MARKET UPDATE

You can scroll to read the usual update as well. As the written version is the exact same as the video.

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Overview

Grains mixed but all bounced nicely off the early lows. So decent price action across the board.

We included a lot in today's update as it's a longer one so here is a breakdown of everything we cover today in order:

USDA estimates
The history of the Jan USDA report
What is the corn spread story?
The funds. Now long +229k corn
Argentina dry Jan & yield correlation
Corn chart breakdown
Why aren’t beans sub $9 already?
Bean seasonal suggests mid-Jan drop
Meal chart concerns
Why wheat is undervalued

USDA Report Estimates

Report is out Friday. The trade is looking for very slight cuts to yields for both corn & soybeans.

Estimates

Corn: 182.7 bpa (183.1 last month)
Bean: 51.6 bpa (51.7 last month)

The actual yield moves are almost larger than the trade is expecting, hence why this report can be such a big market mover.

Trade Range Estimates

Corn: 181.3 to 183.7
Bean: 51.1 to 52.6

This estimate for corn is historically narrow while the bean range is wider than normal.

Corn and beans have both fallen outside of their estimate ranges 3 of the past 6 years.

History of this Report

How has this report shaped up in the past?

First let's look at price action.

This report is often a big market mover.

On average corn moves over double digits, while beans move over 20 cents.

For the past 14 years, both corn and beans have closed green on the day of the report 9 times while closing in the red 5 times.

Now let's take a look at the actual numbers.

First for corn.

Yield has came in higher or unchanged vs the previous month 5 of the past 7 years (71%)

However, corn yield has only come in higher or unchanged 8 of the past 15 years. (53%)

Past 15 years of corn yield change:

Unchanged: 2 years (13%)
Raised Higher: 6 years (40%)
Cut Lower: 7 years (47%)

Something to keep in mind is that harvested acres can negate changes in yield. An example of this would be last year where yield was bumped +2.4 bpa but harvested acres dropped -0.6 which led to production only increasing +108 million.

For the past 15 years harvested acres have:

Unchanged: 4 years (27%)
Raised Higher: 4 years (27%)
Cut Lower: 7 years (47%)

Now looking at soybeans.

For the past 15 years yield has been:

Unchanged: 1 year ((7%)
Raised Higher: 6 years (40%)
Cut Lower: 8 years (53%)

The past 2 of 3 years yield was bumped higher, but since 2015/16 yield has came in lower the past 7 of 9 years.

Harvested acres change:

Unchanged: 5 years (33%)
Raised Higher: 1 year (7%)
Cut Lower: 9 years (60%)

We have only seen bean acres bumped 1 time in 2013/14.

Have a Plan Before USDA

With the major report in a few days and the recent uptick in volatility, those that are uncomfortable should prices drastically move one direction or another should strongly give us a call or text so we can help you with a marketing plan before the report. It doesn’t cost you anything.

(605)295-3100

Corn Spreads Story

Often times people will say "the spreads tell a story".

Well what is the story?

Look at the July to Sep corn spread.

When a market is going from a carry to a huge inverse like this one, it signals that demand is currently out weighing supply.

One theory some have is that corn yield might not be as large as currently advertised.

Whether it be yield, carryout, a bump in demand. Something isn’t quiet adding up.

If you take a look at this……….

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