Play Turner’s Take Ag Marketing Podcast Episode 261
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The CBOT rally refuses to stop and we have the Jan WASDE next week (Jan 12th) at 11 am. Back in 2007 to 2013 I think all but one of the Jan WASDE reports resulted in limit move in either corn, wheat or soybeans. If the USDA throws a big curve ball at the market I would not be surprised to see a limit move next week. In this podcast we go over why we are taking some profits heading into the WASDE and what we think about old crop and new crop prices going forward. I also take a look at our supply and demand tables for both old crop and new crop. The podcast ran a little long this week but we had a lot to go over. Make sure you take a listen to our latest Turner’s Take Podcast!
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Supply and Demand Tables
Below are my latest tables for corn and soybeans. I am assuming we plant 230mm acres of corn + wheat + soybeans this year. That would be the second highest total in the past 20 years. Only 2014 would be higher after years of high grain prices. If wheat gets 46mm acres then corn and soybeans have to split 184mm acres. We’ve decided to split it evenly as most farmers I talk to see both corn and soybeans as attractive crops to plant. This number can change but you have to start somewhere.
Corn – I think exports go higher and old crop production comes down. The carryout will be around 1.4 t o1.5 billion. That justifies corn in the mid to high $4s. If Argentina continues to lose production (exportable bushels) then old crop can break into the low $5s. The old high from 2014 is around $5.25 and then $5.70 from 2013.
If new crop acres are “only” 92mm and we have a trend line yield around 180 (big number for so many acres), then we only produce as much as we use for new crop. Stocks are still around 1.6 billion. That means there is no room for error this spring and summer for US production. Planting and growing weather rallies should be volatile.
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Soybeans – Beans have the potential to far exceed most traders expectations. I think soybeans trade between $12 and $15.50 with the potential for higher prices if a couple of thing go right (or wrong depending on your perspective) for the US new crop. Ending stocks for old crop will most likely reach “pipeline” levels this marketing year and the need for demand rationing will eventually take soybeans to $15. We have been long beans for a while and I do like taking profits before the WASDE, especially in futures positions.
Not only will old crop be extremely tight, new crop will be tight also. At 92mm acres (many analysts have bean acres 90mm to 91mm) and a 50.5 trendline yield, the US adds only 100mm bushels of soybeans to the ending stocks year-over-year. That is assuming 92mm gets planted and a trend line yield. La Nina could extend into the spring and that typically leads to drought like conditions. US soil is already dry in many parts of the central US. The past couple of years the ground has been super charged with moisture. That is not likely in the cards for 2021.
The reason why I think soybeans can go to $15 or higher this spring or summer is because of the new crop supply and demand table. We need a lot of acres, good weather, and a trend line or higher yield just to stay in the $12 to $15 range for soybeans. Weather rallies could be fierce and I want to buy May and July $15 calls ahead of the report. They are a flier but they $13 March calls we liked at 10 cents are now 50 cents in the money. The same thing could happen to the $15 calls given the right conditions in April, May, or June. Going forward I prefer options to futures. I’ll be taking profits on my futures positions and switching over to option plays. If you do want to trade futures then I strongly recommend having some put protection going forward.
***It is very important to note we can fall $1.00 over three trading sessions at any time. If you don’t believe me then ask a farmer or grain trader who was around between 2007 and 2013. Things can get real hairy, real fast. Take profits when you have them, never open yourself up to unlimited risk, and buy the dip when everyone thinks the party is over.***
One thing that is different this year for soybeans is both meal and vegetable oil are in short supply and high demand. I don’t remember that ever being the case. The high prices for both products will keep crush margins profitable, and that will make the high price for soybean still profitable for crush. In years past during the big soybean rallies it was usually the crush margins that eventually killed demand and ultimately lead to effective price rationing. If both soybean oil and meal are high and deserve to rally, that just means soybeans could take out all time highs.
Interested in working with Craig Turner for hedging and marketing? If so then click here to open an account. If you are a speculative or online trader then please click here.
Monthly Charts
Below are some monthly charts for corn, soybeans, soybean oil, and wheat. I just want to remind everyone where these markets trended in the past 10 years. The prices I am talking about are not out of the question when you have very tight old crop stocks + new crop weather rallies.
Interested in working with Craig Turner for hedging and marketing? If so then click here to open an account. If you are a speculative or online trader then please click here.
Corn Monthly
Soybeans Monthly
Soybean Oil Monthly
SRW Wheat Monthly
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 312-706-7610 cturner@danielstrading.com Turner’s Take Ag Marketing: https://www.turnerstakeag.com Turner’s Take Spec: https://www.turnerstake.com Twitter: @Turners_Take Contact Craig Turner
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