Head to Head: Questions Abound for 2019 Crops

07:33AM Sep 12, 2019
The August USDA reports are behind us and did farmers no favors. What is your outlook moving forward regarding late summer and fall pricing opportunities?
( AgWeb )

Q: The August USDA reports are behind us and did farmers no favors. Can you summarize your impressions of the report? What is your outlook moving forward regarding late summer and fall pricing opportunities?

Upside Opportunity for Corn Prices

DuWayne Bosse. Owner, Bolt Marketing, [email protected]

The August USDA report was very bearish for the corn market. What really surprised the trade was USDA raising the corn yield to 169.5 bu. per acre, an increase of 3.5 bu. per acre. These yields were calculated by gathering 21,000 farmer surveys and analyzing satellite imagery. I believe when farmers drive by their corn fields, they feel the crop looks much better than it did earlier in the spring. 

Purdue’s Ag Barometer jumped 50 points the first week of August, which was the first indication producers were starting to feel good about the current crop. However, when the combines roll, I predict yields come in lower than expected. A very large percentage of this year’s crop was mudded in. Ear girth is determined early in development. I believe maximum yield potential was reduced this spring when conditions were cool and wet. 

Markets like to trade what is in front them, such as the bearish report. Instead of being upset at the report, producers can take advantage of a harvest low under $3.62 December corn to exit hedges and buy back previously sold bushels. If the national corn yield comes in below 160 bu. per acre, the new crop ending stock will drop below 1.6 billion bushels and result in an upward price trend this winter. 

Corn Yield Story Far from Over

Rich Nelson, Chief Strategist, Allendale, [email protected]

USDA’s Aug. 12 report shocked the trade with higher-than-expected acreage and yield estimates for corn. The market feels this surprise is solid, as USDA’s National Agricultural Statistics Service factored in the farm program acreage data from the Farm Service Agency (normally this happens in October). We’ll see moderate acreage adjustments in future reports, but they might not be big market movers.

Yield is the big question. The current 169.5-bu.-per-acre yield implies only a 4% drop from trend. August’s farmer survey was also conducted on a very immature crop. This year’s crop will see fewer days of vegetative growth (four to 11 days for the eastern Corn Belt), and fewer days of kernel fill/finish. Allendale’s Nationwide Producer Yield Survey, conducted from Aug. 19–30, should shed some light on a portion of these issues. Separate, but related, is the remaining fall frost risk.

Left alone, USDA’s numbers would imply December corn at $3.30 and November soybeans at $8.60. We expect the corn balance sheet to see lower yields and a small offset from lower exports. December corn might rebound to $4.00 to $4.20. Lower soybean yields ahead might not fix the balance sheet. We see futures sinking to $8.20.

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