This past week, I had the privilege of talking Agellum™ with several growers, at our Agellum™ meeting and on farm. All growers I talked with had certain positive thoughts about the program, and some concerns and hopes for future development. With that in mind, I am here to tell you, when making a choice on what farm planning software to purchase on your farm, think about the service package that comes with the software. Here at CHS Larsen, utilizing the Agellum™ Program on your farm gets you a service team that cannot be beat by any other software provider in the Ag industry. Locally our YieldPoint® team, comprised of myself, Olivia Wagenson, Cody Miller, and Ryan Jones are the first line of questions when issues arise and when clarification is needed. Agronomically, your CHS Agronomist is the best source of advice into building a Farm Plan that works for your operation, and is the most financially sound decision in these tough margins. This is a winning team to help you through any farming questions and software concerns of your operation, all in the same time zone and local area.
The one piece of information that I want to tell you about Agellum™ today, is the break-even and variance tool of our Farm Planning section. This tool, after building your farm plans, allows you to analyze marketing and strategic grain contracting, field by field. Utilizing this tool can help you make sound decisions in farming for the upcoming year, below you will see an example of what our chart looks like.
After 2 Months, We Finally Get A USDA
Report. Unfortunately, It Does Not
The USDA was out with its monthly crop report last Friday
for the Grain Industry. The report was a
rather large data dump as this report was the combination of the Jan ’19 and
Feb ’19 monthly data. The government
shutdown prevented the USDA from releasing its January report on time. Thus, Friday’s report gave us first quarter
grain usage, winter wheat planted acreage, final numbers from the ‘17/18 crop,
and the supply and demand and ending stocks update for the current month. Since the grain trade was waiting on this
information for 2 months, it was widely anticipated and projected to be a game
changer. In the end, it changed little
and came back as mostly as expected with little market reaction.
In the corn market, the USDA reduced the corn yield by 2.5
bpa down to 176.4 which caused total corn production to drop 206 M bu down to
14.42 B bu. This change was mostly as
expected by the market, and already factored into futures. On the demand side, the USDA reduced corn
used for feed by 125 M bu down to 5.375 B bu.
This was not expected by the market.
We have a big increase in total livestock now consuming corn, so how can
feed corn usage go down? The USDA also
reduced corn used for ethanol by 25 M bu and reduced corn used for seed by 15 M
bu. When the dust settled, the corn
ending stocks for this crop year was reduced by 46 M bu down to 1.735 B
bu. As discussed, the market pretty much
anticipated this yield cut and the resulting reduction in corn ending
stocks. Generally, a 2.0 B bu carryout
puts the market into comfort mode, and a 1.5 B bu carryout starts to put the
market on edge. This level allows the
market to remain at the status quo as if we look back through history, this
type of carry over number is actually quite common.
The market will be looking forward to how the South American
corn crop develops and if Brazil’s corn crop will have its yield trimmed like
its beans. Additionally, the market is projecting
US corn planting intentions around 92 M acres this spring. Dec corn futures are hovering just above
$4.00 today. Corn acres could get a bump
if Dec corn rallies upwards close to the $4.25 level.
On beans, the market is a bit different. It is currently being pushed around by the
latest tweet, and the most recent headlines coming out of the US / China
negotiations as the teams aggressively try and end the tariff war prior to the
March 1st deadline. If no
agreement is made between the US and China by March 1st, the 10% US
tariffs on China’s goods that we buy will increase from 10% to 25%. This is a huge deal to the Chinese because
they hate these tariffs, but it is the major item that is forcing China to be
honest and negotiate with the US. In the
end, it will be Trump who will make the final decision to extend the March 1st
deadline if no deal is made, but significant progress has / is occurring.
China is now done with buying beans from the US and from
this point forward, they will buy all of their beans from South America as
their beans are the cheapest in the world and both Argentina and Brazil are in
major harvest mode today. Argentina’s
bean crop is just massive, but the Brazilian bean crop has been trimmed down to
the 115 MMT level or so due to dry weather.
In the last week, Brazil has received more rain and Argentina received
less rain which is benefitting both countries.
Thus, we could see the bean yields improve on both as we move forward.
Nearby, the bean market is in a tug-of-war between the big
optimism of a new China trade deal, and the yield reducing weather in
Brazil. The fact is that neither will
affect the outcome of this year’s world bean carryout that much. The world has a huge cushion of excess beans,
and once the Brazilian crop gets harvested, and the market sees that their
volume is still quite substantial, and once the US gets its bean acres planted
and emerged, I believe we could see a major reduction in bean prices going
forward. The US bean carryout is between
900 M and 1.0 B bu and could grow substantially going forward depending on
final bean acres and planting weather.
Nov ’19 bean futures above $9.50 is a gift and should be sold by the
farmer. We have beans tucked away in
many areas of the Corn Belt this year as the farmer hated the wide basis levels
this past fall. One can build a case
where we have back to back bean harvests in late summer as the farmer cleans
out his bins just before fall harvest to make room for new crop. This will likely pressure futures and basis
lower to significantly lower once the new crop acres emerge.
Let’s look at the USDA report from Friday. The USDA reduced the bean yield by 0.5 bpa
down to 51.6 bpa which lowered the final bean production number by 56 M bu down
to 4.544 B bu. The USDA also increased
beans used for crush by 10 M bu, but lowered bean exports by 25 M bu down to
1.875 B bu. With the lack of Chinese
bean buying, the bean export number is still vastly overstated, and I can see
bean exports being trimmed by at least another 100 M bu by the end of the crop
year. When the dust settled, the final
bean carryout was trimmed by 45 M bu down to 910 M bu. Yes, the bean carryout was reduced, but we
are still looking at over 900 M bu which is a huge number! To give you some historical background, the
US bean carryout has never been over 1.0 B bu.
Going back to 1975, the biggest bean carryout prior to this year was in
2007 when final bean carry out was only 573 M bu. Our current bean carryout is almost double
this and looks to grow once exports come down.
If you do not like the basis, sell beans on an HTA contract
and set basis later. However, the posted basis today could very well be the
best basis of the year, only to widen out considerably as we get closer to
harvest. If you plan on growing soybeans
on your farm this summer, and if you don’t have them sold yet, I strongly
suggest you do this now. I have no
problem getting at least 50% of these beans protected in some way. If you don’t like the cash price, and you
don’t want to sell beans on an HTA, another option is to use our cash plus
contract where you can generate an additional 25 cents today in exchange for a
new crop offer. Please see below for
more details. This is a great tool, and
many customers are using it.
If you would like to place a target to sell grain, you can either call us or place your own target on our Online Target Offer system. It is easy, free, and an awesome way for you to protect your farm. Please click here for more information. If you would like to talk to one of our grain originators or make an appointment for one of them to meet with you on the farm, please click here.
Do You Want a Premium for your
Beans? Cash Plus Is The Answer
We are currently bidding $8.20 for cash beans and $8.70 for
Oct / Nov ’19 beans delivered into Readfield.
If this level is still not enough to satisfy you cash flow demands, you
should consider our Cash Plus Contract.
This contract will allow you to receive a 24 cent premium over the cash
bid, and paid to you today. In exchange
for this premium, you will give us an offer to sell the same quantity of new
crop November ’19 bean futures at the $9.90 level if on October 23rd 2019,
the price of November soybean futures closes at or above the $9.90 level. This is a win-win for you. You will be paid a 24 cent premium now on
your cash beans. If on October 23rd
, November bean futures close at or above $9.90, you will have the same
quantity of beans sold at $9.90 futures, less the basis of 90 cents under
November (this could vary slightly), equals a new crop bean contract at $9.00
for Oct / Nov ’19 delivery into Readfield or Center Valley. This is a good price considering our posted
new crop bean bid is $8.70 and represents a 30 cent premium over our posted new
crop bid. If on Oct 23rd ,
November bean futures close lower than $9.90, then you keep your 24 cent cash
premium, and have no other obligation.
This contract has been popular as of late, and if you still own old
beans, you should seriously consider it.
Recommendations For Corn & Bean
Meal Consumers (Livestock Producers)
The bean market has ramped up yesterday with the China enthusiasm, and this has pushed bean meal higher as well. Corn futures ramped higher yesterday, and corn basis is firming. At some point, this enthusiasm will cool and the marker will reset lower. This will be the time for you to lock in corn and bean meal for your livestock. Here are my recommendations for coverage. To see where futures are currently trading, please click here.
Cash Corn – March 19 Corn Futures – Support at $3.67,
Resistance at $3.88, Place Targets at $3.71
Cash Bean Meal – March 19 Meal Futures – Support at
$303, Resistance at $325, Place Targets at $308
Sign Up NOW For New Average Price
We are again offering an average price contract this year
for new crop delivery. The new crop
contract will be for corn or beans for Oct / Nov ’18 delivery into any of our
facilities. The contract is a cash
contract and will use a 10 week period to average the price. The timing of the new crop contract will be
May 1st through July 3rd. We
will simply average the closing prices each Wednesday during these periods,
pricing 1/10 of your contracted bushels each week during the period. At the end of the period, we will simply
average the prices together. There is no
minimum quantity and the best part of these contracts are that they are FREE.
There are no fees associated with these averaging contracts.
The dates associated with the new crop pricing period of May 1st through July 3rd is normally a very good time to sell new crop grain because the market is dealing with planting problems and then dealing with dry weather problems somewhere in the Corn Belt. When problems surface, the market puts more risk premium in the futures, and you will be participating in the market to capture these premiums. If there are no problems, the market usually drifts lower after the July 4th holiday, making the timing an excellent part of this new crop average contract. These contracts are simple, easy to understand, and they work. Every farmer should put a decent amount of grain into these contracts to help protect your farm. For more information on these exciting new contracts, please click here.
What Are The Charts Telling Us? Recommendations For Grain Producers.
Here are the support and resistance levels for cash and new
crop grains. These are all futures
levels as traded at Chicago:
Cash Corn – Mar 19 Corn Futures – Support at $3.67,
Resistance at $3.88, Place Targets at $3.83
New Corn – Dec 19 Corn Futures – Support at $3.91,
Resistance at $4.08, Place Targets at $4.03
Cash Beans – Mar 19 Bean Futures – Support at $8.80, Resistance at $9.41, Place Targets at $9.31
New Beans – Nov 19 Bean Futures – Support at $9.23, Resistance at $9.71, Place Targets at $9.65
New Wheat – July 19 Wheat Futures – Support at $5.17,
Resistance at $5.50, Place Targets at $5.40
To see where grain futures are currently trading, please click here.
February Results For CHS ProAdvantage
For those of you who have placed bushels in the CHS ProAdvantage program, we have the updated pricing results for February. Again, ProAdvantage is our fully managed contracts that we offered during December for patrons who wanted a completely “hands off” approach to grain marketing. You simply gave the trading professionals at CHS a portion of your production for next harvest, and they take care of the rest. Behind the scenes they are aggressively buying and selling complex futures and options positions to generate as much profit as possible on your bushels by the end of the program. The goal is to give you the highest possible futures price at the end of the program as possible by using trading techniques and options that typically are not available to the individual farmer. The signup period is obviously over. However, we can see each month how they are progressing, and look at their current values as they trade through the period. We can also see the percentage of the crop they have sold, which gives you a clue to how bullish or bearish they are. For those of you enrolled in the program, and you did not receive the results yet, here they are. This is an interesting read. Don’t worry if you don’t completely understand all of the information. If you have any questions about anything, and you want help, please call me and I will explain it to you. Please click here to see the Feb results.
As always, if I can help you with anything, please call me
at the main office in New London at 419-279-3809 or send me an email at firstname.lastname@example.org.
The current down swing in the market has put a damper on farmer’s spirits lately. Are you currently looking to get more out of the market? Cash + contracts have done well for corn pricing. Farmers are getting anywhere from a $0.12 premium on a cash contract for a $4.40 new crop offer, to $0.20 premium for a $4.10 new crop offer. These need to be in 5,000-bushel increments. New crop prices are currently lingering above $3.50 which is a good place to start your pricing for the year.
The soybean market has been bleak especially when it comes
to basis. Everybody needs to be proactive on getting some priced before things
get worse. Cash + contracts on the compass programs is not very promising below
$0.30 premium. However, getting some bushels on the books instead of selling
over the scale is a good idea. It is never too late to start looking towards
2019 harvest. New crop bean prices have been shaky, especially the last few
trading days around $8.50 with a -$0.90 basis. HTA contracts can possibly help
make up the difference by locking in the futures and hoping the basis improves
by the time harvest comes around.
If you have questions or want to get some contracts in place feel free to reach out to Mike Steingraber and he would be happy to go over options with you.
January 3, CHS Larsen Cooperative welcomed, Jenn Stowe, to their Dairy
Nutrition team. Stowe graduated from UW-Platteville with a Dairy Science Degree
with an emphasis in Animal Nutrition. She has relocated to the Waupaca area
from Harvard, IL. She’ll be working as a Feed Sales Rep in conjunction with,
Jay Hoffman, Feed Department Manager.
Stowe grew up in northern Illinois on a hobby farm and has been involved in the
agricultural industry her whole life. She was very active in her 4-H club
working with and showing horses and cattle, which helped her decide she wanted
to work in the Ag Industry. She achieved her Associates of Science at McHenry
County College before attending UW-Platteville. While attending county college
she worked on a dairy farm. This is where she first became exposed to nutrition
by working with the head herdsman on their ration formulation as well as doing
the actual mixing and feeding.
was one of the first to graduate with the Dairy Science Degree, as this is a
new degree for UW-Platteville. She was very involved in extra-curricular
activities. In the Pioneer Dairy Club, she attended the ADSA and PDPW
conferences as well as helped chair the Pioneer Consignment Sale. The
consignment sale is a completely student run cattle auction where the students
work with local farmers to get commitments of selling their cattle at the show.
They create the show magazine showcasing the consignments. Stowe worked with
the cattle the week of the auction to monitor for their health and make sure
they looked good for the show.
While at UW-Platteville, Jenn Stowe was selected to compete in the Midwest Intercollegiate Dairy Challenge. Students from around the U.S. and Canada apply theory and learning to a real-world dairy while working as part of a team. Each team is assigned a real farm to evaluate their nutrition, animal health, reproduction and financials. They then have an opportunity to walk the farm to see their conditions and have only a few hours to complete and memorize a presentation on how they feel the farm can be improved. They present their findings to a panel of judges, the producer and an audience. Jenn worked on the nutrition side of the competition which was another experience that lead her to wanting to work in Dairy Nutrition.
During College, Jenn Stowe worked at two vet clinics: Galena Square Vet Clinic and Family Pet Hospital. She enjoyed working closely with the clients and their pets. She acquired information from the clients to learn about animal history and issues, which she would then share with the vet. She assisted with surgeries, animal analysis and bloodwork. She gained a lot of customer services skills and genuinely enjoyed working with people.
looking forward building relationships with the producers, expanding her
knowledge of the dairy industry and helping farmers achieve their farm goals.
She is excited to meet CHS Larsen Co-op’s producers and customers. Outside of
work Jenn really enjoys riding and training horses, trap shooting, hunting and
enjoying the outdoors. Please help us in welcoming Jenn Stowe in her position
at CHS Larsen Cooperative.
CHS Larsen Cooperative recently completed an interior and exterior lighting upgrade to LED lighting at their New London main office. After learning about the Focus on Energy rebates from Jeremy Bellile, owner of BNH Lighting, LLC, they worked together to get everything in the offices, warehouse and parking lot converted over to LED technology. This will save the cooperative thousands of dollars each year on their electric bill.
CHS Larsen Cooperative received a rebate from Focus on Energy that covered half the cost of the project. After the rebate and the savings on maintenance costs, the conversion will pay for itself in approximately 1.5 years. They are proud to work with Focus on Energy, which partners with New London Utilities, to help businesses reduce energy waste.
“Working with BNH Lighting, LLC, was great from designing the new LED solution and maximizing the Focus on Energy incentives,to the installment of the lights,” said Randy Marx, New London location manager.The install went quick working with Nass Electric, a local electrical contractor.Jeremy was thorough with the LED solution, paperwork for Focus on Energy,organizing the installation and quick to follow up with the completion. “We are excited about our new lighting and the savings to come.”
CHS Larsen Cooperative, a full-service ag retailer, is part of CHS Inc., a leading energy, grains and foods global agribusiness owned by farmers, ranchers and cooperatives across the United States. Diversified in energy, grains and foods, CHS is committed to helping its customers,farmer-owners and other stakeholders grow their businesses through its domestic and global operations.
USDA Released Its December Crop Report. China Buys 30 Bean Cargos, Finally…
The USDA released is December crop report on Tuesday and really did not change much from November. Corn carryout did increase, but bean carryout remained the same. Let’s look at the numbers.
For the ’18/’19 crop year, the USDA dropped corn used for ethanol by 50 M bu down to 5.6 B bu. They also lowered the amount of corn imported into the US by 5 M bu down to 45 M bu. When the dust settled, the USDA raised corn carryout by 45 M bu to 1.781 B bu. The cut in ethanol usage was not a surprise to the market as their margins have been negative for some time. Each week it seems like there is another ethanol plant being moth-balled because the industry is not profitable right now, so the higher cost operations are being shut down. A 1.781 B bu carryout is tighter than last year’s numbers, but it will be interesting to see how the higher priced corn will affect feed demand incoming weeks, as lower priced corn from South America will be coming on line in March.
As harvest ends in the US, the corn basis levels have moved higher. This is most noticeable in the southern Corn Belt where harvest has been over for quite some time. Basis levels there have been stronger than normal for some time to try to stimulate movement. The recent run up in corn futures has allowed the basis to back off slightly, but the farmer still is in no mood to deliver big quantities of corn yet, especially with the questions with China and how much they will buy of Ag commodities going forward. China will focus on beans, but if they buy beans, the market should react positively, which will affect corn futures as well.
The USDA did not change one item in the bean complex on their December crop report. This is odd as the market feels confident that bean exports need to be reduced at some point even if China starts buying now. Bean exports are currently pegged at 1.9 B bu, and probably in January they will start to get trimmed back. In the meantime, the USDA probably wants to give China some time to see what they will do. Yesterday, their state-owned grain company SinoGrain purchased 30 bean cargos of US beans mainly from the PNW. This is roughly 42 M bu or so. Will they buy more? Time will tell. However, we finally have them buying our beans and the northern plains finally have a market for their bean crop. Brazil is just about out of beans, but they have a huge crop on the horizon. This crop is at least 30 days earlier than normal, and Brazil’s weather so far has been just about perfect. Even though China purchased beans yesterday, the window will close rapidly on the amount of beans they will buy from us for the balance of the year as Brazil will have a huge quantity available to them in roughly 30 days at a cheaper price.
The USDA left bean carryout at 955 M bu. I don’t see how this bean carryout number can shrink much if any over the coming weeks. Frankly, I think there is a bigger chance that bean carryout will grow to over 1 B bu, and there is no doubt this would have happened if China did not step in yesterday and buy some beans. Now, the real question is how many more will they buy before going back to Brazil? Yesterday’s buying from China has caused the bean basis at the Gulf and PNW to firm quite noticeably and will cause the basis in Brazil to weaken substantially. The market’s role now is to get us back to a neutral market between the US and Brazil and unwind the premiums it placed on Brazilian beans over the last 6 months. In the US, the bean basis ought to start to firm. However, we are still carrying out nearly 1 B bu of beans which is a huge quantity, possibly the biggest ever for the US. This will likely weigh on the bean basis for the balance of the crop year unless China really ramps up its US buying program. Time will tell, but China holds the cards at the moment.
We have seen a nice run up in the price of beans over the last 2 weeks as the market gets excited about China returning as a bean buyer. I would recommend that all producers take a good look at the bids for new beans for next fall. Nov ’19 bean futures at Chicago are now trading at $9.65 and have rallied over 50 cents in the last 2 weeks. You need to seriously look at this opportunity and start to lock in bean production for next year. The bean basis has firmed in the last 2 weeks, but if you still don’t like the basis, lock in the futures using an HTA contract. The HTA contract will allow you to sell futures now, and then come back and set the basis at a later time. However, there are fees involved for an HTA contract as the co-op will be covering the margin calls that you would pay if you sold futures in your own hedge account. Also, now is a great time to use our Cash plus contracts as it will pay you a big premium now in exchange for a new crop offer. The calls for new beans next year are nice and fluffy and a great time to sell them and put these premiums in your pocket. I will describe in detail below. If you would like to arrange an appointment to meet with one of our grain originators to develop a custom marketing plan for you, pleaseclick here. We would be glad to meet with you to help you with this process. To see our current cash bids, pleaseclick here.
Do You Want a Premium for your Beans? Cash Plus Is The Answer.
We are currently bidding $8.12 for cash beans and $8.61 for Oct / Nov ’19 beans delivered into Readfield. If this level is still not enough to satisfy you cash flow demands, you should consider our Cash Plus Contract. This contract will allow you to receive a 21 cent premium over the cash bid, and paid to you today. In exchange for this premium, you will give us an offer to sell the same quantity of new crop November ’19 bean futures at the $10.10 level if on October 23,2019,the price of November soybean futures closes at or above the $10.10 level. This is a win-win for you. You will be paid a 21 cent premium now on your cash beans. If on October 23, November bean futures close at or above $10.10, you will have the same quantity of beans sold at $10.10 futures, less the basis of 95 cents under November (this could vary slightly), equals a new crop bean contract at $9.15 for Oct / Nov ’19 delivery into Readfield or Center Valley. This is a good price considering our posted new crop bean bid is $8.61 and represents a 54 cent premium over our posted new crop bid. If on Oct 23rd ,November bean futures close lower than $10.10, then you keep your 21 cent cash premium, and have no other obligation. This contract has been popular as of late, and if you still own old beans, you should seriously consider it.
Recommendations For Corn & Bean Meal Consumers (Livestock Producers)
The bean market has ramped up over the last 2 weeks with the China enthusiasm, and this has pushed bean meal higher as well. We have not seen the incredible gains in the corn market either, but corn basis is firming, and the corn market slowly trades higher in the meantime. At some point, this enthusiasm will cool and the marker will reset lower. This will be the time for you to lock in corn and bean meal for your livestock. Here are my recommendations for coverage. To see where futures are currently trading, pleaseclick here.
Cash Corn – March 19 Corn Futures – Support at $3.78,
Resistance at $3.95, Place Targets at $3.83
Cash Bean Meal – Jan 19 Meal Futures – Support at $305,
Resistance at $319, Place Targets at $310
LAST CALL – CHS ProAdvantage
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 handover 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 4 years and the results have been quite solid. 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 2019 delivery. For next year’s production, you can enroll in a Fall of 2019 delivery,and we also have Fall of 2020 delivery contracts as well. The cost is 10 cents per bushel for the July 2019 or Fall 2019 contracts, and 12 cents per bushel for the Fall 2020 contracts. The Fall 2020 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 14th,This Friday.
What Are The Charts Telling Us? Recommendations For Grain Producers.
Here are the support and resistance levels for cash and new crop grains. These are all futures levels as traded at Chicago:
Cash Corn – Mar 19 Corn Futures – Support at $3.78,
Resistance at $3.95, Place Targets at $3.90
New Corn – Dec 19 Corn Futures – Support at $3.99,
Resistance at $4.06, Place Targets at $4.03
To contract or not to contract, that is the question…or is the real question, when to contract or at what price to contract? These things can lead to a lot of stress, not only for the consumer, but for the energy consultant too. Over the years I have developed a strategy that helps answer some of these questions and alleviate the stress associated with planning out your annual energy budget. Let’s look at some of the tools that have helped me assist my customers with making educated decisions.
Recently, I spoke with a customer who has contracted for the past 15 years, though he feels contracting is usually a good option, he still remembers the time about 6 years ago when he locked in and the market tanked. His contract ended up being higher priced than the local market. This made him feel like he “lost”. I reminded him that other years his contract price was lower than the local market, so I guess you could say that he “won” during those years. I am not a huge fan of the “winning/losing” outlook. Customers will actually benefit more from a contract if they use it to set their budget for the year. When contracting time comes around and someone is ready to lock in their pricing for the year, I ask them a few questions:
Is this a price you feel comfortable with?
Will this price work with your annual budget? If not, what price will?
Do you have a target we should be looking at?
Then question of when is a good time? Again, I look at historical pricing. Below is a chart that shows the highest/lowest offered pricing for over the past 20 years. Click here to see historical pricing. As you can see, fuel pricing tends to be at a lower level Dec-Feb. Though, this may not always be the “winner”, it is a great tool to utilize when making buying decisions. FYI: the best contract price offered last year was 2/14/18, but the best retail price was offered in March 2018. So, this is not perfect, but it gives us a darn good idea of when; not to lock in futures pricing.
My suggestion is to talk to your local energy consultant and clearly explain your needs for the upcoming year. Together, you can come up with a plan for your spring/fall 2019 fuel needs. Again, I want to stress that locking in your fuel supply is not about winning or losing, but focusing on setting a budget for the upcoming season. My final advice that I give to all of my customers is DON’T LOOK BACK! What I mean by that is; after you decide to lock in your fuel price at a value that works for you and your business, don’t drive yourself crazy by watching the market and constantly second guessing yourself and the decision you made. Please feel confident that you made a good decision and though pricing may or may not drop lower, you are going to be OK and a few extra pennies per gallon either way will not make or break your business.
With the cold weather settling in, it is time to start thinking about winter diesel fuel. Cenex®Winterized Premium Diesel product line offers broad coverage to meet your unique needs – from moderate temperatures to extreme winter cold and everything in between.
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Cenex Wintermaster®Winterized Premium Diesel is formulated with an operability of –30° F and a typical cold filter plugging point (CFPP) of –55° F. Cenex Wintermaster® is specifically formulated for the demands of diesel powered equipment in the most extreme winter conditions.
Cenex Roadmaster XL®and Ruby Fieldmaster®Seasonally Enhanced Premium Diesel Fuels are formulated for moderate climates and provide outstanding shoulder season flexibility. Cenex Seasonally Enhanced Premium Diesel Fuels deliver a typical cold filter plugging point (CFPP) of -25° F.
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After you park the combine for the year, you should head to the office to grade your financial success and start planning for the next crop cycle.
Harvest marks the end of one season and the beginning of another. After you park the combine for the year, you should head to the office to grade your financial success and start planning for the next crop cycle.
“Just as the combine gives you absolute production yield, an office-centric mind will give you absolute profitability yield,” says Chris Barron, director of operations and president of Carson and Barron Farms in Rowley, Iowa. “Once harvest ends, take time to understand your production cost.”
Use this time to rest your body and mind and then start planning for a profitable 2019.
“Now you have the time to look at the numbers,” says Ashley Arrington, founder of ag consulting firm Agri Authority and a 10-year veteran of ag banking. “What was this year like? What will next year be like? If you start thinking on these items before beginning next year’s crop cycle, you will be better positioned for a more successful and less stressful year.”
With continued financial stress for many farmers, now is the time to be proactive. Ask yourself the following questions, Arrington and Barron suggest.
Were you on budget for the year? If not, why? Should you alter your budget for next year? Or, was it a one-time expense that you don’t need to account for in the future?
Be sure to calculate each expense in terms of cost per bushel, says Barron, also a financial consultant for Ag View Solutions and Top Producer columnist. “This helps you understand the value of incremental changes. You might assume an expense is significantly higher this year than last year when it might only represent a difference of 2¢ or 3¢ per bushel.”
How close were your income and yield projections? Were variances from your income expectations attributed to prices or yields? Analyze and document the reasons, Arrington suggest. If the answer is yields, was it a one-time event impacting yields or the start of a new yield trend?
Can you pay off your annual operating lines and other loans? If not, how short will you be?
“It is probably best to address this with your primary banker sooner rather than later,” Arrington says. “If addressed quickly you can probably work hand in hand with your banker to create a workable restructuring deal.”
Can you make your annual debt payments on land and equipment? If not, talk to your banker soon and start an action plan to work through the shortfall.
Did all components of my operation make money? Look at each profit center in your operation. For example, did your crop acres fall short and cow herd earn profit?
Analyze the expenses and income for each profit center, Barron suggests. “This is critical to determine which parts of your business are performing and which ones are lagging.”
How will next year be different? Will you need to change some aspects of your operation to be on top of your game for next year?
“If you know you will need to make some necessary land improvements, replace some equipment, or make some large but essential repairs, go ahead and talk to your banker about it,” she says. “Start running the numbers on how the changes could possibly positively impact your operation and decide if the changes will pay for themselves.”
Trump and China’s Xi Will Meet This Weekend. Can A Deal Be Reached? Harvest Nears Completion.
The big news as of late is that Trump will meet with China’s President Xi over the weekend in Buenos Aires at the G20 Summit. As you can imagine, the grain industry is very hopeful that a deal can be reached with China at some point, so the 25% soybean tariff can be lifted. Up to this point, each country has been standing staunchly behind their guns, but I get a sense that China may be in a position to finally negotiate. The tariffs are hurting their economy and their bean processors are really getting squeezed. On our side, we are suffering from a lack of their demand for our beans. Beans are stacking up in a big way all across the Corn Belt, and bean basis levels in all areas are depressed by 25 to 50 cents depending on the area. Nearby bean futures have rebounded significantly since the beginning of October, but the loss in basis has hurt the American farmer.
Unfortunately, the world is a competitive place, and when one trading relationship does not work, the market usually finds an alternative solution. If the US and China can’t work out a trading solution rather quickly, other countries will step up and supply China with the beans that they need, permanently destroying our demand base. We have seen Russia, in recent weeks, take steps to make selling big volumes of soybeans to China much easier and workable. They would like nothing more than to supply China with beans. We have also seen the Brazilian farmer be much more aggressive in planting early varieties of soybeans this year. Instead of harvesting them on Feb 1st, some will be ready to cut a month earlier than normal. Why? So they can supply China with more beans because they know China is not buying US beans, at least not yet. The Brazilian bean crop has in fantastic shape. The beans are nearly all planted and they have had adequate moisture. A huge bean crop is on the horizon for them, if the weather holds. This is a double wammy for the US. Their large bean crop will continue to pressure bean futures, and they are directly taking away our demand base. Not a good deal folks. Stay tuned as the bean market is very volatile as of late. Huge price swings can be caused by a simple tweet. The results of the meeting will likely dominate the markets Sunday night and early next week.
Harvest is finally starting to wrap up in most areas of the Corn Belt. The USDA pegged both corn and bean harvest at 94% complete in the nation. There are some pockets that still have corn and beans let, but this is the exception. These crops will not sit until we get consistent cold and dry weather to freeze the fields with little snow to slow down harvesting. We will see on Dec 11th what the USDA pegs the corn and bean yields at. I would not be surprised if the yield could be slightly reduced on both again. Beans suffered heavy shatter loss and the tops of the plant broke off due to excessive rains on a mature plant. Additionally, many areas suffered corn yield loss due to extreme dryness or too much rain in June. The USDA will peg the final yield in its January report.
Its not too early to start thinking about protecting next years corn production. Nobody likes the current cash bean price. As discussed above, the lack of China bean demand has caused the bean prices this year to be relatively weak. Thus, most US farmers will likely plant more corn next year. My guess is that we could plant at least 92.5 M corn acres next year, and if the weather cooperates during April, we could see as much as 95 M corn acres planted next year. What do you think this will do to Dec ’19 corn futures? Once we pass the 50% mark on corn planting in early May, watch out. The market will likely suck the risk premium out of the market at press futures lower, and possibly significantly so, into harvest next fall. Dec ’19 corn futures are currently trading at $3.95 and the chart shows significant resistance around the $4.08 level. Personally, I would have targets in to sell Dec ’19 corn futures at $4.00 and sell at least 10% of next years production every nickel higher. I believe it will be very difficult for Dec ’19 corn futures to rally higher than $4.25, assuming normal weather and planting. Obviously, if the crop does not get planted, or we have a drought, all bets are off.
Corn basis has already started to strengthen in many areas of the Corn Belt. The delayed harvest has caused the processor to firm up quicker than normal, and now that harvest is complete in many areas, and the bin door is slammed shut, the basis will be forced to do more of the heavy lifting. Corn basis should work firmer in the coming days and months as the processor and feed demand picks up.
Bean basis is different. It has been soft all year, and this will likely not change anytime soon. That being said, very little beans are moving now, so the processor has been firming his bids too stimulate movement. But will we get back to historical basis levels this year? Doubtful. Also, we are looking a having a huge amount of bean ending stocks this year. When is the last time we have carried over 1.2 B bu of beans? I don’t think its ever been this large. This will pressure futures, basis, and spreads all year long. That being said, if the US and China can work out an agreement of the weekend, this would have a dramatic effect on the bean market. Futures, basis, and spreads would all instantaneously strengthen, but after all of the market gyrations, we will still be carrying over 1.2 B bu of beans. No matter how you slice it, this is still a big pile of beans. To see where the cash grain prices are today, pleaseclick here. To talk to one of our grain originators about a contract, or to schedule an appointment for one of us to visit you at your farm, please click here.
LAST CALL – CHS ProAdvantage Contracts.
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 4 years and the results have been quite solid. 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 2019 delivery. For next year’s production, you can enroll in a Fall of 2019 delivery, and we also have Fall of 2020 delivery contracts as well. The cost is 10 cents per bushel for the July 2019 or Fall 2019 contracts, and 12 cents per bushel for the Fall 2020 contracts. The Fall 2020 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, 2018.
Recommendations For Corn & Bean Meal Consumers (Livestock Producers)
The corn market broke lower over the last week and many took this opportunity to lock in their corn needs for the next several months. The corn basis has been relatively firm in many areas, and will likely remain so. If you need to buy corn, especially if we see corn futures continue to drop, sooner is better than later. The price of bean meal has been sliding lower in recent weeks, and the chart looks to be wedging to the down side. This tells me that there is a decent chance that bean meal will move lower in the near future. Jan ’19 bean meal futures have bounced off of the $303 level 4 times in the last few months and is currently trading at $309. If we can break down through the $303 level, it will likely break hard to the down side. I would be patient buying bean meal, buying only hand to mouth, until the market gives us further direction.
Cash Corn – March 19 Corn Futures – Support at $3.56, Resistance at $3.75, Place Targets at $3.60
Cash Bean Meal – Jan 19 Meal Futures – Support at $303, Resistance at $312, Place Targets at $305
What Are The Charts Telling Us? Recommendations For Grain Producers.
Here are the support and resistance levels for cash and new crop grains. These are all futures levels as traded at Chicago:
Cash Corn – Mar 19 Corn Futures – Support at $3.67, Resistance at $3.75, Place Targets at $3.74
New Corn – Dec 19 Corn Futures – Support at $3.91, Resistance at $4.05, Place Targets at $4.00
Cash Beans – Jan 19 Bean Futures – Support at $8.56, Resistance at $9.00, Place Targets at $8.95
New Beans – Nov 19 Bean Futures – Support at $9.10, Resistance at $9.50, Place Targets at $9.40
New Wheat – July 19 Wheat Futures – Support at $5.17, Resistance at $5.48, Place Targets at $5.42
To see where grain futures are currently trading, please click here.
Still Own Old Beans? The Cash Price Still Not Good Enough? Cash Plus Is The Answer
We are currently bidding $7.85 for cash beans and $8.24 for Oct / Nov ’19 beans delivered into Readfield. If this level is still not enough to satisfy you cash flow demands, you should consider our Cash Plus Contract. This contract will allow you to receive a 29 cent premium over the cash bid, and paid to you today. In exchange for this premium, you will give us an offer to sell the same quantity of new crop November ’19 bean futures at the $9.70 level if on October 23rd 2019, the price of November soybean futures closes at or above the $9.70 level. This is a win-win for you. You will be paid a 29 cent premium now on your cash beans. If on October 23rd , November bean futures close at or above $9.70, you will have the same quantity of beans sold at $9.70 futures, less the basis of 110 cents under November (this could vary slightly), equals a new crop bean contract at $8.60 for Oct / Nov ’19 delivery into Readfield or Center Valley. This is a good price considering our posted new crop bean bid is $8.27 and represents a 33 cent premium over our posted new crop bid. If on Oct 23rd , November bean futures close lower than $9.70, then you keep your 29 cent cash premium, and have no other obligation. This contract has been popular as of late, and if you still own old beans, you should seriously consider it.
As always, if I can help you with anything, please call me at the grain office in New London at 419-279-3809 or send me an email at email@example.com.