Corn & Soybean Update from Matt Bennett | June 20
I am back in the saddle. We went on a family vacation to Alaska to visit with our oldest and her husband. What a time to be gone! We’ll get to the markets later, but some of my clients have informed me I can’t go on vacation anymore after we lost a couple of bucks on beans and about a third of that on corn in just a week’s time. For the fun stuff, neither Tif or I had been to Alaska, so the whole family was able to have plenty of new experiences. We went on the Alaskan rail to Seward where we hopped a day cruise, seeing whales, sea lions, seals and glaciers…among other things. I climbed a mountain with the 16 and 9 year-olds, while we thought that may be too much for Abileen, the five-year-old. It really was quite the vacation for us. This time of year is quite amazing in Anchorage, where we visited. It doesn’t get all that dark…heck, at midnight it looked like we do at 5 or 6 pm. While the winter brings the opposite, I didn’t quite get used to the day-round light. When the trip was over, I was glad to get back home to our normal lives. We enjoyed our week with Autumn and would have loved to stay longer, but at the same time, we have plenty going on around home.
I came home to corn that was rolling, but from talking to some of you, it appears my crop is in better shape than many. As I wrote the column over the weekend, we had some rain, although the radar sure looked like we might have missed the good soaker. A couple of tenths is better than nothing, but given the heat we’ve seen, we’re going to need more rain before long. The forecast keeps putting rain in, but without the rainfall materializing, it’s tough to get excited about the next forecast. Keep me posted on how things are going in your area if you get a chance. firstname.lastname@example.org
The corn and bean markets took it squarely on the chin this past week. While we saved some face with a nice rally on Friday, the week up to that point had been a disaster. While weather forecasts seemed to get some blame for the sell-off, other factors certainly played as big or bigger of a role. With talks of mass waivers for the blenders, renewable fuel demand was certainly called into question. If some of the talk ends up verifying, this administration will hurt demand for corn and beans as much or more than high prices will. Additionally, China was supposedly curbing speculation with some of their companies, but my guess is that talk was simply to get some corn and beans bought cheaper. Outside markets were likely negative in contribution to our markets this past week. The US Dollar has been in rally mode, gaining .336 on Friday, with September settling at 92.209, up 2.076 in the last two weeks. The DOW has been in retreat, settling at 33,155. We settled 538 points lower on Friday and 1,587 lower over the last two weeks. July crude oil was the lone bright spot, settling up 60 cents on Friday at $71.64. In the last two weeks, we’ve rallied $2.02.
The corn market was getting killed this past week but rallied on Friday to save some face. On Friday, July closed up 22 ¼ cents at $6.55 ¼. This was 8 ¼ cents off the high and 25 ¾ off the low. On the week, July corn lost 29 ¼ cents. September corn, however, lost 52 ¼ cents as deferreds were beat up more than the nearby…with bull-spreading remaining a feature, it’s not a bad sign. In all honesty, this corn market has withstood pressure from a stronger dollar, talks of more waivers granted from the Biden administration and enough wet forecasts to go around. Losing a half-dollar on the week is no fun, but at least we got 22-30 cents to close the week. What I’m seeing is divergent forecasts…and given how dry most of the corn-belt has remained, it’s tough to get excited about a forecast that gives a peron a shot at an inch or two of rain. Until we get widespread rain, these markets are likely to stay supported. Now, if we get moisture across the corn-belt, I’d say new highs would be a long-shot, but I’m not sure the market will plummet with the tight stocks situation. However, as producers we must realize getting $5 instead of $6 corn may not be as sexy…but it’s super-profitable yet. This time of year, with all this volatility, don’t forget to maintain perspective.
DEMAND Demand was decent overall with smaller exports and corn usage for ethanol off but still big. Export sales for this marketing year were just 18k tons, so sales were about 170k lower than a week ago. However, with new-crop sales of 276k tons for new crop, total sales were a little better than a week ago due to good new-crop sales. Corn usage for ethanol was off of the biggest number we’d seen since pre-covid but still rather large...according to the Department of Energy’s EIA report. We posted just over 103.5 million bushels of corn usage for the week, down around four million bushels. Posted basis levels were softer on the week. My local basis was a nickel wider, with a posted bid of a dime over the July. In Decatur, basis was a dime wider, posting 27 over the July. On the river in St. Louis, basis was posted at 34 over the July, 7 cents wider.
CASH CORN With cash corn, we’ve lost some ground of late. Whiile we’re bidding versus the July, which saw the least amount of deterioration this past week, we also lost basis. It’s interesting to see basis widen as we hear of some originators pushing big for quantity. The thing is, big quantities aren’t all that common this summer. While I can see major tightness yet, the further we get into summer, the more risky it is to hold onto old corn. We’ve had a few shots at $7 corn and even 8...so a person has to understand what the stakes are. Could we see an epic run if we don’t get some rain on a widespread basis? Absolutely...but we could also lose a buck or buck and a half pretty quick with good weather and a few more acres at the end of the month. My gut is to trim down on corn on any rally action but to keep enough to participate if this weather doesn’t turn...as this market could get pretty hot again. As always, I stick to the basics of maximizing return when trying to figure out when to make sales...and an easy way to track profit margins is with one of the tools me and my team have put together. You can use the profitability calculator from the Channel website or the one on the AgMarket app. https://www.agmarket.app/app/
2021 CORN December 2021 corn had a rough week but pared the losses with a nice Friday rally as well. On Friday, CZ21 closed at $5.66 ¼, up 33 ¾ cents on the day. We lost 42 ½ cents on the week. Fall corn bids lost 70 cents in the 7 days I was gone…but at least we got half of that back on the first day I was back in the office. Hey, if a guy is going to get blamed for the drop while out of the office, he may as well take credit for the rally when he’s back in. Looking at this situation, the stress we’ve seen of late certainly could hamper this crop’s ability to get close to a 180 yield. Yes, we had a good start this year, but with ratings plummeting while the drought index is growing, we need a change of pace fast when it comes to weather. Producers are in a tough spot if they’re dry…I understand how risky it is to sell more physical product…I wouldn’t do it just yet. I’d get some rain before another sale but remember there are tools to lock in income. Whether looking at setting a floor in place or covering sales already made, risk-management on a year like this can make a world of difference. If you don’t have enough risk quantified with these high prices, you may consider locking in some of this robust net income.
WHAT TO WATCH FOR For 2020, 100% sold averaging $4.75 (not including re-ownership gains) ***must consider local basis. For ’21, 20% sold at $4.10, 10% at $4.39, 10% at $5 & 10% at $6.35
Strategies I’ve employed or considered:
- Straight hedge of Dec21 at $4.05 then $4.14 then $4.39 then $5, then $6.35 – 10% on each sale
- *Bought May $3.80/4.40 c spread & sold March SD $4.10 c for 8 cents-sold for 12 cents
- *Bought July $4.20/5.20 call spread & sold $3.70 put for 12 cents-sold for 69 cents
- *Bought March $4.30/5.10 c spread and sold March SD $4.30 c-12 cents-sold for 49 cents
- *Bought May SD $4.30 calls at 11 cents & sold for $1.20
- Bought Dec $4.50/3.90 p spread & sold $5.70 call for 12 cents 10% of APH
- Bought Aug SD $5.75 call at 30 cents
- **lifted these positions**
The bean market got smoked as well this week but recovered some of the losses with a big Friday rally. On Friday, July beans settled at $13.96, up 66 ¼ cents. This was 12 ¼ cents off the high and 65 ¼ off the low. July lost $1.12 ½ on the week and 1.87 ¼ over the last two weeks. Without Friday’s rally, we’d have been down close to $2 on the week and pushing $2.50 in two weeks! This bean situation is still razor-thin, so why the setback? In all honesty, the tight stocks story is plenty mature, and the market is well aware we’ve bought production. We’ll likely gain a few acres here in the US and likely a good chunk in the Southern Hemisphere this fall. I’m not bearish beans though…not after a $2 drop. In fact, I see beans similar to corn…we likely hold together at very profitable levels until we see huge production locked in due to a good acreage jump and good enough weather to see a national yield at 50 or better. Anything less, given where stocks are, would be quite supportive. This is a good situation we’re in, but it certainly doesn’t make it any easier to market. IF we get a good rain or two in the next couple of weeks, I’ll likely sell some more beans…it’s tough not if we’re still at $13+. If we don’t get rain, I see no reason to do much of anything as I don’t want to get oversold and see beans rally $3 or $4…which is definitely within the realm of possibilities given our situation this year. Stay on your toes, don’t get greedy and base your decision on your farm’s situation…it will help keep us out of trouble.
DEMAND Soybean export sales were positive again but not terribly impressive by any means. Sales came in at 65k tons, which was an increase of 50k from last week. 6k in sales were posted for new-crop, so overall sales were around 70k smaller than the previous week. While we haven’t seen many sales of late, rumors were China was buying new beans late in the week. Let’s hope that verifies. Basis for beans again continue to widen. It appears originators aren’t terribly concerned with running out of beans. Local bids for me were posted at 60 cents over the Nov…a dime wider in the last week. Decatur’s basis for cash beans was 70 over the Nov…15 cents wider. On the river, basis is still versus the July, posting 27 over…four cents wider.
CASH BEANS Cash beans have been getting beat up. While I understand a person wanting to hold onto them, it’s been rough of late. Do I think we can make new highs and drag old beans up? It’s possible, but we’ll need to see very little in the way of moisture for the next few weeks…and I’d assume very few of us want to see that. Given most are down to gambling bushels, I don’t have much advice to share. It’s up to the producer…being patient on the 2020 bean crop paid huge dividends. I’d say go with your gut on the remaining beans, keeping in mind just how volatile this ride is likely to be. We could go up a dollar this week and down two bucks the next week. It may be best to just put a couple of offers out there and hope they get hit…then put your focus on new-crop.
2021 BEANS November 2021 beans had a similar week as the rest…big drop then a rebound on Friday. Nov21 settled the week at $13.13, up 60 ¼ cents on Friday. We lost $1.25 ¾ cents on the week. Again, we’d have lost about $2 if we hadn’t gotten the big rally to close the week. My thought on beans as always is to sell when you can lock in income…this year, we’ve had chances to lock in more income than we’ve seen in many years, so it’s tough to know when to pull the trigger. Again, I’d treat your farm as a stand-alone…and tune out the noise. We’re a long way from knowing what kind of a bean crop we have, so buying some puts on any rally may be wise…if you’re like me and have several new-crop beans sold already. If a person runs the math on APH beans at $12.50 even…it’s pretty impressive. Don’t lose sight of that.
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 For 2020, I’m 100% sold @ $9.66 average basis SX20 with re-ownership in place. For 2021, we’re 50% protected through fall sales with calls in place.
Strategies I’ve employed or considered:
- Straight hedge/sell SX20 of 15% at $9.60 & 10% at $9.68 & 45% at $9 & 30% at $10.65
- *Bought $8.70 Oct put & sold $9.20 call for .05 for report. Liquidated at a 19-cent loss
- *Bought March $10.20/11.20 c spread & sold March SD $10.50 c 11 cents-sold for a 46-cent gain
- *Bought March $10.40/12.00 c spread & sold March SD $10.50 c for 21 cents-sold 81-cent gain
- *Bought Nov21 $9.80/8.80 put spread & sold $11 call for 14 cents 10% exited at 52-cent loss
- *Bought Nov21 $10.40/9.40 put spread & sold $11.40 call for a nickel 10% Exited at 31-cent loss
- *Bought Nov21 $11.60/10.20 p spread & sold $13 call for 18 cents 20% Exited at 18-cent loss
- Sold 10% of ’21 at $11.60 basis SX21, & 10% @ $12 & 20% at $12.75 & 10% at $14.35
- Bought Aug SD $12 calls for 32 cents.
- **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 me know if I can help you in any way.