Wow What a WASDE!

The last few days have had the WASDE August 16 report released and a few days later I attended the Midwest-Great Plains Ag Outlook /conference in Des Moines IA. Many of us have heard the headlines from the WASDE report predicting the US largest corn and soybean crop on record. US corn yields are projected at 175.1 bushels (BU)/acre (A) for a 15.153 billion (b) bu crop. Both the size and yield were higher than the highest trade estimate. The same happened with the soybean estimates in WASDE, 4.060 bbu with 48.9 bu/A. Both are higher than trade estimates like the corn trade. Sounding like a broken record, milo followed the same pattern with WASDE beating trade estimates projecting 0.475 bbu total with 66.2 bu/A, both higher than analyst estimates.

Last year’s crops were not the largest on record leading to slightly lower corn ending stocks however soybean ending stocks did rise. Ending stocks for both corn and soybeans are projected to increase after the 2016 crop is harvested. Corn ending stocks are projected to be over 16% and soybean stocks 8% of use. That compares to last year’s ending stocks of 12% for corn and 6.5% for soybeans. The expected increase will over hang corn and soybean prices for some time, until some kind of news, lower yields or higher exports or problems with other country’s grain production, would change the supply/demand calculation. At this point however there are no big news items that could change our grains market to one that is bullish.

So what was the consensus, as if there really is such a thing, or my perception of it, at the Midwest-Great Plains Outlook conference? Except for a few areas of crop problems in Ohio and Michigan, crops are in very good shape and are likely to perform very close to the high yields that USDA and other crop yield modelers have calculated. No significant disease or insect problems were reported. The discussion led eventually to marketing, storage and transportation of the Fall 16 crop. We already know some portion of the winter wheat crop is stored on the ground which will likely lead to loss of quality and quantity. That wheat will probably end up in feed. The US wheat stocks are projected to be 47% of use by crop marketing end while world wheat stocks are projected to be only 35% of use. That is some good news for wheat but stocks of world wheat are up even though use is projected to be up. Use is projected up for the US wheat crop and still stocks are projected to increase. The same situation is going on in corn and soybeans. So then another question is about transportation. Railroad companies are telling university crop economists that they are ready for the anticipated large fall crop. Coal shipments are lower than in previous years freeing up rolling stock to move grain more expeditiously in the past. That is good news for farmers who can anticipate that Fall 16 basis may not be as low as would have been.

What are farmers to do when marketing such a big crop? Many will be convinced to store rather than sell at or near harvest. Big crops tend to have poor carry and thus storage may not gain enough to pay for itself. In planning post harvest crop marketing, farmers must consider the carry that is offered. If the carry is less than the cost of storage, the market is telling you to sell sooner rather than later which would mean less money for the crop in the future due to storage costs.

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