Weekly Grain Update – January 3, 2018

Cold Start to the New Year

As we start a new year, the market is dealing with several items that have moved to the surface.  First is the extreme cold temperatures across most of the Corn Belt.  This has the market worried about the winter wheat crop and how much damage will be created since many of the acres in the US do not have a snow cover to add protection.  For months, the wheat market has been in a downward slide.  For now, it looks like we might have hit solid support, and are bouncing back.  For those of you who have wheat planted, I would keep my eye on new crop wheat values in the coming weeks.  I believe the wheat market has shifted, and is now on an uptrend, and could move significantly higher.

The extreme cold is also causing real problems on the Mississippi River as ice is slowing much of the barge traffic much earlier than normal.  Reports surfaced yesterday that the river is froze as far south as the Melvin Lock, which is north of St Louis.  Normally, the river does not freeze this far south this early in the year.  The result is much higher barge freight, and this is depressing the basis in areas along the river.  It is also slowing down barge shipments during the heavy January shipment month.

For the last 45 days, the bean market has been reacting to the weather conditions in Argentina.  First it was dry, and then the rain came.  Well, the forecasts are starting to get dry once again and the market is watching.  The conditions in Brazil remain good to great, but the forecast in Argentina is turning dry again.  As a result, the bean market has been firming as of late, and if it stays dry there, the bean market could work significantly higher.  However, the window of opportunity is starting to close on this Argentina weather market.  We have about 3-4 weeks for the market to react before it won’t make much difference to the crop.  If you have any old crop beans to sell, and missed the November rally, please keep an eye on nearby beans for an opportunity to sell.  We might have one more pop in this bean market over the next 3-4 weeks to liquidate as the market deals with this Argentina weather situation.

Finally, it’s the start of a new year, and the index funds will need to rebalance their portfolios based on the current market prices.  Many times, these index funds hold a basket of stocks and commodities in their portfolio, and are required to rebalance them annually based on the values today.  Obviously, the grains have been pressed lower over the last year.  In order for the grain portion of their portfolio to have the same weighting as last year this time, they need to buy more grain and sell off better performing assets, like stocks, as they have been on fire over the last six months.  This rebalancing process happens annually, and many funds will do this in the first five business days of the year.  Thus, we are looking for many funds to be buying grains over the next week, and this buying will support the grain market.  If you have cash corn, beans, or wheat to sell, please keep an eye on the market this week and see if an opportunity presents itself.

Catch the Market When It Pops

I encourage all of you who need to sell grain to use targets to take advantage of a pop in the market.  It is simply amazing what these markets can do in a very short amount of time.  There is simply no way we can communicate to all of you during a short rally at 3 am in the morning.  This is why targets work so well.  It allows you to have resting orders already in position at Chicago so when the market starts to gyrate, your orders get picked off and you can take advantage of a very nice pop in the market. Targets are a great tool to help you lock in better returns for your farming operation.  You can call us and we can enter them for you, or you can do it all by yourself by entering them online through our Online Bid Center by clicking here.

The USDA will be out with their January crop report on January 12th.  This will be a major report with possible major implications to the Supply and Demand tables.  The changes that the USDA make next Friday will likely cause a major change in the price of grains at Chicago.  Thus, if you have grain that needs to be sold, I would have my targets in place and in order prior to the report next Friday.

As I look at the charts today, the corn market has bounced considerably and is in the middle of a sideways pattern.  Based on March corn futures, support is at the $3.46 level and upside resistance is at the $3.60 level.  Currently, March corn futures are trading at the $3.54 level, and have firmed in the last couple of days.  For those of you needing to sell corn, I would place a target just under the $3.60 level vs March corn futures.

The bean market has been clobbered over the last month as Argentina finally received their much needed rains.  However, as I look at the charts, I see support at the $9.54 level and resistance at the $9.78 level vs March soybean futures.  The market is currently trading at the $9.65 level, and if Argentina turns dry again, the market can pop right back up again.  For those of you who need to sell cash beans, I would put targets in a just below the $9.78 level vs March bean futures.

In addition to all of this, all of you need to be watching for opportunities to sell new crop ’18 corn and beans for this fall.  Today, you can sell new corn for Oct / Nov ’18 delivery into Readfield at $3.41 and $9.14 on beans.  Personally, I would put targets out there to sell new corn at $3.50 and new beans at $9.25.  If the targets get hit, this is a great thing and is protecting your farm.  I would simply raise the corn target by a dime and the bean target by 25 cents and enter another set of targets.  If these get hit, add another set of targets.  This is easy, simple, and is adding layers of protection to your farming operation.  Rinse and repeat.  Easy.  Done.

Do you have beans in the bin or on Delayed Price and missed the selling opportunity last month?  Please look at our Compass Contracts.  They can generate a better price NOW.

Hopefully, most of you took advantage of the strength we witnessed during the first part of December to liquidate bean ownership.  For those of you who missed the opportunity, all is not lost.  With our Compass Contracts, you are still able to collect a big premium now in exchange for giving us a new crop bean offer on new bushels that you intend to plant, but have not sold yet.  This contract is the best of both worlds.  You can collect a big premium now on old crop bushels and lock in a nice price for new crop bushels as well, keeping the entire premium.  For example, today you can collect a 30 cent premium with for an offer to sell Nov ’18 soybean futures at $10.05 if the futures close at or above $10.05 on Oct 24th, 2018.  No matter what the market does, you will get to keep the entire 30 cent premium now, and depending on where Nov bean futures close on Oct 24th, you may also be able to sell new crop beans at a cash price of $9.36 delivered to Readfield for Oct / Nov ’18.  With the big crop of beans in Brazil and Argentina, once can certainly build the case for significantly lower bean prices later in the year.  If interested, please call us at Readfield and we can explain the contracts to you in detail.  All of you should consider this contract because the new crop bean options are nice and fluffy now, and you can use these premiums to protect your farm.

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

Marcus

 

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