Some market answers are coming soon…

By Jon Scheve, Superior Feed Ingredients, LLC

This past week many funds exited their long grain positions. Some in the market were concerned over a worldwide economic recession and the two-week weather forecast that suggests widespread good growing conditions. 

Basis and spreads

Record basis levels throughout the western Corn Belt suggest farmers are not selling cash corn. That’s why end users are increasing bids because they likely do not have all their July needs covered. The July corn futures spread between September and December also increased, indicating strong demand for the immediate shipment of corn. 

Both factors have likely forced commercial facilities to sell out of all remaining grain ownership, which means any grain still left in the U.S. is likely owned by farmers who have not priced corn stored in the bins. 

Farmer vs. end user

Farmers who still have unpriced grain are telling me they are not selling anything until they know more about weather conditions in mid-July. Market inverses in the U.S. suggest most end users do not have much coverage on for August. Depending on how quickly farmers sell their remaining grain after July 4^th, the next 6 weeks could get very interesting.

Ukraine

The ongoing conflict in Ukraine may have been minimized by trend traders this past week. Missile strikes this past week damaged several large vessel loading facilities in the Odessa region, where 50% of Ukraine’s grain is exported from. Plus, there is still no progress in talks between the two countries. Even if something could be negotiated, it would take another month before ships would be able to load and leave. If grain cannot be moved out of Ukraine by ship, there will be global supply issues and the prices the market is currently trading are not enough to ration demand long term.

Biggest report of the year?

The June 30^th USDA acreage report is probably one of the most important and anticipated reports of the year, because it will give the market more price direction clarity. After it is released, the market will focus on corn pollination and the weather after July 4^th.

Bottomline

There are a lot of unknowns ahead, including acres, weather and war. Some answers to these questions will become available over the next couple of weeks. With that, price direction will also become clearer.

Please email jon@superiorfeed.com with any questions or to learn more. 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.