Don't Let Robust Brazilian Exports Dim Hopes For Corn Price

November 1, 2017 05:22 AM
 
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Brazil’s supply of corn on Oct. 1 was record large, and the country looks to be a competitive exporter even as new-crop U.S. supplies make their way to export locations. After an aggressive Brazilian corn export campaign earlier this year, Brazil’s export effort through the end of the year will likely remain robust.

That doesn’t mean pressure on U.S. corn prices. USDA’s 2017/18 corn export estimate is down about 450 million bushels from last year’s shipments because of bulging Brazilian supplies. Still, that Brazilian corn will cap upside potential through the winter.

The heightened competition for corn exports, isn’t likely to be repeated in the 2018/19 marketing year. Brazilian farms are dealing with low corn prices and high transportation costs, reducing full-season corn acres by as much as 15% from year-ago levels. Safrinha corn acres could be down, too.

The market is still months from focusing on 2018/19 U.S. corn export potential, but the level of competition for those exports is being determined (in part) right now. Corn futures already are reflecting some of that increased export potential.  —Chip Flory

[Don’t miss the 2018 Top Producer Seminar, where Chip Flory will lead a panel discussion titled, “Ag Lender Expectations, Wants and Needs.” Register at TopProducerSeminar.com.]

Ask an Analyst: Bryan Doherty | Stewart-Peterson
bdoherty@stewart-peterson.com

What is your commodity marketing philosophy?

Sell early and sell often. Look for opportunity. Shift risk, take advantage of opportunities and use the right tool at the right time.

Bryan Doherty

What distinguishes your consulting firm from others?

We lead with strategy and not outlooks. Outlook can be right, but they can also be wrong.

What is one action every producer should take to manage marketing risk?

This is the first year in a long time that world demand for corn will exceed world production. That’s after record U.S. production last year and in the Southern Hemisphere. I don’t think in these windows we’re particularly interested in chasing sales. But if you don’t have the cash flow or storage space, that’s where the strategy comes in. Do you use a basis contract? Do you buy a call? October and November are really your key planning window for price recovery. Be disciplined enough to make sales and generate cash flow.

What percentage sold should farmers be on their crops?

Most years, producers should be sold at least 50%. This year, we recommend they be sold 50% on soybeans. On corn, if the market can rally back, let’s use 15% recovery off the low to initiate sales. For corn, a price increase of 50¢ would be 15%. That’s around $3.90 for December corn, maybe $3.85. If corn rallies to there, I think it’s time to start selling the grain in smaller increments.

Which marketing tool is most underappreciated?

The options market is not appreciated as much as it should be because of a lack of confidence and knowledge about the combination of time, long-term objectives and options strategies. If you see potential for a bullish market, reowning your sold grain with a call option can be a great way to participate in the market.  

Whose business advice do you respect greatly?

I appreciate those in my industry who help farmers understand the marketing process and how to utilize marketing tools correctly.

What activities do you enjoy?

My favorite “off work” activities are spending time with my wife and four children.  —Nate Birt

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