Chicago Board of Trade Market News
Outlook: The 2014/15 crop year for U.S. corn and sorghum began on September 1, and in just two years the market has transitioned from drought into a bumper crop. Consistently favorable crop conditions are causing market participants to look at the December 2014 new-crop contract and ask how low it can go. That question will be answered in part by the contents of next week’s WASDE report, which will be published on Thursday September 11.
There is already an established expectation that USDA will increase corn yields in next week’s WASDE and the only real uncertainty is by how much. The maturity of the current crop is about a week behind schedule. Some analysts estimate that average U.S. corn yields could be well above 170 bushels per acre (bu.) if weather conditions remain favorable until maturity is complete. Of course, weather is still an uncertainty and so is the final average yield of the different corn varieties. The result is that most analysts expect USDA to stair-step any increase in the forecast of final yields until they receive more concrete harvest information.
USDA estimated a national corn yield of 167.4 bu. in the August WASDE for the current 2014/15 season, which is well above the 2013/14 average of 158.8 bu. It is entirely possible that USDA could further increase their yield estimate in the September WASDE to 170 bu. next week. However, a December contract of $3.50 bu. (cash prices below $3.30 bu.) seems to already reflect such a yield. This is important to note, because open interest has been increasing at present price levels. Traders with short positions need USDA to eventually confirm their confidence that weather and the productive ability of this season’s varieties will result in further yield increases.