Mark Welch is a well-respected Texas AgriLife Extension Economist who publishes the “Feed Grain Market Outlook.”
Following are highlights from Jan. 13, 2014:
“On Jan. 10, 2014, World Agricultural Supply and Demand Estimates reported a decrease in corn supply and an increase in use compared to the December report. Feed use increased 100 million bushels, and ending stocks decreased 161 million compared to last month. The stocks-to-use ratio stands at 12.4 percent, down from 13.7 percent in December. World corn supplies tightened primarily on lower beginning stocks (-2 mmt). Increased use estimates were only slightly higher than increased production (+0.3 mmt). Days of use on hand at the end of the marketing year declined from a 63-day supply to 62.
“A bullish surprise came from the Grain Stocks report as well. Traders expected corn stocks of 10.790 billion bushels in all positions; the report showed stocks of 10.426 billion, 360 million less than expected. Dec. 1 stocks are up 30 percent from last year and just above the five-year average. The last time corn stocks were this high on Dec. 1 was 2009 (10.902 billion bushels).
“In the biofuel era (since 2007), the January Crop Report has created significant market volatility. In four of the past eight years, December corn has traded either limit up or limit down on the day of the Crop Report and has averaged a price change of 14 cents in the other years. On average, the December contract at expiration has been within two cents of the closing price on the day of the January Crop Report; but that average includes two years of contract expiration $1.50 over the price in January and two years going off the board $1.50 below. I will take advantage of this uptick in the market to price the first 20 percent of 2014 production, using technical tools to time this sale.
“There is still a long way to go in this marketing year with plenty of uncertainty ahead. I hope the price I lock in this early is the worst of the year; I have plenty more corn to sell. If prices do move lower, I will be glad to have gotten some priced at this time.” See Welch’s “Feed Grain Market Outlook” in its entirety at agecoext.tamu.edu/resources/market-outlook/feedgrain-outlook.
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