The August crop report left many farmers and traders in a state of disbelief. You may be convinced the USDA is wrong, particularly in its much-higher-than-expected corn crop estimate. LG Seeds has heard the same concerns from their dealer network and has partnered with Brock Associates, a commodity marketing service, to gain additional insights in this time of market turmoil. Brock Associates cautions to not get distracted by the report, as the market trades based on the USDA’s estimate numbers. The largest variables in the weeks ahead will be final harvested acres and final yield. Let’s take a deeper look into how Brock Associates sees the current market for corn and soybeans.

CORN
USDA’s estimate of planted acres strikes many as too high, but when you look at state acreage totals, along with prevented planted acres reported by the FSA, it may be accurate. The real question, of course, is harvested acres. The crop is maturing faster than many anticipated and while localized production estimates might feel slightly lower, the USDA estimates may not be as far off as they seem.

As hard as the market fell following the report, if the USDA is correct, there still is likely to be significant downside remaining. This looks like a significant bear-market - one that has made a long-term top. From a marketing perspective, the USDA report is a good example of how having a strategy for your operation is important in controlling emotions and making sound decisions. Don’t be hung up over where the price was back in June and July. Instead, consider where prices could be headed now. Basis levels throughout the country remain strong overall, but are vulnerable to a quick retreat.

SOYBEANS
The soybean market is another story. While the USDA’s soybean yield estimate was also surprisingly high, planted acres came in at just 76.7 million, which was well below anyone’s expectation.

There are serious demand problems for soybeans as exports continue to slip away and the trade dispute between China and the United States seems more entrenched every week. However, assuming USDA’s crop projection is accurate, the estimated 2019-20 carryover is 755 million bushels. That translates to an expected season-average farm price around $8.40 to $8.50, implying that soybeans are currently not overpriced.

This also means that with any type of production problems between now and harvest, soybeans have some upside potential. With the political unrest in Argentina, it is thought that they will go back to charging large export taxes on crops, which would be bullish for U.S. exporters. The bottom line is, farmers will not want to press the short side in soybeans as aggressively as in corn.

Volatility is going to continue to be very high, and no one truly knows where any of these markets will be in three months. In the current environment, minimizing your risk is critical and the only thing producers can do is implement the best strategies possible. For 2020, part of that strategy should be a field-by-field plan.

A field-by-field plan doesn’t stop at what seed you plant. You need a plan for how to make the most of that seed when it’s in the bin. LG Seeds is proud to equip growers with a team of local experts to help you make the most of your grain. Together with Brock Associates, LG Seeds offers business resources when you need them most.

Ready to make a field-by-field plan? Connect with a teammate today.