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What USDA Corn Figures Mean for Markets

January 13, 2014
By: Nate Birt, Top Producer Deputy Managing Editor
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The lower corn yields and carry-over figures published Friday by USDA took the market by surprise, experts acknowledge during the U.S. Farm Report Market Roundtable. But the reality is that the corn and soybean crops are still big, and people will soon be focusing on the crop that will be planted this spring.

"There were 76% odds that they were going to raise the yield on corn, and they blew that one away," says Bill Biedermann, Allendale, Inc. "They lowered the yield, lowered production, carryover said a 1.8 – it’s 1.6 billion bushels – and everybody’s falling over themselves to say, ‘What now?’ Some people are saying the bottom is in in corn. But the reality is 1.6 billion bushels is not a shortage."

(Click here to view AgWeb's complete coverage of the Jan. 10 USDA reports.)

The market close proved surprisingly orderly, though it could have gone differently in another environment, notes Gregg Hunt, Archer Financial Services, Inc.

"This is a great opportunity," Hunt says. "There’s a lot of guys, I’m happy for them—they didn’t get to move anything, I know they were deer-in-the-headlights watching this thing go down and people panicking. We’re probably going to see one last little burst here on some short covering. But I’d take advantage of that, because I don’t think these prices are going to stick up here."

Biedermann agrees that there’s probably a little profit to be squeezed yet – but not much.

"The stocks on the farm and off-farm, we were about 364 million bushels below what the trade estimated," he explains. "If you run that through an economic analysis, you’re roughly about a 15- to 30-cent price adjustment back up. Well we put in 20 of that today. So maybe you’ve got another 10 cents up or so. That’s about it.

He continues: "But Gregg mentioned the animal units. Animal units are the lowest right now that they’ve been in nine years, and we’re probably not going to see the corn feed use end up that high. Then the market’s going to start focusing on new crop. We’re going to have 9 million acres. As long as we get everything planted and we don’t have a prevent-plant problem, we’re going to have 9 million more acres next year. It’s going to go into production of everything. So the long-term is still down. So you’re looking at a 10- to 15-cent more upside potential, maybe some sideways trade while we adjust, but the long-term is down."

Click the play button below to watch the complete U.S. Farm Report Market Roundtable, including an analysis of the soybean and wheat markets:

 

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