Sunday Night Calls
US – China Update: November Chinese exports fell 1.1% from a year earlier, the fourth straight fall. Additional tariffs would hurt.
PRC Exports to the US were down 23%, the worst such result since February and the twelfth monthly decline in a row.
Another round of US tariffs (156 bil) on Chinese goods is due next Sunday, as part of the ongoing trade dispute.
Last Friday, White House economic adviser Larry Kudlow said the 15 December deadline – to impose a new round of tariffs on some $156bn of Chinese exports – remained in place. But also said there is no hard deadline on trade talks.
A spokesman for China Commerce Ministry said the two sides had agreed to cancel the tariffs “in stages” as the agreement develops.
Reuters and Bloomberg reported that a US trade official had confirmed that some tariffs would be lifted, should a deal be reached.
But US negotiators Friday did not publicly endorse the report and Reuters later reported that the plan faces “fierce” internal opposition in the Whitehouse.
Calls are better on the following reasons:
Expectations that if there is a surprise in the USDA report this week, it would be supportive as corn exports downward revision should be offset with a higher ethanol and feed use. Also acreage and yield could be, but are rarely adjusted until January. Soy exports could also be increased a smidge.
Crops left in the field are still significant and weather questions quality and stand.
S America is idea accept for Argentina which remains mostly dry another 10 days.
Biggest barrier to support is the fear that trade talks will turn sour for the 500th time.
I hope all is well for you and your family. With December, we all have plenty going on…from parties to programs at church or school, it is
a hectic yet fun season. I had to travel this week to Wichita, Kansas, but fortunately it’s the only travel I have for the whole month. It will certainly be nice to be home and with the family for the hustle and bustle of Christmas, especially given January is right around the corner. While I look forward to seeing many of you this winter, the ‘speaking season’ can be quite a gauntlet to navigate. With that being said, if you want to know where I’ll be speaking this winter, it will be posted on our website, which is listed at the end of this newsletter. Hopefully, the weather will be good, not just for travel but for those who still have crops in the field. I’ve seen pictures of snow as tall as the corn posted on Twitter this past week, and I hate to think how frustrated some of you are with the situation. While I know better weather would be desired, many of you have told us you also need the ground frozen, so it’s not going to be easy to finish up. Hang in there…and keep us posted. email@example.com
Corn and beans went down separate paths this past week with beans finally finding some support. With continued strong demand for beans, the lack of a trade deal wasn’t able to keep the market moving lower. With support holding, it was apparent the bears had eaten everyone’s lunch enough for the time being. Dry weather in Argentina likely supported bean prices as well while weather in Brazil continues with no big worries. The corn market struggled though…with talks of potentially large production in South America followed by projections of big US corn acres in 2020, traders seem quite cautious. The frustrating thing in watching the corn market this week is it rallied…most every day before seeing it sell back off. With a December USDA report coming up this week, maybe we could see something able to jolt this market. While this report is usually uneventful, I would be cautious as to think no changes can or will be made. This year has been anything but typical. For outside markets, we saw a mixed feel heading into the weekend as the Dollar was higher on the day while crude also rallied. January crude closed up 62 cents at $59.05. This was 80 cents off the highs and $1.35 off the lows of the day. Jan crude rallied over $3.50 on the week.
CORN – The corn market wasn’t much fun to watch this past week as prices were steady to lower. Even as the bean market rallied, corn couldn’t find spillover support. To close the week on Friday, March corn closed unchanged at $3.76 ¾. This was 2 ¾ cents off the high and a penny and three-quarters off the low. On the week, the corn market lost 4 ¼ cents. This corn market looked as though it wanted to rally most of the week, but no staying power was there as corn continued to be in a narrow range. There simply hasn’t been enough feed for the bull, but maybe we’ll see that change before long. With a December report many are ‘sleeping on’…and for good reason as it’s usually a boring report without any changes…there’s always the chance the USDA will throw us all a curve-ball, which would seem to be of the bullish sort, given the late harvest and uber-bearish demand implications they’ve given us already. I’m still remaining patient on both old and new corn as far as my farm’s sales are concerned.
DEMAND – Demand was mixed on the week with exports off while corn usage for ethanol continues to ramp up. Weekly export sales were 546 thousand metric tons for this marketing year, around 250k less than a week ago. For next marketing year, just 2400 tons in sales were posted, so overall sales were well below a week ago. Corn usage for ethanol was again rather large, coming in just under 107 million bushels, according to the Department of Energy’s EIA report. This was a snall increase but an increase nonetheless. Corn usage for ethanol has gone up for 10 straight weeks now! Basis is moving around a bit as we move to bidding off the March but is staying strong. My area saw basis three under the March, which was an improvemet, factoring in the carry, of a nickel. In Decatur, basis moved to 10 over the March, which is actually a nickel wider than we were. On the river in St. Louis, basis was quoted at 9 cents over the March, which was four cents wider than a week ago.
CASH CORN – Cash corn didn’t do much this past week. In some areas we lost over a nickel of flat cash value as basis widened while futures were lower. While I doubt that trend would continue, we have to remember processors know a ton of grain will be showing up at the first of the year when we all have bills to pay. Therefore, other than a bump around the holidays, I expect basis to stagnate a bit for a few weeks. I would think IF we get a rally in corn, basis would widen…no guarnatees, but it sure seems like processors aren’t excited to pay much over $4. I heard whispers of someone paying 30 over the March in central Illinois this week…from a customer who does business with Indigo. I couldn’t find out who was offereing that though. Again for me, I’m going to wait and see what happens over the next few weeks. I’d like to think we can get a run IF we see a report in January like I hope we see.
2020 CORN – December 2020 corn also had a quiet, boring week. Dec20 closed on Friday down a quarter-penny at $3.90 ¼ as it continues to flirt with sub-$3.90 levels. This was a loss on the week of a penny and three-quarters. I still sit at 20% sold so far, but as I’ve said many times, I’d be glad to sell more, especially with any sort of a rally. If today’s prices work for your farm at conservative yields, it may be smart to get a sale or two on the books, but that’s just how I see it. Locking in profit margins makes it tough for a guy to go broke. I continue to urge those who talk to us to be getting their costs together with projections on yield with acreages for 2020…to find out what break-even is looking like. The webinar Channel has me doing has the third episode in the series this next Wednesday, so be sure to tune in. We’ll be talking about basis and cash management. Go to the website to register…it’s free. Also, don’t forget to use the profitability optimizer or the AgMarket.Net 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 @ $4.20 basis Dec9 after selling corn across the scale.
For 2020 CZ, 20% sold at $4.06. Next target still $4.17.
BEANS – The bean market found support this past week and rallied into the weekend. To close the week, January beans settled 5 ¼ cents higher at $8.89 ½. This was 5 ½ cents off the high and a nickel off the low. Jan beans rallied 13 cents on the week…stopping the bleeding for the time being. Personally, I think the low is in for awhile on beans, but to be totally honest, I didn’t think they’d drop this far either. With solid exports continuing to impress the market and Argentina having hot, dry conditions, it’s not hard to think beans could rally back some of the steep losses we’ve seen in the last month. For the beans I haven’t sold yet, I’m watching for opportunities to sell, keeping in mind how much bean basis has improved the last several weeks.
DEMAND – Soybean export sales were well below what we’ve seen lately, which some attributed to the Thanksgiving holiday, which sometimes sees reduced export interest. With net sales of 684k mt for old crop, sales were almost a million tons smaller than a week ago. For new crop, no sales were recorded so overall levels were again much smaller than the previous week. For basis, we aren’t seeing hear the movement we saw during the glut of harvest, but basis levels are staying solid. Local bids for me are 15 under the Jan, which is the same basis as a week ago. Decatur’s basis for cash beans didn’t change, staying at a dime over the Jan. On the river, basis was quoted at 19 over the Jan, which was a penny better than last week. I still expect basis on beans to not do much for a bit. If this rally continues, it would be reasonable to think we see some widening if we see any movement at all.
CASH BEANS – Cash bean bids were higher pretty much everywhere as basis stayed intact even with the futures rally. While beans looked pretty-much DOA early in the week, the support we tested held and the enthusiasm for selling beans waned a bit. With many seeing beans as having gone enough down for now, it would appear cash beans could continue to build value. It was reassuring to see basis hold intact in the midst of a rally. However, at the same time, what we need to really analyze is how today’s prices, considering a strong basis, match up with our individual farm’s profitability situation. With basis improving up to 60 cents in some areas since the start of harvest, flat cash values have really fluctuated. For me, I’m going to lower my price point to sell beans due to this…and will have offers in place.
2020 BEANS – November 2020 beans also rallied this past week along with the rest of the bean complex. On Friday, Nov ‘20 beans settled at $9.37 ½, up 4 ½ cents. Nov20 beans rallied 10 ¼ cents this past week. I remain 15% hedged…and have considered dropping my next target from $9.83 due to the steep sell-off…and the fact I can still make money at these prices. I’ve always felt like there wasn’t any sense in getting too aggressive early on if solid profit couldn’t be locked in. Our current target (for now) remains $9.83…but a continuance of this rally over maybe $9.60 would be an area to consider more sales from my vantage point. Don’t forget to keep offers current. If you know you can make money, be proactive about your marketing plan and have profitable offers sitting there ready to get taken.
As always, be sure to figure break-evens when deciding whether you want to make sales. For figuring your break-evens, we recommend using either the Profitability Calculator on 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 60% sold/hedged (basis APH) at a board-based average price of $9.46SX for 2019.
For 2020, I got my first 15% sale on at $9.60 SX20.
**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 us know if we can help you in any way.
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