I have subscribed to Sue’s email service for a few years. Her insight into what moves the markets is extremely helpful to my farm operation. She has such a global view of information and then puts it together so I can base my marketing decisions off that. It amazes me how many times Sue will make a prediction on a reversal or a market high or low and nails it to the day! That consistency really builds my trust and respect in her.
Thank You Sue.
Advisory of Ag Markets Infusing a Forward Outlook
Realizing the Present and Discovering the Future
September 17, 2020
Cash Sales Recommendations: (Old Crop 2019/20)(New Crop 2020/21) Note, an “*” means trade recommendation on cash or towards cash is complete.
Wheat: Note: *When recommending cash sales on either Chicago or KC wheat, it should pertain to both. 12/19/19 20% Cash Sales with futures at 460 (HRW) – Done
*2020/21 20% Cash Sales recommended on Chicago futures at 575-585 (SRW) – Done
*2020/21 New recommendation for selling new crop wheat cash sales. Sell 20% at steady to higher on Tuesday 4/21/20. If filled, this would bring recommendations of cash sales to 60% sold. – Done 547.5 to 554
* 2020/21 Recommendation in commentary on 7/15/2020 to sell another 20% on Thursday. Assuming the need for elevators to open…we will take 545-548. This now brings cash sale recommendations to 80%.
*New recommendation for replacing cash sales in both Chicago and KC wheat – 6-24-2020 – buy back cash sales of wheat at steady money via December wheat. KC Dec @ 456.5 and Chicago Dec @ 498 – Done
*For replacing buys on sold cash wheat, we recommend a sell stop 489.5 basis December Chicago and 446.25 sell stop protection on December KC. Stopped out!
Corn: *2019/20 Corn sales of old crop at 10% is recommended at 335 via July futures. If one has basis contracts rolled to July, this may be a target. Close enough – Done!
*2019/20 Another 10% cash sales recommended against the 335 area again. Close enough – Done!
*2019/20 Corn sales of old crop at 40% is recommended at 338 via July futures. (we would like to revise this percentage to 50%) Done!
2020/21 We recommend 10% new crop corn sales at 375 basis December futures. (Cancel order)
2020/21 We recommend 25% new crop corn sales at 380 basis December futures.
*2019/20 Soybean sales for old crop at 889 is recommended at 25%. (Basis July futures – Done! High of 891 on 6/30/2020)
* 2019/20 Note, this is a change in recommendation: Soybean sales of old crop basis August futures recommended at 890 at 15%. Done!
*2020/21 Soybean sales of 20% basis November futures recommended at 916. Note, a change in price and moved to 902. (Note, this is another change as of 7/20/2020) Done!
*2020/21 Soybean sales of 15% basis November at 980 recommended. For those looking to sell off the combine, we would recommend moving the percentage to 25%. Done!
*2020/21 Soybean sales of 15% basis November at 1010 recommended. Done!
*2020/21 Soybean sales of 15% basis November at 1060 recommended.
IT has not totally finished all the updating and new firewall for the website. We anticipate this will be done by Monday late. We are noticing changes on our end and are praying this does not disrupt transmission at such a critical time in markets. Thanks for patience.
Due to writing so much about soybeans and corn this evening we are passing on wheat and livestock.
WEATHER: Briefly, weather leans negative as good harvest weather is in store through the end of September.
CORN: December corn futures pushed to a new high for December corn during September at 377.25. This contract is nearing Wave 2. Soybeans helped to pull corn higher today. We continue to wonder if corn will be the surprise in yields to the adverse over soybeans.
Adding support was the additional sale of 120 tmt to unknown destinations announced this morning along with excellent export sales for the past week. It was interesting that while there were total export sales notices of 976 tmt to unknown destinations along with 490 tmt of confirmed corn for shipment to China, the country officially announced no changes to its corn import quota of 7.2 MMT for 2021 calendar year. So, some in the export consulting business ask if this means that China will still keep buying corn or will there be cancellations on the horizon?
Gulf and PNW basis is firming while, loadings in Brazil’s port of Santos is $1.30 per bushel over the December futures but offers were limited. In Argentina, higher replacement costs continued to weigh on the market with offers holding at $1.10/bushel over for October shipment against bids of no lower than 98 cents over the December futures. That said, we hear the Vietnam offered February 2021 corn shipments a full $10 per metric ton above March when Argentina’s new crop is expected to start coming to the market. Ukrainian bids also firmed today which has also occurred much of this week.
According to the Buenos Aires Grain Exchange, the corn planting is getting a slow start due to continuing dryness in Argentina. We also note, Argentina’s Central Bank added new regulations to further restrict access to the foreign exchange market for individuals and companies which may have a negative impact for large grain exporters needing to access funds to finance transactions. These measures are expected to last into the end of the year. The Bank may be aiming to protect its dwindling international reserves. The rule also indicates that financial institutions may only agree to disburse new financing in foreign currency for large exporting companies with its prior agreement. Restrictions of this kind may negatively change the capacity of exporters to obtain new financing and the conditions of operations. Here again, this could be helpful for US exporters of grain. Lastly, Argentine farmers receive fewer pesos for their grain sales as they receive less money due to the current grain export duties, which are 33% for large soybean producers and 12% for both wheat and corn producers. Argentine farmer sales hit four-month lows since beginning of May. Example, sales of both old and new crop corn, wheat, and soybeans totaled 1.55 MMT in the week ending September 9th versus the same week last year of 3.57 MMT of corn, wheat, and soybeans sold.
Keep in mind, corn remains in a narrow range and this market like soybeans has been compressed for a very long time.
We share that since the USDA started releasing monthly yield estimates for corn in 1965-66, there has been 25 years that the corn yield fell in September from that of August. Of those 25 years, the yield fell again in October in 14 of them. We will expand on this after the October report but one thing we noticed in looking at this report is that years ending in a zero tended to see September reductions followed by another reduction in October. This may be a thing to keep in mind when looking at revenue crop insurance. Note, just because the yield fell in September and again in October, it did not necessarily mean higher prices.
For tonight and tomorrow, December corn has resistance at 379 and 382 with support at 370 and 364.
SOYBEANS: Soybeans surged through Wave 3 on the weekly November soybean chart and now appears to be pushing for the 1069 Wave 4 objective. What is driving this market now? We are hearing more rhetoric of brokers turning bullish which is adding enthusiasm to this market. Ironically, now they believe this market is going substantially higher…where were they a month ago? For now, we think this market is entering into the autumn of this move that should lead to a correction and then another leg higher. It has been our premise all year that soybeans were following the path of 1980. So, today we went back for a review but in a bit of a different slant. (we will share that in a sec) Another reason that this market has started to run is that China has continued to aggressively buy US soybeans. We have always said, it is not what China says but their actions that speaks louder than words. Weather in China has been downright horrific this growing season and between what probably is poorer yields, hog numbers are on a sharp uptick which is supporting soymeal. However, we question how much the poultry industry expanded in efforts to garner more protein in a shorter time for the population. Here again would support soymeal and corn. Then, demand for veg oils has gained with Malaysian palm oil setting new highs after seeing a dicey correction in the past few weeks. Soybeans are finding support from both products. At the end of the day, China continues to chase the soybean market higher on need but we also wonder if China may be a bit concerned about La Nina effects on Brazilian crops? Recall, the Brazilian farmer had sold well ahead for 2020/21 production and even some into 2021/22. Should Mother Nature turn on Brazilian production, China could be in a world of hurt for protein to feed to their pigs and herd along with poultry.
Since 1970, there have been 8 years in which November soybeans attained new contract highs in the futures during the month of September. Out of the 8 years, 1972, 1980*, 1983, 1995, 2003, 2007, 2010, and 2012, 6 of them broke down into October and then resumed the rally to higher highs. The two years that did not make new highs still broke into October but the tip-off was a lower monthly close at the end of September. Those two years were 1983 and 2012 which were weather markets, as well. While, 2020 has dealt with some weather issues of drought and a derecho storm, it is also a year that is seeing fabulous demand being driven of course, by China!
Of the six years that saw a break into October and then a renewed contract high, 1972 fell 18 cents to the October low of October 13th. (keep in mind, the correction was a 5.1% decline and prices were in the $3’s). 1980’s correction fell $0.94 to the October low on October 3. In 1995, the break into October was a decline of 6% at $0.41 cents on October 3rd. 2003 saw November soybeans decline 3.2% or $0.22 into October 6th. In 2007, November soybeans fell into October 9th to the tune of $0.95 or, 9.4% and then resumed the rally. In 2010, November soybeans fell into October 4th to the tune of $1.02 or 9%.
So, looking at history and using the smallest percentage of decline of 3.2% would equate to a correction of (assuming today’s high of 1032.2) would be 33 cents. Or a move to $10. The largest percentage of decline in continuing higher years is 10.7% or a decline of $1.105. The average of the past 6 years that corrected into October and turned to higher highs is 5.7%. That would indicate a potential of 59.25 cents or, a potential correction to 973. We remind you that the close of November soybeans in August was 952.50.
If, we add in the two years, 1983 and 2012 that “closed lower at the end of September” and did not renew the rally to new highs from an October low, the break into October was 20.6% in 1983, and 17% in 2012. “Assuming the high today of 1032.25” is the current top for September on November futures, a 20.6% decline would equate to $2.12.50 and, a decline similar to that of 2012 from 1032.25 would equate to a decline of $1.75 from the current high. Again, a tip-off of something amiss would be for soybeans to close below 952.5 at the end of September basis November futures.
Lastly, we do not know for sure if we hit our high today but the next major wave count on the weekly November soybean chart is 1069 and this market seems to have enough enthusiasm to push the rest of the 37 cents. Window this area. History is no guarantee for future results but is a great barometer for what the path may hold. History does repeat itself but most of the time, not in the same fashion or for exactly the same reasons. We merely show this for guidance. We suggest for those that are adamantly bullish, that now may be a good time to buy puts to floor your crop. Funny how soon we forget. We do note, if soybeans close higher but have corrected by month’s end, it would seem the market will offer another move????
Over the coming weekend and next week, we should start to hear more soybean yields. I have to share, thus far, farmers’ comments are similar, “the beans are yielding better than I expected.”
The Argentine peso is weakening and this is discouraging farmers from selling and that could lead to a smaller crush? Argentine soy oil and soymeal premiums are firming. Brazilian importers have locked up multiple purchases of Argentine soy oil cargoes over the past few weeks marking the first time in two years that the world’s largest soybean producer and exporter has had to buy in bulk from its neighbor. The move comes after Brazil ran dry of soybeans which is causing a lack of domestic oil supply with around 60 tmt to 70 tmt of Argentine soyoil bought by Brazilian importers over the past few weeks. This would normally happen in February and at much smaller volumes. Despite of harvesting a record soy crop, Brazil has seen such a strong export program to China that has left the country short of the oilseed and with a tight supply expected to persist until its next harvest in February. What happens if Brazil remains dry and soybeans are later planted?
For tonight and tomorrow, November soybean resistance is 1039 and 1048 with support at 1012 and 994.
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