Weekly Grain Update – March 6, 2018

 

3/6/18

USDA To Release March Crop Report On Thursday

The USDA will be out with its March crop report on Thursday March 8th at 11 am.  As we look at the supply and demand tables we expect the corn supply to tighten up a bit due to its relative low cost to the world.  US corn is the cheapest source of corn in the world, and this will likely remain intact until early summer.  We have also seen corn exports remain stout, ethanol crush remain firm, and feed demand staying strong with the price of cattle now at $125.  On Thursday, I would not be surprised to see the USDA make a slight increase to corn exports due to our extreme price competitiveness.  Additionally, I would not be surprised to see corn carryout to be trimmed in a small way on Thursday.  As of right now, we have the corn machine running on all 8 cylinders with ethanol, exports, and feed all supporting a great demand base.  We also have the issues in Argentina and Brazil which are supportive.  Brazil is too wet and having a hard time getting their second corn crop planted and Argentina’s dry conditions are reducing its first corn crop down to 37 MMT or so.  This means the world will be coming to the US to buy corn, and this should keep our basis very firm at the gulf.  This will keep the corn basis relatively firm for the majority of the Corn Belt as this strength moves up the Mississippi.  December 18 corn futures made a fresh high on Monday at $4.06 with steep farmer selling.  I expect Dec corn to trade to the $4.15 to $4.20 before running out of steam and retreating.

The bean situation is different than corn.  We all know about Argentina’s dry weather problem and its affect on the bean meal and soybean markets.  However, right next door to Argentina sits Brazil with a huge and growing bean crop on their hands.  Reports surfaced last night that Brazil’s bean crop will top 117 MMT even though Argentina’s bean crop could be trimmed down to 42 MMT or so.  For every bean bushel that Argentina loses, it seems that Brazil is gaining.  The problem is that the US is not the cheapest source of beans in the world.  Brazil is.  And the largest bean buyer in the world is China.  As of late, the majority of China’s bean purchases have been coming from Brazil, and their Chinese bean purchases are expected to really ramp up as their bean harvest nears 50% completion.  On top of all of this, the Trump administration just slapped a 25% tariff on steel, a 10% tariff on aluminum, and has already placed tariffs on Chinese washing machines and solar panels.  Are we going to have a trade war with China?  We have already seen what China did to the milo market.  They stopped buying our milo last month and the Texas Gulf basis crashed.  Will the same thing happen with beans?  One thing is for sure, these tariffs won’t help us sell the Chinese more beans.  However, they need our beans, and there is no one on earth who can supply the quality and quantity of beans to them in short order.  As bean vessels back up in Brazil’s ports over the next 60 days, the Chinese will likely send business to the US if the line up becomes too long.  Still, we are only getting the “crumbs” and not the full blown bean sales from them.

The point of all of this is that I fully expect bean exports numbers to be cut in the coming months.  The current USDA bean export number is 2.1 B bu.  I would not be surprised to see this number be cut down at least 2.0 and more likely 1.95 B bu when the dust settles.  The current bean carryout is 530 M bu.  This is a huge amount of beans.  If the above happens, all of these bushels will increase the bean carryout number to 700 M bu or so.  If the Chinese all of a sudden enter a trade war with us, this bean carryout number could grow to 800 M or so.  We have not seen a bean carryout number this big since the CCC days in the mid 80’s.  And if this situation develops, our bean market will surely be pressed lower, and possibly significantly so.  An 800 M bu bean ending stock number will likely cause November bean futures to drop at least $2.00 by harvest.  November bean futures made a fresh high on Monday at $10.44 and I see clear overhead resistance at the $10.50 level.  We have seen a huge run up in prices with the market closing higher 15 out of the last 16 trading days.  The market is getting overbought, and everyone is moving to one side of the boat.  It is time for a pull back because markets do not trade higher forever.  Again, I do not have any problem of having at least 50% of my bean APH forward contracted for fall delivery here with November bean futures at the $10.40 level.  I personally think before the report on Thursday, it would be a very prudent thing for you to do to protect your farm.  To see where our cash grain bids are currently trading, please click here.

Take Advantage Of Short Selling Opportunities With Online Targets

Just prior to the monthly USDA grain reports, volatility really ramps up in the grain markets.  This causes the futures levels to move around much more than during the rest of the month.  I encourage all of you who need to sell grain to use targets to take advantage of a pop in the market.  It is simply amazing what these markets can do in a very short amount of time.  There is simply no way we can communicate to all of you during a 15 minute rally that happens right during a crop report.  That is why targets work so well.  It allows you to have resting orders already in position at Chicago so when the market starts to gyrate, your orders get picked off and you can take advantage of a very nice pop in the market. Targets are a great tool to help you lock in better returns for your farming operation.  You can call us and we can enter them for you, or you can do it all by yourself by entering them online through our Online Bid Center by clicking here.

What Are The Charts Telling Us?

Looking at the charts today, all grains made a fresh high on Friday last week.  Since then, we have been pulling back.  I get the sense that the market is due for a correction as all grains are seriously over bought.  Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – May 18 Corn Futures – Support at $3.78, Resistance at $3.88, Place Targets at $3.85

New Corn – Dec 18 Corn Futures – Support at $4.00, Resistance at $4.06, Place Targets at $4.04

Cash Beans – May 18 Bean Futures – Support at $10.50, Resistance at $10.82, Place Targets at $10.74

New Beans – Nov 18 Bean Futures – Support at $10.24, Resistance at $10.44, Place Targets at $10.38

New Wheat – July 18 Wheat Futures – Support at $4.92, Resistance at $5.31, Place Targets at $5.21

FRIDAY – Signup Deadline For July Delivery Corn, Beans, or New Crop Wheat Average Price Contracts

Friday is the last day to sign up bushels to be enrolled in our average price contract program for old corn, old beans, or new wheat, for July 18 delivery into the elevator.  This is for old crop corn or beans that you are storing in the bin, or new crop wheat that will be harvested in July.  This contract is a cash contract and will use a 10 week period to average the price.  We will average the price from March 14th through May 16th.  We will simply average the closing prices each Wednesday during these periods, pricing 1/10 of your contracted bushels each week during the period.  At the end of the period, we will simply average the prices together.  There is no minimum quantity and the best part of these contracts are that they are FREE.  There are no fees associated with these averaging contracts.

The nice thing about the averaging period on the old crop contract is that you are locking in the market carry to July on your old crop bushels.  For old crop bushels, the earlier you can sell the bushels in the crop year for delivery later in the crop year, the better.  You will capture more market carry and put it in your pocket.  These contracts are simple, easy to understand, and they work.  Every farmer should put a decent amount of grain into these contracts to help protect your farm.  For more information on these exciting new contracts, please click here.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

 

Marcus Cordonnier

Weekly Grain Update – February 28, 2018

 

2/28/18

South American Weather Issues Are Still The Market Focus

The weather issues in South America continue to be the main focus of the grain trade as of late.  The market is now getting very pessimistic on the rain prospects in Argentina, and is refusing to back off until the rain actually falls, and at least curbs to short term devastation.  Argentina remains dry and Brazil is suffering from too much rain that is delaying their bean harvest and delaying the planting of their second corn crop.  On top of all of this, the values of soybean meal have skyrocketed higher and now this market is being traded by individuals farther and farther away from our ag industry.  Soybean meal is the market leader now.  Argentina is the world largest exporter of bean meal, as roughly 50% of the country’s bean meal production is exported out of the country.  If you take this away due to dry weather and much less bean production, the world needs to suddenly go to Brazil or the US for its bean meal needs.  This is the reason bean meal is on fire, and it is the driving force behind the rally in beans, and the firmness in corn and wheat as well.  May bean meal futures are now just under $400 a ton, and this market has a full head of steam, pushing up each day.  Livestock producers who use bean meal need to start looking for substitute sources of protein as these higher bean meal prices will stay elevated at least until the US cuts beans this fall.  If you want to talk to one of our feed salesmen to look at other sources of protein, please click here to see what other options are available.

The bean meal market is all jacked up right now with less and less ag participants controlling the day to day movements of the market.  These types of bull runs attract outside speculators who want to jump on the bandwagon vs try and hedge their use or protect their production.  The index fund now has interest because we have a bullish market and a money making opportunity.  The individual speculator wants to own bean meal futures as a quick way to make a profit.  All of these different types of buyers are now being attracted to bean meal futures and artificially propping up the price.  Unfortunately, they will push this market higher than it needs to go, and volatility will really ramp up with huge market gyrations during trading hours.  This is a classic bull run.  The grain producer will benefit because the price of corn, bean, and wheat futures will be inadvertently dragged higher in this process.  I encourage all grain producers to be fully engaged with their crop budgets and know full well what your cost of production is.  This market will give you the opportunity to lock in nice profits in the days ahead.  Your challenge will be to identify what your selling goal will be, and then get this order to your grain buyer so the order can be executed once the market gets there.  These markets move very quickly, and selling opportunities come and go very quickly.  This is not a time to get complacent, but to put a plan together, and to know exactly where and when to pull the trigger to sell grain in the bin and for next year.  The producer who can put a plan together to protect farm revenue and cover costs, will be very well served in the months ahead.  The market is giving you an opportunity.  It is up to you to take advantage of it.  We will wake up one morning and without warning, these markets will be significantly lower, and the selling opportunity will be gone.  If you need help putting a marketing plan together, please contact one of our grain originators and we will be glad to help by clicking here.  If you are interested in putting targets in to sell your grain by yourself, please click here to learn more.  We are here to help you market your grain.

Have You Sold New Beans Yet?  Make Values Even Better With Cash Plus Contract

I am still adamant that producers need to be aggressive sellers of new crop beans at these levels.  Fundamentally, the bean market is being propped by the strength in bean meal, and the uncertainty of how much Argy bean meal will be available for the world to consume.  However, we do NOT have a problem with a lack of soybeans in the world or in the US at the moment.  The Brazilian bean crop will likely hit 117 MMT or so, and the US farmer has been selling new crop beans in a big way.  Brazil has the cheapest beans in the world, and China has been buying Brazilian beans, not US beans as of late.  Our current bean carryout for this crop year is currently at 530 M bu.  However, there is no way the 2.1 B bu export number can hold up with all of the Brazilian beans going to China vs coming from the US.  I fully expect the final bean export number to drop to 1.95 B Bu or so, and all of these beans will go directly to more carryout bushels.  I fully expect bean carryout to be over 700 M bu by the time we get to August.  Additionally, the market is all propped up by bean meal currently.  At some point, the fundamentals will be the focus again, and when this happens, many will see this bean market as over priced.  You now have an opportunity on new crop beans, and it begs to be sold.  Take advantage of it while it lasts.  I have no problem with any farmer that wants to lock in 50% of his APH here at November bean futures at the $10.35 level.  You are covering your costs, producing a profit, protecting your farm, and your banker will love you.  It is a prudent thing to do.  Click here to see where new bean prices are today.

If you still have new beans to sell, please check out our Cash Plus Contracts.  We can add a premium to your new crop bean sales price in exchange for an offer to sell more new beans if November Bean futures close above a certain level on Oct 24th.  These contracts will allow you to sell new beans today with a 27 cent premium added to the new crop cash price in exchange for an offer to sell the same quantity of new crop bean futures at $10.75 if on Oct 24th, the November bean futures close at or above this level.  If futures close below this level, you get to keep this entire premium, and you don’t have any other obligation.  So it is a win-win for you.  You get to keep the 27 cent premium paid to you on top of the current new crop bean price, and if on Oct 24th, depending on what November bean futures trade at the close on this date, you might be able to keep this entire premium free and clear.  The worst case is that you would have the same bushel commitment in another new crop sale where November futures were locked in at the $10.75 level.  Taking off the basis of 69 cents under the November futures for delivery into Readfield, which is our current posted new crop bean basis, you would have a new crop bean contract at 10.75 – 69 = $10.06  The worst case is that you would have another set of new beans sold at $10.06 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.63 today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

What Are The Charts Telling Us?

All markets are being pulled higher due the strength in bean meal or concerns about HRW production in the US plains.  Most markets made fresh highs this week and deserve consideration.

Cash Corn – May 18 Corn Futures – Support at $3.75, Resistance at $3.85, Place Targets at $3.82

New Corn – Dec 18 Corn Futures – Support at $3.97, Resistance at $4.03, Place Targets at $4.00

Cash Beans – May 18 Bean Futures – Support at $10.50, Resistance at $10.60, Place Targets at $10.58

New Beans – Nov 18 Bean Futures – Support at $10.24, Resistance at $10.36, Place Targets at $10.33

New Wheat – July 18 Wheat Futures – Support at $4.90, Resistance at $5.12, Place Targets at $5.08

For more information on where the Chicago Grain Futures are trading, please click here to get a current futures quote.

LAST CALL For Old Crop Average Price Contract Signups

We have two new Average Price Contracts that we are now offering.  One is for old crop grain that you are storing in the bin, and the other is for new crop grain that will be delivered during this fall.  The old crop averaging contract will be for corn, beans, or new crop wheat for delivery during July ’18 into our facilities or direct into your local corn processor.  The new crop contract will be for corn or beans for Oct / Nov ’18 delivery.  Both contracts are a cash contract and use a 10 week period to average the price.  On the old crop contract, we will average the price from March 14th through May 16th, and the timing of the new crop contract will be May 2nd through July 5th.  We will simply average the closing prices each Wednesday during these periods, pricing 1/10 of your contracted bushels each week during the period.  At the end of the period, we will simply average the prices together.  There is no minimum quantity and the best part of these contracts are that they are FREE.  There are no fees associated with these averaging contracts.

The nice thing about the averaging period on the old crop contract is that you are locking in the market carry to July on your old crop bushels.  For old crop bushels, the earlier you can sell the bushels in the crop year for delivery later in the crop year, the better.  You will capture more market carry and put it in your pocket.

Additionally, the dates associated with the new crop pricing period of May 2nd to July 5th is normally a very good time to sell new crop grain because the market is dealing with planting problems and then dealing with dry weather problems somewhere in the Corn Belt.  When problems surface, the market puts more risk premium in the futures, and you will be participating in the market to capture these premiums.  If there are no problems, the market usually drifts lower after the July 4th holiday, making the timing an excellent part of this new crop average contract.    These contracts are simple, easy to understand, and they work.  Every farmer should put a decent amount of grain into these contracts to help protect your farm.  For more information on these exciting new contracts, please click here.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

 

Marcus Cordonnier

Join CHS Larsen Cooperative to help fight hunger through CHS Harvest for Hunger 2018

New London, WISC., February 26, 2018 – CHS Larsen Cooperative is gathering donations of money, food and crops to help fight hunger. As part of CHS Harvest for Hunger food and fund drive, CHS Larsen Cooperative will accept contributions from March 1 through March 20 at its locations in New London, Readfield, Center Valley, Weyauwega, Larsen, and Oconto Falls; they will then deliver all collections to our local food pantries.

“Hunger is a reality for more than 40 million people in America, including 13.1 million children. Every dollar we raise through CHS Harvest for Hunger can purchase six pounds of food through our food banks,” says Todd Reif, general manager, CHS Larsen Cooperative. “That’s making a real difference for those in need.”

Financial donations are encouraged because they enable food banks to leverage their buying power to provide nutritious food at deeply discounted rates. In 2017, CHS Larsen Cooperative raised $4,208 and over 5,028 pounds of food which their parent company, CHS, added bonus dollars to bring the 2017 total to $10,092. This all stayed in the communities in which we reside.

“Our local communities also win when CHS Country Operations makes a contribution to help friends and neighbors right here in our community. Fighting hunger in our communities’ ties directly to what farmers and ranchers do every day, raising crops and livestock to feed the world,” adds Reif.

Donations can be made at CHS Larsen Cooperative’s locations in New London, Readfield, Center Valley, Weyauwega, Larsen and Oconto Falls. If you would like to donate to this cause but are unable to drop it off at one of our locations please contact Anne Moore at our main office 920-982-1111 and she will send someone out to pick up the donation. Or you may mail a check to CHS Larsen Cooperative Attn: Harvest for Hunger P.O. Box 308 New London WI, 54961 or call 920-982-1111 for more information on how you can help.

For more information click here. 

Weekly Grain Update – February 21, 2018

 

2/21/18

Argentina & US Plains Still Providing Market Support, Awesome Soybean Opportunity

The hot and dry conditions in Argentina continue to be the main focus of the grain trade as of late.  Argentina did receive some rain over the weekend, but it was not enough to satisfy the bulls.  Argentina affects the bean market considerably as it is a huge exporter of bean meal to the world, and the price of bean meal has sky rocketed higher during the last 3 weeks.  The strength in bean meal has led the charge higher, and beans have followed suit.  To a lesser degree, corn and wheat have trailed in the background, but have started to diverge in the last couple of days.  We are clearly in a weather market for another week or so.  Brazil is now harvesting their bean crop and yields are coming back very good.  Brazil was blessed with very good rains during their growing season, while Argentina was not.  Brazil’s bean production will likely climb to 115 MMT, but Argentina’s bean production is currently pegged at 50 MMT, but could fall to 47MMT or so.  Thus, Brazil’s great yields will mostly compensate for Argentina’s shortfall, but it gives the bulls something to shout about and it has given all of you an awesome selling opportunity for new crop beans that you will raise on your farm.

We have dramatically ramped up all grain markets during the last 3 weeks at Chicago.  I now get the sense that the grain markets are getting toppy and overbought.  We started to see the weakness come through on Friday’s pricing action, and then we closed significantly off of our highs in the bean market at the close yesterday.  When the market opened at 7 PM Tuesday night, beans were down significantly, but managed to claw back during the night.  I would not be surprised to see the market take a breather this week until the market gets more confirmation of how bad the Argentina bean crop is.  Additionally, we are seeing more precipitation in the western US plains this week which will help the HRW producing areas of the US.  If the wheat market suddenly falls out of bed due to the dry areas in the plains being reduced, this might tip the scale lower for corn and beans as well.

This whole weather scenario in Argentina and in the US plains has caused the funds to cover their massive short positions.  In corn and wheat, their entire short has now been covered.  In beans, not only has their short been covered, but now they have purchased a sizable long position as well.  More will be known this Friday when the Commitment of Traders report is released.  My guess is that the funds could be as long as 50,000 contracts of beans and meal, but time will tell.  This whole process of short covering by the funds has really benefitted the grain markets because the funds were covering (buying) futures.  All of this buying added a layer of underlying support to the markets.  Now, this has stopped, or is greatly reduced from 10 days ago.  From this point forward, it will be more difficult for futures to continue this rally because the buying has almost stopped.

Again, I am very uneasy about the long term prospects of this bean market.  I truly believe that this country will plant close to 92 M acres of beans because the market is buying new beans each day, and the banker is cutting off excess funding to many farmers.  With less money to work with, the farmer will plant more beans as the cost of production is much less.  On top of all of this, I believe the production in Brazil will be better than expected, and that it will cover Argentina’s shortfall to a great extent.  We are in a weather market now, and the market is giving all of you an awesome opportunity to forward contract new beans significantly above the cost of production.  However, all of this enthusiasm will dissipate over the next few weeks as more and more solid yield data is known about South America’s bean crop.  On top of all of this, the US’s bean carryout will grow massively.  Today, the USDA has pegged the bean carryout at 530 M bu.  I believe that the bean export number is still vastly too large at 2.1 B bu.  I believe that this export number could eventually fall to 1.95 B bu or so.  When this happens, bean carryout will grow to 700 M bu.  This is a huge bean carryout number, and when this happens, the bean market will transition from a bull market to a bear market in short order.  Thus, you need to protect your farm revenue.  If you are planning on growing significant bean acres this next spring, you need to get these beans under contract, and in a big way, to protect yourself.  Yesterday, if you took our recommendations and had new crop bean targets in our system, all of the $9.60 cash bean targets for Oct / Nov ’18 delivery into Readfield or Center Valley were hit during the night, but then backed off significantly after hitting this target.  The bean market is in weather mode today and giving all of you a great opportunity.  Please take advantage of it.  A few weeks from now, the tide will turn, and this bean market will very likely turn around and head lower, possibly significantly so.  It would not surprise me to see cash beans be worth $8.50 or lower this fall.  The opportunity is here.  All you need to do is grab it.  For more information on how to enter bean targets online, please click here.  Its free, simple, and easy for you to do on your own, if you like.

Still Own Old CORN?  Tired Of Paying Storage?  Check Out Our Cash Plus Contracts

Do you still own old corn in the bin or on Delayed Price at the elevator?  Do you need the money now and tired of paying storage?  Please consider our Cash Plus contracts.  These contracts will allow you to sell corn today with a 10 – 12 cent premium added to the cash price in exchange for an offer to sell new crop corn futures around $4.15 if on Nov 14th, the December ’18 corn futures close at or above this level.  If futures close below this level, you get to keep this entire premium, and you don’t have any other obligation.  So it is a win-win for you.  You get to keep the 10 -12 cent premium paid to you NOW on top of the cash price, you stop the storage charges, if hauling from the bin you get to haul them now, you create cash flow now, and if on Nov 14th, depending on what December corn futures trade, you might be able to keep this entire premium free and clear.  The worst case is that you would have the same bushel commitment in a new crop offer where December corn futures were locked in at the $4.15 level.  Taking off the basis of 40 cents under the December futures for delivery into Readfield, you would have a new crop corn contract at 4.15 – 40 = $3.75  The worst case is that you would have new corn sold at $3.75 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $3.55 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

What Are The Charts Telling Us?

Looking at the charts today, all grains made a fresh high on Tuesday this week.  Since then, we have been pulling back.  I get the sense that the market is due for a correction as all grains are seriously over bought.  Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – May 18 Corn Futures – Support at $3.72, Resistance at $3.78, Place Targets at $3.76

New Corn – Dec 18 Corn Futures – Support at $3.94, Resistance at $3.99, Place Targets at $3.97

Cash Beans – May 18 Bean Futures – Support at $10.23, Resistance at $10.50, Place Targets at $10.45

New Beans – Nov 18 Bean Futures – Support at $10.15, Resistance at $10.30, Place Targets at $10.25

New Wheat – July 18 Wheat Futures – Support at $4.73, Resistance at $4.93, Place Targets at $4.88

Deadline Quickly Approaching For Average Price Contract Signups

We have two new Average Price Contracts that we are now offering.  One is for old crop grain that you are storing in the bin, and the other is for new crop grain that will be delivered during this fall.  The old crop averaging contract will be for corn, beans, or new crop wheat for delivery during July ’18 into our facilities or direct into your local corn processor.  The new crop contract will be for corn or beans for Oct / Nov ’18 delivery.  Both contracts are a cash contract and use a 10 week period to average the price.  On the old crop contract, we will average the price from March 14th through May 16th, and the timing of the new crop contract will be May 2nd through July 5th.  We will simply average the closing prices each Wednesday during these periods, pricing 1/10 of your contracted bushels each week during the period.  At the end of the period, we will simply average the prices together.  There is no minimum quantity and the best part of these contracts are that they are FREE.  There are no fees associated with these averaging contracts.

The nice thing about the averaging period on the old crop contract is that you are locking in the market carry to July on your old crop bushels.  For old crop bushels, the earlier you can sell the bushels in the crop year for delivery later in the crop year, the better.  You will capture more market carry and put it in your pocket.

Additionally, the dates associated with the new crop pricing period of May 2nd to July 5th is normally a very good time to sell new crop grain because the market is dealing with planting problems and then dealing with dry weather problems somewhere in the Corn Belt.  When problems surface, the market puts more risk premium in the futures, and you will be participating in the market to capture these premiums.  If there are no problems, the market usually drifts lower after the July 4th holiday, making the timing an excellent part of this new crop average contract.    These contracts are simple, easy to understand, and they work.  Every farmer should put a decent amount of grain into these contracts to help protect your farm.  For more information on these exciting new contracts, please click here.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

 

Marcus Cordonnier

Spring is Right Around the Corner

With the planting season around the corner , have all the preparations been made to have maximize your profitability. Will you get a return on your investments and have we made the decisions that will create positive results?  We can’t control the weather , what it does or does not do. We do control planting our seed in the right places at the right population, using the right crop protection products and making the right fertilizer decisions. Getting our equipment up to date and ready to hit the fields when they are fit to plant. There are a lot of variables deciding return on investments and profitability .We need to make the right choices that put us in the situation to sustain positive results. Contact your CHS Larsen Agronomist and YieldPoint Specialists to help you maximize your profitability so when planting gets here you are ready knowing the decisions we control are done and now it’s up to mother nature.

Matt McKown, Agronomy Sales Manager

Weekly Grain Update – February 15, 2018

 

2/15/18

USDA Increases Corn Exports, Cuts Bean Exports

The USDA released its February crop report last Thursday and showed a tighter supply and demand situation in the corn market, but not so much in beans.  Much of the changes in both markets were due to anticipated exports.  In corn, the USDA raised the exports by 125 M bu up to 2.05 B bu.  Currently, the US has the cheapest corn in the world, and our window of opportunity to supply the world with corn is over the next 4 months until Brazil’s second corn crop is harvested.  We are also seeing a ramp up in corn used for ethanol production, and the demand for DDGS from cattle feedlots is extremely strong since the price of bean meal has spiked up.  China has reportedly cancelled 4 cargo ships of corn due to GMO concerns as trade tensions rise with the Trump administration.  Despite this news, the corn market seems to be getting tighter as time rolls on.  When the dust settled, the ending stocks from the USDA were slashed from 2.477 B bu last month to 2.352 B bu this month.  This is still a huge amount of corn, but it shows how the corn fundamentals are firming.  The cure for cheap prices is cheap prices, and this is what is happening with corn as the market becomes more aggressive to buy new crop corn acres.

In beans, the fundamentals are telling a different story.  Similar to corn, the exports were the main change in the USDA report last Thursday.  Unlike corn, US beans are not the cheapest source of beans in the world.  Brazil is starting to harvest their bean crop and they have they cheapest beans in the world.  Thus, our bean exports are struggling to keep pace, and the USDA backed of bean exports by 60 M bu last week to 2.1 B bu.  The bean fundamentals are quite negative, vastly different from the corn picture.  Brazil’s bean crop is expected to be very good, but Argentina’s yields are anticipated to be reduced by the hot and dry conditions there.  Argentina produces a significant quantity of bean meal for the world, and this explains the explosion in bean meal prices as of late.  However, all of the tightness in the bean situation from Argentina will be mostly offset by the huge bean production coming out of Brazil as their crop is large and expected to get larger as harvest moves north.  The USDA confirmed the negative fundamentals as bean carryout increased from 470 M bu last month to 530 M bu this month.  This is a huge amount of bean ending stocks, and this number looks to grow substantially over the coming months.  By the time summer arrives, we could easily see bean carryout grow to 6-700 M bu, which we have not seen in decades.

Funds Have Covered Massive Short Positions, Pushed The Market Higher In The Process

The USDA has presented a firming fundamental picture in corn, and a weakening fundamental picture in the bean market.  However, much of these weak fundamentals are being over looked by the market due to the hot and dry weather situation in Argentina and the dry weather concerns for the HRW areas in Oklahoma and Kansas.  We are definitely in a weather market today and this means huge volatility and fund short covering.  Coming into February, managed money funds held a massive short position at Chicago, holding roughly a record short position of 230,000 contracts of corn, nearly 100,000 contracts short of beans, and over 140,000 contracts short of wheat.  In the last 2 weeks, much of these short positions held by the funds have been covered, and now they have no short position remaining.  In beans and bean meal, they are going long the market.  So in the last 2 weeks, the dryness situation in Argentina and US plains were enough to spook the managed money folks to bail out of their short position and give us an excellent opportunity to take advantage of a futures rally.  Any time these funds cover a short position, they are buying futures to cover their short.  This buying process is the fuel that propels the market higher and gives all of you the opportunity to sell better prices for cash and lock in great new crop levels.

The problem is that this covering of short positions is coming to an end.  Their short is now gone, and the massive buying due to being stopped out of their short positions is almost over.  The trade will start to focus on Brazil’s great bean yields in the next week, and our fuel for this rally could soon be over.  In addition, one can make the argument that the US farmer could very easily plant 92 M acres of beans in this country due to the lower input costs, and the current difficult farming economy.  The point here is that we will transition from a weather market and this short covering frenzy and begin to focus on the fundamentals once again.  Once this happens, the market will realize that beans are over priced.  If bean exports continue to dwindle, if the US plants 2 M more bean acres, and if the Brazilian bean yields prove to be as good as projected, then the bean market will slide lower and possibly significantly so.  The bean market is not looking at this today.  It is all jacked up about Argentina dryness, fund short covering, and weather.  This will end, and when the market refocuses on the real fundamentals, things will change, and we will have a lower bean market.  You need to do what is right to protect your farm.  Most of you have started to sell new beans above $9.40 cash price for new crop.  I encourage all of you to start if you have not done so already as the market is giving you an early Christmas present.

Weather markets are exciting, and volatility most always ramps up.  With volatility comes opportunity.  Brazil is now in bean harvest, and once this ramps up, much of the fuel that has been creating this rally will go away.  Additionally, now that the funds have covered their short, much of this buying that has propped up this market, will cease.  Time will tell whether the yields in Argentina are as bad as the market has feared.  With the new genetics of seeds, corn and beans can still produce amazing quantities of grain even when being starved for water.  It will be interesting to see how Argentina’s final numbers pan out.  Still, the threat of lower yields is what has caused this rally.  Many times the perception of the problem is worse than the actual problem once all of the facts are known.  This has been an incredible pricing opportunity for all of you to be able to sell new crop corn over $3.55, new beans over $9.50, and new wheat over $4.15.  I hope all of you have at least started selling new crop at these levels this week.  If you would like to place a target to sell grain, you can either call us or place your own target on our Online Target Offer system.  It is easy, free, and an awesome way for you to protect your farm.  Please click here for more information.

Sign Up NOW For New Average Price Contracts

We have two new Average Price Contracts that we are now offering.  One is for old crop grain that you are storing in the bin, and the other is for new crop grain that will be delivered during this fall.  The old crop averaging contract will be for corn, beans, or new crop wheat for delivery during July ’18 into our facilities or direct into your local corn processor.  The new crop contract will be for corn or beans for Oct / Nov ’18 delivery.  Both contracts are a cash contract and use a 10 week period to average the price.  On the old crop contract, we will average the price from March 14th through May 16th, and the timing of the new crop contract will be May 2nd through July 5th.  We will simply average the closing prices each Wednesday during these periods, pricing 1/10 of your contracted bushels each week during the period.  At the end of the period, we will simply average the prices together.  There is no minimum quantity and the best part of these contracts are that they are FREE.  There are no fees associated with these averaging contracts.

The nice thing about the averaging period on the old crop contract is that you are locking in the market carry to July on your old crop bushels.  For old crop bushels, the earlier you can sell the bushels in the crop year for delivery later in the crop year, the better.  You will capture more market carry and put it in your pocket.

Additionally, the dates associated with the new crop pricing period of May 2nd to July 5th is normally a very good time to sell new crop grain because the market is dealing with planting problems and then dealing with dry weather problems somewhere in the Corn Belt.  When problems surface, the market puts more risk premium in the futures, and you will be participating in the market to capture these premiums.  If there are no problems, the market usually drifts lower after the July 4th holiday, making the timing an excellent part of this new crop average contract.    These contracts are simple, easy to understand, and they work.  Every farmer should put a decent amount of grain into these contracts to help protect your farm.  For more information on these exciting new contracts or if you wish to sign-up, please click here.

February Results For CHS ProAdvantage Contracts

For those of you who have placed bushels in the CHS ProAdvantage program, we have the updated pricing results for February.  Again, ProAdvantage is our fully managed contracts that we offered during December for patrons who wanted a completely “hands off” approach to grain marketing.  You simply gave the trading professionals at CHS a portion of your production for next harvest, and they take care of the rest.  Behind the scenes they are aggressively buying and selling complex futures and options positions to generate as much profit as possible on your bushels by the end of the program.  The goal is to give you the highest possible futures price at the end of the program as possible by using trading techniques and options that typically are not available to the individual farmer.  The signup period is obviously over.  However, we can see each month how they are progressing, and look at their current values as they trade through the period.  We can also see the percentage of the crop they have sold, which gives you a clue to how bullish or bearish they are.  For those of you enrolled in the program, and you did not receive the results yet, here they are.  This is an interesting read.  Don’t worry if you don’t completely understand all of the information.  If you have any questions about anything, and you want help, please call me and I will explain it to you.  Please click here to see the Feb results.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Winds of change in China

global agriculture

By Joe Lardy, research manager, CHS Hedging

China has had a long-standing policy to be self-sufficient in key food source production, including rice, wheat and corn. In 2004, the Chinese government made historic adjustments to its agriculture policy when it eliminated taxes on agriculture and created a new system of subsidies for key commodities. The subsidies supported seed and machinery purchases and resulted in improved infrastructure.

This set the stage for a huge buildup of acreage devoted to corn production. (more…)

Annual Seed Pick-Up Days

 

It is time for CHS Larsen Cooperative’s annual “Seed Pick-Up Days.”  We have scheduled Thursday, March 22nd and Friday, March 23th.  Pick-up times will be from 10:00 am until 4:00 pm at the New London Main office warehouse.

Please call us at 920-982-1111 ASAP to let us know if you will be picking up your seed order, this will allow us to have your seed order sorted and ready for you.  If you will not be picking up your order, please call and arrange a delivery time at NO CHARGE if delivered before April 27th.  Each order delivered after April 27th will be considered “In-Season” and will be charged the normal delivery charge of $55.00.

As an added bonus for picking up your seed, a free gift will be given for each order picked up on these days!!

Sandwiches and beverages will be available throughout the day.

 We truly want to “Thank you” for supporting and placing your trust in CHS Larsen Cooperative’s Agronomy Department.  We look forward to seeing you at “Seed Pick-Up Days.”

Weekly Grain Update – February 6, 2018

2/6/18

USDA Report on Thursday, Feb 8th At 11 AM

The USDA will be out with its February crop report on Thursday this week.  Usually, this report is not a market mover, but anything is possible.  On corn, there is a decent chance that corn ending stocks from this year could be reduced due to very good ethanol production and decent corn exports as of late as the US has the world’s cheapest source of corn.  Corn exports last week amounted to just under 73 M bu which is very good and our window of opportunity is now for another 3 months until the South American corn harvest is brought to market.  Additionally, the market is concerned about how much corn production is being lost in Argentina as this country suffers from dry weather.

Concerning beans, the market is expecting higher bean ending stocks due to lower exports.  Many are expecting bean ending stocks to grow as high as 500 M bu for the ‘17/18 crop year.  This year’s bean exports continue to lag last year’s exports significantly, and this is contributing to the larger ending stocks.  The market is also looking at some huge production potential in Brazil, even though the yields in Argentina will be cut due to the drought.  However, Brazil’s bean production could more than offset the Argentina short fall.  The other issue is the increased bean acres planted in the US this spring.  There is a good chance that the US farmer will plant 2 M extra acres of beans this year from 90 M acres last year to 92 M acres this year.  This will just add more beans to an already heavy bean market.

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