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Ray Grabanski: Corn is king?
While wheat and soybeans continue to languish in its recent ranges for
prices, with Dr. Jekyll and Mr. Hyde type trading back and forth, the
corn continues to march higher in a steady manner, with no sign of a blow
off top yet in corn. Corn has rallied to near 2 year highs, with it is
pushing against the resistance at about $4.50 futures.
What seems to be driving the corn market higher?
While many talk up the poor corn yields so far in the southern most Corn
Belt and southeast, it does seem to suggest that corn yields may not be
as high as projected so far by USDA. However, Pro Ag would dispute that
contention. Pro Ag yield models are currently suggesting a crop size of
168.5 bu/acre, well above the 165 forecast last month by USDA (our yield
model has risen 3.5 bu since August 1). The improvement in the crop
since August 1 would suggest that corn yields will probably be hiked in
the coming Sept. 1 USDA report.
Pro Ag can reconcile the supposed contradiction of lower than expected
yields in the south and the national yield models that exceed last year's
yield. Its been a warm summer across the Corn Belt, and on warm summers
the excellent crops don't come from the southern end of the Corn Belt.
Heat usually hurts that crop and it means that southern growing regions
end up with smaller than normal crops. But the northern most part of the
Corn Belt benefits from a warmer than normal summer, and that should mean
that crops in MN, IA, SD, ND, WI, and MI should be much better than
expected, with little to no frost damage expected in 2010. Overall, its
likely that the record large yields will come in the northern corn belt,
not the southern corn belt. Crops are currently in very good shape at
the northern Corn Belt states, perhaps the best that they've ever been.
Pro Ag expects record large crops in the north, and that should be where
we get the new record large yields in 2010 in corn (and also likely in
The Pro Ag soybean yield has also expanded about 1 bu/acre during the
last month, with the Pro Ag yield model currently suggesting a crop size
of 44.8 bu/acre, well above USDA's current projection. Based on that
analysis, its likely that USDA will need to raise the projected soybean
crop size again in the Sept. report. And the crop is not finished yet,
and recently has been making huge strides in yield potential in the past
few weeks. Since its unlikely any crop will be hurt by frost in the fall
in 2010 due to the advanced crop progress this year, its likely yield
potential based on yield models will expand even further.
If corn prices are rising on expectations that the US crop is not as good
as currently projected by USDA, we might be near a yearly high right now
in corn prices. That means IF corn is rising on US yield concerns, its
likely we should be pricing a lot of grain right now.
However, if prices instead are still rising on the world production
problems (such as the FSU problems), then prices might be able to rally
further in spite of a rise in USDA numbers in the Sept. report.
We should start to get yield estimates from private forecasters soon, and
then the USDA report will provide their best guess of crop size in the
Sept. report. How the corn market reacts during this time might be very
important to determining whether corn should be sold hard (like most of
this year's crop, and also a good share of next year's crop), or hang on
for still higher prices. IF Pro Ag yield models are any indication, it
might be time to get our selling hats on!
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completeness, has been obtained from sources we believe to be reliable.
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