Chicago Board of Trade Market News
Outlook: USDA released their WASDE report Thursday, and it confirmed established market biases by being bullish on soybeans and being somewhat bearish for corn. As a result of the data, soybeans rallied and corn sold off. This price action is noted because a substantial number of large speculative traders already hold positions that are long soybeans and short corn. In the very near-term, those traders may seek to rally soybeans and drive the December corn contract to a new low, but it will not be much longer before they reverse those positions and seek to lock in profits.
As noted last week, data will be released by Farm Service Agency (FSA) on September 17, which may imply that total U.S. corn acreage is likely to be adjusted downward. As well, there is less certainty about how favorable corn yields will be as the harvest moves into the more northern portions of the Corn Belt. Consequently, if a new low price is established in the December corn contract, then traders with short positions may be seeking to take profits shortly thereafter. Their attempt to exit their short positions could cause somewhat of a rebound in futures prices.
In Summary: USDA increased the yield estimate for average U.S. corn production from the August estimate of 154.4 bushels per acre to a new estimate of 155.3 bushels per acre. This increase occurred because of better yields across the South and in the Central Plains. Total planted and harvested acreage was left unchanged. As noted previously, FSA will release revised data next week and that could cause USDA to adjust their October acreage numbers.
The bump up in corn yields for the present 2013/14 season was partly offset by a modest 58 million bushel reduction in the carry-over stocks from the prior 2012/13 season, which just ended on August 31. Demand factors in the present 2013/14 season were left unchanged and the result is that total ending stocks are forecast to increase from 1.837 to 1.855 billion bushels. USDA forecasts that this slight increase in production will reduce the average U.S. farm price of corn by 10 cents a bushel. Average farm prices are expected to range from $4.40 to $5.20 per bushel, assuming the correctness of this cash price forecast supports the notion that corn futures have limited downside from present price levels