This week’s crop production report was a shocker, but so far it has had minimal effect on the corn market. What’s going on?
With its release of the August Crop Production reports, USDA stunned the market. The estimated corn yield was dropped by 5.7 bu. to 153.bu./acre. The total U.S. corn crop is projected to come in at 12.914 billion bushels.
“The government shocked us by lowering corn yields more than anyone expected,” says Jerry Gulke, Gulke Group
With this report, he says, USDA made calls to farmers and asked what they thought their yield was going to be. “There are some thoughts farmers were a little too negative on yields.”
Minimal Market Effect
The report showed an aggressive reduction in both corn and soybean yield expectations. "This lead to a limit up trade in corn and a sharply higher trade in soybeans," reports Scott Harms of Archer Fiancial Services. "Neither were able to garner much follow-through strength on Friday as exhausted traders showed little interest in adding to positions."
The reports dropped yields and showed tightness into next year and all we could muster was 10 cents up for the week on December corn, Gulke says. “You’ve got to wonder what’s going on.”
Overall, the market is shifting focus, from demand to supply, Gulke says. “This is not a demand-driven market that outstripped our supply. It is a supply-reduction market that isn’t able to meet the demand out there.”
Regardless, many cards still have to be played before the real picture is determined in this supply and demand situation. Attention will still be on yield.
"The debate will rage on next week as to whether the USDA’s aggressive yield adjustments this week will represent figures closer to the final yield or if they are simply the first in a series of yield reductions," says Harms.
Gulke agrees that more changes could be on the way.
“I think we could still have some shocks ahead of us on what those yields really are,” he says. “There’s a lot of variability out there and the market is pretty confused.”
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