Weekly Grain Update – November 21, 2017

China Buys Corn

The big news this week was that China was in the market place buying corn and ethanol.  We have seen the Chinese purchase soybeans for many years, and frankly, we count on them to buy huge quantities of beans during the fall harvest.  They are a cornerstone of our US bean export program, and help to add stability during a time when prices in beans could get quite sloppy.  So when we see the Chinese looking at buying corn and / or ethanol, the market pays attention, and it causes some unique things to happen.

The funds currently have a huge net short position in corn futures.  They are so short that last week’s Commitment of Trader’s report showed that they broke a new record on the size of their short position.  Previously, the record short for managed money was 229,000 contracts of short corn futures.  Last week’s report had them short 231,000 contracts, or a new record.  The funds are short because the fundamentals tell them to be so.  The corn crop is huge.  Our corn export program is in the tank.  The crop seems to be getting bigger each month, and there is a huge amount of farmer selling just above the market.  All of this is weighing on corn, and they see this and are putting their money where it counts.

Now, when China all of a sudden looks to start buying our corn, this tells the market place that something is changing.  First of all, the Chinese are master manipulators when it comes to buying their grain.  They are not afraid to take positions, cancel sales, or make statements just to satisfy their purchasing criteria when buying our grain.  So when they start to look at buying our corn, something has changed.  Most likely, our corn now has gotten cheap enough to potentially to do business with the US.  And when China does something, they usually do it in a big way.  They see our situation, and they know we could sell them a massive quantity of corn if the price is right.

So when the news broke on Friday that China was looking at buying our corn, this caused the funds to get nervous in the massive short corn position.  Many decided to start covering some of their short positions, take the money to the bank, and lock in the profits.  When the funds cover their short position, they buy futures to offset their short, and many of them did this on Friday.  The massive amount of buying on Friday caused nearby December corn futures to pop up and eventually closed 6 cents higher for the day and beans closed 18 cents higher as well.  This was a huge change of character for the corn market as we have not seen this type of strength in months coming out of the corn market.  The key here is whether the funds will continue to cover their short.  The fact that China is looking to buy our corn also tells me that corn many be at a support level where it may have a hard time getting much cheaper as it has been beaten down for many months.  Only time will tell.

Where to Set Targets

As I look at the charts, December corn futures ran right back up to the previous resistance level at $3.45.  The support level is last week’s low of $3.36  I see December corn futures trading in a sideways pattern between these two levels unless something else changes in the world corn market.  For those who must sell corn, I would have targets in to sell December corn futures at the $3.43 to $3.45 level.  On beans, the market went right back up and “kissed” the upper resistance line during the strength on Friday.  Beans are now in a solid upper channel movement with support at the $9.73 level and resistance at the $9.92 level vs January soybean futures.  If you need to sell beans, I would place targets around the $9.87 to $9.92 level vs January futures.

We are constantly looking for ways to add value and profitability to your farming operation.  One way we can do this is by offering unique contract alternatives that will allow you to diversify your grain marketing portfolio, spread out your risk, and add another layer of pricing protection to your operation.  We are again offering the CHS ProAdvantage grain contract this year.  This contract is a very simple approach to allowing our trading professionals at CHS to market your grain for you.  Basically, you will hand over a portion of your grain to them to squeeze as much money out of the market as they can.  They will do many trades behind the scenes to generate as much profit for you as possible and when the program is over, their profits will be added together and given back to you in the form of a price that should be higher than the prevailing price at that time.  You don’t have to worry about the trades that they do, or any complex marketing strategies to learn.  This is easy folks.  Just give them a portion of next year’s grain production, and allow our marketing professionals to make money for you.

This contract has been offered for 3 years and the results are quite remarkable.  Their bean contract has worked well, and has allowed participants to enjoy contracts that were significantly higher than the current market.  All of this goes directly to your bottom line.  For bushels in your bin, you can enroll in a contract for July 2018 delivery.  For next year’s production, you can enroll in a Fall of 2018 delivery, and we also have Fall of 2019 delivery contracts as well.  The cost is 10 cents per bushel for the July 2018 or Fall 2018 contracts, and 12 cents per bushel for the Fall 2019 contracts.  The Fall 2019 is an especially good deal because the contract allows our traders an additional year to make trading returns on your behalf for only 2 additional cents.  Also, the 2 year contract has worked tremendously well over its history.  There is no minimum bushel quantity required.  Please click here for more information on our CHS ProAdvantage contract.  Every grower in the area should take advantage of this contract on at least a portion of next year’s production.  It is a very good contract that has a long history of success.  If you have other questions, please call me at Readfield.  Enrollment ends December 8th, 2017.

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

Marcus

 

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