Weekly Market Update – November 20, 2020

Everyone wants to know how high this market will go and is kicking themselves for any sales they made before now. There is no simple answer to how high the market will go. We can make guesses and use all sorts of pictures drawn on charts and fancy models taking weather and yields and demand and any number of other factors into account but at the end of the day they are all still just guesses. Anyone who tells you they know more than that is a liar. We can all look back and say what we should have seen coming but if we had got a few more showers in the Midwest at the end of the growing season and some more rain in South America we would be having a different conversation right now. The market does not always go up in an election year but sometimes it does. It is cliche because it is true to say that the crop is not made until it’s in the bin. The market was pricing in a big crop that we had almost made but then lost it at the end. This is my personal opinion that the Chinese are buying from us because they waited as long as they could and they are out of grain and South America is too. I am sure there are so many shenanigans behind the scene that it would blow all of our minds, but at the end of the day they had to buy from us because everyone else was out and they need grain.

It is human nature to regret, but do not beat yourself up about prior sales. Try to be happy you are pulling your average up not down. Do not forget how quickly things turned around for us this year. We had everything going against us for several years in a row and all of a sudden everything is going in our favor. Do not forget how quickly it can turn the other way too. The market will keep going up until China slows down buying and/or South America makes a big crop. Noone knows when exactly that will be.

Soybeans have been almost straight up this week except for Thursday. Thursday morning we came in to see red on the screen with some showers falling in South America. Before the day was out the markets had turned around and pared back losses as the rain totals were disappointing. The model runs are also turning drier for the next two weeks and are adding heat into the mix which will not help the crop. We have already shipped as much this marketing year (since September) as we did all of last year. Soybean oil is the cheapest veg oil price in the world and it continues to move higher and most users do not have much meal coverage on. Beans have a lot more room to run higher if we keep shrinking the crop in South America.

Basis does not feel like middle of harvest in the Southeast right now. I have never seen basis stay this strong through harvest. Move what beans you need to but the basis should add to carry for after harvest. I think you should still be scaling in sales but very slowly now. I would get a little done on new crop but do not mind reaching with orders close to 10.99.

RFA is reporting they received a pledge from Joe Biden that the EPA will not grant the SRE waivers that were helping the oil industry get around the mandate. It may not matter much now with energy demand so low, but it will when things turn around. If followed through, it will be a big help long term. We thought there was no way we could replace the amount of corn demand we have lost from the drop in gas usage but we have. Exports have already reached about half of what we did last year just since September. We still have a long way to go. Corn basis is huge as vom issues plague the eastern corn belt and rail is not running well. We have already seen basis bids north of $1.50.

Same as with beans, scale in but slowly. Work orders above the market and let it come to you. Put a little on the books for new crop above $4, which should be $5 with basis and then be patient.

Wheat does not have the fundamentals to lead. With new highs in corn and beans wheat has not made it back close to its highs as the Russian crop seems to be getting bigger. But if wheat falls too low it will quickly be added into the feed rations and lose the excess so it should stay fairly well supported. Export pace is nothing spectacular. Argentina is a big wheat producer so if it says dry down there that could add to wheat strength but right now wheat is going to be a follower not a leader. Get some new crop hedged above $6!

Cotton exports are behind last years pace. Cotton is facing harvest pressure that the other commodities never experienced this year. Cotton should get some strength as it is poised to lose a lot of acres next year. There is not as much excitement to talk about as there is in the other commodities. Dec found its way back over $0.70 and I would be getting a few sales on there.