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Will on-farm storage be the Achilles heel for corn?

Will on-farm storage be the Achilles heel for corn?

Corn traders this afternoon will be digesting the latest weekly USDA crop-condition estimates. Most inside the trade believe at least 90% of the corn crop is now planted with a very large percentage actually emerged, both running ahead of schedule. Perhaps even more impressive is the fact 77% or more of the U.S. corn crop could be considered in good-to-excellent condition. The near record conditions will obviously have the bears beating their drum, but the bulls will be quick to reference how 2012 started, with 77% of the U.S. corn crop rated good to excellent, then rapidly deteriorated in June and July and prices moved north of $8.00 per bushel.

Just be careful with this theory and don't let yourself dive too deeply into the comparison. Yes, in the May 2012 report the USDA did project a record U.S. crop of around 14.8 billion bushels, but they were also showing a lot less corn in storage. Though early conditions might be similar to 2012, as a nation we are now sitting on approximately a billion more bushels of corn, the Chinese are kicking cargoes right and left, we are in the midst of the worst bird flu virus in our nations history, and the U.S. dollar is stronger than we've seen in over a decade.

For the sake of it, I compared drought maps from both May 22, 2012 and our most current May 19, 2015 map, and there's not a whole lot of difference between the two. My suggestion is leave it at that, a simple "weather" comparison. When you dive deeper into the numbers you can see these two marketing years, as well as the underlying investment landscape is drastically different. Yes, an extreme weather hiccup, flooding, etc. could spark a nice rally, but more than likely nothing in comparison or the magnitude of 2012 rally.

Make certain you understand and recognize the differences and adjust your marketing plan accordingly. Near term, I look for the trade to start more heavily debating the final 5 to 10  million acres of U.S. corn that has yet to be planted, especially with so much heavy rainfall being reported. The question is, how many acres will actually go into "preventive plant" and how many corn acres will be switched to soybeans?

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