Weekly Market Recap and Tom's Take May 22, 2020

Memorial Day

MARKET UPDATE:

July corn closed up 1/4 on Friday at 3.18, but down 1 1/4 last Friday’s close, while December corn closed down 1/4 at 3.32 3/4, but that is 3/4 higher week-on-week.

July beans lost 1 3/4 on the day, closing at 8.33 1/4 and almost a nickel lower than last Friday. November beans closed down 1 at 8.44 1/2, also down 1 for the week.

The big story this week is the announcement of the details of the USDA’s Coronavirus Food Assistance Plan or CFAP. While questions remain, what we now know is that “a payment will be made based on 50 percent of a producer’s 2019 total production or the 2019 inventory subject to price risk as of January 15, 2020, whichever is smaller, multiplied by the commodity’s applicable payment rates.” Confused yet? It gets more confusing, as corn will be eligible for both 32 cents in one program and 35 cents in another program, while soybeans will be eligible for both 45 cents and 50 cents. Several questions are being asked throughout the industry, but the main ones swirl around the definition of “inventory subject to price risk as of January 15th”. Our team has reached out to several governmental and non-governmental entities for clarity, and as of this writing, we do not have definitive answers. We can tell you what we “believe”, but we think the questions should be and will be answered at your local county FSA office starting next Tuesday. Please keep in mind that you will need to make an appointment with them in order to gain entrance to their offices. 

Tom’s Take:

I’ve been thinking about the CFAP announcement made earlier this week, and the many grain marketing stories I’ve read since then. Many of these have the same concern I have: how does access to this government money impact the movement of grain, specifically corn over the next few months? I keep thinking that what I expect to happen around pollination time is that most farmers will take a good look at their fields and realize that once again these new generation hybrids are doing their job, and that most people are going to be looking at prospects for big yields this fall. That thought will then lead many people to the same conclusion: “I need to move all of this OLD CROP out of my bins and into town to get ready for harvest.” So, I’ve been saying I don’t think we (the industry) will have to work very hard to get corn to flow to town during July and August. My fear is that it won’t leave us enough time to get our facilities prepped and ready for the 2020 Harvest, especially if that starts September 10th or 15th instead of October 1st.

Now, marry that with the thought that the government is about to make payments to offset some of the lower prices that you have experienced the past few months. My advice would be to put that money to work and let it help you market your grain now, not in another month or two when all of your neighbors begin to empty their bins. Please don’t just sit back and feel like you’ve got enough cash flow now to last you 30 or 60 days and then worry about moving your Old Crop. If this crop is even close to what I, the market, and perhaps you, expect it to be, values for Old Crop and New Crop will erode even further. Getting ahead of that should pay off. If you’re on the fence, give your GMA a call, and let’s see what we can do to encourage you to move grain now, not a month and a half from now when we’re getting overrun. Let me know what you think. Drop me an e-mail at Tom.Guinan@LandusCooperative.com

For more information on factors impacting corn and soybean values, check out our Bull Bear Banter podcast: https://landuscooperativeexperience.podbean.com/

Have a great weekend, and remember that Monday is Memorial Day and our offices and the Board of Trade will be closed.