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Which Way for Corn Yields?

00:00AM Sep 10, 2008
Linda Smith, Top Producer Executive Editor
Since 1990, USDA has raised its corn production estimate from August to September, 10 years and lowered it eight years. As the table shows, the greatest reduction was in 1995, and in three of the down years, the reduction was less than 1 million bushels. The past three years marked relatively large increases.
Informa Economics in Memphis raised its national forecast to 156.5 bu./acre, up "a relatively modest” 1.5 bu./acre over USDA's August estimate. That would push 2008-crop carryover to 1.3 billion bushels and next year's carryover could grow to 1.9 billion, Informa figures.
Meanwhile, based on its farmer survey, Allendale believes corn yield will drop to 152.5 bu./acre. That would be somewhat more extreme than the 153-154 yield most in the trade are expecting, and counter to the past several years.
Looking forward into the final January report, in 2006 and 2007, yields fell from September into January, settling in the 147-151 bu. zone, Allendale economists note. Should their yield estimate prove correct, carryover could drop from the current 1.1 to 1.2 billion down to 1 billion bushels, they figure.
USDA September Report vs. August Report
(million bu. change)
1990 4.0
1991 -1.7
1992 0.1
1993 -2.9
1994 0.6
1995 -4.5
1996 1.5
1997 -0.1
1998 2.0
1999 -2.5
2000 -0.1
2001 -0.4
2002 0.2
2003 -1.4
2004 0.5
2005 4.0
2006 2.5
2007 3.0
Play the report?
One way to capitalize on USDA's report is to buy short-term "serial” options, Allendale advises. If you buy a put and a call for 10¢ each, the market would only have to move more than 20¢ in one direction or the other for the purchase to make you money, the analysts point out. Recent reports have brought far bigger moves, and there is no reason to believe this report will be different.
For more information on serial options:
Infinity Trading Corporation - Grain and Soybean Futures and Options

You can e-mail Linda Smith at