Crop progress was near expectation at 50%. But here is what you don’t see:
4.612 billion bushels of corn or 31% of US production will have a maturity date post October 4. That means that unless everyone from ND to OH switch to shorter day season, most of those bushels will be in a race to maturity.- The cutoff date for planting corn is May 25 for ½ MN and everything west of the Red River. That is in 4 days. The rest of the MN, WI, IA is May 31. Planting can continue at a discount to insurance coverage and if prices are high enough, farmers tell us they will plant until approximately June 5. In order for the math to work, Farmers need a cash price equivalent of 4.20-4.50 to justify planting past PP dates. Add basis to that in the states in yellow (-.40 to -.65) and you’re looking at 4.60-5.25 futures price needed…..OR a farmer could simply buy the board since it is below his cost and own bushels risk free of weather and guaranteed in quantity and quality and simply file PP. Now you would own bushels cheaper than the risk of farming and you get your PP. We know what makes sense but not sure of the final farmer decision.
3. Once again there are 7 disturbances that will come across the US in between now and June 5. The good news is there is a lot more heat in the eastern belt and rains are just a little more scattered so following this week, the east will probably get most everything in over the next 14 days. Some are saying farmers will switch some bean ground to corn where they can. That probably will happen but it will not make up for lost acres and it might just have a net draw down of bean acres. There are 18.5 million corn acres in SD, ND, MN alone of which 7.32 are planted or only 39%. Assuming an incredible push to get corn planted, it looks like about 12.82 ma would be an aggressive guess to get planted and would assume that most will plant until June 1. That would leave 5.6 million acres unplanted just in those states. Thus we think it is realistic to expect a total US 7.2 million acre loss in 2019. In order to be conservative this week, we will temper that to 3.6 for this week’s S/D just to give weather a chance to really improve next week despite the forecast.
Another concern we have is the temperatures. Looking at the 14 day map above you can see it will continue to be very cold from St Louis to MI north and west. We are already hearing about horrible stands, rotting seed and corn growing sideways. Thus there is a real problem if we consider the possibility that maybe 5-20% of those western and northern acres need to be replanted. At the very least this is a crop that will need lots of TLC and miracle weather. Reality check – the odds of a good (not trend) yield are declining. In 1993 we lost 22 bu/acre. We believe we are now between 5-10 bushels of nationwide yield. That makes our S/D projections tank toward a 1.170 billion bu end stocks and an 8.0% Stocks to use rartio. This is historically very low and potential very supportive to prices. We believe we need another week of spring weather forecasting to nail this down better but this is by FAR a VERY big deal. And remember – we only used a 3.6 mi acre loss. If next weeks weather justifies a revision to 7.6, then stocks are below 1.0 billion.
People say that our numbers are wrong because demand will not be that large. DUH!! Because when prices rally to levels needed to ration, demand will fall. But first we have to factor in the shift in the supply curve to determine how high prices need to get to ration that demand or incentify imports to make up supply.
Price implications are preliminary at this time because of what we just said, but last weeks models suggest 4.77-4.88 and we can now say that is a pretty firm idea.
Recommendations:
End users need to get bought out ahead. Our active end users have done this and are in good shape. Getting into Q1 2020 is not a bad idea.
Farmers without fall price protection on insurance need to buy calls immediately. We recommended this last week.
Farmers should implement a risk management plan to lock in a profitable floor on EVERYTHING, and then hope for higher pices to actually sell at. Do not sell cash forwards. Keep your basis and delivery open.
So we had someone say why would I spend 20 cents to lock in a profit on my operation when I could just wait till it hits 4.75 or even 5.00. Well because we are managing a business and if we are factoring in the costs of the option, the interest on any margin calls, the commission, your costs of inputs and land and we can guarantee a minimum profit AND keep the upside completely open….we put you in a position of no stress in we get ASF or something unexpected and we celebrate if the market goes to 5.00 and you can bring in $1000/acre. It is simply smart.
We are purposely not putting out specific recommendations on this report so that we can publish it to all our readers. We will however, post a more detailed recommendation on our website in the AgIntel subscriber area. All clients of AgMarket.Net can sign up for a free trial and we will get your subscription in place cat no cost.
Bill Biedermann
AgMarket.Net
815-893-7443 o
815-404-1917 c
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