Special Market Update
Grain Market Commentary
Monday, May 14, 2018
By Greg Johnson, Executive Account Representative, The Andersons
Ending stocks will be tighter next year. Now what?
Last week the USDA estimated U.S. ending corn stocks for the 2018/2019 crop at 1.68 billion bushels. If realized, this would be the smallest U.S. corn carryout since the drought year of 2012 (see chart below).
USDA is using a 174 bpa trend-line yield for this year’s corn crop. Until the market feels more comfortable that the corn crop can achieve a yield in the 170’s (which probably will not be until early July), the corn market should be fairly well supported at these price levels. On weather scares, corn prices could approach $4.50 this summer. However, if we do not have a major weather problem and we have a yield in the 170’s, corn futures could be as low as $3.60 this fall.
A final corn yield in the 170’s would likely give corn prices (currently at $4.15 December futures) 35 cents of potential upside vs. 55 cents of potential downside. Keep these price ranges in mind as you revise your marketing strategy.
USDA estimated that the 2018/2019 ending soybean stocks will be 415 million bushels. This would be 115 million bushels less than the 2017/2018 carryout of 530 million bushels, but still the 3rd largest carryout in the last 13 years (see chart below).
Soybean demand is very unpredictable (think U.S./Chinese trade discussions and a much smaller Argentine bean crop), and every change of 1 bpa in the U.S. soybean national yield affects the carryout by almost 90 million bushels. As a result, there is a wide range of potential prices for November soybean futures (currently trading around $10.15). A good crop or a Chinese tariff on U.S. soybeans could push bean prices below $9.00. On the other hand, a reduction of just 2 bpa in the national yield could push bean prices over $11.00. With this much potential volatility in prices, consider using more min/max programs, which lock in a floor while still giving you upside price protection. Contact your Andersons account representative to go over the details.