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Apr 18, 2014
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September 2012 Archive for From the Editor

RSS By: Brian Grete, Pro Farmer

Pro Farmer Editor Brian Grete takes time to talk with Pro Farmer Members about some of the key issues in each week's Pro Farmer newsletter.

Just 'Lost' 2.2 bu./ac. From the 2012 Corn Supply

Sep 28, 2012

Chip Flory

From The Editor

September 28, 2012

Hello Pro Farmer Members!

We made an aggressive move for corn hedgers this week by advising you to get to 100% sold on expected 2012 corn production. We also advised cash-only corn marketers to get to 75% sold.

When we made the advice, corn futures were breaking below support on the charts and everybody seemed to be talking about "bigger-than-expected" corn yields. Then USDA delivered "September surprise" (in reverse) and we had another limit-move price reaction to the September Quarterly Grain Stocks Report.

So... what now? Hold off on making those cash sales? Not a chance. There still isn't enough economic incentive in the market to put corn in the bin. Toss in the risk of loading a bin full of aflatoxin and this is one of those years to sell the corn.

And if you've locked in prices on all your 2012-crop corn, don't panic. If we see followthrough buying, we've got plenty of time to reown a portion of sales in either long futures or call options to ride a post-harvest rally.

Looking forward, today's smaller-than-expected Sept. 1 corn stocks estimate of 988 million bu. does change the attitude of the market... including the 2012-crop contracts. That's because one year's carryover is the next year's beginning stocks. So USDA could make no changes to the 2012 crop estimates in the Oct. 11 Crop Production Report and total corn supplies in the Supply & Demand Report will be down 193 million bu. from the September S&D Report. So... the supply-side cushion for the 2012-13 marketing year is a bit thinner.

At harvested acres of 87.361 million (from the Sept. Crop Production Report), losing 193 million bu. from 2012-13 beginning stocks is no different than losing 2.2 bu. per acre from the national average yield estimate. The end result will very likely be a 2012-13 corn carryover projection down around pipeline levels -- something around 650 million bushels. And the only way that can happen is if estimated use is cut... again.

So the Quarterly Grain Stocks did change the market... both fundamentally and psychologically. Hedgers should be ready to reown a portion of 2012-crop cash sales.
 

That's it for now...

Have a safe harvest!

To join Pro Farmer, click here!

Informa Sees Higher Harvested Acres

Sep 21, 2012

Chip Flory

From The Editor

September 21, 2012

Hello Pro Farmer Members!

After the newsletter went to the printer, Informa Economics Inc. reportedly released its latest update of 2012 planted and harvested acres and projected 2013 planted acres.

The Memphis-based consulting firm reportedly put 2012 planted corn acres at 97.172 million. That's 767,000 acres above USDA's estimate in the June Acreage Report. Informa also put harvested corn acres this year at 87.657 million. That means harvested acres would be 90.2%.

Based on a normal harvested acre percentage of 92.5%, this estimate does reflect an increase in acres harvested for silage or simply abandoned. We're working with a harvested acreage percentage of 89.5%, based on data from the Pro Farmer Midwest Crop Tour.

On Tour this year, we collected 1,195 corn samples. Of that, 38 samples were under 10 bu. per acre. That's 3.2% of the total... and those are acres we figure will be abandoned or harvested for silage.

If 92.5% of planted corn acres are normally harvested for grain, that's the starting point. Removing an additional 3.2% from that total drops the harvested acreage percentage to 89.5%.

We also added more to the planted acreage tally than did Informa, but using the lower harvested acreage percentage means our harvested acreage estimate is 87.141 million. That's about a half-million below Informa's harvested acreage tally and is about 200,000 acres below USDA's harvested acreage estimate in the September Crop Production Report.

Informa reportedly estimated the 2012 corn crop at 11.093 billion bu. and projected a 2013 corn crop of 14.630 billion bu. on planted acres of 97.357 million and harvested acres of 90.215 million. Informa's first 2013 corn yield projection (trendline yield) was reportedly 162.2 bu. per acre.
 

That's it for now...

Have a safe harvest!

To join Pro Farmer, click here!

Should USDA Change the Marketing Year?

Sep 14, 2012

Chip Flory

From The Editor

September 14, 2012

Hello Pro Farmer Members!

Hats off the USDA's World Ag Outlook Board (WAOB). This is the USDA agency responsible for producing the monthly Supply & Demand Reports. I've argued plenty with WAOB estimates over the years, but there is clear evidence the analysts are working to adjust to changing times in the farming industry.

In September 2010, WAOB's corn carryover estimate was about 300 million bu. below actual Sept. 1 corn stocks. It just didn't plan on 2010-crop harvested corn slipping back into the 2009-10 marketing year. And if they did, they didn't anticipate a big enough move. And in that report, the use of new-crop corn in the old-crop marketing year barely got a mention.

In September 2011, WAOB's corn carryover estimate was about 150 million bu. below actual Sept. 1 corn stocks. But in this report, analysts attempted to do a better job of explaining how the backward movement of new-crop corn into the old-crop marketing year was impacting the feed & residual usage estimates for corn.

In September 2012, WAOB brought more transparency to the process. Here's what it said about 2012-crop corn harvested before Sept. 1:

"Feed and residual use for 2011/12 is lowered 150 million bushels based on the record level of crop maturity and harvest progress as of September 1. State-level crop progress reports indicate that nearly 11 percent of the 2012 corn crop was harvested before the September 1 start of the 2012/13 marketing year. Based on state-by-state production forecasts from the September 12 Crop Production report, nearly 1.2 billion bushels of new-crop corn are estimated to have been available for use before the end of the old-crop 2011/12 marketing year. This is up more than 700 million bushels from a year ago. Early new-crop corn use is expected to displace use of 2011 old-crop corn and boost old-crop inventories on September 1. As a result, early new-crop usage reduces the feed and residual calculation in the balance sheet."

Obviously, WAOB analysts are doing a better job of accounting for corn that moves back in time than they used to. And just as importantly, their doing a much better job of explaining how they account for that corn. It may not be "generally accepted accounting practices," but they are explaining the situation much more clearly than in the past.

That, however, won't stop me from once again asking USDA to consider changing the start and finish of the marketing year. With increased corn production in the South and the amount of corn harvested ahead of September 1 likely to continue to increase in the years ahead, now is the time to consider starting the marketing year for corn on Aug. 1. That would greatly reduce the amount of new-crop corn harvested ahead of the start of the marketing year -- and that's the corn that "muddies" the outlook and creates surprises from the September Quarterly Grain Stocks Report. While some corn was harvested in the far-South in July this year, it wasn't enough to create the carryover uncertainty we face today.

By switching the marketing year to Aug. 1 - July 31 schedule, the old-crop stocks situation would be much more clear cut than it is today. But the August-July marketing year isn't without problems. Imagine getting a 1-billion-bu. Aug. 1 stocks tally in a year like 2009 when the crop was planted late, matured slowly and was harvested very late. Corn supplies would be exceptionally tight by the time harvest started.

It would also result in moving the Dec. 1 corn stocks estimate to Nov. 1. Again using 2009 as an example, there could be plenty of corn left in the field when USDA's NASS surveyed for "Nov. 1 corn stocks." So... no... this isn't the "perfect" solution -- it has problems. But an August - July marketing year would give the market a much more clear dividing line between old- and new-crop supplies.

That's it for now...

Have a safe harvest!

To join Pro Farmer, click here!

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