Matt Bennett’s Weekly Comments

Good Morning!

I hope your weekend has been a good one so far. Mine has been excellent as the weather has been as good as a person could ask for. While the tropical storm brought some of you a fair amount of rain, it seemed like the general consensus was totals were on the light side. This didn’t bother me a great deal for our operation as we were wanting to finish our re-plant and get everything put away for the final time. We achieved that as my dad and hired man filled in the last ponds of beans…and we tried to get the maturity to be short enough to match up given plant dates were about two months apart. The last few years it seems we’ve had ‘green beans’ as we’ve harvested due to all the re-plant during these wet springs. I know many of you are experiencing the same thing we are in Illinois…but our county and state fairs have officially been canceled. While they’re offering the kids a chance to ‘virtually show’ their projects, when it comes to livestock, I can’t say we’re too thrilled out it. I really appreciate everyone trying to find alternatives…but to say 2020’s shenanigans are getting old would be putting it mildly. While it was nice in the early stages to have no ballgames, meetings or travel on my part, losing our fair was a tough pill to swallow. Speaking of that, I know a few of you have reached out telling me how challenging of a year you’re experiencing…and you’re tired of hearing how the US is in good shape overall. I understand that and hope things improve for those who are in that boat. I appreciate your feedback…so keep me posted if possible. mbennett@agmarket.net

The corn and bean markets didn’t move a great deal overall on the week. While corn was off a bit, beans gained some. With the Chinese continuing to buy plenty of US beans of late, it appears the saber rattling of two weeks ago hasn’t hurt US exports. On the weather front, a hot and dry period is upon many of us, but many forecasters have put rain in ten days out. If that materializes, we likely won’t get a weather rally going…keep an eye on it though. As far as outside markets are concerned, the US Dollar turned around toward the end of the week and posted weekly gains, settling at 97.3, up .4 on the week. The DOW also backed off, showing a huge loss on Thursday. The close on Friday of 25,536 put us at a loss of over 1,500 on the week. July crude oil settled on Friday off 8 cents at $36.26. July lost $3.16 on the week, stopping the run of big gains over the last several weeks.

CORN – The corn market was deader than a doornail this past week. On Friday, July corn settled off a quarter-penny at $3.30. This was 3 cents off the high and a penny and three-quarters off the low. On the week, July corn was off a penny and a quarter. While early in the week it looked like July corn was continuing the rally, we saw a big loss on Tuesday which seemed like a back-breaker. Either way, we’ve certainly showed more life in the last two to three weeks than we’d seen in a while. With the funds holding a massive short position now reported at over 300k contracts, we certainly have a vulnerability to short-covering. However, we need something to get the market stirred up as we currently see funds rather content with the idea corn won’t rally. Most forecasts are quite warm and dry across the corn-belt over the next couple of weeks, but also keep rain in towards the end of the forecast. If that would verify, it would be exactly what we need to grow a big crop. However, if we can’t break out of a hot and dry pattern, there’s no doubt we’d see significant short-covering rather quickly. It’s for that reason I’m going to remain patient for now. This is typically a time when we can see some strength…and we rarely go through a summer without some sort of weather scare.

DEMAND – Demand was mixed this past week. Exports were similar to a week ago but corn usage for ethanol continues to impress. Weekly export sales were 661k tons, which was 20k tons bigger than a week ago. Net sales of 26k tons were posted for next marketing year, so overall sales were essentialy right where they were a week ago. Corn usage for ethanol continues to recover as plants come back online. With right at 85 million bushels of corn usage, we were 7 mb above last week’s corn usage and 32 mb higher than just six weeks ago, according to the Department of Energy’s EIA report. Posted basis didn’t change a whole lot this past week but I gained a little in my area. My local basis narrowed two cents with a bid 15 under the July. In Decatur, basis was unchanged, posting a nickel over the July. On the river in St. Louis, basis was also steady, posting 22 over the July. I continue to hear of a push here and there…don’t be afraid to ask.

CASH CORN – Cash corn values were steady on the week. With basis levels not moving around much and the board dead, the only people who saw better bids were those where buyers were pushing to get the corn. Given quality in many areas isn’t the best and local demand for some has resumed, a person has to realize what their individual situation is. If you have good corn, you’ll certainly be in a good bargaining position…but if it’s in the elevator, you don’t have much leverage if any. We’ve been talking about moving on sales here recently. With my farm at 80% sold, I’m looking to sell another 10% if we rally a dime to $3.40 on July. I’ll keep the last bit for now but likely have an offer in to get it cleaned up and gone. I’m not bearish right now…but if we have good weather this summer, it’s going to be really tough to rally this corn market. Re-ownership is certainly a good way to stay in the game as options are cheap.

2020 CORN – December 2020 corn lost some ground on the week. CZ20 closed on Friday at $3.43, off three-quarters of a penny. On the week, Dec was down 2 ¼ cents. Dec is 45 cents below the spring price. I am also looking for a bit of a rally on new corn. While I’m not necessarily bullish, I can’t sell at these levels without having a decent idea on production. With this huge fund short, there is certainly a decent chance we could see a short-covering rally with any weather threat. If you’ve been following me this year, I’m 30% sold at $4.05 basis the Dec. I’ll add another 10% if we can get to $3.65 as far as my farm is concerned. Remember if we have a big crop, there will likely be a decent incentive to store, so we’ll have a decent shot at making money off of our bins here in 2020. Also…as I’ve said previously, I don’t want to push sales at levels that don’t make sense just to be doing it…if we can add 10 or 20 bu/ac of production into our profitability scenarios, we can sell at lower prices and make money. However, until we know this…it’s pretty risky adding to sales. Again, we have to know what prices work for us, so plug your numbers into the AgMarket app. If you need help setting up your plan for 2020, it’s never too late to get ahold of us.  https://www.agmarket.app/app/

What To Watch For –On 2019 corn, my farm is 80% sold @ $4.30 basis May20.  New ’19 target***must consider local basis. For 2020 CZ, up to 30% sold at $4.05.  Next target for me and my farm is $4.09.

– Strategies I’ve employed or considered.

Straight hedge of Dec ’19 corn at $4.06 then $4.18, $4.39, $4.59, $4.72 & $3.90(80% total)

*Buy July20 $4.40 put:sell July20 $5.40 c & July $3.80 p for .10-took 44 cents profit**

Straight hedge of Dec20 at $4.07, then $4.05, then $4.04 (30%) Offer on another 10% at $3.65

*Buy $3.45 June put & sell $3.90 Dec call for even money to protect cash bushels-rolled to $3.10

*put at a 20 cent profit**  Sold $3.10 for a nickel, loss of three cents – net gain 17 cents

Bought Sep $3.20 call, sold Dec $2.80 put and $4 call for 7 cents total – insurance play

**lifted these positions**

 

BEANS – The bean market cooled off a bit after a great rally the previous week. At the close Friday, July beans up 5 ¼ cents at $8.71 ¼. This close was a penny and three-quarters off the high and 7 ¾ cents off the low. On the week, July beans were up 2 ½ cents. This is three weeks in a row we’ve seen a higher weekly close. I feel good about the rally continuing, especially if the Chinese keep buying US beans. While talk was less-than-ideal between the US and China of late, they’re sure buying our beans. Given Brazil has exported a ton of beans in the last two months, some questions on how much exportable supply they’ll have moving forward has surfaced. Regardless, China can’t survive on Brazilian beans alone and as they continue to rebuild their hog production, those needs will intensify. I’m still of the mindset we could see a few more acres on this June report, but I also see potential tightness for this old-crop, so I’m going to be patient as we see how sales unfold and how this weather behaves. If we could get a weather market going, this bean market could get interesting.

DEMAND – Soybean export sales were huge for both old and new crop. With net sales of 1.003 million metric tons for old crop, sales were over 500k in excess of sales we saw a week ago.  For new crop, 1.212m tons were recorded so overall levels were well over a million tons more than what we saw the previous week. If we see sales like this continue, there will be a need for USDA to increase bean exports which will certainly lower the carry for old-crop. That would certainly be supportive. As far as basis is concerned, not much movement was noted. Local bids for me are 17 under the July, which improved two cents. Decatur’s basis for cash beans was status-quo, staying at 7 over the July. On the river, basis was posted at 32 over the July, which was two cents improved.

CASH BEANS – Cash bean bids were steady to improved on the week. Lately we’ve seen the bean market rally and basis improve at the same time…it’s not generally something we see this time of year, but it certainly indicates demand for beans is rather strong. The Chinese have really stepped up their bean purchases, which is certainly a pleasant surprise and long overdue. With the South American crop well-known to be large, big global demand continues to keep supplies tight. This should keep bids for old beans strong, especially in parts of the US where beans aren’t in plentiful supply. It’s amazing just one year ago we assumed bean carry for this marketing year could be over a billion bushels. This week the USDA said we’d be lucky to have 400 million bushels going into harvest. For my farm, I’m going to move on another 15% on a rally to $9 July. I think we have a good shot of seeing that, especially if we get the heat to stick around a few days longer. Regardless we have to think about cleaning up some of these old-crop supplies before we get too close to harvest. Any time we hold too far into the summer, we take the risk we’ll get squeezed out of those bushels as new supplies become available. I’m ok with staying patient for now, but I’d also recommend having your offers in place at reasonable levels.

2020 BEANS – November 2020 beans had a quiet week. On Friday, Nov ‘20 beans settled at $8.79 ¾, up 3 cents. Nov20 beans lost a half-penny on the week. Nov beans are now 37 cents under the spring insurance price. While I’m not sure we get Nov back to the $9.17 price we averaged in February, I have to think we see some opportunities at $9 beans. We don’t have the big fund short we see for corn…in fact, the funds are long beans. However, given the supply and demand situation for beans, any weather situation would likely see the funds step in and buy with both hands. IF we don’t see much change for planted acreage at the end of this month along with continued strong export demand, the balance sheet could continue to tighten. As always, know what your needs are for this fall. If you need to get beans sold, have your offers in now…this market could be quite volatile if we get into a weather situation. For my farm, I’m going to sell another 5% if we get to $9 basis the Nov. I don’t like round figures to make my sales at, but am placing my offer in that vicinity. If filled, this would get me to 30% sold. Now…if weather is excellent over the next few weeks, I may sell several more beans at a similar price…if given the opportunity. With what these beans can yield nowadays, there’s no doubt we can make money at a lower price than we see today if blessed with bumper yields. Call us if you need help with your plan.

As always, be sure to figure break-evens when deciding whether you want to make sales.  For figuring your break-evens, I recommend using the AgMarket.Net Profitability App https://www.agmarket.app/app/ to help you get a handle on your budgets and to set your marketing plan for 2019 or 2020.  We’d be glad to help, so be sure to reach out.

 

What To Watch For – I am 70% sold/hedged (basis APH) at a board-based average price of $9.64SH for 2019.  I’ll sell another 15% of my old beans with a rally to $9.00 July.

For 2020, I’m up to 25% sold at $9.63 average basis SX20.  I’ll sell another 5% on a rally to $9.00.                                                                                                                                   Strategies I’ve employed or considered.

*Options tool – Nov ’19 beans. Buy $9.20 put, sell $8.20 put & $10.20 call-sold @ .59 profit**

*Floor on Nov ’19 beans-Buy $9.00 put, sell $7.90 put & $9.90 call @ 22 cents-sold @ 40 cents**

*Straight hedge of Nov ’19 beans at $9.58 filled – bought back @ $8.42 for profit of $1.12**

*Put in an offer for a straight hedge of Nov ’19 beans at $8.80 filled, bought back – $8.69**

*Sell July @ $9.54 beans straight hedge – bought back @ $8.21 for profit of $1.33**

*Hedged old beans at Aug $9.25 and will now lift the hedge at $8.50 for profit of 75 cents**

Straight hedge of 15% for Nov 2020 beans at $9.60 & 10% at $9.68. Offer in at $9.83

**Lifted these positions**

**For the strategies I talk about on here, please remember these are the tools I use for my farm.  These are not recommendations but merely a way for the reader to see how I approach marketing for my operation.  There are tons of good tools out there. For more information on markets, strategies and ways to set up a solid marketing plan, visit my website at https://agmarket.net

I hope you have a great week.  Please let us know if we can help you in any way.

Matt

217-273-1133 – Work

@chief321 – Twitter

mbennett@AgMarket.Net – E-mail

 

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