We will get our first crop ratings report on corn today, and it should not be a surprise if it shows poor, if not historically poor, ratings. Crop progress should show one of the best weeks this spring with an average guess of 80%, which may be low—if we are 85%, the idea of high prevent plant that some university economists have predicted, might be too high. Six million fewer acres planted is about one billion bushels.
The multiple highs made May 30 near $4.54, that June trade failed to exceed, likely discounted a 1.2-billion-bushel reduction. Was it not for the fact that South America has about 800 million bushels more corn than thought possible six months ago, and that we have in place already global competition chopping at the bit to take our share of the market that was not there in 2011 and 2012.
Technically there is and was a lot of discussion in the media that corn needs to go to $5.00 to trim demand enough to insure adequate supplies. I cannot dispute the potential as I have remembrance of the $5.50 level, which a close below a few years back ended the hay-day in ag. The progress (or lack thereof) and Tuesday’s USDA report including a reexamination, the best they can, of the crop losses they are willing to print, as well as revised demand, will be released.
The key will be if production reduction equals demand reduction. The USDA has admitted to a lack of “historical data as a precedence” so I’d expect a conservative action on their part, regarding production reduction whatever they print. It is for USDA to admit to significant reduction in usage (exports in particular) for either corn, soybeans or wheat that would be concerning.
Volatility is back in vogue and rightly so. If we can be of assistance, contact our office.
Jerry Gulke or call 480-285-4745 or 707-365-0601.
Find previous audio and written reports with Jerry Gulke at agweb.com/Gulke
Check current market prices in AgWeb's Commodity Markets Center.