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

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