The grain markets have a bleak outlook. AgResource Company’s Dan Basse says his message to farmers is to sell early and sell often.
It’s time to accept reality, says Dan Basse, president of AgResouce Company in Chicago. "Everything has come down except the gauntlet itself, in terms of stagnant demand for corn," he says.
Basse’s message to farmers: sell early and sell often.
Even with prices much below last year’s, Basse says, farmers still need to be thinking about selling corn and taking advantage of any rallies that would happen to come from Friday’s round of USDA reports or any other weather calamities.
On Friday, Basse says his firm is expecting U.S. corn stocks to be around 10.9 billion bu., which is about 2.8 billion above a year ago and the third largest on record. "We did see good usage during the first quarter, specifically from ethanol demand," he says. "I think that is encouraging, but it’s not something we can count on continuing."
Basse says the main issue with the corn market is the absence of a major demand driver. "That’s the problem," he says. "The ethanol era is over and we are now in something different – we just have to determine what different is."
Move Your Grain
Based on AgResource Company’s modeling, Basse says corn prices could decline to $3.75 by spring planting. With this dismal price outlook, he says farmers need to be making regular sales. "This bear market isn’t something that will leave us anytime soon unless we have weather problems," he says. His firm is 80% sold in 2013 corn and 85% sold in 2013 soybeans.
"If someone wanted to hang on to 20% of what we would call gambling stocks, we think that’s fine," he says. "But at this stage, we wouldn’t want to have any more than 20% of old stocks in the bin. If you are still holding old-crop corn, you are really just betting on weather problems, either in South America or the U.S."
For 2014, they are 65% sold in corn and soybeans, making them more heavily sold at this time of the year for nearly a decade. They are even 15 to 25% sold on 2015 corn.
See the average hedge position for the eight participating market advisers in AgWeb’s Hedge Position Monitor:
"We are very much in line with the sell early and often plan," he says. "So far that’s worked out well for us. We look at every rally as a selling opportunity."
2014 Acreage Mix
Overall, Basse thinks farmers have decided their crop mix on 80% of their acres for 2014. He’s seeing more of a lean toward soybeans over corn. "We may see spring wheat as another crop that does well this year," he says.
His early predictions for 2014 acreage is 81 million acres of soybeans (up from 77 million acres in 2013) and 93 million acres of corn (down from 97.3 million acres in 2013). He says last year’s large number of prevent plant acres, make predicting this year’s acreage mix a little tricky.
For More Information
AgResource Company participates in AgWeb’s Hedge Position Monitor, a bi-monthly tool that provides you with a snapshot of the average hedge position of two key positions for corn and soybeans.
Read more Pre-Report Analysis of Jan. 10 Reports.