After running the numbers reported in the USDA’s March 31 Prospective Plantings report, it seems only a small shortfall in US average corn yield below trend would be needed to eliminate the current modest surplus of corn.
That assessment was made by agricultural economists at the University of Illinois and published by the Corn and Soybean Digest who went on to say the market appears to be taking a wait-and-see attitude about yield prospects with little production risk reflected in new-crop corn prices.
“An average yield above trend would likely put some additional pressure corn prices, but that risk is not immediate,” the economists said. For this reason, they are advising corn farmers to “maintain patience in pricing the 2016 corn crop.” In other words, they expect corn markets to price in a weather premium at some point, a market element they do not see reflected in current corn prices.
After the Prospective Plantings report, prices dropped by $0.15 ½ a bushel or 4.22%, to close at $3.51 ½ from $3.67 the day before the report,
However, the market began to recover from the March 31 low of $3.47 ½ before the close. Support at the low was tested April 1 with a low of $3.47 ¼, and the market had recovered more than half of those losses before tumbling again on Monday.
THE SOURCE OF HIGHER CORN PRICES
In the short term, higher corn prices could come from a more rapid pace of consumption, production concerns or a combination of the two, the economists said. In the longer term, higher prices could come from stronger US and world economic growth.
Much of the current market focus is on the pace of exports and whether USDA projections will be reached, the economists said. Last week’s Census Bureau export estimates for February indicated that corn exports for the first half of the 2015-2016 marketing year exceeded cumulative USDA weekly export inspection estimates by 39 million bushels.
However, exports during the period, at 642 million bushels, were 163 million short of the same period a year earlier. To reach the current USDA export projection of 1.65 billion bushels, exports during the last half of the year need to total 1.008 billion bushels, or 51 million fewer than exported in that period last year.
New sales of 330 million bushels, an average of 15.1 million a week for the rest of the year, are needed to elevate commitments to 1.65 billion bushels, the economists said. Sales have averaged 34.4 million a week since Jan. 1 and 38.4 million a week over the last five weeks,
CASH CATTLE QUIET
Cash cattle markets were quiet Monday with feedlots generally showing more cattle to packer buyers this week.
Business last week was at $132 per cwt up to $136 on a live basis with most around $133 to $134, steady to up $2. In dressed markets, cattle traded at a steady $214 to $216.
The USDA’s choice cutout price Monday was up $1.65 per cwt at $216.45, and select was up $1.80 at $207.05. The choice/select spread narrowed to $9.40 from $9.55 as 120 loads of fabricated product were sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Friday was $157.86 per cwt, down $0.62. This compares with the Apr CME settlement Monday of $155.55, down $0.35.