TOP FARMER INTELLIGENCE – Weekly Perspective by Bryan Doherty
A RACE TO THE FINISH
This week we received stark reminders that this year’s crop is well behind schedule. This all came through the USDA Crop Progress report, a bout of gloomy wet weather, and now already two weeks beyond Labor Day. On the June 2 USDA Crop Progress report, more than one third of the corn crop was yet to be planted. Soybeans were also well behind schedule, with over 40% left to plant. Now that fall is quickly approaching and we’re already experiencing cooler temperatures, it is likely that crop maturity is pushed back even further. That jeopardizes additional acres that may not make full maturity. End users should be on alert – the quality and quantity of this year’s crop could still be significantly altered.
USDA’s September 9 Crop Progress report estimated corn in the dent stage at 55% versus a 5-year average of 77%; corn in the dough stage at 89% versus a 5-year average of 97%; corn considered mature at 11% versus a 5-year average of 24%. Most analysts are in agreement that, at a minimum, both the corn and soybean crops are two to four weeks behind their normal schedule. That could mean that as much as 2 billion bushels of corn is at risk of an early frost (generally speaking, a frost prior to October 1). With a normal frost date, there is nearly another billion bushels of corn at jeopardy (generally speaking, a frost by October 10). Even a late frost suggests 600 to 800 million bushels in jeopardy of not reaching full maturity. End users should consider buying calls, buying futures, or securing inventory.
In soybeans, this week’s Crop Progress report showed setting pods at 92% versus a 99% 5-year average. It is estimated that nearly 7 million acres are at risk of an early frost, or about 8-9% of the expected crop. Soybean futures may be starting to reflect this concern, posting strong weekly price gains. Ending stocks could be cut in half. Buyers of soybeans and soymeal should secure inventory. Buy calls, or hedge by buying futures.
The point of this Perspective is to again highlight what everyone knew in June. That is, a late-planted crop needs a full growing season, and we’ve had less-than-ideal weather the last several weeks to push crops along. It is our belief that either bushels could be lost (frost damage beyond harvest), or we’ll see lower quality of some of the crop by late September or early October. The other point is to again encourage end users to recognize their potential risk. This year is not business as usual. Cover your needs sooner than later. If unable to do so because of cash grain availability, then consider purchasing call options on futures. Current volatility is historically low, which can mean less expensive call option premiums.
Call a professional advisor. Find out how you can protect yourself from higher and lower prices. Learn how the tools to do so can affect your cash flow, and select the tools that work best for your operation.
If you have questions or comments, contract Top Farmer at 1-800-TOP-FARMER. Ask for Bryan Doherty
Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.