TOP FARMER WEEKLY PERSPECTIVE 05/13/2022 BY BRYAN DOHERTY
USDA Acknowledges Late Start to the Planting Season
The May 12 WASDE report was viewed as supportive for corn, as it lowered expected yield from baseline projections of 181 bushels per acre to 177. This reduction was a surprise to many. The last time the USDA made a yield adjustment was in 2013, nearly 10 years ago, and for the same reason: a late start to the planting season. Since then, however, better equipment and, let’s face it, better farmers, can make rapid progress and plant nearly all the crop in a one-week window. Still, the reduction was cheered by many, as this year’s significantly late start (especially in the lower third of the Midwest) suggests there is little chance of reaching a baseline projection.
So, what does this mean? From the perspective of a later-than-normal planted crop, it suggests more acres planted in the same window. The consequences of this could be positive or negative. If good weather for pollination and crop maturity occurs, then most all the crop benefits. The opposite could also true. If weather conditions are less than ideal, almost all the crop could suffer. In other words, it’s the all-your-eggs-in-one-basket theory. Additionally, if conditions make it difficult for planting, there is an increased chance, daily, that some farmers will be able to collect an insurance indemnity if the preventive plant date arrives and they can’t get into the field. Most all the northern half of Minnesota and North Dakota have a prevent plant date of May 25. In some areas, soils are saturated, and more rain is forecast.
As the world inventory tightens, it is critical that the Northern Hemisphere produce big crops. Although the USDA suggested a lower yield, we don’t know that to be the case until the growing season unfolds. It does, however, create a more sensitive market. That is, future headlines and weather forecasts could have more impact and prices will likely be more volatile. Volatility can be stressful, yet opportunities also rise out of price movement.
From a marketing perspective, the May 12 numbers are subject to change, and they often do on subsequent reports. The stage is set for prices to rally to all-time new highs, potentially up to 10.00 or higher. Still, there is time for weather improvements this spring.
Create a strategy to reward current prices and leave the topside open. Consider hedge-to-arrive or forward sell up to 50% of the crop soon; purchase call options that can gain value if futures rally; purchase puts on what you don’t anticipate selling. Visit with a professional advisor to understand the risks and rewards, and to see if this strategy may work for your operation.
If you have any questions on this Perspective, feel free to contact Bryan Doherty at Total Farm Marketing: 800-334-9779.
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.