September WASDE Reports
This one didn’t seem to shock the masses like the August reports but the USDA raised yield by half a bushel again on both corn and beans. There is much disgust across farm country with projections of the 2nd highest ever bean yield and the 3rd highest ever corn yield. These may be the final production numbers by the January report or maybe not. If production is trimmed in the coming months, it is doubtful that it could be enough to shift the core problem of simply too much supply of everything laying around the globe. Odds strongly favor that we will be facing much the same fundamental situation leading into 2018 as we had last winter leading into 2017. The multi-year market structures we have been dealing with appear to be firmly in place for yet another year. The good news is, these structures make setting up marketing plans relatively easy. The bad news is, these structures only allow building marketing plans that provide skinny margins at best and slim losses for those dealing with higher production costs.
Speaking of 2018 Marking Plans
It is absolutely time to have preliminary plans in place for next year’s production. It is always difficult to look forward into new crop marketing when dealing with unpriced old crop that is underwater. We have seen this many times over the years when an old crop anchor around the neck paralyzes folks’ ability to think beyond the immediate problem at hand. Everyone has more 2017 crop to deal with than we would normally expect to have at harvest time. That is simply a product of a lousy market (corn in particular) that provided very limited pricing opportunities throughout the growing season. It is what it is, and yes, those unpriced 2017 bushels will need plenty of attention in the coming months. What absolutely needs to be done though is to compartmentalize the different crop years. It is imperative to set aside some time for some keen focus on your 2018 marketing plans. We can ill afford missing some opportunities on the upcoming crop while mired in the immediate muck of the current crop. Therefore, in the next segment we will shift gears to 2018 and get some initial action items in place and working.
2018 Plan Development
CORN STRUCTURE: Corn has been locked inside a $1.50 trading range ($3.00 to $4.50) since the summer of 2014. Based on what appears to be a very similar projected ending stocks number leading into the 2018 crop, it would only be logical to assume the current consolidation trading range will continue. This year, unlike the previous two summers, new crop December corn failed miserably in an attempt to stretch for the $4.50 area. $4.17 ended up being this summer’s high which left a lot of sales targets in the $4.20 to $4.50 area unfilled. So what about next year? Could we expect the $4.17 to become a new high-water mark or is the $4.50 area back on the table as a possibility? Great questions that unfortunately no one can answer with any certainty. That said, there are some positives in corn to hang onto leading into the winter months:
SOYBEAN STRUCTURE: Beans continue to operate in a solid 5-year downtrend. One of these years that downtrend will be breached but the current structure will be in place until… until it’s not. As the downtrend line declines, making sales below that line becomes less desirable. You may not be an aggressive seller with targets stacked below resistance but don’t put the blinders on… you need to have some targets working below the trendline which currently means some percentage of 2018 beans should be sold prior to $10.25 Nov. futures.
WHEAT STRUCTURE: This has been quite a dog of a market in recent years but in reality wheat provided more volatility and opportunity in 2017 than either corn or soybeans. Granted the drought rally didn’t last long (pretty normal) but boy did it ever provide some timely opportunity. Positive information to hang your hat on may be limited but here are a few things to keep in mind.
There is one last potential development that could provide a price positive atmosphere for all commodities. At last winter’s Outlooks we indicated that the U.S. Dollar was technically poised to resume its rally. That couldn’t have been any more incorrect as the Dollar has declined by 10% since then. It has morphed into a definable downtrend and more often than not, trends continue. A cheaper Dollar into 2018 could provide an additional boost to demand via improved exports.
So stick all this in your pipe and take a good long drag. It’s not all doom and gloom, and maybe, just maybe, the sky isn’t falling. The point that must be crystal clear though is that one must step out of the cloud surrounding unpriced 2017 grain and get engaged with developing the front end of your 2018 plans. It is time because these markets are on the verge of providing some opportunities. The past few years have proven beyond any shadow of a doubt the importance of preparation. Most years, there have been some opportunities but they come and go very quickly. Having one’s ducks in a row ahead of these events is the appropriate path to capturing opportunity when it rears its head. TAKE SOME TIME TO GIVE YOUR UNDIVIDED ATTENTION TO 2018 PRODUCTION!