Market Analysis




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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Has the corn market established $5 as this season’s price floor?

By Jon Scheve, Superior Feed Ingredients, LLC

The USDA report found an additional 246 million bushels to add to the production side of the balance sheets. Plus, the export pace for last year’s crop was not met, which added another 70 million bushels to the bottom line of this upcoming marketing year supply. All of this should have been bearish news; however, the market bounced off the lowest value since April 13 minutes after the report was released.

Technicals

When the USDA provided bullish corn news in August there was an initial price jump, but ultimately the market closed nearly 20 cents off the highs that day and has worked lower ever since. After bearish news Friday the market closed 20 cents off the lows for the day. From a technical standpoint, December corn closed above the 200-day moving average which was around $5.05. Also, corn traded to the 50% retracement level of the move between last summer’s low to this May’s high before turning around and trading higher.… Continue reading

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Bearish corn, bullish soybean numbers Sept. 10

By Doug Tenney, Leist Mercantile

In the days leading up to this USDA report day, traders were looking for both corn and soybean yields to increase from the August report. In addition, U.S. corn acres were expected to be up one million acres and U.S. soybean acres near unchanged.

This report was to include FSA acres into the mix of publishing supply and demand tables for corn, soybeans, and wheat. In the past, it was very common to have those FSA acres released after the October WASDE report. It is a rare event to see the FSA acres released in September. The FSA acres are supposed to be released AFTER the WASDE report. For whatever reason, however it happened, someone hit send on Wednesday afternoon this week, releasing those FSA acre numbers. 

After the noon report was released, corn was up 2 cents, soybeans up 12 cents, and wheat down 3 cents.… Continue reading

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Will corn pull back to $5? Are beans finished going down?

By Jon Scheve, Superior Feed Ingredients, LLC

The pull back in prices last week is partly due to concern with the damage Gulf export facilities have suffered in the New Orleans area. One elevator will likely be down for 6 months, but the remaining 7 or 8 facilities will hopefully be operational as soon as power is restored, and minor damage is repaired. While there may be some missed export opportunities in the short-term, it is still early in the exporting season. If most of the facilities are up and running by middle or late September, there should be minimal impact.

Some market participants believe that planted corn acres for the 2021 crop will be increased in the September report. Others believe the national yield average will improve at least one bushel per acre from the August report. If both turn out to be true, it could mean 250 million more bushels of carryout for the 2021 crop which would be bearish prices from these levels.… Continue reading

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Oats don’t know and lumber prices have no bearing on grain values

By Jon Scheve, Superior Feed Ingredients, LLC

Corn and beans continue trading within tight ranges. Yield estimates seem less certain than usual for this time of year. Therefore, a sideways market may be likely until the September USDA report is released. 

With so much uncertainty, there are those searching for some sign of where the corn and bean markets are headed. This includes trying to look for similarities in other markets, like lumber and oats. The following looks at each case and illustrates why other market similarities are more likely coincidences than correlated.

Correlation between the lumber market and the corn market

Lumber futures awareness entered our daily lives about one year ago when sheets of plywood doubled in price within a few months and seemed to be the new toilet paper shortage craze. Lumber prices rallied more than any other commodity for the first few months of 2021, but then fell dramatically since May as seen in this chart below:

Some traders are concerned what happened to lumber could happen to grain prices too.… Continue reading

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Corn and soybean price outlook

By Jon Scheve, Superior Feed Ingredients, LLC

Corn Outlook

In 12 of the last 15 years December corn futures have had a pullback in August or September. This seasonal trend is usually due to several factors:

  • By this time of year, weather’s impact on corn yields is limited as the crop approaches maturity
  • Farmers tend to sell off the last of their old crop still sitting in the bins
  • Harvest is approaching, so an influx of new supply will be available soon.

This year is no different. A few farmers still clinging to the hope of record prices are likely moving the remaining corn out of their bins as we approach the harvest of a new crop. This is likely leading to a small pull back in the market.

National yield estimates are still uncertain as the eastern belt may still potentially increase yields while late-season dry weather has negatively impacted the west.… Continue reading

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Prices are looking up

By Jon Scheve, Superior Feed Ingredients, LLC

Last week, the USDA decreased the expected national corn yield more than what the trade was expecting. There have only been 4 years in the last 15 when the estimated final yield was higher in the January report versus August. None of those years had weather conditions like what we have witnessed this year. Some in the trade still expect yield estimates to continue falling through harvest. However, even at current levels it is positive for prices longer term.

The USDA decreased feed and export demand to help offset the lower yield, but corn demand should remain strong through the next marketing year. This is because Brazil’s yield estimates were also decreased this month and the global wheat stock estimates were also scaled back. 

The drop in Brazil’s yield means that corn exports that normally would come from the Southern Hemisphere may have to be shifted to the United States.… Continue reading

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Bullish report, both corn and soybean yield below expected

By Doug Tenney, Leist Mercantile

The U.S. corn and soybean yield numbers will be easy talking points with the USDA report today. 

However, look beyond those numbers. Instead, focus your attention on the corn tables. First, look beyond the U.S. for the Brazil corn production estimate. Second, back to the U.S. for the two numbers of 2021-22 total corn demand and corn ending stocks.  

Brazil corn production was 87 million tons. Last month USDA was 93 million tons. Total US 2021-22 corn demand was 14.650 billion bushels. Last month USDA was 14.840 billion bushels.

US 2021-22 corn ending stocks were 1.242 billion bushels. Last month USDA was 1.432 billion bushels.

The U.S. corn yield today was 174.6 bushels per acre and the U.S. soybean yield was 50.0 bushels per acre. The average trade estimate for the corn yield was 177.6 bushels while the trade estimate for the soybean yield was 50.4 bushels.… Continue reading

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Massive spreads between posted bids and prices

By Jon Scheve, Superior Feed Ingredients, LLC

Corn futures continue to trend sideways, as the market waits for the Aug. 12 USDA yield estimate. This week saw the first fields of the 2021 corn harvest begin in several southern states. 

As a result of harvest beginning in the South basis values will come under pressure. Old crop corn basis levels have been dropping over the last few weeks, but many basis bids throughout the U.S. still hover around +60 to +70. During the middle of harvest most of these same locations will likely be bidding -40 to -30. This means there will likely be a $1 per bushel decrease in basis values between now and the end of September regardless of what futures prices do. While this drop is likely slow for the next week or two it will begin to drop rapidly as the harvest pushes northward.

This past week the Gulf barge market, which is the most widely traded basis in the country, had bids and offers as wide as 60 cents.… Continue reading

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Plenty of market uncertainty moving into August

By Doug Tenney, Leist Mercantile

As we move into August, we would normally be seeing much higher consensus about expected U.S. corn and soybean yields. Nothing could be further from the truth for this unusual growing season in the U.S. For weeks many have called this a growing season of the “haves versus the have nots.” Consistent rains in June and early July in the eastern Corn Belt states of Illinois, Indiana, and Ohio have many producers expecting above average corn and soybean yields. Several of those rains were broad in coverage.  

Conversely, the northern Corn Belt states of Minnesota, South Dakota, and North Dakota would be called the “have nots,” with poor yields, as they have consistently during June and July experienced numerous hot and dry periods of a week or more. Rains then followed, broad in scope and geographic coverage for several states, but severely lacking in significant amounts of rain of one inch or more.… Continue reading

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Storage and freight costs

By Jon Scheve, Superior Feed Ingredients, LLC

Hot and dry weather is expected for the next week or two, but forecasts vary on how dry August will be. Any weather shift could shake up the market.

Debates continue if the areas where crops look great can make up for the northwest Corn Belt’s reduced yields due to persistent hot and dry weather. The market still has a premium price in place, if overall trendline yields are produced.

Some parts of China received 30 inches of rain over 2 days, but so far, it is unlikely to affect total production much as the corn grown in those flooded areas is not that significant. A concern might be that nearly 1 million hogs and chickens might have been lost in the region which could hurt demand.

Brazil has been battling a drought for several months and now some areas have had frost. Therefore, yields are trending lower, and Brazil is buying some corn from Argentina.… Continue reading

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Why inverse markets mean farmers should sell their grain now and not later

By Jon Scheve, Superior Feed Ingredients, LLC

The USDA had no surprises for corn and beans last week. Now the market will wait for national yield estimates in the August USDA report. A quarter of the Corn Belt is dry, so the next 2 weeks will be critical for the national yield outcome and price direction. The price potential range is still very wide.

Carry versus inverse markets

A market carry is when a nearby futures contract month’s price is lower than a later month’s price. On Friday, December corn closed at $5.52 while March closed at $5.59. This indicates corn supply during and after harvest is expected to be higher than demand usage, so the market is encouraging hedgers to store the grain for later use by paying them the carry spread.

Inverses are when the nearby futures contract month’s price is higher than a later month. For instance, on Friday September corn was $5.56 while December was $5.52.… Continue reading

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Basis and spread trades can boost the bottom line

By Jon Scheve, Superior Feed Ingredients, LLC

Another week of good weather for most of the Corn Belt has put downward pressure on prices. Corn prices declined each day this week and is nearly $1 per bushel lower than last week’s market high. The market seems to be trading a national average yield of 177 right now. The market will be keeping a close watch on rainfall in the Dakotas and western Minnesota over the next two weeks and be waiting for the August USDA report a month from now when national yield is usually updated.

Since the end of last year’s harvest, my entire 2020 corn crop was priced with futures along with half of my 2019 corn crop, which was priced with futures from the previous summer. I had been keeping all this in on-farm storage and was monitoring the basis market around my farm and across the U.S.… Continue reading

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USDA numbers bullish for wheat, negative for corn and beans

By Doug Tenney, Leist Mercantile

Expect within 20 minutes of the noon report release for market’s focus to return to central U.S. and world weather. Traders are also expecting Brazil’s corn production to decline. 

Shortly after the report was released, new corn was up 2 cents, new soybeans up 4 cents, and wheat up 13 cents. Just before the report release, new corn was up 11 cents, new soybeans were up 12 cents cents, and wheat was up 7 cents. 

Corn and soybean yields should see little changes compared to the June report. Yield numbers should start to see changes reflecting weather conditions beginning with the August 12 report.

Today, expect market reaction to the numbers to be volatile and quick. Numbers that are a surprise could easily move corn and soybeans multiple dimes within 3 minutes.

The tables below detail US production, yields, and ending stocks:

USDA 2021-22 US Corn, Soybean, Wheat Production and Yield                                      (Production is Billion Bushels)                                                                                                             (Yield is Bu/Acre)
 USDAAverageRange of USDA
 July 12 EstimateEstimatesJune 10 
Corn Production15.16515.11514.863-15.27514.990
Corn Yield179.500178.800177.0-179.5179.500
Soybean Production4.4054.3944.335-4.4054.405
Soybean Yield50.80050.70050.000-50.80050.800
All Wheat1.7461.8471.724-1.9471.898
All Wheat Yield45.800  50.700
USDA 2020-21 US Grain and Soybean Ending Stocks (Billion Bushels)
 USDAAverageRange of USDA
 July 12 EstimateEstimatesJune 10
Corn1.0821.0881.000-1.2571.107
Soybeans0.1350.134.120-.1490.135
USDA 2021-22 US Corn, Soybean, and Wheat Ending Stocks (Billion Bushels)
 USDAAverageRange of USDA
 July 12 EstimateEstimatesJune 10 
Corn1.4321.4021.057-1.5421.357
Soybeans0.1550.148.120-.1650.155
Wheat0.6650.729.575-.8090.770

U.S.… Continue reading

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