Market Analysis

Maximizing basis

By Jon Scheve, Superior Feed Ingredients, LLC

As the holidays approach, the market continues to watch South American weather and Chinese purchases. The Brazilian bean crop was planted later than usual, and precipitation has been lower than normal, but it could still turn out an average size crop. Argentina has been dry as was expected with La Niña present. Crucial crop development will be taking place next month. The export pace over the next couple of months to China will play a pivotal role in price directions.

Recently I set basis on 100% of my 2020 bean crop. With the news of low U.S. carryout, I had hoped basis would continue to rally. However, as the chart below shows, basis climbed until Nov. 1 and then went flat. The red X is the date and value I sold basis, picked up on my farm. The white line shows the best posted bids available since harvest in my area.… Continue reading

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Price averages and grain marketing strategies

By Jon Scheve, Superior Feed Ingredients, LLC

The market will be closely watching South America’s weather for the next 45 days. While there is weather premium currently in place, widespread dryness throughout the Southern Hemisphere will need to continue for corn to trade above $4.50 and beans above $12.

Grain marketing is challenging because everyone wants to sell at the top of the market; but no one knows when that will be. Some farmers hold on the entire year, waiting for a huge rally. However, many farmers sell incrementally during rallies to reduce risk, while leaving some crop available to sell if the market rallies further.

My grain marketing plan

Last week I discussed how my grain marketing plan priced me out early on corn, but left upside potential open on beans. This strategy allowed me to hit my summer goals of $4 corn and $10 beans even though when I set those goals prices looked unattainable.… Continue reading

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Neutral report for Dec. 10

By Doug Tenney, Leist Mercantile

There was some disappointment that soybean production for Brazil was unchanged. Argentina was down 1 million tons. Corn production for both was unchanged.

U.S. corn and soybean ending stocks along with SA corn and soybean production were the main features with this report. U.S. demand, especially exports, and South America weather have been the big price drivers for the past month.

Corn ending stocks were 1.702 billion bushels. Last month they were 1.702 billion bushels. Soybean ending stocks were 175 million bushels. Last month soybean ending stocks were 190 million bushels. Soybean crush was up 15 million bushels, soybean exports unchanged. Corn exports and ethanol demand were unchanged. China corn imports were up 3.5 million tons to 16.4 million tons with last month at 13 million tons.

The average trade estimate for U.S. grains ending stocks were: Corn 1.691 billion bushels, soybeans 168 million bushels, wheat 874 million bushels.… Continue reading

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Risk management with a marketing plan

By Jon Scheve, Superior Feed Ingredients, LLC

The market has slowed its upward movement as South American weather has seen adequate precipitation and Chinese purchasing has been less active. Ethanol may be running into some profitability issues as well. 

On a positive note, funds have reduced their long bean positions by 30% and the market only pulled back 50 cents. Should the funds find a reason to add more length to their positions it could cause a strong rally.

Risk management

Every farmer wants to sell 100% of their crop at the top of the market each year. However, having this as a marketing strategy goal is unrealistic. Working in the grain trading industry over the last 20 years, I’ve yet to meet one person who can do this year after year. In general, I have found the best trading strategies work well 70% to 80% of the time, while the worst strategies work best about 10% to 20% of the time.… Continue reading

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Big sales continue to drive markets

By Doug Tenney, Leist Mercantile

Mid-November, corn and soybean harvest activity was quickly winding down for many Ohio producers. The first 10 days of November provided great weather as 70 degree daily highs enabled that final push for many to complete the harvesting of soybeans. Corn moisture levels reached 18% to 20% as they finally were able to move away from the mid 20s and higher, which had plagued many producers well into the final days of October. Vomitoxin was an unwelcome reality for many in Ohio as it became just one more nuisance for the 2020 growing season. 

The monthly WASDE Report of Nov. 10 provided a welcome bullish surprise for grain producers across Ohio and the Midwest. Both corn and soybean production and yields had been expected to decline with the hope of seeing a report friendly for grain prices. Those numbers were reduced more than expected with December CBOT corn closing at $4.23, up 15.5 cents.… Continue reading

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Climbing corn prices

By Jon Scheve, Superior Feed Ingredients, LLC

The corn market continues to trade at new high levels for the year. This is only the third time in 25 years that the December futures contract high occurred after September 15.

Why do corn prices keep going up?

A big rally this fast requires a “perfect storm” of unexpected events happening at the same time. In this case, carryout predictions among market participants for the 2020 crop have decreased from nearly 3.5 billion bushels in the spring to under 1.5 billion this month. A 2 billion-bushel drop in such a short time is unprecedented. The trade has been known to be a bit extreme with their prediction compared the USDA’s numbers, however even the USDA has shown a record drop this year as well from 3.3 billion in the May report to 1.7 billion earlier this month. For reference, in 2012 the USDA carryout reduction was only a 1 billion-bushel drop from spring until after harvest.… Continue reading

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Soybean boom

By Jon Scheve, Superior Feed Ingredients, LLC

With beans trading above $11, many in the trade are wondering where futures are headed next. In the last 9 years that beans managed to hit $11 in a marketing year, prices went on to quickly trade above $12. Technical signals and fundamentals both are suggesting it is a real possibility. The following summarizes some big factors impacting bean prices right now.

Brazil imported U.S. beans

When the world’s largest bean producing country buys product from their chief competitor, it raises heads….and prices.

Many U.S. farmers were selling beans through harvest

On Oct. 6 corn was only $3.80 but beans were trading $10.50. This meant the market was encouraging farmers to sell beans off the combine and store corn during harvest. Plus, grain traders throughout the Midwest tell me that storage piles at ethanol plants are limited and many bean processors reported extremely long lines during harvest.… Continue reading

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November WASDE Bullish

By Doug Tenny, Leist Mercantile

USDA today projected the US corn production at14.507 billion bushels and the US corn yield at 175.8 bushels per acre. Last month US corn production was 14.722 billion bushels and the yield was 178.4 bushels per acres. This month the US soybean production was 4.170 billion bushels and the US soybean yield was 50.7 bushels. Last month the US soybean production was 4.268 billion bushels and the US soybean yield was 51.9 bushels per acre.

Corn ending stocks were 1.702 billion bushels, down 331 million bushels. Soybean ending stocks were 190 million bushels, a decline of 100 million bushels. Corn exports up 325 million bushels with soybean exports unchanged. China corn imports up 6 million tons to 13 million tons.

Shortly after the report was released, corn was up 11 cents, soybeans up 27 cents, and wheat up 10 cents. Just before the report release, corn was up 4 cents, soybeans up 13 cents, and wheat up 8 cents. … Continue reading

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China buying bolsters prices

By Doug Tenney, Leist Mercantile

The strong China buying bonanza for U.S. soybeans and U.S. corn the last several months has been instrumental in the price gains seen for January soybeans from July to the end of October. Summer lows were $8.40 for January CBOT soybeans. December CBOT corn had a low this summer of $3.20. During much of the early growing season there was much press about China not meeting the goals of purchasing $36 billion of U.S. agricultural goods. By the end of October it was estimated they had purchased at least 30 million tons (1.1 billion bushels) of U.S. soybeans. 

In addition, analysts are suggesting China could be purchasing 20 million tons of U.S. corn. China recently issued additional corn import licenses, above the first round of import licenses of seven million tons. They were a buyer of U.S. corn numerous times in October. Many are anticipating U.S. corn and U.S.… Continue reading

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China purchases boosting corn prices

By Jon Scheve, Superior Feed Ingredients, LLC

Two months ago, farmers hoped corn prices would stay above $3. Two weeks later, many feared $3.50 would be the high before harvest. One month ago, corn hit $3.75 before rolling back to $3.60 and many felt the high for the season might have been posted. Then Friday, corn traded to $4.20, leaving everyone questioning where the top will be.

What is causing this?

An unexpected increase in China’s supply needs is a major reason. For the last 30 years, China never imported more than 7 million metric tons (MMT) per year. With 1 MMT equaling about 40 million bushels, that’s equal to around 280 million bushels.

However, in the last 2 weeks, reports suggest that China will need to import at least 30 MMT over the next year to maintain supply needs. That would be 1 billion bushels from around the world more than estimated just 2 months ago.… Continue reading

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Will market factors keep feeding the bull?

By Doug Tenney, Leist Mercantile

We are fortunate to have a field of soybeans or corn each year at the edge of our backyard. On a recent hectic Thursday, with a list of “home” work yet to go, Cindy chose to take a short break on the back porch swing. Then she heard a combine. She said, “I ditched my list to soak up every minute of watching the harvest. I’ve spent money for tickets to see things nowhere nearly as satisfying and fascinating.” A one-time-a-year production as a result of the hard work, planning, and amazing dedication of the lovers of the land. What a gift!

Weeks long soybean planting delays in Brazil continued to make headlines in mid-October. Dry conditions for Brazil continue to be problematic as timely rains are not taking place during the September and October planting season. Those dry conditions will prevent Brazil from reaching the typical January shipping pace of 6.5 to 8 million tons of soybeans into China.… Continue reading

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Neutral numbers for Oct. 9

By Doug Tenney, Leist Mercantile

Will the bullish surprise of September 30 be matched with another bullish report today? There was a quick spike higher on soybeans with ending stocks down, but the yield is unchanged. The spike to 29 cents higher for soybeans quickly disappeared as traders realized the yield was unchanged.

That September report was a game changer as it erased months of negative moods for grain prices. Price activity that September day was unprecedented, closing prices had corn up 14 cents, soybeans up 30 cents, and wheat up 28 cents.

USDA projects the US corn yield at 178.4 bushels with the U.S. soybean yield at 51.9 bushels. Corn ending stocks were 2.167 billion bushels, down 336 million bushels. Soybean ending stocks were 290 million bushels, a decline of 170 million bushels. Grain imports into China has soybean imports of 100 million tons, up 1 million tons with corn imports of 7 million tons, unchanged.… Continue reading

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Is forward selling next year’s corn a good idea?

By Jon Scheve, Superior Feed Ingredients, LLC

The USDA surprised everyone this past week with a 250-million-bushel carryout reduction in corn. In the last 20 years, this was the largest decrease on record, and only the third time carryout fell more than 50 million bushels.

Three factors likely impacted these carryout estimates — less acres were planted in 2019 than previously estimated, yields were probably lower than originally thought, and feed demand could have been higher than previously believed. This revised estimate drastically changes the upcoming 2020 carryout situation. While many were anticipating a record carryout only a week ago, now carryout may be within a “normal” range. A normal carryout could also mean “normal prices,” a welcome relief after so much “sub $3 futures fear” this summer.

The USDA supply and demand report in the next week should shed more light on where price ranges will be for the winter now that we have this new stock report.… Continue reading

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Volatile day following USDA reports

By Doug Tenney, Leist Mercantile

With the USDA report today for grain stocks numbers on Sept. 1, 2020, corn stocks of 2.0 billion bushels, soybeans 523 million bushels, and wheat 2.16 billion bushels.

Corn, soybeans, and wheat stocks were all below trader estimates, that is the bullish news today. Grains stocks trade estimates were: corn 2.250 billion bushels; soybeans 576 million bushels; wheat 2.242 billion bushels. Last year at this time, stocks were: corn 2.221 billion bushels; soybeans 909 million bushels; wheat 2.346 billion bushels.

In addition, traders had expected changes to the 2019 corn and soybean production numbers. Shortly after the noon release, corn was up 9 cents, soybeans up 22 cents, and wheat up 20 cents. Just before the report, corn was unchanged, soybeans up 9 cents, and wheat up 11 cents.

The stocks report today had been expected to be boring. However, to put the numbers in perspective and examining reports back to 2005, traders have missed the corn number compared to USDA as much as 17%.… Continue reading

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What’s in your marketing toolbox?

By Jon Scheve, Superior Feed Ingredients, LLC

Given current perceived carryout estimates, corn prices seem a little high for the start of harvest. While some suggest carryout could fall to levels similar to the past couple years, it will likely take more demand or a big supply reduction to keep prices as high as last week until after harvest.

The bean market has been running hard and is finally getting tired. It needed to pull back some. Exports have been good, but they will need to continue to be strong. Focus will start to shift to weather in South America very soon.

What is in your toolbox?

This weekend I was on the farm helping with harvest. While fixing a broken sickle, 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.… Continue reading

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Building on $10 beans

By Jon Scheve, Superior Feed Ingredients, LLC

The buying continued this week, with all grains posting healthy gains. Beans continued their rally and are up $1.80 per bushel from Aug. 10. Several reasons for the huge run up are the low potential yields, big purchases by China and possible adverse weather in South America during their upcoming growing season.

Corn seems to be along for the ride. There have been some nice export sales, but corn yield potential looks pretty good at this point.

Early harvest reports

As the corn harvest begins, early observations suggest that areas that looked very good in July haven’t been impacted much by the late August heat. Even the areas that were dry in both July and August are seeing yields generally in line with what farmers were expecting.

Early bean harvest reports are limited and show wide-ranging yields. So far, many farmers are disappointed with early yields, a few say it’s better than average.… Continue reading

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September report neutral to bullish

By Doug Tenney, Leist Mercantile

A plethora of numbers were released today with the USDA WASDE report at 12 noon ET.

No major surprises today.

Key numbers to watch today included the U.S. corn and soybean yields as well as corn and soybean imports into China.

USDA projects the U.S. corn yield at 178.5 bushels with the U.S. soybean yield at 51.9 bushels. On grain imports into China, soybean imports are pegged at 99 million tons and corn imports of  7 million tons.

Traders were already expecting a volatile day hours before the report. Shortly after the report was released, corn was up 3 cents, soybeans up 16 cents, and wheat down 2 cents. At the 8:45 a.m. grains pause, corn was up 2 cents, soybeans up 6 cents with wheat up 1 cent. Just before the report release corn was up 2 cents, soybeans up 10 cents, and wheat down 1 cent.… Continue reading

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Will beans hit $10?

By Jon Scheve, Superior Feed Ingredients, LLC

This week a bean trader told me, “it’s not a matter of if beans hit $10 but when.” With a little 2019 futures position left to sell, and all of my 2020 bean crop unsold, this was music to my ears.  However, it brings back memories from 14 months ago, when the potential for $5 corn seemed like only a matter of time.

How realistic are $10 beans?

There are so many factors affecting prices, that it’s impossible to accurately predict when the high will occur.  Instead, I prefer to make a list of why prices could go either direction, and then evaluate the likelihood of each scenario happening.  This helps me when making grain marketing decisions for my farm.

Reasons to be bullish are:


The Fed said keeping the economy running and bringing unemployment levels down were a higher priority than keeping inflation in check right now. … Continue reading

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China ramps up corn and soybean purchases

By Doug Tenney, Leist Mercantile

China was an active buyer of U.S. corn and soybeans during August. That trend continued into the first week of September. It appears their appetite for U.S. grains is large. The concern of China meeting their Phase 1 trade deal agreement of $36 billion of U.S. agricultural goods in the first year of the agreement garners significantly less attention than it did earlier this summer. The amount of U.S. corn China will purchase in the current marketing year ending next Aug. 31 continues to increase. Current USDA estimates had China purchasing 7 million tons of U.S. corn. Yet, just days into the new marketing year the first week of September, they had already purchased a total of 9 million tons of U.S. corn. Estimates of total corn imports into China are as high as 15 million to 20 million tons. The U.S. share could reach 12 million tons. … Continue reading

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Making the most of unprofitable prices

By Jon Scheve, Superior Feed Ingredients, LLC

The market continues to go nowhere. Iowa’s storm damage doesn’t seem large enough to impact overall prices, and while dry weather pockets may hurt bean yields some, it’s unlikely to affect much of the corn this late in the growing season.

As harvest approaches, farmers will be clearing old crop out of bins, which may keep downward pressure on prices for another month.

With prices at unprofitable levels, I made 2 recent trades that helped me pick up some added premium that I’ll add to previous trades. These kinds of trades can help me maximize my profit potential in a down market.

Straddle trade

On 4/22/20 when September corn was trading at $3.27, I sold a $3.20 straddle (selling both a $3.20 put and a $3.20 call) on 10% of my 2019 production collecting 43 cents. As I was selling the straddle, I bought a $2.90 September put for 7 cents. These… Continue reading

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