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What’s Moving The Market?

market boxGlobal carryover has reached the lowest estimated days-of-use on hand at 69.4 since 2013’s carryover of a 67.2-day supply, says Mark Welch, Texas A&M agricultural Extension economist, in his most recent Market Grain Outlook. His report on corn and other grain markets continues as follows:

■ Revised export numbers drove the changes to the U.S. corn supply and demand balance sheet in today’s “World Agricultural Supply and Demand Estimates.” With no supply changes and a 125 million bushel increase in exports, ending stocks dropped to 2.352 billion bushels from 2.477 billion in January. The projected season average farm price for 2017/18 increased five cents to $3.30, which reset the PLC payment to $0.40.

■ Globally, corn supplies are lower as a production decrease in Argentina (-3.0 mmt or 118 mil bu) offset a small increase in beginning stocks (1.0 mmt). Despite a small increase in use (1.7 mmt), the decrease combined to lower world ending stocks by 3.5 mmt.

Grain Use

As reflected in the revised WASDE numbers, corn exports have been relatively strong over the last several weeks. Sales for the week of Feb. 1 were 73 million bushels bringing the total for the marketing year to 1.270 billion. This is 65 percent of the revised marketing year target. A normal sales pace puts exports sales at the end of February at 71 percent of the projected total.

Grain sorghum exports have been strong the last several months. The export sales number released today, 3 million bushels, was right on pace to reach the marketing year target. The total so far this year, 207 million bushels, is 80 percent of the current marketing year target. China currently accounts for 78 percent of U.S. sorghum export sales. On Monday, China announced that it has initiated an anti-dumping and countervailing duty investigation on sorghum exports from the U.S. This action is taken when imports are suspected of being sold at less than fair value (dumped) or if a foreign government provides subsidy program benefits to an exportable product. This raises the concern that sorghum exports may face tariffs or other import restrictions in the future.

Outside Markets

The February jobs report showed the U.S. economy added 200,000 to non-farm payrolls in January. This is above the average job gain of the previous six months of 159,000. Much of the turmoil in the stock market following the release of the employment situation is attributed to the wage growth numbers in the report, raising the specter of inflation.

Marketing Strategies

The seasonal price pattern for the December corn contract shows that prices tend to have some upward momentum early in the year as we watch crop conditions in South America and gauge planting prospects in the United States.

2018 Feed Grain Marketing Plan

My preliminary budgets show a breakeven price for corn in 2018 of $3.75 (includes fixed costs for equipment, depreciation, and a land charge). With a positive basis, current futures prices are at a profitable level. On the price strength of the market last week, I initiated my first sales of the 2018 crop. The first sale in the marketing plan can be hardest to make, and I hope it is the worst sale I make all year.