Are the Odds In Favor of a "Bullish" Corn Report?
Jul 26, 2011
Morning Summary: As I mentioned yesterday, I firmly believe you have to take advantage of the next 2-3 weeks if we see some additional "weather" related price rallies. The problem is I don't want to carry a large portion of our production forward simply on "hopes" of seeing additional yield reductions somewhere down the line. All you have to do is look at what happened in the wheat market as of late, to help you not make that mistake. The wheat market was running wild a couple of months back with thoughts of lower yields coming at harvest time. Once the producers got into the fields and found the yields hadn't suffered as much as many had anticipated, the trade quickly setback. Yes, there was also the major implications of Russia coming back online that has weighed heavily on the market as well, but I just wanted to point out that the time to take advantage of "yield" premium is when speculation is at its height, not when the yield is actually being accounted for.
With this being said, one would have to imagine the "yield speculation meter" (if there were one) during the next three weeks would be at its peak. Especially now that the USDA took another 4% off of the "good-to-excellent" rating in last nights corn crop condition report. The biggest one week downgrade in 3 years.
With thoughts that the overall condition is getting worse, I am hearing corn yield speculation ranging from the upper to mid 150s, all the way down to the more extreme 130s. These extreme type views are coming on the belief that late "silking" will push pollination even further into the heat that is now being forecast for the next couple of weeks. Not to mention that last nights USDA numbered showed corn "silking" last week jumped from 35% to 65% in just one week. That means a large portion of the US corn crop was pollinating right in the middle of that extreme heat wave...Not Good!
As you can imagine the rumors should start running wild in regards to how far yields could potentially drop. My fear is that once producers get into the fields and start reporting better yields than have been forecast, some of the bulls will start to bail out, and the extremely low side of the yield estimates will quickly be discounted and taken off the table.
Same thing goes for soybeans, just simply push the timetable back a couple of weeks. Yield speculation, or should I say yield reduction talk should start to peak during early to mid-August. As time passes and the high estimates and low estimates are gradually discounted, the price premiums will also adjust accordingly. Bottom-line, I like using these volatile pricing periods to make cash sales.
I had some questions yesterday from some readers about my thoughts regarding the USDA corn yield estimate coming up in this next report. Many are thinking that since the USDA traditionally counts "stalks" rather than "kernels" their yield estimates will be much lower in the coming reports rather than in the upcoming August report. I am not saying that couldn't be the case, but I am not yet in that camp. I prefer to work off of what I have seen the USDA do in the past. Many are speculating that with the extreme heat and dry conditions at pollination, it will force the corn to start ticking back on the cob, essentially not filling all of the kernels. Thoughts are since the USDA looks at stalks and not kernels this time of year they will not be taking this into account. My thoughts are somewhat different.....
For the rest of what I believe the USDA will take into account in determining yields go ahead and get signed up for my report. It's FREE! I also give my full run down on soybean yields along with my thoughts on making cash sales as we head into this Supply and Demand Report and harvest time. Remember, the markets don't react to fundamental news like they use to, in the FULL report, I bring you the inside scoop on what the Big Money players (Hedge Funds/Managed Money) are doing and how to take advantage of it! Simply follow the link below. You can also click the button below to follow my Team and I on Twitter and get daily updates on what is happening in the grain and livestock markets.