MARKET UPDATE

You can scroll to read the usual update as well. As the written version is the exact same as the video.

Timestamps for video:
Overview: 0:00min
Corn: 2:20min
Beans: 5:10min
Wheat: 11:25min
Cattle: 13:05min

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Futures Prices Close

Overview

Grains mixed today as we were all over the board while the cattle market saw some weakness.

It was actually a very interesting, extremely high-volatility day.

Soybeans were up +8 cents early this morning, then they were down -19 cents at one point, before ultimately closing down just a penny. With a huge +/- 27 cent range on the day.

KC wheat was down around -8 cents before closing down just -2 cents.

So why the volatility?

The first piece of news that came out was some biofuel news that had the bean complex strong to start the day.

The Trump administration plans to reallocate at least 50% of the exempted biofuel blending obligations to big refiners, and signaled it that it could go higher.

Essentially, it means they are taking the biofuel requirements that some small oil refineries were allowed to skip, and making the large ones do it instead.

So some gallons of biofuel that weren’t getting blended previously will now be blended.

Not a game changer or anything, but positive for biofuel demand.

Then the Trump and China News...

This was the reason beans dropped over -20 cents at one point today.

A report from the South China Morning Post says that the preparations for the Trump and China meeting scheduled for March 31st to April 2nd have been "faltering" (aka losing momentum).

The report claims that China isn’t happy with how the US has been preparing for it, and the US has had weak planning and limited coordination.

China is used to rigid planning. They are mad that the US is trying to cram months worth of planning into a few weeks.

China fears that the meeting with be "all show and no substance". Meaning it won’t provide a major win for them. Just small transactional wins such as aircraft sales or soybean purchases.

Despite this, the meeting is still expected to happen as scheduled.

The meeting is expected to include soybean imports, energy deals, and aircraft sales. The meeting is being framed as a truce extension essentially. To prevent the trade war from getting worse.

The trade doesn’t like uncertainty, but it sounds like the meeting is still going to happen, so it sounds like China will still be buying soybeans.

It was just one news article, so I don’t put a ton into it.

(Here is a short solid AI analysis of the report)

Today's Main Takeaways

Corn

Fundamentals:

I'm not going to spend a ton of time on corn today, as we've recently did some deep fundamental dives.

Corn is simple in a situation where we have a crazy amount of supply but that supply is meeting phenomenal demand. So the market is kind of stuck here waiting for direction.

Corn has been decently strong heading into first notice day.

The next week or two of price action will be important.

Usually we see weakness heading into first notice day, then once that natural sell pressure is off the market we head higher.

But since we've seen a little strength into first notice day, you have to wonder if the opposite will happen.

There is an old saying that says buy first notice day weakness, and sell first notice day strength.

So the next week or two of price action should be pretty telling.

If we are strong into first notice day, then sell off after it would not be a friendly sign.

New Crop Potential

I've touched on this recently, but it feels like most of the risk lies in old crop compared to new crop.

Clearly, the US is still battling with a big crop today from old crop.

Production last year was +2 billion bushels more than it was the previous year.

But now.. that number is forecasted to come down.

The Feb outlook has it down over -1 billion vs last year.

Look at the March to Dec spread.

It's at a -34 cent carry.

Dec corn just posted a new high for the year.

Meanwhile March corn is well below it's high for the year.

What is this telling us?

It's basically telling us that the market is expecting less production.

We have plenty of corn today, but the market realizes that supply is still a potential issue in the future.

The market knows new crop has "potential".

I've already went over this balance sheet before.

But if this is really what we are working with, it's not a bearish balance sheet for new crop.

We'd need a 183 yield just for our carryout to drop -300 million bushels vs last year.

The US is absolutely going to need another big crop if we want to keep the new crop balance sheet elevated.

On this balance sheet, the USDA also has us losing -400 million bushels of demand.

But what if we don’t lose demand?

If acres fall, yield falls, production falls, and demand can stay strong, it could create a lot friendlier corn story for new crop than we are looking at for old crop.

Technicals:

May Corn:

Still struggling to crack above that old support turned new resistance.

If we can crawl back into that range, it offers upside.

In the meantime, we need to hold the red box.

That is the golden zone of the entire rally. Failure to hold that will be the first sign that market is rolling over if it happens..

Soybeans

Today's Alert:

This afternoon we did issue a sell signal and hedge alert for new crop and old crop soybeans. One of our first official ones for new crop.

Click Here for Alert

We like rewarding this rally in some fashion, provided that this allows it to be a profitable sale.

We do not want to be super aggressive or go overboard here. At all.

But a simple, small start in new crop might make sense for some of you.

I think this market has a ton of potential. But it's about getting comfortable.

If you are a producer who normally has some sold by now, then it might make sense to take some chips off the table here.

If you are someone who normally waits until spring or summer, then we don’t have an issue remaining more patient.

We just like the idea of having some protection here with prices sitting near two year highs.

Some Sample Strategies:

Here are a few that I included in the signal.

You could consider:

Sell a Nov $13 call to buy a April $11.50 put. This would cost just a few cents.

Or you could sell a Nov $12.00 call to buy a May $11.50 put and collect a few cents.

We like doing this vs making sales to leave your upside open in the event we were to head to +$12.00, depending on the strategy.

If you are going to use options, you could also consider using old crop options for your new crop.

If we head lower, often times old crop should lead the way.

If you sell some soybeans, you could use the July-Nov spread as a re-ownership strategy.

It's at about a 50-cent inverse. Which is about the same cost as owning a July ATM call option.

For reference, look at the July-Nov spread chart.

When we rallied, it led the way both times. Going from 7 cents to 50 cents.

When the market fell apart, the spread fell apart.

It can just be a cheaper way to consider re-owning.

If you have any questions about any of this or want to come up with a strategy, give us a call or text:

Jeremey: (605)250-3863

Lauren: (806)484-1214

Bulls vs Bears

Bears argue Brazil has a monster crop on the way.

That monster crop is $1.30 cheaper than ours.

Both of those statements are true.

But do they matter?

They matter yes, but sometimes money flow can outweigh fundamentals.

Markets don’t always have to follow the fundamentals.

Does it make sense for China to buy our soybeans?

No.

But that doesn’t mean they can’t or won’t.

Bears argue that we are going to see a bunch of cancellations out of China so they can buy Brazil's crop instead.

Yes it could happen.. but don’t you think it would’ve already happened by now?

Bears argue that Brazil's crop is going to kill non-China business.

That is a valid argument.

But does it matter if China actually buys what they apparently agreed to?

Trump claims they are going to buy so many soybeans, that it would be the entire size of the US carryout.

There are so many logistical question marks about this. But if it is in fact true, it's not a small thing.

This chart shows exports to China. The two green bars are the orginal 12 million vs the new 20 million China might buy.

The difference between those two green bars on the first chart is 294 million bushels.

Almost the size of the US carryout.

(Green = Carryout) (Blue = Difference in China Purchases)

The funds are back to being crazy long soybeans.

One could argue that we're going to see them do what they did last time, and them holding 200k contracts offers the potential for them to sell.

Others could argue that they are buying for a reason.

They've bought every single intraday dip so far.

It's not like they aren’t aware of the Brazil crop and the difference in prices.

The funds are aware that Brazil's crop is $1.30 cheaper.

They know that China is going to be our only buyer of soybeans, even if it's politically motivated.

Maybe.. Brazil's big crop is old news?

The fundamental story, aside from China is known.

We also have the fact that there is less farmer selling in soybeans compared to corn, because off the combine many chose to sell beans and store corn.

So less farmer ownership is helping keep the rally going on top of the fund buying.

Now yes. There is clearly still risk in this market.

Back in October and November we rallied on the thought of China buying soybeans.

The exact day we saw our very first flash sale of soybeans marked the high in the market. To the day.

So there is always the chance for a buy the rumor sell the fact type of event short term.

At some point, the market is probably going to need concrete proof that China is going to buy those extra beans.

For us to go above $12, the market will probably need evidence. The risk is that we don’t get that proof.

Regardless, we like managing a little bit of risk here despite realizing the clear bullish possibilities. While keeping plenty of dry powder due to those possibilities.

Can’t completely ignore two year highs.

Event Timeline

Planting intentions is March 31st.

The Trump and China meeting is also March 31st.

Biofuel final guidelines could take a month.

Which means both of these huge factors might take place after planting intentions.

So we really might not have a solid idea on acres until the June 30th survery.

Double Top?

This was a big reason behind today's alert.

We are right back at those November highs for both old and new crop.

It's a big level bulls will need to clear and it could offer resistance.

If we break above, it should result in the next leg higher. But for now, it's resistance.

The indicators are also giving some reasons to be cautious.

We are overbought (top panel is the RSI).

The MACD (bottom panel) is showing some weakness, potentially signaling a shift in momentum.

So a short term correction wouldn’t come as a shock. As we have yet to see any meaningful pullback this entire rally.

Next Stop?

Now if we can break above these November highs.

The next level we want to reward is $12.00

After that, $12.50 is the next level.

$12.50 was our 2024 highs. It was also our 2023 lows.

Not only that, $12.50 equals 161.8% of the recent lows up to those November highs. Known as the golden fib extension.

But first we have to clear this level.

Wheat

Fundamentals:

Long term I still think wheat has plenty of potential.

This market has already built in all of this bearishness. At a certain point, it gets priced in.

Altough this rally hasn’t been massive, we're witnessing the longest rally we've seen in 5 years.

It's been more of a steady grind rather than a huge pop that lasts just a few weeks.

But short term we ran into some technical resistance which was the reason for the sell alert last week.

Weekly KC:

We rejected right at those highs from June on the front month contract chart.

If we can clear that, it should result in some room to run long term.

Long term, this looks like a chart that's put in a bottom.

Right at those highs from 2020.

May KC:

We failed at the golden zone up to the June highs.

We are now attempting to turn this old resistance into support.

Bulls would like to carve out some lows here.

For those who followed the sell signal and like to play both sides of the market, this wouldn’t be the worst area to lock in profits and or reverse your position. If you do this, use proper risk management.

If you want specific trade recommendations tailored to you give Jeremey or Lauren a text or call at their office number:

Office: (806)484-1214

If we fail here, it could open the door another 10 to 20 cents lower.

The golden zone of the entire rally.

May Chicago:

Chicago also failing in the golden zone target box.

If we continue to pull back or chop sideways, it could set up a potential cup and handle pattern moving forward.

Cattle

Cattle got hit with another headline.

There is rumors that the JBS is going to strike tomorrow, and it sounds like it is highly likely that they do.

This would further reduce kills and push leverage back toward the packer.

We also had a small cash trade this week in Kansas at 244, which was lower on the week.

Cash has been higher week over week since the beginning of the year, so this is a possible warning signal the market has been looking for.

Technicals:

April Feeders

We are still holding support but the chart still feels heavy.

Lose that support box and it could lead to a larger pullback.

The RSI is at it's lowest levels since last year.

Yet prices are not.

Still very clear bearish divergence and why we've been cautious for weeks.

April Live

Exact same story in live cattle.

Past Sell or Protection Signals

Feb 19th: 🌾

KC wheat sell signal & hedge alert.

HUGE VOLATILITY