New Trade Deals Get the Go-Ahead. Christmas Rallies Reward Farmers.
Markets gave famers a nice Christmas rally thanks in part to new trade deals getting the go ahead.
March corn was just about to revisit recent lows of $3.66 when Mexico stepped up and bought corn after Congress gave the green light on the USMC trade agreement. That began a rally in March corn that took prices back up to the 100-day moving average resistance of $3.90. Should corn break through this resistance, prices could target $4.07. These rallies should be used as cash selling opportunities. Basis in some areas has been attractive and could widen after the first of year, when producers are more likely needing cash for January expenses.
New-crop prices for corn rallied and created some attractive targets to start thinking about hedging opportunities. New-crop December 2020 futures at the time of this writing were trading near $4.01 – a 13¢ jump from recent lows.
Beans have enjoyed a 60¢ run. China was an avid buyer of beans prior to the trade agreement as a sign of good faith. The concern going forward will be if China continues to purchase beans in the near-term or, once we turn the calendar, begin buying beans from South America. Prices for 2020 beans have also rallied to near the top of their range. Below is a chart showing the amount of products China has purchased from the United States in the past.
Big picture, producers need to be sellers on these bounces and reward these rallies. Also, traders will likely wait to see what agriculture products China will buy and look for signs that demand is really picking up to take prices up further. Corn sales are roughly 30% behind where they need to be to meet USDA’s expectations.
Also, looking ahead to 2020, producers are expected to plant 94+ acres of corn and 86+ acres of beans, which will certainly add to supplies given a trend line yield. This will likely keep prices in check on rallies, which is why producers need to be diligent sellers and reward potential demand-driven rallies.
Looking ahead into the next year will be USDA’s January 10 crop report. The government will try at that time to release what will be considered the final 2019 crop size. Also, we’ll see quarterly grain stocks and planted wheat acres.
Prices should remain supportive in the near term until after the January crop report and in anticipation of getting a China deal signed early next year. We shall see just what and how much China will come in and buy next month. That said, the iron is hot and opportunity may strike; then wither quickly the later into winter we go.
If you have questions, you can reach Cathy at email@example.com.
The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Neither the information presented, nor any opinions expressed constitute a solicitation of the purchase or sale of any commodity. Those individuals acting on this information are responsible for their own actions. Commodity trading may not be suitable for all recipients of this report. Futures trading involves risk of loss and should be carefully considered before investing. © 2019 Total Farm Marketing by Stewart-Peterson. Past performance is not indicative of future results. No representation is being made that scenario planning, strategy, consistency or discipline will guarantee success or profits. Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Total Farm Marketing. Total Farm Marketing and TFM refer to Stewart-Peterson Group Inc., Stewart-Peterson Inc., and SP Risk Services LLC. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. SP Risk Services, LLC is an insurance agency and an equal opportunity provider. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with all three companies. SP Risk Services LLC and Stewart-Peterson Inc. are wholly owned by Stewart-Peterson Group Inc. Unless otherwise noted, services referenced are services of Stewart-Peterson Group Inc.