'Get ahead of the game' in 2019 grain marketing
2018 was a roller coaster ride in the grain markets with big crops and the trade war dominating headlines.
Market analysts say that uncertainty will carry over into 2019, especially as the trade watches the negotiations between the U.S. and China. Most are not optimistic about a deal with China by March 1.
"With the fact that the Trump administration likes tariffs, I don't think we will see a deal done," says Randy Martinson, with Martinson Ag of Fargo.
Frayne Olson, North Dakota State University Extension crop economist/marketing specialist says agriculture is only part of a long list of issues. "I don't think we're going to have a formal deal, but I do think we'll have an outline enough to keep the momentum on continued negotiations," he says.
Other market factors are South American weather and the acreage battle with the corn-soybean price ratio favoring corn.
Luke Swenson, market analyst with The Money Farm in Fargo, says corn prices don't necessarily have to go up to get acres, "you just need beans to go down."
"Guys are going to be quicker to take advantage of new crop corn prices because they're better now and then hope beans can rally on any news of China or something to offset that," Swenson says.
Olson says he thinks some of the shift has been baked into prices when comparing November soybeans to December corn.
"The question is if the shift is enough? Right now, based on my math, we're probably looking at a 6 million acre cut in soybeans and a 3 million acre increase in corn."
He says if the shift is bigger than that, prices will respond.
Martinson disagrees on soybeans. "I think we might not see as many beans disappear because of the lack of field work being done and some of the bankers are going to pull back on budgets and force farmers to plant a little lesser-cost crop."
Martinson is a short-term bull for row crop prices, long-term bearish and Olson agrees due to the growing inventories.
Olson says not to miss out on short-term opportunities in the market. "I don't think the rallies are going to come as big and as strong as a lot of people first expected," he says.
Swenson says he is less optimistic about 2019 row crop prices and more optimistic about 2018 corn where he sees more demand.
He says farmers need to take advantage of those pops in the market to aggressively hedge corn and sell into chart resistance. For soybeans, Swenson says they are looking at puts and calls to provide a fence through the crop insurance season.
Olson says farmers need to look at a shorter time horizon for marketing plans. "Right now, I think farmers are focusing on 2018 crops, but I do think they need to be shifting that focus a bit more on the 2019 marketing and make sure they get ahead of the game," he says.
Martinson is looking at the acreage battle to provide some pops in the market and has price targets of $9.85 for starting to hedge new crop soybeans and $4.50 for December corn.
The acreage story hasn't played out in wheat yet either. Martinson says winter wheat acres will be down in 2019 and that will show up in the January report if it isn't pushed off with the government shutdown.
"I think once we see where those acres come out that will free up this market to go after and buy some spring wheat acres," Martinson says.
The other key will be what happens with exports as the U.S. is down with the Black Sea region continuing to dominate the market.
Olson says USDA's supply and demand tables show a tight supply of high protein milling quality wheat. "Canada had a good crop, but they have some quality issues again emphasizing the milling quality portion of the market," Olson says. "So I think spring wheat has potential, but exports need to pick up."
Swenson also sees winter wheat acres down with the late harvest in Nebraska and Kansas. Once that's recognized by the market, it may provide a pricing opportunity. "We're waiting for a little more of a pinch on basis and futures in spring wheat before we start selling some."
Martinson is looking for a 30- to 40-cent pop in the spring wheat market and then he'll have customers start pricing.
Olson said he believes there will be some pricing opportunities in January into February. "I do encourage people to do some new crop sales at that time."