What Producers Need to Know About Corn Ahead of Friday
Jan 09, 2013
USDA will warrant most ALL attention this week as we approach Friday's much anticipated report. Below are a few of the highlights, my thoughts, and the early estimates floating around in the marketplace: Because of the importance and historical volatility of this report, I will continue to run these estimates and numbers the remainder of the week in the report.
- Harvested Corn Acres: We all know this is one of the main numbers in question. How many acres were cut for silage and how many were simply abandoned before harvest in last years drought? We heard countless stories of producers abandoning fields and cutting crops early for silage but yet we have seen no real significant reduction by the USDA, who continues to keep their harvested acreage estimate at close to 90% of that planted. As I am sure you have heard, in the drought years of the 80s the harvested acreage numbers were closer to 85% of those planted. With the USDA currently estimating 96.9 million planted acres in 2012, an 85% "harvested" rate would equal 82.365 million acres. With advancements in technology, I don't see how we fall to those levels, but I do believe the USDA could cut another 1.5 to 2.5 million acres from their current harvested acreage estimate of 87.721 million. However to really excite the bulls I think you are going to need to see the USDA cut harvested acres by 3 million or more. Essentially meaning, if you are a bull, then you will need the corn "harvested acreage" estimate to be south of 84.7 million acres.
- Corn Yield: I think it is safe to say if the "harvested acres" are cut significantly, then the USDA will in turn RAISE their national average yield estimate from the current 122.3 bushel per acre. Think about it like this, if the producer could have harvested the field with an average yield of 5-10 bushels per acre, but opted for silage or abandonment, then the harvested acreage number must be reduced, but the average yield will move higher because the low total from this field were taken out of the equation. Certainly the best of all worlds for the bulls would be to see a massive reduction in harvested acreage along with a reduction in the overall yield. Sorry, I just don't see how this is possible. My guess is that there is very little shift or change in total yield but if there is it will be to the upside, offsetting any total production losses associated with the reduction in harvested acreage.
- Total Corn Production: As I mentioned above, I believe there will be a sliding scale meaning if "harvested acres" are moved lower, the "yield" will move higher producing very little divergence from the current USDA "total production" estimate of 10.725 billion bushels. To help the bulls you will need to see a number south of 10.5 billion, where as the bears will be looking for a number above 10.8 billion bushels.
Thanks for reading! Remember, this is just a portion of my comments leading up to the January Report. If you would like more of my thoughts on Dec 1 corn stocks or ending stocks as well as more detail on US soybean and wheat production and South American production, click here to sign-up for my FREE-TRIAL. I will be doing extensive covereage of the report leading up to it as well as breaking it down in the days after. It is a critical report and will set up market conditions as we move forward into 2013. Don't miss it!
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