USDA Stocks Report: Interpreting the Report and what contracting options Key recommends to mitigate the risk

 

The USDA stocks report this past Friday pulled everything lower to end the month.  This was a dramatic set-back from what had been a favorable uptrend over the last ten days, leading into the report.

September 1st corn stocks were clearly bearish at 2.140 billion bushel – which was 130 million bushels above the trade average and 40 million more than the high end of the trade guess.  If you maintain new crop feed and residual numbers at status quo, and take the USDA’s September 2018/19 balance sheet at face value, then Friday’s report would raise the carry-out from 1.774 billion bushels, to approximately 1.9 billion bushels.  This further unwinds the tighter stocks-to-use that we were anticipating and increases the need to be more pro-active with marketing this next year.

It was a similar negative report for the soybean market. September 1st stocks of 438 million exceeded the 398 trade average by 40 million bushel and actually comes in eight million bushel above the “high end” of the trade guess.  This was the third largest stocks increase versus trade estimates in the last 25 years!  These increased stocks should roll into October’s supply and demand report, implying a nearly 900 million bushel bean carry-out.

With new crop coming in, I’d like to highlight some alternative marketing options:

Minimum Price Contract:

If you are going to hold on to your beans, I’d lean towards putting them on regular storage versus price later since that gives you the opportunity to capture the carry.  Right now, there’s approximately 45 cents carry in the cash bean market between now and May of next year.

Extended Price Contract:

Both minimum price and extended price contracts come with a two cent fee.

Harvest is off to a wetter-than-average start, to say the least, so I’d like to remind you that we do moisture averaging on both corn and soybeans.  There’s a full moisture average on all loads within a delivery number for corn and we average all loads of soybeans together within the same delivery number, as long as they’re under 13.5 percent moisture.  This policy should be beneficial as we try to get back into the field.

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