Last week the USDA gave us new numbers to chew on. As expected, corn yield was dropped slightly from 175.1 bpa to 174.4 bpa, and soybean yield was increased from 48.9 bpa to 50.6 bpa. 2016 total US corn production was reduced from the August report by 60 mln bushels to 15.093 billion while the total soybean production was increased 141 mln bushels to 4.201 billion.
There is still some chatter that corn yields simply are not going to be that good and that the final yield number could get closer to 170 bpa. It feels like there is more confidence in the soybean number at this point. We are very close to getting a better feel for yields as harvest will soon pick up in earnest. Currently, it is reported that 9% of the corn crop is harvested and 4% of the soybean crop.
We could spend a lot of time debating the numbers and will need to wait until January for the USDA to report “final” 2016 production. No matter how you slice it, 2016 is going to be another BIG production year, our fourth in a row. They say “low prices solve low prices” and demand for US grain has certainly improved. Production issues in South America have certainly improved our export outlook. Will CRP take some acres out of production? It’s possible as many have indicated at current grain prices, cash rents need to come down, and CRP rates may provide a greater return.
It is important to remember that the market does not trade fundamentals alone. In simple terms, fundamentals are supply/demand driven. Just as important, if not more, the market trades technical analysis. Technical analysis looks at historical trend information looking for recognizable patterns in past trading data to predict future prices. I look at trade fundamentals as more of a long-range predictor of prices while technical analysis can provide short-term opportunities and short term price targets.
On a side note, keep an eye on carry in the corn market. December 2017 corn futures are currently trading above $3.80 and December 2018 corn futures right around $4.00. Think about what 2017 and 2018 break evens could look like and get orders placed. If fundamentals don’t take us there, maybe the technical traders will.
I’m not sure what analysis I am using to make this prediction, but I have the Huskers going into the Ohio State game 7-1. We will take that one on the chin, come back and finish the regular season 10-2, and get back to and again lose the BIG10 Championship game. We will earn a bowl game we can’t win and end the season 10-4. Now debate that!