Special Market Update

Grain Market Commentary

Wednesday, November 13, 2019

By Greg Johnson, Executive Account Representative, The Andersons

USDA’s November Report is Behind Us. Now What?

On November 8th, the USDA issued its monthly supply and demand report. There were no fireworks in the report; corn yield was lowered by only 1.4 bpa, harvested acres were left unchanged, demand was lowered by 100 million bushels, offsetting the lower yield. As a result, ending stocks for corn were basically unchanged at 1.9 billion bushels, more than adequate to meet the flat demand that is forecasted.

For soybeans, both the yield and the acres were left unchanged. Demand was lowered by 15 million bushels, which resulted in an ending stocks number of 475 million bushels – not as high as what was forecasted several months ago, but still more than adequate.

With the November USDA report behind us, what will traders be focused on over the next couple of months?  In no particular order, here are some items to keep an eye on:

  1. South American weather – Brazil started off on the dry side, but recently have received some beneficial rains. Keep in mind that the beans have just been planted, and that the critical time frame for Brazilian soybeans is late January/early February.
  2. S.-China trade talks – Rumors are circulating that the U.S. and China are “close” to reaching an agreement on Phase 1 of a trade deal, which would include the buying of U.S. soybeans, pork, and other commodities. But we have been “close” several times before. Stay tuned.
  3. Weekly export sales – With demand for feed and ethanol relatively flat, we probably need a pick-up in exports to stimulate some interest. Thus far in the marketing season, soybeans are running a little ahead of expectations, while corn exports are running behind.
  4. Basis levels – With lower yields and lower acres in the eastern Corn Belt this year, basis levels for both corn and soybeans have been extremely firm in Ohio, Indiana, and Illinois. This has had a spillover effect on basis levels in the western Corn Belt. Will farmers continue to be tight holders? Or will they start selling ahead of next March’s planting intentions report?
  5. Speculative funds – Funds are currently long soybeans and short corn, and have been comfortable maintaining these positions the last couple of months. Will something change to cause them to alter their attitude towards corn and soybeans?
  6. January 10th USDA crop report – USDA does not normally adjust acres or yield in their December report - only demand factors. Thus, we are almost 60 days away from any potential changes in yield or harvested acres.

What should you do?

  1. With a relatively uneventful S&D situation such as we are in now, markets could remain range-bound for the foreseeable future. Make sure you have offers in that are reasonable and within the ranges that we have seen over the past several months.
  2. Look to establish floors while maintaining some upside price potential. Use min-max-averaging programs to help you accomplish these goals. If you are unfamiliar with these strategies, ask your Andersons account representative.
  3. It is not too early to enroll bushels in one or more of The Andersons managed marketing programs. These programs are professionally managed, have a good track record, and use several different tools (futures, options, technical, fundamentals) to help get your grain marketed at profitable levels. Talk to your Andersons rep about which program(s) best fits your needs.