The mood of the market coming into this past week was at a fevered pitch. With a sharp rally for both corn and beans that made producers second-guess profitable sales on a daily basis, we were bound to see a setback.
While the May WASDE report was expected to be friendly, that should be no surprise; that expectation has ruled the roost for the last few weeks. Any time we come into a report with one-sided expectations, the potential exists for a less-than-stellar reaction, no matter the data. What’s next, moving forward?
Corn cool down
With regards to cash corn, the cool-down was needed but certainly not one producers were glad to see. For the week ending May 7th, July futures rallied 56 ½ cents, settling at $7.32 ¼, as bull-spreading and strong basis levels were the name of the game. This past week ending on the 14th was an entirely different story, given July futures settled at $6.43 ¾, down 88 ½ cents! This reaction was perhaps surprising if only looking at the USDA report, which slashed old-crop carry-out by 95 million-bushels to 1.257 billion-bushels.
With the USDA making what many thought was a much-needed 100 million bu. increase on exports, old-crop carry came in similar to the trade’s expectation. With basis steady to softer in most areas even as the markets were in free-fall mode, it appears old-crop highs could be tough to overcome.
New-crop corn also took a hit, although the pain wasn’t quite as stout. With Dec21 closing on May 7th at $6.36 ½, the market had rallied 62 ¾ cents. Bids for $6 corn right out of the field were common in the I-states and many producers took advantage on at least a handful of bushels. This weekend, those sales look awfully good as Dec21 lost 93 ¾ cents, settling at $5.42 ¾.
Wednesday’s report showed a carry of 1.507 billion bu. as USDA dropped new-crop exports by 325 mbu year-on-year down to 2.45 bbu. While this carry was over 100 mbu above trade expectations, one must remember we’re looking at extremely tight stocks, so the pressure is on to raise a big crop.
Soybeans in neutral
When it comes to soybeans, not much has changed. Given USDA stuck to its 120 mbu number like it was glue, even strong exports and shipments weren’t able to get the agency to budge on any of the balance sheet. With carry for 2021/22 going up to 140 mbu, the trade is well aware there is little margin for error in 2021. We certainly need acres and the cooperation of mother nature IF we’re going to see a carry this next year that can be described as anything other than razor-thin.
For soybeans, the week went much smoother, with July beans settling at $15.86 ¼, just 3 ½ cents lower than the previous weekly close. November beans settled at $14.00 ¾, 29 ¾ cents lower on the week. While new beans didn’t fare as well as old beans with bull-spreading still intact, Nov beans certainly gained on Dec corn in a big way, making final acreage even more interesting.
Your strategy now
So, how does a producer handle all this volatility? If you tell me it’s easier to sell at high prices than low prices, I very well may accuse you of fibbing. Hey, it’s tough to sell no matter the price. However, we must take a reality check when it comes to pricing old or new crop, whether it’s corn or beans.
When a producer tells me they can’t sell 90 cents lower than it was just a week ago without discussing what profit margins look like at these levels, I have a tough time listening. Let’s be real: almost $5.50 corn and $14 beans are something to complain about? I don’t think so. My best advice for producers is to look at what these prices mean to your operation on a profitability standpoint.
As your crop gets up and going and we navigate the potential craziness of these 2021 markets, we must strongly consider hedging off risk as we get more comfortable with production. The bottom line? If this corn market would go down this coming week just like it did this past week, it would be tough to stomach for those thinking these prices aren’t good enough. The name of the game is profit -- not just price, so be sure to manage your profit margins wisely.