, we saw a rally of less than 1,000 points but nonetheless was well-received. The Dollar also had a rough week, dropping clear down to 95.9 on the index as compared to a settlement of just over 98 last week. Energy markets however also took a huge hit. On Friday, April crude oil closed down $4.33 at $41.57. $45.26. This was $4.81 off the highs and 52 cents off the lows of the day. Crude lost another $3.69 on the week but $12 in the last two weeks! This isn’t good for our ethanol prospects IF we continue to see this collapse for crude. I’m not sure what turns it, but we need something to help stabilize this thing.
CORN – The corn market had a good week going after the first three days, but Thursday and Friday took some of that back. On Friday, May corn settled at $3.76, down 5 ¾ cents on the day. This was 6 ¾ cents off the high and a penny off the low. On the week, the corn market rallied 7 ¾ cents. The corn market can’t seem to catch a break. While the market looked oversold with buyers interested in stepping in, more talk of Coronavirus as well as other demand implications continues to plague the markets. Additionally, the US Dollar plummeted this past week, but the Brazilian Real continues to make new all-time lows, which doesn’t help our US export prospects by any means. With talks of big acreage continuing to loom over the market, it appears rallies, especially for new-crop, could be few and far between. I still like having some old-crop ownership…especially if producers feel they can keep it around for a potential summer shortage. However, it might be tough to see a rally in the corn complex without serious weather issues this spring. I can’t stress enough how important it is to have a plan in place for both old and new corn. Chances to latch onto profit margins might not happen as often as we’d like in 2020.
DEMAND – Demand was mixed this past week with a decrease for exports but an increase in corn usage for ethanol. Weekly export sales were 769k thousand metric metric tons for this marketing year, down about 100k tons from a week ago. For next marketing year, 100k tons in sales were posted. Overall sales were down by a shade over 100k tons from a week ago. Corn exports haven’t been bad but need to pick up while Brazil doesn’t have much to put on the world market. Corn usage for ethanol was up again on the week…with 108.5 million bushels of corn usage, we were up by around 3.5 million bushels, according to the Department of Energy’s EIA report. Basis moved to versus the May, but that doesn’t mean much this year with a penny inversion right now. Factoring in the move, my area saw basis widen three cents, moving to two under the May. In Decatur, basis was quoted at 16 over the May, which is a fair bit wider than the 25 over the March posted a week ago. On the river in St. Louis, basis didn’t do much, moving to 27 over the May.
CASH CORN – Cash corn values rallied on the week for the most part. While we saw some basis loss in a couple of places, the rally on the board helped ensure most corn was worth more than the previous week. There are ways to move the old corn and keep in the game, but a person has to be willing to get creative and potentially do it on paper. For the corn in the bin, I’d like to see how this spring unfolds…IF that corn is in good shape. However, few bushels of good quality corn are out there this year, so the challenge is going to be getting it to keep. There are a ton of opinions out there on what to do with old corn…so ultimately, you need to decide what’s best for you and get a plan put into action. Let me know if we can assist you with that…as again there are some low-risk ways to stay in the market and get your cash in hand by selling the physical product.
2020 CORN – December 2020 corn had a better week than the previous one. With a close on Friday at $3.81 ½, we were off 2 ¼ cents. However, on the week, we were up 4 ½ cents. The thing is, on Friday we’d traded up to $3.85. It seems like that level is getting sold as we saw resistance there on both Thursday and Friday. At this point, barring major weather issues, we could see Dec corn struggle to get back to $4 anytime soon. It’s imperative you have a plan in place for this type of market…as it could be unforgiving IF we see big acres and a solid yield in 2020. It’s important to be figuring 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/
What To Watch For –
On 2019 corn, my farm is 80% sold @ $4.30 basis March20.
For 2020 CZ, up to 30% sold at $4.05. Next target for me and my farm is $4.09.
BEANS – The bean market didn’t rally on the week but didn’t lose much ground either. At the close Friday, May beans were down 5 ¾ cents at $8.91 ¼. This was 8 ½ cents off the high and 2 ¾ off the low. On the week, beans were down just a penny and a half. As with corn, we saw some rally action earlier in the week, but beans struggled as well to finish it out. While a big crop in Brazil is something we’ve discussed plenty of times, perhaps more problematic is the pathetic showing the Real has had of late. As we continue to see their currency plummet, it’s going to keep them competitive on the world market with the beans they’re still harvesting. I have to think China will be in buying US beans…as they’ve said they would…but at the same time, I’m not sure it will be enough to spur the kind of rally most of us are hoping for. My gut feeling is we’ll get some sort of a bean rally this year…but that it may be short-lived and of course not as much as we’d all like to see. I think knowing where you can make money and aggressively locking that in will be important here in 2020.
DEMAND – Soybean export sales were poor once again as buyers aren’t interested at this point. With net sales of 345k tons for old crop, sales were essentially the same as a week ago. For new crop, just 1,400 tons in sales were recorded so overall levels were lower on the week by around 20k tons. We need to see some more bean exports this marketing year or it could be tough on our carry levels as the USDA would need to lower exports. As far as basis is concerned, beans also moved to the May, which strengthened bids a bit. Local bids for me are 18 cents under the May, which is an improvement of about four cents. Decatur’s basis for cash beans was also improved…likely by a good nickel, moving to a dime over the March. On the river, basis was quoted at 22 over the March, which would be a basis improvement of a couple pennies.
CASH BEANS – Cash bean bids were steady to higher in many areas even though futures markets were off a shade on the week. We know all the reasons making it tough to see a rally on futures, so it’s not worth bringing them up. Essentially, we have a cash market on beans that has stayed relatively strong with basis levels continuing to show strength. While bean prices haven’t been near what we’d all like to see, it could always be worse is how I’d tend to look at it. I’d like to see producers base their decisions on their own individual farms…as it’s not always easy to gauge where prices may go. Plenty of experts out there are good at keeping us more confused than anything…so try to tune the noise out and sell your beans when you know you can make money.
2020 BEANS – November 2020 beans also lost some ground on the week. To close the week, Nov ‘20 beans settled at $9.05 ½, down three cents. Nov20 beans lost 2 ¾ cents on the week. Beans were back up to $9.20 before falling off again. It’s tough to see beans a dollar under where most would like to make sales. However, be aware that most of us have seen yield potential increase to levels we didn’t think we’d see just 5 or 6 years ago. I know we can’t all plan on 10-bushel/acre above APH yields, but the chances we see them and how profoundly they can impact income is certainly not something to ignore. I’m still not pushing sales down here around $9, but I know some can make these prices work. If that’s the case for you, I would never argue with selling a few. The main thing is to pay close attention to your break-evens. And as I said earlier, be cognizant that rallies could be short-lived. Having your offers in plenty in advance makes great sense to me. Selling in increments at profitable levels has always served me well. Also, let me know if me or someone on my team can help you. We have plenty of good tools to assist you in setting up a good 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.
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.
aMatt
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
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