Home / Markets / Markets Analysis / Finally, the estimate that counts

Finally, the estimate that counts

Agriculture.com Staff 08/10/2006 @ 2:21pm

The USDA reports are tomorrow morning and the estimates are all very tightly bunched, leaving the possibility that either many analysts will be right or many will be surprised.

In general, the estimates are for yields that are just slightly above the USDA's trendline yields in the supply/demand tables. The August report will feature the first survey-based estimates for the corn and soybean crops.

Besides providing a base for trading in the coming weeks, the USDA reports will highlight a well-advertised drawdown in corn stocks during the coming year. Many will also point out that this should continue in the future, as more and more ethanol plants come on line. The futures market, with its ever increasing prices for corn, reflects the coming tightness.

With the above market signals to grow more corn, many farmers will undoubtedly respond. The increase in volume plus the increase in local marketing choices means storage issues must be addressed. To take advantage of a wider range of delivery options and improved basis levels, farmers must think beyond fall delivery to their local elevator.

Changes in marketing plans and money management may also occur. If there are more choices of delivery points and basis levels shift at various times during the year, then marketing may be more profitable if the farmer carries the futures or options position. Forward contracts, locking in location and basis, or hedge-to-arrive contracts, locking in only location, may not be the best strategy.

Thinking like an elevator is a concept to chew on. Farmers can hold on to the physical supply and hedge those bushels in a deferred month, then evaluate the opportunities as basis levels improve after harvest.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The USDA reports are tomorrow morning and the estimates are all very tightly bunched, leaving the possibility that either many analysts will be right or many will be surprised.

CancelPost Comment
MORE FROM AGRICULTURE.COM STAFF more +

Farm and ranch risk management resources By: 07/07/2010 @ 9:10am Government resources USDA Risk Management Agency Download free insurance program and…

Major types of crop insurance policies By: 07/07/2010 @ 9:10am Crop insurance for major field crops comes in two types: yield-based coverage that pays an…

Marketing 101 - Are options the right tool… By: 07/07/2010 @ 9:10am "If you are looking for a low risk way to protect yourself against prices moving either higher or…

MEDIA CENTERmore +
This container should display a .swf file. If not, you may need to upgrade your Flash player.
Improving Soil Health