The U.S. Department of Agriculture’s recent corn harvest estimates were lower than anticipated, though still on target for record production.
Dr. Mark Welch, Texas A&M AgriLife Extension Service grain marketing economist, advised producers in his latest newsletter that recent estimates could alter short-term corn futures.
“December corn futures traded below $4.50 before reversing higher after the supply and demand numbers were released,” Welch said. “My marketing plan calls for pricing an additional 20 percent of expected 2013 production before harvest. While (recent) supply and demand numbers may not spark a major price rally, this key reversal may signal a short-term change in trend that will provide the next pricing opportunity.”
The average trade-guess going into the report was a U.S. crop of 14 billion bushels, up slightly from July, Welch said.“Instead, the USDA lowered the yield from 157.7 bushels per acre to 154.3 bushels, leaving acreage unchanged and new crop estimates of 13.8 billion bushels,” he said. “This is still a record corn crop, but on the low end of trader expectations.”
Welch noted to watch crop condition reports over the next few weeks to see if yield potential changes in the key producing states. For example, the yield estimate for Texas corn is 138 bushels per acre, up from 130 last year. Texas sorghum is estimated at 50 bushels, down from 59 in 2012.
Compared to July, the combination of lower production and fewer beginning stocks lowered corn supplies in the 2013/2014 marketing year by 197 million bushels.
“On the use side of the supply and demand balance sheet, feed use was reduced 50 million bushels and exports cut 25 million bushels,” Welch said. “The net effect of these revisions was a decrease in ending stocks of 122 million bushels. The corn stocks-to-use ratio is now estimated at 14.5 percent compared to 15.4 percent last month and 6.4 percent last year.”
Welch noted the recent U.S. corn crop condition index has held steady at 368 with 64 percent of the crop rated as good or excellent.
“The crop condition index score – 1 point for very poor, 2 points for poor, 3 points for fair, 4 points for good, and 5 points for excellent – is just above the average for this time of year of 357.”