Commodity analysts live by the mantra “Big crops only get bigger,” and that appears to be the case in 2017. USDA boosted corn, soybean and cotton yields as well as production numbers this week. The revised numbers came in above the average trade guess and larger than August’s crop production numbers.
Despite the report initially sending bearish waves through the markets, grain prices turned a corn mid-week, posting green on the Chicago Mercantile Exchange (CME). Jim Bower of Bower Trading is deeming 2017 as a “very unusual year” on U.S. Farm Report this weekend.
“We're going to have to accept the fact that you can be right one minute and dead wrong the next minute - it's been that kind of that kind of market,” he said.
Bower says when looking at not only market action this week, but the past two months, he says the higher than expected production and yields are weighing on prices. However, he cautions producers to keep in mind that the final production story remains unwritten.
“The markets going to figure out real quick now and the next two to three weeks whether that yield is there or not,” he said. “Pay very close attention to that, and make your marketing decision based upon that.”
Joe Vaclavik of Standard Grain disagrees, saying if you look at long-term trends, the market action isn’t that unusual.
“This has been very normal in that we put in a summer high, and we figured out that the crops are bigger than what we thought,” said Vaclavik. “We've seen this story many times before - big crops get bigger - and that's what we saw from USDA in September.”
He warns producers to keep in mind that harvest time is typically a time when crop prices perform poorly. Unless USDA chips away at overall production numbers in its next report, he thinks prices don’t have a big chance of getting better this fall.
“Hopefully there’s light at the end of the tunnel with some kind of post-harvest event,” he said.
Watch Jim Bower and Joe Vaclavik on U.S. Farm Report this weekend.