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

Weekly Grain Update – March 27, 2018

3/27/18

The USDA Will Release Its Prospective Plantings Report Thursday At 11 AM

The USDA will release its annual Prospective Plantings report and March 1st Grain Stocks at 11 AM on Thursday morning.  There is no other report during the year that is quite like this one.  This is a big report, with a lot of information, and it usually causes the market to move in large volumes, either higher or lower, depending on what the government puts out.  This is the first time during the crop year that the USDA gives us their prediction on new crop acres of corn and beans and it sets the starting point for the ‘18/19 supply and demand tables.  The focus now shifts from the ‘17/18 supply and demand tables to ‘18/19.  Thus, this report is a big deal, and it usually creates market gyrations that affect the trade for several days after its initial release.  Today, the market is expecting the ‘18/19 corn acres to be in the range of 89 to 90 M acres, and the bean acres to be in the range of 91 to 92 M acres.  Last year, both corn and beans were right at 90 M each.  So this is a shift away from corn to more beans.

There are several reasons for this.  First, the bean market has give all of you a great opportunity to sell new crop beans for this fall at profitable levels.  Thus, more new crop beans will be grown.  Secondly, the farming economy is struggling on many fronts.  The banker is ramping up his criteria for farm loans, and raising corn takes much more dollars per acre than beans.  The path of least resistance is more beans and less corn, especially since we had the opportunity to lock in nice profits with new crop beans already this year.  However, the American farmer loves to plant corn if he can get his crop planted on time and has a big enough window to get this done.  I have said many times that the weather during corn planting determines final corn acres.  If he gets his original allocation planted and it is still dry enough to plant corn, and we are still before May 10th, he will pound more corn in the ground and less beans.

This report has a long history of significantly moving the market once the numbers are released.  Volatility will again be the word of the day.  Due to this, this is an excellent opportunity to get target orders placed for any remaining old crop bushels that remain unpriced in the bin or in elevator storage, and get orders to sell new crop bushels.  It is simply amazing how the markets will move in fractions of seconds once the numbers are released.  I encourage all of you to put a plan together, if not already done so, and put solid target orders to sell remaining old crop bushels and try to get at least 50% of your new crop bushels locked in before the planters roll.  I like July delivery corn at $3.50 or above, new corn at $3.60, July delivery beans at $9.75, new beans at $9.60, and new wheat at $4.10 and above.  These levels are all within 15 cents from hitting, and I would have no problem putting orders out there during the report to see if they could be picked off, and take advantage of the volatility of the report.  To see where cash grain prices are today, please click here.

I encourage all of you to be much more aggressive in forward contracting your grain ahead of planting and take advantages of opportunities while they last.  This is not the time to become bullish, but the time to pounce on opportunities to protect your farm.  The farmer can and will pound a massive amount of corn and beans into the ground at ever increasing speeds, so our planting risks continue to be reduced each year.  The earlier we plant, the less likelihood of having drought problems later in the year.  New seed varieties can produce even during the driest of the years.  We still have planting and weather scares during the year, but the industry is reducing these risks continually.  We also have massive amounts of grain around the globe.  The point is that the market will give you opportunities to lock in profits ahead of the planting season.  However, time is starting to run out.  Once the planters roll, and the corn gets planted, the market will give you less and less opportunities to forward contract bushels for this summer or this fall as it will get more and more comfortable with the crops growing in the field.  Your advantage is to lock in these premiums BEFORE the crop gets planted, not after.  There is no incentive for the market to rally after the crop is planted, unless we have a weather problem, as the crop is already planted.  If a premium is given, the market will try and encourage you to plant a certain crop before the crop is actually planted, by dangling a big carrot in front of you.  The carrot vanishes once the crop is planted.  The proactive grain marketer will be the successful operation moving forward.

Last week did a huge amount of damage to our grain markets.  Many times, after a significant pullback, the market will go back and “kiss” the previous low level goodbye, before the weaker trend prevails and the markets move lower and lower.  You can call us and we can enter these targets for you, or you can do it all by yourself through our Online Target Center by clicking here.

LAST CALL To Reserve Your Seat For Next Week’s Grain Meetings

On April 2nd and 3rd, we will be hosting 3 Grain Marketing Meetings throughout our draw area.  Here is the schedule:

  • Monday April 2nd at 5:30 at the Larsen Precision Ag Building. Dinner then meeting.
  • Tuesday April 3rd at 9:30 at the Waupaca Ale House. Meeting with lunch to follow.
  • Tuesday April 3rd at 5:30 at New London Crystal Falls Banquet Hall. Dinner then meeting.

Brian Rydlund from CHS Hedging will be joining us to go over the current S&D’s and also offer his recommendations for contracting and marketing.  It will be a lively discussion on current grain topics.  You are welcome to attend.  For more information on the location, times, and how to RSVP, please click here.

What Are The Charts Telling Us?

Looking at the charts today, all grains made a fresh low on Friday, and then worked higher into the close.  Since then, the market has not done much.  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 $3.69, Resistance at $3.80, Place Targets at $3.77

New Corn – Dec 18 Corn Futures – Support at $3.91, Resistance at $4.02, Place Targets at $3.98

Cash Beans – May 18 Bean Futures – Support at $10.09, Resistance at $10.40, Place Targets at $10.30

New Beans – Nov 18 Bean Futures – Support at $10.12, Resistance at $10.36, Place Targets at $10.26

New Wheat – July 18 Wheat Futures – Support at $4.62, Resistance at $4.79, Place Targets at $4.74

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

New Arrive Delayed Price Rates have Been Reduced

Effective March 20th, we have reduced our Delayed Price rates again 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.

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.

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 – March 22, 2018

 

3/22/18

Rain Finally Breaks the Grain Markets

After eight weeks of higher grain markets, the tide has quickly turned.  And like many times, we went higher than we should have, and now unfortunately, we may go lower than we need to.  This is the definition of volatility, and many times this correlates with fund activity in our grain markets.  We have been saying for weeks that Argentina is dry and the US plains are dry.  These facts caused the funds to cover their huge short positions that they have carried since fall harvest.  The news of dryness in Argentina and in the HRW areas of Kansas and Oklahoma causes them to get spooked and they covered (bought back) their short positions.  But they not only got back to an even position, they kept buying until they had a very sizable long position in beans and corn.  In fact, if you go back to mid-January, the funds held a short corn position of 227,000 contracts and a short bean position of 104,000 contracts.  Now, as of Tuesday of last week, they had accumulated a long position of 233,000 contracts long of corn, and 208,000 contracts long of beans.  What does this mean?  This means that in the 8 week period from mid Jan to mid-March, the funds bought a total of 460,000 contracts of corn, or 2.3 B bu of corn, and 312,000 contracts of beans, or 1.56 B bu of beans, all on paper.  Now, let’s compare this to the size of our entire corn and bean crop the US raised last year.  We produced a total of 14.604 B bu of corn and 4.392 B bu of beans.  This means that in the last 8 weeks, the funds have purchased 15.7% of the entire corn crop on paper and purchased 35.5% of the entire bean crop on paper.  This shows you the magnitude of their operations and why grain futures rallied and were supported like they have been.  We hear so much about the short covering rally.  What we witnessed this week was just the opposite:  the long liquidation sell-off.

In life, good things rarely last forever, and the grain markets are no exception.  We were getting clues last week that this market was way overbought and due for a correction.  When a market is given very bullish news and does not react bullishly, then the top is in, at least for now.  Last week on Thursday, we had a corn export number that was just huge.  It was the single largest corn export number that we have seen in 23 years!  Any yet, the market did nothing.  Secondly, NOPA bean crush came out with a huge monthly bean crush number, and the market did nothing but go lower.  These were clear signals that the tide was changing.  It was time for a correction lower.

The final straw that broke the back of the camel was rain over the weekend in Argentina and in the US plains.  Both areas receive more rain than predicted and that did it.  When the grain markets opened at 7 PM Sunday night, all grains gapped lower on the open and never looked back.  When the dust settled at the close, corn was 11 cents lower, beans were 25 cents lower, and wheat was 16 cents lower.  The market was easier on Tuesday as well.  What had taken weeks to establish was gone in 2 trading sessions.  Here is a summary of why the market sold off:

  • Fund position liquidation
  • Trade war fears
  • The funds held a longer position than thought
  • 1-2” rains in Argentina and US plains
  • Much easier bean meal markets
  • Argentina’s bean crop losses now capped. Bean crop should be larger than 40 MMT.
  • Weaker markets leading up to the huge sell-off on Monday
  • Much weaker technical readings from the charts
  • Big drop in the stock market on Friday

 

The recent sell-off in the grain markets has caused the producer to become very disengaged from marketing his grain and instead, is focused on preparing to plant his corn crop.  In the coming days, this lack of participation by the farmer due to lower grain prices should help the basis to improve.  We are already starting to see this happen in the southern areas where the basis and spreads are now going to be forced to do more of the market lifting since futures have backed off.  I suspect the local basis will firm as well, but it will likely take a bit more time for the strength to reach our area.

If you have not prepared a marketing plan for any remaining unsold grain in storage or in your bin, I strongly suggest you do so now before you plant your corn crop.  Yes, the market has pulled back, but now is the time to figure out where you want to sell your old crop, and at what level you want to sell your new crop production at.  New corn is at $3.57, new beans at $9.55, and new wheat is at $4.01.  We could see another rally during May and June if we have a planting problem, and the weather will likely not be perfect everywhere.  I strongly suggest that you talk to our grain originator and get a grain marketing plan in place so when the market gives us an opportunity to forward sell new crop or cash bushels, you don’t have to think about it, but only pull the trigger.  If you have not sold any new crop bushels yet, I strongly encourage you to start here and then place targets to sell each 5 cents higher on corn and wheat, and each dime higher on beans.  You can make money at these levels, it is prudent marketing to get these levels locked in, and this will give you risk protection for your farm.  You can call us to enter a selling target 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.

New Arrive Delayed Price Rates have Been Reduced

Effective March 20th, we have reduced our Delayed Price rates again 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 go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

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 28 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 $10.65 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 28 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 $9.55 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.

Corn Basis Contracts Create Cash Flow NOW and Stop Storage Charges

Do you still own old corn in the bin at home or on Delayed Price at the elevator?  Do you need cash flow now and want to stop the storage charges?  Please consider a corn Basis Contract.  A basis contract is where you simply lock in the basis (the difference between the cash price at our elevators and level where corn is trading on futures at Chicago.)  Today, cash corn at Readfield is trading at 37 cents under the May ’18 corn futures level.  In a basis contract, we would lock in this 37 cent basis level under the May futures, but leaving the futures portion unpriced.  You will then have a contract that will trail the May corn futures by 37 cents.  Most people will then give us a target to price the futures level to price the contract when corn futures rally 5 or 10 cents higher.  In the mean time, you can start to deliver against this contract if coming from the bin, or we will allow bushels on Delayed Price or Open Storage to be applied onto this contract with no charge.  Once the contract is filled, if you are paying storage, the storage stops immediately, and we can then advance you 70% of the contract value based on the current market.  The balance of the contract value will be paid to you once you set the final price on the contract.  This is a win-win for all parties.  You get cash flow now to pay bills, you stop the storage from accumulating, and you get to haul the bushels now when you have time.  This is a great alternative vs doing nothing.  On top of all of this, corn basis levels are stout right now.  The basis level you will be locking in is a great level compared to basis levels in the past.  It deserves your serious consideration.  Please give us a call, and we can explain to you all of the details if you have any questions.

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 cent premium added to the cash price in exchange for an offer to sell new crop corn futures at $4.20 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 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 close, 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 $4.20 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 4.20 – 40 = $3.80  The worst case is that you would have new corn sold at $3.80 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $3.57 or so today.  Please check this out.

What Are The Charts Telling Us?

Looking at the charts today, all grains made a fresh low on Monday.  Since then, the market has not done much.  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 $3.73, Resistance at $3.85, Place Targets at $3.80

New Corn – Dec 18 Corn Futures – Support at $3.95, Resistance at $4.03, Place Targets at $3.98

Cash Beans – May 18 Bean Futures – Support at $10.21, Resistance at $10.50, Place Targets at $10.40

New Beans – Nov 18 Bean Futures – Support at $10.21, Resistance at $10.48, Place Targets at $10.38

New Wheat – July 18 Wheat Futures – Support at $4.62, Resistance at $4.92, Place Targets at $4.82

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

CHS Larsen Co-op To Host Grain Marketing Meetings

On April 2nd and 3rd, we will be hosting 3 Grain Marketing Meetings throughout our draw area.  Meetings will be held in Larsen, Waupaca, and New London.  Brian Rydlund from CHS Hedging will be joining us to go over the current S&D’s and also offer his recommendations for contracting and marketing.  It will be a lively discussion on current grain topics.  You are welcome to attend.  For more information on the location, times, and how to RSVP, 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 – March 13, 2018

 

3/13/18

USDA Report Bullish Corn, Bearish Beans

The USDA released its March crop report last Thursday and gave some interesting numbers to the grain trade.  Changes were made to both corn and bean export numbers which took the market by surprise and made this report a game changer.  The corn numbers were rather bullish.  However, the changes made to the bean supply and demand tables were rather bearish.  Let go through the details.

The USDA made two changes to the corn supply and demand table.  First, they increased corn used in ethanol by 50 M bu to 5.575 B bu and secondly, they increased corn exports by 175 M bu to 2.225 B bu.  The net result of these changes was a reduction in corn carryout for this year of 225 M bu down to 2.127 B bu.  Usually, the USDA does not make much of a change on its March crop report.  This was not the case this month.  The above changes really surprised the market, and as expected corn closed 6 cents higher on the news on Thursday.  We have been saying for weeks that the corn demand structure is stout, and these numbers are just confirming this strength.  We have a corn market that is now the cheapest source of corn in the world, and this is expected to be the case until early summer.  We also have solid ethanol demand as $60 crude oil is allowing plants to run at full capacity.  We have excellent feed demand as the price of cattle now trade at $125.  On top of all of this, you have a corn production problem in Argentina, where their crop is expected to fall to 35 MMT or so.  We now have a world corn carryout that is now below 200 MMT for the first time since the ‘13/14 marketing year.

This strength has been shown through the basis at the Gulf, and it has been on fire as of late.  As the bean market crashed on Friday, the corn market remained calm and did not sell off like beans did.  The previous bean rally has allowed the farmer to sell new crop beans in a massive way over the last 2 months.  However, the market has not bought nearly as much new crop corn as beans.  The market needs the American farmer to plant at least 90 M acres of corn this year to keep the corn market well supplied.  Even with 90 M corn acres planted this summer in the US, the ‘18/19 corn carryout is expected to drop to 1.775 B bu or so.  Thus, the market this summer will be very sensitive to any weather or planting problem affecting the corn market.  If a problem develops, the corn market could turn bullish in a heartbeat.

The bean market could not be more opposite than corn.  Even with the problems in Argentina, beans are starting to stack up worldwide, and it will start to weigh on prices.  The USDA cut bean exports by 35 M bu down to 2.065 B bu.  They also increased crush by 10 M bu to 1.96 B bu.  The result of these two changes is an increase in bean carryout by 25 M bu to 555 M bu.  The market did not expect the reduction in exports which pushed bean carryout higher.  This change seemed to take the wind out of the sails of the bulls, and led to the steep sell off in the futures on Friday closing over 25 cents lower.  The real uncertainty now is how much more exports will be lost during this marketing year.  The administration is at odds with Canada and Mexico over NAFTA, and we could be at tremendous odds with China over the steel and aluminum tariffs put into place on Friday.  China is the largest buyer of beans in the world, and Brazil currently has the cheapest beans in the world as they begin their bean harvest.  If the Chinese decide to not buy our beans due to the steel tariffs, our beans will stack up in a huge way.  If this happens, we could have bean ending stocks next year that start with a 7 and not a 5.

Fortunately, crush margins have been just huge over the last 4 weeks as the price of bean meal ramped higher.  Stronger crush margins means more crush demand which will support the cash bean basis.  It is hard to know what the final yields will be in South America, but Brazil will likely have a bean crop close to 117 MMT once the dust settles, and Argentina will fall to 40 MMT or so.  These changes are already factored into the current bean futures prices.  The world bean carryout is still pegged at just under 95 MMT which represents a stocks to use ratio of 27.5%.  On top of all of this, the US farmer has been selling new crop beans, and looks to plant up 92 M acres this spring.  One thing is for sure, the world will not run out of beans anytime soon.  In fact, if Argentina did not have its drought this year, the price of beans could have easily been $1.50 to $2.00 lower than where we are today.

I can’t stress enough how over priced beans are today.  Any sort of problem with China, where they reduce their buying of US beans, and the beans will start stacking up in the US in a huge way.  Our carryout is already at 555 M bu.  If China stops buying our beans, we will be over 700 M bu in a heartbeat.  The banker is also putting pressure on the American farmer to plant more beans because the inputs are cheaper.  If we plant 92 M acres of beans this year, bean ending stocks will grow to levels we have not seen in decades.  November bean futures are currently trading at $10.38  At this level, I recommend that you have at least 50% of your new crop APH forward contracted for this fall.  There is significant risk of lower prices.  Let’s add a layer of protection to your farm.  Please click here to see which grain originator on our staff can help you create a unique marketing plan for your farm.

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 25 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 $10.80 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 25 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 $10.80 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 10.80 – 69 = $10.11  The worst case is that you would have another set of new beans sold at $10.11 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.70 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.

What Are The Charts Telling Us?

Looking at the charts today, all grains made a fresh high on Thursday last week.  Since then, we have been pulling back.  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 $3.87, Resistance at $3.94, Place Targets at $3.92

New Corn – Dec 18 Corn Futures – Support at $4.03, Resistance at $4.10, Place Targets at $4.08

Cash Beans – May 18 Bean Futures – Support at $10.32, Resistance at $10.60, Place Targets at $10.55

New Beans – Nov 18 Bean Futures – Support at $10.24, Resistance at $10.48, Place Targets at $10.43

New Wheat – July 18 Wheat Futures – Support at $5.00, Resistance at $5.32, Place Targets at $5.22

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

Take Advantage Of Short Selling Opportunities With Online Targets

Just prior or after 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.

CHS Larsen Co-op To Host Grain Marketing Meetings

On April 2nd and 3rd, we will be hosting 3 Grain Marketing Meetings throughout our draw area.  Meetings will be held in Larsen, Waupaca, and New London.  Brian Rydlund from CHS Hedging will be joining us to go over the current S&D’s and also offer his recommendations for contracting and marketing.  It will be a lively discussion on current grain topics.  You are welcome to attend.  For more information on the location, times, and how to RSVP, 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 – 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

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

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

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