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John Stewart & Associates, March 9, 2018 Comments: (posted 3/11/18)

The past 2 weeks have had a much higher level of excitement in the markets than what we have seen since late last summer.   Much of that excitement can be attributed to Argentina who is suffering from one of their worst droughts in over 35 years and similar to what the US endured in 2012.  With that said, we feel much of the loss in production in Argentina may already be priced into the market and given the rain in the forecast there for later next week many are starting to feel that further cuts to their production may not be warranted.  We also had a WASDE report on March 8th which was viewed as bullish corn on higher demand and slightly bearish on soybeans given cuts in US export forecasts and higher Brazilian production.
For some of the reasons stated above and due to the fact that we have reached some of our initial price targets for corn and soybeans we have been more aggressive in selling additional fall and winter soybeans as well as initiating our first corn sales for the fall.
In corn we sold 20% of the fall position vs CZ8 on March 8th at 4.0975.  This is our first corn sale for any position next year or in the year #2 CZ19 program.  We continue to be somewhat patient in adding sales given how early it is in March.  We continue to see demand getting added to the US (especially exports) causing ending stocks to shrink notably in the past 2 months USDA reports for old crop.  As old crop ending stocks decrease, new crop beginning stocks of course decrease as well, and we continue to believe that trendline production next year may not be enough to fully satisfy demand for new crop meaning the 2019 carryout could be shrinking as well.  We do have corn orders working to sell our first portion of winter corn near $4.20 but again we remain patient.  Our next corn triggers fall roughly 10-15 cents above the current market
In soybeans we have gotten quite aggressive with our sales in the past 2 weeks.  Our fall position in soybeans versus SX8 is our most aggressive position.  By volume we have sold 80% of our fall pool of soybeans with an average price of 10.32 on that 80%.  However, we recognize that it is quite rare to see highs on November futures in Feb/Mar and do not want to be totally exposed to a weather issue in the US this summer.  For this reason, we have re-owned on March 9th half of our short position via calls.  Although, we look at today’s price as one we want to capture and protect, we feel it is way too early to simply sell and walk away given we are still roughly 2 months from planting the first beans in the US.  When you factor all futures and options positions on fall beans we are technically 57% sold today with a floor price established on 80% of the pool.  In the winter period for soybeans we added another 20% to our position taking us to 40% sold at an average of 10.32. We have yet to make any summer 2019 sales or fall 2019 sales.
For all of our old crop 2017/18 program we remain 100% sold on summer corn and soybeans.
Brian Burke
John Stewart & Associates


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