How Will "Psychology" of Trade Play Out?

Published on: 08:04AM Aug 13, 2014

We saw the USDA raise yields by 2.1 bushels per acre to 167.4, from their initial crop estimate of 165.3 bushels per acre.  Overall production was raised +172 million bushels while demand was raised by +100 million bushels.  We have heard over the past few weeks that the trade was thinking that the exports were a bit overstated, as the glut of Ukraine and Black Sea region corn that may be hitting the marketplace, with EU demand waivering.  Since earlier this year, the feed usage number has been debated and there has been no real explanation as to how we have a +50 million bushel jump.  Here in point is the "psychology" of the trade that will begin to play out.  The trade currently seems a bit skeptical in regard to the USDA's latest jump in "demand," thinking it's overly optimistic. On the flip side, the trade seems worried the USDA has a lot further to go in regard to raising the US corn yield.  The minimal rise that the USDA gave us yesterday for the corn yield, is somewhat hard for me to believe considering the abnormally low temps and improved rainfall totals we have been experiencing. You can't possibly tell me the USDA was expecting this kind of weather when they came out with their initial 165.3 estimate, especially when you take into account the extreme weather cycle we have been in the past few years??? All I'm trying to say is the market isn't buying it and believes "total" US production is going to work it's way higher (increased ear weights, etc...).  In return I have to believe the corn market will continue to make lower highs and lower lows. The tech guys will want to argue the charts are setting up for a possible short-term reversal, and this might actually be the case (perhaps a bounce back up towards $4.80 is in the cards), but longer-term I still believe we are going lower.  I should note, the USDA lowered their average farm price for new-crop down to between $3.55 and $4.25.  CLICK HERE for my daily report...