There was something for nearly everyone in our cash market recommendations this week. Advice to sell was issued for corn, soybeans, wheat, and rice. Only those that grow cotton can turn the page.
Corn: Hedgers were advised to sell 10% in both old and new-crop corn bringing them to 70% and 25% respectively, while strict cash marketers (SCM) were advised to advance marketings by 5% in each crop, bringing them to 75% and 25% for old and new-crop. The prior week’s rally was fueled by a combination of wet weather delaying planting in the U.S. as well as adverse weather conditions for corn in Argentina and Brazil. As for the U.S., an above average start to planting progress has been reined in back to normal and will likely dip below normal in Monday’s report, but it is nowhere near panic mode. With the size and speed of current planting equipment as well as a nearly full column of water to work with in many areas, our feeling was, and is, that the runup was overdone and one to sell. As fast as these price spikes can disappear, we elected to pull the trigger at the first sign that they showed weakness this past Wednesday. With USDA’s first corn balance sheet of 2024 issued on May 10th not surprisingly predicting a similarly sized large surplus of corn for the coming year, implying similar harvest prices to this past year, prices in the $4.80 range basis December looked like a suitable place to sell.
Soybeans: Hedgers only were advised to add 10% to old- crop sales in two different 5% recommendations, bringing them even with SCM at 80%. SCM were advised to sit tight. Additionally, hedgers were advised to advance new-crop sales by 5%, bringing them to 30%, as opposed to SCM which again were advised to stay at 25% priced. Rinse and repeat our logic for corn sales above as justification for these moves. Although WASDE predicts a 445-million-bushel carryout, the potential for USDA printing a 500-million-bushel carryout was very real. Mid-week, futures were the highest of the last four months and above the $12.50 mark for old-crop July and over $12.00 for new-crop November, prompting us to advance sales. As with corn, bean planting was off to an above average start and recent weather has merely brought progress back to normal. We did proceed with caution due to the increased market volatility, selling 5% at the first hint of a downdraft and adding 5% when the market followed through with further declines the day after. SCM were not invited to this party only because they were already 80% and 25% marketed respectively. Pushing new-crop further seemed a bit dicey before the crop gets planted. If you are fortunate enough to have gotten the crop in and are a SCM, you may want to advance your sales further. Although not a common practice for us, hedgers also have the added ability to buy back cash sales on the board, making it easier to sell a bit more cash.
All wheat marketers were advised to advance new-crop sales by 10%, bringing everyone to 30% priced. This sale falls into the “reward the rally” category as the market has surged nearly a dollar since our last sale. Throwing in the fact that we felt a bit underpriced for too long last marketing year, combined with the storm clouds of harvest pressure forming on the horizon was enough to get us to advise a sale. The market’s reaction to the May WASDE was very positive and has the market challenging horizontal resistance in the mid $6.60’s for July Chicago wheat. If we punch through that then we could rally to a bull flag objective just under $7.00.
Last but not least, all rice growers were advised to sell another 10% of new-crop, getting everyone to 20% priced. While there is nothing on the new-crop chart that even vaguely resembles a sell signal, the new-crop market has been taking its signal from old-crop, being dragged up to the $15.50/cwt while old crop July futures powered its way a full $4.00 higher at $19.50/ cwt. As old-crop looked to have run out of steam, we elected to sell 10%. As Richard Brock likes to say, sell 10% and hope it’s the worst sale you make. With plenty of dry powder for future rallies, all marketers now stand at 20% sold.
