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Brighter Forecasts on the Horizon

Published on Monday, May 13, 2019

It has become impossible not to acknowledge the chasm that currently exists within the grain complex.  On one side you have the funds, holding record and near record short positions across the entire grain complex.  Fueled by weakening demand, an ongoing trade war, and burdensome supplies, funds have currently held the upper hand in our market.  On the other side you have an ongoing weather story developing.  Planting progress remains behind the 5 year average, today's estimate came in at 30% vs the 5 year average of 66%.  The full ramifications of this have yet to be seen, but the debate continues.  Will we see a shift in acres planted, prevent plant acres, or yield expectations?   

Weather forecasts for the next 6-10 days ( see maps below ) show marginal chances of rain across much of the corn belt and a more normalization of temperatures.  Any progress would certainly be welcomed.

After posting new lifetime contract lows early in Monday's trading session, both corn and soybeans were able to make significant gains.  December 2019 corn rallied .12 3/4 cents off it's lows to close up .04 1/2 cents on the day.  While it was not able to post a positive gain on the day, November 2019 soybeans did rally 12 cents off it's contract lows for a minimal loss of .05 3/4 cents on the day.  Could this be the start of something greater?  Only time will tell.

Our invitation to you would be to get realistic sales targets working with your local elevator on both old and new crop.  Should we see some price appreciation, it will likely be coming at a time of year when you are trying to get your crop planted.  Having these targets established ahead of time will allow you to focus on the task at hand and capitalize on better pricing opportunities should they arise.  One should also consider the purchase of put protection on any unpriced bushels for the coming year.  Friday's WASDE report gave us our first look at the 2019/2020 balance sheets.  As it sits today, corn ending stocks are pegged at a lofty 2.485 bln bushels.  While certainly there is a lot that needs to play out, should it be realized, it would be the highest ending stocks in the post ethanol era.  Soybean ending stocks were projected at .970 bln, a number that would only be second to this year.  The market will trade these numbers until it doesn't and certainly will challenge any robust price moves higher.  

Contact us to sort through appropriate risk management strategies that meet your needs.