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Yield Estimates Up for Beans, Not Corn

October 31, 2012
By: Ed Clark, Top Producer Business and Issues Editor
TP 41 1
  
 
 

In the know about corn, beans and organic production

Corn and soybean prices got an early boost from USDA’s Crop Production report released Oct. 11, even though grains took a beating the following day. This beating was due not to supply-demand factors, but to investor position sell-offs. Overall, this report and the department’s World Agricultural Supply and Demand Estimates report were expected to give an upward price spike to all major crops except cotton.

"The reports would have to be considered bullish for corn, friendly to bullish for soybeans and wheat, and there is nothing else you can say but bearish for cotton," says Chuck Danehower, University of Tennessee ag economist. In its latest forecast, USDA estimates corn prices for the 2012/13 marketing year to be $7.10 to $8.50 per bushel, down 10¢ from the September report.

Yields continue to deteriorate. Again lowered from the previous month’s report, yield estimates
were cut by a modest 0.8 bu., totaling 122 bu. per acre. This is slightly lower than the trade estimate of 122.7 bu. However, the trade still looks for a cut in harvested acres, and some expect that to happen in future reports, Danehower says.

Adding to the bullish fever was the reduction of global grain stocks, which are projected at 4.6 billion bushels, 263 million less than in the September report.

Danehower suggests that those with adequate storage consider storing corn for basis improvement. "I would not store unpriced [grain] without a floor in place through buying a put option," he says. At press time, a March $7.70 per bushel. put cost 48¢ and set a $7.22 futures floor. Furthermore, Danehower advises being 10% priced for 2013 corn production with September 2013 futures an attractive $6.75.

For soybeans, USDA increased both planted and harvested acres. The department bumped up yield estimates by 2.5 bu. per acre to 37.8 bu. However, soybean demand increased for the new crop
marketing year by 250 million bushels as crush increased 40 million bushels, with exports up by 210 million bushels.

Danehower says that he would be 50% sold for the 2012 crop at harvest, with another 30% priced in put options. "At these price levels, I would be inclined to sell unpriced soybeans at harvest,"
he explains. Storage should be used for basis appreciation and not necessarily futures price speculation, he adds. From a price management standpoint, a January $15.50 put would cost 52¢ (as of mid-October) and set up a $14.98 futures floor.

Ag economist breaks down USDA Crop Production report

Corn and soybean prices got an early boost from USDA’s Crop Production report released Oct. 11, but then took a beating the following day. The beating was not due to supply and demand factors, but rather investor position sell-offs. Overall, the report and the department’s World Agricultural Supply and Demand Estimates were expected to provoke an upward price spike to all major crops except cotton.

"The reports would have to be considered bullish for corn, friendly to bullish for soybeans and wheat, and there is nothing else you can say but bearish for cotton," says Chuck Danehower, University of Tennessee ag economist. In its latest forecast, USDA estimates corn prices for the 2012/13 marketing year to be $7.10 to $8.50 per bushel, down 10¢ from September.

Corn yields continue to deteriorate. Again lowered from the previous month’s report, yield estimates were cut by a modest 0.8 bu., totaling 122 bu. per acre. This is slightly lower than the trade estimate of 122.7 bu. However, the trade still looks for a cut in harvested acres and some expect that to happen in future reports, Danehower says.

Adding to the bullish fever was the reduction of global grain stocks, which are projected at 4.6 billion bushels, 263 million less than in the September report.

Danehower suggests farmers with adequate storage should consider
storing corn for basis improvement. "I would not store unpriced [grain] without a floor in place through buying a put option," he says. At press time, a March $7.70 per bushel put cost 48¢ and set a $7.22 futures floor. Furthermore, Danehower advises being 10% priced for 2013 corn  production with September 2013 futures at an attractive $6.75.

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FEATURED IN: Top Producer - November 2012

 

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