Sunday Night call is easier on follow through from Friday’s fear driven sell off. The Coronavirus is a serious problem and will cut travel and entertainment spending dramatically. It is fair to ask how this virus would cut into food consumption. History tells us that it really does not cut into normal daily consumption. But it should cut into restaurant demand and travel. As of tonight, China has restricted travel in 16 cities affecting 15 million people. Msny countries are working on evacuation strategies for their people from China.
Compare latest data:
Coronavirus US 5 sick, PRC ~2000 sick. Total deaths 56. The initial market response is to get out of all risk positions on the possibility the economy could drag everything down if everyone stopped spending. But looking at the market during the SARS disease, you probably do not need to panic too much. Bigger factors like when will China buy, can we compete with the S American crop, will support hold with markets over sold?
SARS – started in Nov 2002 and peaked in June 2003.
Corn prices in Oct 2002 247’4 v June 2003 244’2 nearly unchanged .
Soybean prices in Oct 2002 578’6 and in June 624’4 or up ~8%
Dow prices Oct 2002 8850 and in June 2003 8852 – basically unchanged
Bill Biedermann
Below are Matts Comments:
Please take a minute an sign up for our meeting in Council Bluffs https://www.agmarket.net/its-profit-not-price/. We have a great line up of speakers. I’m telling you that you will walk away with direction. Maybe not market direction but you will get strategy and profitability direction.
| I hope all is well around your place. I haven’t seen my place much this past week. I went to Madison, Wisconsin then to Farm Futures in Iowa, where I spoke at that event Wednesday, Thursday and Friday. I’m worn out right now…but Tif and I get to spend 4 days together from yesterday until Tuesday with a group of growers in the Dominican Republic. I know you likely feel sorry for me…or not. TO be honest, we don’t get a chance to go anywhere alone often, so we’re really looking forward to this as I write on Friday night. This week I will be speaking at Top Producer Seminar and after next week’s AgMarket.Net meeting in Council Bluffs, I’ll finally slow down. I am certainly looking forward to being home. I hope you’ve been able to be home for the most part. Let me know if you’re going to be at any of these events. Either way, stay in touch. mbennett@agmarket.net |
| The corn and bean markets seemed to be on different trajectories going into Friday as the bean market couldn’t find any footing while corn finally broke out of its range, settling over $3.92 basis the March. The close on Thursday led to hopes we’d see follow-through buying on Friday. We didn’t get that by any means as corn reversed and closed with big losses, following along with the weak bean market. China’s issues with ‘Coronoa-virus’ has led to fears that any demand bump seen from a potential Phase-I trade deal could possibly be mitigated. As well, we know any Chinese buying is unlikely to materialize until February as the deal is supposed to start tracking purchases then. It sure looks like a steady market for corn and steady to lower for beans moving forward…hopefully, that will change. As far as the outside markets are concerned, a negative contribution was felt as the Dollar was higher on Friday while crude was lower. March crude closed down $1.39 at $54.20. This was $1.75 off the highs and 35 cents off the lows of the day. Crude lost $4.64 on the week! |
The corn market had a great day on Thursday but quite disappointing day on Friday. With a breakout on Thursday, hopes for a rally on Friday were dashed in a big way as March corn closed 6 ½ cents lower at $3.87 ¼. This was 6 cents off the high and just three-quarters of a penny off the low. On the week, the corn market lost two cents but seemed much worse after making a intermediate-term high for the move then settling lower on the week. Simply put there’s not enough buying interest in corn. Seeing us break out of the trading range we’ve been in for some time didn’t get anyone to step in and buy the market to any degree. This is concerning but doesn’t change my overall outlook. I still see cash holding their value but struggle to see a big rally for new-crop corn. Only time will tell, but it sure seems like we’re looking at two totally different situations between the two.
DEMAND Demand was pretty solid on the week as exports were sharply higher than recent totals while corn usage for ethanol was off from the big number a week ago. Weekly export sales were just over a million metric tons for this marketing year, up by over 250k from a week ago. For next marketing year, just 2k in sales were posted. Overall sales were over 50k in excess of last week’s totals. Corn usage for ethanol was down moderately at just under 106 million bushels, according to the Department of Energy’s EIA report. This was a decrease of around 4 million bushels. Basis continues to be solid in most every area I check on. My area saw basis two under the March, which is two cents wider than a week ago. In Decatur, basis didn’t change, staying at 14 over the March. On the river in St. Louis, basis narrowed a nickel, moving as to 19 over the March.
CASH CORN – Cash corn was lower on the week as futures were off a couple while basis in most areas was steady. With all the corn moving…which isn’t as impressive as most years…a person would think basis would really weaken but that hasn’t been the case. I still hear originators saying they can’t get the corn bought they were hoping for. One big issue moving forward is going to be quality…especially where corn was excessively wet when harvesting and test-weights were light. I’d expect this phenomenon will be highlighted by the quarterly stocks reports that come out in March and June…but for the time being, look towards basis to get a handle on how bad they need the corn. As I’ve said before, I look for basis to do the work of getting cash bought…i don’t have confidence the futures will rally, but i sure hope I’m wrong at the same time. As always, the main thing moving forward is to have a plan with regards to your corn in the bin, on basis contracts or in storage. Let us know if you need help with that plan.
2020 CORN – December 2020 corn was also jumping around, following along with front-month futures fairly closely. Dec20 closed on Friday down a nickel at $3.98 ¼. This close put Dec20 prices 4 ½ cents lower than the close from a week ago. It seems the ‘new-corn’ market is struggling to see buying with all of the talk of big acreage floating around. Informa came out with an estimate of 93.4 million acres this week, which to be honest, is a bit low compared to many ideas including my own. While I’m not sure we can get over 95 million acres with the liquidity challenges we see here in 2020, it wouldn’t surprise me if we plant 95 or close to it. 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 and I put together that I’ve mentioned several times continues to be a great tool for producer to access if they need help understanding how to get a plan in place. As always, don’t forget to use the profitability calculator on the AgMarket.net app to see how your profitability is shaping up. If you need help with a marketing plan for 2020, let usknow and ‘we will walk you through it. https://www.agmarket.app/app/
What To Watch For
On 2019 corn, my farm is 80% sold @ $4.30 basis March20. We are holding for now
For 2020 CZ, up to 30% sold at $4.05. Next target for me and my farm is $4.09.
The bean market is on the struggle bus and riding clear at the back. No one seems interested in buying beans right now as evidenced by the poor performance, especially heading into the weekend. On the close Friday, March beans settled 7 ½ cents lower at $9.02. This was 9 ¼ cents off the high and a penny and three-quarters off the low. On the week, beans were down 27 ¾ cents and 44 cents over the last two weeks. As said earlier, the bean market can’t seem to see the light of day. With many looking for Chinese purchases of US beans, one has to wonder how they’ll do that when US beans aren’t as cheap as Brazilian beans…which will be coming on-line in the next few weeks. I hope and pray these huge purchases materialize as we need them big-time…but as a producer, we must operate based on the market today and not the hope strategy. While I’m not real bullish still, I have to think we’re going to run out of selling pressure soon.
DEMAND – Soybean export sales were slightly above totals from a week ago. With net sales of 790k tons for old crop, sales were 80k tons better than a week ago sales. For new crop, 121k in sales were recorded so overall levels were around 200k tons more than a week ago levels. As far as basis is concerned, there again hasn’t been much movement. 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 22 over the March, two cents improved from last week. Bean basis isn’t improving enough given the huge drop in futures prices in my opinion…hopefully one or the other will improve moving forward.
CASH BEANS – Cash bean bids were sharply lower this past week. With the basis improving slightly in some areas and remaining constant in others, dropping 27 cents on futures sure hurts. Again, no one seems to interested in owning beans. Where the funds had bought back their shorts driving a nice rally starting around the first of December…they sure don’t seem as interested in buying them now. Part of the problem as well is the lack of a weather issue in South America, which suggests they could see a record crop due to big acreage combined with good yields. I sure don’t wish any ill will on anyone, but a big crop on both the first and second crops in Brazil is the last thing we need to see. As far as moving cash beans go, we’ve had some great opportunities. While I’m not saying the market is over, it may be tough to make a run back to new highs. Market your beans according to your farm’s profitability…be tough to go wrong if that’s the way you handle it.
2020 BEANS – November 2020 beans again lost ground this past week as pressure from nearby contracts carried over to new-crop. To close the week, Nov ’20 beans settled at $9.38 ¾, down 8 ½ cents on the day. Nov20 beans lost 21 ¾ cents on the week…and has lost 36 cents in the last two weeks. I am still sitting at 25% sold for 2020 beans but always considering adding to sales. Our target was $9.83 to get another 10% sold…but our team also is likely to sell some beans cheaper than that. Given how profitable some of our clients can be anywhere close to $9.50, it’s tough to not sell a few. Either way, we need to have a plan in place. Call us if you want help with your 2020 marketing plan. We’d be glad to help you get it put together.
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 2020. We’d be glad to help, so be sure to reach out.
What To Watch For –
For 2019, I am 70% sold/hedged (basis APH) at a board-based average price of $9.64SH. 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. Look to sell more on a rally to $9.83.
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Matt
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
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