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Upcoming WASDE Report Considerations

Published on Monday, April 8, 2019

Any time the market has an infusion of new information, we have a greater chance for volatility.  On the last day of March the USDA quarterly stocks and planting intentions reports were released with a few surprises and volatility ensued.  US corn stocks were pegged nearly 300 million bushels above the highest trade estimates, which was a huge surprise to say the least.  That coupled with the US corn planting intentions of 92.8 million acres sent the corn lower.  That left the funds with a new record short of 269,827 contracts and May corn with a new contract low at $3.56.  

Tomorrow at 11:00 CST, the USDA will be releasing its latest revisions to the WASDE which will give the market a fresh set of numbers to trade.  As we asses the data from the quarterly stocks report, one of two things may happen: 1)  Either we have grossly underestimated the size of the 2018 corn, and/or  2) We have significantly over estimated feed demand - likely a combination of both. 

This along with an increasingly competitive export market and weak ethanol demand, could continue to keep pressure on the corn market.

There is a caveat, weather.  We have experienced a very wet and cool spring thus far and while long range forecasts do point to better days, we could see some corn acreage shift to soybeans in the wettest areas.  While I want to give merit to switching of acres, I think there is another angle to be examined that could have an equal impact of this market in regards to demand and that is of the losses incurred by cattlemen across much of the central plains.  

Early estimates by the Nebraska Farm Bureau have overall economic livestock estimates between $400-500 million dollars.  While these estimates do not mention exact head count losses, it can be surmised that the death loss is significant.  The severe winter storms and persistently wet spring have set a number of record river floodis across the corn belt ( see map below).  As you lay this against a map showing cattle on feed, you will quickly note that many feedlots were in the path of destruction.  

With corn demand weakening and current feed demand in question, a significant loss to the cattle herd would only amplify the effect on corn prices.  Each year approximately 1/3 of the US corn crop is used for feed consumption across the U.S.  Should we see a significant loss to the 2019 calf crop, that will have a lasting impact.  

With all of this in mind, issues both with production and consumption may come forward in any advancing developments.  Be ready for potential volatility in either direction.  To that end, we invite you to contact us to evaluate strategies that give you the ability to capitalize on movement in either direction.