Weekly Grain Update – January 17, 2018

1/17/18

USDA Confirms Huge Grain Supply

On Friday, the USDA released its January crop reports and confirmed the huge grain supplies across the globe.  Starting with corn, they raised the final yield on the crop by 1.2 bpa up to 176.6, which is a new record and larger than expected.  However, they did reduce harvested corn acres by 400,000 acres down to 82.7 M and they did reduce planted acres down by 200,000 acres down to 90.2 M.  On the demand side, they left exports and corn used for ethanol unchanged from last month.  They also pegged the December 1st corn stocks at 12.516 B bu which was larger than expected.  When the dust settled, corn ending stocks increased by 25 M bu up to 2.477 B bu.  This is a tremendous amount of corn and March corn futures made a new low on the news, trading down to $3.45 ½.

On beans, the situation was not quite as bearish.  The USDA left the harvested acres unchanged, but reduced the yield by .4 bpa down to 49.1 bpa.  They did increase the amount of beans used for crush by 10 M bu but they did decrease the amount of beans exported out of the country by 65 M bu down to 2.160 B bu.  Even though we did see a yield reduction and an increase in crush, these gains were more than offset by the decrease in exports.  Dec 1st bean stocks came in at 3.157 B bu, which was slightly supportive.  When the dust settled, bean ending stocks increased by 20 M bu up to 470 M bu.

On wheat, the shocker was that planted acres actually increased vs last year when the market had fully expected the planted acres to be reduced.  The USDA pegged the wheat acres at 32.6 M acres.  On the Wheat Supply and Demand Table, there were no surprises on exports or demand, but carryout did grow to 989 M bu which added more weight to the heavy market.

The only bullish reaction to the numbers came in the bean market.  The reduced yield in beans and the larger crush numbers combined with a slightly dryer forecast in Argentina caused some funds to cover their short position.  This buying propped up the bean market and beans closed up 12 cents on Friday.  This reaction to the reports now gives everyone the opportunity to start selling new crop beans for fall ’18 delivery at some very decent levels around $9.20 at Readfield or Center Valley, something that you need to seriously consider.  If the $9.20 cash price does not work for you, then I would strongly consider placing a target to sell fall beans at the $9.25 to $9.30 level to start marketing your beans for this fall.  You can either enter your targets on your own, or we can place them for you.  Please give us a call and we can help you place a target.  With the huge crop of beans coming from Brazil, it will be critical that you start protecting you farm income through these selling opportunities.  To place a target through our online bid center, please click here.

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 35 cents under the March ’18 corn futures level.  In a basis contract, we would lock in this 35 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 35 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 December?  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 now 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.

Delayed Price Rates Are Reduced

For those of you with corn or beans in the bin, another option available to you is to deliver them today, and place them on Delayed Price at cheaper rates.  On Jan 15th, we are offering reduced rates on corn and beans delivered to either Readfield or Center Valley and placed on Delayed Price.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018.  The new rate will be 30 days FREE, and then 3 cents flat per month thereafter.  Corn placed into Delayed Price will only be shrunk and dried down to 15.0% moisture and beans will only be shrunk down to 13.0% moisture.

As always, if I can help you with anything, please call me at Readfield.

Marcus

 

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