Corn & Soybean Update from Matt Bennett | June 27
I hope you’ve had a great weekend. My weekend has been a nice one, although a bit different than most of them so far this summer. We’ve had a steady dose of storms in the area, which have blessed us with some rains but fortunately we’ve missed the floods so far. While the kids want to go to the lake, that’s the last place I want to be when a thunderstorm whips up. If you’ve been on the water during one, you know what I’m saying. Our corn will be tasseling in the next week or so, while the spraying is done on the beans, other than a dose of fungicide. Speaking of spraying, Liberty works well if you’re wanting to kill Extend beans…one of the retailers we work with accidently spraying a border for us with Liberty, even though we’d given them what we planted and where. 120 feet of beans, right on the highway, were deader than a doornail. We replanted the strip this past week, and to be honest, if that’s the worst thing that happens this year, we’ll do just fine. All in all, our crop looks great. I know not all of you are in this situation, so I am simply sharing what’s going on out here…not trying to be boastful. If this last week or two has showed us anything, it’s that one hailstorm can take out a ton of acres quickly. Many of you in the north-western corn-belt have reached out telling of how dry it’s been. I sure hope this weekend blesses you with a soaker. Please keep me posted. firstname.lastname@example.org
The corn and bean markets had another tough week. While it looked like the week wasn’t going to be too bad, Friday’s trade ensured weekly losses would be pronounced. Given huge rain totals forecasted early in the week looked more and more likely to verify as we got towards the weekend, it was no shock to see pressure. Crop ratings, which have plummeted the first three weeks, are likely to rebound swiftly after a nice drink over a decent chunk of the corn-belt. This week brings the June Planted Acreage Report as well as quarterly stocks. With average guesses on corn at 93.78 and beans at 88.95, the trade is looking for a jump in overall corn and bean plantings of around 4 million acres. Quarterly stocks are thought to be supportive but likely not the focus of the report. Outside markets were likely positive in contribution to our markets this past week. The US Dollar lost some ground, losing .049 on Friday, with September settling at 91.844, down 365 on the week. The DOW rallied, settling at 34,333. We settled 251 points higher on Friday and 1,218 higher on the week. August crude oil continued its march, settling up 75 cents on Friday at $74.05. On the week, we rallied $2.41.
The corn market was holding its ground somewhat this past week but got hit pretty good on Friday. On Friday, July closed down 16 ¾ cents at $6.36 ½. This was 23 cents off the high and 2 ½ off the low. On the week, July corn lost 18 ¾ cents. September corn, however, lost 47 ¼ cents or about a dollar in the last two weeks! The corn market has no doubt took a beating as this weather has taken a turn. It’s crazy how fast things can change as several weather folks were just talking drought two weeks ago. Either way, this week is a big week to see how this market holds up. IF we get an acreage number close to or bigger than expectations on Wednesday, new highs will be quite unlikely. As ratings improve, the market will try to settle in and find a range to trade that will obviously be a good dollar off the highs. I wouldn’t bet the market holds $5 either…but longer-term, tight stocks are going to require this crop to be a big one. With solid demand, I look for producers to have the opportunity to make some great money in 2021, so long as they market for profit. Let us know if you need help with a plan.
DEMAND Demand this past week was decent overall with exports a bit improved and corn usage for ethanol up. Export sales for this marketing year were 216k tons, so sales were about 200k better than a week ago. With new-crop sales of 310k tons, total sales were over 200k in excess of last week’s poor showing. Corn usage for ethanol was solid...according to the Department of Energy’s EIA report. We posted just under 106 million bushels of corn usage for the week, up two and a half million bushels. Posted basis levels were much softer on the week with some bids moving to vs the Sep. My local basis was around 30 cents wider, with a posted bid of 85 over the Sep. In Decatur, basis was 22 cents wider, posting a nickel over the July. On the river in St. Louis, basis was posted at 34 over the July, status-quo.
CASH CORN With cash corn, we’ve lost some serious ground the last two weeks. Given basis deterioration and the board plummeting, holding onto those last bushels doesn’t feel too good right now. I certainly understand holding onto gambling bushels as tight as our corn situation is, but the heat so far this summer and solid weather of late much have originators thinking they’ll have enough corn to get to harvest. If you have a bunch of corn, I wouldn’t beat yourself up too bad are still awfully good compared to what we’ve seen the last few years. However, a person has to make a decision sooner or later. Do I think we could see another rally? Absolutely, but the fear factor we had before isn’t likely to drive the market like we’ve already seen. We’re a long way from a crop here in 2021, so weather can still play a role...but my gut is telling me, as it has for a while, that more than gambling bushels could be a bit risky for my liking. 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 another rough week, capping it off with a poor showing on Friday. CZ21 closed the week at $5.19 ¼, down 16 ¾ cents on the day. We lost 47 cents on the week and about 90 over the last two weeks. Wow…what a drop, but when it rains in late-June, it’s tough to ask for a corn market to rally. We’ve talked at great length the last couple of month about keeping our balance and selling or protecting profit when it’s been present. Please remember it’s still one heck of a price. IF you raise an APH or better yield, you’re going to make some serious money with corn still above $5 IF you manage that price risk. While I don’t think we’re going to $4 by any means, getting under $5 could be accomplished this week with a big acreage jump, especially considering how much rain we’ve seen occur. Regular rain is going to be needed in North and South Dakota as well as Minnesota, NW Iowa and parts of Nebraska…but if we get enough rain in those areas, a national yield closer to 180 than 170 will start looking more and more likely. Being at 50%, we haven’t done much for a while…as I don’t like getting any more aggressive than I already have pre-pollination. Having a floor under more bushels makes sense though, just to lock in big income. Don’t be afraid to get a sale on as well…if your physical sales aren’t where you want them and you feel good about production.
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 hammered again this past week, cemented by steep losses on Friday. To close the week, July beans settled at $13.29 ¾, down 41 ½ cents. This was 55 cents off the high and just 4 off the low. July lost 66 ¼ on the week and over $2.50 in the last three weeks! This bean market is in free-fall mode, mostly due to funds pulling money out of what they consider a profitable trade on a product they see as over-valued. However, extremely tight stocks are still present and the acreage report this week needs to show acreage up close to 90 million. If we don’t get enough acres, the elevated prices we’ve enjoyed so far this year could be present into this next year as well. I know we’ve seen major deterioration, but as with corn, if we’re honest, these prices are significantly better than we’ve seen in several years. Given that, remember these markets could still move lower from here. Be cautious as to assume a big drop can’t continue. We’re a long way from having a crop here in 2021, but IF we see a big acreage jump and summer weather cooperates, it could be tough to rally to the levels we’ve already seen.
DEMAND oybean export sales were better than a week ago by a fair margin and some good numbers for this point in the marketing year. Sales came in at 142k tons, which was an increase of 80k from last week. 47k in sales were posted for new-crop, so overall sales were over 120k bigger than the previous week. The Chinese have been in buying new-crop beans this past week, so next week’s sales will be fairly impressive. Basis for beans again has stabilized a bit. Local bids for me were posted at 60 cents over the Nov…status-quo on the week. Decatur’s basis for cash beans was 70 over the Nov…also unchanged. On the river, basis is still versus the July, posting 23 over…four cents wider.
CASH BEANS Cash beans have also been getting beat up. The problem with gambling bushels is we don’t always win…and sooner or later, the high will have been made. It’s rare we catch it. I don’t see beans making new highs this year unless we see acreage a bullish surprise and we turn off hot and dry in August. We need the acres on new-crop beans…no doubt about it. Given how tight stocks are, some have been shocked to see the market plummet like it has. However, we’ve traded lofty levels for several weeks now, so it’s not a huge surprise to everyone we’ve backed off so much. If you have old beans yet, good luck if you’re going to hold onto them. My gut tells me the worst of the plummet is over, especially this early in the summer…but as we’ve seen of late, these markets can move fast, so be cautious.
2021 BEANS November 2021 beans had a rough week, dipping under $13 later in the week. Nov21 settled the week at $12.69 ¾, down 22 cents on Friday. We lost 43 ¼ cents on the week and about $1.70 in the last two weeks. As I’ve said plenty this year, pulling the trigger isn’t any easier at high prices than it is with low prices. However, even with a drop like we’ve seen, these bean prices are quite profitable. If you run the math at APH yields and today’s prices, it’s a big-time winner. Again, we don’t know what production is going to look like for beans in June, but if you’re worried about more price deterioration, setting floors under the market makes great sense. No doubt it’s early in the growing season and marketing year…but at the same time, we might consider while last year’s summer sales were a dud, this summer’s sales could be your best. Trying to figure out where the market is going is generally a fruitless notion, but selling at profitable levels, on a year like 2021, isn’t too hard to accomplish.
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.