Weekly Grain Update – November 29, 2017

In A Carry Market

As most of you are now done, or almost done with harvest, I would like to take a minute and start looking at new crop levels for next harvest of 2018.  It is no secret that we are in a carry market with huge amounts of corn and bean carryouts each year.  There is a large quantity of farmer selling orders above the market, and any market rally attempt is quickly stalled by selling orders from the country.  I don’t see this changing anytime soon, especially in the corn market.  The farmer is undersold on corn in a large way, and the market knows this.  This situation creates huge board carries.  This means the market heavily discounts the front end, but rewards the producer for locking in deferred values now.  My guess is that cash corn will stay close to the $3.00 level over time, but the carry will slowly grind out of the market over time.  What do I mean by this?  Let’s go back two months ago.  The cash price for corn delivered into Readfield for July 2018 delivery was roughly a 50 cent premium over the cash price.  Today, this premium has been reduced to only 27 cents.  If we wait another month, it will likely drop to 20 cents, and until we eventually get to almost even money.  The point is that the market is willing to pay you a premium if you are willing to step up and write a contract to lock these premiums in.  However, you only get these premiums if you contract the grain.  If you do nothing, once we get to July, the cash price of corn will be the same as it is today, roughly $3.00, and that entire 50 cent premium has just vanished over time.  This is a text book definition of big carry markets and how the carry gets “ground out” as we move through the crop year.  Big premiums are available for those who take the time, create a plan, and are willing to forward contract their grain.  One cannot receive this big premium by waiting until July 1, and selling cash at that point, but forward contracting those levels NOW for delivery THEN.

I have always encouraged the farmer to have at least 75% of his crop already marketed by Thanksgiving each year.  Good marketers always have a good handle on how many bushels they will produce, and are willing to jump on opportunities as they see them in the future.  They are willing to take the time to forward contract the vast majority of their grain before one kernel is harvested in the fall.  Over time, these marketers have a solid plan and know how to protect the revenue on their farm.  These keen marketers have a huge opportunity now because the market is offering some huge premiums for later this summer, and for harvest delivery next fall of 2018, and the fall of 2019.  However, and I repeat, the only way you can take advantage of these levels is to forward contract them TODAY vs waiting to sell them over the scale during next harvest.  I encourage all of you to get your old crop grain (harvest of 2017) marketed as soon as possible, and put it in the past, and then focus on the production from 2018, and some from 2019.  We now have bids out over 2 ½ years into the future which you can view by clicking here.  There are some huge opportunities available, but you must be willing to forward contract to lock in the premiums.  If you don’t, they will vanish over time.  It’s just that simple.

How to Benefit from a Carry Market

Let’s look at a few examples.  You can now sell corn for Oct / Nov ’18 delivery into Readfield at $3.33 and for Oct / Nov ’19 at $3.51.  Almost all of you have just sold some corn this past month at the $3.00 level across the scale, so what is wrong with these levels?  The market is giving you a gift.  Why don’t you gracefully take some, and put your mind and your banker at ease?  This is easy, simple, and SAFE.  Let’s look at beans.  The opportunity is not as big, but there is still a premium.  All of you just sold some bushels across the scale this month at the $9.00 level.  Beans for Oct / Nov ’18 can be sold for $9.25 now and for Oct / Nov ’19 are at $9.14  Both are over $9.00 and worth consideration.

Finally, lets look at wheat.  Out of all the grains, wheat has the most carry in the market.  If you grow wheat, you need to be selling the vast majority of your crop a year in advance because the rewards are just huge.  Cash wheat is now $3.50 at Readfield.  However, wheat for July / Aug 2018 is at $3.85 and wheat for July / Aug 2019 is at $4.42 or nearly $1 over the cash market!  These are huge premiums and worth serious consideration.  Again, the market is offering you a gift.  Please reach out your hand and take some!

My clients have had excellent success with starting to sell next harvest bushels around Thanksgiving time and then placing targets to sell 10% of next year’s APH each 10 cents higher on corn.  On beans and wheat, I recommend selling 10% of next year’s APH each 20 cents higher, and reward the market as it moves higher.  You really need to look at your wheat production for July / August 2019 and get some of those bushels forward contracted as well.  Placing a target is easy and it is free.  You can manage this yourself by clicking here and placing targets on our online bid center.

This is the LAST CALL for our CHS ProAdvantage  Contracts.

All growers need to try at least one contract to diversify your marketing strategies.  It is a great tool, and has worked well.  Below is a description:

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 8, 2017.

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

Marcus

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