Data Dump: June 4, 2019

Data Dump Truck

CORN MARKET UPDATE:

  • For the past two weeks the corn market has raced higher as #Plant19 has turned into an absolute dumpster fire across most of the cornbelt

Image result for dumpster fire gif

  • Thankfully, in our region, we’ve fared better than most, and I expect we should have at least an average crop, so producers should be making a base of sales (if not done already).
  • Corn prices have been “choppier” since late last week, and you could say the market feels tired.  It’s almost as if the corn market has gotten numb to the ongoing planting problems.  Compared to two weeks ago, it feels a lot less certain that the market needs to rise further.
  • Some BEARISH stuff to think about:
    • This sort of vertical move, with multiple “gaps” higher, rarely lasts longer than three weeks.  I studied similar moves going back to 1986, and +/-20 trading sessions seemed to be the most common duration.
    • From a seasonal standpoint we are within 10-15 days of the “end” (see chart below)
    • The market is currently crossing a price level that has been the market top during several crop years:

PerpetualChart 6-3-19

  • With all of that considered, however, I feel it’s very important to acknowledge that this is a “black swan” event unfolding right in front of us, and it’s dangerous to lean too heavily one way into the market just because you feel it is a top.  Extreme disruptions in supply & demand don’t care about seasonal curves, technical indicators, or historical precedent.  Therefore, if you want to sell >50% of your new-crop, consider using options to protect your position.
  • I’ve had many customers ask me if it’s time to make sales for the 2020 crop year.  I think it’s time to be mindful of the opportunities, have an idea in mind for how much you would want to have sold this far in advance and at what price, but otherwise BE PATIENT.
    • There is now a strong inversion to CZ’20, so the nearby bids will drop much more quickly than the deferred values after the price peak is reached.
    • Due to the inversion, it might make more sense to buy nearby puts and “roll them up” until we have more clarity regarding the 2019 crop.
  • The seasonal model is now flashing a bright yellow “CAUTION” signal, as we are within days of the typical seasonal peak:

Corn Proj 6-3-19

  • The Seasonal Averaging contract is currently running at $3.96 CZ’19 with 80% of the program bushels priced.  If the market doesn’t run much higher, the final average price should be about $4.06.  While that’s quite a bit higher than we would have expected a few weeks ago, the averaging contract is now trailing the market by about 50-cents.
  • I remain fully committed on old- and new-crop corn (though not all is priced due to participation in averaging and managed-futures programs), but had bought enough call options to fully cover my positions.  Since last Thursday I’ve started selling back some of the call options to lock in gains.  However, since I am so committed with cash sales, I plan to hold some of the call options through next Tuesday’s WASDE report, and I will be looking for a less expensive place to buy SEP calls again sometime in late-June or July.

SOYBEAN MARKET UPDATE:

  • Admittedly, I haven’t been paying much attention to the soybean market, but my basic strategy hasn’t changed: whenever corn stops going up, sell beans soon thereafter.
  • The soybean averaging contract is running at $8.66 SX’19 at just over halfway through the program.

SB Proj 6-3-19

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