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Ron and Sue Mortensen: Corn harvest controls the market

09/16/2010 @ 3:26pm

An undercurrent of concern about disappointing corn yields is driving the corn futures market higher again this week.  This theme is long-lasting, having seriously surfaced after the August crop report.  

The vast amount of anecdotal yield reports which circulate on farm web sites and email add to this concern.  Only a few reports have started to surface regarding good corn yields in the western Corn Belt.  These reports are not frequent enough to calm fears of a sub-160 bushel national yield.  The supply/demand situation for corn could be very tight.    

Many analysts have larger use (mainly exports) for soybeans and wheat than the USDA is currently projecting.  But even with increased exports, the supply/demand situation does not end up as tight for beans or wheat.

Given the large exports most have dialed into the market, the export sales report this morning was disappointing.  For wheat, there were even cancellations by Egypt.  Did they buy too much in the panic regarding Russia?  Corn, bean and meal sales were also a little light.  Only soy oil sales were robust.  Light sales have the potential to create a seed of doubt in traders’ minds about demand, but several weeks may be needed.  

So how long does the move in corn last?  Something needs to change—an increased stream of good yield reports, rain in the dry areas of Russia, a string of small export sales reports, or a crumbling of ethanol economics.  On the supply side, watch for the September 30th Stocks report and the October 8th Crop Production report.  

The risk of loss in trading commodities can be substantial.  You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

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