Chicago Board of Trade Market News
Outlook: Corn futures have declined since the release of USDA data last Friday projecting that the average yield will increase by a half bushel per acre to 168 bu. Less attention was seemingly paid to that fact that the estimate for harvested area was reduced by 500,000 acres to a lower total of 80.7 million acres. The reduction in harvested acres more than offset the increase in average yield and that caused total projected corn production to decline slightly from 13.585 to 13.555 billion bushels. Thus, this week’s setback in prices is not because of increased production but rather because disappointed bullish traders lacked sufficient justification to fuel additional upside momentum during harvest. Their selling and limited hedge activity is the cause of lower corn contracts; however, note that the decline is occurring in an orderly manner because there are a substantial number of traders who desire to buy corn at lower levels. The competitive buying among those traders will increase as prices move lower until a point is reached that the number of buyers outnumbers sellers. It is at that point that the majority of global buyers wish to make purchases, but buying at the low is always easier said than done.
The current 2015/16 crop marketing year for U.S. corn began on September 1 and this season’s pace of export sales has been slower than normal. For example, most recent data shows that only about 23 percent of the annual estimate for total exports has been sold so far when the more recent rate has averaged closer to 45 percent sold by this time. The current slower sales pace is not because lower prices have diminished demand, but because of the common hope among buyers to purchase at reduced prices, preferably at the bottom. The outlook is that once a bottom in prices is more clearly defined, then that pent-up demand will enter the market with full force. It is entirely feasible that before the calendar year is over there will be increasing announcements of large corn exports, and that news will likely facilitate more purchasing.