Most recent report may end a lot of speculation (Grain Marketing)
(Editor’s note: John Hall is a professional commodities analyst.)
I want to take time to review the USDA June Supply and Demand Report that was released June 11 for two reasons.
First, there is a lot of hype that seems to have growers more optimistic than maybe they should be.
Second, I believe that the June acreage report that will be released June 28 and included in the July Supply and Demand Report could end much of the current speculation.
Fact: USDA employs statisticians that use survey data from growers, elevators, industry and export facilities to make their projections.
They use current and historic data to assure maximum accuracy in these mathematical projections.
Let’s review the June USDA Supply and Demand balance sheet for corn. In the table at the top right, look at line 1. You will notice corn acres were expected to increase from 89.1 million last year to 92.8 million back in February.
Due to the wet spring and flooding, USDA cut 3 million acres from last month’s estimate. It is unusual for USDA to adjust acres until before the acreage report which is based on farmer surveys.
Some analysts suggest that the reduction in corn acres could be in the 6-8 million range. We will have to wait until June 28 to find out.
Now take look at line 3. USDA also cut yield 10 bushels from last month.
Now look at line 6: imports have increased. We are in a world market.
If it can be bought cheaper outside of the United States, it will be shipped in.
Last week Reuters news service reported Brazil’s 2018-19 corn crop at 97.010 million tonnes, an increase from last month’s estimate of 95.254, and well above last year’s 80.709.
Look at that increase!
They see their soybean crop at 114.843, also an increase from last month’s 114.313, but below last year’s 119.282 million metric tonnes.
Lines 8 — 12 discuss usage — Domestic use is down. According to Allendale’s Rich Nelson, usage is where several analyst disagree at this time.
Keep in mind usage is driven by price (cost). When corn price goes up, usage tends to come down. Now look at line 12.
We have heard all the negative news about the tariffs. You see that exports are down some, but not the magnitude the news suggests.
Finally, look at line 14: The current balance sheet still suggests ending stocks at 1.6 billion bushels.
Nelson believes that ending stocks, the number that drives price, will be in the 1.7 – 1.9 billion bushel range even if acreage is reduced further.
That said, corn prices maybe reaching the highs for the season.
Have you started pricing in increments? Can you lock in a profit at the current prices? I have heard story after story about holding out for a certain price then watching the market fall.
Strategic marketing is not about hitting the highs.
It is about marketing when prices are profitable.
Options are tools that can be used to add market opportunities.
The soybean balance sheet at the bottom left shows planting intentions for bean acres (line 1) were cut from 89.2 million acres last year to 84.6 million this year.
Note that projected yield was not changed. Now look at exports in line 9.
The tariffs have not been as devastating as some of the news suggests. Finally look at line 13 ending stocks.
This number is burdensome to price!
I am concerned with bean prices at this time.
The Midwest has encouraged prodcuers to consider the Prevent Plant option with their crop insurance.
The decision to use the Prevent Plant option is not real simple to understand.
Will growers choose this option? Most growers I know have trouble looking at an unplanted field all summer.
Having said that, what happened to bean ending stocks if there is an additional 1-3 million acres planted?
(Note: I research material from Allendale, DTN, USDA, University Land Grants and other credible sources in compiling this article. It is not merely my opinion, but rather a consensus of experts in the trade. Looking for a marketing coach or someone to discuss strategies with? Contact me at firstname.lastname@example.org, or call 410-708-8781.)
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