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.

 

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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.

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