Market Analysis




Neutral numbers on big report day

By Doug Tenney, Leist Mercantile

Finally. USDA report day. Producers and traders alike have been long awaiting this day. Some call this day the most important USDA report day. One thing is for certain, USDA released a plethora of numbers today at 12 noon eastern time. 

Today, the numbers are not contained in one report. Rather there are 3 separate reports to review, including: The Monthly WASDE Report (supply and demand), Quarterly Grain Stocks, and Winter Wheat Acres. While not a separate report, traders will view with great interest corn and soybean production in Brazil and Argentina. The big unknown includes, how the market views all 3 reports in totality. 

After the noon report was released, corn was down 3 cents, soybeans down 1 cent, and wheat  down 15 cents. Just before the report, corn was down 3 cents, soybeans down 5 cents, and wheat down 4 cents.

One thing is almost certain today.… Continue reading

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Are beans going to $14 or will they trade back under $13 again?

By Jon Scheve, Superior Feed Ingredients, LLC

One year ago, the March ’21 soybean board was trading around $13, with projected U.S. carryout at 175 million bushels. Now beans are trading at slightly higher values, but U.S. potential carryout is at 340 million bushels. 

There are concerns U.S. export pace isn’t high enough to meet current USDA estimates, and upcoming reports may show carryout levels increasing even higher. Plus, Brazil’s current cash values suggest they have a 30- to 50-cent price advantage over U.S. beans for shipments about a month from now when their harvest is fully underway. This may mean current price levels are not sustainable longer term.

If U.S. export pace was reduced enough for carryout to increase to over 375 million bushels, that would be 200 million bushels (or 4 million metric tons) more than last year. While early South American estimates are predicting a reduction of 4 million metric tons, it’s important to remember that Brazil’s total production alone was projected to be 6 million metric tons more than last year only a month ago. … Continue reading

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Only YOU can prevent the spread of “free” storage

By Jon Scheve, Superior Feed Ingredients, LLC

Last week beans rallied on fund buying due in part to weather concerns in South America. After the 3-day holiday weekend, price direction will be largely dependent on weather forecasts and if funds want to keep buying.

Some are suggesting that Brazil’s yields have been reduced 2% due to lack of rain in the southern part of the country. However, even a 4% yield reduction would still match Brazil’s record crop produced last year. Plus, 70% of Brazil’s growing area is receiving adequate or better than normal moisture. Therefore, with what we know today, it may be a stretch to expect total production to drop below last year’s levels.

Technical analysis suggests futures have turned bullish as beans closed above $13, and some suggest continued dry weather in South America may send prices to $14. However, if next week’s weather forecasts include precipitation the market could pull back and technicals could suddenly look bearish again.… Continue reading

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Futures vs. cash

By Jon Scheve, Superior Feed Ingredients, LLC

The December USDA report is arguably the least important of the 15 reports released each year for corn and beans because there are rarely any changes made to U.S. balance sheets. This year was no different. The market will now be anticipating the January report, one of the three most important reports of the year, for price direction. South American weather conditions over the next month will also be a potential market driver.

Last week I mentioned I set prices on 40% of my 2021 production and I was asked if they were futures or cash sales. That was a great question. They are futures sales only that did not include any basis values.

I prefer to focus on futures separately because the cash price includes the basis level. I will eventually trade the basis level separately too, so I won’t know my cash price (i.e.,… Continue reading

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USDA punts in uneventful report

By Doug Tenney, Leist Mercantile

After the noon report was released, corn was down 4 cents, soybeans down 10 cents, and wheat  down 21 cents. Just before the report, corn was up 2 cents, soybeans down 6 cents, and wheat down 13 cents.

Typically, the December WASDE Report is a boring report. Today USDA will not be providing US corn and soybean yield and production numbers, a decades old trend. USDA will insert the same numbers they published November 9. Final US corn and soybean yield and production will be published with the January 12, 2022 WASDE Report.

Trade volume at the CBOT this week has been light ahead of today’s USDA WASDE Report.

Corn for ethanol was unchanged, US soybean exports were unchanged.  

US corn ending stocks for 2021-2022 were 1.493 billion bushels, last month, 1.493 billion bushels. US soybean ending stocks were 340 million bushels, last month, 340 million bushels.… Continue reading

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Spreads suggest undervalued corn needs to trade at $6

By Jon Scheve, Superior Feed Ingredients, LLC

Usually, the corn market is in a carry this time of year, meaning futures values are higher in later months versus current months. When the market is in a carry there is an incentive for those with storage capacity to hold grain for later use. 

Last week the December corn futures entered its delivery period and is now worth more than the March contract. This suggests the market wants corn sooner than later. Having an inverse in the futures market at this point in the marketing year is uncommon for corn and may signify corn is undervalued.

Is corn really undervalued?

Since harvest finished throughout the U.S., basis values have continued to climb much higher. Some end users in recent weeks have had to increase their basis bids by 20 cents or more to keep corn flowing into their facilities. Others have turned to free storage or fancy marketing gimmicks to encourage farmers to deliver their corn right now.… Continue reading

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2021 straddles

By Jon Scheve, Superior Feed Ingredients, LLC

Last week the markets dropped due to concerns over the new COVID variant throughout the world. Wheat, beans, crude oil, and the stock market opened lower and didn’t rebound throughout Friday’s trading session. On the other hand, corn, oats, and spring wheat started lower but rebounded higher during the shortened trading day.
Until more is known about the new strain’s effects, how it spreads, and if current vaccines offer protection, market direction is unknown.


Market action

In early August after watching the market swing between $6 and $5 throughout July, I was uncertain of market direction from August through November. I thought if corn was at or above $6 once harvest was over, it would be a good price to start selling more of my 2021 crop. However, at that time it seemed like a sideways corn market through November was the most likely outcome.
Therefore, on 8/2/21 when December corn was trading $5.45, and before the August USDA yield estimate was released, I made the following 2 straddle trades. … Continue reading

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Wheat update

By Jon Scheve, Superior Feed Ingredients, LLC

Historically, wheat has had an impact on corn prices. However, for the past several years it has been somewhat overshadowed by both corn and beans, as all wheat planted acres fell to historically low levels. Recently though, there has been a price shift and wheat suddenly became the market leader. Over the next few months corn may be following wheat’s price direction more closely.

Wheat closed out last week at $8.23, up $1 per bushel or 14% higher than where it was the day after the October USDA report. During the same timeframe, corn increased 58 cents, or 11% higher, closing out the week near $5.70.

What can wheat prices do?

The world wheat stocks-to-use ratio is at a 50-year low. The last time the wheat supply was this tight were the winters of ‘11/’12 and ‘07/’08. In both marketing years wheat prices eventually traded above $9.40.… Continue reading

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Can soybeans trade back to $13 or will they continue to slide lower?

By Jon Scheve, Superior Feed Ingredients, LLC

Last Tuesday January beans closed at their highest value since the October USDA report. Then the market dropped 50 cents in three days to end the week at the same value it traded a day after the October USDA report.

Can beans rally?

There are several factors that make a bean rally difficult right now. One, harvest reports suggest the U.S. bean crop is bigger than previously estimated. The Brazilian crop was planted quickly with adequate moisture. Combine that with large acres expected to be grown there and the trade suspects U.S. beans will have a lot of upcoming competition from the southern hemisphere by Valentine’s Day.

On the other hand, crushers are making healthy margins, which should keep a strong bid under the market and be a positive for beans. Also, Friday the USDA released their 10-year long term projection report that showed only a modest increase of 300,000 bean acres estimated to be planted next spring.… Continue reading

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Soybean yield drops, prices up double digits

By Doug Tenney, Leist Mercantile

The corn yield went up and the soybean yield went down. Huge price action took place for soybeans. Soybean exports down 40 million bushels, soybeans for crush unchanged. 

After the noon report was released, corn was 6 cents, soybeans up 25 cents, and wheat up 9 cents, Just before the report, corn was down 3 cents, soybeans down 4 cents, with wheat unchanged. 

Trade expectations for this report had both corn and soybean yields increasing. Soybean exports were expected to decline while ending stocks were expected to increase. Corn bulls were expecting demand to increase and ending stocks to decline. Note that USDA is often slow to even very slow to increase demand numbers even when the trade had expected increases for months. 

The U.S. corn yield today was 177.0 bushels per acre and the U.S. soybean yield was 51.2 bushels per acre. Traders were expecting both the corn yield and the soybean yield to increase.… Continue reading

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Will corn trade back to $7 or drift back to $5?

By Jon Scheve, Superior Feed Ingredients, LLC

Corn broke out of its recent trading range of 5.05-5.40 last week to close at 5.68. There are many variables impacting the market right now.

Ethanol

One reason for last week’s rally is that the ethanol grind rate is at its highest level in the last 4 years, while ethanol stocks on hand are at a 4-year low. Profit margins for ethanol producers are currently very strong. Going forward oil prices could impact the margins ethanol producers make and may take corn in the same direction as oil.

Fertilizer

Another reason for last week’s rally may be that global fertilizer prices are approaching levels almost triple to last year. This is creating some concern that fewer corn acres will be planted in the U.S. And even if all the acres do get planted, some think less nitrogen will potentially be applied in the U.S.… Continue reading

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Understanding the marketing tools in your toolbox

By Jon Scheve, Superior Feed Ingredients, LLC

Wheat prices continue to rally higher and seem to be helping pull corn prices back to the upper end of its 8-week trading range just under $5.40. Beans unfortunately cannot break out of their trend to lower values. For both corn and bean crops, yields continue to look very good across much of the country.  

Once the harvest is over and the grain bin doors are locked will farmers be in a hurry to sell at these values?

What is in your toolbox?

Last month I was on the farm helping with harvest. While fixing a broken gathering chain, I looked inside the toolbox at the many tools we carry on the combine to fix potential problems in the field. It reminded me of all the grain marketing tools we use to price the grain we are harvesting.

Just as most farmers know how to use their tools and wouldn’t go to the fields without them, farmers should be knowledgeable about the grain marketing tools available to them too.… Continue reading

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Can corn break out of the current trading range?

By Jon Scheve, Superior Feed Ingredients, LLC

With harvest in full swing around the country, the markets are watching. 

Corn outlook

Corn rebounded off the lows last week, but still it remains in the tight trading range of $5.10 to $5.40 it has been trading in for seven weeks. Some of this can be attributed to the recent wheat price rally in this country. Also, for the first time in several months China’s domestic corn price is lower than the price levels of Chinese domestic wheat. This could cause a demand increase for corn for feed should the price trends continue. 

Corn yield reports throughout the U.S. continue to be impressive and suggest the national yield average could still increase. If so, this could be an anchor to prices. On the flip side, Argentina’s spring planting is extremely dry and the potential for upcoming weather issues from November through March could provide the corn market some upside potential.… Continue reading

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Should I store corn or beans this year with limited bin space?

By Jon Scheve, Superior Feed Ingredients, LLC

With harvest in full swing, many farmers are asking me “which crop should I store if I am limited on space?”

What to store at harvest?

My farm operation has over 100% on-farm storage capacity, and I highly recommend most farmers should as well. Having 100% on-farm storage capacity not only simplifies harvest storage decisions and increases flexibility, but it also allows for more low-risk opportunities to maximize profit potential.

Despite the benefits, many farmers are still resistant to having more storage for a variety of reasons. Those farmers will need to analyze their own basis opportunities, market carry profitability and their operating note interest to determine what is more profitable for them to store at home. Following shows how I like to calculate each one.

Futures values do NOT matter when deciding which crop to store 

This runs contrary to what many farmers think.… Continue reading

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Neutral corn but bearish soybeans for Oct. 12

By Doug Tenney, Leist Mercantile

Both corn and soybean yields increased.

After the noon report was released, corn was 6 cents, soybeans down cents, and wheat up 3 cents, Just before the report, grains were all lower, corn  6 cents, soybeans 15 cents, and wheat 4 cents.

The U.S. corn yield today was 176.5 bushels per acre and the U.S. soybean yield was 51.5 bushels per acre. Traders were expecting the corn yield to decline and the soybean yield to increase. The average trade estimate for the U.S. corn yield was 176 bushels while the trade estimate for the U.S. soybean yield was 51.1 bushels. USDA last month had the U.S. corn yield at 176.3 bushels and the US soybean yield was 50.6 bushels.  

Corn production was 15.019 billion bushels, last month, 14.996 billion bushels. U.S. soybean production was 4.448 billion bushels, last month, 4.374 billion bushels.

U.S. corn ending stocks for 2021-2022 were 1.5 billion bushels, last month, 1.408 billion bushels.… Continue reading

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USDA Stocks Report highlights

Thursday’s report was pretty bearish for soybeans due to substantially more supply still remaining in storage than the trade expected. Even so, the market only decreased 40 cents after two days of trading, which is encouraging.

Estimates were not bullish for corn, but after this summer’s massive market inverses, the final numbers were not out of line either. Even after the bean news, corn managed to close on Friday no lower than where it was the day before the report was published.

The report showed fewer wheat bushels than expected, and after two days of trading, prices increased more than 50 cents. This may suggest wheat replaced more corn in rations last spring than originally thought. And this makes sense, considering wheat prices were very close to corn values in April and May. However, now that the wheat/corn price spread is much wider, it is unlikely that very much wheat will be used for feed this upcoming marketing year.… Continue reading

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Sept. 30 numbers bearish for beans

By Doug Tenney, Leist Mercantile

If you were expecting yield and demand changes for this report, you are in the right church, wrong pew. It will be a wait of days to see those changes. The next USDA WASDE report will be Oct. 12. However, if Congress cannot raise the debt ceiling timely, a U.S. government shutdown in the early days of October will prevent USDA reports from being released according to schedule.   

The USDA report today details quarterly US grain stocks as of Sept. 1. If corn and soybean stocks are vastly different than those detailed with the Sept. 10  WASDE Report, it means the Oct. 12  WASDE report could see changes in the supply and demand tables for those two crops. It also means 2020 production numbers were too higher or too low, with corrections to take place in October.

US grain stocks as of Sept. 1 were: corn 1.24 billion bushels, soybeans 256 million bushels, and wheat stocks 1.78 billion bushels.… Continue reading

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Did beans bounce off a seasonal low?

By Jon Scheve, Superior Feed Ingredients, LLC

The corn market wasn’t very exciting this week as the range in closing prices was only 12 cents. This was the smallest one-week trading range since late July.

Harvest is progressing rapidly with wildly variable yield reports due to disease pressure in parts of the country. The northwest Belt’s yields are coming in as predicted with the southern half of the belt having really good yield reports. With what I have seen so far, the current USDA yield estimate seems reasonable. In the last 16 years, the final yield number in January compared to the September estimates were split evenly being either higher or lower.

While basis values are pulling back in areas where harvest has started, it is still higher than normal for this time of year. Given the large basis market inverse over the last 2 months, this isn’t surprising and validates that most commercial storage and end user facilities were empty as harvest began.… Continue reading

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Ask the right questions about early yield results

By Jon Scheve, Superior Feed Ingredients, LLC

The market is trying to determine what the upcoming harvest yields will be. Early reports where harvest has started south of I-80 are positive. Generally, areas that received ample precipitation are experiencing better than average yields. However, there were also many pockets of dry weather too, so overall yields are unclear right now. In Illinois specifically, expected yields are varying more than previously estimated.

Still, more dry weather was experienced north of I-80 and west of I-35 where harvest won’t start for another week. Therefore, average yield estimates will remain largely uncertain a little longer.

Asking the right questions when discussing early yield results

As harvest begins to ramp up, early progress reports begin to spring up on social media and local talk among farmers at elevators or coffee shops can run rampant. I also receive many secondhand reports of corn and bean yields throughout the Midwest.… Continue reading

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Uncertainty in the Gulf, other market factors at play

By Doug Tenney, Leist Mercantile

Weather forecasts just before the middle of September suggested the Midwest would have two weeks of warm and dry weather. Certainly this will help speed Ohio’s corn and soybeans to maturity earlier than normal. Rainfall during July and August was extremely erratic south of I-70 in Ohio. Pickaway County even had some areas which failed to have a single rain event which totaled one inch or more during June, July, and August.

Fungicide use in corn and soybeans continues to ramp higher in recent years. The costs for product and its application are always a factor. The goal remains constant: keep the maturing crop as green as possible as long as possible. Research indicates 25% of the corn yield takes place after corn has reached the black layer stage. It is easy to see why the benefits of applying fungicides to corn has gained growing and rapid acceptance in recent years.… Continue reading

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