In its November report, USDA shocked some farmers and traders by announcing corn yield average will hit 175.4 bu. per acre—a new record. Thanks to increased demand in corn the market hasn’t responded so far with a dramatic drop in basis and USDA anticipates the 17/18 marketing year price average to continue at $3.20 per bu.
Overall, production forecast raised 298 million bushels compared to the October report. Demand this year raised by 75 million bu. from exports, feed and residual markets. Projected ending stocks are 147 million bu. more than October as well.
“We knew going into it the chance was there (for high yields) and many folks were surprised on physical yields when they got into fields—even in South Dakota where there was a record drought,” says Angie Setzer, vice president for Citizens LLC. “We didn’t see a slam dunk harvest done in 10 days, which helped keep the market stronger.”
She says more people are finding new ways to store grain and hold out for better prices. Grain bins, and even temporary storage is on the rise in the countryside, all while seeing fewer ground piles near elevators in some areas.
“The amount of bushels we have in the pipeline, whether the yield is 172 or 175, is still a significant number compared to five years ago,” Setzer says. Even with a recent increase in export sales, record production and high ending stocks means farmers need to be especially strategic when marketing for the 18/19 year.
“Overall it is going to cap our ability to see an exceptional move higher without something changing significantly,” Setzer says. “In 18’ we don’t need to have an acreage competition—I don’t want to see a significant increase in soybean acres and definitely not in corn acres. We already have high carryover on both.”
Some wheat farmers captured July 18’ opportunity to lock in $6 per bu., but she says there doesn’t appear to be any shining stars as far as alternative crops go. Look for local opportunities in non-GMO, lentils or other specialty crops. For corn and soybean acres take a good look at futures in crops you can grow to lock in a profitable per bu. price as soon as possible—especially on cash rent acres.
Learn from your marketing past, too, Setzer advises. “Look back on 2017, if you said I wish I would have done this or that, it makes sense to do that in 2018. For example, I have guys putting target orders in more aggressively.”