MANHATTAN, Kan. – The U.S. Department of Agriculture on Sept. 12 estimated this year’s corn production at 8.8 billion bushels, 37 million below its projection a month earlier.
The smaller number may not be enough to support prices this fall, a Kansas State University agricultural economist said. The average yield was estimated at 125.4 bushels per acre.
Lower expectations. The 8.8-billion bushel production figure was slightly above the average of analysts’ expectations.
If realized, both the yield and production would be at their lowest levels since 1995.
“Crop conditions have changed little since Sept. 1 [when the USDA assessed the crop for the report], but yield models based on recent crop conditions and the USDA’s September yield estimate suggest that the October estimate could be 1-2 bushels [per acre] lower than the current estimate,” said Bill Tierney, a Kansas State crops marketing specialist.
Despite the smaller production projection, slow exports and typical price pressure during the fall harvest could push feed grain prices lower in the near term, he said.
Underestimation. And, the economist said, the USDA has a tendency to underestimate final production on its September report.
“Given the seasonal tendency for feed grain prices to decline into harvest, and allowing for the possible increase in the size of the [final] corn crop, it’s likely that corn prices will decline,” Tierney said.
“Upon examining the December [Chicago Board of Trade] futures contract, the first downside objective would be a ‘gap’ at the $2.61-$2.66 [per bushel] level. If prices penetrate $2.60, the next objective would be another ‘gap’ at the $2.46-$2.53 area.”
Slow sales pace. Another bearish factor weighing on corn values is the slow pace of corn sales, Tierney said.
“As of Sept. 1, export sales of ‘new crop’ corn were estimated to be 231 million bushels. That’s 75 million less than last year and it is only 12 percent of projected annual exports,” he said.
“On average, by that date 24 percent of total annual exports are already on the books.”
Soybeans, too. Tierney also expects soybean prices to succumb to harvest pressure. The USDA estimates this year’s soybean production at 2.656 billion bushels, 1.21 percent more than its August estimate, but 17 million bushels below the average of industry expectations.
The figure was also 8.1 percent less than last year’s record soybean crop.
As with corn, Tierney expects soybean prices to weaken as the harvest progresses.
“Based on an examination of the November [CBOT] futures contract, it is expected that futures will decline and attempt to fill a gap at the $5.29-$5.30 level. If prices penetrate $5.28, the contract could trade down to $5.00.”
Following harvest, Tierney said, soy prices may not stage much of a post-harvest discovery due to competition from another expected record-setting South American soybean crop.
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