The latest USDA report on grain stocks, issued Sept. 30, suggests a price floor might be forming. That’s because it didn’t produce a “big bearish shock” some analysts might have feared, particularly for corn, says Chip Nellinger, Blue Reef Agri-Marketing.
“Historically, over a long-term horizon [of] five, 10, 30 years, you get to the first week in October and you’re about to the harvest low in corn,” says Nellinger in an interview with “AgDay” host Clinton Griffiths. “I don’t know why that would be any different this year. To me, I think we have a little bit of a floor underneath of us now. It doesn’t mean we’re going to turn around and go immediately higher, but it means that maybe the downside’s getting limited from this point.”
The report found corn stocks of 1.74 billion bushels, up slightly from year-ago levels; soybean stocks of 197 million bushels, up 3% from year-ago levels; and wheat stocks up a whopping 21%.
In his view, Nellinger says, the USDA data suggest farmers moved a lot of old-crop grain in anticipation of the 2016 harvest. Yet hefty stocks are still a reality producers will wrestle with for the foreseeable future.
“We’re still going to kind of struggle to get that cycle back to normal because there’s so much old crop carried over. I think that’s a slow process,” Nellinger says. “We’ve built more on-farm storage in the last few years, so farmers are better able to do that. No big shocks there to me. … The normal pattern, and it kind of shows in the stocks number of on-farm, is farmers storing corn and selling their soybeans out of the field. I think that will continue through this harvest, as well.”
One lingering question from the report is whether feedlot operators will begin moving toward wheat and away from corn because of massive wheat volumes in the bin.
“That debate’s going to continue for a couple more quarters until we know more about that,” he says. “Logically, you could expect that there would be some switching. It’s not always easy to do in real time out in the feedlot, but that would be something to watch going forward for the ’17 feed usage number.”
Watch the complete "AgDay" interview with Nellinger below.