Are more corn cuts to come?
Sep 18, 2013
Corn bulls are excited to see the FSA make further downward adjustment to their planted acreage totals. I said it yesterday and I will say it again today, "be careful reading too much into this data." If you recall, FSA data released last fall ended up being about 3.5 million acres below the USDA's final acreage estimate. Also keep in mind, even if "harvested acres" are reduced by 2.1 million. This still gives us 87 million (which seems a little low considering we harvested 87.4 million acres of corn last year). With yields working their way higher, a 158 type number can't be ruled out of the equation, especially if they cut acres. If this ends up being the case "total US corn production" would still end up being around 13.746 billion bushels. Meaning ending stocks would still be north of 1.8 billion bushels and our stocks/use ratio still well above 15%. Much higher than last year 6.5%. Below are a few scenarios to play around with. Keep in mind the USDA currently has harvested acres estimated at 89.1 million and yield estimated at 155.3 bpa. For those who still remain wildly bullish, just keep in mind it will be really tough for the USDA to aggressively cut both "harvested acres" and "yield." In fact my hunch is the USDA works yields slightly higher through the Jan report. I wouldn't have said this prior to the release of the Sept. data, but seeing how they raised yields out of the blue, and many of the producers I speak with are harvesting yields 10-15 bushels better than they thought two-weeks ago, I see no compelling reason to believe the yield number wont be pushed higher once again.
- 88M Harvested @ 160 yield = 14.080 billion bushels = 2.1 billion plus carry
- 88M Harvested @ 155 yield = 13.640 billion bushels = 1.7 billion carry
- 87M Harvested @ 160 yield = 13.920 billion bushels = 2 billion carry
- 87M Harvested @ 155 yield = 13.485 billion bushels = 1.5 billion carry
- 86M Harvested @ 160 yield = 13.760 billion bushels = 1.8 billion plus carry
- 86M Harvested @ 155 yield = 13.330 billion bushels = 1.4 billion carry
From my perspective, as long as we are trading "production," bullish players will need to see a 3-million plus reduction in "harvested acres" and the national "yield" fall to sub-155 levels before we start getting the funds to bite. As I always advise, know what your betting on and the time-frame you need it to happen. In my opinion betting on a bullish move near-term might be a real long-shot. Bulls will need help from South American weather headlines or a possible hidden Chinese demand story.
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