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Market Commentary for 5/12/23
One of the biggest reports of the year was just published and it provides the first look at supply and demand for the 2023 crop. Usually, there are few surprises in this report because the trade is already using the acreage number from the March 31st report and the trendline yield estimate from the February Outlook Forum. In the last 10 years, the yield number was only changed twice on the May USDA report from the February numbers.
The USDA’s usage estimates are generally predictable. They tend to use a slightly higher number than the average of the last 5 years of usage in feed, ethanol, and exports. It seems this was done again for 2023.
Are These Numbers Attainable?
Acreage
There were concerns that persistent snow in North Dakota would delay a lot of corn planting past the May 25th planting deadline in the state. However, spring weather has been better than expected and the amount of prevent plant acres may be lower than previously estimated.
Another variable is the amount of wheat in the central plains that was abandoned. Farmers will likely be switching some of these acres to corn in the north and to milo in the south. These additional acres could offset some potential prevent plant acres in the Dakotas.
Yield
At first glance, a 181.5 yield seems high. However, under the right conditions it could happen. Usually, corn planted early to on time does better than a late-planted crop for the country as a whole. Normal or better precipitation in July also helps, and that happens more often than dry low yielding years.
From 2014 to 2018, corn yields were well above the 40-year trendline, at levels some people did not think were attainable at the time. On average, a new record yield is established every three years. Since weather is unpredictable, it will be closely monitored for the next 90 days.
Feed and Ethanol Usage
These categories do not get a lot of movement year to year, so a surprise here is unlikely. If there is a surprise, it will not likely be bullish.
Exports
This category could move in either direction over the next 18 months. South America’s weather for the next two months and a year from now will be a big factor on our export program. Plus, geopolitical issues around the world are impossible to predict as well.
Final Thoughts
Looking forward, what will final carryout numbers be 18 months from now? Following summarizes the last 12 years:
- 5 Years – the final carryout saw a drop of more than 500 million bushels from the May report.
- 7 Years – there was no more than a +/- 100 million bushels change.
- 1 Year – the final carryout was higher by more than 500 million bushels.
Bottomline, weather controls overall price direction long-term. Since it is impossible to know what weather in July will be today, it is impossible to know for certain what prices will do over the next 18 months.
Want to read more by Jon Scheve? Check out recent articles:
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The Market Will Be Focusing On Planting Pace In The Dakotas
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Jon Scheve
Superior Feed Ingredients, LLC
