Sunday night calls are steady to lower on follow though from Fridays selling. Good weather in S America and the fact that nothing is probably going to happen with Chinese buying US goods this week. I have however heard that Mnuchin and Liu may be ready to sign on off on draft text by Jan 8. Hope so. There was an article in China today that suggested the impeachment drama might become an obstacle. Understandable. Comments from both official channels are adamant that the deal is getting done. It is a win – win and both sides needed that. Note – most of Friday’s sell of was related to Jan bean options expiring. A close below 930 tanked all the calls.
Bill Biedermann
Matt Bennett’s weekly Commentary
I hope Christmas was great for you and your family. We were quite blessed to get our whole crew together. While we’d hope it would happen every year, my oldest daughter’s husband is in the Army…so they could be few and far between from here on. Man I really do feel old when I talk like that though…while I’m not a grandpa yet, I suppose I can assume it will happen sooner rather than later. Once that happens, I can’t imagine not seeing them fairly often. Life comes at a person fast, doesn’t it? A couple of you have reached out and heard a radio program I was on for Christmas. The guy who put it together is Jeff Nalley from Kentucky. Here is the link if you’d like to listen. http://www.farmboaudio.com/5_Aux_Audio/0001.mp3 It is the story of our daughter Abileen and her fight with E-Coli and HUS. I have to say it was possibly the hardest interview I’ve done…but it has had a good ending to this point. I know many of you have fought similar battles and even lost a loved one unexpectedly. If the last couple of years have taught me anything, it’s that the ag community is amazing at lifting brothers and sisters up. I really appreciate those who take the time to reach back out and communicate with me. Keep the dialogue open and let me know how things are on your end. mbennett@AgMarket.Net
Corn and beans were able to etch out a positive week, although it wasn’t quite the winner we’ve seen of late…particularly with soybeans. While the holiday-shortened week looked solid for much of the time we traded these markets, Friday wasn’t a great day for beans. With January options expiring and January bean futures seeing first notice day this week, we saw the buyers step to the sidelines. While the funds are still short this bean market, they don’t seem too excited to cover those shorts just yet. With plenty of speculation on just what volumes of export business we’ll see, even the Chinese have said they’d be buying corn, beans and wheat…along with ethanol, beef and pork. I realize this begs the question from most of us in ag…why aren’t we seeing a huge rally? Well, it’s safe to say we’ve seen a rally in the last month for both corn and beans…it just isn’t as big as most people would prefer to see. I’d assume once we start selling and loading vessels with corn…verifying this is all really going to happen…things could possibly get a little more volatile. As far as the outside markets are concerned, we saw a bullish tilt heading into the weekend as the Dollar was weak on Friday while crude steady to higher. February crude closed up just four cents at $61.72. This was 25 cents off the highs and 48 off the lows of the day. Feb crude rallied $1.36 on the week.
CORN – The corn market continued the supportive/friendly feel as we get closer to the end of the calendar year. On Friday, March corn closed up a penny and a half at $3.90. This was a penny off the high and two cents off the low of the day. On the week, the corn market rallied 2 ¼ cents and 13 cents over the last three weeks. There really wasn’t a ton of news for the corn market to digest this past week, but the sellers who’d been so active in late-harvest are still at bay for the time being. It would seem to me this January report will have plenty in the trade a bit worried about taking too much risk. This report coming up could be a big one. With the guys I work with at AgMarket.net, we have been lamenting on just how much could be conceivably taken out of the carry for corn. IF we would happen to see a Chinese purchase of corn soon…prompting the USDA to at least consider keeping exports the same, it would be tough to think corn carry would do anything other than drop at least 150 million bushels…this is opinion of me and my cohorts. We aren’t alone though…not by any means. This doesn’t mean I’m bullish…I’m supportive and looking at any rally as opportunity. I hope everyone who reads this understands exactly what I’m saying…rallies aren’t rallies unless they get sold.
DEMAND – Demand was mixed with exports off sharply as was expected by most traders…while corn usage for ethanol continues its tear. Weekly export sales were 625k metric tons for this marketing year, over a million metric tons less than a week ago. For next marketing year, a shade over a ton in sales were posted. Overall sales were sharply lower than the big number from a week ago. Corn usage for ethanol was solid again this week, coming in just under 109 million bushels, according to the Department of Energy’s EIA report. This was an increase of around two million bushels. Corn usage for ethanol has gone up 12 out of the last 13 weeks! Basis has held right in there for corn, even as we continue to see strength. 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 the same as a week ago. On the river in St. Louis, basis was quoted at 16 over the March, which was six cents improved from a week ago. Basis continues to impress…but I’d have to think we’ll see weakening at some point as we start seeing plenty of grain move. IF we would see the rally continue, it would shock me if basis didn’t back off a bit.
CASH CORN – Cash corn rallied on the week once again as futures were higher while basis continues to stay steady to improved. It’s been a good few weeks for those who didn’t give up on this corn market. I know a ton of producers, including myself, who have some bushels on a basis contract. I get asked about what to do there pretty much every day. As with any ownership of corn right now, I’d be hesitant to give up too much ownership if I didn’t have to. Now, if a person can lock in solid income, there’s nothing wrong with selling out and focusing on 2020. As far as my farm is concerned, I’ll likely keep ownership of corn either with physicial bushels or on paper. I want to see the January report before I give up too much ownership. While I could be disappointed, that’s why I’ve tried to manage some of the risk that is present by taking that stance.
2020 CORN – December 2020 corn also held its own this past week. Dec20 closed on Friday up a penny and a half at $4.03 ½. This was a rally on the week of a penny and three-quarters and 13 cents in the last three weeks. We got up to $4.04 on Friday, but didn’t trade another tick, so those who had orders in didn’t all get filled. My team at AgMarket.Net decided to make our next target at this price, so we certainly have people getting up to that 30% level I’ve talked about lately. Many are buying a call to stay in the game on new corn…’insulating’ the hedge. I wouldn’t get carried away on cost, but the month I’d look at is the August short-dated calls, which expire in late July…which gets you through summer weather. I have been working on people 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 https://register.gotowebinar.com/recording/267519279209723137. As always, don’t forget to use the profitability optimizer to test your strategy using the AgMarket.net app. This will show you how your profitability is shaping up using any type of strategy. 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. Waiting for report for next move.
For 2020 CZ, up to 30% sold at $4.05. Next target for me and my farm likely at a similar price as my current average…$4.04
BEANS – The bean market was performing similar to what we’d seen the last month, but cooled off a bit on Friday. On the close, March beans settled a nickel lower at $9.41 ½. This was 9 cents off the high and 3 off the low. On the week, beans posted minimal gains after seeing a half-dollar rally in the last three weeks. This bean market is still abuzz over potential Chinese business but looks a bit tired as we move into the end of the year. With weather in Brazil improving in the next couple of weeks after a brief dry period, the market ran out of buyers. In all honesty, with the funds still holding a moderate short position, I’ve thought they may get those covered before the January report…and they still might. However, for the time being, the bean market backing off a bit after such a strong run should be expected. I am more in the ‘neutral’ camp for now…at least thinking we should be protecting some of what we’ve gained of late.
DEMAND – Soybean export sales were well below a week ago levels. With net sales of 736k t for old crop, sales were right at half of what we had posted a week ago. For new crop, just 11k in sales were recorded so overall levels were around 800k tons less than a week ago levels. It was mostly expected exports would be off this week coming into the holidays, but hopefully we’ll see a resumption of big sales once the new year hits. Local bids for me are seven cents under the Jan, which is three cents improved on the week. Decatur’s basis for cash beans also improved three cents, moving to 18 over the Jan. On the river, basis was quoted at 28 over the Jan, which was two cents wider than a week ago. Bean basis continues to be impressive in most places…even with the recent rally.
CASH BEANS – Cash bean bids were mostly steady this past week after several weeks in a row of higher net cash prices. With beans having such a great run of late, I’d have a hard time not selling some. When you look at the way beans have rallied between futures and basis appreciation, a producer who held off on making bean sales has done themselves a favor. By looking to manage some price risk in here or make a sale or two, that doesn’t necessarily make a person a bear. Again, I’m more neutral than bullish or bearish. It’s tough to get too bearish beans, especially with talks of big sales into China again. We’ve already seen them buy decent quantities, so with the Phase I agreement, it appears those sales will continue. As I said last week, we moved to 70% sold on old beans. If you can make money, moving to totally sold isn’t necessarily wrong. It’s all about making money. I’ll look to sell more beans if we can see March climb to the $9.55 area.
2020 BEANS – November 2020 beans posted a small rally on the week, giving back some of the gains on Friday. To close the week, Nov ‘20 beans settled at $9.69 ¾, down 2 ½ cents on the day. Nov20 beans rallied 3 ½ cents this past week and 45 over the last month. I am currently sitting at 25% sold for 2020 beans and would be ok sitting there for the time being. Our target is $9.83 to get another 10% on. What matters most when hedging next year’s crop…as always…is if you can post profits. Beans in this area look really good for producers I’ve gone through profitability spreadsheets with. Make sure you consider what these prices mean to you. Let me know if you need help with a marketing plan for 2020.
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. 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