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.

The corn market made a harvest low on September 18th, and has rallied 25 cents since then.  The corn basis made a harvest low during the first week of September, and has steadily improved since then.  The farmer has done a good job of keeping corn off the market, and the corn basis has stayed firm all harvest so far.  Corn demand has been solid so far.  However, in the last week, we have seen some corn boat cancellations, and this is starting to weigh on the market.  Dec ’18 corn futures have made a high on Oct 15th at 378 ½ and has is currently trading at $3.67  Up to this point, we have not seen any harvest pressure on basis or futures as of yet, but I sense that this is starting to change.  As more and more of the northern Corn Belt finishes beans and turns to corn, more and more corn will be brought to market as more beans are being stored on farm this year.  This will start to weigh on futures.  Ultimately, I believe $3.50 Dec ’18 corn will hold, but I would not be surprised to see futures trade lower through the $3.60 level.  I do not think we will see an abnormally soft corn basis develop.  The ability of the farmer to keep corn off the market will keep the basis in check, and earlier this week, we saw the Decatur, IL corn market improve from -20Z to +0Z, and the Chicago Argo market went from -14Z to +2Z for deliveries during October.  As corn harvest moves north, this basis strength should move north as well as harvest winds down.

The situation in beans is similar to corn.  November ’18 bean futures made a low on September 18th at $8.12 and then rallied to a high of $8.92 on Oct 15th.  The slow start to harvest due to wet weather allowed futures to bounce higher to mid-October.  Once more and more beans were harvested, Nov futures were continually pressured lower, and today they are trading at $8.50  Looking back through history, we have seen bean futures rally during first half of October several times in the past before resuming the previous down trend.  Obviously, the huge deal this year is the lack of export demand from China.  Current boats that were sold to China several months ago are being cancelled.  China is not buying US beans due to the 25% tariffs in place.  Instead, China is buying nearly every bean that Brazil has available.  As Brazil and Argentina plant new crop beans today, their planting progress is on record pace, nearly at 40% planted today.  This means that their bigger volumes of earlier beans could be ready for China as early as February.  This means that the window that China may be forced to by US beans is closing rapidly.  This inability of China to buy US beans, will likely keep bean ending stocks exceedingly high in the US, most likely north of 1 B bu in the coming months.  So we have beans stacking up in this country at the same time South America is planting record amounts of beans due to much increased Chinese demand and due to their currency devaluation, a much higher bean cash price in their local currency.  The end result is a much higher world ending bean stock number which will continually work to depress soybean futures levels and continue to keep soybean basis levels much wider than it has been in past years.  We will likely not see a huge improvement in local soybean basis levels, and I would not be surprised to see nearby bean futures to once again test the Sept 18th low of $8.12  However, all bets are off if the US can somehow remove the barriers to trade with China once again.  The US and China will meet after the midterm elections at the G20 summit.  We will see if these meetings will be fruitful.  Today, both sides seem to be deeply rooted in their own positions.  To see where cash prices are today, please click here.

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 $3.60, Resistance at $3.78, Place Targets at $3.73

New Corn – Dec 19 Corn Futures – Support at $3.95, Resistance at $4.08, Place Targets at $4.03

Cash Beans – Nov 18 Bean Futures – Support at $8.37, Resistance at $8.75, Place Targets at $8.65

New Beans – Nov 19 Bean Futures – Support at $9.04, Resistance at $9.52, Place Targets at $9.42

New Wheat – July 19 Wheat Futures – Support at $5.27, Resistance at $5.62, Place Targets at $5.47

To see where futures levels are trading at Chicago, please click here.

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

We are currently bidding roughly $7.40for cash 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 20 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 $9.65 level if on October 23rd, 2019 the price of November ’19 soybean futures close at or above the $9.65 level.  This is a win-win for you.  You will be paid a 20 cent premium now on your cash beans.  If on October 23rd 2019, November ’19 bean futures close at or above $9.65, you will have the same quantity of beans sold at $9.65 futures, less the basis of 110 cents under November (this could vary slightly), equals a new crop bean contract at $8.55 for Oct / Nov ’19 delivery into Readfield or Center Valley.  This is a very good price considering our posted new crop bean bid is $8.01 and represents a 54 cent premium over our posted new crop bid.  If on Oct 23rd 2019, November ’19 bean futures close lower than $9.65, then you keep your 20 cent cash premium, and have no other obligation.  This contract has been very popular as of late, and if you still own old beans, you should seriously consider it.  To talk more about this contract, please give one of our originators a call by clicking here.

CHS ProAdvantage Signups Begin

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 are very consistent.  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 one of our grain originators by clicking here Enrollment ends December 19th, 2018.

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

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