What is in this article?:
- Consumption will now drive corn, soybean prices
- 30-year numbers
• The positive response to what appeared to be neutral to negative production forecasts suggests the market had priced in the risk of even larger production forecasts.
“In the previous 30 years, the forecast of the U.S. average soybean yield declined in September and increased in October, as was the case this year, in seven years.
“In six of those seven years, the November yield forecast exceeded the October forecast. The average increase was 0.5 bushel, in a range of 0.2 to 0.9 bushel. The final yield estimate released in January was above the November forecast in four of those six years. The January yield estimate was above the October forecast in all six years,” Good said.
In addition to the new yield forecasts, there will be some interest in the forecast of the acreage of corn harvested for grain in the November USDA report.
Good quoted the October report forecast acreage harvested for grain at 87.721 million acres, 9.225 million less than acreage planted for all purposes.
“That difference (mostly silage) is above the previous five-year average of 7.2 million acres, but less than the 9.467 million acres in the comparable drought year of 1988 and the 11.082 million acres in 1980.
“Widespread reports of corn abandoned or harvested for silage this year had resulted in the expectation for the difference between acreage planted and harvested for grain to be larger than the current forecast,” he said.
While the November production forecasts will provide a clearer picture of the availability of corn and soybeans, Good said that prices will now take direction primarily from the ongoing rate of consumption.
“Those patterns were detailed in last week’s newsletter,” Good said.
(For those numbers, see Corn, soybean prices searching for support).
“The strong pace of soybean exports and export sales continue, and the corn export program remains weak. For corn, however, considerable uncertainty about the pace of feed and residual use will persist until the Dec. 1 stocks estimate is available in the second week of January. It seems unlikely that the pace of feeding has yet been reduced to the level forecast by the USDA. Consumption in that category is forecast at only 4.15 billion bushels, 412 million below the official estimate for the past year.
“However, last year’s consumption is likely understated due to the availability of larger-than-normal quantities of new-crop corn,” Good said.
“Similarly, part of the consumption that will be reported during the current year may have been used last year. Prices of both commodities should be well supported until rationing has been confirmed.”