Chicago Board of Trade Market News
Outlook: The November WASDE report was published on Monday and the yield for U.S. corn was estimated to be 173.4 bushels per acre. That was below the average trade estimate of 175.2 bushels. The majority of analysts were expecting yields to continue increasing above the October estimate of 174.2 bushels and the results of USDA’s analysis was actually lower. While the estimate was bullish in comparison to expectations, market participants seemed uncertain about how to trade because corn contracts had already increased 50 cents prior to the report as they followed a rally in the soy complex. There was also a common assumption that the pre-report increase in corn contract prices was temporary. The result is that contracts have only worked moderately higher as market participants took several days to digest the unexpected news.
The reduced U.S. corn yield estimate caused ending stocks for the current 2014/15 season to decline to 2.008 billion bushels. This is a comfortable level of ending stocks, but not cumbersome. Global corn stocks of 191.5 MMT means that export competition will be stiff, but the United States does not need to have a fire sale because its own feed grain production is unmanageable. Therefore, the likelihood of corn contracts returning below $3.50 diminishes. That prospect alters the interest of traders from seeking selling opportunities, with more limited potential, to seeking buying opportunities. Such a change in the mindset can alter the bell-curve of the trading range of probable prices. For example, a month and a half ago the probability would have been remote of the December contract ever retesting the July 7 gap at $4.10 per bushel. Now, such price action is no longer out of the question.