What is in this article?:
- Corn, soybean prices following short-crop pattern
- January report critical
• The general downtrend in soybean prices since mid-September has accelerated, with January futures now at the lowest level since June 29.
• Corn prices have moved into the lower half of the trading range that has been in place since mid-September and December futures are at the lowest level since Sept. 28.
January report critical
“The final estimate of the size of the 2012 crops to be released on Jan.11, 2013, is one of those factors. For soybeans, the pattern of 2012 yield forecasts to date, lower in September and higher in October and again in November, was experienced six other times in the previous 30 years.
“The yield estimate released in January following harvest in those six years was above the November forecast three times and below the forecast three times. The deviation ranged from 0.1 to 0.8 bushels,” Good said.
History does not provide much guidance for forming expectations this year, Good said.
“For corn, the pattern of yield forecasts this year, lower in September and October and higher in November was experienced only two other times,” he said.
“The January yield estimate equaled the November forecast in one of those years and exceeded the November forecast by 0.7 bushels in the other. Again, history provides little guidance for forming January yield expectations this year,” he said.
Good said the bigger issue for corn production may be the January estimate of acreage harvested for grain. There is a general expectation that the USDA’s large December survey may reveal fewer acres than currently forecast.
“On the supply side, the progress of the South American crops will be most important for the next three months,” Good said.
“Weather conditions are currently improving somewhat from early wet conditions in Argentina and dry conditions in central and western Brazil. Some on-going dryness is noted in southern Brazil and Paraguay. Some argue that corn production potential has already been reduced in Argentina. For the near-term, markets will likely continue to reflect expectations of very large crops,” he said.
Good commented that prices will also be influenced by the ongoing rate of consumption of the 2012 U.S. crops. For corn, there is some anticipation the pace of export activity, which has been extremely slow to date, may accelerate as South American supplies dwindle and Asian customers return to the U.S. market.
“The larger issue, however, surrounds the pace of domestic feed and residual consumption,” Good said.
“The USDA’s estimate of Dec. 1, 2012, stocks to be released on Jan. 11 will provide some much needed clarity to the rate of consumption in the last quarter of the 2011-12 marketing year and the first quarter of the 2012-13 marketing year.
“For soybeans, the National Oilseed Processors Association estimate of the size of the October crush is expected to be released later this week. That estimate will provide insight into the pace of crush relative to the projected rate. The pace of new export sales will also be important, with some concern about cancellations of earlier purchases by some customers.
“Prospects for further price declines for corn and soybeans into 2013 favor pricing more of the old and new crop sooner rather than later.
“However, the transition to lower prices will be erratic so that timing of sales will still be important. Recent price declines, particularly for soybeans, seem to be a little excessive given the amount of production uncertainty,” Good said.