Do not feed the bears (Grain Marketing)
(Editor’s note: Rob Davis is a market advisor with Nagel Farm Service.)
It was one year ago that I left my job in finance and at the time I was excited about the move into the ag industry.
What I didn’t realize at the time was that the biggest benefit would be the move into the ag community.
Business is not just business here, it’s partnerships, friendships and family.
The wins are celebrated and losses managed together.
The corn market sell-off has continued, December corn closing at a contract low $3.53 on July 11th.
There’s a saying: “Bulls need to eat,” implying that a market needs bullish news to keep moving higher.
The market was able to bounce 15 cents off of the July 2 lows, but ran out of steam without any news to support the move.
The demand for corn remains strong, but the potential for a record crop continues to weigh on the markets.
We’re going to need a record 180-bushel national yield average just to keep ending stocks from falling, so prices should react quickly to any changes to the tight supply/demand balance.
The USDA ripped off the tariff band-aid with the WASDE report on July 12 increasing U.S. soybean ending stocks by 51 percent to 580 million bushels, which would top the 2006-07 record of 574 million.
Soybeans sold off 10 cents but rebounded to slightly positive for the day. The November contract closed near $8.50 per bushel on July 12.
Everyone is getting tired of hearing about the trade war, traders seem to have thrown in the towel for now as the situation is too unpredictable.
The one thing that I’ll mention is that the trade war is taking a toll on the Chinese stock market.
The Shanghai Index is down 17 percent year-to-date, which represents about $850 billion of market value lost.
The S&P 500 has gained 3 percent during the same period.
In the United States, the trade war has hit the soybean market the hardest, but the front month soybean contract is down $1.08 since Jan 1, which represents about $4.75 billion (using 2017 production).
This doesn’t help pay your bills, and it’s not an apples-to-apples comparison, but it helped some to know that the pain is much worse on the other side (179 fold in this case).
The wheat market has held up well compared to corn and soybeans.
Dry weather in Russia and France have helped the market hold up during harvest.
We may see some of their export business come to the United States, but once that happens, the market will likely go back to focusing on the large supply of wheat here in the U.S.
Once again, keep an eye on 2019 Wheat.
The wheat market usually has a wide spread that will disappear between now and next year.
Here are a few items to keep top of mind:
• Sell your old crop before 2018 harvest! As soon as harvest gets going, you instantly lose basis value;
• Remember your crop insurance guarantee! The insurance price was set earlier this year at $3.96, so even if you have a decent yield you may still get an indemnity check; and
• Now is probably not going to prove the best time to sell bushels but review your marketing plan and review all of your options if you are underhedged.
The markets and weather are dealing some heavy blows to farmers here on the Delmarva right now.
Reach out to business partners, advisors, friends, family and fellow farmers.
The farming community will weather the storm as always, coming out stronger on the other side.
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