Monthly Archives:: July 2017

Grain Market Recap 7.28.17

Market Snapshot:

At the risk of sounding like a broken record, weather is the market maker.  Rains in our region have been favorable in the past few weeks, and our crops are reflecting the improved weather.  However, headline traders and fund traders want nothing less than perfect weather throughout the entire US.  As we all know, this is nothing short of impossible.  So, as the weather models fluctuate, so do grain markets.

Standard weekly reports this week kept the market guessing once again.  Crop conditions released Monday afternoon showed a bigger than expected drop, driving prices sharply higher overnight, only to sell off hard Tuesday.  The sell off continued through Wednesday before uncertain weather models helped the market recover on Thursday and again on Friday.  Thus far the near term models show cooler temperatures which is helping to minimize potential impact of less than perfect rain fall in parts of Iowa and Nebraska.

The local supply of grain seems more then adequate to meet local demand.  However, soybean basis has shown signs of improvement late in the week, even as the board started to stabilize and even move higher.  Now that we are at the end of July, most bean bids have rolled to the November futures, some improving bids in the process.  Corn basis on the other hand, has shown more weakness this week.  The inevitable farm-to-market movement of last year’s record crop has begun.  Look for end users of corn to continue to soften basis and cut hours as the supply pipeline continues to be plugged.

Don’t keep wondering…  ASK A MERCHANDISER!

What does it mean when you say the bids “rolled to November?”

Simply put, when grain buyers “roll” bids, they are changing the futures contract being used to establish cash price.  Instead of using August (SQ) futures to establish cash price, the November (SX) future is now used.  Many times the cash price will remain relatively flat through the futures roll, however the basis will change.  In most situations, the basis will widen in an amount equal to the difference between the old futures contract and new futures contract.  For example, today, August beans are roughly $0.13 lower than November futures.  So the basis is likely to get wider, or worse, by $0.13.  A -$0.24SQ basis becomes a -$0.37SX basis.

 

Read Full Market Update

Aaron D. Ulland
CHS – Procurement Merchandiser

Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

Grain Market Recap 7.26.17

Market Snapshot:

Sharply lower crop conditions on Monday were not enough to hold any rally in our markets.  Rain throughout the region to start the week added significant pressure to the board.  Tuesday along saw corn trade in a relatively wide 15 cent range.  Soybeans stayed stronger overnight but quickly fell, showing a 43 cent range.  With little to no fresh news to give market direction headline traders keep control of the daily trade, mostly focusing on each new weather model.  Following the corn sell off Tuesday, futures were near the bottom end of recent ranges drawing in some bargain buyers to the market, leading to a mild rally.  With all the gyrations in the futures over the past few weeks, basis values for beans have firmed while corn has remained steady with a slightly lower bias.  As the old crop bean basis has firmed the new crop values have improved slightly as well.

Consider this…  One bright spot to the recent corn price collapse is the deferred futures spreads have improved slightly, generating some comparatively attractive prices for summer 2018 sales.  Consider putting in offers for summer 2018 sales to help lock in some of the cash carry in the corn market.

Don’t keep wondering…  ASK A MERCHANDISER
Are there any tools available to help improve the price for my old crop grain?

One way to improve today’s cash price is with a Cash Plus contract.  A Cash Plus contract pays a premium on a nearby sale of grain with a firm offer to sell an equal amount of grain at a later date.  Typically a cash plus contract can be customized to fit each producer’s situation and can also be used for corn or soybeans.  The following example is using approximate prices from 7/26/17 and are subject to change.

Example:  Sell 5,000 bushel old crop corn at current market delivered Winona, attach a Cash Plus contract using a December 2018 $4.40 strike price.  This would pay approximately $0.23 premium on today’s cash price and establish an offer to sell 5,000 bushels at $4.40 CZ18 futures if corn closes above $4.40 on 11/23/18.  When using this type of contract, you have to remember to keep 5,000 bushels of next year’s crop unsold because you won’t know if you have a sale until November of 2018.

 

Read Full Market Update

Aaron D. Ulland
CHS – Procurement Merchandiser

Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

Grain Market Recap 7.24.17

Market Snapshot:

Rain in the key “I” states hit the market hard Sunday night into Monday.  Sunday night saw grains drop hard on the open, leaving a gap from Friday’s close to Sunday’s open.  Corn gapped lower by four cents and beans left a nine cent gap on the charts.  Isolated pockets of 5 to 7 inches of rain fell in parts of northern Iowa.  Other parts of the northwest corn belt received some much needed rain as well, though not deemed enough yet.  The latest weather runs are pointing to drier weather throughout much of the corn belt. Cooler weather through the same period is seen as limiting stress to the crops.  As a result, the rain is pushing prices lower while the cool temps are putting a floor under the market.  By the close of Monday, grains closed well off their lows for the day thanks to these changing forecasts.

The heat across the country last week is expected to drive another decline in crop conditions on this afternoon’s report.  Most traders are looking for another 2 to 3 point decline, implying lower yields compared to USDA’s last estimate.  Unless and until we see improving crop conditions, it is very possible we will a sideways trending market as the two key fundamental inputs, conditions and weather, fight for dominance.

On the local front, basis has been mixed to start the week.  Grain prices throughout the world are moving into the export market at significant discounts to US grain, leaving domestic users the only game in town.    In most instances, that should lead to softer basis values, but the slipping board price is also slowing deliveries and sales leading to a game of chicken.  Who blinks first?  The basis trader, or the farmer looking to clean out the bin?

Consider this…  Most of the attention lately has been old crop grain, but let’s not lose sight of next year’s crop either.  There are opportunities to lock in very respectable prices for the fall of 2018 as well.  One example after the close today is the Price Builder Bonus contract offering December 18 futures at $4.44 with a trigger price of $3.76 and a firm offer of $4.44 as well.  These quotes are subject to change at any time.  Give Aaron or Jared a call to learn more about this and other contracts to assist you market your grain.

 

Read Full Market Update

Aaron D. Ulland
CHS – Procurement Merchandiser

Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

Grain Market Recap 7.21.17

Market Snapshot:

Mother nature is fully in control of our markets.  The trend for the week had been drier overnight forecasts pushing markets higher.  As the mid-day runs come out with slightly wetter bias, futures gains were reduced.  The heavy rains and high winds in Southeast Minnesota weren’t enough to impact the markets much.  However, when Thursday rains in Iowa were better than anticipated, traders took notice and started selling.  Profit taking and position squaring at the end of a volatile week such as we have seen this week can often take place, this week the beneficial rains only added to the selling pressure.  Beans are softer today as well but faring a little better than corn.  Weather over the next five weeks is still very critical to bean production, causing traders to be more cautious with their bean positions.  While it is too early to debate bean yields with much accuracy, corn yields continue to be a key topic in pricing discussions.  Most analysts are using corn yields in the 165 to 167 range for the coming year.  Others, though, are starting to float the idea of much lower yields, closer to 163, which would take a significant chunk of production off the projected balance sheet.  Should this prove accurate, we could should see a floor develop under prices.

Weekly crop conditions to be updated Monday are expected to show another drop, some think up to three percentage points lower.  This, along with weather models will continue to rule the trade on the Sunday night open and into next week.

Consider this…  Lower markets don’t necessarily mean it is time to tune out the world of grain.  Opportunities still exist to work toward better prices.  Consider a Daily Price Plus compass contract which can price bushels above the current market with a guaranteed floor price should the market continue to drop.

 

Don’t keep wondering…  ASK A MERCHANDISER!

How can basis contracts work into my marketing plans?

Basis contracts can be utilized in a few different ways and their advantages change with the time of the year and market dynamics.  Basis is often at its widest at the heart of harvest which would be the least opportune time to utilize a basis contract.  And as one analyst often says, “a rising tide lifts all boats.”   In grain speak, improvement in nearby basis will frequently lead to an improvement in deferred basis.  The same is true for declining basis as well.  Setting basis on deferred delivery periods in an up-trending futures market is the ideal scenario.

Another way to utilize basis contract is to lock in attractive basis to match with such contracts as Average Price, Pro Advantage or Compass contracts where the final HTA futures price is not yet set.  Once the final HTA price is set, the basis contract can be used to establish the final cash price.

 

Read Full Market Update

Aaron D. Ulland
CHS – Procurement Merchandiser

Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

Grain Recap 7.19.17

Market Snapshot:

Markets are chasing daily weather forecasts.  Tuesday started strong buy faded as mid-day weather runs showed more rain in stressed growing regions.  Tuesday night models took some of the rain chances out so markets worked mildly higher again today.  Minnesota corn conditions dropped slightly again this week, but in line with market expectations nationally.  Bean conditions were slightly lower as well, but since beans are made in August, the market pays slightly less attention to bean conditions in July.  Locally, as more and more corn pushes tassels out, we await a general widespread rain to help the entire territory.  The spotty rains over the area this week have done little to ease the concerns of locals.  Today’s radar looks promising, but seeing is believing.

On the cash front, the stronger dollar takes us further out of the export market.  Ethanol plants seem to be getting their fill of spot corn and unwilling to push bids, but also not feeling the need to weaken basis further either.  The bean market has started to show some signs of life along with the board working higher.  River bids improved for the second day in a row.  Processing plants joined the fun today, firming nearby bids, yet still showing significant carry to September.

Consider this…  As the calendar continues to move closer to October and another harvest, logistics will start to play a bigger role in marketing decisions.  Consider locking in a cash price for the grain you plan to ship, but keep the upside open to participate in any rally.  This can be done using a minimum price contract where the cost of a call would be deducted from your cash price.  Which call to chose can vary depending on your risk appetite and overall opinion of the markets.  Many December 17 calls can be purchases for less and a dime, minimizing your cash price hit, but leave the upside open.

Don’t keep wondering…  ASK A MERCHANDISER!

How can I take advantage of the carry in the futures market?

A futures carry is when the nearby futures price is lower than later months.  For example, December 2017 futures are lower in price than July 2018 futures.  Board carries will often fluctuate, starting narrow and working wider as the crop grows.  This means the best way to take advantage of this fluctuation is to lock in new crop HTA contracts with December futures (for corn) and wait for the carry to become more favorable.  As an example, given our current corn carry out scenario, it is reasonable to expect the carry from December 17 futures to July 18 futures to widen to $0.24 or more.  Today that carry stands at $0.205.  So a producer could lock in December 17 futures today at $4.00, wait for the carry to widen and roll to July 18 at $0.24 netting a $4.24 July 18 HTA, before any fees.  Keep in mind basis still needs to be set.  The objective is to allow the basis to improve post-harvest making the net cash price more attractive than selling right out of the field.

Read Full Market Update

Aaron D. Ulland
CHS – Procurement Merchandiser

Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

Grain Recap 7.17.17

Market Snapshot:

Last Friday capped a rather tumultuous week for grains with corn and beans both closing slightly higher on the day, yet still suffering double-digit losses for the week.  Today started with mixed results as weather forecasts gyrate from hot and dry to warm with a wetter bias.  Overall, weather continue to drive the market in the near term.  The only other market news is weekly USDA reports like Exports and Crop Conditions.  Weekly export inspections were strong for corn this morning, but this late in the year doesn’t impact the market too much.  Export sales this Thursday are likely to disappoint again as US prices continue to be dramatically higher than our South American counterparts and drive business away from our ports.  NOPA crush numbers today were lower than expected but taken in stride by the market.  As for weekly crop conditions, traders are generally looking for another decline of one to two percentage points, despite the rains received last week.  Declining crop conditions could give the market more friendly headlines to trade but until we see a change in expected USDA yield, we are unlikely to see major price action.  The last government figure was unchanged at 170.7 for corn and 48.0 for beans.  The overall market opinion has a corn yield of 165 – 167 figured into prices.  The bean yield at roughly 47 is the prevailing market opinion.

Consider this…  Even though prices are well off the highs, and potentially below breakeven cost of production, there are ways to work toward higher prices.  December 2018 futures are still above the $4.00 mark.  November 2018 beans are hovering around $10.00.  The worldwide supply of grain doesn’t necessarily point to higher prices for the 2018 crop.  Consider setting a pricing window for using a Min/Max contract.

 

Don’t keep wondering…  ASK A MERCHANDISER!

FUTURES:  Prices for commodities traded on the Chicago Board of Trade

Futures fixed, or HTA, contracts offer great flexibility for marketing your grain.  Futures and Basis are often inversely related which presents the opportunity to capture attractive futures prices at a time when you believe basis is too wide and will improve before you are ready to deliver.  HTA contracts will generally offer flexible delivery points as well.  If you were to lock in, or set futures with CHS Rochester, you have the flexibility to deliver directly to any of the local CHS elevators or CHS facilities in Winona, Fairmont, Mankato, Savage or the corn plant in Lyle for no additional fee.  If you have on farm storage available, HTAs are also a great tool which allows you to capture board carry and higher futures prices for holding your grain until a later delivery date.

Read Full Market Update

CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

Grain Update 7.13.17

Market Snapshot:

The summer weather market has begun in earnest.  To start July, deteriorating wheat conditions combined with a hot and dry forecast really drove the market to start July.  From the close of 6/29/17, the day before the June acreage and stocks report, to Tuesday 7/11/17, December corn gained $0.34 while November beans rallied $1.18.  The rally came to a swift halt Wednesday as we got the first look at the updated USDA balance sheet incorporating the June acreage changes.  While the market was anticipating a decrease in average corn and bean yields, lowering overall production, the USDA left yields unchanged this month.  Combing that with the increasing crop size in South America, and the world supply of grain and soybeans is becoming overwhelming.  As a result, December corn lost nearly $0.16 and November soybeans dropped nearly $0.09.  Though the market is still expecting yields to drop in forthcoming reports, we are left to trade the numbers as printed today.  Focus is likely to shift back to weather forecasts in the coming days along with lower production levels.

Something new to consider…  Grain markets can make the most seasoned producer’s head spin.  Marketing your grain is no easy feat in the best of times.  Don’t go it alone and don’t keep wondering.  With the new periodic publication, your CHS Rochester grain team would like to the opportunity to answer your marketing questions.  We are here to help and chances are if one grower has a question, a dozen more have the same question.  Send Jared Schaefer (Jared.Schaefer@chsinc.com) or Aaron Ulland (Aaron.Ulland@chsinc.com) your grain marketing questions and we will do our best to answer your question and walk through any appropriate scenarios to help understand.  I’ll get us stared this week with some basic definitions we commonly use in the world of grain.

Don’t keep wondering…  ASK A MERCHANDISER!

FUTURES:  Prices for commodities traded on the Chicago Board of Trade
CASH: Final price paid to producer
BASIS:  Difference between Futures price and Cash price

There are several factors influencing basis.  Every location and grain company will use and interpret the factors differently.  That is why there is not one uniform price for grain.  Some of the biggest factors impacting basis are freight, local margin, supply, demand, competition, and end user bids.

 

Read Full Market Update

CHS – Rochester Grain Team
Kasson: 507-634-7545 ext 7
Ostrander: 507-657-2234

This Material has been prepared by a sales or trading employee or agent of CHS and should be considered a solicitation.  The information contained in this presentation is taken from sources which we believe to be reliable, but is not guaranteed by us as to accuracy or completeness and is sent to you for information purposes only.  There is a risk of loss when trading commodity futures and options.  CHS bases its recommendations solely on the judgment of CHS personnel.

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