Ray Grabanski: Corn-topping action?
Corn prices continue to rise the past week, pushing up a little faster recently as prices have pushed near $5 already, after topping $4.50 just last week.
Prices continue to accelerate their price rise, right as harvest is beginning for the corn market, with 11% of the crop now harvested vs. 6% normally at this time. So far, harvest yields of the southernmost corn has not been impressive, and the disappointing yields thus far have people talking about an even larger reduction in corn yields in future USDA reports (USDA dropped it 2.5 bu in Sept. to 162.5 bu/acre). The size of the final US corn crop size is the real question, and so far the market seems to be suggesting that the final size will indeed be smaller than current numbers are suggesting.
Corn prices have gained 5 straight days as of Wednesday (as of this writing), while typically market tops occur with 6-8 days of gains, and then the blow off top can be completed. At the current pace of price gains, corn could then top out in a few days at $5.20-$5.30 Dec. futures- a price people only dreamt about just a few months ago. Corn prices are up almost 50% from their lows in June, and prices seem to have accelerated their price rise in the past few weeks.
While everyone is bullish corn now, it seems that livestock producers are starting to feel the pinch of higher corn prices. Already USDA has lowered the feed use of corn in the Sept. report, expecting some price-rationing already to occur based on the tight stocks situation that has developed with the combination of an 'average' crop yield wise, and the huge drought losses suffered by FSU countries and EU27 crop problems.
The combination of the losses throughout the rest of the world, and the US producing a disappointing crop (compared to earlier expectations) has meant a good price for corn.
Pro Ag yield models dropped for corn and soybeans this week, with the corn down 1.35 bu/acre from last week to 166.5 bu/acre. Soybean yields dropped a little more aggressively, with 0.4 bu/acre drop this week that has pushed soybean yields down to the 44.5 bu/acre level. These yield drops are friendly to the market as harvest expands northward, and indicate that indeed the US crop may not be as good as it once was thought to be. This is the second week that corn yields have dropped in the corn yield model, and the first week that soybeans have shown a similar decline. The real question is, how far will yields drop, and where will the final corn crop yield be in January??
So far, soybean yields reported thus far have been good, with some very large soybean yields reported in some areas. Its surprising that soybean yields could be so impressive, while corn yields are less impressive.