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Turner’s Take Podcast: 97 Million Acres of Corn!


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Turner's Take Podcast

Play Turner’s Take Podcast Episode 225

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I am working from home while IL has a Stay at Home order in effect until April 30.  My office cell is 312-651-4621.  My office phone 312-706-7610 will roll over to my cell phone if you call my trade desk.  This week we talk about jobless claims, unemployment expectations, and how bad economic reports can get in for Q2 of 2020.  We then take a look at what the Planting Intentions and Stock Report means for corn and soybeans.  Make sure you take a listen to the latest Turner’s Take Podcast!

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

Macro Markets

Jobless claims on Thursday were over 3 million, which was four times the previous record.  The US has been tracking jobless claims since the 1960s.  Unemployment is going higher but the big question is “how high”?  Conservative estimates are coming in around 10%.  Much more aggressive analysts are saying between 20% and 30%.  Goldman Sachs just came out this week and says unemployment could be 15% this year.  No one knows how bad it will get but it certainly seems unemployment will be over 10% some time in the near future.

Economic reports in April and May will be historically bad.  Corporate earnings reports will be much lower compared to prior quarters.  The market is pricing all of this now but it all still has to play out.  The reports will have surprises and create some big headlines.  This is all part of the wide ranging consolidation bottom we have been talking about.

CNBC | Fed Sees 30% Unemployment Possibility in 2020

The Hill | Goldman Sachs Says Unemployment Could Hit 15% in 2020

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

Grains & Oilseeds

The Planting Intentions report has corn acres at 97 million and soybean at 83.5 million acres.  Keep in mind these surveys were completed weeks ago.  If you asked farmers today I bet the corn number is lower and the soybeans are higher.  We’ll get into corn here and then soybeans below

Corn stocks were lower than expected today due to better feed numbers combined with the USDA most likely underestimating last year’s crop.  In a vacuum the stocks report was bullish.  Unfortunately the loss in demand from ethanol and the higher than expected new crop acres will weigh on corn.

In our table below we have old crop highlighted in yellow.  We add 200 million to demand for Feed & Residual as a result of the Stocks Report today.  We also take off 350mm of ethanol demand.  That puts old crop around 2 billion ending stocks.

New Crop looks bad.  We estimate we lose another 150mm in demand from low energy prices in the 2020-21 marketing year.  With 97 million acres and a trend line yield we see ending stocks blowing out to 3.4 billion.  This puts cash prices and harvest lows under $3.  Even if corn acres go down to 94 million ending stocks are just under 3 billion.  Our 91 million corn acres are not realistic but we even if we had late planting and a lot of prevent plant, ending stocks still are at 2.4 billion.  Rallies in new crop corn should be sold.  Farmers should look into buying put spreads and selling call spreads to finance on any significant new crop corn rally.

For spec and hedgers I still like the Dec 20 vs Dec 21 corn bear spread.  The CME increased the premium charge for corn from roughly 5 cents a month to 8 cents a month. That means Dec20/Dec21 corn can max out at 96 cents as opposed to 60 cents.  These spreads rarely reach the full cost of carry but if corn is anywhere close to a 3 billion carryout we could make a big run lower in that bear spread.  Chart is below.

Corn Supply & Demand Table Scenarios

Dec 20 vs Dec 21 Corn

Below we have soybeans and old crop ending stocks are unchanged at 425 million.  At 83.5 million acres, new crop ending stocks could be 235 million.  If corn is swelling at 3 billion and soybeans are close to 200mm, then the soybean to corn price ratio could range between 2.7 and 3.0.  Corn could trade to the low $3s while soybeans are in the mid to high $9s.

The big question is if farmers can really switch millions of acres from corn to soybeans this late in the game. A lot of analysts and farmers doubt it, especially those in the big producing states like Illinois and Iowa.  In the New Crop tables below we do have estimates for 85mm and 87.5mm acres too.  Even at 87.5mm acres (which is not realistic at the moment) we just barely produce as much as we use. Anything short of 87.5mm and a trend line yield results in lower ending stocks year-over-year.

I like Nov 20 vs Nov 21 soybeans (chart below). In years of tight stocks that spread can trade to 50 cents to $1 over.  It looks like it is trying to break out now. If it fails and drops a nickel or dime I like getting in.

Hedgers can look into selling put spreads and buying call spread.  I don’t see a lot of downside risk in Nov Soybeans right now.  You could probably sell the $8.60/$8.00 put spread and buy the $9/$10 call spread and collect about a couple of pennies. Later this summer if soybeans rally, you can sell your new crop while still having upside potential due to the call spread.

Soybean Supply & Demand Table Scenarios

Nov 20 vs Nov 21 Soybeans

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

This Month

I will be working from home. You can call my office number 312-706-7610 and it will roll to my cell phone. My cell is 312-651-4621 and you can reach me there too.  Anything I can do in Chicago I can do from my home office, so feel free to call, text, or email anytime.  Stay safe and lets hope for better news and developments soon.

What I’m Doing at Home with the Family 

Backyard Camping – It is supposed to warm up this week so I plan on doing some back yard camping.  My oldest is a boy scout and he has been itching to get outside, set up the tent, and do some camping.  His troop camps once a month and he missed March and I bet they don’t have it in April or May either.  We’ll get the grill going, have a fire and roast some smores, and the Boy Scouts just put out a list of merit badges you can work on during social distancing: https://blog.scoutingmagazine.org/2020/03/20/merit-badges-for-social-distancing/

If you are not a subscriber to Turner’s Take Newsletter then text the message TURNER to number 33-777.  You will receive the newsletter and podcast notifications for free!

About Turner’s Take Podcast and Newsletter

If you are having trouble listening to the podcast, please click here for Turner’s Take Podcast episodes!

Craig Turner – Commodity Futures Broker
Turner’s Take Ag Marketing: https://www.turnerstakeag.com
Turner’s Take Spec: https://www.turnerstake.com
Twitter: @Turners_Take

Contact Craig Turner

Turner’s Take Newsletter & Podcast

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Turner’s Take Newsletter & Podcast – Turner’s Take is a complimentary weekly market commentary newsletter that covers the Grain, Livestock and Energy futures spread markets using fundamental, technical and seasonal analysis.

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This material is conveyed as a solicitation for entering into a derivatives transaction.

This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.

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About Craig Turner

Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com. Mr. Turner has a Bachelors from the Rensselaer Polytechnic Institute (RPI) where he graduated with honors and has worked at the NYSE and Goldman Sachs. While at Goldman, Craig earned his MBA in the NYU Stern executive program. Learn more about Craig Turner.



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About the author


Craig Turner is a Senior Broker at Daniels Trading, author of Turner’s Take newsletter, and a Contributing Editor for Grain Analyst. Craig is often quoted in the Wall Street Journal, Reuters, Dow Jones Newswire, Corn & Soybean Digest, and also makes appearances on SiriusXM – Rural Radio Channel 80 providing commentary for the Grain and Livestock markets. Craig has also been featured in FutureSource’s Fast Break series, Futures Magazine Online, and INO.com.

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