My son recently completed his project for his final rank in the Boy Scouts of America – thank goodness!!
One key part of scouting is the scout motto, “Be Prepared.” It’s very simple, yet valuable advice they will utilize during their lifetime. And it’s something we should all apply to our grain marketing plans.
On June 30, the market was shocked on USDA’s updated acreage estimate with a record miss versus trade expectations, taking corn acreage down 5 million acres from March intentions to 92 million. Total planted acreage in the U.S. is estimated to drop 7 million acres versus a year ago, which is hard to fathom considering last year they lowered total planted crop acreage 6 million acres as excessive moisture delayed planting.
Those missing acres
The U.S. had better conditions to plant a crop this spring versus last year, yet planted fewer total acres? I recall myself and many colleagues wondering if the report was a mistake, and the wrong numbers were released. It’s one of the biggest gaps ever in what the trade thought on corn acres, and what USDA was reporting as current acreage. How is this possible? Where did the acres go, how bad can USDA be on their estimate? Was this an election-year-driven drop in acres to help corn prices rally?
In any case, the report and ensuing rally gave farmers an opportunity to liquidate old crop ownership and add to new crop execution of marketing strategies. The market has rallied 38 cents since the June 26th low on Dec futures, $3.22, but is still 70 plus cents off the start of Jan2020.
Now back to the scout’s motto. Were you prepared for the $1 per bu. drop in corn over the past twelve months? Are you prepared if the current heat or dry weather patterns continue and markets rally going into late summer?
This spring our country was hit by massive shutdowns as a horrible virus invaded U.S. shores. Were you prepared for an epidemic? Are you prepared if a second wave of shutdowns hit this fall, potentially crushing the demand return?
As I mentioned earlier, many in the trade were in no way expecting the huge cut in corn acres. The idea that a virus could shut down schools and the economy was inconceivable. Were you prepared? If not then, are you now?
Be ready to execute
As we grind through the next couple of weeks, weather will be critical as the U.S. crop gets pollinated.
In addition to weather, we will see additional USDA reports released this summer. We will also see regional concerns in how economies re-open. Add to the mix a little politics for fun with the upcoming November election and you get a cocktail of uncertainty that leads to a headache worse than your worst hangover.
Are you prepared for what may or may not happen in higher or lower markets?
Recent upward price movement and volatility offers producers a chance to prepare for the unknowns going into harvest. Now is not the time to be complacent. Though prices may not be at the most advantageous or desirable levels, the blunt truth is the market doesn’t have to take care of each individual’s most desirable pricing needs. The markets could care less about what we feel. Its only job is to provide price discovery.
This year has and will be like many others in the past – full of uncertainty. It’s probably a good time to ask ourselves if the Scout motto is something we should apply to our lives as well. Be prepared!