Grain Update – September 28, 2018

9/27/18

The USDA Will Release Its Sept 1st Grain Stocks Report At 11 AM Friday.  This Will Give The Market Direction.

The USDA will release its Sept 1st quarterly grain stocks report at 11 am on Friday.  This report will give us the details of the last quarter of the ‘17/18 crop year, and will give us the starting point for the ‘18/19 crop year.  We will be able to see exactly how many bushels of corn and beans were used and exported during the last quarter, and the resulting ending stocks of the last crop year.  The ending stocks from last year will become the beginning stocks for this next ‘18/19 crop year.  The average trade estimate for Sept 1st grain stocks are as follows:  corn – 2.01 B bu, beans – 401 M bu, and wheat – 2.343 B bu.  Any major deviation from these numbers on Friday will cause the market to react, possibly significantly, if any major differences occur.  Our demand for corn has been rather large as of late, but just the opposite with beans without participation from China, our largest bean buyer.  Thus, I would not be surprised if corn carryout was trimmed a bit, but our bean carryout will likely approach 1 B bu for next year.

We have seen a nice rebound in futures prices over the last 2 weeks.  Dec ’18 corn futures have rebounded 23 cents higher in the last 10 days, and Nov ’18 bean futures have traded 46 cents higher during the same period.  The funds had accumulated a modest short position in corn and beans, and this rally was caused by them covering (buying) a good portion of this short position.  A general lack of farmer selling has allowed the futures to bounce back and the basis as traded at the Gulf has also firmed 6-8 cents on both corn and beans in the last few days.  The rain system that moved through most of the Corn Belt last weekend slowed harvest activity down enough to allow futures and basis to firm as a result.  Once harvest activity ramps up again, expect downward pressure to resume again on futures and basis.

Friday’s report at 11 am will also give the market direction.  For now, both corn and beans have rallied enough in the last 10 days that both are at upper resistance points on the charts.  If you have corn or beans that you must sell for harvest, I would seriously consider rewarding the market on this rally.  There is a very good chance that when harvest activity resumes, and more and more farmers everywhere begin to harvest grain, the futures and basis will soften, possibly significantly, through much of October.  It will likely take until mid November until the basis finally firms locally, and we see noticeable improvement, especially in beans.  Depending on corn demand, the corn basis this year could firm more easily than beans, just because we have so many beans in this country as compared to a normal year.  But despite this, corn carryout has been trimmed to just around 1.8 B bu or so, and corn demand remains stout.

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.

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 – Dec 18 Corn Futures – Support at $3.48, Resistance at $3.64, Place Targets at $3.60

New ‘19 Corn – Dec 19 Corn Futures – Support at $3.83, Resistance at $3.98, Place Targets at $3.93

Cash Beans – Nov 18 Bean Futures – Support at $8.12, Resistance at $8.58, Place Targets at $8.50

New ’19 Beans – Nov 19 Bean Futures – Support at $8.79, Resistance at $9.24, Place Targets at $9.14

New Wheat – July 19 Wheat Futures – Support at $5.36, Resistance at $5.63, Place Targets at $5.53

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

Grain Update – September 14, 2018

The USDA Surprises Market With Larger Than Expected Corn Yields.

The USDA released its September crop report on Wednesday and confirmed big corn and bean yields.  The surprise was their larger than normal average corn yield of 181.3 bpa which is record breaking in many states.  The market did not expect this big of an increase over the 178.4 bpa yield which was reported in the August report.  This 240 M bu increase in production now puts total corn production at a whopping 14.827 M bu.  With this increase, the USDA also increased feed demand by 50 M bu and exports by 50 M bu as well.  When the dust settled, corn carryout for 18/19 was increased by 90 M bu from 1.684 M bu last month to 1.774 M bu this month.  Record ear counts and ear weights led to the 240 M bu production increase on Wednesday.  At the market close, corn traded down 14 to 15 cents.

The market simply did not expect this increase in corn production and it was a shocker to many traders.  The relatively tight 18/19 corn carryout around 1.5 M bu was the single remaining supportive item left that any bull could hang his hat on as there is nothing bullish about anything in the bean market.  With Wednesday’s increase in corn production, this hope that the corn market’s strength might help offset the bean weakness all but instantly vanished.  A 1.5 B bu corn carryout is bullish but a 1.8 B bu corn carryout is not.  Once the carryout approaches 2.0 B bu, the market gets in comfort mode and a comfortable market does not rally.  This change will allow the basis, futures, and the spreads to trade weaker in the coming days, and will likely push the trading range of Dec ’18 corn lower in coming days.  Previously, I believed the $3.50 area would hold on Dec ’18 corn futures at Chicago.  After this increase, the $3.50 level will likely not hold and new lows will be made, most likely down to the $3.25 – $3.30 level.

On beans, the situation was not as bearish as the market believed it would be.  We have been talking about huge yields and massive bean carryouts for some time.  The USDA did raise the bean yield and pegged it at 52.8 bpa up 1.2 bpa from August.  This is the 5th year in a row where the USDA raised the bean yield from Aug to Sep.  Rains during last half of August have really helped to fill the bean pods and there are many areas of the Corn Belt where bean yield potential is just huge.  The crop is lush and improved genetics are proving beneficial.  Wednesday’s increase in bean yield raised total bean production by 107 M bu up to 4.693 B bu.  With these numbers, there are 8 states which made new records on yield.  When the dust settled, bean carryout was increased by 60 M bu up to 845 M bu.

Big crops generally get bigger, and I would not be surprised if in future months that the national average bean yield will end up over 53 bpa.  If this happens, the bean carryout will approach a staggering 1 B bu level that this country has never seen before.  Obviously, our inability to get the trade dispute reconciled with China on buying our beans will only allow the beans to stack up faster and faster in the interior.  If the bean yield continues to grow and we are not able to put a deal together with China by this harvest’s end, which seems less likely each day that we move forward, then the prospects of any rally in Nov ’18 bean futures goes down the drain.  Nov ’18 bean futures at Chicago made a new contract low just before the report and eventually traded down to $8.21 at Chicago.  With the above increases in yield, no progress on a China deal, I see no way that this $8.21 level will hold.  I believe that new lows in Nov bean futures will be made, and the market will likely test the $7.75 level during gut slot.  This will be especially true if we get any bean carryout number halfway close to 1.0 B bu for this year.  If this happens, Nov ’18 bean futures will be pressed lower big time.

This massive bean production is causing futures, basis, and spreads to be weak and look to get even weaker.  The basis at the Gulf is now trading negative numbers which is some of the weakest basis levels we have seen in over 30 years.  The normal bean basis at the gulf is usually +75 cents over the November bean futures as traded in Chicago.  Today, it is trading at 5 cents UNDER Nov futures, which is 80 cents less than normal.  This explains why our local basis is so weak today.  This is what happens when you take our biggest bean buyer (China) out of the picture.  The market’s role is to discount beans cheap enough to find new demand.  We now have a bean market that is cheap enough in the US and has pushed the bean market high enough in Brazil, as the Chinese are sucking them dry of all their beans, that we have a market difference in price that totally covers the 25% tariff.

Now, the real question is whether the cash strapped Chinese bean crusher will actually buy US beans because they are cheaper even with the 25% tariff price increase in beans.  There will be huge political pressure for the Chinese crusher not to buy US beans no matter if the total price is cheaper or not.  Economics don’t matter here.  You do not buy US beans no matter the cost!  Besides, we have a trade war going on, and what team are you on!  The result is that the ports at the pacific northwest in Oregon and Washington State are desolate with very little beans being loaded out as this is where the Chinese primarily pull US beans out of the country.  Nothing about this bean scenario is good for our farmers or our bean market.  How we handle this new dynamic will be very interesting in the next 8 weeks.  We will likely see things occur that we have never witnessed before.

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.

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 – Dec 18 Corn Futures – Support at $3.48, Resistance at $3.68, Place Targets at $3.63

New ‘19 Corn – Dec 19 Corn Futures – Support at $3.86, Resistance at $3.99, Place Targets at $3.94

Cash Beans – Nov 18 Bean Futures – Support at $8.21, Resistance at $8.51, Place Targets at $8.46

New ’19 Beans – Nov 19 Bean Futures – Support at $8.65, Resistance at $9.05, Place Targets at $9.00

New Wheat – July 19 Wheat Futures – Support at $5.27, Resistance at $5.72, Place Targets at $5.64

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

Grain Update – August 30, 2018

 

8/30/18

The ProFarmer Tour Confirms Big Yields.  The Soybean Market Remains Weak Without A China Trade Deal.

The ProFarmer Crop Tour was held last week throughout the Corn Belt and confirmed big yields in most areas.  The tour started from Ohio and South Dakota last Monday and both sides eventually met up in Northern Iowa on Thursday evening.  Each day the teams reported corn yields and 3’ x 3’ area soybean pod counts in various locations along the route as both sets of teams moved to the center of the Corn Belt.  Corn yields and pod counts were generally better than previously expected and confirmed the big yields the USDA recently used on its last August crop report.  When the dust settled last Friday, the ProFarmer Tour pegged the corn yield at 177.3 bpa and beans at 53 bpa.  The USDA pegged the corn yield at 178.4 and the bean yield at 51.6 in their August crop report.  Generally, there is a tendency for ProFarmer to give yield estimates that are several bushels less than the USDA on both corn and beans.  The fact that the tour gave us essentially the same corn yield and gave us a bigger bean yield tells me that the crop is very good in most areas, and the final USDA yields could grow bigger yet, not smaller.  Additionally, the tour basically confirmed the USDA’s August crop report yields and now most of the trade is wondering how much bigger the final yields could grow to vs being reduced in future crop reports.  The fact that the tour gave us a bean yield that is bigger than the USDA tells me that there is a huge bean crop on the horizon.  Generally, this does not happen, and for the tour to out yield the USDA, something very special has occurred.

On top of this, most areas of the Corn Belt received nice rains in the last week that will finish out the crop in nice order.  Locally, some areas have received almost too much rain, but most areas received 3-4” in the last week.  Receiving this much rain during August really does not happen that often.  This rain will fill the bean pods and add kernel size and test weight to corn.  Ultimately, it will add a significant amount of bushels that will be harvested in the next few weeks.  The big corn and bean crop continues to get bigger and bigger.

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Grain Update – August 23, 2018

Written August 16, 2018

The USDA Gives The Industry A Bearish Outlook.  Corn Demand Remains Stout, But No Trade With China Is Causing Beans To Stack Up.

The USDA released its August monthly crop report last Friday, and shocked the industry with its findings.  Starting off with corn, it left last years supply and demand table the same as last month and made no changes.  However, for the ‘18/19 crop year, the USDA raised the corn yield 4.4 bpa up to a whopping 178.4 bpa.  Many times the USDA raises the yield in the August report based on the weather and crop conditions during the summer months.  However, the increase from 174 last month to 178.4 this month was a rather large one month adjustment, and it surprised many in the industry.  This increase in corn yield caused total production to increase by 357 M bu up to 14.587 B bu.  The USDA increased feed usage by 100 M bu up to 5.525 B bu and also increased corn exports by 125 M bu up to 2.35 B bu.  All of these adjustments caused the ending stocks for next year to grow by 132 M bu up to 1.684 B bu.  Obviously, the increase in yield was the over riding change and even though feed and exports improved, they were more than offset by the yield.

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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.

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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.

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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.

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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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