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Ray Grabanski: Corn is king?

09/02/2010 @ 8:17am

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 

soybeans).  


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 

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