It was almost as if USDA's August crop production report didn't happen. On August 12, USDA released one of the most bearish reports in history, projecting a a record corn yield and production on both corn and soybeans. A reality that many analysts thought would send prices shooting lower, however, that didn't happen. The September corn contract tested the key support level of $3.18, but didn't stay there long. Brad Matthews of Roach Ag Marketing told U.S. Farm Report the reason is simple: the trade doesn't believe USDA.
“I’m not sure the trade believes that really is what the yield is going to be,” said Matthews.
He said trade was also looking for a big number, and they decided to “sell the rumor, buy the fact.”
Advance Trading's Brian Basting agrees with Matthews, saying trade built in a big number and chances are that 175.1 bpa corn won’t materialize.
“The fact that we had seen the market take a negative stance going in the report probably encouraged some short covering ,and really, we’ve seen really good export demand recently,” said Basting. “Maybe there’s some export buying down there, too.”
Matthews believes the predicted high corn yield needs to come down, because the true test for yield will be harvest.
“I do believe it seems like it’s going to be difficult to beat the 2014 record by that much,” said Matthews. “We had really good conditions in 2014. We didn’t have the heat, and that’s where I’m wondering if we can beat 2014. There’s a lot more heat this year.”
Because of this skepticism, Matthew believes we will see corn around 166 bpa.
Bastings said in his area around Bloomington, Ill., there’s been crop tours showing yields close to 2014, but thing are still being determined for this year. Just this week, the Illinois ProFarmer Crop Tour yield estimate came in at 193.5 bra. While that's 12.7% higher than 2015, it's slightly below 2014's record of 196.96 bpa.
“I think when you look at things like how many kernels is going to take to make a bushel, in 2014 we were much lower than the 90,000 kernels to make a bushel,” said Bastings. “I think [this year] certainly has the potential to challenge 2014.”
On the soybean side, Bastings says with the September report, he doesn't think USDA will raise their soybean yield numbers, saying the USDA wants to wait until more information is known.
Trade Doesn’t Buy 175.1 National Corn Yield