Traders expect this week will be a big one for the grain and livestock markets, partly due to the USDA reports to be released.
“We think what we’re going to find on the Quarterly Grain Stock [report is how] we fed a lot more corn than what we traditionally do,” says Jim McCormick, hedging strategist with AgMarket.net.
McCormick says there was a scramble to come up with livestock feed for the industry after DDGs plants temporarily or permanently shut down at the beginning of the pandemic.
“Guess what [farmers] fed? Corn. A lot of it because A, we had a lot of it and B, it was cheap,” he explains.
Some hog producers switched to using corn, if it wasn’t a part of their feed ration before, to slow down weight gain.
“We are moving diets that use more corn or almost all corn later in the ration, which just slows down intake,” said Brady Reicks, a Lawler, Iowa hog producer, during an interview in April.
Some producers had to switch to a ration that didn’t use DDGs because of plants sitting idle.
“We’ve actually had to pull DDGs out of [the hogs’] diet because they became too expensive and hard to get,” said , Ill., producer Mike Haag in April.
The nation’s hog herd continues to be in expansion mode.
The latest Quarterly Hogs and Pigs report from USDA shows as of June 1, there were almost 80 million hogs and pigs on U.S. farms. That’s up 5% from June 2019 and 3% from March. Between March and May, almost 35 million pigs were weaned, up 1% from the same time last year.
“We knew those numbers were going to be up,” says Alan Brugler, president of Brugler Marketing and Management LLC. “We were running at a 3% to 4% expansion pace back at the beginning of the year. This was a little bigger inventory than what trade had been looking for.”
McCormick thinks there could be other positives in the corn market.
“I’m in the camp the government might have overestimated last year’s corn crop,” McCormick says. “That also will kind of come into the equation.”
He believes there are good opportunities for China to buy U.S. corn if the country decides to make big purchases to fulfill the Phase 1 trade agreement. As of now, he says exports to the country are lagging.
“China has been selling a lot of corn out of its state reserves,” McCormick explains. “The Chinese buyers are buying really old corn at extremely high prices. [In] the meantime, here’s the United States with an abundant supply of corn [and] relatively cheap prices.”
Click on the video to watch more.