Good Morning!
I hope things are running smooth around your place. With harvest starting to heat up, I’ve noticed most people are telling me they’re not quite able to go full-bore due to how variable these crops are. With replant in many fields, it certainly makes it a challenge due to the differences in moisture levels. We did get started finally. We cut some beans on Thursday and again on Friday. They were borderline on moisture as again we had to spot in beans here and there after a couple of 5-inch rains this spring. My loads so far have ranged from 13-15%. I hate to take a moisture dock, but at the same time, had beans I knew were ready in those fields. The problem is not all of the beans in the field are maturing the same and the replant that are spotted in are messing up my test. Yields aren’t terrible by any means, but 20% or more below a year ago…in fairness, those were some big yields. Regardless, I would imagine we’ll switch over to corn on Monday and see if we can find some dry enough. I’m hearing guys locally who are into earlier-planted corn that’s testing 17-18%, but the average of what I’ve heard so far is in the low-20s. Yields in Illinois continue to be variable but leaning towards the low-end, while growers from Iowa, Nebraska and Missouri seem a bit happier. The early yields were supposed to be the best, so I can’t help but think yields will likely be revised lower again in October. Bean yields seem below what most people thought coming in…much more consistently than with corn. I expect those to come down as well. I appreciate those of you who are sending yields. Keep them coming. mbennett@agmarket.net
The corn and bean markets seriously had the most boring week when it was all said and done. While we had some movement on the overnight markets at times, it seemed like things quieted down during the day session and movement overall was minimal. Yield talk seems abundant with most of the talking heads thinking yields are a bit low, however the markets haven’t paid much attention. Trade talk was positive on the US/Japan trade agreement, which was signed, but the US and China remain on shaky ground. With President Trump reportedly looking into restricting capital investment ability into China from the US, this trade war could take an ugly turn into a financial war. With the democrats talking about impeachment hearings, passage of USMCA could be a way off yet…as well as any actual work to be done. I’m not a fan of talking politics…especially right now…what a mess. Heading into the weekend, outside markets likely had a minimal impact as the Dollar was quiet while crude was off a bit. On Friday, November crude was down 23 cents at $56.18. This was 58 cents off the highs and $1.43 off the lows of the day. Crude was down $2.21 on the week.
CORN – The corn market didn’t see much action on the week. Without too much back and forth, corn ended the week quietly. On Friday, December corn closed at $3.71 ½, down a penny. This was a penny and a half off the high and a penny and three-quarters off the low. On the week, the corn market picked up three-quarters of a penny. There wasn’t a great deal of information out there this week. With a big report on Monday (USDA Ending Stocks) it seemed like the market was a bit dead to end the week. Buyers seem reluctant to buy corn with demand issues continuing to persist…even in the wake of plenty of discussion around disappointing corn yields. Those on the selling side seem satisfied for the time being that the market has gone down enough for now. IF we see bearish information on Monday, I fully expect a return towards the lows we set previously but can’t see making new lows with the information we currently have. I could see a bullish report on Monday given the USDA cut feed demand in March after a harsh winter with huge livestock numbers…yes, exports have been disappointing, but given how strong basis has been in the last several months, I struggle to believe we have as much corn sitting around as the USDA has suggested.
DEMAND – Demand wasn’t anything to brag about on the week with exports way off of the big number a week ago, while corn usage for ethanol was poor. Weekly export sales were 494 thousand metric tons for this marketing year, which about a million tons less than a week ago. For next marketing year, no sales were posted, so overall sales were over a million mt lower than a week ago. Corn usage for ethanol was six million bushels lower on the week, coming in at a marketing-year low of 94.5 million bushels, according to the Department of Energy’s EIA report. As far as basis is concerned, there wasn’t quite as much movement as a week ago. At a dime under the Dec, my area’s basis was status-quo. In Decatur, basis narrowed by two cents, moving to 12 cents over the Dec. On the river in St. Louis, basis was quoted at 16 cents under the Dec, which is a dime wider than a week ago. With more harvest activity around the river, corn basis was bound to get a big wider.
CASH CORN – Cash corn didn’t have a big week on any count as basis didn’t change much in most areas while prices on the board moved less than a penny. I’ve been getting plenty of calls on what to do with corn that isn’t sold going into harvest. The corn you can hold at home, I’d probably store and try to manufacture some money out of it..but keep in mind basis is way better than it was a year ago. In many areas, it’s 30-50 better. I understand the dilemma on bushels that have to go to town as commercial storage costs continue to go up. If we look at previous years, in most years it’s been tough to get commercial storage to pay, although last year in many cases, producers were able to make good money even with corn put in the elevator. This year we can’t ignore what basis is trying to tell us. Basis is strong even as we get into harvest…the market is telling the producer it wants the corn now. So…if a producer is bullish corn, selling the corn and re-owning would make some sense, while locking in basis could be an option on a few bushels as you’ll still get some money in your pocket. I personally would prefer getting all the money though…by selling and then re-owning. Keep in mind storage costs out to March would be 25+ cents in most places…you can get an in-the-money $3.80 March call for under 18 cents. I’m not furthering sales just yet, but if we saw a rally on Dec up to $3.90, whether it be on the report Monday or Oct report, I’ll be selling another 10%.
2020 CORN – December 2020 corn performed about the same as Dec19. On Friday, Dec corn settled at $4.03, down a penny and a quarter. This was a gain of a penny. Given I have 10% of 2020 corn sold right now and it’s a year until harvest, as a producer, I need to be looking at more sales IF I know I can make money. As fertilizer prices trickle in and you book expenses, plug them into your profitability calculator on the Channel.com website or my app for those who use it. If at average yields you can pencil profits, it’s not a bad idea to make a true hedge. For my farm, the next target will remain $4.17 for another 10%.
What To Watch For – I am out of 2018 corn. My final average was $3.74 CZ8 or $4.01 CN9 plus the gain from the calls I purchased to keep ownership (Net 31 cents).
On 2019 corn, I’m 55% sold @ $4.31 basis Dec9. New ’19 target will be at $4.04.
1st sale for 2020 CZ straight hedge of Dec20 at $4.07 (10%)
BEANS – The bean market had a similar week as news wasn’t in abundance…and activity was minimal as volume wasn’t too heavy. To close the week, November beans settled 5 ½ cents lower at $8.83. This was 6 ¼ cents off the high and a penny and a half off the low. Nov beans rallied a whole quarter of a penny on the week. While it’s nothing to get too excited about, it’s better than seeing them go down. With the bean situation focused heavily on demand, it’s tough to see a rally right now. As with corn, yield reports seem to be quite disappointing, which isn’t hard to fathom, considering what the crop went through. As with corn as well, early-planted beans were supposed to carry yields…but given the stress they went through, my hope is the later beans don’t fall off too bad on yield. I am encouraged by Chinese purchases of beans of late…but concerned if we try to limit investment of US money into China how it might impact any progress made. I am hopeful they need the beans bad enough we can still sell them more…but again a bit cautious. I’m still of the opinion I want to see how these two reports play out as well as yields this fall before giving up on this bean market. While I don’t see a huge rally unfolding, I have a tough time being bearish at these prices.
DEMAND – Soybean export sales were again good-sized but nothing like we saw last week. With net sales of 1.04 million mt for old crop, we saw an decrease of over 700k tons. For new crop, no sales were recorded. Overall levels were again over 700k smaller than a week ago. For basis, similar action as with corn was the case with the river the only place any basis moves were seen. Local bids for me are 48 under the Nov, which was status-quo on the week. Decatur’s basis for cash beans also stayed constant…staying at 23 under the Nov. On the river, basis was quoted at 26 under the Nov, which narrowed by six cents…likely due to solid export demand of late.
CASH BEANS – Cash bean bids didn’t do much at all this week. With harvest getting underway though, it’s nice to see basis holding together. Basis stinks in most places, so it’s not like the situation with corn…where it’s tight enough to help make up for the prices…but at least it’s not getting weaker yet. When it comes to these bean prices, again I’m going to be patient. Bean basis is likely to have a better chance to improve than corn does. Therefore, I’m more likely to store as many beans as I can…the ones that aren’t sold going in of course. Given carry from Nov to July is currently 46 ½ cents, it may make sense to sell the July and wait to see what basis does. Given how wide it is now, my assumption is we’ll have a decent shot of it getting better. As I keep saying…overall, I want to see how this bean crop turns out. I can’t get too bearish in here…even though demand is likely to remain a huge question mark.
2020 BEANS – We had a quiet week for November 2020 beans as well. On Friday, Nov ‘20 beans settled at $9.40 ½, down 3 ½ cents on the day. Nov20 beans went up a quarter of a penny this past week. I don’t have much to add to what I’ve been saying lately. With bean prices in this range, I’d certainly get a sale or two on the books IF it was profitable to do so. While most are talking about corn acreage going up substantially, it’s hard to get bullish beans longer-term as the South American crops seem to keep getting bigger every year. Given their ability to expand, it concerns me a bit, especially if we get into a situation where commodity markets are more profitable than we see today. Long story short, I have a tough time being bullish 2020 beans.
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 – I’m 100% sold-2018 beans with average of $9.63 cash.
My targets for cash beans are $9.16 & $9.41 basis the Nov. I’d have offers in now to take advantage of any rally unfolding. I am down to 50% sold/hedged (basis APH) at a board-based average price of $9.50SX 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. There are tons of good tools out there.
I hope you have a great week. Please let me know if I can help you in any way.
Matt
217-273-1133 – Work
@chief321 – Twitter
mbennett@AgMarket.Net – E-mail
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