Don’t take your farming operation to Vegas (Grain Marketing)
(Editor’s note: Rob Davis is a market advisor for Nagel Farm Service.)
The soybean market continues to make headlines from agricultural to mainstream media.
There are two stories that have propped the market up recently, both having the potential to help our unfavorable supply and demand picture. Thankfully, we’ve been able to keep this four-month long uptrend intact.
First, the trade talks in China wrapped up last Wednesday.
U.S. Trade reps say that talks did focus on China’s commitment to buying substantial quantities of US ag, energy and manufactured goods. Chinese officials released a statement that results would be summarized within the next couple days. I think it’s safe to say that everyone would welcome some clarity on the situation.
The second reason is South American precipitation. Brazil’s soybean crop is experiencing some dryer than normal conditions.
Farmers there are reporting disappointing yields for early-maturing beans — data from Mato Grosso reporting is showing yields are around 8 bushels per acre less than expectations. Argentina, on the other hand, has too much rain, currently 58 percent more than the normal 60-day precipitation levels. On Wednesday of last week, AgRural cut their Brazil production estimate significantly, from 121.4 MMT to 116.9 MMT.
Soybeans have been on a pretty impressive $1.10 run since the lows back in September. The March soybean contract is approaching it’s 200-day moving average and is just below last Monday’s highs — it’s very possible that the market tests that resistance at $9.30.
If you are considering making a sale, either old crop or new, I would watch this level closely as it will likely be a fork in the road, and the price could move sharply in either direction as we get more news on trade and the South American crop.
We’re short on facts and long on rumors, but both are mostly positive at the moment. While it is possible that a farmer friendly trade deal pushes the market even higher, the possibility of giving back a significant chunk of this rally is more concerning from the farmer’s perspective. As I write, the market is assuming that there have been 4-5 million metric tons purchased by China, but we have no confirmation.
As of Wednesday Jan. 9, November soybeans were trading at $9.62, which is significantly higher than it should be, even if the South American crop falls a little short of current estimates. At the moment we are recommending that farmers protect these prices, especially for new crop.
Leaving your 2019 production unprotected at the moment feels similar to standing at the roulette wheel and putting your 2019 soybean profits all on black.
The story has not changed much in the wheat market. The recent weakness in the dollar has helped keep the market on its feet.
The dollar index closed at 94.79, which is the lowest close in three months. Just last week we saw some renewed strength on the news that Egypt tendered for wheat and the U.S. wheat offers were the lowest on a FOB basis; that doesn’t always mean that we’ll get the business due to freight but it did get the markets attention.
On Wednesday, Jan. 9, July wheat futures were in the green, closing at $5.31.
The corn market is up on the day as well. Global supply remains relatively tight and at current price levels we don’t see a massive shift of U.S. soybean acres, over to corn in 2019.
The corn market is going to be more sensitive to the bean market as traders try to guess the acreage mix through the spring.
The best seasonal period to sell corn is still 5-6 months out and as we know, mother nature likes to keep us on the edge of our seats. If you were going to roll the dice on one of the three grains, corn would be my choice at the moment.
I cringe when I read that last sentence back as the metaphor represents the opposite of what we strive for in grain marketing.
But none-the-less, trying to pick your spots in the current market does start to feel like we’ve overstayed our welcome in Sin City.
(Editor’s note: Rob Davis is a market advisor with Nagel Farm Service and can be reached at Rob@nagelgrain.com or 410-822-6300. Nagel Farm Service has been serving farmers since 1946 and offers grain merchandising, crop insurance and risk-and-profit consulting services throughout the Mid-Atlantic region.)
1-800-634-5021 410-822-3965 Fax- 410-822-5068
P.O. Box 2026 Easton, MD 21601-8925