Rounding out CoffeeTalk for the month of March, AGI SureTrack Senior Product Manager, shared insights into the ongoing agriculture volatility in the agricultural markets, citing lower crude oil and unleaded gas prices, ethanol plant shutdowns and planting intentions, breaking each sector down by its implications on old crop and new crop.
“Oil prices have suffered their biggest fall since the Gulf War in 1991. Saudi Arabia is not limiting production and letting the price wars play themselves out and factored with the lack of travel because of COVID-19, there isn’t the demand,” Hoyt says.
Compounding an already weak market, ethanol prices also took a heavy hit in the month of March, with Poet, the Nation’s largest ethanol producer halting corn purchases and several big players including Valero and Andersons shutting down ethanol production, altogether.
“Things are slowing down because we don’t have these huge empires buying grain; it has nowhere to go,” he says, “It has had a huge negative effect in putting more pressure on an already stressed grain market.”
Looking ahead, Hoyt says that planting intentions and our current trade situations don’t paint a favorable picture for corn prices in 2020. He shares that the corn #plant2020 projections forecast a record number of corn acres—coming in either second or third in total acres planted. Ports and export opportunities crippled by COVID-19 are also adding to the market volatility.
The effects of planting projections, alone, will be overarching on the markets throughout the growing season, with consideration for crop performance, meaning that it is very likely that every bushel of old crop corn sold, a farmer will likely take a hit. Trade adjustment due to the on-going pandemic may carry repercussions that will be seen for several crop seasons to come.
So what’s next? Hoyt says that agriculture is in a “what can we do” situation.
“It’s all about the tools that you have to use and the strategies you have to use them,” Hoyt says.
Around 90% of producers don’t use futures and options—they don’t hedge, meaning that they are in the cash marketplace. Outside of that, producers can utilize three marketing opportunities: hedge to arrive contracts, forward cash contracts and basis or spot contracts.
March Madness in Corn
Old crop corn, grain that is still in the bin, may have quality issues given the late planting dates and high moisture content of most corn at harvest.
On top of the quality issues, producers have seen significant losses over the last month.
“If you’re trying to make sales on anything still in the bin right now, you saw the market move fifty cents lower in a really short amount of time,” Hoyt says, “So going forward, you need to be looking at the top, middle and bottom thirds of the market and making decisions based on what your carrying capabilities are.”
Todd Sears, AGI SureTrack brand ambassador, says what we are experiencing in the markets right now is shows that keeping grain in condition through the spring and summer months pays dividends.
“This data really validates a story that we here at AGI SureTrack tell everyday about marketing grain from the farm. When is the best time to sell grain, June, July and August. The Chicago Board of trade has shown that time and again, and BinManager® is really the tool that helps you hold your grain through those hot months and make it to those higher prices,” Sears says.
Hoyt shares that by holding grain to sell in June, July and August, a farmer can expect to see three times more per bushel than selling direct from the field.
As for new crop corn, the market is currently down 27 cents and Hoyt is not recommending basis contracting at this time, recommending that instead farmers know what grain characteristics are present in their bin, have the ability to maintain those characteristic and be patient.
“The reason that basis contracts aren’t a good strategy right now,” Hoyt says, “is because buyers already know what oil is doing, they know what kind of restrictions exist because of COVID-19 and they know what planting intentions are. They aren’t going to be adjusting their prices.”
March Madness in Soybeans
“Soybeans are 85 cents lower, but we have a big recovery to talk about in beans,” Hoyt says. “That recovery is coming in from the meal marketplace.”
The meal market will continue to be the leader in this market for the foreseeable future, and some of the tools that are going to work well in moving these old crop beans are forward cash, hedge direct and basis contracts. Hoyt recommends that farmers in the bottom 1/3 utilize a cash or basis contract, and notes that farmers have several tools to work with—far more than the market may indicate.
“The moral of the old crop soybeans story is: Keep grain in condition and pay attention to local supply and demand,” says Hoyt.
New Crop Soybeans
Looking at Nov you are in the bottom 1/3 of the market; no reason to get excited, but if you are planning on planting extra soybeans this year look at keeping them in the bin a little longer.
March Madness in Wheat
Wheat is usually a different story from corn and soybeans and today’s situation is no different.
“Over the last month, we have seen wheat trade down 29 cents and then rally up 77 cents. This is just a reflection of what we are seeing in the grocery store,” Hoyt says.
The marketing tools suggested to move old crop wheat right now are Hedge to Arrive and basis contract options.
“Wheat is going to be a watch-and-see market, and the longer you can keep riding the opportunity, the better prices you are going to see,” he says.
New Crop Wheat
A similar story to what is being seen in old crop wheat markets, new crop wheat is rallying behind consumer demand at the grocery store.
“We just have to be patient with these new crop wheat markets,” Hoyt says, “Let it work for you.”
The summary of what is happening in today’s markets is: Know what you have and know you’re your numbers are.
“There’s never been a time when it is more important to know what your true breakeven numbers are,” says Hoyt, “Not margins, but actual, true breakeven numbers because there isn’t any wiggle room in these corn and beans markets.”
And that fact is what makes the integration of Compass to the SureTrack solution suite a game changer for customers. True breakeven numbers are always available, at a farmer’s fingertips, on any internet connected device to allow management decisions to be made in a split-second rather than at the end of the season—trying to separate the red ink from the black ink.
Day-to-Day will deliver and define real-time breakeven numbers, to help farmers decide which management practices are making money and vice versa.
“Everything that we pull from SureTrack, is real-time. We capture actual event costs as they are occurring and those numbers help you decide what on-going and future field activity plans should be.
AGI SureTrack is about partnership: helping customers, no matter how many acres they farm, to become more profitable. The Alliance program is proof of that partnership mentality.
Through the Alliance program, customers are able to implement every hardware and software solution on the optimized 2.0 SureTrack platform and tie back to the recordkeeping and true economics of the operation with Compass—using one app and one login.
Sears says that even though the value proposition of SureTrack alone drives revenue back to the farm, the no interest, no payments until December 1st and long-term financing provided through the Alliance program shows the commitment the company has to helping farmers succeed.
“The details of this program just really spoke volumes to me,” Sears says, “The tools and the financing we provide, with warranties throughout the life of the subscription, all implemented by AGI CEO Tim Close, told me just how much he values and wants the customer to succeed.”
To learn more about the Alliance program and how your operation can implement the complete SureTrack solution, give one of our AGI SureTrack coaches a call at: 855-293-5607.