Weekly Market Recap and Tom's Take July 17, 2020

Bradford latimer plot harvest

MARKET UPDATE:

September corn futures gained 2 3/4 Friday, ending at $3.33, but down 4 1/4 from last Friday’s close. December corn gained 2 1/4 today, ending at $3.39 ¾. That is 5 lower week-on-week.

August soybeans were up 4 1/2 today, closing at $8.98, gaining 10 3/4 from last Friday. November beans were up 4 at the close, at $8.95, and up 4 1/4 for the week.

The Big Story this week was way more about sales to China than the weather. Throughout the week, we received updates about large sales being made to China for old crop and new crop. Most of the excitement was about corn being sold in quantities large enough to grab headlines. There were also sales of soybeans made. From last Friday forward, we’ve seen several “flash” sales reports. This week alone, we’ve seen 86.9 million bushels of corn sold to China for new crop. Last Friday, there was another BIG sale announced, and adding that in brings us just shy of 150 million bushels of corn bought by China in 5 business days. This week they also bought 38.2 million bushels of soybeans, with 33.3 of that for new crop. Again, going back to last Friday, they bought 11.75 million bushels of WHEAT. So, when you tally it all up, they purchased 199.5 million bushels of corn, wheat, and soybeans during those 5 days. And these are just the sales attributed to China. There were several other sales to “unknown” in the past week as well. Whether or not some of those were for China, this has been A VERY BIG week for purchases by them, especially when compared to their historical corn purchases. A lot of reports are saying that it now appears that they have met their commitments for Phase I purchases from the U.S.

Now, that said, we are returning to high temps over the next several days. Weather is still going to be an important factor for the rest of the growing season. Continue to keep an eye on changes to forecasts.

For more items impacting the market this week, tune into our free weekly Bull Bear Banter podcast: https://landusexperience.podbean.com/

Tom’s Take:

For some time now, we’ve been encouraging producers to enter into “forward” sales. By that, I mean something beyond the next 30 to 60 days. Our research has shown that by and large, producers do a better job of marketing grain when they are pricing well ahead of delivery. This is especially true in years where there are large supplies, and even more true with large Ending Stocks numbers.

A farmer once told me they never take anything to town that isn’t already priced in some fashion. They just don’t pay commercial storage. But, I know that they do a really good job marketing grain. It takes some time and effort. But, more than that, it takes discipline.

I know that some people view making a sale prior to knowing their total “actual” production as a risky move, but I think of it more as managing the risk. No, you don’t want to get crazy and market 100% of your expected production before Harvest. What I’m advocating is that you get comfortable with marketing a percentage of your crop prior to Harvest. If you’re already doing some, start adding to that, do an extra 5 or 10%. If you’re not doing anything prior to Harvest, start marketing 10% of your APH prior to starting the combine. And then, sell it for the delivery period just prior to when you know you will need money to pay some bills.

So, let’s look at an example using Friday’s close of the Board of Trade. Futures for December of 2020 corn ended the day at $3.39 3/4, while December of 2021 ended at $ 3.67 1/4, or about 27 cents higher. My “simple” question is this: If I offered your 25 (or 27) cents more for delivery this Fall than what we are currently bidding, would you sell me some? If your answer to this question is yes, then let’s get a sale on the books for Harvest 2021. My current belief is that we’re going to hang in this $2.90 to $3.00 cash range (maybe even drift a little lower before Harvest) and we’re going to stay there for a year or more, just because of the large expected ending stocks a year from now.

So, how about a challenge? Before the end of this July, sell us 5,000 bushels of corn for Harvest 2021, as a Futures Only Contract. Then, if you can make another sale to us at a better “futures” price than you originally locked in using the same “futures” month, we’ll waive the 4 cent fee on the first contract. But, if you can’t beat that original price, you have to agree to sell us another 5,000 bushels of your 2021 crop at some point. OK?

If you are interested, contact me, or your local GMA and refer to “Tom’s Challenge”. Tom.Guinan@LandusCooperative.com

Be aware of the high temps this weekend, stay hydrated, and take frequent breaks if you’re working outside.