Matt Bennett’s Weekly update 101419

Weekly Update

 

Harvest was in full-swing across much of the corn-belt this past week.  We were able to get a ton done up through Thursday evening.  Then our luck on excellent weather ran out.  We received 3+ inches of rain on most of our farms, which will give us a little breather.  We were dry, so I’m assuming we’ll soak this up, however we now are praying we don’t get much follow-up moisture.  For our farm, we’re about 300 acres from being finished with beans while we still have 800 acres of corn.  We’re over half done.  I know many producers in my part of the world who are in similar situations, while some of you north and west of me haven’t been able to run much just yet.  The weather of 2019 has continued to be a pain in the rear-end for most of us.  With yields all over the place, I continue to see a mixed bag on corn yields while bean yields seem disappointing for more producers, relatively speaking.  When comparing to a year ago, there’s no question both have been disappointing, as a general rule.  As always, I appreciate the feedback.  Keep the updates coming…and please be safe out there.  As frustrating as this year has been for many of us, I can see some of us getting in a hurry this fall. Remember to take a break now and then and think safety first.  Be careful out there.    mbennett@AgMarket.Net

I’ve had a good amount of those who read this column comment their favorite part is what I write about my family, so I wanted to share a story that’s near and dear to me.  16 years ago on October 15th, I was in a bad mood that morning as harvest was dragging on, we had plenty to do yet, and two of my guys weren’t able to work that day.  I had a kid from Lake Land College helping me…and we were going to fill trucks, haul the corn and do it all over again…not what I had in mind with several hundred acres to go.  However, mid-morning I got a call to head home immediately, where I found out my only sibling, my sister Jennifer had passed away from a brain aneurysm that morning, leaving behind a husband and two young children.  Our family business consisted of my parents, she and I…with a few other workers, but our nuclear family ran our family grain elevator.  We were of course a tight-knit group.  While our family and friends came together and helped us finish harvest…something I’ll forever be grateful for, I learned a valuable lesson that fall day.  No matter how tough things get and how frustrated we may be with our day-to-day situations, life can show you very quickly that there are more important things to life.  All of the problems I thought I had that morning seemed insignificant in the blink of an eye.

Now let’s talk about the markets.  Corn and beans both had a solid week, especially after the nice day on Friday.  The USDA report on Thursday showed corn yield bumped .2 of a bushel up to 168.4, but the more bearish part of the report was carry-out coming in at 1.92 billion bushels, which was significantly above the average trade guess.  For soybeans, yield was dropped by a bushel to 46.9, which brought the bean carry-out down from 640 million bushels last month down to 460 mb.  The report was certainly considered friendly for soybeans, while for corn a 14-cent drop told the tale.  Fortunately, the big drop in the corn market on Thursday was more than reversed on Friday as the trade seemed to understand the weather issues in the upper-midwest and western corn-belt could have a sizable impact on production.  Adding to a positive tone on Friday were thoughts the US and China could have a trade deal put together.  Overall, there was plenty of news to digest this past week with the general theme having more of a friendly tone for both corn and beans.  Hopefully that tone will continue this week, especially with President Trump announcing Phase I of the deal with China agreed upon.  While nothing is signed, it sure sounds promising with talks of China buying more agricultural products than they were before tariffs went into place.  Heading into the weekend, outside markets were doing their part as the Dollar was lower while crude was up.  On Friday, November crude was up $1.36 at $54.91.  This was two cents off the highs and $1.27 off the lows of the day.  Crude was up $1.90 on the week.

CORN – The corn market had a roller-coaster week with gains on the week heading into the USDA report on Thursday.  While corn took it on the chin after the report, on Friday we saw a different tune as December corn surged, closing up 17 ½ cents at $3.97 ¾.  This was a penny off the high and 17 ¼ off the low.  On the week, the corn market rallied 13 cents and 26 over the past two weeks.  Many of us have mentioned a harvest rally in the last few weeks, but in fairness, we’d been beaten up bad enough for the time being…a rally was bound to happen at some point.  The thing is, harvest isn’t generally the time we see that, but this year has been anything but common.  For the report, I take issue with the ‘feed and residual usage’ category as the USDA clearly missed on this category last year.  The ending stocks, released just two weeks ago, came in 300 under trade guesses…but close to where many of us have felt all along as USDA ‘found’ 250 million bushels back in March…in this category…after record cattle number and huge livestock numbers overall, combined with a harsh winter.  Make sense to you?  No, me either…but at least they fixed last year.  Here’s the problem…last year’s usage in this category ended at 5.615 billion bushels. This year we have 2% more livestock on feed and they dropped this year’s feed and residual usage to 5.3 billion bushels.  You can’t make this stuff up.  Moral to the story for me…whether we’re talking yields, harvested acres or demand, there’s plenty more to be learned about this corn situation.  I believe we’ve seen the most bearish demand numbers for this marketing year, although I remain a bit concerned with ethanol and exports…hopefully this US/China trade deal will help on the export front.  Long story short, I’m still a fan of corn ownership for the time being.

DEMAND – Demand wasn’t that great this past week with exports half of last week’s poor number, while corn usage for ethanol was up slightly from last week.  Weekly export sales were 285 thousand metric tons for this marketing year, which again is half of a week ago.  For next marketing year, no sales were posted, so overall sales were less than half of a week ago levels, which were nothing to brag about.  Corn usage for ethanol was up from another poor number last week, coming in right at 96.5 million bushels, according to the Department of Energy’s EIA report.  This was up a half-million bushels on the week.  As far as basis is concerned, there wasn’t much movement other than around the river.  At 8 under the Dec, my area’s basis was unchanged.  In Decatur as well, basis was status-quo, staying at 12 cents over the Dec.  On the river in St. Louis, basis was quoted at three cents under the Dec, which is nine cents better than a week ago.  IF this rally develops, don’t expect basis to hold through the thick of harvest.

CASH CORN – Cash corn had a solid week with the gain on futures and steady to improved basis levels.  I don’t have much new to add.  This rally has given people a chance to make some catch-up sales.  Some of you have asked what calls I’ve bought to re-own corn across the scales…and the answer is March at-the-money calls as I haul in for a dime to 13 cents or so.  A person could buy May or July calls as well…or not buy any at all.  If you can make money selling the corn and walking away, there’s no shame in that…but if you’re like me and think corn could be good property, calls are still fairly cheap.  The excellent basis levels and less than 20-cent carry from Dec to July is the market telling us to reward it now.  I believe we should listen to this cash market as basis levels like this at harvest aren’t something we generally see.  Yes, I’m going to store corn at home…but for the bushels that have to go to town, I’m certainly going to sell and re-own instead of store.

2020 CORN – December 2020 corn didn’t again didn’t have the week nearby futures had, but certainly gained.  On Friday, Dec corn settled at $4.10, up a nickel.  This was a gain of 5 ¾ cents on the week.  I remain at 10% sold but have a standing offer in to sell corn at $4.17.  Many of my clients have similar offers in and around that price.  I highly encourage you to plug in the costs you know including fertilizer that many are currently applying.  With fertilizer prices where they are, most of our guys can pencil a profit.  Use the profitability calculator or the app I created…either way, you might be surprised at profit margins with normal yields and this year’s costs.   https://www.agmarket.app/app/

What To Watch For –

On 2019 corn, I’m 65% sold @ $4.28 basis Dec9.  New ’19 target will be at $4.04.

1st sale for 2020 CZ hit at $4.07 for 10%. Offer to sell another 10% at $4.17

BEANS – The bean market had another nice week as the report kept the rally intact.  To close the week, November beans settled 12 ½ cents higher at $9.36.  This was 3 ¼ cents off the high and 12 ½ off the low.  Nov beans rallied 19 ¾ cents on the week and 53 cents over the last two!  Some of you have probably choked reading me the last few weeks, showing a hint of bullishness on this bean market.  It has been a long time since I’ve felt good about a bean rally.  However, this bean crop is not getting bigger…especially with the weather we’ve seen of late here in the corn-belt.  In South America, weather continues to be less-than-ideal as Brazil struggles with drought in areas with a hot and dry forecast continuing in some of the bigger production regions.  Now, we’ve rallied a half-dollar in the last two weeks, so we should try to keep perspective.  While I could see this rally continue, rewarding that kind of a rally certainly makes sense.  I’m already 65% and comfortable there, but if you need to make catch-up sales, my price targets are mentioned below.

DEMAND – Soybean export sales were huge on the week once again with the big purchases coming from China.  With net sales of 2.09 million mt for old crop, we sold essentially the same amount of beans as a week ago…I’d like to see more weeks like this for sure.  For new crop, just 3k mt in sales were recorded but overall levels were essentially the same as a week ago.  For basis, some narrowing was the case once again.  Local bids for me are 40 under the Nov, which was two cents improved on the week.  Decatur’s basis for cash beans was status-quo, staying at 22 under the Nov.  On the river, basis was quoted at 9 under the Nov, which narrowed by seven cents…and 17 in two weeks!

CASH BEANS – Cash bean bids were again much higher on the week.  With beans continuing the rally and basis improving, a person has to see the dynamic that’s unfolding.  Some end-users seem a bit worried about origination, especially given the weather we’ve seen.  With no guarantee beans will get harvested anytime soon in those areas that are saturated, basis levels continue to firm.  Basis compared to corn still stinks, but it’s certainly improving.  Two weeks ago and again last week I’ve felt we should put these beans in the bin…and I am still in that camp.  But…if you need some cash this fall and this rally offers you the price you want, don’t forget the board has rallied over 50 cents in two weeks…and in some areas, basis has improved 20!  A 70-cent rally in cash price isn’t anything to sneeze at in my opinion.  I’m not bearish…but as always, make sales when you can make money.  Keep it simple.  If you can be profitable, sell some…and hope to sell more at a higher price.

2020 BEANS – We had another good week for November 2020 beans as well.  On Friday, Nov ‘20 beans settled at $9.70 ¾, up 3 ¼ cents.  Nov20 beans rallied 8 cents this past week…and over 30 cents in the past two weeks.  I am 15% hedged at this point…and will sell another 10% if we get to $9.83.  If we get a push up to and over $10, I will likely protect price in some fashion…maybe up to 50%.  While I’m not bearish, I can make great money at price levels like we’re talking about.  If you are in the same boat, get your plan in place…and call me if you need help getting that plan put together.

As always, be sure to figure break-evens when deciding whether you want to make sales.  For figuring your break-evens, I recommend using either the Profitability Calculator on the Channel website or 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.  I’d be glad to help, so be sure to reach out.   http://www.channel.com/Markets/Pages/Profitability-Calculator.aspx

What To Watch For –

My targets for cash beans are $9.30 & $9.57 basis the Nov.  I’d have offers in now to take advantage of any rally unfolding.  I am 60% sold/hedged (basis APH) at a board-based average price of $9.46SX for 2019.

For 2020, I got my first 15% sale on at $9.60 SX20.

**For the strategies I talk about on here, please remember these are the tools I use for my farm.  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 me know if I can help you in any way.

Matt

@chief321 – Twitter

mbennett@AgMarket.Net – E-mail

 

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