Grain Market Update – October 10

Things Currently Driving the market       

It has been reported that China has offered to buy US products which is easing the tension in the trade war, which could mean continuing strength in the Soybean market. Follow that story closely because there is a lot of optimism for the bean market in the coming months. This story has also been followed by rumors of a partial trade deal with China so let’s see what happens. This could have a positive effect on the corn market as it tends to follow the bean market in relation.

Currently, the weather pattern has stayed consistent for the year as being wet, the predicted “blizzard” for North Dakota and Minnesota is also having an impact on the bean market. The window has been small for bean harvest as of late but as of Wednesday Oct. 9th beans have been consistent at 13.5% off the field. Numbers on yields have been reported lower in parts of Iowa, Illinois, and Ohio so if this stays true, we may see a bump in futures from the yield drop after harvest.

If you are reading this, you may already know the results of Thursday’s report. Current estimates are putting stocks down for corn and beans which may run the markets higher already.

Ideas:

If you are like me and are optimistic about bean futures, we may look at doing a minimum price contract.

Benefits:

Cheaper than storage.

                  Provides cash flow now.

                  Lets you participate in the market for a period and capture a gain.

                  You can’t do any worse than you get paid up front.

Disadvantages:

               Will not receive market price, will only get the price of the call.

Minimum price are 5,000 bu minimum.

Example: If you buy a $10 bean call for $0.18 and the cash price is $8.48 you will receive $8.30 (this is the minimum price you will receive). Say the market goes to $11 that $10 call may be worth $1 you sell that call back for a dollar which covers the initial cost and more. If the market were to fall you still get paid your minimum price of $8.30. If you have any questions on this call your grain originator for more details.

Pro-Advantage sign up is continuing, the deadline is December 11. I recommend trying this to diversify your marketing plan and use as a benchmark for your marketing year. There are 1 and 2 year programs and no minimum bushel amounts.

We will be starting a twice weekly grain email – Against the Grain in the coming weeks written by the CHS Larsen Grain staff. If you receive this email you will also receive the update, but if you know of anybody else wanting information let us know and we will get them on the list. They can also click here to sign-up to receive cooperative updates.

Grain Market Update – September 18

The grain markets have had a nice bump over the past few weeks followed by typical pull back. With a lot of uncertainty yet in the Chinese trade talks I believe it is beneficial to remain patient. New beans are over $8 for the time being, which as my dad would say is, “better than a sharp stick in the eye”. However, until something gets settled I would not expect it to make a major comeback.

As I have said it is never too early to look to next year, consider utilizing some of our programs that have no minimum bushel amounts. The Pro-Advantage program sign up is beginning now. I think it’s a good idea to put some bushels into it. Pro-Advantage is a controlled program where a third party will do background trading on your bushels to capture higher prices. It is a good way to versify your grain marketing.

As I said there are no minimums and we have the updates on our website, and you can also sign up to receive them via e-mail. Contact your grain originator for more information or to sign up for the program, as well as any other program that you may be interested in. We will be offering average price and a few other new programs that may fit your marketing needs.

Written by Michael Steingraber, CHS Grain Originator

Grain Market Update – September 5

Grain prices have steadily declined over the last month since the last report. Estimated yields and acres dropped but not enough to help prices. Hopefully you were able to capture prices on the higher end while it was available.

Looking forward it will be beneficial to watch prices for 2020 new crop if the numbers were at all accurate. The US sold a large amount of beans to Mexico but it is less than the market would like to be sold for new crop. I feel that yields will be low and we could see a spike come harvest. Also, the US and China have agreed to have “big meetings” come early October which may help drive some prices come harvest. I think it would be beneficial to be proactive instead of reactive but this year has been different all around so I think patience will be a virtue this year.

Long Term Storage Agreement Listing: a local farmer has listed the reminder of their long term storage agreement, better known as condo storage. If you have an interest in purchasing this click here to see listing or contact Mary Kay for more details. They are listing a price for just this one year or for the remaining 12 years.

Written by Michael Steingraber, CHS Grain Originator

Grain Market Update – August 7

Wheat Harvest 2019

The markets have been on the downward spiral the last few weeks. There is a lot of speculation on what the report will read, come Monday at 11 a.m. Many people think that the USDA did not take into consideration the prevent plant acres. That should be on this report which may cause a bump in the corn market. Markets should remain relatively flat until that point, but be proactive once they do come out with targets. You can set your own targets with our Online Target Offer Center, click here.

Weather is still moving the market to some extent. Beans are, in large part, still being effected by the Chinese trade wars one way or another. Consider doing a cash plus with beans for a little premium that may get back to the $8 range for cash prices.

Wheat was effected as of late, due to weather conditions and other countries buying wheat from others outside the US.

Long Term Storage Agreement Listing: a local farmer has listed the reminder of their long term storage agreement, better known as condo storage. If you have an interest in purchasing this click here to see listing or contact Mary Kay for more details. They are listing a price for just this one year or for the remaining 12 years.

Written by: Michael Steingraber, CHS Grain Originator

Grain Market Update – July 24

The corn market has been a bit of a roller coaster these last few weeks. The market is currently running off weather until the next report on August 12, which should give us an accurate depiction of the crops that are out there and how beans and corn will progress through the year. China trade talks are still in discussion, if they do buy beans we could see a return on the bean market.

Do not be afraid to look to next year’s crop already, I still believe we need to be proactive. 2020 new crop corn is still hanging around the $3.75 mark and it may not be a bad idea to set your bench mark at that level. Consider doing an HTA (set futures now and wait for basis to narrow then apply the basis).

Leadership Change Update

Employees were informed July 17 that Gerry Baker from CHS Elburn is going to be our Interim Grain Manager in this time of transition.

The CHS Larsen Cooperative Grain team came together and met with four individuals from CHS Elburn in late July. The team from CHS Elburn will be collaborating with CHS Larsen to ensure all management duties are covered.

CHS Elburn is based in Illinois and handles 150-160 million bushels annually. They have two ethanol plants and one river terminal grain outlet. They have five grain facilities, including one in southern Wisconsin. This knowledgeable team will be a great resource to utilize during this time as they are well versed in grain marketing. Your local grain originator will still be your on-farm contact

The seamless sharing of people resources across CHS businesses, when needed, is a good reminder of the value of our CHS cooperative system.

Any questions call us in the grain department, we are more than willing to help.

Thank you!

Mike Steingraber

Grain Market Update – July 10

7/10/19

The USDA To Release July Crop Report on Thursday

The USDA will be out with its July monthly crop report to be released on Thursday at 11 am.  After the June 28th acreage report, the market will likely take this report with a grain of salt.  The real challenge is and will continue to be being able to accurately predict the amount of actual planted acreage of both corn and beans.  Up to this point, the industry is grasping at straws to figure out what corn and bean acreage numbers actually are.  Most everyone agrees that the 91.7 M corn acres that the USDA released on June 28th are much too high, and the 80 M bean acres are much too low.  The numbers played havoc with the grain markets following the June 28th report.  My best guess is that the corn acres will be close to 89 M acres and beans at 82 M acres.  The USDA will be resurveying all of the producers in the Corn Belt states during the month of July, and then the August 12th USDA report will have the updated acreage numbers based on this resurvey.  Thus, on August 12th, we should have the first solid acreage data of the year.  The market will be trying to position itself ahead of this data release.

After months of wetness especially in the eastern Corn Belt, we have finally been receiving warmer temps and the excessive rain has finally moderated.  This has allowed the corn and bean crops to finally start to catch up in maturity, and the heat and less water has allowed aggressive and productive growth, finally.  The crop will still be late, but maybe with continued heat, as long as the rain still comes, we can close the gap somewhat before harvest.  Most of the corn has now had nitrogen applied and many corn acres are now aggressively growing with a deep green color.

There are major corn and bean acreage in Ohio, Michigan, Indiana, and Wisconsin that did not get planted.  Northwest Ohio, northern Indiana, central Michigan, and northeastern Wisconsin are the worst areas with the largest unplanted acreage.  Folks, this is serious.  There are thousands and thousands of unplanted acres in these areas.  I know as I have travelled through them all.  The major livestock producing areas in west central Ohio, northwestern Michigan, and east central Wisconsin are all in panic mode because they are unclear on how they will secure enough corn to feed their livestock for the next 14 months.  Basis on old crop corn in these areas have skyrocketed higher in Ohio and Michigan to +75 to +100 over at major feed destination locations.  Farmers who have old crop corn are not budging.  They can see that they have a commodity in demand, and they want to get as much as possible during this opportunity.  They also are unsure of their own production this year, so they do not want to sell to much and possibly leave more in the bin to hedge next year’s production.  All of this has caused old corn and new corn basis to rachet higher to severely higher the more east you travel.  CSX Columbus, Ohio corn trains traded today at +75 cents over the September futures today in the east.  This is the high-water mark so far this year.  The extreme strength in old crop corn will continue to support basis and will ultimately cause corn spreads to stay narrow, and likely keep new crop spreads more narrow than normal as well.

The other story today that is not getting much press is the continued efforts to get a new trade deal approved with China.  The US has been working diligently with China for the last 18 months to get a new deal developed, but nothing is concrete as of yet.  However, President Trump did meet with Chinese President Xi last week at the G20 meeting.  The US delegation continues to negotiate with China, but there is still work to be done.  This will be something to watch in the coming weeks.  Ultimately, we need to have a China bean export program for Oct / Nov out of the Gulf as well as the PNW.  My fear is that the weather problems has caused a much higher corn price that is killing our export demand.  South America has the cheapest corn and beans in the world, and China is buying their corn and beans instead of ours.  Long term, this is not good for the US.  Any time we destroy our demand base, it takes years to redevelop these relationships.

Targets Produce Success and Protection For Your Farm

Weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  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.

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 1, 2019 when new crop storage rates will go into effect.  The new Delayed Price rate is now FREE through Oct 1, 2019.

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 – Sep 19 Corn Futures – Support at $4.13, Resistance at $4.45, Place Targets at $4.40

New Corn – Dec 19 Corn Futures – Support at $4.20, Resistance at $4.48, Place Targets at $4.45

Cash Beans – Aug 19 Bean Futures – Support at $8.71, Resistance at $9.03, Place Targets at $8.95

New Beans – Nov 19 Bean Futures – Support at $8.90, Resistance at $9.22, Place Targets at $9.15

New Wheat – Sep 19 Wheat Futures – Support at $4.98, Resistance at $5.19, Place Targets at $5.15

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

As always, if I can help you with anything, please call me at 419-279-3809 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Grain Market Update – June 19

What a Bizarre Spring!  The Abnormally Wet Weather Is Causing Problems In All Areas Of The Corn Belt.

The spring will go down as one of the wettest, if not the wettest, in history.  And not just for this area, but for the entire Corn Belt.  We have never witnessed a spring that has been so wet and has caused so many problems with getting our corn and bean crops planted.  Many local areas in Wisconsin, Indiana, and Ohio have been able to only plant 50-60% of their originally intended corn acres, and now the clock is running out on beans as well.  Many, many acres of corn and beans will go unplanted this year.  Some estimates have between 10 – 15 Million acres of corn and beans that won’t be planted, and if the farmer has Prevent Plant Insurance, these acres won’t be planted at all.  If a farmer does not have insurance, then he is continually struggling to get something planted to save his farm.  Corn planted today won’t yield much grain, but it can work for silage, and if you are a dairy farmer, this will be its intended use.  It is entirely too late now to plant corn for grain production as the crop will run into an early freeze, not to mention it will be very wet and suffer from poor test weights and higher FM levels.  Beans planted today could still work, but the window is slamming shut rather quickly.  And as I look at the forecast, the 6-10 day maps continue to look very wet for this area.  Not to mention that the crops that are planted are having a hard time emerging because we are lacking sunshine and heat to rapidly grow the crop.

The market is continuing to have a very difficult time getting its arms around the final planted corn and bean acres this spring, as well as the yield potential for this crop.  With the planting conditions being much below par and everything being at least 3 weeks later than a normal crop, there will be a yield lag that is quite noticeable this fall.  Without boring you with a detailed S & D analysis, my best guess is that corn ending stocks for this fall could easily drop down to 1.2 B bu and if we have a dry summer, it could drop as severely as 800 M bu.  If this happens, this will cause corn to remain very firm, much firmer than it already is.  Much of the corn carry on the CBOT will vanish, as it already has, and basis will firm dramatically.  On beans, the current estimate on bean carryout for this fall is just over 1 B bu.  If the weather does not cooperate, this could very likely be the biggest carryout estimate of the year.  Add to this a new Chinese agreement, and then the bean market could be off to the races because bean exports will all of a sudden grow instantly to China.  Similar to corn, bean carries are about half of what they were just 2 weeks ago, and bean basis is firming as well.

Just like you, the market is very stressed out about not having a clear picture on acres and yields.  It could be months before we have any accurate idea on what this crop will or will not produce.  In the mean-time, the market will gyrate like we have not seen since 2012.  The downside potential for corn and beans is limited, and any surprise in poor weather or a new Chinese agreement will just fuel us to a bullish story.  The corn market is not done rallying yet, and the bean market is very concerned about getting its last few acres planted while still in June.  We have seen the market correct a bit over the last day or so, but this is needed for a healthy bull market.  Corn and beans suffer from a lack of planted acreage and the late timing of the planted crop, and wheat is suffering from excess spring rains which will hurt quality.  None of this is bearish.  I expect that all grains will advance another leg higher once this small correction runs its course.

There are some producers who were very fortunate and were able to get most of their corn and beans planted.  If you are one of these folks, consider yourself lucky, and now you have a very favorable market to price your crop.  Dec ’19 corn futures are currently trading at $4.59  I believe we will have a shot to trade Dec corn up to the $5.00 level in the next few weeks, especially if we have a problem with the weather.  On beans, its anyone’s guess.  If the weather turns dry and we get a new Chinese deal, this market could turn from a sleeping bull to an enraged bull overnight.  The other factor is the actual acres planted, and how NASS is quantifying these acres each week.  Are the acres being planted or are they going to Prevent Plant and no longer being intended to be planted?  And if no longer intended to be planted, NASS is considering these acres planted whether they are actually planted or not.  This is all adding to the market’s confusion and frustration over the amount of planted acres.  This will likely add to the bullish sentiment as we move forward.

For livestock producers, this is going to cause you to pay more for corn in the coming year.  I wish I had better news, but your cost of corn will likely get rather expensive for the next year.  The lack of a planted corn crop locally has caused both futures and basis to firm in dramatic fashion, and frankly, I don’t see it backing off in material quantity until well after harvest.  Local basis has firmed over the last month, and this won’t change much either.  People who need to buy corn will likely need to pay at least option (zero basis under the Chicago futures level) or more to secure corn, if one can even find a source to sell corn to you.  Thus, for all of the above reasons, the corn basis has rallied firmer over the last month and will likely continue to do so.  New crop corn basis has firmed as well, and it will likely remain firmer than normal until past harvest.  I also expect the bean basis to firm as well.  Last harvest bean basis was very cheap due to the huge yields and the lack of Chinese buying.  This year is different, especially if a new Chinese deal is signed.  I don’t see new crop bean basis getting weaker than it is today at 90 cents under November and could firm dramatically if these other factors come into play.  Get your seat belts tightened.  Volatility will ramp up and this will be a wild ride.

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 2019 when new crop storage rates will go into effect.  The new Delayed Price rate is now FREE until Oct 1st 2019.  After Oct 1st, these bushels will be subject to the new crop storage rates posted at that time and are not known today.

Targets Produce Success and Protection For Your Farm

Weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  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.

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 19 Corn Futures – Support at $4.38, Resistance at $4.64, Place Targets at $4.60

New Corn – Dec 19 Corn Futures – Support at $4.54, Resistance at $4.73, Place Targets at $4.70

Cash Beans – July 19 Bean Futures – Support at $8.94, Resistance at $9.21, Place Targets at $9.15

New Beans – Nov 19 Bean Futures – Support at $9.21, Resistance at $9.48, Place Targets at $9.40

New Wheat – July 19 Wheat Futures – Support at $5.15, Resistance at $5.49, Place Targets at $5.40

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

As always, if I can help you with anything, please call me at 419-279-3809 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Grain Market Update – May 30

The market has been driven by wet weather across the Corn Belt, but is also effecting us here in the north. Hopefully you were able to get something in the ground. However, if unfortunately, you were not able to get what you needed planted there are options to help take care of your contracts.

Many people are taking insurance or preventive plant alternatives due to lack of planting ability. If you do have corn to market, set targets above $4 and in increments above to hit on the way up. Beans are getting slightly pulled up with corn, but are also on planting delays, so if you can hit a decent $8 price you can add a cash plus for a decent offer to even out the prices for some risk.

The government is planning on issuing out relief support this year probably based off of county averages and not this year’s crop.

If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.

Written by: Michael Steingraber, CHS Grain Originator

Grain Update – May 15, 2019

Kimmes spring corn planting

5/15/19

Planting Delays Are Starting To Get Serious

The big news of late is the inability to get our corn crop planted on time, and the real risk of corn acres either not getting planted or they get switched to beans instead.  On Monday’s crop progress report, the US has only planted 30% of its corn crop and last year we were are 59% complete.  On beans, only 9% were planted as compared to 32% last year.  Obviously, the wet weather has prevented the farmer from getting in the field and has pushed all planting significantly back from normal completion rates.  However, as I speak now, the farmer is aggressively planting corn in many areas of the Corn Belt right now, running full bore and around the clock.  Conditions are not perfect, but the calendar is forcing the issue.  Rains are expected to come towards the end of the week, and they are getting it done, one way or the other.

After weeks of relentless fund selling of grain futures at Chicago, this late planting issue finally came to a head on Tuesday as the corn market rallied 15 cents higher and beans over 30 cents higher.  The funds had a record short position in corn of over 325,000 contracts short and beans over 150,000 contracts short, which had been accumulated in the last 30 days.  These funds had been significantly pressing grain futures lower through last week, being relentless on pressing futures lower consistently over the last 3 weeks.  Beans last $1.20 and corn over 25 cents.  However, this mentality started to change on Monday, and the market screamed higher on Tuesday and it is still higher today.  Its all about the lack of planting process on both corn and beans, and now the market is putting more risk premium in the market for delayed planting and yield lag.  The funds were extremely short and this news has caused them to cover their short position buy aggressively buying futures.  This buying has propped up the market in a big way and is giving all of you the opportunity to make “catch up” sales. 

Time will tell whether the farmer will be able to get all of his corn acres planted.  However, there is no other time in history where the farmer has had less capacity to plant massive acreage once the conditions are right.  Today’s farmer has aggressively invested in new planting capacity to be able to plant his crop in very short order.  Yes, we are behind.  But the real question is whether the farmer can catch up on planting.  He definitely has the tools.  He just needs Mother Nature to cooperate.

Even though we are seeing a nice rally, the grain fundamentals still have not changed that much, especially for beans.  Please view this rally as an opportunity to catch up on forward new crop sales that were missed earlier.  The bullish case for corn has more standing power than beans.  Still, this is not the time to get bullish on either corn or beans, but time to think about salvaging a very difficult marketing year.  This is especially true for beans.  This weather scenario will likely add more bean acres at the expense of corn.  The result will be an even bigger amount of beans carried out next year, most likely between 1.0 and 1.3 B bu, which is just huge.  This is the 3rd day of our rally, and you can tell it is starting to lose some of its steam.  Now is the perfect time to place target orders just under resistance levels and get more new beans sold for harvest or next summer if you have bin space. 

Targets Produce Success and Protection For Your Farm

The weather markets are pushing the market around like a yoyo and producing unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here These types of volatile markets are a grain marketer’s dream.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  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.

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 19 Corn Futures – Support at $3.43, Resistance at $3.80, Place Targets at $3.76

New Corn – Dec 19 Corn Futures – Support at $3.63, Resistance at $3.98, Place Targets at $3.95

Cash Beans – July 19 Bean Futures – Support at $7.91, Resistance at $8.58, Place Targets at $8.48

New Beans – Nov 19 Bean Futures – Support at $8.15, Resistance at $8.80, Place Targets at $8.70

New Wheat – July 19 Wheat Futures – Support at $4.19, Resistance at $4.60, Place Targets at $4.55

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

Have You Sold Enough New Beans Yet?  Make Values Even Better With Cash Plus Contracts

I can build a solid case why beans will move lower in the coming weeks as more acres get planted and less corn.  In addition, the bean planting window is not nearly as tight as the optimum corn planting window.  If you still have new beans to sell, please check out our Cash Plus Contracts.  We can add a premium to your new crop bean sales price in exchange for an offer to sell more new beans if November Bean futures close above a certain level on Oct 23rd.  (These premiums are for contracts in 5,000 bushel increments only.)  These contracts will allow you to sell new beans today with a 36 cent premium added to the new crop cash price in exchange for an offer to sell the same quantity of new crop bean futures at $8.60 if on Oct 23rd, the November bean 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 36 cent premium paid to you on top of the current new crop bean price, and if on Oct 23rd, depending on what November bean futures trade at the close on this date, 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 another new crop sale where November futures were locked in at the $8.60 level.  Taking off the basis of 92 cents under the November futures for delivery into Readfield, which is our current posted new crop bean basis, you would have a new crop bean contract at 8.60 – 92 (basis) + 36 cent premium = $8.04  The worst case is that you would have another set of new beans sold at $8.60 November futures for Oct / Nov ’19 delivery into Readfield or Center Valley. 

As always, if I can help you with anything, please call me on my cell at 419-279-3809 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Grain Update – April 11, 2019

4/11/19

USDA Shows More Corn, But Market Holds Steady

The USDA released its April crop report on Tuesday and showed more corn stocks than originally thought.  However, the market held firm after the release.  Let’s look at the details.

In the corn market, the USDA reduced feed usage by 75 M bu down to 5.3 B bu.  They also reduced the amount of corn used by the ethanol industry by 50 M bu down to 5.5 B bu.  This industry continues to struggle with a lack of margins, and the industry is not running at capacity at this time.  This helps to explain why corn usage has backed off.  Finally, corn exports were reduced by 75 M bu down to 2.3 B bu as well.  The US market is struggling to find export demand.  Last year, the PNW was very busy shipping corn to China.  This year, Brazil and Argentina have huge corn crops on the horizon and their price is substantially cheaper than corn from the US.  In fact, they have the cheapest corn in the world now, and the Chinese are buying their corn and not ours.  On top of all of this, the Trump administration and China continue to work together to try and get a new agreement in place to end the tariff war between the two countries.  This is allowed China to not buy corn like in past years as well.  Its been a very long time since we have seen the USDA reduce all three of these categories on the same report, and it added to the heaviness of the report.  When the dust settled, there were 200 M bu of corn added to ending stocks, increasing this final number to 2.035 B bu.

As I have said many times, having a corn carryout starting with a “2” puts the market in comfort mode.  Supplies are plentiful, and the market will likely see no need to rally.  However, we have a mounting problem just around the corner.  This relaxed sentiment makes the assumption that we have no problems planting a 92.8 M acre corn crop.  Will the US be able to get all of this corn planted at the right time as major areas of the western and northern Corn Belt sit now with a major snow or rain event on top of it right now?  Even with no snow or rain today, vast areas still are dealing with wetter and colder soil conditions which will likely press the corn planting date well into May.  Now, with more snow and rain, it just keeps pushing the likely corn planting date farther and farther into the back edge of the appropriate planting window for corn.  If any other weather systems develop and drop more precipitation in these areas, I can easily see many corn acres get switched to beans.  If this happens, all of a sudden, we don’t have such a plentiful corn supply.  In the coming days, I see the corn market becoming much more sensitive to the weather situation.  On top of this, the funds are extremely short corn futures, and all we need is a reason for them to cover (buy) their short position back, and we could have an explosive corn market on our hands until the we get our corn completely planted.  Thus, I am not bearish corn.  There is a real potential for the corn market to bounce from these levels and rally until at least we get 50% of the crop planted.  It is a real risk, and the market will eventually recognize it, at some point.

The bean market is totally different.  But first, lets look at the USDA report.  Unlike corn, the USDA made very little changes to the Supply and Demand table during April.  They reduced imports by 3 M bu and increased seed usage by 2 M bu.  But the most obvious change that is needed, they failed to adjust, again.  They left bean exports at 1.875 B bu and continue to leave bean exports alone.  If the USDA was honest with us, they would start cutting these back instead of waiting until the end of the crop year to slash them.  My best guess is that exports will be lowered (eventually by 200 M bu or so.  When this happens, bean carryout will grow from its current 895 M bu to at least 1.1 to 1.2 B bu.  Folks, this is a lot of beans.  Many producers went ahead and used the $1.65 from the USDA and used this payment to supplement their cash flow needs and left their beans in the bin or in storage, and still unpriced.  I can build a case where beans move lower and lower as more and more corn acres get planted with beans, and the farmer won’t move their beans until they are forced to do so just prior to fall harvest.  Thus, we could have a very heavy farmer deliveries during Aug / September and have 2 harvests back to back.  This will add increased pressure to futures and basis as more beans are rammed in the pipeline.

Most farmers are waiting for a China deal to be finalized before selling more of their beans.  My best guess is that Trump will demand a perfect agreement with China, and this will take another 6-8 weeks to get accomplished.  By then, the opportunity for China to buy any more old beans will be completely over.  Brazil and Argentina have the cheapest beans in the world right now, and their bigger than average yields will continue to press bean prices lower and lower.  On top of this, if the US farmer cannot plant his corn crop due to wet / cold weather, and instead plants beans to be able to survive, the beans carryout will continue to expand and beans are /  will be extremely over priced compared to today’s values.  Thus, I am bearish beans in a big way.  The market is not looking at these fundamentals yet, but as we inch closer and close to planting, and experience continual delays in plating corn, the market will be forced to recognize it in a big way.  The real risk here is a substantially lower bean futures market and a substantially wider new crop basis levels that will be considerably wider than last years wide basis level.  If I were you, I would take action today to protect your farm.  Please click here to see which grain originator on our staff can help you create a unique marketing plan for your farm, and help you place target orders in our online system.  I offer further explanation below.

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 – May 19 Corn Futures – Support at $3.55, Resistance at $3.66, Place Targets at $3.65

New Corn – Dec 19 Corn Futures – Support at $3.84, Resistance at $3.96, Place Targets at $3.95

Cash Beans – May 19 Bean Futures – Support at $8.83, Resistance at $9.12, Place Targets at $9.02

New Beans – Nov 19 Bean Futures – Support at $9.18, Resistance at $9.39, Place Targets at $9.34

New Wheat – July 19 Wheat Futures – Support at $4.35, Resistance at $4.82, Place Targets at $7.78

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

Have You Sold Enough New Beans Yet?  Make Values Even Better With Cash Plus Contracts

I can build a solid case why beans will move lower in the coming weeks as more acres get planted and less corn.  In addition, the bean planting window is not nearly as tight as the optimum corn planting window.  If you still have new beans to sell, please check out our Cash Plus Contracts.  We can add a premium to your new crop bean sales price in exchange for an offer to sell more new beans if November Bean futures close above a certain level on Oct 23rd.  These contracts will allow you to sell new beans today with an 18 cent premium added to the new crop cash price in exchange for an offer to sell the same quantity of new crop bean futures around $9.60 if on Oct 23rd, the November bean 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 18-cent premium paid to you on top of the current new crop bean price, and if on Oct 23rd, depending on what November bean futures trade at the close on this date, 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 another new crop sale where November futures were locked in at the $9.60 level.  Taking off the basis of 92 cents under the November futures for delivery into Readfield, which is our current posted new crop bean basis, you would have a new crop bean contract at 9.60 – 92 +18 cent premium = $8.86  The worst case is that you would have another set of new beans sold at $8.68 for Oct / Nov ’19 delivery into Readfield or Center Valley.  This is a good price considering our posted new crop price is at $8.38 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.  Please click here to see our current cash grain bids.

Targets Produce Success and Protection For Your Farm

Before long, weather markets will push the market around like a yoyo and produce unprecedented volatility.  However, volatility can be your friend if you have a solid marketing plan and know how much and at what price you feel comfortable selling when the right opportunities present themselves.  If you are not working with one of our grain originators today, please give us a call.  We will gladly sit down with you to create a plan and help you protect your farm.  For a list of our grain originators and the one closest to you, please click here.  The volatility present selling opportunities that are very short lived.  For the disciplined marketer, who knows exactly what commodity he needs to sell and at what level, this is a perfect scenario.  You simply place target orders in our system and at 3 am in the morning next Thursday while China makes an announcement when we are all sleeping, the markets ramps up, hits your target, locks in your contract price, all automatically while you are in bed.  How fantastic is that!  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.

LAST CALL For New Crop Average Price Contracts – Sign Up Today

We are now enrolling bushels into our new crop Average Price Contract which is for new crop grain that will be delivered during this fall.  This 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  to 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.

As always, if I can help you with anything, please call me at the grain office on my cell at 419-279-3809, or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

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