The higher corn and soybean yields USDA announced in its September report took a lot of people by surprise, including “Market Rally Radio” host Chip Flory. But don’t just assume that because the agency raised expectations this month that it will lower them in October.
“You can do that if you want, but boy, you’re putting yourself at risk if you do because those numbers from USDA are what the market is going to be trading for at least the next month,” Flory tells host Chris Barron on the latest “Margin Minute” episode at AgWeb.com. “Now things might change when we get to the October report, but history shows us that if they go up from August to September, they’re more than likely going to hold at least steady September to October and probably go up. That’s what history shows us. There are exceptions out there, and we need to be aware of what the conditions were around those exceptions. [With] late August/September weather conditions like we’ve had—over what, 80% of the corn and soybean area?—those are the years that you can see the exceptions. But you don’t count on it.”
Many market observers are recommending producers store corn this year, Flory says, but he strongly encourages farmers to make space for soybeans, as well.
“If you can put half of your overrun soybeans in the bin, I think it’s going to pay this year,” Flory says. “You need to look at it and use a strategy that’s going to capture the carry right away because you don’t want that carry to get away from you. Use a strategy that will capture that carry, whether it be a hedge-to-arrive for delivery into July or May, or you can buy the nearby and sell the deferred and lock in your carry that way and then just do the best job you possibly can at marketing the cash.”