USDA Releases Corn Data with a bullish slant!
As expected the corn yield was lowered a touch from 168.8 down to 167.5 bushels per acre. The trade was anticipating a reduction and this number was within trade estimates. Maybe more important is the perception that the USDA's exuberance of a very large crop, that was still growing in size with their yield increase last month, may now be backpedaling on the yield number. Global corn stocks fall from 195.09 to 189.69 MMTs. Again, the trade took the numbers as bullish and pushed prices up .13, to 3.87. Is there more to come? Lets hope that we can see some follow through on Monday.
Corn has rallied a bit this week ahead of what some inside the trade are thinking could be bullish adjustments by the USDA. Technically I still see heavy resistance up in the $3.85 to $4.05 range and believe it will be tough for corn prices to stay above this area until more harvest details become available, ensuring traders of a smaller U.S. crop. Personally, I'm not looking for much of an adjustment by the USDA in this report.
The October report might be a bit of a different story as I continue to hear reports of less than expected yields being harvested in many locations. If the yields to the south an east continue to disappoint, I have a real hard time believing we harvest a national average yield anywhere near the 171 harvested last year. Remember, the current USDA yield estimate of 168.8 is only 2.2 bushels off last years pace. That's tough to swallow when you consider Illinois harvested a 200 bushel average last year and this year will be lucky to harvest a 170 average. You also have major disappoints compared to last year in states like Indiana, Ohio and Missouri. Unfortunately this isn't anything we didn't know last month, when the USDA elected to throw us a curve ball and actually raised the yield.
As I've been saying the past several weeks, be careful going up to bat in this report, especially with such extreme variability in many key production states. Bottom line: I believe it's a very difficult year for forecasting local yields, yet alone a national yield. In other words, the USDA might have a real tough time finding the strike-zone. So don't be surprised if you see a pitch throw in the dirt, behind your head or into the stands...
As a producer I'm hoping to see a knee-jerk higher, followed by some positive macro tailwinds that provide me another opportunity to reduce a bit more longer-term risk. As a spec I like using any significant rally as a chance to build a more bearish short-term strategy, ultimately looking for a move back below $3.50 in the next 90-days.