Huge corn and soybean bumper crops by all estimates will make USDA’s report on Monday unlikely to move bearish markets, according to analysts.
Given the massive corn supply and constant overhead of stored grain, there is no bullish card until there is a weather problem, observed Don Roose of U.S. Commodities.
“Corn still hasn’t been challenged by harvest, but it’s still too much of a good thing, “ he said.
So far, early corn harvest yield results in Kansas and the southern corn belt have been disappointing, down 20 to 25 bushels per acre because of a spike in temperatures during the hottest summer on record, Roose observed. “You get in middle of the corn field, and it’s like an oven,” he said.
USDA final yield estimates don’t come out until October, according to analysts.
With September corn trading at $3.20 and July corn at $3.57, the corn market is likely to be caught for the balance of winter between $3. 20 and $3.60, depending on storage, Roose explained.
Even if USDA reduced corn yield by around roughly 1 bushel, it still would be a record crop, he said. Soybean estimates also are at a record high, but so is demand.
USDA’s August report put corn yield estimate at a record 175.1 bushels per acre, compared to the 2016 Pro Farmer Midwest Crop Tour estimate of 170.1 bushels per acre. USDA put soybean yield at 48.9 bushels per acre, less than Pro Farmer’s estimate of 49.3 bushels per acre.
So what would it take for USDA’s report to move markets? “If yield came down by 5 to 6 bushels, it would be a big deal,” Roose said.
Other key numbers to watch for are global corn and wheat ending stocks, according to analysts.
The trade “needs” corn ending stocks to drop back closer to 2 billion bushels, (and) without a sharp increase … in soybean carryover, according to Mike Zuzolo, president of Global Commodity Analytics, in Atchison, Kan.
“Given the large net short by managed money funds … then that sets-up a sentiment shift that instead of a huge crop getting more huge, it changes into a huge crop getting smaller,” he said.
Wheat carryover is important because it is competing with corn as a feedstock, Zuzolo noted.
So what should farmers do? Zuzlo’s advises selling into a bean rally above $10 to make room for cash corn.
"I think corn has a bigger discount to store for a better premium in the future,” he said.