“ALL of the so called experts were wrong! NONE of them saw this coming! How could an entire industry be so wrong?”
These are a few of the comments I have seen on social media in recent weeks. Some farmers are frustrated for selling grain “too soon.” These thoughts and feelings are very real and valid. Many producers sold soybeans at $10 (the best price they had sold at in years) for harvest delivery, and now soybean futures are close to $12 per bu. That is real money, and I understand how a producer could express those sentiments.
Sometimes it is prudent to take a few steps backward to reflect upon this journey.
That is certainly the case for the corn and soybean market. Since July grain market information, fundamentals, and prices have shifted dramatically. These are things that you are well aware of, but it is important to have a visual representation of where corn and soybean fundamentals were just months ago, and how dramatically different the situation is now. How did we get here? And where can we go from here are important questions to probe further.
Back in July, the USDA pegged U.S. 2020/21 corn carryout levels at 2.648 billion bushels. An astonishingly large amount. And at the time, the crop growing had few production concerns. Talk was that U.S. national yield could be well over 180 bushels per acre.
Also at the time, Chinese exports were just starting to gain traction, but many felt they would not import enough to come close to meet the Phase I goals. The industry talk was that a 3-billion bushel carryout for corn was possible. As a result price sentiment was low, with the possibility of getting worse. Had the 3 billion bushels carryout number occurred, we would very likely be seeing corn priced with a $2 in front of it.
Now fast forward to today. A Derecho storm, extreme August heat, a surprise friendly September Quarterly Socks report, and exceptional export demand has wiped out that negative price sentiment.
As you can see from the slideset, corn carryout lost nearly one billion bushels -- in a matter of months! It would normally take USDA a good year to make changes like that on reports, but not this year.
Back in July, the USDA pegged U.S. 2020/21 soybean carryout at 425 million bushels, an increase from the month prior. Similar to corn, soybean fundamentals were leaning negative. Chinese buying was just beginning, and there was no immediate production threat to our crop.
The soybean situation today is drastically different. August drought and strong export demand has turned this market around.
Some in the industry feel that soybean rationing has not yet begun. Some feel that export demand may continue to stay strong and that USDA may need to increase export demand by 50 million bushels. If so, that would result in another dramatic ending stock reduction in upcoming reports.
Soybean futures are near the $12 price resistance level on monthly charts. This is significant! This is the highest soybean futures have been since June of 2016!
All eyes are on South American production, palm oil production in South East Asia (which is lower due to La Nina weather concerns), and U.S. export demand.
Continue to brush up on the grain marketing tools available to you. The price volatility will continue. We cannot predict the weather, Chinese spending habits, or another potential Covid lockdown that could affect prices, either higher or lower. Stay disciplined with your marketing. Stay current with market information, and as always, feel free to reach out to me with any questions you may have. I’m happy to help.
Reach Naomi Blohm: 800-334-9779 Twitter: @naomiblohm and [email protected]
Disclaimer: The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc. Presented for solicitation