Crops looking average with pockets of damage

It appears the market is just waiting for the updated USDA corn yield estimate on 8/10/17. Once published, the market will debate why it’s incorrect. Generally the market is trading corn based upon a national yield assumption of around 165-166. With a surprise below 165, $4 corn is a possibility again. An estimate above 166, and $4 is unlikely until a future report shows significant decreased yield.

In the past two weeks I have travelled 1,500 miles around the Corn Belt.

Crop conditions — Southeast Nebraska to Minneapolis

Following highlights some observations during my drive from Beatrice, Neb. to Minneapolis, Minn.

Beatrice — Our farm’s dryland fields missed some needed rain the past few weeks. While fields with less drought-tolerant seed indicate some significant yield drag, fields with drought-tolerant seed are showing average yields. Irrigated fields are still producing well.

Council Bluffs, Iowa — The crops looked good. There were very few signs of any significant stress.

When I drove East to Des Moines, along I-80, I noticed some signs of stress. Bad soil had more damaged corn. Good soil showed fair corn crops. Generally speaking, fields weren’t as green this year compared to the same time last year.

Des Moines to Minneapolis — My drive concluded with a run north from along I-35. The crop conditions improved mile by mile from Ames.

Beans along this route looked good. I didn’t see any areas of concern. If adequate moisture continues for the next seven days, I would expect average yields.

Crop conditions – Southern Indiana and western Ohio 

I also travelled extensively throughout the southern half of Indiana this week giving marketing presentations to farmers. Following are some observations:

South of I-70 from Washington, Ind. to Indianapolis, IN – Corn looked mostly good, with occasional water damage. Beans looked amazing. I’ve never seen beans so tall. Several farmers mentioned they were worried the bean plants were wasting too much energy on plant growth at the expense of reproduction.

North of I-70 along the IN/OH border I began to notice damage from excessive water. Some fields had apparent drainage issues and it was clear where the tile lines ran. I had previously heard about bad corn crop condition for this area, but in my opinion, fields weren’t as bad as I expected. Beans on the other hand didn’t look as good. I would estimate 15% of fields had extensive damage in this area.

Wapakoneta, Ohio to Cincinnati (I-75) — This area looked normal for corn and beans.

Cincinnati to Indianapolis (I-74) – This area also looked great for both crops.

I would summarize crop conditions throughout the areas I travelled this past week to be mostly average with pockets of damage.

 

Current corn and bean positions

Considering the number of trades I do, it’s important to pull all my numbers together occasionally to be sure my marketing plan is pacing well and I’m meeting operation profit goals. I break out my positions by each section of my marketing plan because they all work independently of each other. I want to make sure I’m maximizing my profit potential in every category:

  • How much have I sold for each crop year
  • CBOT average price
  • Market carry premium
  • Any premium or losses from options trades
  • Basis (for corn picked up at the bins on my farm in Beatrice, Neb.)
  • Cash Price is the sum of every part of my marketing program
POSITION – CORN 2016 2017 2018
Corn Sold – Futures

98%

15-40%

25%

CBOT Price Average

$3.94

$4.00 – $4.20

$4.18

Market Carry

$0.23

$.24 est

$.24 est

Options & spread profits $0.26 unknown n/a
Final hedge price

$4.43

$4.24 – $4.44 est

$4.42 est

       
Basis on Farm (Beatrice, NE)

($0.46)

$-.30 est

$-.30 est

Final Cash Price on my Farm $3.97 $3.94 – $4.14 est $4.12 est

 

Corn notes:

  • 2016 — I’m nearly done pricing my corn with futures. I only need to set basis and deliver on another 33% of the grain, which is sitting in my bins on the farm. I’m now waiting for a good basis opportunity.
  • 2016 basis for my farm has ranged from -.40 picked up to as low as -.60 this year. In years past this has been 20 to 30 cents better than this year.
  • 2017 — My CBOT price average shows a range because my final price will vary depending on where futures are landing at on Thanksgiving. At that point, I’ll know which options positions were executed, leaving me with a sold position (or not).
  • 2017/2018 Basis — I don’t have any basis set for either crop year. The number shown is the average of my post-harvest basis prices for the last 10 years.

 

POSITION – BEANS 2016 2017
Beans Sold – Futures

100%

100%

CBOT Price

$9.30

$9.85

Market Carry

$0.47

$.30 est

Final hedge price $9.77 $10.15 est
     
Basis on Farm (Beatrice, NE)

($.70) est

($.40) est

Final Cash Price on my Farm $9.07 est $9.75 est

 

Bean notes — 100% of my 2016 production is still stored, waiting for a basis opportunity. Basis levels near my farm haven’t been very good compared to previous years. Hopefully, we go back to more traditional values in the upcoming year.

 

Jon grew up raising corn and soybeans on a farm near Beatrice, NE. Upon graduation from The University of Nebraska in Lincoln, he became a grain merchandiser and has been trading corn, soybeans and other grains for the last 18 years, building relationships with end-users in the process. After successfully marketing his father’s grain and getting his MBA, 10 years ago he started helping farmer clients market their grain based upon his principals of farmer education, reducing risk, understanding storage potential and using basis strategy to maximize individual farm operation profits. A big believer in farmer education of futures trading, Jon writes a weekly commentary to farmers interested in learning more and growing their farm operations.

Trading of futures, options, swaps and other derivatives is risky and is not suitable for all persons. All of these investment products are leveraged, and you can lose more than your initial deposit. Each investment product is offered only to and from jurisdictions where solicitation and sale are lawful, and in accordance with applicable laws and regulations in such jurisdiction. The information provided here should not be relied upon as a substitute for independent research before making your investment decisions. Superior Feed Ingredients, LLC is merely providing this information for your general information and the information does not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision. The contents of this communication and any attachments are for informational purposes only and under no circumstances should they be construed as an offer to buy or sell, or a solicitation to buy or sell any future, option, swap or other derivative. The sources for the information and any opinions in this communication are believed to be reliable, but Superior Feed Ingredients, LLC does not warrant or guarantee the accuracy of such information or opinions. Superior Feed Ingredients, LLC and its principals and employees may take positions different from any positions described in this communication. Past results are not necessarily indicative of future results. He can be contacted at jon@superiorfeed.com.

 

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