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Grain Blog

I’m sure everyone is wondering what happened last Fridayafter corn and beans took a huge dive.  I will save the beans for adifferent article but don’t expect China to save us.  African SwineFlu has killed soybean demand.  There are rumors of 30% hog feed reductionthere.  That is 30% of 700 million hogs.  The USA only grows 121million hogs total.


Anyway on to corn, for months we have been talking about howgood the fundamentals have been.  Well last Friday that all changed. We are looking at close to 300 million more bushels of corn in the lateststocks report.  That would translate into a bearish 2.1 billion bushelcarryout up from 1.8 billion bushels.  


The second problem comes in the prospected plantingacres.  At almost 93 million acres we have a corn problem.  I knowpeople have been talking about flooding and weather issues but over time theUSDA is 96 percent accurate when projecting final planted acres.  The twolargest deviations in the last 30 years was 1993 at 2 million acres and 2010 at1 million acres.  So we are looking at a lot of corn acres thisyear.  


The next problem is the yield.  If we are looking at174 bushel yield for 89 million harvested acres we are looking at 15.486billion bushel crop.  We will need record demand in feed, ethanol, andexport to just get to 15 billion bushel of demand.  I can see feedincreasing to a record level but the other two could be tough giving thecurrent market outlook.  Therefore we are looking at adding another 400million bushels to our current 2.1 billion bushel carryout and that isconservative that this point.  Considering this year’s 178 bushel yieldrecord, that is a another whopping 350 million bushel.  I think it is verylikely we are heading for a plus 2.5 billion bushel carryout in 2020.  


That is enough bad news for one article.  Let’s look atthe good news. Forward prices still look somewhat attractive.  We areheading into a risk premium time of year.  We can lock in accumulators forover 4 dollars on corn and 9.80 on beans.  I do think there is some upsideto these forward contracts due to weather premium but I would suggest beingvery aggressive in forward marketing this year.  Know when you are makingmoney and take that risk off the table.  Be more afraid of taking 3 corn thanwaiting for $5.  We are here to help you get the very best pricepossible.