Keep your selling shoes on the planter with you (Grain Marketing)
(Editor’s note: Rob Davis is a market advisor with Nagel Farm Service.)
It is rare that I talk to a farmer and they’re 100-percent satisfied with how they’ve marketed their crop and this year has been more challenging than previous years.
I’d chalk that up to the combination of burdensome supplies in the grain markets and uncertainty of trade negotiations. I do have some good news for farmers that are not as sold as they’d like to be — we are entering that seasonal period when we usually see stronger prices, especially in the corn market.
I’ve said before that betting against the American farmer getting the work done or growing a crop has been a bad bet many times before. The speed at which we can plant a crop now is almost shocking, the majority of our corn crop can be planted inside of a two-week window.
That being said, Mother Nature has been anything but friendly recently — snow is falling on the Western Corn Belt as I write. Weather analysts are already calling for another significant rain event to form again this week.
Despite all of this, the grain markets don’t seem to be paying much attention yet. The poor planting conditions across the majority of the Coern Belt should begin to have more of an impact on the market within the next week or so. I would expect to see strength in the corn market, and potentially weakness in soybeans as acres could shift to into soybeans as we get later in the planting season.
On April 11th May corn closed at $3.60 per bushel with the December contract at $3.885. As John Hall mentioned last week, the Prospective Plantings Report did not help the corn market as both the planted acres and ending stocks estimates were increased more than expected.
While the planted acres can still change, we need to take the numbers at face value and dial back price expectations for this year.
One bright spot has been the spread widening in the corn market — since the Prospective Plantings Report, the May 2019 corn contract is down 14 cents, while the May 2020 contract is only down 3 cents.
This can be attributed to the Chicago Mercantile Exchange increasing the commercial storage rate from 5 cents per month to 8 cents.
This creates an opportunity and I would keep an eye on next year’s crop when your selling this year.
On April 11th May soybeans closed at $8.9525 per bushel, with the November contract sitting at $9.28 ¼. Soybeans continue in a sideways rut, with the front month contract trading either side of $9. It will likely take a trade deal to get strength back into the bean market. Regarding the Chinese trade negotiations — just last week Treasury Secretary Mnuchin maintained his cautiously optimistic tone, but did say that the two countries have agreed on an enforcement mechanism, which had been a major point of contention since the trade war broke out.
I previously mentioned that the market seems to be getting desensitized to the news and that hasn’t changed as the market should have rallied on this news.
The lack of a rally could be attributed to the fact that the hog herd in China (a main source of soybean demand) has been decimated by African Swine Fever.
Analysts are estimating that they’ve lost 30 percent of their herd, which represents more hogs than the all of the herds in Brazil, U.S., Mexico and Canada combined.
This has been great news for the hog market — the price of hogs is more than 60 percent year to date.
At the risk of sounding like a broken record — the soybean market is priced too high, held up by the hopes of a trade deal. The upside involved in a trade deal rally, is significantly less than the potential downside when the market changes the focus back to fundamentals.
On April 11th May wheat closed at $4.605 per bushel, with July coming in at $4.655. We continue to see export business as our wheat is competitive on the global marketplace at these prices, which should limit our downside risk. Similar to corn, the wet weather is making it difficult for farmers to get fieldwork and spring wheat planters in the field. We’ll hear more about this in the next couple weeks.
Here on Delmarva, farmers are dialing back yield expectations as the wet weather hurt the crop and left many low spots completely drowned out. Our crop insurance agent, Mark Sultenfuss, has recently given our farmers this heads-up, which I’ll pass along with his permission: If you’re considering destroying a field, seek the advice or your crop insurance agent and potentially an agronomist first! If you have Revenue Protection Coverage on your wheat, the high projected price and low harvest price will move your trigger yield up significantly. You may have a claim, even if you end up with an average yield!
Farmers wear many hats, and during the busy planting season you might need to wear a few at the same time.
You can’t avoid it, but you can plan and be ready to make a quick decision when things come up.
Get a couple wish orders working or know your target prices and don’t forget to keep your selling shoes with you on the planter!
(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.)
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