Grain Update – May 15, 2019

Kimmes spring corn planting

5/15/19

Planting Delays Are Starting To Get Serious

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

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

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

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

Targets Produce Success and Protection For Your Farm

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

What Are The Charts Telling Us?

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

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

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

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

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

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

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

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

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

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

Marcus Cordonnier

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