Chicago Board of Trade Market News
Outlook: USDA released its annual ten year outlook for major crops, an exercise it conducts merely to aid budgeting for farm programs, and it immediately gets overly interpreted by the market. It forecasts that the area planted to corn will fall to 88.0 million acres by 2025/26, while the yield continues to grow, resulting in ending supplies continuing at current levels. However, there are several private analysts that believe the area planted will expand as farmers try to cover their fixed costs, and instead it is yield that fails to measure up as they cut the variable cost side of their ledger with reduced fertilizer use.
Either way, futures market trading volume remains light, meaning any short covering that occurs will likely have an exaggerated impact. The Fed raised its interest rate to a quarter-point, and Argentina’s Mauricio Macri followed through on his commitment to eliminate the corn export tax and devalue the peso. However, that does not obviate the impact of any potential future adverse weather impact on corn production.
Rabobank says that China’s sorghum and feed barley imports may decline in coming years due to policy changes, but Saudi Arabia is set to become a better market for imported feed grains as it phases out fodder production over the next three years due to water limitations.
At this stage, the trade will be waiting for USDA’s January reports, including the release of the December 1 stocks report.