Grain Update – November 29, 2018

11/29/18

Trump and China’s Xi Will Meet This Weekend.  Can A Deal Be Reached?  Harvest Nears Completion.

The big news as of late is that Trump will meet with China’s President Xi over the weekend in Buenos Aires at the G20 Summit.  As you can imagine, the grain industry is very hopeful that a deal can be reached with China at some point, so the 25% soybean tariff can be lifted.  Up to this point, each country has been standing staunchly behind their guns, but I get a sense that China may be in a position to finally negotiate.  The tariffs are hurting their economy and their bean processors are really getting squeezed.  On our side, we are suffering from a lack of their demand for our beans.  Beans are stacking up in a big way all across the Corn Belt, and bean basis levels in all areas are depressed by 25 to 50 cents depending on the area.  Nearby bean futures have rebounded significantly since the beginning of October, but the loss in basis has hurt the American farmer.

Unfortunately, the world is a competitive place, and when one trading relationship does not work, the market usually finds an alternative solution.  If the US and China can’t work out a trading solution rather quickly, other countries will step up and supply China with the beans that they need, permanently destroying our demand base.  We have seen Russia, in recent weeks, take steps to make selling big volumes of soybeans to China much easier and workable.  They would like nothing more than to supply China with beans.  We have also seen the Brazilian farmer be much more aggressive in planting early varieties of soybeans this year.  Instead of harvesting them on Feb 1st, some will be ready to cut a month earlier than normal.  Why? So they can supply China with more beans because they know China is not buying US beans, at least not yet.  The Brazilian bean crop has in fantastic shape.  The beans are nearly all planted and they have had adequate moisture.  A huge bean crop is on the horizon for them, if the weather holds.  This is a double wammy for the US.  Their large bean crop will continue to pressure bean futures, and they are directly taking away our demand base.  Not a good deal folks.  Stay tuned as the bean market is very volatile as of late.  Huge price swings can be caused by a simple tweet.  The results of the meeting will likely dominate the markets Sunday night and early next week.

Harvest is finally starting to wrap up in most areas of the Corn Belt.  The USDA pegged both corn and bean harvest at 94% complete in the nation.  There are some pockets that still have corn and beans let, but this is the exception.  These crops will not sit until we get consistent cold and dry weather to freeze the fields with little snow to slow down harvesting.  We will see on Dec 11th what the USDA pegs the corn and bean yields at.  I would not be surprised if the yield could be slightly reduced on both again.  Beans suffered heavy shatter loss and the tops of the plant broke off due to excessive rains on a mature plant.  Additionally, many areas suffered corn yield loss due to extreme dryness or too much rain in June.  The USDA will peg the final yield in its January report.

Its not too early to start thinking about protecting next years corn production.  Nobody likes the current cash bean price.  As discussed above, the lack of China bean demand has caused the bean prices this year to be relatively weak.  Thus, most US farmers will likely plant more corn next year.  My guess is that we could plant at least 92.5 M corn acres next year, and if the weather cooperates during April, we could see as much as 95 M corn acres planted next year.  What do you think this will do to Dec ’19 corn futures?  Once we pass the 50% mark on corn planting in early May, watch out.  The market will likely suck the risk premium out of the market at press futures lower, and possibly significantly so, into harvest next fall.  Dec ’19 corn futures are currently trading at $3.95 and the chart shows significant resistance around the $4.08 level.  Personally, I would have targets in to sell Dec ’19 corn futures at $4.00 and sell at least 10% of next years production every nickel higher.  I believe it will be very difficult for Dec ’19 corn futures to rally higher than $4.25, assuming normal weather and planting.  Obviously, if the crop does not get planted, or we have a drought, all bets are off.

Corn basis has already started to strengthen in many areas of the Corn Belt.  The delayed harvest has caused the processor to firm up quicker than normal, and now that harvest is complete in many areas, and the bin door is slammed shut, the basis will be forced to do more of the heavy lifting.  Corn basis should work firmer in the coming days and months as the processor and feed demand picks up.

Bean basis is different.  It has been soft all year, and this will likely not change anytime soon.  That being said, very little beans are moving now, so the processor has been firming his bids too stimulate movement.  But will we get back to historical basis levels this year?  Doubtful.  Also, we are looking a having a huge amount of bean ending stocks this year.  When is the last time we have carried over 1.2 B bu of beans?  I don’t think its ever been this large.  This will pressure futures, basis, and spreads all year long.  That being said, if the US and China can work out an agreement of the weekend, this would have a dramatic effect on the bean market.  Futures, basis, and spreads would all instantaneously strengthen, but after all of the market gyrations, we will still be carrying over 1.2 B bu of beans.  No matter how you slice it, this is still a big pile of beans.  To see where the cash grain prices are today, please click here.  To talk to one of our grain originators about a contract, or to schedule an appointment for one of us to visit you at your farm, please click here.

LAST CALL – CHS ProAdvantage Contracts.

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

This contract has been offered for 4 years and the results have been quite solid.  Their bean contract has worked well, and has allowed participants to enjoy contracts that were significantly higher than the current market.  All of this goes directly to your bottom line.  For bushels in your bin, you can enroll in a contract for July 2019 delivery.  For next year’s production, you can enroll in a Fall of 2019 delivery, and we also have Fall of 2020 delivery contracts as well.  The cost is 10 cents per bushel for the July 2019 or Fall 2019 contracts, and 12 cents per bushel for the Fall 2020 contracts.  The Fall 2020 is an especially good deal because the contract allows our traders an additional year to make trading returns on your behalf for only 2 additional cents.  Also, the 2 year contract has worked tremendously well over its history.  There is no minimum bushel quantity required.  Please click here for more information on our CHS ProAdvantage contract.  Every grower in the area should take advantage of this contract on at least a portion of next year’s production.  It is a very good contract that has a long history of success.  If you have other questions, please call me at Readfield.  Enrollment ends December 8th, 2018.

Recommendations For Corn & Bean Meal Consumers (Livestock Producers)

The corn market broke lower over the last week and many took this opportunity to lock in their corn needs for the next several months.  The corn basis has been relatively firm in many areas, and will likely remain so.  If you need to buy corn, especially if we see corn futures continue to drop, sooner is better than later.  The price of bean meal has been sliding lower in recent weeks, and the chart looks to be wedging to the down side.  This tells me that there is a decent chance that bean meal will move lower in the near future.  Jan ’19 bean meal futures have bounced off of the $303 level 4 times in the last few months and is currently trading at $309.  If we can break down through the $303 level, it will likely break hard to the down side.  I would be patient buying bean meal, buying only hand to mouth, until the market gives us further direction.

Cash Corn – March 19 Corn Futures – Support at $3.56, Resistance at $3.75, Place Targets at $3.60

Cash Bean Meal – Jan 19 Meal Futures – Support at $303, Resistance at $312, Place Targets at $305

What Are The Charts Telling Us?  Recommendations For Grain Producers.

Here are the support and resistance levels for cash and new crop grains.  These are all futures levels as traded at Chicago:

Cash Corn – Mar 19 Corn Futures – Support at $3.67, Resistance at $3.75, Place Targets at $3.74

New Corn – Dec 19 Corn Futures – Support at $3.91, Resistance at $4.05, Place Targets at $4.00

Cash Beans – Jan 19 Bean Futures – Support at $8.56, Resistance at $9.00, Place Targets at $8.95

New Beans – Nov 19 Bean Futures – Support at $9.10, Resistance at $9.50, Place Targets at $9.40

New Wheat – July 19 Wheat Futures – Support at $5.17, Resistance at $5.48, Place Targets at $5.42

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

Still Own Old Beans?  The Cash Price Still Not Good Enough?  Cash Plus Is The Answer

We are currently bidding $7.85 for cash beans and $8.24 for Oct / Nov ’19 beans delivered into Readfield.  If this level is still not enough to satisfy you cash flow demands, you should consider our Cash Plus Contract.  This contract will allow you to receive a 29 cent premium over the cash bid, and paid to you today.  In exchange for this premium, you will give us an offer to sell the same quantity of new crop November ’19 bean futures at the $9.70 level if on October 23rd 2019, the price of November soybean futures closes at or above the $9.70 level.  This is a win-win for you.  You will be paid a 29 cent premium now on your cash beans.  If on October 23rd , November bean futures close at or above $9.70, you will have the same quantity of beans sold at $9.70 futures, less the basis of 110 cents under November (this could vary slightly), equals a new crop bean contract at $8.60 for Oct / Nov ’19 delivery into Readfield or Center Valley.  This is a good price considering our posted new crop bean bid is $8.27 and represents a 33 cent premium over our posted new crop bid.  If on Oct 23rd , November bean futures close lower than $9.70, then you keep your 29 cent cash premium, and have no other obligation.  This contract has been popular as of late, and if you still own old beans, you should seriously consider it.

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

Marcus Cordonnier

Grain Update – November 8, 2018

 

11/8/18

USDA To Release Monthly Grain Report On 11/8/18

The USDA will release its monthly grain report on Thursday, November 8, at 11 am CST.  The market is expecting the corn yield to be reduced by 1-2 bushels down to 180 or so.  As harvest has moved north, many of the areas in the northern corn belt were forced to deal with flooding conditions in June.  This has caused more yield variance than normal, and it has also caused vomitoxin levels to rise in some of these flooded areas as well.  We have also seen some lower test weights in corn than previously thought.  Lower test weights lower the bushel per acre yield as well, and also affect corn quality.  We have seen some major hog producers in western Iowa now raise concerns about the lower quality corn with higher vomitoxin levels.  With this new threat, they may now be forced to buy their corn from another region to secure better quality corn so their feed ration quality does not deteriorate.

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Grain Update – October 25, 2018

 

10/25/18

Corn & Bean Harvest Progress Passes The Halfway Point

The USDA reported on Monday that the national bean harvest was 53% complete and corn harvest was 49% complete.  The northern Corn Belt has been in active harvest since mid-last week, and farmers have been making huge progress in the last week.  Locally, the focus has been on beans first, and then the corn.  I would estimate that bean harvest is now 30% complete and corn harvest is likely only 5% complete today.  Farmers will likely continue to harvest beans until Sunday when rain is forecasted, and this rain will continue for several days next week.  Thus, beans that don’t get harvested this week, it may be some time before farmers are able to return.  In the meantime, many will likely change heads on their combines and go after corn until the beans dry out again.  Bean yields continue to be very good and way above average.  Corn yields seem to be more varied as many fields were negatively affected during the dry period in mid-June.  Some corn fields are having problems with lodging with a few varieties having a real problem.  The decent yields and soft soil conditions are making some fields more prone to lodging compared to others.  We have not seen much damage in soybeans as compared to the problems in the Delta areas and southern Corn Belt.  However, another rain event, and this could start to change.  Over all, yields and quality seem really good this year on corn and beans.

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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.

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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.

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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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