The Market Moved Early. Now What?

Um we were right in this episode's gonna be we were right in beans, we're wrong in corn, but a little bit wrong in everything. You know, timing was everything. Um we'll go over work, where do we go from here? And we're already gonna start talking about December 27 corn hedges, not putting them on, what to do for next year. The whole cycle repeats. Again, we'll tackle 26. We got a lot of time to tackle that.

We're already looking forward to that. We're gonna talk beans and uh weather. Thanks. Yes.

Was there anything else? Guys shorting at the elevator or shorting here and that was as as as good as as it really got. Sure, you can short some calls, guys shorted some calls. There was never any really great premium to get out. But of course all that looks smart in hindsight. What what's disheartening is this is this happened what three we a full three weeks before normally seasonally it would happen. And this is gonna be the third year in a row that we've fallen going into July expiration.

Um I think it has a lot to do with the storage out in the countryside. So what happens is we're finding our bottoms in August. And that's the good news and we'll get to that here pretty soon. Um it pushes down hard in August, and we've seen this for the last couple of years, makes a bottom and then works its way out of there.

Now that being said, we have a lot of summer ahead of us. Rain for most everybody really has got this thing on its heels. That was selling out before the rain actually came. As a matter of fact. Um you go back a couple you know a week and a half ago, it looked very dry for a lot of the US. Forecasts are shifting fast. Got very wet two weeks ago, two weekends ago, not this last weekend, the weekend before, surprise rain for everybody that wasn't even in the forecast.

And now everybody's getting steady with a lot more storms, especially to the north and the east, um e th of the growing belt, and that would be Wisconsin, uh Michigan and a lot of storms coming that way.

of July, sometimes the tenth of July, you'll find your your your or you used to find your highs. Now the market is evolving it seems like unless there's gonna be a s because there's no planting delays and there or there hasn't been and you know with the machinery that we have nowadays what What we're s the pattern we're seeing is this thing gets in in a timely manner.

Um and then we're seeing rain follow it, which is making the seasonal shorter and shorter every year. Last year it peaked out in um February and one could say really the seasonals are now the momentum.

Guys, chase momentum. It builds on itself. We've gotten to$5 three times in a row now for corn. And that's all it's had. Now, where do we usually start? 460, 470? is where we start and then we work up our way to five bucks. So we're talking like a 30 cent rally for the last three years is essentially what we've had to deal with. And

It's very hard in marketing corn when you get a thirty cent rally. Now, did we say do nothing? No. Market incrementally. Are we where we want to be? No, and then I guess, you know, a lot of people aren't going to be. But the good news is a lot of guys have marketed at its 40, 50, 60, 70%. Is very common where the last couple years it hasn't been that common. A lot of guys have moved most of their old crop. You're not hearing the same horror stories.

But we are seeing the same patterns. This thing isn't holding together and I think it has everything to do with commercial store or on farm storage. It goes in the bin, so if it goes down to a low price in August, that's where we're finding our lows. We pushed$3.95 in September, two years in a row, and then bounce quickly out of there.

Um ended I think two years ago at 430 at Dem December expiration and 440 the year before. And now without going too fast, what I'm trying to say is very corn has not stayed below these levels or within 10 cents of these levels. For very long. I mean, it has happened for the last two years, but it tends to come out of there because they need it. Demand is phenomenal, it's record breaking.

So you're seeing it bit get bit up shortly after the last of the old crop supplies used, which would be August. And then you're finding your bottoms naturally and it this cycle repeats. So that's what we would expect this year. But that being said, we still have a lot of weather. I mean, we definitely aren't anywhere near pollination or even close.

Um but with this moisture now we got a little buffer here and and that's really what we have going on in grates. Um we could talk about Iran um but the

You're just getting this good weather pattern and it's continuing. This year they sold it off extra, extra early, well before weather, well before everything else, just because of what it looked like it was happening in the Iran. was gonna sign this deal, it's imminent and all this. And we're still hearing that to this day. The deal is right around the corner. Oil's cooled off a little bit, but it was still ninety-five when when corn topped out.

So yes, to your point, it did not correlate at all to oil, which is a little different. One would not expect a a complete corn breakdown with oil at$95,$92 call it, and we're going into one of the most volatile time periods of the year for weather premiums that go in the market, not out of the market, in the market.

So it's never easy in marketing and this certainly isn't easy. Um, but the good news is we never were very high. We never rallied with oil much, 25 cents. And generally the fall isn't too bad. You know, to the lows. It can be, you know, 20-30 cents more than this. And then it comes rocketing back up here and gets to these prices. That's basically what we've seen. Is that a guarantee that's going to happen this year? No, but at least

We have a template to work with. Yeah. We don't have the corn acres. That really bothers me. Where the last two years one expected the corn acres to continue to go up or at least be big. That's not expected this year. So it does bother me. We don't know

Then we're we're gonna come up from where we are right now in corn. But already on this dip, South Korea stepped in and also Japan. People are interested in our corn. We're selling a record amount. The problem continues to be overproduction and the whole market depends on the funds either buying it or selling it.

Which is not a great market. Not a great market to be in. No. So enough human and han about corn. Um I feel like we missed the chance at five dollars and it's not coming back anytime soon. Where beans still could easily fall another dollar if the weather stays.

you know, when the corn hasn't rallied very much. Yep. In and that's really what it all amounts to. There was no great hedge. Sure you could sold sold calls and bought puts, but that Opens you to margin calls.

Sometimes there's just not a lot you can do. Um again, we were marketing incrementally on the way up, or that was our recommendation. Hopefully, guys. got enough on the books to make themselves comfortable. And then we'll we'll start coming up with strategies to deal with, you know, getting rid of this new crop, which is gonna become old crop pretty soon. DJ.

Calves. Yeah, that's that is the most efficient way to use the corn. And I would not be surprised if it starts trending that way. Granted, we're not gonna grow the cattle herd, but you know, you get a n you get tired of raising this corn and not getting paid for it. You know, if you can figure out a way, and that's been the most efficient, is to feed it to cattle and sell cattle, um, of course that'll change as well. But that the I don't doubt that some of some fence is actually gonna go up.

Um, guys get really tired of giving all this stuff away. It's really disheartening too, because we do have record demand. You know, we're used to record demand and some sort of bullish markets, but look where these bull spreads are. Minus 18 and a half for July, November beans. And then you look at July, December corn at minus 27.

Th these are terrible numbers. I mean these are numbers about as wide as it gets, meaning that even after this record demand or rec it's record crush demand in the US and then it's record um overall demand for corn, including exports, it's really disheartening when you have record demand or near record demand. And then just simply can't hold even minor rallies.

You know, beans I would argue that we had a very nice rally for the fundamentals and it offered you all kinds of marketing opportunities. And I think we've said it enough that that that's what it what that's what that market looked like it was.

had a Trump tweet that it really liked and rallied on that. So beans were a little bit of luck and then corn rallied twenty five cents from basically So when I say twenty five cents, I mean new crop corn gets to four seventy five every year, or it has in the recent past, right? Yep.

So that's that's a common number that anybody could take. Four sixty, four seventy five, you know, um, and then it barely rallies from there. That's what I'm saying. That's where the when I say twenty five cent rally, I mean from where it normally is, you know, mid winter going into Yeah.

it it's able to rally twenty five cents. We used to have, you know, dollar rallies. We're just not seeing that. It's not getting tight. The spreads are wide. We got rain in the forecast. We got a wet problem and over production and that's what's going on

on in the US grains. And uh you know and I was before I forget I was gonna bring up something interesting. I'm getting calls and uh they're they're wondering if they you know the I think maybe they're listeners and they're they're talking to their banker and they're trying to come up with plans. Um I'm getting guys that want to do more on paper and I tell you why.

Uh I think I figured this out. Paper when I say paper they want to do it here instead of commit the physical bushels to the elevator. For two reasons. you know, three uh you know, upwards of three cents or even more to roll contracts, to do do various things. Of course this is just a generic thing. So th the costs are number one. Number two, they don't want to commit to bushels and get a better base

And be able to have it pass on a better basis later on. So the basis is a big p part of it. Of course, you don't have to lock basis with every contract, but it You know, I'm just talking about the ones where they do. Um they're finding that the basis is improving and they wish they would have waited. And they want more flexibility. That's what I keep getting for'em. They they don't want to be committed to these bushels at these prices. They want flexibility and they're

in their hedge. But that's a fine line too. You don't want to necessarily trade your hedge. You want to hedge the hedge. And I had a conversation with another producer about that. He wants to start hedging, hedging, you know, doing it Hedging his bushels and then when he sells his bushels lifting the hedges. And I'm talking about hedging hedging and we've talked about I have a couple guys that their mind's like a calculator and that's what they do with

Other guys just want more flexibility. They want the the they want to be able to get out of these contracts when they want. Like they see a low in August, they feel it's low enough, they want to be able to pull that and you know, again they get to expensive doing that stuff at the elevator.

So th that's I I'm finding that interesting because the number of different people are calling, kinda all asking the same questions. And my advice is talk with your banker, get on the same page, come up with a plan. And there's nothing wrong with doing it in a brokerage account at all. It offers you that flexibility. Do 100% there? No. But start working that way if you want more flexibility. And the reason I want more flexibility, as I was saying, is.

that that's where all the margins been for profitability. Like

And that's really where the profitability's been. It hasn't been in a higher price in corn now for years. And again, the same thing's happening. Beans finally got to a profitable, profitable price where you could just sell them, be profitable. Um more corn is just barely got there for la the last three years. Um and then once that collapses, all the profitability has been in good rolls.

Better basis management and storage and then storing into a better market. That's where all the profitability's been. So that's why I think that there is gonna be a move back to that as margins get thinner and thinner. Other guys stick with what they know and it's the path of least resistance for'em. Sure I know it costs three cents, but you know, the money's there and I don't have to have margins and all that.

Um I the a lot of you know a lot of people are getting away from that, like we I just mentioned. They're wanting to take control of their hedges. I think I think that's a good idea going forward, at least doing it on a smaller scale until you're comfortable with it. Um, but because again, the margins are so thin and uh that's what it is right now. That's the markets we have to deal with.

But where do we go from here? Well, let's get back on the topic. Where do we go from here? We like the downside in beans as long as it's raining. I'm very, you know, I'm I'm doing it very cautiously. So currently we're looking for downside strategies in soybeans. That's number one. And what exactly are we doing? A lot of different things we're looking at from bear spreads to selling a call, buying a put, to just buying puts and what works for farms.

And then we also have to see Iran and what's going in there. Uh a Black Hawk helicopter got shot down last night. So far it hasn't it hasn't really intensified the fighting.

But they didn't. You know what I mean? So this is what we have to deal with. Um but again we're already looking at new crop twenty seven corn stuff, um, which again we'll talk about on the insider on Thursday. And the whole cycle just repeats. It's just disappointing the way this all plays out year after year. We're just not getting any substantial rally in in corn. Nothing really. Right.

Maybe not hedges in the hole, but w is there anything I can do down here on cattle that I'm gonna have ready to go for June 27th? So you selling a lot of time premium, you know, is the only thing that I see. And of course that's as risky as it gets. But how do you use a board that's$20 to$30 underpriced? And that's that's the problem for hedging. So as far as hedging goes, very difficult board to use. And we've been through a few of these cycles and we talk about it.

Um, doesn't mean that it can't keep going down at all. And that's what we've seen in cattle. Like just when you think it's bottoming and it's way underpriced and it's gonna go rocketing back up. screw worm or whatever, um, then it kind of fails. And that's we've seen this, you know, so c cattle look very different.

What I think to happen to cattle and what I think is happening in the grains is a large amount of m momentum traders flooded the markets and they were also mixed with inflation buying on the oil. Now it looks like they're throwing that trade away, and I think it includes some cattle. Of course I can't know that, but that's what it looks like to me is happening, is that you're just getting this liquidation in this inflationary trade in commodities, which we talked about doesn't work.

you know, just buying to buy for inflation all ultimately pops. Um we had uh some July call uh puts on in beans and it was one of those mean markets where it didn't fall when you wanted it to. And then when it finally fell, it's a little too late. And again, why do I hate July options? It just it seems to just fall short of the finish line for people. The guys that buy August were much happier in September than the guys that bought July.

That being said, the July got to be profitable. Um, but again, back to why I don't like July options. It just seems to be this in-between month. One of these years, what's gonna happen, and it's not maybe gonna happen this year.

is that you're gonna have an actual weather market. You're gonna have things going on like we did for wheat this year. And it's gonna go up substantially. Everything everybody's gonna be so trained to be shorting these these low prices, they're not gonna recognize when that comes. I I

Um I still like the upside wide open for this from these levels. You know, we have not seen anywhere near enough weather to have any idea what yield is gonna be. Nothing correlates to what's happening right now with final yield.

Um so don't give up on this market either. Just take it day by day. That's all you really can do. There's nothing there's no you know, damage I feel is done in mostly in corn. There might be another thirty cents. Other guys disagree. They're like the next stop on the chart it's three three eighty five. Could it go down to three eighty five and stay there? I guess if they don't want the acres next year, yes it could.

Um but with record demand I feel like it's gonna be more like the last two two years. And we still again don't even know uh w which is really unfortunate that you have to make all your marketing decisions before you see any US weather. I I'm not a big fan of that, but you know these are evolving markets and guys gonna have to evolve with them. I hope uh we can recognize some turning points coming up here. Um but I will already start my uh my December twenty-seventh hedges.

that worked the stuff that we did last August last year worked wonderfully this year and I'm gonna do the exact thing same thing. So The whole cycle repeats. But again, we do we call us and we'll go over our short bean strategies, short bean ideas. We wanna do it with a limited risk. That's that's where I'm at right now. I don't know how you feel, but

We're learning a lot about the straits. We're learning a lot about oil reserves. And the oil analysts are still adamant. Numbers are numbers. And this thing is going the wheels are gonna come off and we're going to$120 a barrel.

And you know what? What if we do? What if corn goes to five fifty again? That's the kind of markets we're dealing with. Wildly unpredictable. I don't think anybody has the answer. Just navigate it the best you can. Very, very difficult markets and that fell very early this year.

But other than that, you just keep on, keep those legs moving, and uh it will get better. Um But I again we haven't seen enough weather. Anything can happen. Give me a call at 218-731-1578.