Just when you thought the corn market was full steam ahead on a bearish train, USDA shares a few surprises.
A challenging spring, coupled with a hot and dry summer, left most corn and soybean producers dismal about yield prospects. Yet, reports of higher-than-expected yields for corn and soybeans were common across the country this past fall.
Headed into the Jan. 10 USDA reports, most analysts were expecting to see USDA revise its yield estimates and total productions. USDA has been known to throw a few curveballs, and Friday’s laundry list of reports did not disappoint.
"Everyone, including myself, was fooled that the corn crop got bigger," says Jerry Gulke, president of the Gulke Group. USDA estimates the 2013 U.S. average corn yield at 158.8 bu./acre, which is down 1.6 bushels from the November forecast but 35.4 bushels above the 2012 average yield of 123.4. Area harvested for grain is estimated at 87.7 million acres, up slightly from both the November forecast and 2012.
Hear Gulke's full audio analysis:
Gulke says USDA decreased the average corn yield, while increasing the harvested acres to result in a reduction in production of 74 million bushels. "Corn demand was increased 100 million bushels in feed & residual and 50 million bushels in ethanol usage, in spite of the concerns of EPA reducing the mandate," he says.
Corn stored in all positions on Dec. 1, 2013 totaled 10.4 billion bushels, up 30% from Dec. 1, 2012. Regardless of the decrease in ending stocks, Gulke says, the U.S. still has a sufficient corn supply.
A Line in the Corn Price Sand
Following the reports, Gulke says, the corn market exhibited major technical key reversals. "We kind of now know what the low is for old-crop corn," he says, with the low coming in between $4 and $4.20. "Anything below that should signal to the rest of the world that we have corn pretty cheap," he says.
This is finally some positive news for the corn market he says. "We needed this good news for corn ahead of planting," he says.
As thoughts now turn to spring planting, Gulke says, corn is now less likely to lose acres. "We probably won’t reduce corn acres as much as we thought," he says. "The market is telling us we might need 92 million acres of corn next year, especially if we have a weather issue. Now we have an interesting program going forward with weather playing a bigger part than we thought it would, just yesterday."