Market News & Headlines >> Brock Consultant Katie Hancock's Blog: Marketing into Corn Harvest
Insights from Brock Associates Consultant Katie Hancock
Harvest is gearing up in the area of southwest Kentucky and northwestern Tennessee. USDA pegged Kentucky’s corn harvest at 14% complete last week. I expect a significant jump in the next progress report because many fields are testing below 18% moisture. The yields I’m seeing are in line with state projections. Looking back a few years, our typical deviation from the average is matching actual yields for 2016. This gives the yield forecasting tools credibility for my farm, but I feel some projections are miscalculated.
Estimating yields for nearby areas is tricky. I have a clear idea for what’s been combined on my farm, but nearby areas have been a hit or miss for quality rains. Areas of northwest TN, for example, were caught in pockets of drought. It was a matter of extremes. Either you had good rains or you didn’t. What is interesting to me is the U.S. Drought Monitor doesn’t show any sign of drought on the map for the areas I’ve been told are dry and yielding poorly. If it’s not on the map, are there other gaps in the system and ultimately, were those yield issues accounted for?
It’s questionable that Tennessee’s projected yield is only 10% below last year. Eastern Tennessee is reportedly “abnormally dry,” on the drought monitor, but I’m suspicious western TN is not included appropriately. Dr. Simon Atkins, who produces Brock Market Weather Edge, has pointed out drought monitors take time to adjust accordingly. If the problems areas are indeed left out, could other areas in the U.S. need to be adjusted as well?
Tennessee is not significant in the grand scheme of U.S. corn yields. Still, it supports my argument for low 170s on Monday’s supply and demand report. I don’t feel a small reduction is bullish, but it is supportive at the least. Remember, yield is only part of the story. For example, you can handle the supply if the demand is there.
So how am I positioning myself? I have half of my corn sold and will store the rest. I consider the majority of my storage costs as fixed expenses, so want to take advantage of the carry. Last year, I priced the unsold bushels as soon as I had total production numbers. I want to be more patient this time because I think corn is near its bottom. Last year at this time, futures were still near break-even, making it an easier decision to sell and lock in the carry. If in doubt, I’ll make small sales throughout the winter. Seasonally, I would wait for June or July, but that will interfere with winter wheat harvest and hinder cash flow. Paper ownership doesn’t allow me to capture carry in the winter, but could be a solution long term. At the same time, do you invest in the previous crop (2016) or focus on the next (2017)?
Old-crop corn prevented early shelling premiums, yet river basis levels have been better than I expected. This year, I locked in my corn basis for harvest-delivered bushels early, but have been pleased how well basis held up going into harvest momentum. Soybeans have very little carry- if any. The crop is big in my area, even with a few issues, but I don’t expect it to be bigger than last year. That being said, we can handle the size as long as there aren’t barge disruptions.
Up or down, it is certain the numbers WILL be different. I see better odds toward a small yield reduction nationwide, but nothing drastic. Remember, yield is not the only factor to watch. Miscalculated or not, we’ll have to wait and see.
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