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Turner's Take Ag Marketing | Pro Farmer Crop Tour Kicked Off Today

By: Craig Turner, Senior Risk Management Consultant

Pro Farmer Crop Tour Kicked Off Today
 
Craig Turner
Senior Risk Management Consultant
craig.turner@stonex.com

Pro Farmer Crop Tour

The Pro Farmer Crop Tour kicked off today and based on my twitter feed SE South Dakota has some better than expected looking corn and central/eastern OH looks good too.  I don't think Pro Farmer went through much of the problem areas in SD so we'll see how they account for that.  Tomorrow the eastern leg of the tour is in IN and the western leg will be in NE. If you want to follow along on twitter the hashtag is #PFtour21 

Corn Straddles

I wrote on Friday that I like short corn straddles for the next month or two.  The Dec Corn $5.70 straddles are around 67 cents. The Dec Corn $5.80 straddles are about 69 cents.  I think the corn market chops for the next month or so. Tight stocks will ultimately prevent corn from trading below $5. We expect demand to be strong this fall but harvest pressure will be a factor too.  Between now and mid harvest we like short straddles.  Once we get through the thick of harvest we'll look to get long but for now we expect corn to trade in range.

Turner’s Take Ag Marketing Corn Supply & Demand Scenarios

Soybeans 

I still like July 2022 soybeans from Nov 2022 soybeans. We are long from about 80 cents and they are 96 now.  When you have consecutive years of tight stocks it is important to remember "new crop becomes old crop".  The July/Nov spread was over $1.50 this spring/summer.  Stocks could be just as in the 2021/22 marketing year as it was in 2020/21.  If so July/Nov could go back to $1.50 and possibly higher if there are S. American or new crop US production issues (weather markets).  The chart is below the soybean supply and demand scenario table.

Turner’s Take Ag Marketing Soybean Supply & Demand Scenarios

July 2022 vs Nov 2022 Soybeans

Vegetable Oil

NOPA came out today and showed lower than expected crush.  Soybean oil stocks were higher than expected.  Neither impacted the markets much.  Below is the StoneX July 2021 NOPA Crush Report summary.

Canola was higher again today as conditions and yields continue to look poor.  Spot canola is trading $50/mt over rapeseed (Europe) and over $200/mt over US soybean oil. The market is pricing canola to shut off as much export demand as possible.  This should be bullish for US soybean oil this fall/winter.

Market Outlook

I think corn and the soybean complex remains in range for the next month or two.  Export demand and basis will be low as we head into harvest but stocks will still be projected to be tight for new crop.  Once harvest picks up we expect a lot of export and end user demand.  Even thought the USDA is projecting tight new crop stocks, there will be plenty of grain available once harvest is in full swing.  Below is a quarterly stocks chart for corn but it could be for any grain or oilseed.  The market has the most grain available in the beginning of the marketing year. Anyone who needs grain and oilseeds in large quantities will be best advised to start buying early and often this fall. If S. America or the US has a bad crop again then high prices will not be their number 1 issue.  The biggest risk when starting the year with tight stocks is availability of grain and oilseeds in the 3rd of 4th quarter of the marketing year.  The drought in 2012 came during a period of already tight stocks.  The result was the culling of herds that led to a two year bull market in cattle and dairy products.  Anyone who lived through that on the corporate side in 2012-2014 will want to secure as much grain as possible in the fall and winter.

For now corn and the soybean complex trades in range. Once we get to October we could see the markets rally based on strong demand. The next rally is a demand rally led by the cash market.

Corn Quarterly Stocks Chart

 

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