Given the bearish tone of much of our commentary in this week’s newsletter, it is not surprising that we were active this week in making sales. While we didn’t make huge moves in any one case, the sales across various markets are an indication we see more downside risk than upside currently. The Midwest crop is mostly planted, and weather is good, demand is questionable, and bullish crop fears in Russia and South America are no longer “new.”
Wheat has led the way higher in the complex recently, but has seemed to run out of gas, and on Thursday we recommended a 10% cash-sale, bringing winter wheat producers to 60% sold on the 2024 crop, both for cash-only marketers and hedgers. We also took a dip into next year, recommending contracting 10% of expected 2025 production on a hedge-to-arrive contract.
Also on Thursday, for corn we recommended a 10% cash sale for cash-only marketers, bringing them to 50% sold on this year’s crop. Hedgers stayed at 40% sold in cash, as we recommended a short hedge position in futures for them.
For soybeans, we made just one recommendation, on Wednesday, for a 5% sale in old-crop, bringing all producers to 95% sold. It’s a small sale and we debated unloading the other 5% too. Regardless, the message here is to sell something. As long as Midwest weather remains mostly benign, “rallies are to be sold” describes our philosophy right now across a number of markets.
We also were active in rice this week. On Tuesday, we recommended a 10% sale, bringing everyone to 30% sold in new-crop, and we liked that idea so much that we did the same again on Wednesday, bringing everyone to 40% sold. Note that basis futures at least, new-crop prices have held up much better than old-crop. But if old-crop is going to pieces, then new-crop is going to struggle to hold together as well. Between a good start to the U.S. planting season and favorable monsoon rains in India, there is reason for pessimism about prices.
As noted on page 10 (Tick Tick Tick in On Topic Section, sorry we cannot link yet), there is a lot of old-crop corn still sitting on farms, which is pressuring basis levels and will continue to do so. One positive is that all the rain in the Midwest this spring, and particularly in the western Corn Belt, has replenished the Mississippi River system and brought Mississippi water levels back close to normal. Soil moisture in the Midwest is at its highest levels in four years or more in most locations. While that could change as the season progresses, it gives the system more slack should dry conditions re-emerge, making a repeat of the last couple of autumns unlikely.
