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We work long, long hours on the farm. Most years we don’t know if we are going to turn a profit, and some years we do not. We are at the mercy of the weather. Crop prices seem to always be down, yet input prices always seem to be up. So, why do we keep farming? Let’s be honest, it is because the kid in us loves the life size Tonka Toys! If we had a normal job, we wouldn’t be playing with awesome power equipment like the legendary John Deere 4850!
Allan Avery’s John Deere 4850
In this edition:
Market Actions: Insights on marketing actions to consider.
Technical Indicators: Mixed messages from the technical indicators. Moving averages strongly say sell. The other technical indicators suggest a neutral stance.
Harvest Headlines: More mixed signals coming in from the market.
Farm Bill Highlights: Key points on the updates to the Farm Bill and what the changes could mean for you.
The information provided in this newsletter is for informational purposes only and should not be considered financial advice. We recommend consulting with a commodities broker and financial advisor before making any commodities decisions.
Market Actions
The consensus amongst the satellite data and farm tours is that there are going to be record yields. This coupled with lackluster demand from China will continue to hamper the commodity price comeback that we are all hoping for.
Consus Ag Consulting said there is sentiment that soybeans are somewhat oversold. After worries about hefty global supplies saw the November contract (SX24) plunge by nearly $1 over the past couple of weeks.
The outlook for Corn, Soybeans, and Wheat is not great, but it is looking better. We are not even close to being out of the woods yet, but indications are that soybeans could get back to $10 a bushel. However, that is the ceiling. There is also a good chance they could get back in the 7s.
Due to volatility, a lot of experts are recommending selling all 2023 bushels, most of 2024, and even 50-75% of 2025 bushels. If you are selling far ahead, you might want to look at some put options as well as the money strike prices.
Technical indicators are mixed. The moving averages are still almost all suggesting sell, while the average of the 11 oscillators is giving a neutral signal (see chart below). Overall, the technical indicators are still suggesting the pattern of low prices is probably going to be around for several more weeks and that prices should start to climb a little bit soon. Volatility remains very high.
Technical Indicators
Harvest Headlines
Corn prices also fell, erasing much of the previous day's rebound. Prices are now below $4/bu for the December 2024 contract. Weather forecasts are reassuring about the evolution of crop conditions, with a possible return of rain.
Chicago soybean futures ticked down on falling soy oil prices and technical trading, while corn futures eased on expectations for a record U.S. corn crop as well as strength in the U.S. dollar which can make U.S. exports less competitive.
The week of August 15 is marked by a renewed firmness in crude oil prices, due to new tensions in the Middle East, and in the euro against the dollar. The rise in the euro is inevitably leading to a downward adjustment in European prices, even though export activity for the coming campaign will decline due to lower volumes available. The first figures communicated by the European Commission show that the volume of wheat exported in this new grain season is down by almost -22% on last year, to 3.09 Mt. The situation is similar for barley, with 1.15 Mt exported.
Still reacting to the USDA's latest August report estimates and recent crop ratings, the price of soybeans fell further in Chicago yesterday. The November 2024 maturity is now trading below $9.70/bu, marking a new low. Over the past two sessions, funds have been keen to sell on the prospect of higher production in the USA.
Farm Bill
There has been a lot of talk in congress about revamping the conservation programs that were in the 2022 Farm Bill. Here are the key points:
The Inflation Reduction Act (IRA) of 2022 appropriated $18.05 billion for four Farm Bill conservation programs, with the funds available through FY2031. However, any unspent funds by the end of FY2031 will be lost.
The Congressional Budget Office (CBO) projects that USDA will spend $16.1 billion of the IRA funds by FY2031, leaving approximately $1.95 billion unspent.
The House Farm Bill proposes to rescind the remaining IRA funds and use them to increase the baseline budget authority for conservation programs, creating a tradeoff between temporary and permanent funding.
The proposed House Farm Bill would increase conservation budget authority by $12.9 billion and outlays by $9.9 billion through FY2033, extending beyond the IRA funding period and providing longer-term funding but at potentially higher costs and risks.
The tradeoff involves sacrificing immediate, temporary conservation funds for potentially more stable, long-term funding, though this comes with uncertainties about future Congressional reauthorizations and the impact of inflation on conservation costs.
The discussion raises concerns about Congress prioritizing other agricultural programs over conservation, which may impact farmers' incentives to engage in conservation efforts.
Rest assured that our elected officials are only going to pass bills that make life better for us!
Extended Commentary
As we close out another week in the fields, the mixed signals from the market continue to challenge our expectations. With record yields likely on the horizon and demand from China failing to impress, it’s clear that the path to recovery will be anything but smooth. However, it’s not all doom and gloom—while soybean prices have taken a hit recently, there’s still hope for a rebound, even if it’s capped at around $10 a bushel.
The technical indicators provide a somewhat murky picture, with moving averages suggesting it might be time to sell, while other indicators maintain a neutral stance. This underscores the complexity of the current market environment, where volatility remains high, and certainty is hard to come by. For many, the advice to sell a significant portion of this year’s and even next year’s bushels is not just a recommendation but a necessary step in navigating these turbulent waters.
In the broader economic context, global factors such as the strength of the U.S. dollar and geopolitical tensions continue to exert pressure on commodity prices. The drop in corn and soybean prices, paired with a strong dollar, is making U.S. exports less competitive, further complicating the market outlook.
Turning our attention to policy, the ongoing discussions around the Farm Bill reveal opportunities and risks. The proposed changes to conservation funding highlight the delicate balance between immediate and long-term needs. While more stable, long-term funding is appealing, it comes with challenges and uncertainties, especially inflation and future Congressional actions.
In this unpredictable environment, staying informed and flexible is critical. The insights we’ve shared aim to equip you with the knowledge needed to make the best decisions for your operation. Remember, opportunities can be seized with the right strategy and timing, even in the face of uncertainty. Keep a close eye on market developments, and don’t hesitate to adjust your approach as the situation evolves.
