Weekly Market Recap & Tom's Take May 29, 2020

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July corn closed down 1 3/4 Friday at $3.25 3/4, but up 7 1/4 from last Friday, while December corn closed down 1 1/2 at $3.38 3/4 on Friday, but that is 6 higher week-on-week.

July soybeans lost 6 1/4 on the day, closing at $8.40 3/4, but gained 7 1/2 from last Friday. November beans closed down 4 1/4 at 8.51 3/4, but up about 7 for the week. 

In this holiday-shortened week, the Big Story is that corn has a pulse. On Thursday, July corn futures climbed 10 cents higher at one point. The first indication of Thursday having the potential to be a big day was 2 different stories talking about the price of oats and how it has rallied lately. Both used the old grain trader quip of “Oats knows”. Meaning that as go oats, oftentimes, so goes corn. And a look at the July oat chart shows an impressive run since the middle of March when they bottomed out around $2.61 and by the end of Thursday had climbed more than 25% or up almost 67 cents. But, then you need to also know the other “old grain trader quip”: there are only 2 or 3 people that trade oats in Chicago. Indeed, the volume Thursday was 558 contracts. Now, compare that to July corn futures, where the Thursday volume was almost 400,000 contracts. We’d probably all like to see something close to a 25% rebound in corn. But, again, that is just one point of data. 

The other part was wheat rallying lately. Looking at the Chicago July wheat chart really reminds me of a roller coaster ride. Like oats, July wheat put in a low in Mid-March around $4.95, but then a week later had climbed more than 75 cents or 15%. Then a few bumps and bruises later, and last week it traded below that mid-March level. Now, it has climbed about 5% or 25 cents through Thursday, mostly on talk of extreme heat in Kansas and the OK/TX panhandle next week, as well as production issues in the Black Sea region. 

Corn, in and of itself, also had some positive inputs early Thursday, with the EIA report showing another increase in ethanol production and a decrease in ethanol stocks. So, whatever started the mini rally in corn Thursday, it also triggered some short-covering by managed money funds. Some estimates said they bought in 15 to 25,000 contracts. If either of those are correct, they are still more than 200,000 contracts short. With forecasts changing to warmer and drier, it might be prudent to take a few chips off the table. 

For more factors impacting corn and soybean prices, check out our weekly podcast, called the Bull Bear Banter. It can be found here: https://landuscooperativeexperience.podbean.com/

Tom’s Take:

As I was thinking about that wheat chart earlier, I thought about all of the various roller coaster rides I’ve been on in my life. I mean actual roller coaster rides. I’m generally not a big fan of roller coasters, but I can remember being on several. I don’t remember very many starting at the top, other than the one at Disney World that is called Space Mountain. My daughters convinced me to go on that one with them. That’s really the only one I can remember starting up high and then falling and looping around up and down. I also remember feeling disoriented because it was in the dark. And then, when it was over, I was the first one to say “let’s go again”. 

But, as I’ve thought about all roller coaster rides, I realized they all have one thing in common. They all end at the bottom. Now, I’m not saying that this corn market roller coaster is destined to finish at the bottom. But I do believe we should reward any rallies we see. We bought quite a bit of corn Thursday. At least in relation to the past 3 months. But, in the scheme of things, it really wasn’t that much compared to other BIG days we’ve had. It feels like most people are expecting a fairly decent rally at some point in the next 30 days. I feel differently about that. I’ve shared some of that with you previously, but basically, I expect a large corn crop, especially in Iowa. And as we get closer to pollination, I think most farmers will realize that, too. Then, many of them will also realize they need to move corn to town to get ready for Harvest. I’d rather see those bushels moved in June instead of July and August. 

So, I want to issue a challenge to anyone that has unsold corn left in a bin. We’re trying to get some bushels to move during June. We need to load some trains and want to see more bushels come in. Work with your local GMA, negotiate with them. We’ve given them a little more latitude until we reach our goals. All we’re asking is that you sell us 5,000 bushels for delivery during June. Then, let’s compare the price you sold to the price at the end of June. Give us a shout, that’s all we’re asking. Contact your local GMA and ask them about the 5,000 bushel challenge. Thanks, Tom.Guinan@LandusCooperative.com