Raelynn's Comments 04/10/19 4:31:30 PM
April 10, 2019
The April USDA report was released yesterday, and confirmed what we expected. They increased stocks for corn, which was no surprise following the acreage and stocks report from March 29th. Beans on the other hand had a neutral report. We saw both markets close unchanged yesterday and both positive today.
Given the non-bullish corn report, we’re probably looking at a properly priced market. But, we’re in that time of year where weather is the main influencer. We need either some weather issues or a deal with China to give this market some long-term support. It probably doesn’t need to be repeated, but it’s the same for beans. We still have double the ending stocks versus last year, and even though we lost some acres, we still have resistance with strong South America production. Simply put, we need some demand so we continue to trade politics. It’s hard to suggest a position on the board for beans when news has and can change significantly in a short period of time. But we continue with a significant net short position in both corn and beans, so if we get something to trigger this market, we’re ready to see some green.
For those holding old crop corn, I’m leaning towards selling all of your remaining bushels by the end of May. Currently there is no carry in the market, and if everyone gets busy in the field late April or early May, we typically see some basis improvements. Despite the fundamentals, I believe we will see some short-term selling opportunities in the near future. If you combine some positive news, even if it’s temporary, with the record short positions, you may see some board movement from shorts getting out of the market. Combine that with a basis push, and I would suggest you make a substantial sell, if not all of your old crop corn. Reward the rallies and sell when we’re in an overbought position. I’m hoping we’ll see 10 cents higher on cash prices.
As for cash beans, the big issue is the river. We don’t have a concrete date when the river terminals will open, but right now it is tentatively the end of April to beginning of May. We’re waiting for locks to open south of here to get barges up the river. In addition, it will be an interesting time when they do open and start receiving potentially 3 months worth of bean contracts. If looking to sell old crop beans, I would focus on forward selling to June. I would be selling old crop when we see any rallies and get to an overbought position. This may happen with trade talk and/or weather issues as well, but make sure you’re making sales. We’ve been stressing to customers you need to factor in the Trump Aid package when looking at these prices. We are too late in the marketing season to think we’ll get back to pre-tariff levels.
If looking to do some trading on the board, I think now would be a good time to look at a July corn call or bull-call spread. Current at-the-money 370 calls are 12 cents. If wanting to decrease your premium a bit, consider selling a 395 call for 5 cents bringing your net premium to 7 cents. This bull-call spread position will not be subject to margin. If we’re going to rally, I think it will happen before June 21st, which is when the July options expire. September at-the-money 380 calls are at 19 cents. I think July is the way to go but you’ll have more time to see a potential return with the September calls expiring on August 23rd.
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