Grain Update – August 2, 2018

8/2/18

World Wheat Production Problems Causing a Huge Wheat Rally.  Corn Tags Along For The Ride.

Grain prices have rebounded significantly in the last three weeks due to world wheat production problems and a very strong corn demand outlook.  In the midst of all of this, the Chinese are talking with the US again about working on the tariff issue.  All of these factors have placed a bid under the market and now we have grain futures significantly higher.  Corn has rallied 31 cents from its low, beans are 67 cents off their recent low, and wheat is a whopping 94 cents off its recent low.  These levels might not be exactly what you want, but if you have old crop corn or beans left in the bin or in storage, or if you don’t have enough new crop corn or beans sold for harvest, you need to be paying attention.  This is your opportunity to make catch up sales and put a plan together to help salvage your revenue for the year.

Lets look into the details.  Over the last month, several wheat producing areas of the world are having incredible problems with their wheat crop.  Canada, Europe, Black Sea, Ukraine, and Australia are all suffering from reduced wheat yields due to a lack of rain.  Then last week, the wheat tour witnessed better yields in the Dakota’s compared to last year’s drought, but the current yields of the hard red spring wheat crop is significantly less than the market thought was in the field.  All of this news have caused the bulls to have the upper hand and have pushed wheat futures significantly higher.  The funds were short roughly 10,000 contracts of Chicago wheat.  This news has forced these funds to cover their short positions and to go long.  Today, they are probably close to 50,000 contracts long of Chicago wheat futures.  If the world wants to buy wheat, they come to Chicago and buy wheat futures, and this is what we are seeing.  Currently, September wheat futures at Chicago are trading at $5.65.  The next high point in the chart is at $5.70, which should be attainable in the next day or so.  The contract high is $6.12.  They way this market is acting, I believe this level will be challenged as well in the next week or so.  When a market continues to trade higher each day, no matter the news, it has legs and it will challenge the past highs.  Volatility will ramp up, and the market will start to gyrate around as a top is made.

All of you who grow wheat need to be paying attention for next year’s crop.  The recent strength in nearby September wheat futures has also pushed next July wheat futures higher as well.  Now is the time to consider planting more wheat in September and October, and forward contract your wheat before it is planted.  There is nothing like locking in a nice profit before the crop is planted.  Today’s cash price for July / Aug ’19 wheat for delivery into Readfield is at $5.32. Looking at the July ’19 Chicago wheat chart, the contract high is at $6.09 less our current basis of 70 cents under Chicago, would put the cash price at Readfield at $5.39.  Thus, we are very close to the contract highs now, and this deserves your full consideration.  I would place targets at the $5.35 level and contract another 10% of your anticipated production each 15 cents higher and reward this market strength.  I can build a case for significantly lower corn and bean prices as fall harvest approaches.  Locking in wheat for next year diversifies your portfolio and helps to reduce your total risk.  If you want to see where our cash bids are trading, please click here.  If you would like to speak to one of our grain originators about setting up a marketing plan for your farm, please click here.  We can come to your farm or make an appointment to visit you.

The strength in the wheat market has propped up the corn market as well.  Our corn export pace remains stout, and we are on track to have record corn exports this year.  Our corn price is the cheapest in the world, and the world continues to come to the US to buy corn.  This is especially true since Argentina and Brazil have struggled with a lack of rain for their corn crop.  Over the last few weeks, their corn crops have continued to shrink in size.  The US just came off of a record corn harvest last fall, and we continue to have adequate old crop corn on hand.  However, with the world wheat issues that we have explained above, and the corn production problems in South America, the world has come to the US to buy our corn.  Thus, our corn ending stocks from the ‘17/18 crop year have shrunk, and the corn ending stocks for ‘18/19 are considerably tighter down to 1.6 B bu or so from 2.2 B bu from last year.  This erosion of corn out of our ending stocks position has caused the bulls to buy Chicago corn and for some to cover their short positions as well.  This is especially true since the wheat market has been on fire.  As wheat moves higher, so does corn.

That being said, the easy upwards move for corn is now almost complete.  Looking at the charts, many times a market will retrace either 38.2%, 50%, or 61.8% of a previous move before resuming the previous trend.  I believe the corn market will retrace 50% of its move before turning around and sliding lower into harvest.  Lets look at December ’18 corn futures as traded at Chicago.  The previous high was $4.29 and the recent low was $3.50.  This is a 79 cent move and if you retrace 50% of this, you will run back up by 40 cents.  This will put Dec ’18 corn futures back to $3.50 + 40 = $3.90.  If you take of our basis for Oct / Nov ’18 delivery corn into Readfield of 40 cents, this give you a final cash price of $3.50 for harvest corn.  We are currently trading at $3.41.  If you have more corn that must be sold for harvest, I would place a target at $3.50 for at least 50% of the harvest corn that you must sell.  For the other 50%, I would place a target at $3.60.  I would figure the volumes now, place a firm target now at these levels, and let it do its job.  That way, next week at 2 am in the morning, when China decides to work with us on beans, the market will pop up, hit your target and execute, all while you are sleeping in bed.  This might be one of the very last opportunities you have to get this corn sold before it slides lower into harvest.  I would place the targets and then forget about it.  Let them protect your farm.

We have a significant risk with our bean market.  The Trump administration continues to negotiate very strongly with China, and beans are wrapped in a tariff war between the two countries.  This negotiating process takes time, but unfortunately, the farmer remains in the crosshairs.  I don’t believe this tariff war will be over by November 1st.  If this is true, and China does not buy or greatly reduces its purchases of harvest beans from the US, this will create a huge logistical mess for the US this fall.  We normally run huge amounts of beans down to the gulf or out of the PNW each October as the Midwest goes through bean harvest.  If China does not buy our beans, where will they go?  Other countries will be forced to buy our beans because Brazil has been sucked dry because China is taking all of their beans.  So if other countries normally buy beans from Brazil, they will most likely come to the US this fall.  However, this sounds good in theory.  Maybe the situation won’t be as bad as I fear, but I have a bad feeling about bean harvest this fall.  The market is already anticipating problems.  Just look at the new bean basis at most elevators.  Noticed how weak they have become?  This is why.  China buys most of the beans from the PNW.  All of a sudden, if we cannot ship beans out of the PNW, where will they go?  The answer is likely by rail to St Louis where they can be barged to the gulf.  So the beans in the Dakota’s will have a problem getting away, and the problems will mount along the Mississippi River because twice as many beans will be forced down that funnel into a Gulf market that now has half the business compared to a normal year.  Is the picture becoming clearer for you?  Preparations for bean piles in the Dakota’s are already in progress.  Shuttle rates are being created from the Dakota’s to St Louis.  Beans will likely back up into the interior of the US like we have never seen before.  Basis will get incredibly cheap, bean spreads will widen, and all of this will likely weigh on bean futures.  Now, the bean crop was planted earlier than normal, and many people are saying their bean crop looks fantastic.  Locally, our crop looks great as well.  I believe the USDA is way low on their yield if 48.5 bpa.  If all of these reports are right, what happens if the final bean yield is 52 or 53?  All of a sudden, our bean carryout goes from 600 M bu to 800 to 900 M bu carryout.  How do you think bean futures will react to all of this?  This scenario could be extremely bearish for beans.  November ’18 bean futures starting with a “6” is a real possibility.  If you don’t have enough beans sold for harvest, what would this do to your farm revenue?  How would your banker react?

I have recommended for weeks that farmers should get sold up on any beans that they must move at harvest, and sell them when November beans hit $9.15.  This week, it hit this target briefly on Tuesday and traded up to $9.22 before falling off a cliff since then.  Now, Nov beans are trading at $8.95, and I’m not sure if they will or can get back to $9.15 again.  The $9.15 level is exactly the 38.2% retrace level of the previous $2.34 slide lower from the high level of $10.60.  Do you have more beans that you need to sell for harvest?  Did you sell them this week when Nov beans hit $9.15?  If not, I would put a target back at the $9.15 level and see if the market can make a double top.  This will give you a final cash price of $8.40 for Oct / Nov ’18 beans into Readfield.  My fear is that since this market now retraced the required 38.2% objective, that the bears will now resume the lower trend in the bean market, selling huge amounts of futures, going short big time, and press Nov beans lower than any of you think is possible.  I hope I am wrong, but now the bears are in charge, and don’t be surprised what they can do.  I just hope your farm is adequately protected.  If not, you need to act today.  We would be glad to help you.  Click here to see which grain originator services your area.

Have You Sold Enough July 2019 Wheat Yet?  Make Values Even Better With Cash Plus Contracts

If you still have new wheat to sell, please check out our Cash Plus Contracts.  We can add a premium to your new crop wheat sales price in exchange for an offer to sell more new wheat if July Wheat futures close above a certain level on June 19th.  These contracts will allow you to sell new wheat today with a 33 cent premium added to the new crop cash price in exchange for an offer to sell the same quantity of new crop wheat futures at $6.30 if on June 19th, the July ’19 wheat 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 33 cent premium paid to you on top of the current new crop wheat price, and if on June 19th, depending on what July wheat 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 July futures were locked in at the $6.30 level.  Taking off the basis of 70 cents under the July futures for delivery into Readfield, which is our current posted new crop wheat basis, you would have a new crop wheat contract at 6.30 – 70 = $5.60.  The worst case is that you would have another set of new wheat sold at $5.60 for July ’19 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $5.30 today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

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 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now FREE through Oct 1st.  On Oct 1st, the Delayed Price rate on these bushels will increase to our posted new crop rate.

45 / 96 Road Construction Update

The intersection of 45 and 96 is now completed.  It has been a long 3 months, and we apologize for the inconvenience.  Normal traffic flows have been restored, and you can now freely use this intersection to get into our Readfield grain terminal, just like in the past.

CHS Pro-Advantage  WHEAT ContractsAll growers need to try at least one contract to diversify your marketing strategies.  It is a great tool, and has worked well.  Below is a description:

This contract is a very simple approach to allowing our trading professionals at CHS to market your grain for you.  Basically, you will hand over a portion of your grain to them to squeeze as much money out of the market as they can.  They will do many trades behind the scenes to generate as much profit for you as possible and when the program is over, their profits will be added together and given back to you in the form of a price that should be higher than the prevailing price at that time.  You don’t have to worry about the trades that they do, or any complex marketing strategies to learn.  This is easy folks.  Just give them a portion of next year’s grain production, and allow our marketing professionals to make money for you.

This contract has been offered for 3 years and the results are quite remarkable.  Their bean contract has worked well, and has allowed participants to enjoy contracts that were significantly higher than the current market.  All of this goes directly to your bottom line.  For next year’s production, you can enroll in a July ‘19 delivery, and we also have July ‘20 delivery contracts as well.  The cost is 10 cents per bushel for the July 2019 and 12 cents per bushel for the July 2020 contracts.  The July 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 Pro-Advantage 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.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Grain Update – July 19, 2018

7/19/18

Its All About Politics & Weather. Are Your Ready When Grain Prices Rebound?

The USDA was out with its July crop report last Thursday and indicated a tighter corn scenario but a weaker bean scenario for the upcoming crop year.  Let’s look at the details.

For old crop corn, the USDA cut feed usage by 50 M bu down to 5.45 B bu, but increased corn exports by 100 M bu up to 2.4 B bu.  The other major change was an increase in corn used for ethanol by 25 M bu up to 5.6 B bu.  When the dust settled for old crop corn, ending stocks were reduced by 75 M bu down to 2.027 B bu.  Many in the industry are wondering why feed usage is going down, especially when you consider how much the price on corn has dropped in recent weeks.  The increase in exports makes sense as the US has the cheapest corn in the world now, and with Argentina having a drought and Brazil having reduced yields due to a lack of rain, the world simply does not have an excess of corn, except for the US.  However, old crop corn carry out still starts with a “2”.  This generally puts the market in comfort mode.  But looking right around the corner at the new crop picture, and things tighten up considerably.

For new crop corn, the USDA raised the corn production by 190 M bu up to 14.23 B bu.  They left the yield at 174 bpa but increased planted corn acres by 1.1 M up to 89.1 M acres.  On the demand numbers, they increased the corn used for feed by 75 M bu, and increased the amount of corn exports by 125 M bu up to 2.225 B bu.  The other change for new crop corn was a decrease in ethanol by 50 M bu down to 5.625 B bu.  When the dust settled on ‘18/19 corn, ending stocks were reduced by 25 M bu down to 1.552 B bu.  Thus, when you compare the ending stocks from the ‘17/18 crop year to ‘18/19, ending stocks are roughly 500 M bu less for the upcoming year.  This is a big deal, and this has the market’s attention.  The corn fundamentals clearly do not justify the recent 79 cent slide in Dec ’18 corn futures.  However, we all know that politics, the trade war with China, and the funds going short corn futures are the reasons the corn market has fallen lower.  The good news is that within the last week, much of the tariff information is already factored into the price of corn, and this market has stabilized, and now is bouncing back.  The real question is how far will it rally back before it resumes the dominating down trend.

Unlike the tighter corn situation, the bean supply is getting bigger and bigger.  Obviously, the major factor is the lack of bean buying from China.  China has virtually stopped buying any US beans since April when the US tariff policy was starting to be implemented. On July 6th, the first tariff went into effect, and China placed their tariff as well.  So old crop beans are not being shipped to China, and beans are starting to stack up in the US.  The real question is whether China will come to the market and buy US beans during the October time slot when normally they have been a huge buyer of our beans.  This is a critical factor because it will have a huge affect on harvest operations this fall.  Normally, huge quantities of beans are shipped to the gulf or PNW each October as elevators ship out beans at harvest to make space for corn in their facilities.  All of a sudden if this demand is not there, the beans will back up in the interior like we have never seen before.  This is what the market is fearful of, and this helps explain why beans have crashed in the last 2 months since Memorial Day.  If China does not buy US beans this fall due to the tariff situation, beans will stack up in the interior like we have never seen before.  This means very low prices, very wide basis levels, huge bean carries, and beans being put in unusual places and piled outside.

On old crop beans the demand for bean meal continues to be very robust.  This is especially true since Argentina normally supplies the world with huge amounts of bean meal, but their country is out of the picture this year because of their drought.  Thus, the world, less China, is coming to the US to buy bean meal.  This has allowed the bean crushers in this country to capture incredible bean crush margins.  Bean crush margins continue to stay around $2.00 a bushel, and crushers are processing beans at full capacity.  Its all about the bean meal, not the beans.  With Argentina out of the picture, the world is coming to the US for meal.  This helps to explain why old crop bean stocks are shrinking even though China is not buying US beans.  Let’s look at the numbers.

In old crop beans, the USDA increased crush by 40 M bu up to 2.03 B bu and increased bean exports by 20 M bu up to 2.085 B bu.  China is sucking every bean from Brazil and as a result, the bean price in Brazil has screamed higher by the equivalent of $2.50 per bu.  Thus, other countries who normally buy Brazilian beans are now coming to the US instead.  So we have been selling beans to some unusual buyers as of late.  This helps to explain why old crop exports have perked up this month.  When the dust settled, old crop bean carryout was reduced by 65 M bu down to 465 M bu.  This change was mostly expected by the market and not a huge shock.  Old crop carryout is still close to 500 M bu and this keeps the market in comfort mode.  The market was shocked not by old crop ending stocks, but by the increase in ‘18/19 ending stocks.

For new crop beans, the USDA increased production by 30 M bu up to 4.31 B bu.  They left the yield at 48.5 bpa but increased the bean acres by 600,000 up to 89.6 M acres.  On the demand front, they reduced bean exports by a whopping 250 M bu down to 2.04 B bu.  They also increased crush by 45 M bu up to 2.045 B bu.  Obviously, they are trying to anticipate that the tariff war will reduce beans flowing to China, but they also see the US continuing to crush big amounts of beans to satisfy the world demand for bean meal.  When the dust settled, new crop ‘18/19 bean carry out increased a whopping 195 M bu up to the huge number of 580 M bu.  Additionally, there is a real possibility that if the trade war continues and China only buys a fraction of beans from the US, and if the final bean yield comes in anywhere close to 50 bpa, bean carryout will approach 800 M bu.  This is a real possibility, and this is what the market is fearful of.  This totally explains the market action of the last 2 months where Nov bean futures have crashed lower by $2.34 from a high of $10.60 to a recent low of $8.26.  Fortunately, the markets have stabilized over the past week and we are now rebounding.  The drier weather forecasts and the heat are providing support.  The volatility is reduced, and the markets seem to want to move higher.

After a huge move, it is very normal for markets to retrace between 38% to 62% of the recent move before resuming the dominant trend.  In our case, I believe the corn and bean markets will bounce up to at least a 38% retrace before turning lower and then trading lower into harvest.  These actions can be quick and decisive, and if you miss it, the opportunity will be gone.  I believe we will have an opportunity to sell better levels in the upcoming month that will give all of you who need to put on sales for new crop the opportunity to get caught up on grain sales and protect your farm before things turn ugly once again.  If you are in this position, I would firmly get my arms around what bushels you need to sell yet, and then put target orders in our system to execute once the market gets there.  Again, this opportunity will be short lived and the growers who have their orders resting at Chicago will be rewarded.  Those who are indecisive, unsure of what needs to be done, or unwilling to pull the trigger will be left in the dust.  Now is the time to put a plan in place and protect your operation.

So, how far will the markets rally before turning significantly lower once again?  For Dec ’18 corn futures, the 38% retrace will put Dec futures back up to $3.80 before turning lower.  Our basis for new crop corn into Readfield is 40 under Dec futures.  Thus, I would put targets to sell new corn into Readfield at $3.40.  I would simply figure out how much more corn that you need to sell for harvest, and then either call us or enter the target yourself to sell new corn at $3.40.

On beans, the 38% retrace will put Nov ’18 bean futures back up to $9.15 and our new crop basis into Readfield is 70 cents under November futures.  This puts the cash price for new crop beans at $8.45 for new crop delivery into Readfield or Center Valley.  If you still have new beans yet to sell, I would figure out how many you need to sell, and then put a target in our system to sell new beans at $8.45.  Again, either you can enter this order into our online trading system, or you can call us and we will enter it for you.  Please click here to show you how to enter your own targets in our system on your own.  If you would like on of our grain originators to put a customized marketing plan together for you, please click here for the originator closest to you.  We would be happy to come out and help you create a tailor made plan for you to protect your farm.

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 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Weekly Grain Update – June 28, 2018

6/21/18

The Grain Industry Prepares For A Major USDA Report On Friday.  Trade War Concerns And Great Crop Conditions Still Weigh On Grain Futures.

The USDA will be releasing its end of June crop report at 11 am CST on Friday, and this is one of the biggest reports of the year.  Generally, this report causes the market to make a major move in one way or the other.  The report contains the June 1st grain stocks and it also estimates the corn, bean, and wheat acres that were planted this spring.  The June 1st quarterly grain stocks gives the trade real evidence on grain usage during the 3rd quarter of the crop year, and it will indicate whether a particular grain is being used or shipped more or less than what the trade had anticipated.  Currently, the market is estimating that June 1st grain stocks are as follows:  corn – 5.268 B bu, beans – 1.225 B bu, and wheat – 1.091 B bu.  Any major difference given by the USDA tomorrow and the market will react according, possibly violently if a major difference exists.

The other set of numbers that will have a huge implication on future supply and demand estimates is the USDA’s estimated acres planted to each crop.  These acres will then be used by future crop reports as the basis for their supply estimates.  The acres estimate each June is usually a big focus and a big market mover.  Compared to the March 31st acres estimate, most believe both corn and bean acres will be increased by roughly 500 – 600,000 acres each.  The market now estimates these acres for tomorrow’s report:  corn – 88.562 M acres, beans – 89.691 M acres, and wheat – 47.102 M acres.  Again, any major differences by the USDA tomorrow and the market will react accordingly.  Over the years, the acres estimate has caused very big ripples in the market because the amounts released were not expected by the market.  Thus, it could be a very interesting session tomorrow.

The markets have been relentlessly pounded lower over the last month, and its hard for me to see where the market can really move lower in a big way.  The funds are now short all grains, and some of them could cash in their profitable trades before this report by covering (buying) their shorts back.  This might prop up the market through the end of the month.  Still, anything is possible.  An unexpected additional 500,000 acre increase in corn or bean acres would definitely press the market lower again despite what has happened this month.

Up to this point, the focus has been on the crops in the ground.  For the most part, the condition of the corn and bean crop is very good.  The crop now is not behind and nearly all areas of the Corn Belt have received enough rain to keep the conditions good to great.  There are some areas in western IA and eastern NE that received up to 12 inches of rain over the weekend and have too much water.  However, on July 1st, although it does happen, it is hard for the grain trade to move higher due to too much rain.  Crop conditions continue to be stellar each week with good to excellent corn acres now at 77% and beans at 73%.  This is the time of the year when the crop ratings start to decline due to not enough rain in certain acres.  These conditions remain some of the highest, if not the highest ever, for this time of the year.  So we are off to a very good start, and each week that we continue to stay at these levels, chances improve that the crop will make it to the finish line with incredible yields.  Still, there is a major heat dome building in Kansas today and it is moving slowly east with temps over 105.  The market is concerned about this heat as some of the corn nears pollination.

Concerning the trade war, the US – China relations seems to be stabilizing this week after a rough week last week.  The US looks to be backing off some of its requirements on investments and if the US will actually follow through on the additional $200 B in tariffs at the 10% level.  Time will tell on this.  The Trump negotiating style is to go in and ask for the moon, set the tone early, set up high demands, and then slowly back away as the teams meets in the middle with a resolved deal.  Time will tell if this work out, but this seems to be the way his team gets what they want.  In the meantime, the markets have stabilized last week, and the volatility has been reduced this week a bit, until tomorrow’s report.  We now have much lower trading ranges for all grains and the market seems to be content to move within these trading ranges until the USDA or the trade war gives us something else to focus on.

Quite a number of you still have old crop bushels and new crop bushels that need to be sold.  Again, I believe you need to focus on how the best way to protect your operation, and be realistic about what can be done yet to salvage your revenues this year.  Your first priority should be to get your arms around just how many bushels of old and new crop bushels you need to market yet.  The market did give us an opportunity during May to make excellent sales.  We will likely not make it back to those levels, but I can build a case where the market can make a decent run back to at least halfway.  Like I mentioned last week, generally a market will retrace 50 to 61.8% of a move before resuming the previous down trend.  I still believe this has a decent chance of happening.  However, once the market gets there, you need to have firm targets in place to automatically execute so it is not missed.  From last week, the cash target box for new crop prices into Readfield or Center Valley have not changed.  Again, these are cash prices on new crop bushels for harvest delivery into Readfield or Center Valley.  My recommended target range for new crop corn is $3.54 to $3.62, and for new beans is $8.87 to $9.10.  For those of you who have bushels left to sell, I would put firm targets out there for at least 75% of the bushels you need to sell.  That way in 3 weeks from now when the US and China finally get a deal worked out, and beans make a huge jump at 3 am during the night, your order will be active and be executed.  Its all about reducing risk and protecting your operation.

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 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

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 18 Corn Futures – Support at $3.48, Resistance at $3.76, Place Targets at $3.70

New Corn – Dec 18 Corn Futures – Support at $3.60, Resistance at $3.87, Place Targets at $3.82

Cash Beans – Aug 18 Bean Futures – Support at $8.47, Resistance at $9.57, Place Targets at $9.47

New Beans – Nov 18 Bean Futures – Support at $8.64, Resistance at $9.72, Place Targets at $9.62

New Wheat – Sep 18 Wheat Futures – Support at $4.80, Resistance at $5.10, Place Targets at $4.98

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

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Weekly Grain Update – June 21, 2018

6/21/18

Grain Markets Have Finally Stabilized At Much Lower Levels.  Let’s Prepare To Pull The Trigger On Final New Crop Bushels Once Prices Rebound.

Rumors surfaced this week that the Trump administration is considering adding a 10% tariff on an additional $200 B worth of Chinese goods if in fact China retaliates to the 25% tariffs on $50 B worth of Chinese goods scheduled to be implemented on July 6th.  As you can guess, the grain markets and the equity markets did not find comfort in this news, with all major markets selling off in a big way.  News is also surfacing that Trump is asking the CCC to put a package together to reimburse farmers for the market values that have recently been lost due to this trade war.  More to come on this.  Since Memorial Day, the funds have been avoiding buying grain futures at any cost.  They had a long position prior to Memorial Day of roughly 200,000 contracts long in corn and 100,000 contracts long in beans.  Since then, they have sold off their entire long position and now have a sizable short position of approximately 100,000 contracts in both commodities.  This is a huge and vast reversal in position, and all of this selling pressure helps to explain why our grain markets have crashed since Memorial Day.

Obviously, the trade war with China is the lead story, but our inability to renegotiate a new NAFTA deal is also weighing on the market.  Canada and Mexico buy a huge amount of commodities from the US and not having them fully engaged to buy our grains and livestock is problematic for ag producers.  On top of this, the current corn and bean crop is off to a fantastic start, with beans being planted at the earliest pace ever, and with crop conditions just wildly good at this point in the growing season.  On Monday, the USDA pegged the corn crop at 78% good to excellent and the bean crop at 73% good to excellent.  Rarely are conditions this high for both corn and beans.  Additionally, most all of the Corn Belt received nice rains over the weekend and as I look at the current US Drought Monitor, I can see no significant area in the entire Corn Belt that does not have adequate water.  So, we are sitting here on June 20th with crop conditions off the charts, adequate moisture everywhere, corn and bean populations all very good, and a crop that is now growing at the 5-year average maturity.  There are no problems to speak of with the crop.  The next potential issue is dryness around the corn pollination period of July 10th – 20th this year, and the bean pod filling season around July 20th to Aug 10th.  If dry weather or heat surfaces during these times, it will add support to the market.  Until then, things look good and helps to explain why futures have spiraled out of control as of late.

The next major USDA report will be next Friday, June 29th at 11 am CST.  On this day, the USDA will update the trade on June 1st grain stocks and update the corn and bean planted acres for this growing year.  These acres will then be used on future crop reports as the base for the supply and demand estimates.  This report on the 29th usually causes a very volatile market session at Chicago after the numbers are released because the adjustments in corn and bean acreage causes major changes in the anticipated carryout’s for both this year and next.  Looking ahead, I see corn exports remaining very strong and feed demand remaining very strong in the corn market.  I would not be surprised to see corn carryout being trimmed back, especially for old crop.  On beans, I see nothing but a growing carryout on old and new crop.  This whole situation with China not buying our beans is a big deal because we need them to buy our beans.  Frankly, it is this single issue which has caused our markets to crash over the last 3 weeks.  If the Chinese tariff issue does not get worked out, I can see next year’s bean carryout being in the 7-800 M bu range, which is just enormous, and will weigh on prices.  In fact, this is probably what the market is anticipating considering what the bean market has done in the last 3 weeks, dropping a whopping $1.68 since then.  This is unprecedented, and unfortunately, many producers find themselves in a pickle because they did not sell enough new crop beans when the market presented them with the opportunity.

Fortunately, the market seemed to finally capitulate on Tuesday, with July bean futures trading down 66 cents at one point during the session, to a low of $8.41, but only closed the day being 16 cents lower.  This abrupt move significantly lower, and the popping right back is characteristic of a market finding solid support and new buying interest.  All of the weak players finally have now been stopped out, washed out, and now no longer playing the game.  Unfortunately, this leaves a market that is thinner than normal and illiquid, where a few big players can push the market around in big ways.  There are many traders who are now licking their wounds and thinking twice about trading grain futures again.  The more players we have, the more liquidity the market has and should result in less volatility.  It will take time for this to build back up.

Unfortunately, the market has left many of you with not enough grain sold and now are being forced to deal with much lower prices.  Now, we need to figure out how to make the best of this situation and put a salvage plan together to save your farm.  Many times, when a market crashes like we have seen, the market will go down and hit solid support, and then bounce back.  The market will usually bounce back 50 to 61.8% from the low point to the previous high.  I call this 50 – 61.8% retrace area the target box.  The market will likely trade into this box before resuming the downward trend.  Keep in mind that once we make it into this box, and it could be very briefly, the resuming sell off could be very significant and more powerful than what we just witnessed over the last 3 weeks.  This is hard to imagine, but the entire professional grain trade will be looking at the same set of numbers.  So where is the target box for Dec ’18 corn futures and Nov ’18 bean futures?  Let’s look at the charts.  On Dec corn, the previous high was $4.29 and the low just hit was at $3.60.  Thus, the target box for Dec corn is from $3.94 to $4.02.  On Nov beans, the high was $10.60 and the low was $8.64.  The target box here is $9.62 to $9.85.  Using the new crop corn basis at Readfield at 40 cents under on corn and 75 cents under on beans put the cash target box on corn at $3.54 to $3.62.  On beans, the cash target box is $8.87 to $9.10.  Please get a pen and write these numbers down.

For those of you who find yourself not having enough grain sold for new crop, what you need to do is relatively simple.  You need to assume trend line yields at this point, subtract off the number of bushels that you have sold for new crop, and find out the total number of corn and bean bushels that still need to be sold.  Then, once you know what these bushel totals are, you need to place firm targets to sell these bushels in the target box listed above.  It is critical that you deal with this issue today, and get a firm understanding of what your risk position is for your grain production.  It is also critical that you place a FIRM target to sell at the above levels because the market could be at this level only for 20 minutes at 3 am on July 10th.  The only way your target will get filled is if it is a firm target.  The firm target will prevent you from becoming bullish, right at the very top of the market, when you need to be selling bushels, and not pulling your targets.  The obvious risk is that you don’t sell because you are bullish, and then the market abruptly crashes, and you are level unprotected and exposed with no other selling opportunities.  You can enter this target on your own, in our online target bid center, or you can call us and we can enter it for you.  Either way will work.  But the critical piece is to find out what you must sell, and then get firm targets to sell in the above target box.  This will save your farm.

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 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

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.

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

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 24th.  These contracts will allow you to sell new beans today with a 20 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 $9.45 if on Oct 24th, 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 20 cent premium paid to you on top of the current new crop bean price, and if on Oct 24th, 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 $9.45 level.  Taking off the basis of 75 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 9.45 – 75 = $8.70  The worst case is that you would have another set of new beans sold at $8.70 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This compares to the cash price for new beans today at Readfield at $8.28.

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 18 Corn Futures – Support at $3.38, Resistance at $3.73, Place Targets at $3.68

New Corn – Dec 18 Corn Futures – Support at $3.60, Resistance at $3.94, Place Targets at $3.90

Cash Beans – July 18 Bean Futures – Support at $8.41, Resistance at $9.52, Place Targets at $9.42

New Beans – Nov 18 Bean Futures – Support at $8.64, Resistance at $9.72, Place Targets at $9.62

New Wheat – July 18 Wheat Futures – Support at $4.67, Resistance at $5.03, Place Targets at $4.98

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

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

 

Weekly Grain Update – June 15, 2018

6/15/18

The Massive Selloff Continues.  USDA Confirms Large Old Crop Stocks, But Smaller New Crop Stocks On The Horizon.

The USDA released its June crop report on Tuesday and confirmed large old crop stocks, but significantly less new crop stocks.  In the corn market, the USDA increased old crop corn exports by 75 M bu up to 2.3 B bu for old crop.  We have seen a consistent amount corn being exported out of the Gulf each week, and these numbers have remained higher than normal for quite some time.  When the dust settled, old crop corn ending stocks were reduced by 80 M bu down to 2.102 B bu.  On new crop corn, the USDA reduced feed usage by 25 M bu down to 5.35 B bu.  The end result is a corn carryout for next year at 1.577 B bu.  As you can see, the corn carryout is substantially less next year than the current year.  The market is concerned about this sharp reduction in carryout for next year.  However, the crop is off to a wonderful start, the weather is non threatening at the moment, and there is a real probability that the old crop carryover could grow in size if the weather holds.

On beans, the crush margins has been very good as of late, mainly supported by the decent price of bean meal.  The USDA increased bean crush on old crop by 25 M bu up to 2.015 B bu.  When the dust settled, old crop bean ending stocks dropped 25 M bu down to 505 M bu.  In new crop beans, the USDA is using 89 M acres and a yield of 48.5 bpa.  They pegged next year’s bean ending stocks at 385 M bu, significantly tighter than old crop.  Just like corn, the old crop supplies remain plentiful while the new crop supplies are considerably less.

In the wheat market, the USDA made a small adjustment to old crop exports, and cut them by 10 M bu down to 900 M bu.  This pushed old crop ending stocks up to 1.08 B bu.  On new crop, they increased exports by 25 M bu to 950 M bu and this took ending stocks down to 946 M bu.  Both crop years have ending stocks close to 1 B bu and this leaves the market relatively comfortable.  Although true, there are concerns of lower yields around the world due to drought conditions in the EU, Black Sea, and in Canada.  Even though the US’s supplies remain decent, the rest of the world does not have the same luxury.

The market made a high on the Tuesday after Memorial Day and since then, it has been significantly pounded lower like I have never seen before.  All grains, no matter the significant tightness for next year, have all been pushed lower to levels that no one ever thought possible.  Many in the grain trade are shocked by this massive lower movement of grain futures since Memorial Day, and still cannot believe it has happened.  The fundamentals for next year clearly do not justify such a move, and we still have at least a 60 day period where the weather can easily change the final outcome on yields.  Since Memorial Day, Dec ’18 corn has dropped 46 cents, Nov ’18 beans have dropped a whopping $1.25, and July ’18 wheat has dropped 59 cents.  I have never witnessed anything like this in my 25 years in this business.  The funds had a decent size long position across the board and have been blown out of their entire long position, and now are likely short.  This is a massive amount of grain that has been sold in the last 2 weeks, adding more and more selling pressure to the market.

Additionally, the charts look terrible.  We have systematically blown through at least 3 different support levels on the way down, going through them like nothing was there.  What is concerning, is that we have not stopped going down yet!  As I look at each chart, we have not bounced off of any support level yet.  We now have new crop cash corn at Readfield at $3.42, new crop beans at $8.60, and new wheat at $4.40.  New beans into Readfield traded $9.91 just a few days ago!  This is something for the record books.  For all of you who took our advice and sold new crop bushels earlier in the year, congratulations.  You have saved your farm.  For those of you who were bullish and decided to stick your head in the sand over the last 3 weeks while trying to plant your crop, and now don’t have enough new bushels sold, we have some serious work to do.  Grain futures will bounce.  The questions is when, and from what level.

Why did this sell-off happen?  Let’s go over the list:

  • Although late, the entire corn and bean crop was planted in the Corn Belt.
  • Planting conditions were good, and plant populations are great. This will push yields higher.
  • So far, we have had adequate rain in the majority of the Corn Belt.
  • Heat units are accumulating nicely, and the heat is allowing the crops to catch up.
  • Soybeans were planted much earlier than normal, and final yields should be higher than normal if the weather holds.
  • The funds have sold massive amounts of their spec positions from one of significant length to now being short. All of this selling pushed futures lower each day.
  • The market is incredibly nervous about the potential tariffs between the US and China, Canada, and Mexico. The Trump Administration will make a decision today, June 15th, whether to enact its first tariffs with China on $50 B worth of goods.  The funds and specs do not want to trade grain with this outside influence, so they got out over the last 2 weeks.
  • NAFTA – It looks like an agreement will not be made with Mexico and Canada.
  • North Korea – Will this agreement hold? Are they playing us?
  • The lack of China buying US beans over the last 2 months. They have virtually stopped buying our beans.  If the tariffs get enacted today, the Chinese will do everything not to buy our beans.  This is the real reason beans have fallen by $1.25 in the last 2 weeks.  The bean market is in real trouble if the Chinese don’t buy our beans.

For those of you who now find themselves in a very uncomfortable position, the time is to be truthful with yourself, be honest, and allow us to help you work through this.  We want to help and can work with you to put a plan in place to dig yourself out of this hole.  This is not a time to sit back and be complacent.  Your farm and livelihood could easily be at stake.  Our team can easily sit down and help you put a marketing plan together to help salvage your business.

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 18 Corn Futures – Support at $3.50, Resistance at $3.62, Place Targets at $3.60

New Corn – Dec 18 Corn Futures – Support at $3.79, Resistance at $3.87, Place Targets at $3.85

Cash Beans – July 18 Bean Futures – Support at $9.00, Resistance at $9.26, Place Targets at $9.15

New Beans – Nov 18 Bean Futures – Support at $9.23, Resistance at $9.39, Place Targets at $9.35

New Wheat – July 18 Wheat Futures – Support at $4.86, Resistance at $5.03, Place Targets at $4.97

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

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.  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 1st 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

Condo Space For Sale (aka Long Term Storage Agreement)

The co-op does have 3,000 bu of condo space to sell.  If interested, you can find more information on our web site, or click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Weekly Grain Update – May 30, 2018

 

After A Nice Rally, Bearish Factors Line Up

The grain markets witnessed a tremendous run up in price last week after the productive meeting with the Chinese chief negotiator last week.  Now, the market wants to see some results of this meeting before taking the market any higher.  Trade volume was light towards the end of last week, and this allowed the bulls to easily push the market to new highs without much resistance.  As the market opened Monday night after the long Memorial Day weekend, the bullish mentality began to change.  Tuesday was a bearish day on many levels.  The market opened up strong Monday night and made new highs, only to trade lower and close lower, and some markets closed below the previous day’s lows.  This is the definition of a key reversal, and many grain markets witnessed this on Tuesday.  Technically, this is a bearish signal that might send grain futures lower for a significant amount of time.

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Weekly Grain Update – May 23, 2018

Trade War Avoided.  Bean Planting Much Ahead of Average. Corn Planting Almost Complete.

The big news this week is that a trade war between the US and China has been avoided.  The Chinese head negotiator spent all last week at the White House trying to hammer out a deal between the two countries.  Many of the details are not yet worked out or known at this point.  However, progress has been made, and an outright trade war will not occur.  It appears each side is working through the negotiating process, both giving in and taking, in order to reach a compromise.  The issue with the US is the huge trade imbalance with China.  President Trump is very committed to getting the US back to a more even trade balance with China.  A big trade imbalance is when the US buys more products from China than China buys from the US.  The current trade imbalance is roughly $600 B annually, and this process will try and get this reduced over time.  Obviously, the US needs China to buy grain from us as well as many other manufactured goods.  Frankly, China needs our soybeans in order to satisfy all of their needs.  China is still buying all of their beans from Brazil, and have practically stopped buying any beans from the US in the last 6 weeks.  Each week, we patiently wait for news that China has purchased more beans from us, but this has not happened recently.  This news that a potential trade war has been avoided is a huge deal to the bean market as it signals that China will once again start buying our beans.  Now, we must sit back and patiently wait to see the Chinese finally buy our beans once again.

The market is in full anticipation mode since Monday.  News started to surface on Friday that a trade war with China has been avoided.  As expected, the funds purchased grain futures on this news and pushed all grains higher over the last few sessions.  If China starts to buy US beans again, this is supportive to the grains and the bean market.  So far, the market has ramped up in anticipation of more Chinese purchases, but we have not yet seen any real activity.  I get the sense that we have now pushed grain futures as high as we can go until we see the actual Chinese buying occur.  At the end of the day, this buying is what must occur, not rumors that it will occur.  Time will tell.  Stay tuned.

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Weekly Grain Update – May 17, 2018

5/17/18

Corn & Bean Planting Progress Increases Rapidly.  China Negotiations Continue.

The USDA came out with it’s monthly crop report last Thursday and gave the industry its first look of the ‘18/19 grain supply and demand picture.  As we will see, there is very little room for error in the corn market and it offered a tighter bean picture than most traders thought.  Let’s look at the details.

In the corn market, the USDA did not make any changes to this year’s supply and demand table, and left this year’s corn carryout at 2.18 B bu.  The market was a little surprised that the export number was not raised, and the corn used for ethanol was not raised, to reduce the carryout this year.  We continue to have the cheapest corn in the world, and exports remain high.  However, these numbers indicate that we still have a huge amount of old corn in the country, and we will not run out anytime soon.

Next year’s corn crop is a different story.  The USDA pegged the ‘18/19 corn carryout at only 1.68 B bu, which is a huge drop from one year to the next.  They used 88.0 M acres with an average yield of 174 bpa.  Even though the big reduction in carryout stocks from this year to next, the market was expecting a lower carryout number from the USDA for next year.  We expect exports and ethanol to continue to be strong users of corn next year, but the real key is to get all of the corn acres planted in the next 2 weeks.  Most of the Corn Belt has their corn crop mostly planted and is in good shape.  However, we continue to have problems in northern IA, southern MN, SD, and WI.  These acres continue to struggle with wet conditions and are having a difficult time getting their corn planted.  However, this week’s weather will be a huge factor in how much corn will get planted.  Locally, they have pushed the rain off until Monday, which is huge.  As I speak, almost everyone locally is planting corn on their drier fields.  If the rain holds off until Monday, a massive amount of corn will be planted locally by Monday.  With the very warm soils, this corn should germinate very quickly and explode out of the ground with very good populations which should create better yields.

So, there is very little wiggle room for the corn market next year.  Ultimately, mother nature will decide how much corn will get planted in the areas listed above.  We all know the farmer can plant more corn acres in one day than any time in recent history, so even if the conditions are not perfect, many will figure out a way to get the corn crop planted.  What the market does not want to see happen is a bunch of corn acres in the north not get planted to corn but to beans instead.  This will cause an already tight corn scenario for next year to get even tighter, and a soft bean scenario to get even softer.  All of this will be determined in the next 2 weeks.

That being said, you can sense that the market is getting more comfortable with the corn market each day that it does not rain.  The USDA pegged the corn planting progress Monday night at 62% planted with the 5 year average at 63%.  After a slow start, we are now caught up.  Additionally, we are over 50% and on the downhill slide.  As I said before, once we pass the 50% mark on corn planting, the market starts to get more and more comfortable and starts to take the risk premium out of the corn market for planting problems.  You can see this happening this week in the corn market.  The forecast is now clear for the majority of the Corn Belt until this weekend, and the market is getting less and less worried each day that we will have a problem.  The risk premium is being taken out of the market, and down we come.  With Dec ’18 corn futures now at $4.20, I cannot see a scenario developing that would justify Dec corn over $4.50.  The corn crop will pollinate around July 15th on average, so a hot period during this time will cause a rally.  If we start to have dry conditions in the Midwest during July, this will support futures as well.  However, I don’t see a scenario where we can justify Dec corn over $4.50.  Frankly, a simple and easy way for you to protect your farm and take advantage of a summer rally is to sell 15% of your corn crop at every nickel increment of Dec ’18 futures, starting at $4.20 all the way to $4.50.  This is simple, easy, and will protect your farm and allow you to lock in premiums as the market rallies on any weather issue this summer.

The bean market is a little different.  The USDA increased crush on old crop by 20 M bu and this was the only change to the old crop bean supply and demand table.  This year’s bean carryout dropped by this 20 M bu down to 530 M bu.  This is still a huge amount of old crop beans.  The USDA did not change their old crop bean export number and left it at 2.065 B bu.  The big risk for the bean complex is what the future holds for our trading relationship with China.  Will the 25% tariffs be enacted?  Will the US and China be able to get a new deal hammered out?  Will the Chinese buy any more old beans?  Will the boats already on their way to China with beans be able to be unloaded in China or will they be diverted away to other countries?  Will China buy a huge amount of October beans from the US like they normally have been?  If not, will this create a huge inability for the US to ship beans out of the Gulf while we are harvesting beans this fall?  And the questions go on and on and on….  So many questions, and very few answers.  The fact is that China’s delegation is in Washington this week through Saturday to pound out a new deal with the US.  However, very little news is coming out of the meetings.  Each day that no deal is announced, the market is getting very nervous that no deal will be made.  If no deal is made, the bean market has a huge problem on its hands.  The above export projection won’t mean anything.  Next year’s export numbers won’t be right.  The fact of the matter is that if we cannot ship beans to China this fall, our bean market is terribly overpriced.

The USDA pegged the ‘18/19 carryout at only 415 M bu and the market dismissed this projection almost immediately.  The USDA is using only 89 M acres with a yield of only 48.5 bpa.  The USDA pegged the bean planting progress at 35% on Monday night, and the 5 year average is only 26%.  This means that the US farmer is planting beans much earlier than normal this year at a much faster rate than in the past.  All of this should correspond to bigger yields this fall, and pushes forward the pod filling stage from August to LH July.  Thus, we very likely could have corn pollination and bean pod filling at the same time this year during LH July.  Make no mistake, the weather during LH July this year will be critical as both corn and beans will be affected.  So all of this proactivity in bean planting will cause more bean acres to get planted, especially if there are some northern acres that cannot plant corn and plant beans instead.  This means that instead of 89 M acres of beans, the total could be closer to 91 M acres.  The market also disagrees with the yield of 48.5 bpa.  Most traders feel that this should be closer to 50 bpa with the early bean planting.

So, if you plant the bean crop earlier, you gain more bean acres from the north that cannot plant corn, you gain yield due to the early bean planting, and now you have the potential for exports on both old and new crop to crash if we cannot get a deal pounded out with China, what do you think will happen to the carryout numbers that the USDA put out?  Will they stay at 530 M bu and 415 M bu?  I think not.  The path of least resistance is for these numbers to grow, and possibly quite significantly.  And if this happens, this puts a huge amount of lower pressure on bean futures.  We have already started to see this happen.  Nov ’18 bean futures made a high of $10.60 earlier in the year and are now trading at $10.15 or 45 cent lower.  The path of least resistance is lower in the bean market and possibly significantly lower.

A possible silver lining is an increase in crush which can help offset these increases in production or losses from exports.  The current bean crush margin is just huge at over $2.00 per bushel.  If these crush margins are not an absolute record, they are very close, and they have been stout for many weeks led by the strength in bean meal.  When the processor or makes big money, this will cause the basis to firm on old beans, especially since the farmer is planting and not delivering beans to him.  The beans used in crush will continue to grow.  However, the biggest factor in determining the price of beans is if we get a deal pounded out with China.  Frankly, the bean complex will patiently sit and wait until we know what will happen.  But make no mistake, the decision will impact bean prices either one way or the other.  Talk about gambling.  This is a high stakes poker tournament with the banker sitting right beside you watching your every move.  Sometimes taking your money off the table and selling beans now is the best option for your farm, so you can sleep at night, and a lot less risky.

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.  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 18 Corn Futures – Support at $3.94, Resistance at $4.08, Place Targets at $4.05

New Corn – Dec 18 Corn Futures – Support at $4.12, Resistance at $4.23, Place Targets at $4.20

Cash Beans – July 18 Bean Futures – Support at $9.94, Resistance at $10.27, Place Targets at $10.17

New Beans – Nov 18 Bean Futures – Support at $9.97, Resistance at $10.25, Place Targets at $10.16

New Wheat – July 18 Wheat Futures – Support at $4.86, Resistance at $5.10, Place Targets at $5.05

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 24th.  These contracts will allow you to sell new beans today with a 22 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 $10.50 if on Oct 24th, 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 22 cent premium paid to you on top of the current new crop bean price, and if on Oct 24th, 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 $10.50 level.  Taking off the basis of 69 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 10.50 – 69 = $9.81  The worst case is that you would have another set of new beans sold at $9.81 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $9.44 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

Condo Corner

The co-op did trade 5,000 bu of Condo space this week.  I won’t disclose the patrons or the prices, but we were able to put two buyers and a seller together and completed the transaction.  This was done by information placed on our web site.  Do you own Condo space and wish to sell it?  Are you interested in buying Condo space?  If so, this is the right place.  Condo Storage is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Weekly Grain Update – May 9, 2018

5/9/18

USDA Report On Thursday.  US Corn Planting Makes Good Progress.

The USDA will be out with its monthly crop report on Thursday morning at 11 am.  This report will include the first estimate for the 18/19 crop that is being planted now.  The market expects next year’s corn ending stocks to shrink from the current 2.18 B Bu down to 1.75 B Bu or so for next year.  This is the reason why the corn market is being so sensitive to the late corn planting this year.  As I have said many times, once corn carryout drops much below 2.0 B Bu, the corn market gets uncomfortable and when this happens, the market puts additional risk premium in the market to encourage more production from the farmer.

On beans, the current carryout is 550 M bu and the market is expecting roughly the same number for next year’s carryout.  Again, any bean number over 400 M bu or so puts the market in comfort mode, so we have more than enough beans this year and next year.  Bean planting is off to a really good start and is not lagging like corn.  So the likelihood that we will have a bean problem seems to be diminishing by the day.  This is a big reason why we witnessed a big sell off on Monday.  After weeks of adding length to their already long futures position, the funds decided to reduce their length, especially after a huge weekend of corn and bean planting.

We all need to be anticipating a “curve ball” from the USDA on Thursday to shake up the markets and for you to take advantage of it.  On corn, if the USDA pegs next year’s carryout below 1.7 B bu, this will be extremely supportive to corn futures.  All of you need to in position to take advantage of this situation if this occurs with target orders working to sell cash or new crop bushels for this fall if the market pops higher on Thursday.  Personally, I would have working targets in the system to sell both cash and new crop corn at 5 to 10 cents higher, entered prior to 10:30 Thursday morning, and let them work all day Thursday.  Again, it is simply amazing how much these electronic markets can gyrate in a few seconds time.  The opportunity to sell a nice pop could be here for 3 seconds right after 11 am when the report is released, and then gone.  The only way you could have taken advantage of this opportunity is to have a resting target order in the system working PRIOR to the report.

On beans, unfortunately, the surprise could be bearish, and not supportive to prices.  The surprise could be a much bigger carryout to next year’s bean crop than this year.  If next year’s number grows considerably larger than 500 M bu up to 6 or 700 M bu, this will weigh on cash, this year’s new crop levels as well as new crop ’19 levels as well.  On thing about the bean market, when it moves, it moves in a big way, usually 2-3 times what corn does.  It will not be out of the question to see a 30 cent move on beans on Thursday.  I just hope it is up and not down.  Again, targets work well in this situation, and encourage all of you to use them and put many out there for the slim chance beans could explode higher.  Let them work for you and make money for you.  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.

We have made great progress in planting corn as of late.  The USDA pegged the average US corn planting at 39% Monday evening vs 44% on average.  IL planted 42% of their corn crop last week and now have 74% of their corn in the ground.  IA was 40% complete vs 48% on average.  The market is concerned about the lack of corn planting in the northwest portions of the Corn Belt (MN, SD, ND).  MN is only 9% complete vs 44% on average.  If this situation persists, it should be supportive for corn and bearish for beans as these acres will be switched to beans and make the corn complex tighter and continue to make the bean complex more flush with beans.  This being said, the market believes that a great amount of corn acres were planted on Sunday and Monday at are not included in this total.  With the huge size of modern planters and planting speeds, it is just incredible how many acres of corn can be planted in a single day.  Going forward, getting an accurate estimate each Monday is a challenge for the USDA as the volumes get larger and larger, and planting windows get smaller and smaller.  Thus, the market feels these numbers are understated, and the average corn planting volumes will be right at average next week as we hit the May 15th date on the calendar, when it should be wrapping up.

On beans, the USDA pegged the average at 15% vs 13% on average.  IL was 29% done vs 12% on average.  Thus, bean planting is not behind and is actually ahead of normal.  There is a push this year to get more beans planted earlier than in the past to improve yields.  More and more farmers are planting beans and corn at the same time.  If there is a yield advantage, the farmer will do anything to get it this year as many are struggling financially to cover all of their costs.  Getting the bean crop planted early will also allow them to hit a premium bean market in their area.  Many times, the bean processor will put a big premium on early delivery beans into the plant to encourage the farmer to start cutting beans.  Early beans will be able to be sold for more money, and the yield boost will also add a layer of profitability as well.

Locally, we are struggling to get our crop planted on time.  The wet and cool conditions have pushed everything back 2 weeks.  Areas to the south towards Oshkosh have not turned a wheel yet.  If we get no rain, these areas will go by Friday.  Areas to the north of New London to Clintonville are starting to go.  The sandy areas to the west are going as well.  We just need the rain to hold off for 2 weeks to allow us to get the corn planted.

The other big news event continues to be the potential trade disruption with beans sold to China.  Last week, the US sent a team to China to help pound out a new deal.  Both parties agreed to keep talking, but nothing concrete was established.  Next week, the Chinese delegation will be visiting the US to continue talks.  Approximately 6 weeks ago, China placed a 25% tariff on beans purchased from the US making the internal Chinese bean buyer penalized for using US beans.  Since then, the amount of beans sold to China has virtually stopped in their tracks.  Brazil is now supplying nearly all of the beans to China even though they are paying a heathy premium for those Brazilian beans.  The Chinese buyer will not buy any more US beans until a deal gets worked out with the US.  In the process of negotiation, the US has demanded that US ag exports not be penalized.  However, no agreement is finalized yet, and it remains to be seen how all of this will work out.

Make no mistake.  The market is very concerned about this issue.  China has been a huge buyer of US beans and if they stop buying our beans, this will have wide and lasting results on our bean market.  China also buys many new crop beans during October from us.  If this stops, this will have a huge impact on our harvest operations and market values during this fall for grain elevators and shippers.  Unfortunately, there are many questions, and not many answers at this point.  From your point of view, your biggest concern should be if an agreement is not made with China.  All of a sudden, beans could start stacking up in this country like we have never seen before.  We already have a huge bean carryout, and bean planting is now ahead of schedule.  If a deal cannot be pounded out, the US will be floating on beans, and harvest values will plummet.  Again, the path of least resistance on beans could very likely be much lower in value.  Is your farm correctly positioned for this potential lower move?  Please click here to see where our new crop prices are at.  If you would like to sit down with one of our grain originators to set up a marketing plan, please click here.  We would be glad to sit down with you and set up a plan.

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 18 Corn Futures – Support at $3.99, Resistance at $4.08, Place Targets at $4.05

New Corn – Dec 18 Corn Futures – Support at $4.15, Resistance at $4.22, Place Targets at $4.20

Cash Beans – July 18 Bean Futures – Support at $10.10, Resistance at $10.34, Place Targets at $10.30

New Beans – Nov 18 Bean Futures – Support at $10.16, Resistance at $10.32, Place Targets at $10.28

New Wheat – July 18 Wheat Futures – Support at $5.06, Resistance at $5.38, Place Targets at $5.28

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

Condo Corner

Do you own Condo space and wish to sell it?  Are you interested in buying Condo space?  If so, this is the right place.  Condo Storage is also known as our Long Term Storage Agreement.  We have listed this on our web site.  If you are interested, please click here.  Please call the number listed and talk to Todd.  He will inform you of all the details and who is selling their Condo Space.  In the future, this site on our web page will be updated with buyers and sellers of Condo space for our co-op.  If you own Condo space and would like to sell, or if you would like to buy Condo space, please let us know and we can post your information for you.  We want to make this a useful site to trade Condo Space.

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 2018 when new crop storage rates will go into effect.  The new Delayed Price rate is now 60 days FREE, and then 3 cents flat per month thereafter.

We have also updated our web site with the grain storage options that we offer at the Co-op.  Please click here to see what storage options exist for our patrons, and to see what option is the best fit for you.  Many of you have interest in using Delayed Price as an economical way to store your grain.  However, many of our patrons have had questions regarding Delayed Price and how it is different compared to Open Storage.  We have created an information sheet that compares Delayed Price to Open Storage, and lists every advantage and disadvantage of the program.  I encourage all patrons to read this and it is very informative and will help you to understand our program.  Please click here to see this comparison of Delayed Price to Open Storage.

Still Own Old CORN?  Tired Of Paying Storage?  Check Out Our Cash Plus Contracts

Do you still own old corn in the bin or on Delayed Price at the elevator?  Do you need the money now and tired of paying storage?  Please consider our Cash Plus contracts.  These contracts will allow you to sell corn today with a 13 cent premium added to the cash price in exchange for an offer to sell new crop corn futures around $4.40 if on Nov 14th, the December ’18 corn 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 13 cent premium paid to you NOW on top of the cash price, you stop the storage charges, if hauling from the bin you get to haul them now, you create cash flow now, and if on Nov 14th, depending on what December corn futures trade, 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 a new crop offer where December corn futures were locked in at the $4.40 level.  Taking off the basis of 40 cents under the December futures for delivery into Readfield, you would have a new crop corn contract at 4.40 – 40 = $4.00  The worst case is that you would have new corn sold at $4.00 for Oct / Nov ’18 delivery into Readfield or Center Valley.  This is a great price considering our posted new crop price is at $3.78 or so today.  Please check this out.  We have been writing many of these contracts as of late, and they work really well.

As always, if I can help you with anything, please call me at the grain office in Readfield at 920-667-4955, ext 2 or send me an email at marcus.cordonnier@chsinc.com.

Marcus Cordonnier

Weekly Grain Update – May 2, 2018

5/2/18

Corn vs Beans, Planting Decisions, and Weather

The market is still concerned about the delayed planting progress of the US corn crop.  On average, we are 10 days behind from a normal year.  Although true, we have made tremendous progress planting corn over the weekend and the first part of this week.  All efforts were made to push as much corn into the ground prior to the rain system that moved into the Corn Belt mid-week.  The USDA pegged Illinois with 32% of its corn planted and Iowa with 17% of its corn planted.  Make no mistake, the market will have its eyes squarely focused on these two states and will closely monitor their corn planting progress as the bulk of the US corn is produced there.  Many feel that these planting numbers could be on the low side as many acres were planted on Sunday and Monday that were not included in the total.

Why is the market so concerned about corn planting?  It’s because our margin for error, our cushion, is now gone.  Let me explain.  The USDA pegged the corn acres at roughly 88 M and the bean acres at 89 M.  Even if we plant 88.5 M corn acres, and if we have no production problems and have an average yield of 176 bpa, with our current demand structure, it is very likely that corn carryout next year will fall from 2.1 B bu this year to 1.8 B bu or so next year.  The market gets in comfort mode anytime corn carryout starts with a 2, or close to a 2.  Anytime corn carryout falls much below 2 B bu, the market gets uncomfortable, and when the market gets uncomfortable, it will put a big carrot out in front of you to make sure you do everything possible to get your corn planted.  It puts more risk premium in the market to encourage you to spend the extra money, extra time, the extra whatever, to make sure you get it done.  This explains why we are seeing corn react positively in the last 2 weeks.  The market knows producers make planting decision based on the current market and it is making the corn market as positive as possible right now.

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