Weekly Grain Update – May 9, 2018

5/9/18

USDA Report On Thursday.  US Corn Planting Makes Good Progress.

The USDA will be out with its monthly crop report on Thursday morning at 11 am.  This report will include the first estimate for the 18/19 crop that is being planted now.  The market expects next year’s corn ending stocks to shrink from the current 2.18 B Bu down to 1.75 B Bu or so for next year.  This is the reason why the corn market is being so sensitive to the late corn planting this year.  As I have said many times, once corn carryout drops much below 2.0 B Bu, the corn market gets uncomfortable and when this happens, the market puts additional risk premium in the market to encourage more production from the farmer.

On beans, the current carryout is 550 M bu and the market is expecting roughly the same number for next year’s carryout.  Again, any bean number over 400 M bu or so puts the market in comfort mode, so we have more than enough beans this year and next year.  Bean planting is off to a really good start and is not lagging like corn.  So the likelihood that we will have a bean problem seems to be diminishing by the day.  This is a big reason why we witnessed a big sell off on Monday.  After weeks of adding length to their already long futures position, the funds decided to reduce their length, especially after a huge weekend of corn and bean planting.

We all need to be anticipating a “curve ball” from the USDA on Thursday to shake up the markets and for you to take advantage of it.  On corn, if the USDA pegs next year’s carryout below 1.7 B bu, this will be extremely supportive to corn futures.  All of you need to in position to take advantage of this situation if this occurs with target orders working to sell cash or new crop bushels for this fall if the market pops higher on Thursday.  Personally, I would have working targets in the system to sell both cash and new crop corn at 5 to 10 cents higher, entered prior to 10:30 Thursday morning, and let them work all day Thursday.  Again, it is simply amazing how much these electronic markets can gyrate in a few seconds time.  The opportunity to sell a nice pop could be here for 3 seconds right after 11 am when the report is released, and then gone.  The only way you could have taken advantage of this opportunity is to have a resting target order in the system working PRIOR to the report.

On beans, unfortunately, the surprise could be bearish, and not supportive to prices.  The surprise could be a much bigger carryout to next year’s bean crop than this year.  If next year’s number grows considerably larger than 500 M bu up to 6 or 700 M bu, this will weigh on cash, this year’s new crop levels as well as new crop ’19 levels as well.  On thing about the bean market, when it moves, it moves in a big way, usually 2-3 times what corn does.  It will not be out of the question to see a 30 cent move on beans on Thursday.  I just hope it is up and not down.  Again, targets work well in this situation, and encourage all of you to use them and put many out there for the slim chance beans could explode higher.  Let them work for you and make money for you.  I encourage all of you to start using our online target system.  Its free, easy, and will protect your farm.  Please click here for more information.

We have made great progress in planting corn as of late.  The USDA pegged the average US corn planting at 39% Monday evening vs 44% on average.  IL planted 42% of their corn crop last week and now have 74% of their corn in the ground.  IA was 40% complete vs 48% on average.  The market is concerned about the lack of corn planting in the northwest portions of the Corn Belt (MN, SD, ND).  MN is only 9% complete vs 44% on average.  If this situation persists, it should be supportive for corn and bearish for beans as these acres will be switched to beans and make the corn complex tighter and continue to make the bean complex more flush with beans.  This being said, the market believes that a great amount of corn acres were planted on Sunday and Monday at are not included in this total.  With the huge size of modern planters and planting speeds, it is just incredible how many acres of corn can be planted in a single day.  Going forward, getting an accurate estimate each Monday is a challenge for the USDA as the volumes get larger and larger, and planting windows get smaller and smaller.  Thus, the market feels these numbers are understated, and the average corn planting volumes will be right at average next week as we hit the May 15th date on the calendar, when it should be wrapping up.

On beans, the USDA pegged the average at 15% vs 13% on average.  IL was 29% done vs 12% on average.  Thus, bean planting is not behind and is actually ahead of normal.  There is a push this year to get more beans planted earlier than in the past to improve yields.  More and more farmers are planting beans and corn at the same time.  If there is a yield advantage, the farmer will do anything to get it this year as many are struggling financially to cover all of their costs.  Getting the bean crop planted early will also allow them to hit a premium bean market in their area.  Many times, the bean processor will put a big premium on early delivery beans into the plant to encourage the farmer to start cutting beans.  Early beans will be able to be sold for more money, and the yield boost will also add a layer of profitability as well.

Locally, we are struggling to get our crop planted on time.  The wet and cool conditions have pushed everything back 2 weeks.  Areas to the south towards Oshkosh have not turned a wheel yet.  If we get no rain, these areas will go by Friday.  Areas to the north of New London to Clintonville are starting to go.  The sandy areas to the west are going as well.  We just need the rain to hold off for 2 weeks to allow us to get the corn planted.

The other big news event continues to be the potential trade disruption with beans sold to China.  Last week, the US sent a team to China to help pound out a new deal.  Both parties agreed to keep talking, but nothing concrete was established.  Next week, the Chinese delegation will be visiting the US to continue talks.  Approximately 6 weeks ago, China placed a 25% tariff on beans purchased from the US making the internal Chinese bean buyer penalized for using US beans.  Since then, the amount of beans sold to China has virtually stopped in their tracks.  Brazil is now supplying nearly all of the beans to China even though they are paying a heathy premium for those Brazilian beans.  The Chinese buyer will not buy any more US beans until a deal gets worked out with the US.  In the process of negotiation, the US has demanded that US ag exports not be penalized.  However, no agreement is finalized yet, and it remains to be seen how all of this will work out.

Make no mistake.  The market is very concerned about this issue.  China has been a huge buyer of US beans and if they stop buying our beans, this will have wide and lasting results on our bean market.  China also buys many new crop beans during October from us.  If this stops, this will have a huge impact on our harvest operations and market values during this fall for grain elevators and shippers.  Unfortunately, there are many questions, and not many answers at this point.  From your point of view, your biggest concern should be if an agreement is not made with China.  All of a sudden, beans could start stacking up in this country like we have never seen before.  We already have a huge bean carryout, and bean planting is now ahead of schedule.  If a deal cannot be pounded out, the US will be floating on beans, and harvest values will plummet.  Again, the path of least resistance on beans could very likely be much lower in value.  Is your farm correctly positioned for this potential lower move?  Please click here to see where our new crop prices are at.  If you would like to sit down with one of our grain originators to set up a marketing plan, please click here.  We would be glad to sit down with you and set up a plan.

What Are The Charts Telling Us?

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – July 18 Corn Futures – Support at $3.99, Resistance at $4.08, Place Targets at $4.05

New Corn – Dec 18 Corn Futures – Support at $4.15, Resistance at $4.22, Place Targets at $4.20

Cash Beans – July 18 Bean Futures – Support at $10.10, Resistance at $10.34, Place Targets at $10.30

New Beans – Nov 18 Bean Futures – Support at $10.16, Resistance at $10.32, Place Targets at $10.28

New Wheat – July 18 Wheat Futures – Support at $5.06, Resistance at $5.38, Place Targets at $5.28

To see where grain futures are currently trading, please click here.

Condo Corner

Do you own Condo space and wish to sell it?  Are you interested in buying Condo space?  If so, this is the right place.  Condo Storage is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

New Arrive Delayed Price Rates have Been Reduced

We have reduced our Delayed Price rates for new arrive corn and beans into Readfield and Center Valley.  These rates are for new arrive bushels only, and the rate will be in effect until Oct 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

We have also updated our web site with the grain storage options that we offer at the Co-op.  Please click here to see what storage options exist for our patrons, and to see what option is the best fit for you.  Many of you have interest in using Delayed Price as an economical way to store your grain.  However, many of our patrons have had questions regarding Delayed Price and how it is different compared to Open Storage.  We have created an information sheet that compares Delayed Price to Open Storage, and lists every advantage and disadvantage of the program.  I encourage all patrons to read this and it is very informative and will help you to understand our program.  Please click here to see this comparison of Delayed Price to Open Storage.

Still Own Old CORN?  Tired Of Paying Storage?  Check Out Our Cash Plus Contracts

Do you still own old corn in the bin or on Delayed Price at the elevator?  Do you need the money now and tired of paying storage?  Please consider our Cash Plus contracts.  These contracts will allow you to sell corn today with a 13 cent premium added to the cash price in exchange for an offer to sell new crop corn futures around $4.40 if on Nov 14th, the December ’18 corn 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 13 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 Nov 14th, depending on what December corn 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 December corn futures were locked in at the $4.40 level.  Taking off the basis of 40 cents under the December futures for delivery into Readfield, you would have a new crop corn contract at 4.40 – 40 = $4.00  The worst case is that you would have new corn sold at $4.00 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $3.78 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

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

Leave a Reply

© 2018 CHS Inc.