Weekly Grain Update – October 17, 2017

10/17/17

The USDA was out with its October crop report last Thursday and gave the market some numbers that were not expected.  In corn, they raised this year’s yield by 1.9 bpa to 171.8 which raised total corn production by 95 M bu up to 14.28 B bu this year.  They also raised feed usage by 39 M bu for last year.  When the dust settled, corn carryout for old crop was lowered by 55 M bu to 2.295 B bu but the carryout for next year was left virtually unchanged at 2.34 B bu.

On beans, the USDA lowered this year’s production by .4 bpa down to 49.5, and also reduced last year’s production by .1 bpa down to 52.  This reduction in yield trimmed last year’s production by 11 M bu down to 4.296 B bu and they also increased seed and residual on last year’s crop by 23 M bu.  After the changes were made, the bean ending stocks from last year was reduced by 44 M bu from 345 M bu down to 301 M bu.  This 44 M bu reduction in ending stocks virtually flowed straight through this year’s S & D table to reduce it as well by 45 M bu from 475 to 430 M bu.  These changes in the bean complex surprised the market and caused the funds to add to their already long position.  We have seen this time and time again where the bean ending stocks starts relatively big, near 500 M bu and by the end of the crop year, it gets trimmed down to 300 M bu or so.  This is a relatively big change for beans and will likely add a layer of support under the market long term.  The real test will be determined if the Chinese and others continue to buy our beans.  Bean exports remain relatively good this year, and if this continues, ending stocks could continue to be trimmed further.

Forward Contracts

Folks, our corn crop is big and getting bigger.  Unlike beans, we do not have much of an export program this year.  Corn is being tucked away, off the market, in any place possible by the farmer.  Big crops generally get bigger and I see the same thing this year.  The market’s job is to press the nearby price low enough to stimulate additional demand.  This process of lowering the cash corn price while leaving deferred prices the same puts big carries in the market.  You can take advantage of this by forward contracting much better prices in the corn market for summer delivery or forward contracting for next fall delivery today.  However, you must sell these levels relatively soon, and not wait until we get to that point on the calendar as the carry will evaporate, and the cash price will remain basically the same level it is today by the time we get to July.  In order to lock in the premium for your farm, you need to forward contract these levels today for delivery sometime in the future.

In beans, the market has given you a wonderful opportunity to sell additional bushels needed for cash flow until you move your corn.  Isn’t it amazing how November bean futures rallied to exactly the 10.02 level on Friday which is basically the exact level of the 61.8% retrace of the entire July – August slide?  The real test for the bean market now remains.  Most times, once a market retraces 50 to 61.8% of a move, it will resume the previous trend.  In this case, the previous trend was lower, and judging by the amount of beans we purchased as well as what all commercials purchased on Thursday and Friday, we saw significant farmer bean selling after the report.  All of this selling weighed on futures at the close on Friday.  If you still need to sell beans this year, I would seriously look at this opportunity.  The high water mark of November bean futures of $10.02 reached on Friday could well remain the high level for nearby bean futures for months to come.

Focus on Targets

In the meantime, I encourage all of you to use targets to generate more profits for your farming operation.  Let’s figure out what level you feel comfortable selling, and then either call us or simply use our online target system where you can place a target all on your own.  I firmly believe in rewarding the market when it rallies, and if a target gets filled, simply place another target on beans 20-25 cents higher or 10-15 cents higher on corn or wheat.  Our online target system is simple, easy, free, and we have many people using the system today.  If you have interest, please click here and it will direct you to our online offer center.  If you have any questions, please call us at the Readfield office, and we will be happy to walk you through this process.

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

Marcus

 

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