Monday, June 24, 2024

Market Factors

In his most recent Market Grain Outlook, Mark Welch, Texas A&M agricultural Extension economist, says The Office of the Chief Economist at USDA estimates that for corn, the projection is for planted acres of 91.0 million next year, up from 90.4 in 2017. Welch went on to say the following:

The yield estimate is 173.5 bushels per acre. This would result in a slightly smaller corn crop next year than 2017, but supplies are up due to a higher level of carryover. The corn stocks-to-use ratio increases in this table from 17.2 percent to 18.0 percent, but the season average farm price is $3.30, up from the current estimate for 2017/18 of $3.20.

For other grains, sorghum acres are projected up 1 million to 6.7, the same as 2016. The sorghum crop in 2018 is projected up 28 million bushels and ending stocks up 14 million, with the price for sorghum in 2018/19 at $3.30 per bushel compared to $3.10 currently.

Wheat for 2018 is projected down another million acres to 45.0. With a yield of 47.4 bushels compared to 46.3 in 2017, wheat production is up but supplies are down on lower carryover stocks. The stocks to use ratio for wheat declines from 43.8 to 39.2 percent and the farm price holds steady at $4.60.

Marketing Strategies
The seasonal price pattern for the December corn contract shows that prices tend to have some upward momentum early in the year as we watch crop conditions in South America and gauge planting prospects in the U.S. The first round of sales in my marketing plan coincides with this time period. I sold the last of the 2017 corn crop at harvest in late October and am now working on crop budgets and a marketing plan for 2018.

Trade Agreements
In other market news, corn industry associations, farm bureaus, farmers and many other stakeholders are greatly concerned about possible changes to the North American Free Trade Agreement (NAFTA).

The Nov. 9, 2017, National Agricultural Statistics Service (NASS) Crop Production report pegs the national average per acre corn yield at 175.4 that, if realized, would be a record. With that in mind, Justin Durdan, president of the Illinois Corn Growers Association, had this to say, “We cannot say strongly enough how important export markets are to the profitability picture for corn farmers. Specifically, NAFTA needs to remain in effect, and maybe even improved by the Trump Administration, but we cannot withdraw because losing our top corn customer right now is unimaginable.

Although Secretary of Ag Sonny Perdue has said that the U.S. Department of Agriculture is preparing for the loss of NAFTA, Durdan says no amount of preparation will make a difference to losing that market.

“We have a bright spot to improve markets through ethanol exports to Mexico since they recently approved improving their gasoline to a ten percent blend of ethanol,” Durdan says.

Renewal of NAFTA will be critical to corn producers and many others.

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