Grain Blog

April 4, 2019

I’m sure everyone is wondering what happened last Friday after corn and beans took a huge dive.  I will save the beans for a different article but don’t expect China to save us.  African Swine Flu has killed soybean demand.  There are rumors of 30% hog feed reduction there.  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 bushel carryout up from 1.8 billion bushels.

The second problem comes in the prospected planting acres.  At almost 93 million acres we have a corn problem.  I know people have been talking about flooding and weather issues but over time the USDA is 96 percent accurate when projecting final planted acres.  The two largest 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 this year.

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 feed increasing 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 is conservative that this point.  Considering this year’s 178 bushel yield record, that is a another whopping 350 million bushel.  I think it is very likely we are heading for a plus 2.5 billion bushel carryout in 2020.

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