Mid Week Comments
Is Rally Over??? - 09/14/21
A lot has happened the past 13 months, with prices moving from $3.07 corn
futures to $7.76 high May 13, 2021. Soybeans moved from $8.70 8/7/20 to
$16.60 on 5/13/21, and HRS wheat moved from $4.95 8/7/20 to $9.54 in on
Aug. 13, 2021. Essentially, prices doubled from levels just one year
ago, and since August when rains finally arrived in the western corn
belt, are retreating (albeit slowly).
Any serious marketer has to ask themselves, is the rally over??? After
all, we matched the 2008 highs in corn and soybeans, and went well above
them in Canola. HRS wheat got close to the 2012 highs (although not near
the $24 highs in 2008) due to the devastasting drought in 2021. But all
good things must come to an end, right? So the question remains, is the
grain market rally ending???
We have done a lot this marketing year, allocating a shortfall in
production relative to demand in what was a devastating drought year in
the northwest corn belt. There are still questions about yields, but
relatively good conditions in the east helped to alleviate concerns. If
it weren't for rains in late August, though, the good crop in the east
could not overcome the devastating losses occurring in the northwest from
mid-July to mid-August. But based on Pro Ag yield models, the corn and
soybean crop have improved a lot from mid-August levels nationally -
mostly due to the rain in the northwest corn belt.
So Pro Ag is seriously asking the question, have we sold enough grain
with prices doubling??? Keep in mind, Pro Ag sold 240% of a corn crop
the past year (some 2019, some 2020, some 2021, and some 2022), 365% of a
soybean crop, and 310% of a wheat crop - and we are still asking if we
sold enough. So how much did you sell? These are the highest prices
we've seen in 7-10 years!!! Of course, we held almost 2 crop years of
grain over from 2019/2020 - which aided our ability to sell so much when
prices went higher.
Today's focus in the market remains weather. Weather forecasts remain
warm and dry the next week, but then turn considerably cooler in the 8-14
day forecast. That means a potential frost in the northwest corn belt,
as around Sept. 20 the first frost usually hits in northern areas of
ND/MN. However, most of these crops are at or near full maturity as the
drought pushed crops. In fact, most corn and soybeans crops are drying
down quickly now.
Quite honestly, the perfect harvest weather forecast for the corn belt
means very little harvest losses, which might further enhance yield
potential of the 2021 crop. The past 2 weeks, yield potential has risen
so this is just more of the same.
Pro Ag believes 2022, 2023, and 2024 crop sales will need to be expanded
later this week as prices are still near the highs for these crops.
However, 2021 crops will still see shortages and basis improvement late
in the year as shortages develop. So we see the distant months (where
shortages are less likely) as more attractive sales at this point.
Weekly crop conditions yesterday 9/13 showed steady soy conditions at 57%
rated G/E, but the Pro Ag yield model rose another 0.28 bu/acre to 49.3
bu, now almost a full bushel above mid-August levels (before the
northwest corn belt rain). Another bushel of production is 90 mb, which
basically gives the US a more comfortable carryout level. Corn
conditions dropped 1% to 58% rated G/E, with the yield model down 0.7
bu/acre (but losing the 1988 data year in the model). This further
explains why we want to advance sales of 2022-2024 soybeans as the crises
of stocks might be ending (we will survive until SAM harvests their crop
But lets not miss the forest for the trees; prices have done dynamic
things already this year. What more can be accomplished? If you haven't
sold yet, then when???
Saturday Morning "10 Minute Marketer"
Learn more about grain markets than you thought possible in 10 minutes
from our Saturday morning update at www.progressiveag.com/videos.
Ray can be reached at email@example.com.
Ray is President of Progressive Ag Marketing, Inc., a top Ranked
marketing firm in the country. See http://www.progressiveag.com for
rankings and link to data from Top Producer Magazine and Agweb.com.
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