From The Editor
May 11, 2012
Hello Pro Farmer Members!
When all is said and done, July corn lost 39 cents this week; December corn lost 19 1/2 cents; July soybeans dropped 59 3/4; November beans lost 32 1/4; and July Chicago wheat futures were down 15 cents.That, my friends, is a tough week for the grain markets.
The corn-wheat price relationship this week is interesting. In a week that USDA once again cut estimated old-crop corn feed & residual use due (in part) to an expected increase in wheat feedings, wheat lost 24 cents of pricing incentive to encourage feeders to use more wheat and less corn.
The 50-million-bu. increase in corn carryover really didn't surprise us. USDA's World Ag Outlook Board is following last year's game plan very closely. Carryover was held steady February-April (at 675 last year; 801 this year) in an attempt to keep old-crop corn prices high enough, long enough to slow down use. It worked last year (with the help of some early-harvested corn) and it will probably work again this year (with the help of some early-harvested corn). As we explain on page 4 of this week's Pro Farmer, corn carryover really doesn't reflect "just" old-crop supplies any longer. It's more a reflection of September 1 stocks. I realize old-crop carryover is the old-crop carryover, but there is a difference.
Last year, we might have ended the year with about 700 million bu. of 2010-crop corn. And this year, we might have only about 800 million bu. of 2011-crop corn left on Sept. 1. But, the addition of new-crop supplies will inflate September 1 corn stocks... and WAOB will have to reflect that as carryover. Of course, that won't happen until the October Supply & Demand Report... after the September Quarterly Grain Stocks Report is released.
We think there's a "simple" way to clear up the supply-side confusion in the corn market. "Just" make the marketing year start on August 1 and end on July 31. That would give us a clearer picture of old-crop stocks and would start the marketing year ahead of the early-harvested corn in August that seems to find a way to work into the Sept. 1 stocks tally. It would take some adjustment... no doubt about that. And the first 30 days of the new marketing year could become a wild ride in the cash market. That's especially true if we get another year like 2009 when harvest didn't get started until mid-October (or later) on most of the corn acres out there. But... and August-July marketing year would draw a sharp line between old- and new-crop supplies instead of the gray line that blurs the line between old- and new-crop right now.
We're not saying this would be easy. Heck, we're not even sure those are the right dates. But we are sure the current marketing-year calendar now creates more confusion than clarity.
And a shift in the marketing year has happened before. Up until May 1986, the marketing year for corn started October 1 and ended September 30. In addition to some warnings that it was tough to get accurate information out of Russia because of a nuclear accident at Chernobyl, the Coarse Grain commentary in the May 1986 S&D Report included, "U.S. corn and sorghum estimates and forecasts for all years have been adjusted to a new September 1 - August 31 marketing year. The new beginning stocks estimates were significantly increased for corn."
Presumably, the reason for the "significant increase" in corn beginning stocks is because September 1 stocks reflected only 11 months of use after the start of the marketing year was moved up a month.
The point is, they've done this before to make the calendar better fit what's happening in the field. As we explain on page 4 of this week's Pro Farmer, it's probably time to make that adjustment again.
That's it for now...
Happy Mother's Day to my bride Sue who is the B-E-A-utiful mom to Emily and Thomas! And happy Mother's Day to an exceptionally patient Marlene Flory. And to Rosie Schnieder who after 25-plus years of having me around will still pour me a cup of coffee when we visit.
Happy Mother's Day to all the moms out there!
... have a great weekend.