Markets: Thursday is the Day

One of the biggest reports of the year from the USDA will be released Thursday morning at 11AM. The Perspective Plantings and the Stocks Now Positions Reports have had a history of moving the markets in a big way. The Stocks Report we get from the USDA every three months, and recently we have seen big swings from one report to the next. I still think the USDA is having trouble getting a read on just how much corn and beans is in on farm storage. In the past few years, farmers have built a lot of big grain bins. It is easier for the USDA to survey commercial elevators than thousands of farmers.

The Perspective Plantings Report can be a market mover too, especially with low prices. Traders expect farmers this year to plant more corn and a little less beans than last year. Even though it costs a lot more to plant an acre of corn than beans, traders still think farmers will plant more corn. Last week I talked with a couple of local agronomists and their farmers were telling them they were going to plant at least as much corn as last year, maybe a bit more. Their thought was it is easier to get a very high corn yield than beans so they were hoping for extra bushels an acre to make it profitable.

The point is nobody knows what the numbers will show, so we have to be positioned before the report. If you have a lot of corn or beans in the bin unpriced can your balance sheet survive a bearish report? Greg with ICS had a great point when I was talking with him Thursday. If you have unpriced grain in the bin and we see a big price move lower, there is no way you can recover that loss. However, if you have already sold your crop and prices start to rally, you can still buy it back with futures or options. The other way to protect against a bearish report is to buy short dated near the money put options.