Raelynn's Comments 01/14/20 4:20:02 PM
January 14, 2020
Welcome to 2020! I’m sure many of you are happy to see 2020 on your calendar and have hopes that we won’t see a repeat of 2019. It’s definitely been one for the record books. I want to thank all of our customers for the business in 2019, and we hope to continue working with you in 2020. As always, call if there is anything we can do for you this year and in the years to come.
We had plans to start the year off with a flurry of volatility. We had on the docket a very big USDA report with “final” production numbers followed by the long-awaited US China trade deal. The first has come and gone with very little excitement. If anything, it cemented us into a consolidated trading range that will be on the boring side for a while, unless we see some fundamental changes. Which brings us to the US China trade deal. Our two-year long wait will be over as of 9:30 am tomorrow (Wednesday 1/15). We’ll hopefully see supported trade tomorrow with this deal, but I’m predicting minimal gains unless we see one of two things happen following the big signing. First, a big question is whether we will see the details. There have been differing reports concerning the release of the “shopping list”. Some say the terms will be released and others say we’ll have to wait and see what China buys. Either way the second piece we need to see a bullish market long term is China’s follow through. Commercials are currently concerned that the agreement will be primarily for new crop. This was only further solidified by news today that China will allow 10 mmt of US soybean imports duty free in October. This is great news, but specifically for new crop. Hopefully China will do some buying tomorrow or in the next couple of days as a form of goodwill to push us through some points of resistance.
That’s what’s buzzing in the news right now, so how do we market going forward. Something to consider before you even look at whether the market is going to go higher or lower in the near future is the quality of what’s sitting in your bin. It has been discussed at length already in this office about the quality of the corn crop out there. Due to high moisture almost everyone was fighting this fall, it is more imperative than ever to consider the risk of holding wet corn into warmer weather. If this is a concern of yours, I would consider getting all of it sold and moved by the end of March. I know we usually go by Katy’s birthday (July 7th), but that won’t work if you didn’t have the capabilities to dry your corn this fall. In the next couple of months, we typically see basis strengthen with unfavorable weather. This is the time to move your corn. And I would suggest re-owning a portion of it on the board. Historically we see our highs in the spring. Get rid of your corn before you could see any damage, take your cash, and put a floor on your corn by re-owning with calls on a portion of your bushels. Given the current projections on 2020 acres, getting your old crop marketed by March may be a good move if we don’t have a weather scare this spring.
As for beans, the political teeter-totter may continue for awhile until we feel the trade deal was successful and achievable. What good is a deal if both parties can’t fulfill their end of the bargain? We’re currently still 60 cents above our low in November. If you haven’t sold any cash beans yet, I would consider doing so. We’re seeing cash prices that were a dream over the last two years. Sell some bushels just in case we don’t see China as a big buyer of old crop. It’s been questioned over and over again that the numbers seem too high to be achievable. That may weigh on the market until we see it happen. But, I won’t diminish the potential of a huge impact this could have. Sprinkle old and new crop sales if/as we go higher. With both corn and bean supply predicted to grow (potentially significantly) it’s worth considering the cost of waiting when new crop takes center stage.
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