If there is good news in the grain markets, it may be that officials have decided that the crop is not as big as they thought.
The November USDA crop report indicated the harvest got smaller, and that trend may continue in January, according to Don Roose, president of U.S. Commodities in West Des Moines.
Poor weather contributed to lower predicted yields in the November report. There is no report in December, but Roose says that quite often when a crop gets smaller during harvest, the number continues to drop. Although farmers would rather have those extra bushels, the trend should help boost prices a bit, or at least keep them from dropping as far.
The bad news from a marketing perspective is that the November report also found an additional 5.8 billion bushels of corn in China, nearly doubling world corn stocks.
But Roose says that China doesn’t generally export corn, so that shouldn’t directly put more bushels into the international market. What it could do is to reduce the number of bushels that China imports, which could hurt prices worldwide.
Of course, with a trade war going on between the United States and China, the impact for the U.S. could be primarily in more competition from other markets as grain from South America ends up competing against U.S. grain instead of going to China.
With those things in mind, Roose says farmers still need to look at strategies to protect themselves and to lock in profits where that is possible.
He says the basis has narrowed, which helps many producers. And the opportunity is there for farmers to use some puts to take advantage of the carry in the market. They could, for example, lock in $4 for corn for July delivery. For some farmers, that type of strategy could be a good idea, Roose says.