The following commentary does not necessarily reflect the views of AgWeb or Farm Journal Media. The opinions expressed below are the author's own.
Kevin Van Trump has over 20 years of experience in the grain and livestock industry.
Not only is South America Corn cheaper, but there continues to be talk of US companies like Tyson importing supplies. There is also talk circulating that US ethanol plants may be considering "extended" annual shut downs in the Aug/Sept time frame as corn becomes tougher and tougher to source. With exports continuing to disappoint and the possibility of corn used for ethanol soon heading south for a brief period of time, we may find it tough to generate many bullish demand side headlines. Several in the corn trade now concerned about new-crop exports as Brazil will be harvesting a massive second crop, but more than likely won’t begin shipping much out of the country until early September, right when we begin to harvest and sell cash supplies out of the field. Moral of the story, US producers could be looking at a much weaker "basis" come harvest time. Production estimates for corn obviously remain up in the air and anyone’s guess, but let’s consider a few scenarios: First and foremost we have to believe corn planted acres are moving lower. Right now I am thinking harvested corn acres here in the US will be between 88-89 million. I also have to believe the yield is heading lower on the late planting, wet conditions and shallow roots. Therefore rather than using the most recent USDA yield estimate of 163.6, let’s start by using a yield estimate of 160 bushels per acre. Corn producers who have little to any new-crop bushels priced or hedged have to realize you are essentially betting on sub-140 yields or harvested acreage falling well below 88 million. Any variation of the two could certainly push prices higher. We are still a long ways from the finish line so anything is possible and I will never say never.
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