Market Update 10/16/17:
By Pat Jeanes, United Cooperative Product Procurement and Risk Management
Corn – USDA crop report on Thursday was negative for corn, but corn has been riding along with the soybean rally. December corn found support at $3.45 and will find resistance in the $3.60 to $3.65 area. When harvest finally gets going after the weather dries out we could grind lower than $3.45 but need to see the yields to support it. December corn could break the $3.45 support if yields get bigger and the next support would be $3.30. I still like adding some coverage on a break below $3.45.
SBM –The USDA threw another curve ball when they cut bpa yield from 50 to 49.5, but then raised acres harvested to offset this decrease. Traders saw these numbers as bullish when they were actually neutral and started buying beans and meal. They look at the charts and they buy. Exports have been good and China is also back in buying but this could back off with higher prices. Support for December meal now at $315.00 and resistance in the $330.00 area. Higher board prices should get the basis working in our favor as plants will be running hard during harvest.
Animal Protein – Supplies still exceeding demand and prices are competitive and blood and meat & bone are working well in rations.
Corn Gluten Feed – Prices are the same and high compared to shell corn. Plants claim that they are exporting product and that is where prices need to be. We will continue to buy spot market until we see prices that or worth contracting. Ingredion plant in Chicago making repairs and will be running slow for two weeks.
Distillers – Prices are steady and trying to move higher but until more export business starts prices should stay flat. China coming back for distillers would be very bullish to prices.
Cotton –Finally starting to see some new cottonseed arrive after all the hurricanes and rain. Prices are attractive and could move higher following meal. Cottonseed prices need to be locked-in for the year.
Canola –Basis is still not where it was a year ago, but plants in Canada and US are running at capacity, and product is backing up in pipeline, so we should see better numbers soon but they won’t be what we have seen in the past. It is hard to get basis for 6 months, and for 12 months is tough without paying a $10.00-$15.00 premium. We are buying spot and waiting for basis to come in our direction. Crush margins at plants are not good as the oil portion of the crush is horrible, so plants are trying to make it up on the meal side. Oil is about 66 % of crush profits and the rest is from meal so that’s why basis levels are tighter than we have seen in the past.
Copper – Prices are steady and supplies in good shape. Prices tried to take off but it did not last for long. Large plant in Russia closed as owner of plant thrown in prison. Russian plant supplies about 15% of copper sulfate.
Linseed – Prices are lower and we have product at our Hartford mill.
Summary/Opportunity – The USDA report was far from bullish, but traders saw that it was not as bearish as they thought so they started buying. This could turn around if yields pick up as harvest starts back up. Carryout for beans is good and we need to watch for any planting delays in South America. If the big money keeps flowing into beans and meal we could see some big run ups like we did a few years ago when we added $80.00 - $100.00 to meal for no reason other than the funds buying off the charts.