As if the flooding in parts of the Midwest wasn’t bad enough, farmers last week were hit with bad news when it came to the grain markets.
If there was any good news it was that things couldn’t possibly get worse, said Don Roose, president of U.S. Commodities in West Des Moines.
“The news is so bearish that it about has to get better,” Roose said.
Let’s start with the obvious bad news. The USDA’s March 29 Grain Stocks and Prospective Plantings reports were — to put it bluntly — a shock to the market.
“The stocks number for corn was shocking,” Roose said.
The USDA estimated stocks on hand at 8.605 billion bushels, lower than the 892 billion bushels on hand a year ago but about 270 million bushels above the trade estimates. That means either last year’s crop was larger than previously listed or feed usage declined.
“That is a game-changer,” Roose said.
What’s more, 2019 expected corn acreage was listed at 92.8 million acres, 3.67 million above last year and about 1.5 million above trade estimates. The USDA also projected soybean acreage at 84.6 million, down substantially from last year.
As a result, corn prices dropped 17½ cents on the heels of the report, a 4 percent decline.
Again, if there is a silver lining it is that such a large drop generally leads to some type of short-term bounce-back.
Other news is also hitting the grain markets. The trade war with China continues, and the U.S. is still waiting to see any uptick of sales or shipments to China. And President Donald Trump’s statement last week that he might close the border with Mexico sent all kinds of shock waves through the market.
Mexico gets 99 percent of its corn from the United States. It also gets 100 percent of its soy meal and 97 percent of its soybeans from the U.S., Roose said. No one really knows what shutting down the border means, but it could be devastating to Mexico and damaging to Midwestern farmers.
Even if it forces Mexico to make the changes the president desires, it is possible even the threat of such a shutdown could lead Mexican grain buyers to start exploring other markets instead of depending on U.S. grain.