Weekly Market Update – April 3, 2020

Days are getting longer, temperatures are getting warmer and seeds are going in the ground! With the crap we are all going through, everyone needs to try to find some positives. Spring is a wonderful time of year and we all love watching God’s handiwork grow or we would not be farming.

One other positive late week is a solid bounce in energy prices. There seems to be some progress on coming to an agreement between the Saudi’s and Russia to slow down production. The administration is getting a lot of flack for focusing time on oil instead of fighting the virus, but the truth is that supporting oil prices is very much a necessity for saving the economy when the virus gets under control. So many emerging countries depend on oil exports to keep afloat that if they start defaulting it will ripple through the entire world economy and threaten any chance of a recovery. Higher oil prices have not helped us much this week directly, but they will help the recovery. Russia has set limits for wheat exports and they are very dry in the winter wheat production areas. Argentina has opened up some logistics but continues to stay very dry. Most of the fundamental news this week has been positive, but the price action has not reflected that. Right now with the panic in the outside markets, fundamentals do not matter but they will. I am pasting my price guidance from Tuesday below because it has not changed.

I hope everyone stays safe!

Pricing Guidance
Scale in old crop sales on any positive day. This report was our best chance to correct last year’s balance sheet and we finally got validation on last year’s yield. Unfortunately, it came in the face of chaos. Now we have lost the demand and we are about to start planting new crop. The markets seem to have most of this negativity priced in, but with new crop coming will have little impetus for a sustained rally higher in the near term. On new crop, the market will be watching weather and any move toward $3.70-3.80 dec should be sold.

Basis keeps getting stronger on beans. If you need to move beans, do not sell any posted basis levels. Scale in sales to reward the market. Beans have had an impressive recovery so far. We think beans will make an attempt at $9 on old crop, but you need to be scaling in some sales if you have cash flow requirements coming up soon. We could have a setback due to outside markets. The virus is like having a monster loose, we do not know where it is going to pop up and affect us. Be patient on new crop.

Wheat has better fundamentals than even beans. We have the lowest acres since 1919. Importing countries are trying to secure more inventory and some exporting countries are limiting exports to combat local food inflation. Russia has some significant dryness concerns as the crop comes out of dormancy. If you need to move wheat at harvest, be getting basis locked in now! The board is going to try to make a run at $6, but be scaling in sales.

Cotton acres were well above expectations but dismissed quickly by the market. If we get even close to that many acres planted, it will be grown for the insurance and government payment. Supply side fundamentals do not matter on cotton until we get a clearer picture on the virus and economic recovery. Nothing to do on new crop cotton right now.