Chicago Board of Trade Market News
Outlook: Actual field survey analysis caused USDA to lower its estimate for the national average U.S. corn yield by 2.1 bushels per acre to 154.4 in the August 12 reports. This was below the July yield estimate of 156.5 bushels per acre and substantially below the average of commodity analysts’ estimates of 157.7 bushels per acre. The possibility of a lower estimate was noted in this section last week, as USDA’s August estimates are obtained in a rigorous format.
USDA obtained its national corn yield estimate of 154.4 bushels per acre from numerous physical evaluations of fields and from surveys sent to 24,000 producers. Nevertheless, speculators with substantial short positions were disgruntled and they decided to still shove the December corn contract to new lows the day after USDA data was published. Their aggressive selling was met by more buyers who appreciated the opportunity to acquire corn futures below $4.50 per bushel. Some of the more experienced speculators who were selling seemed to recognize that the potential rewards of a further downside objective may not justify the risks. This worked to weaken the resolve of speculative sellers and allowed prices to bounce back for the next two days.
Speculators who are seeking to drive the December corn contract down to $4.00 per bushel may want to define whom they expect to offset their position in order to reach that objective. Producers are unlikely to be short hedging at $4.00 per bushel, particularly if the basis becomes negative. As well, there is a substantial amount of empty bin space and farmers recognize that pricing ratios and weather could substantially alter pricing dynamics next spring. End-users are unlikely to be chased out of their long positions because most are hedging for the long haul and locking in profitable positions. Even lower prices simply give buyers the opportunity to extend their hedges into more distant contract months in order to lock-in future profits. The near-term outlook is that speculators are offering livestock producers, ethanol facilities and international feed grain buyers an extended pricing opportunity.