USDA’s Friday report had better reduce corn and soybean yields or prices will drop. That’s the consensus among marketing advisers we’ve interviewed.
"The market is trading a national yield of about 160 bu.," says Justin Kelly, President of EHedger. "If USDA doesn’t reduce its yield, it will be bearish. If the yield is close to 164 bu., then the market is already overpriced." Kelly says there’s not likely to be a surprise on the low-yield side. "It’s a little scary—it’s been a long time since so many people are convinced of the same thing [falling yield]."
EHedger is guying some October put options just in case yields are not reduced enough to satisfy the market. "We’d rather lose a nickel on the puts than possibly see the market break 30¢ or 40¢.
"If soybean yields come in at 44.5 bu., it will be pretty bearish; if they come in at 43.5, it will be friendly, though we’ll still have plenty of stocks," says Randy Martinson of Progressive Ag Marketing. He differs from Kelly in his feeling that a corn yield in the 162-bu. area would be pretty bullish; 165 bu., bearish. "We don’t expect much change in the numbers," he says, commenting that the northern states’ yields around Progressive Ag for both corn and soybeans look really good. "If it turns out we are wrong and prices rally, we’ll buy call options against the sales we’ve been making as prices rose."
Allendale puts yields at 162.3 for corn and 43.2 for beans based on its survey. Informa rocked the newswires last week by saying the September report will show corn at 162 but they expect the final yield to drop to 158.