As planting season approaches, grain markets are also keeping an eye on the annual spring reports from the USDA.
Bryan Doherty of Total Farm Marketing said the previous two Supply and Demand reports have been identical, leaving corn prices “dead in the water” over the past few months of sideways trade. However, producers shouldn’t expect that to continue much longer, he said.
“In a year of high price and high volatility, it is just a matter of time before prices break out of a sideways pattern and find direction,” Doherty said.
The next major report from the USDA comes at the end of March, with the Quarterly Stocks and Prospective Plantings numbers bringing new information to the markets. As crop conditions declined toward the end of the U.S growing season, ending stocks numbers “could be supportive,” Doherty said.
Despite supportive ending stocks, acreage is also expected to counterbalance that optimism.
“It is unlikely that the acreage number will support corn prices,” Doherty said. “Expectations are for an additional 3 to 4 million acres, compared to last year’s 90 million.”
With new ending stocks and acreage numbers, April’s Supply and Demand report will likely show significant changes, particularly when paired up with the South American harvest weather and North American planting weather.
Overall, Doherty says to prepare for lower prices when these reports come and go. Corn prices are currently stalled for the most part, and many farmers are selling their inventory. And despite weather issues, there are still expectations of a good South American crop. If demand stays high, however, any price pressure may be limited, which could bring more profitable options for farmers.
“Cover 2020 cash sales with call options,” Doherty said. “For bushels you do not intend to forward sale, purchase put options to establish a price floor. This strategic approach prepares you for a price breakout in any direction and takes advantage of the trend.”