Which Way for Yields and Production Now?

Fundamental analysis is complex, with many pieces and lack of measurement of some key components such as feed use. Right now, futures traders are focused on yields. "Record-high nighttime lows in 37 states this summer support lower corn yields," notes Dan Manternach of Doane’s Agricultural Report.

We asked a few of the advisers we track for their expectations. Richard Brock of the Brock Report offers three scenarios (his "best guess" is in the table below):

• If corn yields fall to 159 bu./acre, carryover slips to 885 million bushels and farm prices run $4.50 to $5.50.

• At USDA’s 162.5 bu., farm price is $4 to $4.75; for 164 bu., stocks rise to 1.38 billion and prices drop to $3.75 to $4.25.

• Soybeans yielding 44 bu./acre would mean stocks under 300 million and prices in the $9.50 to $11 range; 44.7 bu., $9 to $10.50; strong yields of 45.5 bu. take stocks to 416 million and prices $8.50 to $9.75.

Jerry Gulke of the Gulke Group expects final corn yields to slip to 161 bu./acre and 2010 planted acreage numbers to be revised downward 500,000 acres due to prevented plantings. Given his usage figures, 2010 ending stocks drop to 842 million. He doubts USDA will ever print a carry-out under 1 billion; it would instead revise usage, implying prices will rise to keep carry-out adequate.

"We will need 2 million to 4 million more acres next year; 3 million could happen if bean carryover stays above 300 million bushels," he says.

Bryan Doherty of Top Farmer Intelligence is using a 161 bu./acre corn yield. "Yield less than 160 bu. or carry-out under 800 drives prices to $6 to ration supply and buy acres for next year," he says.

Producers need to be prepared for just about anything, Doherty says. "What if prices go up a little, or a lot? What if prices drop a
little, or a lot? Scenario planning helps manage for volatility."  —Linda H. Smith

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