Missed some market news this week? Here's what Ben Potter, Jacquie Holland and our Ag Marketing IQ bloggers noted this week.
Ag Marketing IQ
How often do we find ourselves waiting until the crop gets harvested or in the bin before making a majority of our marketing decisions? Often our default response is to wait to see what we have and then look for opportunities to sell once it is in the bin. An alternative to this approach is to proactively seek opportunities to market that crop over multiple crop years.
Some farmers like to hold old crop grain into the growing season as a hedge against disaster. Those who stored 2020 inventory into spring made handsome profits this year, no matter what their method of ownership. Some of those strategies worked better than others, so a half-year after harvest it’s time to take stock of how different methods fared. The results demonstrate how factors unique to this very unusual marketing year combined to influence success.
Cash basis in the U.S. continues to explode higher for the months of May through August, indicating to the world exactly how tight old crop supplies actually are in the U.S. Basis looks to stay strong until the crop (which is just starting to be planted now) is harvested in the fall.
Nothing is typical about the market we are currently dealing with and there are other risks to consider beyond prices dropping. These risks could be far worse than a drop in price and they involve the market going higher. The word on the street is that a large market participant lost $90 million this week due to their exposure in the spread between May and July corn. Let’s walk through this together.
The latest weekly grain export inspection report from USDA held mostly positive numbers for traders to digest. Corn volume saw moderate week-over-week gains, with soybeans also slightly above the prior week’s tally. Wheat volume was down from a week ago but still landed on the higher end of trade estimates.
The latest set of export sales data from USDA held enough optimistic data to keep most grain prices in the green immediately following the report. Old crop corn sales improved 35% week-over-week, with old crop soybeans tracking well above the prior four-week average. Old crop wheat sales saw a 7% decline from a week ago.
Widespread snow throughout the central U.S. two weeks ago severely put the brakes on planting progress, but weather was more cooperative last week, allowing for some forward momentum, according to data from the newest crop progress report from USDA, covering the week through April 25.
Corn prices climbed around $1 per bushel higher in recent sessions, with soybeans up more than 60 cents in a few short days. Wheat prices also remain very near multiyear highs. A lot of that has to do with uncooperative U.S. weather, which has slowed the pace of corn planting relative to the five-year average.
As April comes to a close, corn futures are slated to end the month up 15% - the largest monthly gain for the contract in over two years. Soybeans are expected to end the month 5% higher, with a layer of prices support coming from higher-than-expected new crop export sales reported in yesterday’s weekly export sales report from USDA. Wheat prices followed the rest of the grain complex lower overnight despite crop damage in the European Union.
The latest grain rally took another big step forward Friday, led by huge gains in corn prices, which have now risen higher for the past five consecutive weeks. July futures jumped nearly 4% higher to close limit up once more, with weeklong gains of 6.4%. Soybean futures also made significant inroads, rising around 2% higher. Wheat gains were more muted, with most contracts rising between 0.75% and 1.25%.