USDA is set to release a slew of reports on Friday. From an updated look at 2019 crop production, to a fresh take on stocks, the reports have the potential to create big moves in the markets.
“There’s a lot of uncertainty and then add to that all the difficulties we've had from start to finish on this crop,” says Chip Nellinger of Blue Reef Agri-Marketing. “There's still a lot of crop in the field in the in the northern portions of the Corn Belt.”
The unharvested crop will be counted as on-farm storage by USDA. That’s created chatter heading into Friday, but much of the market talk leading up to the reports are about the possibility of USDA lowering the national corn yield, while also lowering corn exports.
“I think there's a definite risk of USDA lowering the export figure for corn in January, simply because we probably only had 280 million bushels of corn exports in the first quarter; last year, we were over 600 million,” says Alan Brugler of Brugler Marketing “That's a big drop off, that's not fully reflected in their table. And they can't account for Chinese business before it happens. That's not part of their methodology. So they they're going to have to lower the corn exports. The question is, what do they offset enough on the production side?”
So, what if USDA raises yields? Nellinger says that’s a possibility, and a bearish reaction is always a concern heading into big reports like this.
“That's the fear,” Nellinger says. “Personally, I would think that there's more room for USDA to lower yields than raise yields. And then there's all the uncertainty around what are they going to do with harvested and planted acreage, as well, especially on the corn side. I know there's some good reports of some beans and some late planted beans, but a lot of producers we talked to are way below a year ago. And so, you know, maybe it's backdoor syndrome in the eastern Corn Belt, but I think they've got some room to lower bean yields.”
No matter what happens, Nellinger says if the market response is positive, a producer needs to look at capturing that opportunity.
“In our minds, if we get a sharp rally into the report we have to react to that,” Nellinger says. “It's not an absolute bullish situation…. we have to be willing and ready to reward the rally if we see it, though.”
While Brugler thinks producers should be willing to take advantage of any rally, he thinks it’s too early to look at pricing opportunities for the new year.
“I think it's too early to sell 2020,” he says. “I think our target for an initial sales between $9.80 and $10 for November beans, on the corn $4.15 to $4.25, that would be our next target here. We know there's more acreage coming for next year, simply because we assume we're not going to have the prevent plant but again, we just came out of the lowest 5% of the expected trading range for old crop corn for the year. You don't want to sell too quickly on the way up.”
Considering USDA’s reports Friday could spark a volatile reaction, how should you prepare? Nellinger thinks the first place to look is basis.
“Well, I think first and foremost, in a lot of areas of the of the country basis is really strong,” Nellinger says. “That might be the first item to check off is maybe looking at basis is that an opportunity, especially on the corn side to lock in some really strong basis. And then secondly, still be willing to sell the rallies. I hope it's friendly crop report. Hope they sign that deal and that China starts buying large amounts of our U.S, goods. But we still have to be willing to sell that rally. Just pulling numbers out. We see March corn back near or slightly above $4. And then March bean futures, you know, up in the $9.60, $9.75 range. I think you have to be a seller up there."