March USDA Report

The March supply and demand report is usually a very quiet report and today’s was no exception. USDA does not make any adjustments to the US crop size but sometimes makes adjustments to the demand side of the equation and South American crop size. Some analysts were thinking USDA may up Chinese demand and lower the South American crop size. However, USDA has been way behind on all adjustments for the last few years so it was no surprise when they did not make many adjustments today. They left Brazilian and Argentinian corn unchanged and raised Brazilian beans just slightly and lowered Argentina. They raised world carryout in corn and beans but lowered it in wheat. Overall these were only very minor changes.

Export pace has fallen off recently, but we are still so far ahead of estimates we only need barely a trickle to reach current USDA estimates. The market is going to go back to watching South American weather and demand in China. It is still too wet in Brazil and too dry in Argentina. Ships are lined up waiting on Brazilian beans but they are way behind on harvest. Second crop corn is way behind being planted. The weather has not abated much in Argentina.

The March supply and demand report is typically a nonevent. The March 31st stocks and prospective plantings report can sometimes be a big market mover. I anticipate more sideways to higher trade as we approach it. If we have a big move to new highs before that report, we may be recommending taking some risk off the table going into the report but if we stay flat to lower I think that lowers the risk.

What To Do
I am still being very patient with sales. On old crop if you need to stop interest or pay bills, scale in small sales on up days. I am not in a hurry to price out here but there is a cost to holding old crop. The market has a lot to work out on new crop with acres and the weather going into the growing season with a strong La Nina. Many or most of you have way less new crop sold than you usually do this time of year. For the last several years, the sales we made in December or January were the best sales we made all year. If you want to have something working, put orders in at $12.99 soybeans and $4.99 corn. Do not sell new crop corn or beans without at least some of your inputs locked in. Commodity prices are rallying and so are inputs so we want to be careful doing too much of one without the other.

The wheat is waking up and looking a lot better than it was but has still faced a very difficult winter. If corn is as tight as it looks to be this summer, $6.50 feed wheat is going to look very attractive and suck a lot of our wheat out of the pipeline very quickly. Usually this time of year, those that have to move wheat at harvest, like to have some locked into a flour mill to make sure there is room. I think you can be more patient this year and let the feed wheat price dictate where you go. If you want to protect some, hedge it so you still have flexibility about where to take it.

Cotton has been trading in lockstep with the outside markets. Copper and technology stocks have been down recently and weighed on cotton. Today those outside markets were up and USDA was leaning toward the bullish side on the report but cotton was locked limit down. That is concerning. I do not think we need to panic here and sell everything but it is definitely concerning. If cotton breaks here, it’s going to lose the acres it needs to have so the downside should be limited. And we still have some flexibility about what to plant if it keeps falling.