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Corn Market Looks for a Low

The September 12, 2018, USDA Supply & Demand report had a big surprise, as yield for corn increased to a new record of 181.3 bushels an acre. It was termed a surprise because the figure was higher than even the highest prereport estimate and well above the average estimate of 177.5. This increase of nearly 4 bushels caught the market off-guard. Corn prices quickly lost ground, finishing near 15¢ lower for the day. However, there was a silver lining in the report of 125 million bushels in net increased demand.

The old saying is that "big crops get bigger." While it is possible this year’s crop could grow from the September estimate, even the most pragmatic and logical person may have doubts that the final number could reach 181.3. It may be challenging for the final yield estimate in January to exceed the September estimate, due to several factors: 

  1. Drought conditions in parts of the South and Southwest
  2. Too much rain in the north-central regions of the Midwest
  3. Other dry pockets scattered throughout key growing areas

Since the report, corn futures have dropped well over 20¢, as December futures slipped under $3.50. The setup is in place for end users to secure inventory. The speculative interest will also likely be ready to jump as soon as there is a sign that a bottom is in place.

Why would the market want to buy this dip after negative news? The key is both domestic and world projected carryout. With increased demand, both numbers are projected to decline. Projected U.S. carryout for the year ahead is at 1.774 billion, compared with the 2017/2018 carryout of 2.002 billion. Stocks-to-use dropped 1.7%, from 13.4% to 11.7%. Projected world corn carryout for the 2018/2019 season is at 157.0 million metric tons, a decline from 194.15 million metric tons. World stocks-to-use is expected to decline from 18.2% to 14.2%. This is the smallest stocks-to-use in more than 10 years, suggesting the world’s gas tank of corn is running close to empty. 

The market will continue to move. It can move quickly based on facts and rumors. Set your targets. Be prepared to move with the market to avoid missing opportunities.

If you have questions or comments, contact Top Farmer at 1-800-TOP-FARM, ext. 129, or ask for Bryan Doherty.

Futures trading is not for everyone. The risk of loss in trading is substantial. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not necessarily indicative of future results.

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