Don't Expect Corn Rally Anytime Soon, Analyst Says

May 11, 2017 12:00 PM

Don’t expect a rally in corn prices until the trade or large funds that are heavily short see signs that the U.S. average corn yield will fall at least 5 bu. below trendline, says Joe Vaclavik of Standard Grain.

“If we get to the end of May, we’ve still got planting problems, we’re looking at lower acreage and people think the top end of the yields [will] come off, then that’s when you get your rally,” Vaclavik tells Tyne Morgan on the “AgDay” Agribusiness Update segment for Thursday, May 11, 2017. “But we’re not to that point yet.”

USDA on Wednesday projected a national average corn yield of 170.7 bu. per acre, down nearly 4 bu. from a year ago.

Three key factors are conspiring to inject questions into the corn market, Vaclavik says. They are:

  1. A significant fall in soybean prices since USDA’s March acreage survey.
  2. Excessive wetness in the southern and southeastern portions of the Corn Belt. “Just over the last 10 days, some of these areas have 7” to 8” to 9” of rain locally, which is going to be a big, big problem,” Vaclavik says. “Does that mean that maybe they go into more soybeans?”
  3. Wheat damage that might lead some producers to abandon acres or plant other crops. “USDA’s got that planted acreage report at the end of June, but I think even following that, this acreage thing is going to continue to be a debate really throughout the growing season,” he says.

Until more information is available on those issues, farmers and traders will continue to watch for the spark that ignites corn prices.

“The market will react to the upside when or if it believes that the yield number is in jeopardy,” Vaclavik says. “That’s the biggest swing number on the balance sheets.”

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