Corn & Soybean Update from Matt Bennett | July 4
Happy Independence Day! 4th of July has always been a big holiday for our family for more than one reason. Yes, we all love fireworks, but it’s also my mom’s birthday. Given that, we’ve had a party for her complete with a big fireworks show every year I can remember. In fact, my mom said as a kid she was always so happy her hometown threw such a big party for her…ha, until her parents told her what the fireworks were really for. The interesting thing about this whole fireworks discussion is we all will see literal fireworks this weekend. We may just see some figurative ones coming up as well. It’s that time of year when the markets can be jumpy as can be. I’m not sure they can get more jumpy than we’ve already seen, but by all means, it’s going to be a wild ride for a few more weeks at the very least. Given huge differences in how the weather is treating many of you, it’s going to be a struggle to handicap the 2021 crop. Many of you have told me you can’t buy a rain…while others talk of 10-13 inches of rain…while others yet talk about pristine conditions. I appreciate all the feedback and can tell those of you especially in the western and northwestern-corn-belt…if you are dry as a bone, I hope you catch a soaking rain soon. Keep me posted and be safe this weekend. firstname.lastname@example.org
The corn and bean markets had a wild and crazy week. After a couple of awful weeks of trading, we rebounded sharply, thanks to the June USDA Planted Acreage and Quarterly Stocks Report. While both markets looked like they were on life support just before 11 am on Wednesday, the planted acres gave us a real boost. With 92.7 million acres of corn and 87.55 ma of beans, the trade’s expectations were way too high for both. Given how tight the stocks situation is for both corn and beans this year, those acreage numbers are putting major pressure on Mother Nature. The next report with USDA updating demand in a couple of weeks will be quite interesting but until then, we likely trade weather. Outside markets were likely mixed/positive in contribution to our markets this past week. The US Dollar rallied,, settling at 92.255, up .411 on the week but down .339 on Friday. The DOW rallied, settling at 34,646. We settled 132 points higher on Friday and 313 higher on the week. August crude oil continued its march, on Friday at $75.15, which was down 8 cents on the day but up $1.10 on the week.
The corn market was like a boat taking on water on Wednesday before the report, trading down 15-20 cents…then a minute later, we were up the 40-cent limit. On Friday, we gave back some of the gains, with July closing down 9 ¾ cents at $6.97 ¼. This was 19 ¾ cents off the high and 4 off the low. On the week, July corn rallied 60 ¾. September corn rallied 61 ½ cents on the week, so the spread action wasn’t all that prevalent. This past couple of weeks was a good reality check for all of us. With how poorly our markets traded after months of solid rally action, it was a good reminder that markets don’t necessarily go up all the time. This past week, on the other hand, was a bit of a gift. Now, I know no everyone has had rain, so it’s a tough pill to swallow for those producers. However, after a decent rain event in the corn-belt, it’s not all that common to see a 60-cent rally at the end of June. The acreage report was a reminder to us just how tight our stocks situation is. Producers, in my opinion, should look at this rally as a chance to manage some risk. IF the western-corn-belt stays dry, there’s no doubt we could potentially make new highs. However, after appearing to ‘want to go under $5’ these past couple of weeks, staring $5.80 Dec corn in the face isn’t all that bad.
DEMAND Demand this past week was mixed with exports not so hot and corn usage for ethanol up. Export sales for this marketing year were 15k tons, so sales were about 200k lower than a week ago. With new-crop sales of 68k tons, total sales were around 450k lower than last week. Corn usage for ethanol was impressive...according to the Department of Energy’s EIA report. We posted right at 107 million bushels of corn usage for the week, up a million bushels. Posted basis levels weren’t doing much. My local basis was status-quo, with a posted bid of 85 over the Sep. In Decatur, basis was also unchanged at a $1.10 over the Sep. On the river in St. Louis, basis was posted at 26 over the July, 8 cents wider than the previous week.
CASH CORN With cash corn, we got a shot of adrenaline this past week. As we would expect, some bushels were moving due to that big price bump. For those who chose to hold onto bushels through the report, I’d imagine seeing what the next couple of weeks hold wouldn’t be a bad idea but either way, it will likely be a great sale. IF we can’t get this weather pattern to bless the west with good rain, we’ll likely keep these markets supported. Heat and dryness at pollination where folks are already dry would be the nail in the coffin...so we hope that doesn’t happen, but by all means, it will play a role in how we trade. The cash market will be tight going into harvest...but it’s certainly a chess game between the producer and originator, so good luck on those old crop bushels. 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 nice recovery week but gave some back heading into the holiday weekend. CZ21 closed the week at $5.79 ¾, down 9 ¼ cents on the day. We rallied 60 ½ cents on the week. In all honesty, this is one of those weeks where I strongly encourage you to run profitability numbers at the start of the week then end of the week. What does 60 cents a bushel mean to your bottom-line? Well…if you harvest 200-bushel corn, it’s a cool $120/acre. If you harvest 250, it’s $150, while at 150, it’s $90/ac. Those aren’t anything to scoff at. While I’m not pollinated yet, I’m certainly looking to sell some more corn as my production estimate moves higher. I’m still using APH as a yield, which for me is around 215. However, right now I’m expecting a yield well in excess of this so I have to adjust my expected production. My goal is to be at 50% of actual production as I head into what appears to be a good pollination window. It’s for this reason I sold some more corn this week with December trading at $6.05. With a full soil-moisture profile on July 1 and $6 corn, I felt like it was necessary to make a sale. If I can’t make money at $6, I need to look for a new gig.
WHAT TO WATCH FOR 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 & $6.05 **of APH.
Strategies I’ve employed or considered:
- Straight hedge of Dec21 at $4.05, $4.14, $4.39, $5, $6.35, $6.05 – 10% of APH on each sale
- *Expectations for above-APH yield lead me to believe I’m 50% sold on actual production
- *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 healed up a bit this past week, as the report gave life to an otherwise struggling market. To close the week, July beans settled at $14.51 ¾, up a nickel. This was 13 ¼ cents off the high and a dime off the low. July rallied $1.22 on the week. This bean market has been restored to levels we don’t see all that often, both for old and new beans. The market is supported by razor-thin stocks and stocks to usage levels at a time when acreage didn’t respond the way the market was hoping. Generally, high prices encourage an acreage increase but for beans in 2021, that wasn’t necessarily the case. Plain and simply put, we’re super-fortunate to see acreage at just 87.55 million. This likely keeps support under the market until we see whether we get a bumper crop here in 2021 or not. With the USDA using a yield a shade over 50, expectations are already for a solid yield. However, I’m of the opinion that we could beat that by 4 or 5 bushels IF we could get rain where we need it and good August weather…as plenty of beans are planted on some of the higher-yielding ground in the corn-belt here in 2021. Overall…we have a good situation. IF you sell some beans at these levels, it’s tough to think you wouldn’t make money…many of us, IF we raise a crop, could sell at much lower levels and still make good money. Manage your risk wisely and make it a goal to maximize ROI on your operation.
DEMAND Soybean export sales were better than a week ago once again with some great new-crop sales. Sales came in at 93k tons, which for old crop was a drop of 50k from last week. 1.76 million tons in sales were posted for new-crop, so overall sales were over 1.7 million tons bigger than the previous week. The Chinese being in buying beans for new-crop is a feature we hopefully see more of. Local bids for me were posted at 45 cents over the Nov…15 cents wider on the week. Decatur’s basis for cash beans was 65 over the Nov…a nickel wider. On the river, basis is 50 over the August, which is a solid 25-30 cent drop from last week’s bid versus the July.
CASH BEANS Cash beans were heading down the elevator shaft before this report…and all the sudden found a bottom and bounced. These old-crop bean holders have been on quite a ride. There’s no doubt the bean market could take off and go higher yet…but I’d think someone who has beans and has the chance to get a dollar more for them might take a strong look. It’s a tough call either way and most likely those who read this who have old beans are sitting on mostly gambling bushels. However, it’s tough to let go of any bushels…no matter what the prices are. Good luck at the green felt table on these old beans. On thing is for sure…you did better on old beans from a cash perspective than I did if you’re still holding onto some.
2021 BEANS November 2021 beans had a great week as well, after flirting with sub-$13 beans the last couple of weeks. Nov21 settled the week at $13.99, up 3 ½ cents on Friday. We rallied $1.29 ¼ on the week. As we’ve talked about plenty so far, this rally wasn’t necessarily expected but is more than appreciated. When looking at new-crop beans, I am well aware we don’t know production just yet…it will likely be 4-6 weeks before we have a good idea on our home farms what to expect. However, $14 beans!? I can’t see a scenario where we don’t make money there. At the very least, I think producers should have some of their risk hedged off at these levels given just how much profit there is on the table. I’m not changing my production just yet as we are again too far from the critical time to know what we’re dealing with. I see no reason to sit on our hands with prices this high though.
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.