Weekly Market Recap and Tom's Take Nov. 13, 2020

Elephant

MARKET UPDATE:

December corn was up 2 1/4 today, closing at $4.10 1/4, and that is up 3 1/2 for the week. March corn futures ended at $4.19 1/2, up 1 1/4 today, and gaining almost 6 week on week. 

January beans gained 2 1/2 today, to end at $11.48, gaining 46 1/2 for the week. March soybean futures also ended at $11.48 up 3 1/4 today, and up more than 48 this week. 

Please note that November 2021 futures closed just above $10.40 today, or more than a dollar less than January and March futures.

The BIG Story this week is the WASDE report that was issued Tuesday morning. With cuts to yield, production and ending stocks for both corn and soybeans, we had some fireworks after the report. December corn futures were more than 20 cents higher from Monday’s close to the high on Wednesday, before the collapse later Wednesday and Thursday. Soybeans also rallied after the report, with January futures gaining more than 35 cents on Tuesday. They added another a few cents by the close on Wednesday, but at one point, during Wednesday’s session were up more than 50 cents compared to Monday.

For corn, the Ending Stocks estimate for 2020/21 was reduced, and is now 1.702 billion bushels. Last year, we ended with 1.995 billion, and there are some in the trade that think this number will continue to be shaved, perhaps eventually getting to 1.5 billion. Not only did they reduce production, they also increased demand. We’re now looking at total production of 14.5 billion, based on a national yield of 175.8. So, in effect, they dropped yield about 2 1/2 bushels, moving more than 200 million out of production. 

Export demand was increased by 325 million bushels. They are now using 2.65 billion for the yearly total. That number is now about 150% of the 1.778 billion the U.S. exported last year. The USDA also increased Chinese corn demand to 13 million metric tons (MMT), which almost doubled their initial 7 MMT, but lags what many in the industry expect. In fact, the USDA’s own attaché is using 22 MMT this year, or 3 times the original number. To put it into a little more into perspective, 22 MMT equals about 866 million bushels, or roughly the difference between the current USDA corn export estimate and last year’s total exports. If realized, that’s a lot of corn to China in one year. 

For soybeans, the WASDE was all about changes to the supply side, with yield reduced to 50.7 bu./acre, dropping production by almost 100 million, and pushing ending stocks down 100 million to 190 million, which is a VERY tight ending stocks number. This would represent about a 4.2% stocks to use ratio. Keep in mind that this is where they expect the U.S. to be at the end of August, while Harvest in this part of the country doesn’t normally start until about a month later. We could see a pretty big cash spread between very early harvested soybeans and “normal”. We have to wonder if that will lead to more sales of short season soybeans next spring. 

For more specifics on positive and negative impacts to the markets, tune into our weekly podcast, the Bull Bear Banter: https://landusexperience.podbean.com/.

TOM’S TAKE:

This week, I have been thinking a lot about elephants. That may sound a little weird, but let me explain. For years, I’ve kept a picture on the bulletin board by my desk. In this picture, there is a person riding an elephant. Can you visualize something like that? If you think about it, I’m sure you’ve seen something similar. 

When I look at that picture I think of one question: Who is in charge? What do you think? We want to believe that the person on top of the elephant is in charge. And under “normal” circumstances, that’s the case. The elephant, if properly trained, obeys commands. But what do you think happens when the elephant feels undue stress? Who do you think is in charge then? Definitely the elephant. I’ve been thinking about that in relation to this “BULL” market we’ve been riding lately. For now, it kind of feels like we’ve got this all under control. And, as long as the “Bull” keeps moving forward, we’re fine. I’m more concerned about when the “bull elephant” gets spooked – does it run for cover? Does it charge lower, and perhaps further than it should? What about you? are you in control of your grain marketing or are you just along for the ride. I’ve never ridden an elephant, but I once read a story about a person that did. To get on the elephant, he had to climb up a wooden ladder, and while a bit scary, he said it wasn’t really that bad. But, when it came time to climb down, he noticed a little note at the top of the ladder that said: “Rules for dismounting: compose your mind – much easier to get on than get off.” I’ve also heard that if you get off incorrectly, it can be VERY quick and VERY painful. Imagine dropping from the top of that ladder. Now, go look at a chart of corn or soybeans, and ask yourself, how far can you afford to fall from these heights? 

And while I am thinking about elephants, let’s talk about the elephant in the room. My cohost for our Bull Bear Banter podcast will no longer be joining me during those, as she is no longer working for Landus. I’ll miss her, and I am sure that many of our listeners will, too. 

I’ve thought a lot about Cheyenne the past few days, and about her ability to clearly articulate what’s going on in the market. And since she has a Masters Degree in Ag. Econ, I’ve had to occasionally ask her what something means and how to think or talk about certain issues. I’ve gotten to know Cheyenne well over the past four years, and I’ll miss her steadiness. She’s also become someone that others look up to as a good example for women in ag. I remember one woman say that just hearing Cheyenne’s voice on the podcast helped her to find her own voice. I also remember about a year or so ago when a little girl, about 4 years old, asked her mother if they could go meet Cheyenne because the 2 of them listened to the podcast together every week. So, they contacted us and came to the office and the little girl asked if she could have Cheyenne’s autograph. The mother told us that she looked to Cheyenne as an example of intelligence and education for young women in an industry fairly well dominated by men and how that was making a positive impact on her daughter. So, Cheyenne, we’ll miss you and wish you nothing but the best in everything you do. 

Let me know if you’d like to discuss any of this: Tom.Guinan@LandusCooperative.com