WASDE’s Weather Wild Card

May 12, 2015 07:00 AM
WASDE’s Weather Wild Card

With 75 percent of the corn crop in the ground, planting is way ahead of schedule this spring. So are soybeans (31 percent) and wheat (87 percent), according to Monday’s Crop Progress reports.

That type of progress leaves the trade and farmers wondering what might happen with the monthly World Agriculture Supply and Demand Estimates that will be released today.

“The USDA follows a historical methodology to come up with the first supply and demand for the 2015/16 corn and soybean balance sheets,” according to Paul Georgy of Allendale, Inc. “The wild card is what they will do with yield since planting progress is above normal.”

With that in mind, here’s what the trade expects for ending stocks, according to a survey by Reuters:

  • Corn: 1.864 billion for 2014/2015 and 1.752 billion for 2015/2016.
  • Soybeans: 360 million for 2014/2015 and 443 million for 2015/2016.
  • Wheat: 693 million for 2014/2015 and 750 million for 2015/2016.

"I think they'll be focusing more on the demand side," predicted Farm Journal Economist Bob Utterback on U.S. Farm Report Saturday. "They'll reduce beans just a little, increase corn just a little bit. It will be offset by the increase in South America, so the global numbers will drift up a little, which will not do us any good."

The whims of weather and the significant stockpiles in many U.S. farmers’ bins are causing many to worry about the downside risk of the months ahead.

“We still think it’s too dangerous to carry excessive old crop inventories deep into the growing season, even though we know many farmers are doing just that,” said Mike Mock, senior risk manager at The Andersons on Monday. “If the report is bearish or bullish (Tuesday), we would still encourage folks to liquidate old crop inventories. If you want to play the later in the summer weather game, do it with some sort of at the money or sliding out of the money September call option feature. That would be the way to do it. … Global weather is just too good.”

Utterback urged similar caution.  "If you want to hold for the bull (market), it's going to be mid-June, early July," he said. "The problem is, if you hold that long (and) you don't get the weather, you're dead."

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Spell Check

Chappell, NE
5/12/2015 08:28 AM

  But then you are also dead if you sell for less than the cost of production.


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