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 risk.
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 Inc.