Weekly Grain Update – February 6, 2018

2/6/18

USDA Report on Thursday, Feb 8th At 11 AM

The USDA will be out with its February crop report on Thursday this week.  Usually, this report is not a market mover, but anything is possible.  On corn, there is a decent chance that corn ending stocks from this year could be reduced due to very good ethanol production and decent corn exports as of late as the US has the world’s cheapest source of corn.  Corn exports last week amounted to just under 73 M bu which is very good and our window of opportunity is now for another 3 months until the South American corn harvest is brought to market.  Additionally, the market is concerned about how much corn production is being lost in Argentina as this country suffers from dry weather.

Concerning beans, the market is expecting higher bean ending stocks due to lower exports.  Many are expecting bean ending stocks to grow as high as 500 M bu for the ‘17/18 crop year.  This year’s bean exports continue to lag last year’s exports significantly, and this is contributing to the larger ending stocks.  The market is also looking at some huge production potential in Brazil, even though the yields in Argentina will be cut due to the drought.  However, Brazil’s bean production could more than offset the Argentina short fall.  The other issue is the increased bean acres planted in the US this spring.  There is a good chance that the US farmer will plant 2 M extra acres of beans this year from 90 M acres last year to 92 M acres this year.  This will just add more beans to an already heavy bean market.

The wheat market is expecting dramatically lower wheat production in the Hard Red Wheat production areas in the US plains, especially in OK and KS.  Additionally, we have not had a good winter for the Soft Red Wheat production areas in the eastern corn belt where protective snow cover layers did not allow adequate protection.  All of this makes excessive acres lost to winterkill a real possibility.  Thus, total wheat carryout will likely drop.  However, we are seeing nice wheat production from the Canadian providences and the dry weather in Argentina should not affect wheat production substantially.

My regular readers know that I am adamant about putting targets to work ahead of these major reports.  It is simply amazing what these markets can and will do in fractions of a second now that all trades are electronic.  A selling opportunity will likely happen after the numbers are released on Thursday, but the opportunity might only last 5 seconds, and there is simply no way I can call 250 customers in a 30 minute window to tell them about a great opportunity.  It is just not possible, and as we move more and more into the electronic age, these windows of good selling opportunities seem to get smaller and smaller.  I encourage all of you to enter your own targets using our free, online offer center.  Please click here to learn more and learn how to protect your farm.

Basis Contracts Create Cash Flow NOW and Stop Storage Charges

Do you still own old corn or beans in the bin or on Delayed Price at the elevator?  Do you need cash flow now and want to stop the storage charges?  Please consider a 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 31 cents under the March ’18 corn futures level.  In a basis contract, we would lock in this 31 cent basis level under the March futures, but leaving the futures portion unpriced.  You will then have a contract that will trail the March corn futures by 31 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 Beans and Need Money Now?  Check Out Our Cash Plus Contracts

Do you still own old beans in the bin or on Delayed Price at the elevator?  Did you miss the bean selling opportunity during January?  Do you need the money now and tired of paying storage?  Please consider our Cash Plus contracts.  These contracts will allow you to sell beans today with a 25-35 cent premium added to the cash price in exchange for an offer to sell new crop bean futures around $10.25 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 25-35 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 Oct 24th, depending on what November bean 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 November futures were locked in at the $10.25 level.  Taking off the basis of 69 cents under the November futures for delivery into Readfield, you would have a new crop bean contract at 10.25 -69 = $9.56  The worst case is that you would have new beans sold at $9.56 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.20 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

Last Call for 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 a.m. in New London and at 6 p.m. 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 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

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