Weekly Grain Update – February 1, 2018

 

2/1/18

Is The Rally Over?  Did You Take Advantage Of This Selling Opportunity?

We have witnessed some very exciting grain markets over the last week which have given us some extraordinary opportunities to lock in premiums for cash as well as new crop grain.  Yesterday, we did see a pull back and the weakness continues today.  It was only 2 months ago when many of you were hoping and praying for $3.00 cash corn and $9.00 cash beans to be able to sell across the scale at harvest time.  Today, we can lock in new crop corn, bean, and wheat contracts which are roughly 50 cents higher on these, and they deserve serious consideration.  This is an awesome opportunity for all of you to start locking in new crop levels for next harvest if you have not done so already.  Your banker will love you, and you will add a nice layer of protection to your farm revenue.

There are a number of reasons why the market has rallied over the last two weeks.  However, now is NOT the time to get bullish.  This is the time to take advantage of what the market is given you and protect your farm.  The world is still sitting on a huge amount of grain, and the market can reverse direction at any time.  Here are the reasons why the market rallied over the last 2 weeks, and also why this market can go backwards very quickly:

Bullish Factors:

  • Dryness in Argentina is reducing corn and bean yields there
  • Northern Brazil is too wet which is delaying harvest
  • Poor wheat conditions in the US plains
  • Funds are covering some of their short positions
  • Funds are buying commodities as a hedge against inflation
  • The US Dollar is very cheap which is promoting solid exports
  • Funds are selling stocks and buying commodities
  • US corn is the cheapest in the world

 

Bearish Factors:

 

  • Brazil has a very good crop of corn and beans in their southern and central regions
  • The current rally is destroying export competitiveness which can lead to a sharp pull back
  • Brazil currently has the cheapest beans in the world
  • Concerning wheat exports, the US is not competitive
  • The US farmer sold massive quantities of grain over the last few trading days
  • Futures are now at strong resistance levels
  • Argentina will have a lack of extreme heat to further stress crops, even though they are dry
  • The new 11-15 day forecast in Argentina is calling for significant chances of rain
  • What Argentina is losing in crop size, Brazil could easily be producing
  • Once bean harvest starts in Brazil in a week or 2, the bean market could run out of steam
  • NAFTA talks have stalled
  • The world is still sitting on huge grain stocks

 

Weather markets are exciting and volatility most always ramps up.  With volatility comes opportunity.  Brazil will start cutting beans in the next week or 2, and once this happens, much of the fuel that has been creating this rally will go away.  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 $3.50, new beans over $9.40, and new wheat over $4.00.  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.

 

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 – March 18 Corn Futures – Support at $3.58, Resistance at $3.62, Place Targets at $3.60

New Corn – Dec 18 Corn Futures – Support at $3.90, Resistance at $3.94, Place Targets at $3.92

Cash Beans – March 18 Bean Futures – Support at $9.80, Resistance at $10.05, Place Targets at $10.00

New Beans – Nov 18 Bean Futures – Support at $9.96, Resistance at $10.17, Place Targets at $10.12

New Wheat – July 18 Wheat Futures – Support at $4.62, Resistance at $4.845, Place Targets at $4.80

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

 

Introducing New Average Price Contracts

We are always looking for unique ways to reduce your risk and help capture market opportunities when they appear.  I am happy to introduce 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.

 

CHS Will Host Grain Marketing 101 Workshops On Feb 13th

We are once again hosting a Grain Marketing 101 Workshop for our customers who wish to learn more about grain marketing, the contracts we offer, and how to improve the profitability of your grain operation.  Many have asked us to have these meetings again, as they were a huge success this past summer.  Anyone can attend, and they are free to the community.  We will go through the many different contracting options that we provide and examine the markets in which they work the best.  Now is the time to brush up on your grain marketing skills as outside activity is slow and it is a good time to learn more about what options are available to you.  We will be hosting two meetings on February 13th.  One at 10 AM in New London and at 6 PM meeting in Amherst.  Please RSVP by February 9th to the New London Office at 920-982-1111 or to anne.moore@chsinc.com.  Please click here for more information.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4922, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

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