Missed some market news this week? Catch up here on the latest marketing information from Jacquie Holland, Ben Potter and our Ag Marketing IQ bloggers.
Ag Marketing IQ
In my opinion, we should all be getting more accustomed to expecting the unexpected. So we need to defend our marketing decisions accordingly. If you prefer to be more aggressive and are making forward sales, make sure you are retaining upside opportunity against those sales by incorporating Call options – because nobody enjoys being on the outside looking in, especially if you have a production short-fall. Others may be more comfortable managing Put option floors and the flexibility that they give you.
Grain traders spend a lot of time agonizing over where prices are going. Sometimes, however, it’s useful to look back at how the market got where it is. One year ago, May 2020 corn futures struggled to stay above $3 a bushel headed into delivery. Nearby soybeans likewise battled to hold $8. Trade wars and the pandemic exacerbated fears about rising surpluses. USDA will keep estimating old crop inventories into the fall, but the market’s focus is turning to new crop as farmers watch snow blanket some field in the Midwest. That could curtail planted acreage. The government’s first monthly forecast of 2021 crop supply and demand May 12 will set the stage for the next act, of what has already been a remarkable comeback story.
The reality of deficit supply in regions of the U.S. has fueled cash traders to compete for inventory at record basis bids. Reports this week of commercial bean purchases at $1 to $1.25 over CME price at locations like Kansas City, St Louis and Quincy and Gilman, Illinois; when posted bids were in the 40 to 65 over CME futures got the engines running. The thought of beans headed towards one river house getting diverted on truck to a processing plant, leaving the Gulf short of previously expected delivery was like pouring rocket fuel into the morning coffee of futures traders.
At the beginning of 2021, Class III milk futures were trading at the $16 level. Currently, front month futures prices are in the mid-$18 region. While volatility is expected over the coming months for dairy prices, the outlook remains friendly overall thanks to strong demand. Check out this article for a few additional components of demand and pricing opportunities to be aware of as we head into summer.
Planting progress is expected to slow down later this week, thanks to a widespread cold snap that will even bring some snow to parts of the Corn Belt. But farmers still made some headway this past week, per the USDA’s latest weekly crop progress report, out Monday afternoon.
Drought and winter weather seem to be never-ending for Farm Futures readers in the Heartland, especially as many farmers itch to start spring planting. The first week of the Feedback from the Field 2021 series confirmed this sentiment as growers across the country shared spring crop progress – or lack thereof – with other Farm Futures readers.
Planting was put on pause in most fields across the Midwest and Plains this week as rain, snow and cold weather hampered fieldwork. That has given grain prices a healthy boost in recent sessions, with corn climbing above $6 for the first time in years, and with soybeans sitting on multiyear highs as well.
USDA’s latest grain export inspection report showed some promising results for wheat, while corn and soybeans continued their latest downward trajectories. Traders mostly shrugged off the numbers as they have remained focused on an expected cold snap arriving later this week in the central U.S.
Recent grain export numbers have been fairly disappointing, and USDA’s latest data once again didn’t have much bullish information to digest. Wheat sales were down noticeably from a week ago but still managed to climb 55% above the prior four-week average. Old crop corn sales tumbled 75% below the prior four-week average, meantime, with old crop soybeans sliding 29% lower week-over-week.
Export sales were reported on two days this week. On Friday, Guatemala and unknown destinations took corn and China took soybeans. On Tuesday, Mexico took corn.
Profit takers swooped into the corn complex overnight, taking advantage of yesterday’s limit up trading gains and sending prices $0.05-$0.10/bushel lower. Soybeans followed the rest of the grains complex lower as profit-taking took the top off the complex’s earlier seven-year high set in Thursday’s trading session. Soybeans are still on track to see the largest weekly price increase since May 2019. Chicago and Minneapolis wheat prices remained steady over $7/bushel despite a round of technical selling that pushed prices in the wheat complex $0.01-$0.05/bushel lower overnight. Rains in the Southern Plains left Kansas City wheat futures trading between $6.65-$6.78/bushel.
Some profit-taking overnight and early in Friday’s session kept corn and soybean prices on their heels for a while, but a late-session rally helped push them back into the green by the close. Nearby corn contracts rose another 1%, while soybean prices finished with more modest gains. Wheat prices also continued to improve today. Spring wheat contracts led the way with gains of 1.8%, while winter wheat contracts saw smaller improvements.