Fall is getting into full-swing for much of the corn-belt. While some of you are sitting due to the weather, where that’s not an issue, progress is starting to be made. Several of you have reported a bit of a laggard start, which I can identify with. There is plenty of replant in many areas of the corn-belt, which makes it tough to go full-bore. On our farm, for instance, we were picking corn on Friday evening in a field that had corn testing 16% up to 26%…a solid quarter of the field was replant, but on an average , we were getting the corn to test no more than 20%. While we considered going off and leaving some of the replant, it makes more sense to us to get it done. Now, given a good chunk of what we’re harvesting so far will collect a crop insurance payment, it’s not paying us at all to go and pick wet corn. However, it is October now, and as we all know, the weather can turn at any point. If I can keep my drying costs down to 10-15 cents, given the kind of year we’ve had, I’m all about rolling along. Some of you west and north of me continue to report excessive moisture and I feel for you all. 2019 has certainly been a challenge. As you get in the field, if you’re like me, you’ll want to make up for lost time. Please be careful though…we all know what can happen when we get to running this equipment in a compromised state. Be safe…and keep the yield reports coming. mbennett@AgMarket.Net
The corn and bean markets both had a nice week with beans leading the way. With yield estimates continuing to come in for the October S & D Report, released on Thursday, it appears the trade is realizing this monstrous bean carry-out won’t be so overwhelming anymore. The average trade guess for bean is 47 versus 47.9 on the September report, which translates to a carry-out estimate of just under 500 million bushels. The USDA was 640 on the Sep report. For corn, the huge drop in ending stocks for the 2018-19 marketing year is also making things interesting as traders look for a yield drop of a bushel and a half down to 166.7 with a carry-out of 1.68 billion bushels versus the September estimate of 2.19! Yes, things have changed a bit, but traders seem more optimistic bean prices will rally. With Brazil continuing to struggle with dryness issues, hampering their ability to plant 1st crop beans and China buying US beans this past week, bean bulls drove the market to solid gains. While corn gained as well, we saw weakness going into the weekend, as the trade seemed quite unimpressed by President Trump’s announcement on his attempt to fix the renewable fuel situation. There weren’t enough specifics in that report to comment on here, so I am hopeful we see a clearer picture in days ahead that is more advantageous to producers and the ethanol industry. Heading into the weekend, outside markets weren’t having a large effect on the market as the Dollar was slightly lower while crude was up a bit. On Friday, November crude was up 58 cents at $53.01. This was 34 cents off the highs and 97 off the lows of the day. Crude was down $3.17 on the week and $5.38 over the past two weeks.
CORN – The corn market started solid on the week but didn’t hold onto the fervor created from the huge drop in stocks posted on Monday. After rallying 20 cents between Monday and Tuesday, the market cooled off…and on Friday, December corn struggled, closing at $3.84 ¾, down four cents. This was 4 ¼ cents off the high and a penny off the low. On the week, the corn market rallied 13 ¼ cents. While we’ll take the rally, it was disappointing to see us give back some of the early-week gains. The quarterly stocks report essentially renewed some faith in the USDA for me as having a better handle on the stocks situation, but at the same time, I’m not happy with how their inaccuracy during the growing season affected our markets. Given the huge drop in corn prices, one has to wonder how our markets might have acted had they been more accurate in their reporting on the quarterly stocks reports in March and June. Regardless, we are where we are…and at this point, we’re in a better spot than a week ago. While the market isn’t going to rally wildly out of control just yet, one thing is for sure…we don’t have the huge cushion when it comes to this 2019 crop. IF we see a production drop on this October report, the rally could get back into full swing. I remain cautiously optimistic but want to remind everyone we’re well off the lows…so looking for opportunities to lock in profit should be at the forefront of all of our minds.
DEMAND – Demand wasn’t anything to get excited about about on the week with exports similar to a week ago, while corn usage for ethanol was up slightly from last week’s marketing-year low. Weekly export sales were 562 thousand metric tons for this marketing year, which about 70k tons more than a week ago. For next marketing year, just 2500 tons were posted, so overall sales were around 75k tons more than a week ago. Corn usage for ethanol was up from the poor number last week, coming in right at 96 million bushels, according to the Department of Energy’s EIA report. This was up a million and a half bushels on the week. As far as basis is concerned, there wasn’t a ton of movement as harvest gets underway. At 8 under the Dec, my area’s basis was two cents improved. In Decatur, basis was status-quo, staying at 12 cents over the Dec. On the river in St. Louis, basis was quoted at 12 cents under the Dec, which is four cents better than a week ago. To be honest, basis levels are staying solid at the beginning of harvest. Barring a big meltdown in prices, I’m not sure we can expect this to remain the trend.
CASH CORN – Cash corn had a nice week as futures prices were up on the week while many basis levels were improving or holding steady. With the rally up to and over $3.90 this past week, I got another 10% sold, as I indicated I would in last week’s newsletter. While I’m not necessarily bearish, getting a 20 cent rally this time of year is something to be rewarded, as far as I’m concerned. I will be looking to re-own some corn basis the March calls as I would like to retain ownership while we sort out the size of both the corn and bean crops. As I said last week, pay close attention to what the basis is telling us. With a historically strong basis as harvest is underway, the market is asking us to bring those bushels to town now. Personally, I’m going to store the beans in the bin…then fill the rest of storage with corn. Given the huge carry in the bean market, a person can take better advantage of on-farm storage with beans than corn…but I’ll still store what corn I can as I like being in ownership of corn. For bushels that go to town, again basis is telling me sell instead of store. While I like to keep my risk spread out, the bulk of my bushels heading to the elevator will be sold…and re-owned for a dime or so basis a limited-risk call.
2020 CORN – December 2020 corn didn’t have near the week the front-month futures had. On Friday, Dec corn settled at $4.04 ¼, down a penny and a quarter. This was a gain of a penny and a quarter on the week. Even with the solid rally this past week, I didn’t get to my goal of $4.17, so I remain at 10% sold. At the same time, I know producers who are getting a bit more aggressive as they see the relationship between their fertilizer prices and the price of corn. Many are locking in that ratio on a decent chunk of bushels, which I think is smart. For my farm, I’m going to remain patient and see how this report goes this week…and hope we see another opportunity to make some sales.
What To Watch For –
On 2019 corn, I’m 65% sold @ $4.28 basis Dec9. New ’19 target will be at $4.04.
1st sale for 2020 CZ hit at $4.07 for 10%.
BEANS – The bean market had a solid week as prices continued to rally into Friday. To close the week, November beans settled 4 ½ cents higher at $9.16 ¼. This was a nickel off the high and 6 ¾ cents off the low. Nov beans rallied 33 ¼ cents on the week. This bean market looks like it has the ingredients to put together a solid rally if the right dominoes continue to fall. Given the drop in stocks, which wasn’t as profound as in corn, the bean situation seems to get tighter by the day. While most were calling for a billion-bushel carry last year and potentially this year at one time, now estimates for this marketing-year are half of that. Given the big reduction in acreage for 2019, any slip in yield on this report or further reports could have a big impact on prices. With South American weather less than ideal, I could see traders getting excited, even at a time when demand remains a big unknown. Now, even as the bean situation looks better than it has in some time, we have to keep our focus on profit margins. IF we get blessed with more weeks like the one we just had, we need to have offers in place in advance to take advantage. As with corn, I’ll remain cautiously optimistic…waiting to make more sales until I see this report and more harvest activity.
DEMAND – Soybean export sales were huge on the week as China was in buying beans again. With net sales of 2.08 million mt for old crop, we were sold twice as many beans as last week…and considering last week was a pleasant surprise, this week was even better. For new crop, no sales were recorded. Overall levels were a million more than a week ago. For basis, some narrowing was the case even as bean harvest gets underway. Local bids for me are 42 under the Nov, which was six cents improved on the week. Decatur’s basis for cash beans also improved…by just a penny, moving to 22 under the Nov. On the river, basis was quoted at 16 under the Nov, which narrowed by a dime! With some optimism surrounding the export market and yields disappointing in many areas, basis was a pleasant surprise.
CASH BEANS – Cash bean bids were solidly higher on the week. With a nice rally on the board coupled with improving basis levels, producers have to be feeling better about bean income than just a week ago. With our farm cutting beans this past week, I had beans on contract. Therefore, I didn’t have to make any decisions on selling versus storing. While I’m going to put some beans in the bin this fall, I know many won’t. So if you’re trying to make that decision, keep in mind basis is wide even after some improvement. The market is pretty much the reverse of corn…in that it’s telling you not to sell them just yet. I’m not a huge fan of commercial storage, but at this point, I believe I’d store those beans and see how this crop plays out. That’s just me though…as always, base your decisions on your farm’s profitability.
2020 BEANS – We had a solid week for November 2020 beans as well. On Friday, Nov ‘20 beans settled at $9.62 ¾, up a penny and three-quarters on the day. Nov20 beans went 22 ¼ cents this past week. I made a sale the last time bean prices rallied to this level. My next target to make another 10% sale is going to be $9.83. I will stay flexible though…I may sell a few more on a further rally. One thing is for sure, we didn’t get many chances to this point on the 2019 crop to sell anywhere close to $10. Will we get it this year? I think we have a shot…although IF South America gets straightened out, don’t expect the rally to stick around forever.
As always, be sure to figure break-evens when deciding whether you want to make sales. For figuring your break-evens, I recommend using either the Profitability Calculator on the Channel website or the AgMarket.Net Profitability App to help you get a handle on your budgets and to set your marketing plan for 2019 or 2020. I’d be glad to help, so be sure to reach out. http://www.channel.com/Markets/Pages/Profitability-Calculator.aspx
What To Watch For –
My targets for cash beans are $9.30 & $9.57 basis the Nov. I’d have offers in now to take advantage of any rally unfolding.
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.
I hope you have a great week. Please let me know if I can help you in any way.
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