Weekly Market Recap May 1, 2020

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Hello, and Happy May DAY! Or, as my grand kids call it “ding dong dash day”.

MARKET UPDATE:

July corn lost 1 1/2 today, finishing at $3.18 1/2, down 4 1/2 for the week. December corn lost 1/2 today, and ended at the same place as last week, $3.36 3/4.

July soybean futures were down 5 3/4 at the close, to $8.49 1/2, but that was up 10 on the week. November beans lost 2 3/4 today, closing at $8.55, gaining 13 1/2 from last week. 

This week, a couple of interesting things happened in the corn market. Maybe you missed them. On Wednesday, May corn futures traded to a new low of $3.00 1/4, just below the $3.01 number that was set about a week earlier. The good news was that it stayed above the psychological $3 level, and eventually ended the day over $3.04. And then, on Thursday, we had a little rally in corn, with May climbing to just over $3.13, up almost 9 cents at one point. Nothing to get overly excited about, but it was good to see it trade in the green all day. Part of the support came from rumors of China being in the market buying soybeans, and part came from it being the last day of the month, and traders taking some profits and getting out of some of their short positions. 

And then Friday came along, and on the first day of May, we’re back to red numbers all day. Crude oil mostly lower, stock market lower, corn, wheat and soybeans all finishing lower. PLEASE NOTE: even though we are following July corn futures for our cash pricing purposes, May is still trading, and people are keeping an eye on it. July corn stayed just above it’s contract low of $3.09, but did trade to 3.09 1/4 on Wednesday. 

Here are some items we are watching with regard to corn:

  • World Coarse Grains (barley, corn, millet, mixed grain, oats, rye, and sorghum) stocks-to-use ratio would have to grow to at least 25.0% before U.S. corn futures dip below $3/bushel. Currently we are at 20.6% and the last time it was above 30% was in the 80’s.
  • US Gasoline demand rebounded last week by more than 500,000 barrels per day from the previous week, so we’re continuing to move higher from the low set during the 1st week of April.
  • As of last Sunday, the US corn crop is 27% planted compared to 12% at this time last year and there seems to be no signs of slowing down. Everyone expects a big jump when we see next Monday’s report, especially in Iowa. Early indications point to another big crop again this fall.
  • Last week’s export shipments were strong at 42.4 million bushels, and up from the previous week of 27.5, but we continue to lag last year. We’re currently 36% behind that pace, and the USDA has us pegged with only a 16% reduction. We’ll need to maintain a number above 40 million every week to hit their projection. 
  • Ethanol production dropped again, down to 158 million gallons last week. Even though ethanol stocks dropped a little, they still remain above 1 billion gallons, or said another way 16% above this time last year. 

Items we’re watching for soybeans:

  • The soybean market held some strength Thursday, primarily on rumors of buying interest from China. 
  • Speaking of which, soybean export sales were also up this week at 1.078 MMT, with China buying over 57% of the week’s old crop total.
  • As of last Sunday, the US soybean crop is 8% planted compared to 2% at this time last year, and it sure feels like we’ll see another jump in Monday’s report. We’ve heard from several farmers that don’t remember ever being done this soon with corn, AND this close to done on soybeans. 
  • As relations continue to deteriorate between the US and China, will China continue to look to South America for as much of their soy needs as Brazil and Argentina can supply, regardless of price and the Phase One agreement?

What to watch for/Upcoming Events

  • May 12th will be our next WASDE
    • We expect to see a revision of the USDA’s estimate for ethanol demand
  • The general feel on planting progress is we are well ahead of schedule
    • We’ll now be keeping an even closer eye on weather patterns as we head into the growing season


Tom’s Take:

Recently I’ve been thinking about a comment I made to my oldest daughter several years ago. As a little back story, Angie plays the piano, and I have many fond memories of listening to her practicing in the basement while I was upstairs, watching TV, or doing something around the house. Many times, I’d just stop everything I was doing, and quietly open the basement door and just listen as she played. I’ve always told myself that I’d like to learn a musical instrument. Several years ago, I decided it was time to get serious. So, my wife and I bought a piano for me to learn on. And there it sits…gathering dust…I’ve made a half-hearted attempt to start a couple of times. I bought some books, watched a couple of videos on YouTube…thought about it…talked about it. But, I am still nowhere near a place where anyone would confuse me with someone that plays the piano… And lately, I’ve been wondering, will this be the year? Will I actually be able to play some simple tune in a year? I hope so…I want to…I just need to get around to it. 

That got me thinking about a farmer that I have gotten to know well during the past 30+ years. We used to run into each other at our kids sporting events, other school activities, and things like graduations. For quite a while now, he’s told me that he’d like to get better at marketing his grain. He’s sort of come to the realization that he can’t grow his way out the situation he’s in. If only he was better at marketing grain, he believes things would be better. I’ve always agreed with him on that point. He’s bought “the” book…He went to “the” marketing meeting once or twice…He watched a video or two… But, whenever we talk about marketing alternatives, he still gets glassy eyed about some of the concepts. 

Since I didn’t get to see him at any graduations this year, I called him earlier this week. I asked him what he’s been up to, how was his winter? He told me he spent a lot of time figuring out how to improve his yields. He’s really excited about that part; he’s really good at it, and getting even better. But, he also tells me, he’s no further ahead financially than he was 5-10-15 years ago. When I ask about grain marketing, he says he’s still planning to get around to it.

I feel for him, and I said, “I’ve heard that before” Then, he asks me about the piano…

So, we made a bet…or issued each other a challenge: 

Mother’s Day is coming up. How about one year from now, by Mother’s Day 2021, will I be able to play 2 tunes on a piano? One year from now, will he be able to hold a conversation with me about 2 marketing alternatives that he’s learned about and used and understood? Will he be able to tell me what worked well and why? I’m not sure which one of us to bet on. I’ve been working in my basement for the better part of 2 months now…literally 20 feet from that piano…I walk by it several times a day…and I still can’t quite tell you a C note from a G, maybe it’s time to get around to it…

So, what about you? Do you want to get serious and learn about marketing alternatives this year? If you do, let me know, let’s set up a time to talk and start working on learning one or two. Just drop me an e-mail to Tom.Guinan@LandusCoperative.com with the subject of PIANO. Then, I’ll have even more reasons to learn to play the piano. What do you think, is it time to get around to it? 

If you’d like to hear this week’s Bull Bear Banter podcast, here is the link: https://landuscooperativeexperience.podbean.com/