As floodwaters tear through the western Corn Belt the market has been slow to react. Hogs, cattle and corn are seeing minimal movement as questions remain about the total number of livestock lost and the impact on spring corn acres.
“I think this all happened so quickly it’s hard to get a handle on,” says Matt Bennett, owner of Bennett Consulting and partner with AgMarket.net, farm division of John Stewart and Associates. “I don’t know how to get a handle on numbers—I don’t know if anyone knows. Right now, all those guys are worried about is getting to their farms.”
While it’s too early to definitively estimate, early estimates put ranching losses at $500 million and row crops at another $400 million, according to Nebraska Farm Bureau. Livestock losses cover not only loss of life, but of feed sources and other assets needed in those operations.
The hog market is already a flurry of activity. “I think the way things are the hog market doesn’t need the help,” Bennett says. “If China is buying pork there’s no question it’s friendly. If you lose hogs it’s nothing but supportive—but I still don’t know how many hogs we’re talking.”
Lean hogs are trading around $71 for April and $90 for July. Bennett recommends independents or anyone who has the ability to consider risk management in that high $80 to low $90 range.
“We could be looking at a perfect storm in the cattle market,” he says. “I’m not saying prices for cattle will skyrocket, but without the Chinese situation and flooding situation I would think $129 fat price is too high.”
In the past six years China has increased its beef consumption by 20%. Growing export demand, partnered with unknown losses supports a potentially strong cattle market in the next few months. A market Bennett says he’s going to keep a close eye on as it impacts other markets, too.
“There are pictures of bins collapsing, bags under water and they’re losing some feed,” he says. “Dynamics are interesting and will have a large impact in those areas on basis in cash corn.
“I don’t know that the market is lending enough credence to the fact that it’s getting late enough in the spring in the western Corn Belt and the snow pack we have up in Minnesota, South Dakota and North Dakota. It looks to be a late spring, but it also calls into question the number of prevent plant acres given the last couple of years have been historically low.
USDA recently pegged corn at about 92 million acres for 2019—a number Bennett doesn’t expect farmers to hit unless weather turns ideal from this point forward.
“Next week’s planting intention number could be between 90 and 93 million acres for corn and now we could lose acres to weather or, the more likely scenario, might be prevent plant in the Dakotas,” he says. “You’ll have compromised ground in Iowa, Nebraska and Missouri, but I don’t think it’s in the millions.”
Agmarket.net’s official estimate for the March planting intentions corn number is 91.7 million acres. Next week’s report might be taken with a grain of salt more than usual due to flooding and other weather considerations. The market isn’t reacting just yet, farmers can plant quickly, but he says if things don’t change in the next few weeks the matket could quickly change.
“In my opinion, mid- to late-April would be the earliest the market will get fired up about this—if we’re saturated and more wet weather is on the way the market could get interesting,” Bennett says. “Funds are currently short over 200,000 contracts on corn and stocks to use are the tightest we’ve seen in the last few years. It’s unlikely the funds will go into the growing season short, in my opinion”
He’s not donning his bull horns just yet though and says farmers should continue to sell in incremental numbers. Bennett advises producers to consider backing up a portion of sales with a call, especially the more aggressive a producer gets in their sales strategy.
“It’s going to be very interesting the next six weeks or so out to the first of May to see how this all plays out,” Bennett adds. “I think producers across the Midwest are going to ban together to help. It’s going to be a nightmare to keep livestock fed, I feel sorry for these guys. It’s going to take a while to recover from this.”