Commentary
The USDA punted on today’s WASDE report due to the fact they left ending stocks unchanged for corn and soybeans. Global ending stocks for corn were revised slightly higher by 1.1 million metric tons, while domestic ending stocks stayed at 1.502 billion bushels. Bean ending stocks like corn were unchanged at 120 million bushels while global ending stocks rose 0.38 million metric tons. A big yawn. In my view the trade took one look at the report and went back to trading demand and weather. Crop conditions continue to worsen in Argentina as hot and dry conditions persist into mid-March. Brazilian harvest of beans has been too slow delaying secondary corn crop planting. Unless weather events change for the better, the market could have another leg higher. Those who are going to be planting corn and beans this year should keep an eye on two spreads here. New crop corn and bean calendar spreads. I’m looking at Dec 21/Dec22 corn and Nov 21/Nov 22 soybeans. When we see low prices these spreads noramlly trade to a sizable carry. But given the massive drop in the balance sheet regarding the drop in ending stocks the last 6 months, calendar spreads have traded to sizable inverses. In my view great hedge opportunities arise particularly in beans where stocks to usage tied a record low at 2.6 percent, possibly signalling not much room for error regarding future production. These spreads in my view can offer the Producer a hedge opportunity but like everything else, timing is the key. Both spreads here are starting to wedge a bit here which is telling me a bigger move could be coming sooner than later. First chart is Dec 21 corn vs Dec 22. The 2nd Chart is Nov 21 soybeans vs November 22. Call me with questions on either spread, I’m watching to see which trendlines hold here as they may offer clues to market direction for outright contracts.
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Sean Lusk
Vice President Commercial Hedging Division
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