Corn prices appear to be completing the “short crop-long tail” pattern stemming from the drought reduced U.S. crop of 2012 with record large production this year. 

For many producers, the lower prices now being experienced have been partially offset by high yields or by expected indemnities from crop revenue insurance. Some also forward priced a portion of the crop at higher prices. 

 

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With harvest prices for crop revenue insurance established this month, revenue for all production not yet priced will be at risk.

Anecdotal reports suggest that a relatively small portion of the 2013 crop was forward priced and that producers are choosing to store a large portion of the newly harvested crop. If that characterization is correct, there is a lot riding on the direction of corn prices over the next several months. 

To avoid lower revenues, prices will have to increase more than the cost of owning and storing corn. It is useful, then, to evaluate those factors that will likely influence price over the next nine months. 

In the very near-term, the most important factor is the USDA’s forecast of the size of the U.S. crop to be released on Nov. 8. To move prices higher, that forecast would have to be smaller than current expectations that are near the September forecast of 13.843 billion bushels. 

 

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A smaller forecast will likely have to come from a reduction in the estimate of harvested acreage as yield reports tend to support a yield forecast at or above the September forecast of 155.3 bushels. A yield above the September forecast could reduce or even completely offset the impact of a lower acreage estimate.