By: Fran Howard
Look for December corn futures to dip in the next 30 days.
This year’s wet spring kept producers off more acres than originally anticipated, but early indications are that yield and quality are coming in better than expected on corn. Prevented plantings were higher than expected for both corn and soybeans, according to recently released numbers from USDA’s Farm Service Agency (FSA).
The 2013 prevented plantings for corn of 3.57 million acres were up from August’s estimated 3.41 million acres. The numbers are based on reports from producers who participate in FSA crop subsidy programs and who are required to submit an annual report regarding the use of all cropland on their operations.
Chat Hart, agricultural economist with the University of Iowa, estimates that between 95% and 96% of producers participate in FSA programs.
This year’s prevented soybean plantings of 1.69 million acres were up from August’s 1.62 million acres, according to FSA.
Producers enrolled in the subsidy programs also reported overall planted acreage, including failed acres, of 91.43 million acres of corn, up from August’s 88.77 million acres, and 74.66 million acres of soybeans, up from 72.06 million in August.
USDA could reduce final planted area for corn by 2 million acres or so, says Hart. "But we are still taking about a record corn crop in the mid-13-billion-bushel range," he says.
Ryan Turner, risk management consultant with INTL FCStone, Kansas City, expects USDA to cut harvested acreage by 1 million to 1.5 million acres when it releases its next World Agriculture Supply and Demand Estimates (WASDE) on October 11.
The October WASDE report will also reflect the full impact of the FSA numbers, notes Hart. While both acreage and yield play into the overall production numbers, the big question in the October report will be corn yield.
"Will yield slide? Will 162 bu. per acre come to pass in Iowa? I’m seeing a lot of variability," says Hart. "Some producers who have already harvested in central and southeastern Iowa are seeing 160- to 210-bu. yields, and test weights are decent. So far what’s come in has looked good."
Early indications across the Corn Belt are that test weights are better than expected, which will make this year’s crop easier to store, as long as lower-quality corn is not blended with higher-quality product.
"I’m hearing yield and quality are really good," says Turner. "I think prices could drift lower, take out the lows, and make new lows." Turner expects December corn futures to dip to near $4.25 per bu. sometime in the next 30 days.
When historical corn prices are used in a scatter plot along with an expected 1.8-billion-bushel carryout, it shows corn prices could fall to $3.30 per bu. "But that’s not going to happen," says Turner. "We are in a different demand environment today."
Late Federal Reserve news sent stocks and commodities higher
Fed news boosted the commodity markets Wednesday afternoon. Strength spilling over from the soybean pit offered support for corn futures, but the onset of the southern Corn Belt harvest appeared to undercut prices earlier in the day. However, afternoon news that the Federal Reserve will not taper its bond buying to support the economy sent the markets higher. Concurrent U.S. dollar weakness also boosted commodities. December corn closed 2.25 cents higher at $4.5675/bushel Wednesday afternoon, and May rose 2.25 cents to $4.77.
Soybeans rebounded from Tuesday losses in Wednesday action. Soybean traders were greeted with news of a big U.S. soybean sale to China and another sizeable sale to an unknown buyer Wednesday morning, which powered a general advance. The gains were later exaggerated by the Fed news. November soybeans rallied 5.25 cents to $13.4775/bushel in late Wednesday trading, while October soyoil jumped 0.47 cents to 42.47 cents/pound, but October soymeal sagged $1.8 to $427.0/ton.
Wheat futures apparently rose in concert with the commodity sector Wednesday. The reasons behind early wheat strength weren’t obvious, but soybean strength probably played a significant role in the rise. Thus, it wasn’t terribly surprising to see wheat quotes rise along with the other commodities when the Fed announced that it would not reduce its bond buying program in the near future. December CBOT wheat gained 3.5 cents to $6.465/bushel at its Wednesday settlement, while December KCBT wheat lifted 2.25 cents to $6.925, and December MGE futures edged up 0.75 cent to $7.0025.
Cattle futures also closed strongly today. Although cattle and beef values traditionally tend to rally during late summer and fall, recent beef slippage had short-circuited rally attempts. That was also true in early Wednesday trading, but the afternoon Fed news and the subsequent commodity sector advance and U.S. dollar decline encouraged bullish traders. October cattle futures edged up 0.10 cents to 125.27 cents/pound late Wednesday afternoon, while December added 0.30 to 128.95. Meanwhile, October feeder cattle climbed 0.42 cents to 158.30 cents/pound, and January inched ran up 0.42 cents to 158.92.
Hog futures also posted a bullish reversal Wednesday. Hog and pork prices had recently disappointed CME hog traders, thereby undercutting futures in early trading. However, underlying cash and wholesale firmness, as well as the Fed news, pushed Chicago swine values significantly higher later in the day. October hog futures surged 0.75 cents to 91.72 cents/pound in late Wednesday action, while December lifted 0.42 cents to 87.95.
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