Chicago Board of Trade Market News
Outlook: USDA released their annual production estimates for the current 2013/14 season. The average U.S. corn yield was revised downward to 158.8 bushels per acre after a more extensive analysis. This production estimate is below their prior yield estimate of 160.4 bushels. More importantly, it is below the average trade estimate of 161.1 bushels per acre. As a result, the report was considered bullish and many speculative traders who were holding short positions in corn seemed taken by surprise. Such a scenario can evolve when large numbers of market participants become heavily influenced by sentiment and place too much credence upon phrases such as, “big crops get bigger.” In contrast, USDA is publishing data that is the results of extensive analysis. Records corn yields did occur in 13 states, but the overall United States average corn yield declined slightly.
The decline in the average corn yield estimate from 160.4 to 158.8 bushels per acre was not entirely offset by an increase in harvested acreage from 87.2 to 87.7 million acres. The result was a modest decline in total U.S. corn production from 13.989 to 13.925 billion bushels and a decline in ending stocks for the present 2013/14 season from 1.792 to 1.631 billion bushels. However, market participants were expecting an average ending stocks estimates of 1.844 billion bushel, which was reflected in the aggressive selling that occurred this week prior to today’s reports. USDA also released their estimate U.S. ending stocks on December 1 as 10.43 billion bushels, which was also modestly below the average of 10.77 billion bushel. The end result is that the nearby March corn contract turned and rallied more than 20 cents this afternoon as it becomes increasingly evident that there is little to no downside below the pre-report lows that occurred earlier this week.