A Roller-coaster Ride

October 4, 2010 08:35 AM

Crop conditions deteriorated after USDA’s August Crop Production report estimated national corn yield at 165 bu. per acre. In September, USDA dropped its projection to 162.5 bu. per acre, and most observers expect more downward revisions to come.
AgWeb’s Weekend Market Report eNewsletter, featuring analysis from Top Producer Market Analyst Jerry Gulke, gives key insights into these market changes.

Following is a synopsis of Gulke’s analysis this summer and a taste of what you can get from these weekly reports:

¦Aug. 7: Another Up Week for Prices
Russian wheat concerns continued to push markets. Many people began to reminisce about 2007–08, but a more accurate comparison is the early 1970s.
"It starts in Russia with the heat and the destruction of their crops. It’s the worst drought in 123 years, and it’s reminiscent of 1973–74, when the communist-controlled country came in and bought all of our wheat," Gulke says.

¦Aug. 14: Markets Spotlight Weather
The market was stunned this week by USDA’s surprising national corn yield estimate of 165 bu. per acre. A big crop might be achieved, but the weather will need to cooperate. "We’re looking at some cool weather coming in a week, and we really need that to finish this crop out."

¦Aug. 21: Corn Closes Up 7 Cents, Highest since January
The trade watched the Pro Farmer Midwest Crop Tour results all week. Daily field reports indicated a smaller crop than USDA reported the prior week, and smaller than
Pro Farmer ultimately reported after Friday’s market close.
"This is the highest close in December futures since last January, on totally different fundamentals," Gulke says. "We had huge exports this week and freight and barges are booked up with sales to fill the ports into December."

¦Aug. 28: Corn Market Poised for Technical Break
Technical factors finally caught up with market fundamentals. The corn market is positioned to skyrocket. "I’ve said for years that $4.50 corn can’t be used by anyone. The livestock guy can’t feed it profitably and the ethanol guy can’t use it and keep up. Now we’re seeing corn at $4.40, but basis is so terrible that cash buyers are buying it for what they were a couple of years ago when we had $6 corn."

¦Sept. 4: Pre-Report Calls Shoot Corn Higher
One week before USDA’s September Crop Production report, Informa Economics shook the market. While it expects USDA to release a national corn yield of 164.8 bu. per acre, Informa believes the final yield will be closer to 158.5 bu. per acre. "If USDA stays the same on demand, which most of us think will go higher because of exports, we come in with about 782 million bushels of carryover. That puts the market up a lot higher."

Gulke anticipates more downward revisions to USDA’s corn yield estimates and the markets to remain volatile. Keeping up on current market conditions and what traders are thinking are key factors for success this year.

You can e-mail Greg Vincent at  gvincent@farmjournal.com

With questions about U.S. supply and the size of the current crop coupled with ever-increasing demand, the need to stay informed about market conditions is more important than ever. To keep up, subscribe to AgWeb’s Weekend Market Report eNewsletter, delivered to your e-mail in-box every Saturday morning.

To sign up for your free subscription, go to www.agweb.com/members

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