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Update: What is in Store for Corn and Soybeans


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In case you didnt have a chance to read last weeks report: What is in Store for Corn and Soybeans? It can be found with the following link. It is pertinent to this report. Or send me an email and I will pass it on.

https://www.insidefutures.com/article/2068065/What%20is%20in%20Store%20For%20Corn%20And%20Soybeans?.html

Last week, I reported the move higher in soybeans and corn futures was a gift after the October WASDE Report. I felt and still do feel that soybeans moved higher due to speculators jumping on a slow trading and low volume soybean and soymeal market, pushing meal up to fill a gap left from July and soybeans followed meal higher. When the gap on meal was filled, meal sold off and soybeans have slowly moved lower. There was nothing in the WASDE report that was bullish for either beans or meal. Bean oil had some positive news, but if a crush starts increasing to build oil stocks, unless meal demand picks up, or oil takes off to the moon, crushing for bean oil will simply add to meal stocks and with soymeal about 80% of the crush to18% for soy oil, it is negative for soybean and meal prices.

My biggest concern remains the extremely wide cash basis and what might happen when November soybeans go into delivery. In the report a week ago I used Beardstown, Illinois for an example of a wide basis and because it is a CME Group delivery point. Last week the soybean basis was .47 cents under Chicago November. As I write on Thursday, October 26, 2017 at 7:30AM the basis is .48 cents. For a river market in Illinois it is a very wide basis.

At the same time, as a delivery location, Beardstown is 3.50 cents under Chicago.

In other words, why would a farmer deliver soybeans at .48 cents under Chicago when they can sell the board or may have sold the board at higher prices and post-delivery in Chicago, deliver for 3.50 cents plus a few cents of fees versus selling for .48 cents under Chicago? Of course, there will be farmers that pay no attention to the different prices or understand delivery, but for those that do, deliveries should be heavy. If they arent heavy, it means they are being stored and rarely does storage pay unless the carry is sold and if the basis is tighter. If a farmer uses the carry and a tighter basis as it is intended, great. If not, it is like throwing away money.

What happens if there are big deliveries?

Most likely if there are big deliveries, the cash basis will widen even more and futures will fall. If deliveries are extremely heavy, grain buyers throughout the country may tell farmers they either cant take the grain which some farmers are already hearing in some locations, or buyers will extend the carry to encourage farmers to store.

For corn, the same thing can happen, but with December the first month for board deliveries, basis will more than likely widen and the carry extend during November. When December deliveries can take place, with the current wide basis, it is likely to see heavy deliveries, farmers storing and futures slowly drifting lower.

As the chart below shows, meal rushed up the day of the WASDE Report, filled the gap and as I write is now below the price the day of the report.

DECEMBER 2017 SOYMEAL AS OF 11:25AM CENTRAL 10/26/17

CHARTS FROM ESIGNAL INTERACTIVE, INC.

NOVEMBER 2017 SOYBEANS

A close below 9.68/bushel is negative for soybeans, but like soymeal, the spike after the WASDE report has almost entirely been eaten away and for farmers, the widening basis has in many areas of the Midwest made cash prices 5 to 10 cents worse than the day before the report.

DECEMBER 2017 CORN


Get Your Copy of A Traders Guide to Futures

Download your complimentary copy of this intro to trading futures! No matter what your trading background, this guide will provide a great starting point. If you already know something about futures trading, you can jump to any chapter for a review or to the back of the booklet and test your knowledge in our Futures Quiz.

Download your complimentary copy today!

Since August 31st, corn has traded sideways, but has been slowly drifting lower, but the cash basis has been widening. The futures arent leading grains lower, but farmers are quickly finding out what happens when buyers arent wanting to buy it with widening cash markets.

Have you been marketing or trading grains to your satisfaction? Give me a call, lets look at the future. I can be reached at 1.913.787.6804 or email me at chris.lehner@archerfinancials.com.

Would you like to open an account with Chris? Go to our interactive New Account application at Open An Account. It is fast, saves on postage and its green.

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. The risk of loss in trading futures and options can be substantial. Past results are not indicative of future results or performance. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. Research analyst does not currently maintain positions in the commodities specified within this report. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, 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 ADMIS. Copyright ADM Investor Services, Inc.



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About the author


For Chris Lehner's entire career, beginning in 1976 fresh out of Michigan State, he has worked with agricultural producers and businesses from the cash side of markets, to twenty-nine years as a commodities broker, branch manager, general manager and senior hedging analyst for two of the largest packing companies, livestock cooperatives, one of the largest seed companies and renowned brokerage and agricultural consulting firms.

He is a stickler about continuing education for his clients, as well as for himself.  His library has well over 100 books from the basics of fundamentals to the micro-economics of markets, technical trading and the masters of markets, plus the extensive notes and recordings from times he spent with some of the very best traders in the futures industry. 

Chris' philosophy on marketing and trading is based on the necessity to adapt to multiple variable factors, while maximizing the satisfaction of movement and change. 

Recently, a client of many years, after reading one of his marketing commentaries called him the Paul Harvey of commodities. Rather than duplicating what other analysts or reporters too often repeat, Chris tells the "rest of the story" for the bull and the bear and finishes with his own outlook.  He uses supply and demand, combined with in depth charts because, like washing hands, he personally feels using two in unison is more efficient.

Chris has a weekly news and website commentary and his daily radio grain analysis is heard in several Midwestern states. Whether it is a phone next to his ear, in person, or in front of an audience, Chris looks forward to sharing and using his experiences to enhance his clients' trading experience.
Chris can be reached at (913) 787-6804, or via email at chris.lehner@archerfinancials.com

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