Weekly Grain Update – June 15, 2018

6/15/18

The Massive Selloff Continues.  USDA Confirms Large Old Crop Stocks, But Smaller New Crop Stocks On The Horizon.

The USDA released its June crop report on Tuesday and confirmed large old crop stocks, but significantly less new crop stocks.  In the corn market, the USDA increased old crop corn exports by 75 M bu up to 2.3 B bu for old crop.  We have seen a consistent amount corn being exported out of the Gulf each week, and these numbers have remained higher than normal for quite some time.  When the dust settled, old crop corn ending stocks were reduced by 80 M bu down to 2.102 B bu.  On new crop corn, the USDA reduced feed usage by 25 M bu down to 5.35 B bu.  The end result is a corn carryout for next year at 1.577 B bu.  As you can see, the corn carryout is substantially less next year than the current year.  The market is concerned about this sharp reduction in carryout for next year.  However, the crop is off to a wonderful start, the weather is non threatening at the moment, and there is a real probability that the old crop carryover could grow in size if the weather holds.

On beans, the crush margins has been very good as of late, mainly supported by the decent price of bean meal.  The USDA increased bean crush on old crop by 25 M bu up to 2.015 B bu.  When the dust settled, old crop bean ending stocks dropped 25 M bu down to 505 M bu.  In new crop beans, the USDA is using 89 M acres and a yield of 48.5 bpa.  They pegged next year’s bean ending stocks at 385 M bu, significantly tighter than old crop.  Just like corn, the old crop supplies remain plentiful while the new crop supplies are considerably less.

In the wheat market, the USDA made a small adjustment to old crop exports, and cut them by 10 M bu down to 900 M bu.  This pushed old crop ending stocks up to 1.08 B bu.  On new crop, they increased exports by 25 M bu to 950 M bu and this took ending stocks down to 946 M bu.  Both crop years have ending stocks close to 1 B bu and this leaves the market relatively comfortable.  Although true, there are concerns of lower yields around the world due to drought conditions in the EU, Black Sea, and in Canada.  Even though the US’s supplies remain decent, the rest of the world does not have the same luxury.

The market made a high on the Tuesday after Memorial Day and since then, it has been significantly pounded lower like I have never seen before.  All grains, no matter the significant tightness for next year, have all been pushed lower to levels that no one ever thought possible.  Many in the grain trade are shocked by this massive lower movement of grain futures since Memorial Day, and still cannot believe it has happened.  The fundamentals for next year clearly do not justify such a move, and we still have at least a 60 day period where the weather can easily change the final outcome on yields.  Since Memorial Day, Dec ’18 corn has dropped 46 cents, Nov ’18 beans have dropped a whopping $1.25, and July ’18 wheat has dropped 59 cents.  I have never witnessed anything like this in my 25 years in this business.  The funds had a decent size long position across the board and have been blown out of their entire long position, and now are likely short.  This is a massive amount of grain that has been sold in the last 2 weeks, adding more and more selling pressure to the market.

Additionally, the charts look terrible.  We have systematically blown through at least 3 different support levels on the way down, going through them like nothing was there.  What is concerning, is that we have not stopped going down yet!  As I look at each chart, we have not bounced off of any support level yet.  We now have new crop cash corn at Readfield at $3.42, new crop beans at $8.60, and new wheat at $4.40.  New beans into Readfield traded $9.91 just a few days ago!  This is something for the record books.  For all of you who took our advice and sold new crop bushels earlier in the year, congratulations.  You have saved your farm.  For those of you who were bullish and decided to stick your head in the sand over the last 3 weeks while trying to plant your crop, and now don’t have enough new bushels sold, we have some serious work to do.  Grain futures will bounce.  The questions is when, and from what level.

Why did this sell-off happen?  Let’s go over the list:

  • Although late, the entire corn and bean crop was planted in the Corn Belt.
  • Planting conditions were good, and plant populations are great. This will push yields higher.
  • So far, we have had adequate rain in the majority of the Corn Belt.
  • Heat units are accumulating nicely, and the heat is allowing the crops to catch up.
  • Soybeans were planted much earlier than normal, and final yields should be higher than normal if the weather holds.
  • The funds have sold massive amounts of their spec positions from one of significant length to now being short. All of this selling pushed futures lower each day.
  • The market is incredibly nervous about the potential tariffs between the US and China, Canada, and Mexico. The Trump Administration will make a decision today, June 15th, whether to enact its first tariffs with China on $50 B worth of goods.  The funds and specs do not want to trade grain with this outside influence, so they got out over the last 2 weeks.
  • NAFTA – It looks like an agreement will not be made with Mexico and Canada.
  • North Korea – Will this agreement hold? Are they playing us?
  • The lack of China buying US beans over the last 2 months. They have virtually stopped buying our beans.  If the tariffs get enacted today, the Chinese will do everything not to buy our beans.  This is the real reason beans have fallen by $1.25 in the last 2 weeks.  The bean market is in real trouble if the Chinese don’t buy our beans.

For those of you who now find themselves in a very uncomfortable position, the time is to be truthful with yourself, be honest, and allow us to help you work through this.  We want to help and can work with you to put a plan in place to dig yourself out of this hole.  This is not a time to sit back and be complacent.  Your farm and livelihood could easily be at stake.  Our team can easily sit down and help you put a marketing plan together to help salvage your business.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – July 18 Corn Futures – Support at $3.50, Resistance at $3.62, Place Targets at $3.60

New Corn – Dec 18 Corn Futures – Support at $3.79, Resistance at $3.87, Place Targets at $3.85

Cash Beans – July 18 Bean Futures – Support at $9.00, Resistance at $9.26, Place Targets at $9.15

New Beans – Nov 18 Bean Futures – Support at $9.23, Resistance at $9.39, Place Targets at $9.35

New Wheat – July 18 Wheat Futures – Support at $4.86, Resistance at $5.03, Place Targets at $4.97

To see where grain futures are currently trading, please click here.

Targets Produce Success and Protection For Your Farm

Before long, weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

New Arrive Delayed Price Rates have Been Reduced

We have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

Condo Space For Sale (aka Long Term Storage Agreement)

The co-op does have 3,000 bu of condo space to sell.  If interested, you can find more information on our web site, or click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

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 – May 30, 2018

 

After A Nice Rally, Bearish Factors Line Up

The grain markets witnessed a tremendous run up in price last week after the productive meeting with the Chinese chief negotiator last week.  Now, the market wants to see some results of this meeting before taking the market any higher.  Trade volume was light towards the end of last week, and this allowed the bulls to easily push the market to new highs without much resistance.  As the market opened Monday night after the long Memorial Day weekend, the bullish mentality began to change.  Tuesday was a bearish day on many levels.  The market opened up strong Monday night and made new highs, only to trade lower and close lower, and some markets closed below the previous day’s lows.  This is the definition of a key reversal, and many grain markets witnessed this on Tuesday.  Technically, this is a bearish signal that might send grain futures lower for a significant amount of time.

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Weekly Grain Update – May 23, 2018

Trade War Avoided.  Bean Planting Much Ahead of Average. Corn Planting Almost Complete.

The big news this week is that a trade war between the US and China has been avoided.  The Chinese head negotiator spent all last week at the White House trying to hammer out a deal between the two countries.  Many of the details are not yet worked out or known at this point.  However, progress has been made, and an outright trade war will not occur.  It appears each side is working through the negotiating process, both giving in and taking, in order to reach a compromise.  The issue with the US is the huge trade imbalance with China.  President Trump is very committed to getting the US back to a more even trade balance with China.  A big trade imbalance is when the US buys more products from China than China buys from the US.  The current trade imbalance is roughly $600 B annually, and this process will try and get this reduced over time.  Obviously, the US needs China to buy grain from us as well as many other manufactured goods.  Frankly, China needs our soybeans in order to satisfy all of their needs.  China is still buying all of their beans from Brazil, and have practically stopped buying any beans from the US in the last 6 weeks.  Each week, we patiently wait for news that China has purchased more beans from us, but this has not happened recently.  This news that a potential trade war has been avoided is a huge deal to the bean market as it signals that China will once again start buying our beans.  Now, we must sit back and patiently wait to see the Chinese finally buy our beans once again.

The market is in full anticipation mode since Monday.  News started to surface on Friday that a trade war with China has been avoided.  As expected, the funds purchased grain futures on this news and pushed all grains higher over the last few sessions.  If China starts to buy US beans again, this is supportive to the grains and the bean market.  So far, the market has ramped up in anticipation of more Chinese purchases, but we have not yet seen any real activity.  I get the sense that we have now pushed grain futures as high as we can go until we see the actual Chinese buying occur.  At the end of the day, this buying is what must occur, not rumors that it will occur.  Time will tell.  Stay tuned.

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Weekly Grain Update – May 17, 2018

5/17/18

Corn & Bean Planting Progress Increases Rapidly.  China Negotiations Continue.

The USDA came out with it’s monthly crop report last Thursday and gave the industry its first look of the ‘18/19 grain supply and demand picture.  As we will see, there is very little room for error in the corn market and it offered a tighter bean picture than most traders thought.  Let’s look at the details.

In the corn market, the USDA did not make any changes to this year’s supply and demand table, and left this year’s corn carryout at 2.18 B bu.  The market was a little surprised that the export number was not raised, and the corn used for ethanol was not raised, to reduce the carryout this year.  We continue to have the cheapest corn in the world, and exports remain high.  However, these numbers indicate that we still have a huge amount of old corn in the country, and we will not run out anytime soon.

Next year’s corn crop is a different story.  The USDA pegged the ‘18/19 corn carryout at only 1.68 B bu, which is a huge drop from one year to the next.  They used 88.0 M acres with an average yield of 174 bpa.  Even though the big reduction in carryout stocks from this year to next, the market was expecting a lower carryout number from the USDA for next year.  We expect exports and ethanol to continue to be strong users of corn next year, but the real key is to get all of the corn acres planted in the next 2 weeks.  Most of the Corn Belt has their corn crop mostly planted and is in good shape.  However, we continue to have problems in northern IA, southern MN, SD, and WI.  These acres continue to struggle with wet conditions and are having a difficult time getting their corn planted.  However, this week’s weather will be a huge factor in how much corn will get planted.  Locally, they have pushed the rain off until Monday, which is huge.  As I speak, almost everyone locally is planting corn on their drier fields.  If the rain holds off until Monday, a massive amount of corn will be planted locally by Monday.  With the very warm soils, this corn should germinate very quickly and explode out of the ground with very good populations which should create better yields.

So, there is very little wiggle room for the corn market next year.  Ultimately, mother nature will decide how much corn will get planted in the areas listed above.  We all know the farmer can plant more corn acres in one day than any time in recent history, so even if the conditions are not perfect, many will figure out a way to get the corn crop planted.  What the market does not want to see happen is a bunch of corn acres in the north not get planted to corn but to beans instead.  This will cause an already tight corn scenario for next year to get even tighter, and a soft bean scenario to get even softer.  All of this will be determined in the next 2 weeks.

That being said, you can sense that the market is getting more comfortable with the corn market each day that it does not rain.  The USDA pegged the corn planting progress Monday night at 62% planted with the 5 year average at 63%.  After a slow start, we are now caught up.  Additionally, we are over 50% and on the downhill slide.  As I said before, once we pass the 50% mark on corn planting, the market starts to get more and more comfortable and starts to take the risk premium out of the corn market for planting problems.  You can see this happening this week in the corn market.  The forecast is now clear for the majority of the Corn Belt until this weekend, and the market is getting less and less worried each day that we will have a problem.  The risk premium is being taken out of the market, and down we come.  With Dec ’18 corn futures now at $4.20, I cannot see a scenario developing that would justify Dec corn over $4.50.  The corn crop will pollinate around July 15th on average, so a hot period during this time will cause a rally.  If we start to have dry conditions in the Midwest during July, this will support futures as well.  However, I don’t see a scenario where we can justify Dec corn over $4.50.  Frankly, a simple and easy way for you to protect your farm and take advantage of a summer rally is to sell 15% of your corn crop at every nickel increment of Dec ’18 futures, starting at $4.20 all the way to $4.50.  This is simple, easy, and will protect your farm and allow you to lock in premiums as the market rallies on any weather issue this summer.

The bean market is a little different.  The USDA increased crush on old crop by 20 M bu and this was the only change to the old crop bean supply and demand table.  This year’s bean carryout dropped by this 20 M bu down to 530 M bu.  This is still a huge amount of old crop beans.  The USDA did not change their old crop bean export number and left it at 2.065 B bu.  The big risk for the bean complex is what the future holds for our trading relationship with China.  Will the 25% tariffs be enacted?  Will the US and China be able to get a new deal hammered out?  Will the Chinese buy any more old beans?  Will the boats already on their way to China with beans be able to be unloaded in China or will they be diverted away to other countries?  Will China buy a huge amount of October beans from the US like they normally have been?  If not, will this create a huge inability for the US to ship beans out of the Gulf while we are harvesting beans this fall?  And the questions go on and on and on….  So many questions, and very few answers.  The fact is that China’s delegation is in Washington this week through Saturday to pound out a new deal with the US.  However, very little news is coming out of the meetings.  Each day that no deal is announced, the market is getting very nervous that no deal will be made.  If no deal is made, the bean market has a huge problem on its hands.  The above export projection won’t mean anything.  Next year’s export numbers won’t be right.  The fact of the matter is that if we cannot ship beans to China this fall, our bean market is terribly overpriced.

The USDA pegged the ‘18/19 carryout at only 415 M bu and the market dismissed this projection almost immediately.  The USDA is using only 89 M acres with a yield of only 48.5 bpa.  The USDA pegged the bean planting progress at 35% on Monday night, and the 5 year average is only 26%.  This means that the US farmer is planting beans much earlier than normal this year at a much faster rate than in the past.  All of this should correspond to bigger yields this fall, and pushes forward the pod filling stage from August to LH July.  Thus, we very likely could have corn pollination and bean pod filling at the same time this year during LH July.  Make no mistake, the weather during LH July this year will be critical as both corn and beans will be affected.  So all of this proactivity in bean planting will cause more bean acres to get planted, especially if there are some northern acres that cannot plant corn and plant beans instead.  This means that instead of 89 M acres of beans, the total could be closer to 91 M acres.  The market also disagrees with the yield of 48.5 bpa.  Most traders feel that this should be closer to 50 bpa with the early bean planting.

So, if you plant the bean crop earlier, you gain more bean acres from the north that cannot plant corn, you gain yield due to the early bean planting, and now you have the potential for exports on both old and new crop to crash if we cannot get a deal pounded out with China, what do you think will happen to the carryout numbers that the USDA put out?  Will they stay at 530 M bu and 415 M bu?  I think not.  The path of least resistance is for these numbers to grow, and possibly quite significantly.  And if this happens, this puts a huge amount of lower pressure on bean futures.  We have already started to see this happen.  Nov ’18 bean futures made a high of $10.60 earlier in the year and are now trading at $10.15 or 45 cent lower.  The path of least resistance is lower in the bean market and possibly significantly lower.

A possible silver lining is an increase in crush which can help offset these increases in production or losses from exports.  The current bean crush margin is just huge at over $2.00 per bushel.  If these crush margins are not an absolute record, they are very close, and they have been stout for many weeks led by the strength in bean meal.  When the processor or makes big money, this will cause the basis to firm on old beans, especially since the farmer is planting and not delivering beans to him.  The beans used in crush will continue to grow.  However, the biggest factor in determining the price of beans is if we get a deal pounded out with China.  Frankly, the bean complex will patiently sit and wait until we know what will happen.  But make no mistake, the decision will impact bean prices either one way or the other.  Talk about gambling.  This is a high stakes poker tournament with the banker sitting right beside you watching your every move.  Sometimes taking your money off the table and selling beans now is the best option for your farm, so you can sleep at night, and a lot less risky.

Targets Produce Success and Protection For Your Farm

Before long, weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – July 18 Corn Futures – Support at $3.94, Resistance at $4.08, Place Targets at $4.05

New Corn – Dec 18 Corn Futures – Support at $4.12, Resistance at $4.23, Place Targets at $4.20

Cash Beans – July 18 Bean Futures – Support at $9.94, Resistance at $10.27, Place Targets at $10.17

New Beans – Nov 18 Bean Futures – Support at $9.97, Resistance at $10.25, Place Targets at $10.16

New Wheat – July 18 Wheat Futures – Support at $4.86, Resistance at $5.10, Place Targets at $5.05

To see where grain futures are currently trading, please click here.

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

I can build a solid case why beans will move lower in the coming weeks as more acres get planted and less corn.  In addition, the bean planting window is not nearly as tight as the optimum corn planting window.  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 22 cent premium added to the new crop cash price in exchange for an offer to sell the same quantity of new crop bean futures around $10.50 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 22 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 $10.50 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 10.50 – 69 = $9.81  The worst case is that you would have another set of new beans sold at $9.81 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.44 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

Condo Corner

The co-op did trade 5,000 bu of Condo space this week.  I won’t disclose the patrons or the prices, but we were able to put two buyers and a seller together and completed the transaction.  This was done by information placed on our web site.  Do you own Condo space and wish to sell it?  Are you interested in buying Condo space?  If so, this is the right place.  Condo Storage is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

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 – May 9, 2018

5/9/18

USDA Report On Thursday.  US Corn Planting Makes Good Progress.

The USDA will be out with its monthly crop report on Thursday morning at 11 am.  This report will include the first estimate for the 18/19 crop that is being planted now.  The market expects next year’s corn ending stocks to shrink from the current 2.18 B Bu down to 1.75 B Bu or so for next year.  This is the reason why the corn market is being so sensitive to the late corn planting this year.  As I have said many times, once corn carryout drops much below 2.0 B Bu, the corn market gets uncomfortable and when this happens, the market puts additional risk premium in the market to encourage more production from the farmer.

On beans, the current carryout is 550 M bu and the market is expecting roughly the same number for next year’s carryout.  Again, any bean number over 400 M bu or so puts the market in comfort mode, so we have more than enough beans this year and next year.  Bean planting is off to a really good start and is not lagging like corn.  So the likelihood that we will have a bean problem seems to be diminishing by the day.  This is a big reason why we witnessed a big sell off on Monday.  After weeks of adding length to their already long futures position, the funds decided to reduce their length, especially after a huge weekend of corn and bean planting.

We all need to be anticipating a “curve ball” from the USDA on Thursday to shake up the markets and for you to take advantage of it.  On corn, if the USDA pegs next year’s carryout below 1.7 B bu, this will be extremely supportive to corn futures.  All of you need to in position to take advantage of this situation if this occurs with target orders working to sell cash or new crop bushels for this fall if the market pops higher on Thursday.  Personally, I would have working targets in the system to sell both cash and new crop corn at 5 to 10 cents higher, entered prior to 10:30 Thursday morning, and let them work all day Thursday.  Again, it is simply amazing how much these electronic markets can gyrate in a few seconds time.  The opportunity to sell a nice pop could be here for 3 seconds right after 11 am when the report is released, and then gone.  The only way you could have taken advantage of this opportunity is to have a resting target order in the system working PRIOR to the report.

On beans, unfortunately, the surprise could be bearish, and not supportive to prices.  The surprise could be a much bigger carryout to next year’s bean crop than this year.  If next year’s number grows considerably larger than 500 M bu up to 6 or 700 M bu, this will weigh on cash, this year’s new crop levels as well as new crop ’19 levels as well.  On thing about the bean market, when it moves, it moves in a big way, usually 2-3 times what corn does.  It will not be out of the question to see a 30 cent move on beans on Thursday.  I just hope it is up and not down.  Again, targets work well in this situation, and encourage all of you to use them and put many out there for the slim chance beans could explode higher.  Let them work for you and make money for you.  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

We have made great progress in planting corn as of late.  The USDA pegged the average US corn planting at 39% Monday evening vs 44% on average.  IL planted 42% of their corn crop last week and now have 74% of their corn in the ground.  IA was 40% complete vs 48% on average.  The market is concerned about the lack of corn planting in the northwest portions of the Corn Belt (MN, SD, ND).  MN is only 9% complete vs 44% on average.  If this situation persists, it should be supportive for corn and bearish for beans as these acres will be switched to beans and make the corn complex tighter and continue to make the bean complex more flush with beans.  This being said, the market believes that a great amount of corn acres were planted on Sunday and Monday at are not included in this total.  With the huge size of modern planters and planting speeds, it is just incredible how many acres of corn can be planted in a single day.  Going forward, getting an accurate estimate each Monday is a challenge for the USDA as the volumes get larger and larger, and planting windows get smaller and smaller.  Thus, the market feels these numbers are understated, and the average corn planting volumes will be right at average next week as we hit the May 15th date on the calendar, when it should be wrapping up.

On beans, the USDA pegged the average at 15% vs 13% on average.  IL was 29% done vs 12% on average.  Thus, bean planting is not behind and is actually ahead of normal.  There is a push this year to get more beans planted earlier than in the past to improve yields.  More and more farmers are planting beans and corn at the same time.  If there is a yield advantage, the farmer will do anything to get it this year as many are struggling financially to cover all of their costs.  Getting the bean crop planted early will also allow them to hit a premium bean market in their area.  Many times, the bean processor will put a big premium on early delivery beans into the plant to encourage the farmer to start cutting beans.  Early beans will be able to be sold for more money, and the yield boost will also add a layer of profitability as well.

Locally, we are struggling to get our crop planted on time.  The wet and cool conditions have pushed everything back 2 weeks.  Areas to the south towards Oshkosh have not turned a wheel yet.  If we get no rain, these areas will go by Friday.  Areas to the north of New London to Clintonville are starting to go.  The sandy areas to the west are going as well.  We just need the rain to hold off for 2 weeks to allow us to get the corn planted.

The other big news event continues to be the potential trade disruption with beans sold to China.  Last week, the US sent a team to China to help pound out a new deal.  Both parties agreed to keep talking, but nothing concrete was established.  Next week, the Chinese delegation will be visiting the US to continue talks.  Approximately 6 weeks ago, China placed a 25% tariff on beans purchased from the US making the internal Chinese bean buyer penalized for using US beans.  Since then, the amount of beans sold to China has virtually stopped in their tracks.  Brazil is now supplying nearly all of the beans to China even though they are paying a heathy premium for those Brazilian beans.  The Chinese buyer will not buy any more US beans until a deal gets worked out with the US.  In the process of negotiation, the US has demanded that US ag exports not be penalized.  However, no agreement is finalized yet, and it remains to be seen how all of this will work out.

Make no mistake.  The market is very concerned about this issue.  China has been a huge buyer of US beans and if they stop buying our beans, this will have wide and lasting results on our bean market.  China also buys many new crop beans during October from us.  If this stops, this will have a huge impact on our harvest operations and market values during this fall for grain elevators and shippers.  Unfortunately, there are many questions, and not many answers at this point.  From your point of view, your biggest concern should be if an agreement is not made with China.  All of a sudden, beans could start stacking up in this country like we have never seen before.  We already have a huge bean carryout, and bean planting is now ahead of schedule.  If a deal cannot be pounded out, the US will be floating on beans, and harvest values will plummet.  Again, the path of least resistance on beans could very likely be much lower in value.  Is your farm correctly positioned for this potential lower move?  Please click here to see where our new crop prices are at.  If you would like to sit down with one of our grain originators to set up a marketing plan, please click here.  We would be glad to sit down with you and set up a plan.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – July 18 Corn Futures – Support at $3.99, Resistance at $4.08, Place Targets at $4.05

New Corn – Dec 18 Corn Futures – Support at $4.15, Resistance at $4.22, Place Targets at $4.20

Cash Beans – July 18 Bean Futures – Support at $10.10, Resistance at $10.34, Place Targets at $10.30

New Beans – Nov 18 Bean Futures – Support at $10.16, Resistance at $10.32, Place Targets at $10.28

New Wheat – July 18 Wheat Futures – Support at $5.06, Resistance at $5.38, Place Targets at $5.28

To see where grain futures are currently trading, please click here.

Condo Corner

Do you own Condo space and wish to sell it?  Are you interested in buying Condo space?  If so, this is the right place.  Condo Storage is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

New Arrive Delayed Price Rates have Been Reduced

We have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

We have also updated our web site with the grain storage options that we offer at the Co-op.  Please click here to see what storage options exist for our patrons, and to see what option is the best fit for you.  Many of you have interest in using Delayed Price as an economical way to store your grain.  However, many of our patrons have had questions regarding Delayed Price and how it is different compared to Open Storage.  We have created an information sheet that compares Delayed Price to Open Storage, and lists every advantage and disadvantage of the program.  I encourage all patrons to read this and it is very informative and will help you to understand our program.  Please click here to see this comparison of Delayed Price to Open Storage.

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 13 cent premium added to the cash price in exchange for an offer to sell new crop corn futures around $4.40 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 13 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 $4.40 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 4.40 – 40 = $4.00  The worst case is that you would have new corn sold at $4.00 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $3.78 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

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 – May 2, 2018

5/2/18

Corn vs Beans, Planting Decisions, and Weather

The market is still concerned about the delayed planting progress of the US corn crop.  On average, we are 10 days behind from a normal year.  Although true, we have made tremendous progress planting corn over the weekend and the first part of this week.  All efforts were made to push as much corn into the ground prior to the rain system that moved into the Corn Belt mid-week.  The USDA pegged Illinois with 32% of its corn planted and Iowa with 17% of its corn planted.  Make no mistake, the market will have its eyes squarely focused on these two states and will closely monitor their corn planting progress as the bulk of the US corn is produced there.  Many feel that these planting numbers could be on the low side as many acres were planted on Sunday and Monday that were not included in the total.

Why is the market so concerned about corn planting?  It’s because our margin for error, our cushion, is now gone.  Let me explain.  The USDA pegged the corn acres at roughly 88 M and the bean acres at 89 M.  Even if we plant 88.5 M corn acres, and if we have no production problems and have an average yield of 176 bpa, with our current demand structure, it is very likely that corn carryout next year will fall from 2.1 B bu this year to 1.8 B bu or so next year.  The market gets in comfort mode anytime corn carryout starts with a 2, or close to a 2.  Anytime corn carryout falls much below 2 B bu, the market gets uncomfortable, and when the market gets uncomfortable, it will put a big carrot out in front of you to make sure you do everything possible to get your corn planted.  It puts more risk premium in the market to encourage you to spend the extra money, extra time, the extra whatever, to make sure you get it done.  This explains why we are seeing corn react positively in the last 2 weeks.  The market knows producers make planting decision based on the current market and it is making the corn market as positive as possible right now.

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Weekly Grain Update – April 26, 2018

4/26/18

Weather and China Remain Central Focus

After trading subdued for the majority of last week, the grain markets hit support, bounced back, and seem to be in rally mode the majority of this week.  We are seeing volatility ramp up a bit this weeks as the trade continues to be concerned about the ability of the US farmer to get enough corn planted in the north ½ of the Corn Belt.  The southern ½ of the Corn Belt is either very close to or should be planting corn now or by this weekend.  Many predict that on Monday’s planting progress report that we could have as much as 20% of the US corn crop planted by then.  If this occurs, this will take a lot of the fuel away from the bulls as the planting risk goes down dramatically once 50% of the corn crop gets planted.  Once we get past 50%, any bullish momentum that was developed by slow planting progress seems to dissipate very quickly.

However, the concern is when the northern areas such as MN, WI, northern IA, the Dakota’s, and MI finally get their corn planted.  Last week, many of these areas received huge snowfalls, and some of this snow is still not melted and the soil temps still need to warm up to 50 degrees so corn can germinate.  The real concern here is timing.  When will these areas have soil temps at 50 degrees and will it be easier for the farmer to plant beans and forget about corn?  This is what the market is concerned about.  For the grower, the market still has a nice premium for new crop corn to encourage all of you to get after it.  This is usually the case.  The marker is willing to place a carrot in front of you to make sure you do everything in your power to plant every last acre of corn that you can.  However, many times the market quickly pulls the rug out from under you once it sees that enough acres will get planted and unfortunately, you are so busy doing your job, that the majority of the premium vanishes before you have a chance to react and sell your planted crop.  The market is a ruthless animal.  It could care less if you sell your corn with a premium.  It’s job is to make sure you plant all of your corn.  It could care less if you took advantage of the carrot it placed in front of you to do the job.

Frankly, this is where we can help you.  Our grain originators can help you manage this pricing process BEFORE the opportunity slips away.  We have been busy working with area growers and developing marketing plans and watching the markets for you so you can concentrate on your job.  This is also why targets work so well.  Targets allow you to place firm orders to sell your crop with a premium and will execute when the market reaches your selling price, so you don’t have to watch the market.  These targets work great, are free, and allow you to be more productive during your busy times.  I encourage all of you to pay attention to the new crop corn and bean markets in the next 2 weeks.  Once we get past the 50% mark on planting corn, many times the premium comes out of the market.  You need to sell corn prior to this time as the market gets comfortable.  You need to sell when the market is uncomfortable and is willing to pay you a premium.  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

In addition to potential slow corn planting, the other big news pieces this week are:

  • China has not purchased any US beans in the last 2 weeks. They are buying from Brazil, Canada, and even Argentina.  The price of beans from these countries is moving higher, and the Chinese bean crushers are having a much more difficult time being profitable.  China is doing everything possible to avoid buying US beans due to the 25% tariff.
  • China also slapped a 179% export deposit on US milo. This almost doubles the price of milo to the Chinese buyer who uses US milo.  Thus, the milo market in the US has crashed as there is no more demand from China, and there are currently 5 cargos of milo in route to China that have been just diverted away this week.  Reports surfaced that Saudi Arabia and the Philippines are taking delivery of this milo that was in route to China.
  • The weather has much improved for corn planting. Much of the corn belt is seeing temps in the 60’s this week with very little additional moisture.
  • The extreme dry area in Kansas and Oklahoma did get some rain the past weekend, and the HRW crop seems to be improving. Time will tell whether the rain will continue.
  • The US farmer has been disengaged from grain marketing until he gets his corn crop planted. This has allowed the basis to firm on corn and beans on old crop bushels.  Locally, the old crop bean basis has improved a dime over the last 2 weeks.  Once the farmer starts to sell again, expect the basis to back off.
  • High level US trade reps will be travelling to China next week in order to hammer out a potential deal with the US. The market is being supported today due to this.
  • We witnessed some fresh technical buying this week as the funds want to increase their length of ownnership.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – July 18 Corn Futures – Support at $3.85, Resistance at $4.01, Place Targets at $3.96

New Corn – Dec 18 Corn Futures – Support at $4.02, Resistance at $4.16, Place Targets at $4.10

Cash Beans – July 18 Bean Futures – Support at $10.27, Resistance at $10.78, Place Targets at $10.68

New Beans – Nov 18 Bean Futures – Support at $10.25, Resistance at $10.60, Place Targets at $10.50

New Wheat – July 18 Wheat Futures – Support at $4.67, Resistance at $5.10, Place Targets at $5.00

To see where grain futures are currently trading, please click here.

Sign Up ENDS Monday for New Crop Average Price Contract – Enroll Today

We are now enrolling bushels into our new crop Average Price Contract which is for new crop grain that will be delivered during this fall.  This is a cash contract and will use a 10 week period to average the price.  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 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.

New Arrive Delayed Price Rates have Been Reduced

Effective March 20th, we have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

We have also updated our web site with the grain storage options that we offer at the Co-op.  Please click here to see what storage options exist for our patrons, and to see what option is the best fit for you.  Many of you have interest in using Delayed Price as an economical way to store your grain.  However, many of our patrons have had questions regarding Delayed Price and how it is different compared to Open Storage.  We have created an information sheet that compares Delayed Price to Open Storage, and lists every advantage and disadvantage of the program.  I encourage all patrons to read this and it is very informative and will help you to understand our program.  Please click here to see this comparison of Delayed Price to Open Storage.

5,000 bu Condo Space For Sale

We have a patron who wants to sell 5,000 bu of Condo Space.  This is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

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 – April 18, 2018

 

4/18/18

After Weeks of Volatility, Calmer Markets Prevail

After all of the volatility and turmoil over the last few weeks, all of a sudden, a calm environment has prevailed.  The potential trade disruptions between the US and China have simmered down and Argentina has finally received much needed rain.  The extreme basis strength that we witnessed over a week ago for Brazilian beans has cooled off significantly, and now reside at levels prior to the trade rift with China.  As the Brazilian bean basis has cooled down, so has the bean premiums at the Gulf.  Despite the bombing of Syria on Friday by the US, the ag markets really did not seam to be affected.  The funds continue to be long both corn and beans, roughly 175,000 contracts of each, and the managed money folks seems to be content with their current long positions, and not wanting to add more length at this time.  Bullish markets need to be fed continuously.  Since the funds are not buying more length, futures have been drifting lower, and as a result, the charts are turning down and look weaker than they have been in weeks.

Planting progress pegs the US corn crop at 3% planted vs 5% on average.  With the recent cold and wet weather as of late, US corn planting is anticipated to remain slow and behind.  However, the 8 to 14 day forecast is calling for warmer and dryer conditions across the Corn Belt.  This has allowed corn futures to drift lower as there is no immediate threat as of yet.  Additionally, the market knows the US farmer can plant huge volumes of corn in very short windows if forced to do so.  The biggest one week gain in corn planting occurred in 2013 where we planted 43% in one week.  Most years, a 33% gain in corn planting progress is the biggest 1 week gain during planting.  One thing is for sure though, if we get to May 1st and we still don’t have any corn planted, the corn market will react and possibly violently to add risk premium to December corn futures.  Until then, the stagnant futures are causing the basis in the interior to firm, as it will be required to do more of the work to move corn and beans.  Many processors of corn and beans have firmed their basis in the last week to try to stimulate movement.  Many times, when the farmer cannot plant corn, he does not sell cash or new crop grain until he gets his crop planted and emerged.  The result is a very disengaged farmer as we have right now.

Besides the lack of US corn planting, there are other weather concerns mounting around the globe:

  • Many HRW areas in Oklahoma and Kansas remain dry, with a very substandard wheat crop
  • Brazil has many areas that are starting to dry out and their 2nd corn crop will be affected
  • With the blizzard this week, there are many acres of spring wheat in the Dakota’s that will be planted to beans as the planting window closes rapidly.
  • We could see many corn acres switched to bean acres in the northern areas of the Corn Belt due to the snow and cold temps.
  • Argentina is now receiving decent amounts of rain which is delaying their bean harvest

 

I believe there is a better than average chance that the Corn Belt will lose corn acres and gain bean acres due to the cold / wet spring conditions.  The market still has not put much of a risk premium in December Corn futures as of yet.  In fact, it has been trading lower for the last week.  But the calendar will start to get more and more attention in the coming days, especially if the weather does not improve.  This whole scenario is bullish corn and bearish beans.

 

What Are The Charts Telling Us?

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 $3.80, Resistance at $3.92, Place Targets at $3.88

New Corn – Dec 18 Corn Futures – Support at $4.02, Resistance at $4.16, Place Targets at $4.10

Cash Beans – May 18 Bean Futures – Support at $10.44, Resistance at $10.78, Place Targets at $10.68

New Beans – Nov 18 Bean Futures – Support at $10.34, Resistance at $10.60, Place Targets at $10.50

New Wheat – July 18 Wheat Futures – Support at $4.79, Resistance at $5.10, Place Targets at $5.00

To see where grain futures are currently trading, please click here.

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

I can build a solid case why beans will move lower in the coming weeks as more acres get planted and less corn.  In addition, the bean planting window is not nearly as tight as the optimum corn planting window.  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 around $10.90 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 $10.90 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 10.90 – 69 = $10.21  The worst case is that you would have another set of new beans sold at $10.21 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.78 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.  Please click here to see our current cash grain bids.

Targets Produce Success and Protection For Your Farm

Before long, weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

LAST CALL For New Crop Average Price Contracts – Sign Up Today

We are now enrolling bushels into our new crop Average Price Contract which is for new crop grain that will be delivered during this fall.  This is a cash contract and will use a 10 week period to average the price.  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 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

Weekly Grain Update – April 11, 2018

 

4/11/18

No Major Surprises In USDA’s April Crop Report

The USDA was out with its April crop report on Tuesday, and they did not make significant changes to the grain supply and demand tables.  Their slight adjustments were viewed as neutral for corn, slightly supportive to beans, and bearish for wheat.

In corn, they made no changes to the supply numbers.  On demand, they reduced feed usage by 50 M bu down to 5.5 B bu, and they reduced corn used in the food and seed industries by 5 M bu.  When the dust settled, carryout was raised by this 55 M bu up to 2.182 B bu.

In beans, the USDA also did not make any changes to supply and left production numbers the same from last month.  They did increase the crush number by 10 M bu to 1.97 B bu and they also reduced seed and residual by another 5 M bu.  In the end, bean carryout was lowered by 5 M bu down to 550 M bu which is still a large amount of beans, but the reduction was viewed as supportive.

In wheat, the only adjustment was a reduction in wheat used for feed.  The USDA reduced feed usage by 30 M bu.  This change went straight to the bottom line and increased carryout by 30 M bu up to 1.064 B bu, which was viewed as bearish to wheat.  During a time where we have seen our grain markets being significantly pushed around by potential trade wars, a lack of new crop bean acres, and significant corn exports, this report did not shake the market much at all.

Cold Weather, Slow Planting, and Trade Disruptions

There is more and more concern developing about the slow start to US corn and bean planting.  Much of the Midwest is still covered by snow, and no where near ready to even think about planting corn yet.  Forecasts are calling for continued cold temperatures for the balance of April.  Obviously, we need more heat, and dry weather in the coming days / weeks to get the majority of the Corn Belt in position to plant corn.  Yes, this is only April 11th.  However, many parts of southern IL are usually planting corn by April 20th, and this will not happen this year, at least it does not appear to be the case.  If the situation does not change, this will likely be supportive to corn and bearish to beans as more beans will likely be planted and less corn.  However, the US farmer has proven time and time again that he has much more planting capacity as compared to previous years to plant massive amounts of corn in short amounts of time, if forced to do so.  We are not in panic mode yet, but the trade is paying attention.

Last week, the market witnessed huge volatility from the potential trade disruptions between the US and China.  Each side threw grenades at each other, but at the end of the day, there was no date on the potential tariffs being enacted.  To me, this is negotiating 101.  Hit your opponent with a big thump, make him realize you are serious and won’t back off, call his bluff, and see how he reacts.  You don’t put any time limits on the deal, but it shows the opponent what we could do if forced into a corner, and it shows him that we are very serious about this matter.  It also shows that the US is operating with a strong hand and will not be bullied into something that is not good for us.  Well, we will see how this tactic eventually works out, but we saw early indications yesterday that the Chinese might be the first to make concessions.  Chinese President Xi is looking to open up some of his markets to the outside world, starting with cars.  We will see how the ags are implicated, but one thing is for sure, they still need to buy some beans from the US.  On top of this, their 25% tariff will likely crush their internal soy users.  These internal pressures in China are probably starting to mount, and this is likely why China threw out the first olive branch.  However, we have been here before.  Let’s see what actually gets accomplished before we make assumptions on what will happen.  Stay tuned.

The bean basis in Brazil jumped massively on Thursday last week when the rhetoric between the US and China was at the high point.  If China would not buy beans from the US, that means they would only buy them from Brazil, and the soy market in Brazil proceeded to ramp up by $1 – $2 per bushel in short order.  And since Brazilian beans now became the most expensive beans in the world, everyone was coming to the US to buy beans for later in the year.  As a result, the bean basis in the Gulf started to work higher, and we saw the Gulf bean basis improve 30 to 40 cents in very short order, as a result.  Since Friday, all of these bean markets have cooled down, but this gives you a sense of how our markets react to changing demand due to politics.  The nearby bean basis has firmed a bit.  My guess is that we will continue to see bean basis remain firm on the front end.  Time will tell whether this will continue, or not.  It will largely depend on whether the US and China can work out their differences without a full-fledged trade war.

Targets Produce Success and Protection For Your Farm

These types of scenarios push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

New Arrive Delayed Price Rates have Been Reduced

Effective March 20th, we have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

We have also updated our web site with the grain storage options that we offer at the Co-op.  Please click here to see what storage options exist for our patrons, and to see what option is the best fit for you.  Many of you have interest in using Delayed Price as an economical way to store your grain.  However, many of our patrons have had questions regarding Delayed Price and how it is different compared to Open Storage.  We have created an information sheet that compares Delayed Price to Open Storage, and lists every advantage and disadvantage of the program.  I encourage all patrons to read this and it is very informative and will help you to understand our program.  Please click here to see this comparison of Delayed Price to Open Storage.

5,000 bu Condo Space For Sale

We have a patron who wants to sell 5,000 bu of Condo Space.  This is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

Deadline Approaching For New Crop Average Price Contracts – Have You Enrolled Yet?

We are now enrolling bushels into our new crop Average Price Contract which is for new crop grain that will be delivered during this fall.  This is a cash contract and will use a 10 week period to average the price.  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 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.

What Are The Charts Telling Us?

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 $3.80, Resistance at $3.95, Place Targets at $3.90

New Corn – Dec 18 Corn Futures – Support at $4.05, Resistance at $4.16, Place Targets at $4.12

Cash Beans – May 18 Bean Futures – Support at $10.35, Resistance at $10.82, Place Targets at $10.72

New Beans – Nov 18 Bean Futures – Support at $10.35, Resistance at $10.60, Place Targets at $10.55

New Wheat – July 18 Wheat Futures – Support at $4.89, Resistance at $5.31, Place Targets at $5.23

To see where grain futures are currently trading, 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 – April 5, 2018

4/5/18

USDA Reports, Tariffs, and Volatility

There has been several items that have / will push our grain markets around as of late.  These have been:

  • The USDA Prospective Plantings Report and March 1st Grain Stocks released last Thursday
  • The Retaliatory Tariffs placed on US products by the Chinese
  • The April USDA monthly grain report to be released on Tuesday next week

 

Let’s take a minute and break these all down.

Last Thursday, the USDA gave us its prediction of how many acres of corn, beans, and wheat the US farmer will plant this spring.  Last year we planted just over 90 M acres each of corn and beans and just over 46 M acres of all wheat classes.  The total of these acres planted last year add up to 226.3 M acres.  Before the report, the market had expected that we would plant 88-89 M acres of corn and 91-92 M acres of beans.  This would be the first time that the bean acres in the US would naturally be bigger than corn acres.  Well, the government shocked the market with its acreage prediction on Thursday.  It pegged corn acres at just over 88 M, beans at just under 89 M, and all wheat acres at 47.3 M.  The total of all of these is 224.3 M acres of corn, beans, and wheat.  After these numbers were released, there was a lot of “head scratching” going on as the trade could not figure out where the additional 2 M acres went to.  The trade could accept the corn acreage prediction, but it was shocked at the bean acreage number at 89 M.  In fact, many still believe that the bean number is not right, and when the dust settles after planting this spring, the bean acres will be larger than this.  Also, when hard times fall on the ag community, the farmer tends to plant fence row to fence row to maximize revenue generation.  Why would he just let 2 M acres sit idle?  Something is not adding up.  However, these are the numbers the trade is forced to deal with, and we won’t know the final acreage numbers until the June 30th numbers are included in the July 12th monthly crop report.  Stay tuned.

The other piece of information from last Thursday’s report was the March 1st grain stocks.  These numbers gives the trade and indication of what was produced last fall and also how much has been used during the first ½ of the crop year.  Last year, the March 1st corn stocks were, combining both on farm and in commercial storage, were 8.622 B bu, beans were 1.739 B bu, and wheat stocks were 1.659 B bu.  The report on Thursday pegged March 1st 2018 corn stocks at 8.888 B bu, beans at 2.107 B bu, and wheat at 1.494 B bu.  The story that nobody is talking about, and under the radar due to the acreage surprise, is the massive amount of corn and beans in the country left over from this fall’s huge harvest.  Either the final corn and bean numbers were higher than they originally thought, or usage is less.  Both the corn and bean stock number this year are a record, and they have NEVER been this big before in history.  At some point, the market will be forced to deal with this, but it is not looking at it today.

In the mean time, the market’s reaction to the lack of new crop bean and corn acres was extremely positive to grain futures at 11 am last Thursday.  As soon as the numbers were released, beans shot up 25 cents, corn traded 11 cents higher, and wheat moved 15 cents higher.  The market just could not believe the lack of bean acres and as a result, it needed to “buy” more new bean acres.  But as beans rallied, corn and wheat followed suit.  At the end of the day, beans closed 33 cents higher, corn closed 14 higher, and wheat closed 16 higher.  A tremendous amount of new crop grain was purchased on Thursday by the grain trade as targets were being fill continuously all day.  The market closed on a very firm note, and this strength carried over into Sunday night’s opening, where more and more selling occurred as the market made new highs around midnight.  December corn futures made a new high at $4.16 and November bean futures made a new high at $10.60.  Targets were being filled left and right, and the farmer was protecting his farm revenue.  We had a nice pop in futures and many were taking advantage of this opportunity like they should have.

We have been saying for weeks that trade relations with the Chinese have not been on the kindest of terms as of late.  It started with the Trump Administration’s tariffs on steel and aluminum coming from China.  All total, there was over 100 items on our list worth about $50 B in market value.  This is all due to the huge trade deficit that we have, and the administration is trying to level the playing field.  As you could have guessed, the Chinese did not like this, and the equity and grain markets have been on edge lately because we know the Chinese would fire back with some sort of retaliation.  We knew it would happen, but just not sure what and when.  Well, we got our answer at 4 am Wednesday morning.  The Chinese came out with their own list of items that would be taxed.  Included was soybeans, corn, milo, beef, pork, automobiles, planes, and many more items.  The Chinese would include a 25% tariff on these items coming from the US.  We all know how the Chinese buy our beans.  They have a huge appetite for beans and even though they have been buying the great majority of them from Brazil, they still must come to the US for 30% of their soybean needs because Brazil cannot totally satisfy their needs.  Thus, the bean basis in Brazil has skyrocketed higher, and this strength in bean basis there is starting to cause the basis at the Gulf to firm as well.  At the end of the day, if the Chinese completely take every excess bean out of Brazil, the normal customer that usually bought beans from Brazil will likely need to come to the US to get his beans now.

So, instead of selling our beans to China, we will be selling our beans to many different countries that used to buy them from Brazil.  This is an interesting development, and no one is sure what the exact end result will be.  However, once this news broke during the early morning hours Wednesday morning, as you could have guessed, our grain markets were just pounded lower.  Beans crashed 55 cents lower and corn was down 20 cents.  All of a sudden, the market is wondering if we will have a solid demand for US beans if the Chinese don’t buy them.  The first reaction was the worst, as the markets closed Wednesday much off of their lows, but there is still a huge amount of uncertainty in the market.  Stay tuned.  Once this news broke, December corn traded down to $3.96 and November beans traded down to $9.97 after making a new high at $10.60 just 2 days earlier.  This is the definition of volatility, and why we encourage all of you to use targets to take advantage of these pops in the market.  For more information on how to use our online target system, please click here.

The USDA will release its April crop report at 11 am on Tuesday next week.  In light of the recent developments, these numbers might not have a huge impact on grain futures, but it is another report that can push the markets around.  The USDA will give us an updated supply and demand table for the grains and we will get updated carryout numbers for each.  In light of the huge March 1st stocks numbers listed above, it will be interesting to see if corn or bean carryout grows from last month.

What Are The Charts Telling Us?

Looking at the charts today, all grains made a fresh high on Sunday night, and then made fresh lows on Wednesday after the Chinese tariff news broke.  We now have very wide support and resistance levels to work with.  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 $3.92, Place Targets at $3.88

New Corn – Dec 18 Corn Futures – Support at $3.96, Resistance at $4.16, Place Targets at $4.10

Cash Beans – May 18 Bean Futures – Support at $9.83, Resistance at $10.60, Place Targets at $10.40

New Beans – Nov 18 Bean Futures – Support at $9.97, Resistance at $10.60, Place Targets at $10.35

New Wheat – July 18 Wheat Futures – Support at $4.59, Resistance at $5.09, Place Targets at $4.95

To see where grain futures are currently trading, please click here.

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 13 cent premium added to the cash price in exchange for an offer to sell new crop corn futures around $4.25 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 13 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 $4.25 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 4.25 – 40 = $3.85  The worst case is that you would have new corn sold at $3.85 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $3.71 today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

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

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 29 cent premium added to the new crop cash price in exchange for an offer to sell the same quantity of new crop bean futures around $10.65 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 29 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 $10.65 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 10.65 – 69 = $9.96  The worst case is that you would have another set of new beans sold at $9.96 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.60 today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.  Please click here to see our current cash grain bids.

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

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