Chicago Board of Trade Market News
Outlook: Thursday’s September WASDE was the first of the 2014/15 crop year for corn and sorghum (Sep/Aug). The report was considered bearish in the fact that USDA’s prediction for the average U.S. corn yield of 171.7 bushels per acre was one bushel larger than the average expected yield of 170.7 bushels. Each additional bushel that is added to the national average is expected to increase production by 83.8 million bushels. The combination of an average 171.7 bushels on 83.8 million acres is record U.S. corn production of 14.4 billion bushels. When beginning stocks and import are factored into the equation, the total amount of available corn in the U.S. market is expected to be a substantial 15.6 billion bushels. However, demand is also expected to be strong and the final ending-stocks estimate for the present 2014/15 season will be just over 2 billion bushels. A slight increase in exports would pull ending stocks back below 2 billion bushels, and that is possible.
USDA reduced the estimate for China’s corn production by 5 MMT because of dryness in key growing regions. USDA also reduced their estimate for Argentine corn production by 3 MMT. Hot and dry weather also caused production estimates to be reduced for Ukraine by 1 MMT and Russia by 500,000 MT. The end result is that USDA increased their forecast for U.S. corn exports, and it could increase more in the future because of present attractive price levels. Price action after the release of USDA reports seems to already indicate that market participants perceive a buying opportunity rather than justification for more aggressive selling. That could indicate that further downside in prices is limited in corn contracts.