University of Maryland Extension held their annual grain marketing update at Chesapeake College this week. Some of the news was similar to last year, with grain stocks remaining fairly high. Rob Davis of Nagel’s Farm Service gave a local update for the Delmarva, noting the benefits of the local poultry industry. In 2016, poultry consumed 85, 35, and 1.7 million bushels of corn, soy, and wheat, respectively. This consumption helps keep our local basis higher.
For anyone interested in grain marketing, some great points were made about a thorough analysis of the risk and profitability of your operation. This include gathering your input costs to help calculate the price vs. yield you will need to profit. A diverse plan should use all of the tools you have available (e.g. crop insurance, contracts) to produce consistent returns, but you must also execute your plan and pull the trigger. Waiting for higher prices doesn’t lock in the profit sitting in front of you.
Kevin McNew, president of Grain Hedge gave the national outlook for corn, soy and wheat. We are now going on three years of depressed prices, due to abundant yields and stocks. There is some good news for corn stocks, as China has stopped subsidizing corn production and it has begun to fall below their annual consumption. This, along with their large ethanol mandate for 2020, should help reduce their stockpile of corn. However I noticed their average yield of 96 bushels/acre gives them a lot of room for improvement over the next 10 years, China still has room to grow in corn production.
For stored corn and beans, we have the highest stockpile in ten years, and the current recommendation is to capture the carry. For a good overview of what “carry” is, see this post (https://www.farmanddairy.com/news/understanding-carry-in-grain-marketing/449787.html) from John Barry of Penn State Extension. McNew sees a higher downside for soybeans than corn, possibly losing 50-80 cents over the season. We will need good export sales for bean prices to stay higher. Due to low wheat prices, stocks have been dropping, but remain at 47%, compared to corn (17%) and soy (11%). However, The current drought situation in the southern plains due to La Nina may continue through April, possibly effecting the wheat crop.
For 2018, corn stocks may drop some, but demand has been slow to build. Soybean acres and yields are projected to be similar to last year, and we may be lucky if prices stay above $9. For wheat, stocks should continue to drop, and the current premium for protein should help prices. Overall, the message is similar to the last two years. Outside of environmental conditions lowering yields, expect tight margins for your operation. It is another good year to find a hedge against low prices during harvest.
