The January crop reports from USDA are behind the market. The Phase One agreement with China is now in place. While both events still have lingering questions, Chip Nellinger of Blue Reef Agri-Marketing told AgDay the market will start watching 2020 acreage next.
“I think they are starting to shift its focus already,” Nellinger said. “Typically, the market starts to look, as early as February, how are we shaping up for spring and how many acres are we going to plant?”
He said as the market starts to transition to talk about 2020 production, U.S. farmers may be poised to plant 95 million acres of corn. Even if there’s a repeat of prevent plant on a portion of U.S. acres this year, he says farmers can’t ignore the possibility of 95 million acres planted in corn this year.
“I think you have to go under the assumption right now of ‘what if’ worst case,” Nellinger said. “If you put 94 or 95 million acres into the balance sheet, at a trendline yield, even assuming a little bit better demand than we had in the 2019 crop, you still come up with a big corn carryout of 2.7 or 2.8 million bushels.”
Nellinger knows planting the acres and raising the crop on that many acres could be a challenge, but since the possibility is there, and the market may be timid to produce any type of weather scare reaction in the markets, a big crop could be in store for 2020.
“You have to go under the assumption this year that the market is going to be difficult to produce any type of a weather rally,” said Nellinger. “If we can’t get a rally generated after the spring we came off of in 2019, it’s going to be difficult.”
Nellinger thinks the theme for traders this year will be “wait and see.” Nellinger said the market could wait until the fall crop reports to recognize any crop production issues.
“So, that will take a little bit out of the potential rally in the short-run,” said Nellinger.
Nellinger reminded farmers the last five years, the corn market had produced a rally in mid-February. If that happens, Nellinger encourages farmers to protect those prices.
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