Could Friday's USDA Report Push Corn Prices Lower?

August 10, 2016 12:00 PM
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As September corn futures bounce around the $3.20s, analysts and growers alike are wondering if something could drive these prices even lower. They might get their answer on Friday, when USDA releases its August estimates on yields and production—and potentially pushes prices down.

Even though 2016 is the hottest year on record, and the hottest June in 80 years, with reports from University of Illinois agronomists of stress in their corn test plots, this year’s corn yield is expected to equal or even surpass record highs, analysts say.

“There is a lot of expectation for new record-high yields,” noted Don Roose of U. S. Commodities, adding that USDA’s August report could show a corn yield increase of up to three bushels per acre.

Even analysts who are not expecting records say they still are looking for USDA to increase corn yields above the current USDA trendline of 168 bushels per acre.

Those widespread expectations of larger yields could take corn prices down 20 cents to 30 cents, Roose cautioned.

USDA’s current estimate of 168 bushels per acre is below the 2014 record high of 171 bushels per acre. But some analysts are forecasting yields as high as 174 bushels per acre, according to Mike North of the Commodity Risk Management Group.

Others, such as  DuWayne Bosse of Bolt Marketing in Britton, S.D., expect a “modest increase in corn and soybean yields. Bosse is predicting corn to hit the record 171 bushels per acre yield seen in 2014, and soybean yield to increases to 48 bushels per acre.

The market will react to higher yield numbers even if USDA doesn’t increase yields to these levels, Bosse predicted.  "The trade will most likely discount the information and still trade based off high yield expectations,” he said.

Another analyst, Andrew Shissler, partner at S&W Trading in Downers Grove, Ill.,predicted a bearish corn market, with yields of 171 to 172 bushels per acre. Shissler estimated USDA’s soybean yield would increase by one-half bushel to one bushel per acre. Soybean prices will stay up because of continued demand, observed Shissler. “I don’t really expect anything too out of the ordinary on this report,” he added. 

Also expecting USDA to increase yields “slightly” in corn was Angie Setzer, vice president of grain at Citizens Elevator in Charlotte, Mich.

So what should a farmer do?  “Producers should watch new-crop ending stocks. Further increases in size would equal funds selling and lower prices,” said Bosse.

Farmers also should be aware of the low price of feed grade wheat in Europe, according to Larry Shonkwiler, of Advance Trading in Bloomington, Ill. “The concern for corn is there is so much low-quality wheat (in France) limiting the upside,” he observed. Black Sea wheat has been sold into Asia, and depending on freight costs, those shipments could weigh on U.S. exports, he noted.

Here are the average trade estimates for the key numbers in Friday’s USDA reports:

  • Corn yield: 170.6 bushels per acre.
  • Soybean yield: 47.5 bushels per acre.
  • Corn production: 14.757 billion bushels.
  • Soybean production: 3.941 billion bushels.
  • Wheat production: 2.27 billion bushels.
  • Corn 15/16 ending stocks: 1.716 billion bushels.
  • Corn 16/17 ending stocks: 2.255 billion bushels.
  • Soybean 15/16 ending stocks: 320 million bushels.
  • Soybean 16/17 ending stocks: 316 million bushels.
  • Wheat 16/17 ending stocks: 1.114 billion bushels.

USDA also will estimate how weather woes have affected South American crops. The shortfall in crops there has boosted U.S. exports.

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Spell Check

Delphos, OH
8/10/2016 04:40 PM

  Be lucky to be 50 here Van Wert county Ohio. Less than two inches since planting and 90 degrees everyday, firing above the ear already. Looks better than last year's flood but corn pretty much toast.

Western, NE
8/10/2016 04:48 PM

  And who will be the surveyor of this info? NASS? Farmers are notorious for not being truthful on those surveys--which hurts those that are truthful and then screws with the prices. I don't think there will be a repeat of 2014. Too many pockets of dry, damaged crops. It will be the year of the haves and have nots. Maybe more prevalent this year than years past.

Paul Weinert
Falls City, NE
8/10/2016 05:16 PM

  In past month we have had a couple showers of .20-.30 but are dryland and corn and beans are suffering. We can't help but have yields below our average. Corn is in an unnatural rapid maturing process. We will look like october by end of August.


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