Chicago Board of Trade Market News
Outlook: December corn futures are facing a dramatic lack of news. This has left the contract to drift sideways, caught between poor exports to start the new marketing year, a potentially bearish Grain Stocks report, and early yield reports that corroborate USDA’s large yield projections. Still, the contract has not re-tested its current harvest low of $3.44 ¼ and likely won’t until decisive bearish news is uncovered.
The average estimate for USDA’s September Grain Stocks report is that corn stocks will total 2.35 billion bushels (51 MMT) implying a 2016/17 ending stocks/use ratio of 16 percent. Anything over this figure will be considered decidedly bearish while figures less than expected will be only mildly bullish.
U.S. exports have gotten off to a slow start in the 2017/18 marketing year. Marketing year total exports have reached 84.5 million bushels (1.84 MMT), only a little more than half of last year’s total at this same time. YTD bookings are similarly down, totaling 446 million bushels (9.7 MMT) versus 729 million (15.9 MMT) this time last year. The large Brazilian crop is certainly pressuring U.S. exports early in the year and USDA’s current projections of a 19 percent decrease in exports looks accurate. So far, the weekly pace of corn exports has been below that which is needed to meet USDA’s projection.
The U.S. corn harvest stands at only 11 percent complete, versus 20 percent for the 5-year average. Hurricanes Harvey and Irma caused problems for the early harvest in the Delta and southern portions of the Corn Belt, but good weather has improved conditions there and harvest is underway. On balance, the U.S. corn crop is below-average maturity for the last week of September, and norther states are lagging significantly behind in maturation. Fortunately, warm, dry weather is expected for the Upper Midwest which will aid in maturation and drying.
Early yield reports from the Delta and southern Illinois are pointing to trendline or higher yields, with some farmers reporting record yields. While it is simply too early to draw nation-wide conclusions from these reports, early indications are the USDA’s 169.9 BPA national average yield may not be far from the truth. In total, the U.S. corn crop looks to be more than ample again this year. This will continue to pressure prices, unless significantly reduced yields are discovered as harvest moves north and/or export demand suddenly picks up.