The April WASDE report was released Friday. This report, the fifth of the calendar year, is generally used to reconcile the March Quarterly Stocks Report with the World Agricultural Outlook Board’s balance sheet and provide any necessary updates to their demand estimates.
The implication from corn’s stocks report was that USDA would acknowledge the slightly tighter than expected stocks in the form of additional demand on the balance sheet and possibly acknowledge the pace of export commitments. This was certainly the case, with export, ethanol and feed/residual all revised higher by a total of 150mb, exports being half of the revision.
Quarterly soybean stocks in March were a bit higher than trade estimates, so how the balance sheet would be impacted wasn’t quite as clear since a large contingency of market participants still believed USDA was too low on exports. But in true USDA form, the balance sheet was managed to perfection keeping stocks unchanged. Raise exports 30mb, drop crush 10mb, take 2mb off seed and 17mb off residual and voila…wait, there’s still 1mb left to account for. So go back to last year’s production and raise the yield a fraction of a bushel. Like I said, perfect.
A month from now is when we get a peek at the first official 2021/22 balance sheet for corn and soybeans. The 1.352bb corn carryout and 120mb soybean carryout will now be thought of as carry-in and are the foundation of the 2021/22 balance sheet. The Planting Intentions acreage data will be plugged into new crop balance sheets along with trend-line yields and, most importantly, the first demand assessment for the 2021/22 marketing year.
Whether you believe the acreage numbers or think we can grow a trend yield is irrelevant for the May report because it is what USDA will assume; both are “known” to the market and both will be dealt with in the coming months as more information is gathered. The demand number though, that’s something the trade really doesn’t know yet and the best clues we have are the numbers used from the February Outlook Board. Unfortunately they’re rarely in line with May’s WASDE; this is where the next surprise could reside.
Earlier we mentioned that we just had the fifth report of the calendar year. Below is a chart of May Corn and there is a pattern that we want to be aware of. Whether it’s the day of, or in the case of the two quarterly reports, the day after, each report this year has marked a swing higher on the chart. The Quarterly Report highs were made the night after the report following limit-up settlements.
This is significant because it gives us a defined pattern for timing. Knowing the current pattern revolving around crop reports, it would be reasonable to expect another pullback in the short term as planting accelerates. We can’t say for sure, but the pattern suggests corn could rally again into the May WASDE report, and if it continues, another major high would be expected on that report.
Most producers I speak with have been rather hands off on marketing new crop over the last several months, and for good reason. February provided excellent price averages for crop insurance. But we are quickly approaching the time where highs are often made for the marketing year and, if you aren’t already, you’re about to get really busy.
We are about to embark on the period when the real marketing season begins, and we want you to be ready. The next few months will be emotional, erratic and a difficult overall environment to market grain. If you haven’t done so, try to at least form a loose philosophical marketing plan over the next few weeks, prior to the May WASDE report on May 12.
Like many producers, AgMarket.Net has been quiet as of late on executing sales and/or hedges. We continue to advise replacing any cash sales with calls to maintain the ability to participate in an ongoing bull market while simultaneously managing profitability. We will eventually reach a time when a high enough percentage of expected production has been sold and will then move to utilizing puts.
Things rarely go according to plan, but it’s much easier to manage a plan with a defined goal than it is to manage emotion.