Weekly Grain Update – February 28, 2018



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

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