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MARKET COMMENTARY

Weekly Market Recap November 9, 2018

Friday, November 9, 2018, 9:11 PM
Submitted by: Landus Cooperative


For the week, December corn futures were up 1 1/2, while January soybean futures lost a penny since last Friday’s close.

 

The main driver this week for corn was the USDA’s latest WASDE report, issued Thursday morning. U.S. corn yield was estimated at 178.9 bushel per acre, which is off 1.8 from last month’s estimate. The reduction in yield dropped production by 150 million bushels. Feed usage was reduced by 50 million bushels to 5.5 billion and exports dropped 25 million to 2.45 billion bushels. The net effect for U.S. ending stocks for Crop Year 18/19 is 77 million bushels less, now sitting at 1.736 billion, which is at the lower end of the expected range, but still a fairly healthy number. The big news from this report, is the acknowledgement of the amount of corn that China is storing, almost doubling previous estimates. This increased World Ending Stocks above 340 million metric tons, an increase of 142 million metric tons. It will take some time for the trade to get their arms around this. We don’t have more corn in the world, it’s just that the USDA is now including it in their estimates.

 

For soybeans, the WASDE report was also the main feature this week. USDA decreased the U.S. yield by a bushel per acre, or 90 million bushels. However, they also began to reduce exports, adjusting that number downward by 160 million. Most in the trade expect continued reductions in soybean exports, to reflect the on-going issues with China. This left the expect ending stocks at 955 million bushels, which is a burdensome amount of beans to carry over in the U.S. All in all, it’s somewhat impressive that beans only lost a penny this week.

 

We know that many of you are close to wrapping up harvest, or are already there. Thoughts now turn to field work and getting things prepped from the next crop year. Please keep in mind that you need to inform us of your decisions about the bushels you delivered by the 20th day of the delivery window. We continue to encourage people to store their beans as much as possible and let the basis work a little higher. Whether you are storing them in your own bin or paying storage, our current thought is that you will be better off selling them later. For those making soybean sales, look at the bids further out, as it might make sense to sell for a later month and deliver then, or pay storage to get there.

 

We have several different strategies that are being used as people settle up their corn deliveries. Quite a few are using the Extended Price contract. Lock in the current cash price, take a position against either the March, May or July corn futures, depending on how much time you have until you need to sell. Then, if futures rally, your price moves up accordingly. However, the same is true if futures prices decline; your price moves lower with them on a one for one basis. You can also get a 70% advance if you’d like. There is a 4 cent per bushel fee for this marketing alternative.

 

Another popular pricing alternative is to sell the cash price and add a Bonus Premium to it. With this, you can add 10 or 15 cents to the current cash price. It also requires a non-revocable offer against the December 2019 corn futures. This morning, those offer levels were 4.32 for a 10 cent premium, and 4.14 for a 15 cent premium. These must be done in 5,000 bushel increments. So, today, if you were to add a dime to the cash price, your offer would say “on October 4, 2019, if December 2019 corn futures close at or above $4.32, you would sell an additional 5,000 bushels at 4.32. Then you would need to set the basis to arrive at a cash price. This strategy also works well for folks wanting to sell soybeans and have 5,000 bushels to sell. With this one, you can gain 20 cents with a $10.33 offer against the November 2019 futures. For a 30 cent premium, it would be a $9.90 November 2019 offer. Both also expire on October 4, 2019 (these values were also as of this morning).

 

With either of these marketing alternatives, we encourage you to speak with your local Grain Marketing Advisor and be sure you understand all of the details of the contract.

 

Thanks and have a great weekend.

 

Listen weekly to the Landus Cooperative Experience podcast at:

https://landuscooperativeexperience.podbean.com/

 

 

 

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