Some USDA corn data ‘puzzling’

MANHATTAN, Kan. – The U.S. Department of Agriculture released its latest estimate of this year’s fall-harvested crops Nov. 9, as well as supply and demand projections, and the corn data particularly, held some surprises, said Kansas State University agricultural economist Bill Tierney.



Overall, corn production was tabbed at 10.1 billion bushels, down from last month’s estimate but up from year-ago production. The average yield was estimated at 137.7 bushels per acre. If realized, this would be the largest production and second largest yield on record. Soybean production was projected to be a record-large 2.78 billion bushels, with a yield of 38 bushels per acre.



USDA did not lower its projection for corn exports from its last projection, which remained at 2.275 billion bushels – 338 million more than last year.



“That’s puzzling because, as of Nov. 2, corn export commitments were 622 million bushels, 81 million less than last year,” said Tierney, crop marketing specialist with K-State Research and Extension. “On average, commitments by this date account for 39 percent of total annual exports. This year’s commitments have only accounted for 27 percent of projected exports.



“It’s possible that the pace of export bookings could recover and eventually make the USDA’s projection,” he added. “However, there have been only three other years out of the last 25, in which the ratio of commitments to annual exports was this low.”



The changes in supply/demand figures prompted USDA to reduce its corn ending stocks estimate by 138 million bushels to 1.679 billion bushels, and to raise its price forecast slightly, Tierney noted. The mid-point of USDA’s projected price range was boosted five cents to $1.90 – a 10-cent increase from last year’s price.



“So far this year, corn prices have behaved in a contra-seasonal manner,” he said. “In fact since August, national average corn prices have risen 27 cents a bushel at a time when prices usually drop.”



The boost likely came from anticipation of a smaller crop, given this year’s drought in some growing areas, and strong demand, he said.



Given the seasonal tendency for feed grain prices to decline into harvest; considering the tightness in storage capacity; and allowing for the possible effect of the marketing loan program, at one time it seemed likely that December corn futures would attempt to test their previous contract low of $1.85, set on August 11.



Reports from grain merchandisers, however, indicate that the expected harvest hedging pressure has been delayed because of farmers’ favorable cash flow that was generated by accelerated government payments and loan deficiency payment (LDP) redemptions, Tierney said.



“However, the corn is still there – some of it is on the ground in piles and the recent rains will increase the urgency to move it.”Unless demand is greater than currently projected, there may not be much further upside left in this market until spring,” he said. “Producers may want to consider protecting any unpriced grain by buying puts or they may want to sell now and take advantage of the rally in basis which has occurred over the last two months.”



Tierney expects nearby corn futures to trade sideways to lower over the next 45 to 60 days.



“Corn could still test the previous life-of-contract lows if the USDA significantly reduces its export projection in either the December or January supply and demand projections,” he added.



In addition to the record-large crop prediction in soybeans, USDA reduced its crush, ending stocks and export projections.



Projected ending soybean stocks were trimmed by 15 million bushels, down to 350 million.



USDA also lowered the soybean average price by 20 cents to $4.70 per bushel. That’s still up five cents from last year’s $4.65.



Tierney’s research suggests that cash prices set their seasonal lows in October.



“During October, the November soybean futures contract came within a dime of testing the $4.45 [a bushel] low that was set on July 17,” he said. “Assuming that the harvest low has been set, soybean prices could stage an average post-harvest recovery based on steady demand and possible increases in world consumption that may have been stimulated by the low prices that currently prevail in the world oilseed market.”