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USDA's report is "game changer"
By Cathy Ekstrand
What a difference a report makes. Wow! The USDA on March 28,
2013 put out their Quarterly Grains Stock Report that has some calling it the
biggest market "miss" in history. The USDA released expected planted
acres for the coming year that day as well.
Expectations going into the report had traders looking for
smaller corn and bean stocks number and a larger wheat stock number. They
expected larger acres than a year ago across the spectrum.
However, what was released as far as stocks numbers --
especially corn -- came out substantially higher than expected and rocked the
market. The top three corn contracts dropped their daily limit of 40 cents. Not
even the three-day Easter weekend tempered the market as the two front corn contracts
fell nearly to their expanded limit of 60 cents on Easter Monday. This report was
quite the game changer.
So, as we have been saying all along, volatility is here to
stay, and we haven't even started trading weather concerns yet. We're off to a
cool and wet start to spring. Some areas have benefited from recent rain and
snow alleviating drought concerns for parts of the corn growing areas, while
leaving other areas parched.
What is a marketer to do? There is no way to predict what
reports will say or how the numbers are gathered and calculated. There is no
way to predict what the weather will do. All you can do is prepare yourself with
managed risk positions and hedges and incremental cash sales. That report was
not the end of the world, and there is a lot of market year ahead. However, the
new numbers will set the tone, and it will be best to manage your downside
Forward price what your insurance and soil conditions will
comfortably allow you to do. Get hedge protection in place for those remaining
bushels. Then, come late spring, early summer, should prices decide to climb on
dry weather concerns, you can always come in with re-ownership strategies if it
looks like a significant rally could occur.
No two market years are alike, and it's hard to put the past
year and past prices behind us. This is a new year, with new hopes and challenges
to face. Take a deep breath, and know that with market scenario planning you
can prepare yourself for whatever the market may do.
Market scenario planning (sm) is a service of Stewart-Peterson
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by or attributed to Stewart-Peterson. Commodity trading may not be suitable for all recipients of this report. Futures trading involves
risk of loss and should be carefully considered before investing. Past performance may not be indicative of
future results. Copyright 2013 Stewart-Peterson Inc. All rights reserved.