Updated: September 21st, 2018
 
Closing Prices:
DEC. 2018 CORN $3.57
NOV. 2018 SOYBEANS $ 8.47
JULY 2019 KC WHEAT $ 5.60
Weekly Change: Corn finished up 6 cents for the week, Soybeans up 17, and Wheat finished the week 8 higher.. 
 
 

 

 

 

 

We need help!

Do you know of someone looking for a career working with ag producers and a passion for the markets? If so, we’d like to hear from them.  AgWest is currently looking for a few good folks that can help service the growing demands from our farming partners.  Currently we have the below openings:

For more details and to submit an application, please click HERE.


 

Harvest Progress

This crop got out the gate in great shape last spring and moved through the growing season ahead of schedule. That is now showing up with an early and a fast start to harvest. Next Monday’s numbers should show big gains for the week, but widespread rainfall heading into the weekend will slow the progress early next week.    

 

Was That The Harvest Lows?

Last week we discussed corn and soybeans slipping below major support and the door being opened for additional downside pressure. As we end this week, the question on everyone’s mind is if harvest/fall lows were struck this week. Price strength showed up on Wednesday with a big day on Thursday following surprisingly strong export numbers. Corn exports exceeded the high end of estimates, while beans and wheat landed in the upper end of the pre-report estimates. Of particular interest to the trade was soybean shipments to Argentina. Rumors and speculation circulated as to where the ultimate destination on those shipments may have actually been. We suggested in a Friday Alert several weeks back that the U.S. will export a lot of beans whether the trade issues are resolved or not. If China needs/wants our beans, they will find the path to the end around the tariffs. Add to that thought that U.S. beans are matching 2006 prices…what a bargain!

Feeder Cattle Rally

 

Since last spring, feeder cattle have put together an impressive rally. Basis front month futures, feeders have now retraced 35% of the overall decline. There are two layers of overhead resistance that may curb the enthusiasm:

         The second resistance lies in the $165 area which represents a 38% retracement of the entire decline in 2015/16. 

Another point of interest is the seasonality of the feeder market. The following chart is a five-year (red line) and 15-year (black line) average of the cash feeder market basis Oklahoma City. An uptrending market is apparent during the first seven months of the year and that is followed by a period of price stability. That last part of the year indicates seasonal weakness with the 15-year average beginning to decline about now and the five-year starting its retreat in the November time frame. Either way, we are in the window of time when seasonal weakness may start to influence feeder cattle futures. Tie this information to the overhead resistance just above the current market and strong consideration should be given to laying off some price risk. If not hedged already, talk with your broker about price risk strategies that fit your operation.

Early Acreage Estimate For 2019

 

On Wednesday of this week, Informa released the following 2019 planting estimates:

Given the pain folks are feeling over soybean prices, do not be surprised if corn acreage comes in above the 93 million mark. A lot of water will flow under the bridge before planters roll in 2019, but if there is a large shift in acreage (possible historic shift) from beans to corn, the script could flip with the corn market next fall feeling the pain of the soybean market this fall. There is one truth we can’t escape. When you add up the ending stocks (excess inventory) of corn, soybeans and wheat, it is a monster pile hanging over our markets. We can shift from one crop to another, but until there is a catalyst, such as a significant production-reducing weather event, we may just be stealing from Peter to pay Paul, so to speak. If you planted more soybean acreage in 2018 because that’s what the market was signaling, you hopefully were aggressive in pricing that crop during last spring’s rally. If you shift more acreage to corn in 2019 because that’s what the market indicates, you need to be more aggressive with sales and minimizing price risk.

Another consideration of significantly more acres of corn will be input prices in 2019. A big jump in acreage will require additional imported fertilizer products and that will come with a premium price tag. And how about seed corn…will there be enough to handle a significant acreage increase? Probably so, but at what price? All markets are driven by the balance of supply and demand and the input side of the equation is no different. If we require an increase in input products to plant next year’s crop, price will reflect that demand. Just one more thing to think about this fall. 

 

Inflation

Below is a link to an interesting article from RJO’Brien on inflation. The commodity markets have been plagued by deflation for a number of years. A shift to an inflationary world would certainly put commodities, in general, in a much better place. 

  Have a great week!

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THERE IS SUBSTANTIAL RISK OF LOSS INVOLVED IN TRADING FUTURES AND OPTIONS WHICH MAY NOT BE SUITABLE FOR EVERYONE. HOWEVER, THE RISK INVOLVED WITH PURCHASING OPTIONS IS LIMITED TO THE PREMIUM PAID PLUS TRANSACTION COSTS. THIS MATERIAL HAS BEEN PREPARED BY A SALES OR TRADING EMPLOYEE OR AGENT OF AGWEST AND IS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION. THIS MATERIAL IS NOT A RESEARCH REPORT PREPARED BY AGWEST. IF YOU ARE NOT AN EXPERIENCED USER OF THE DERIVATIVES MARKETS, CAPABLE OF MAKING INDEPENDENT TRADING DECISIONS, THEN YOU SHOULD NOT RELY SOLELY ON THIS COMMUNICATION IN MAKING TRADING DECISIONS.