The September WASDE report showed data for corn largely as expected; increases for acres, yield and ending stocks. Planted acres were increased up to 93.3 million acres from 92.7 million acres. Harvested acres were increased to 85.1 million acres, up from 84.5 million in the August report.
Yield was also increased, to 176.3 bushels per acre, up from 174.6 in August. Ultimately, ending stocks were increased as well. The August ending number for the 2021/22 crop was 1.242 billion bushels, and on the September report, ending stocks were increased to 1.408 billion bushels.
Bearish news like this would normally send the corn futures prices lower. But not this time.
Why? The larger increases were expected and already priced into the market.
After the report was released, initially corn futures pushed lower as the data looked negative. Trade however was already braced for larger acres, yield and ending stocks, and so the news was largely already priced into the market.
What must not be ignored is that fact that trade not only took this report information in stride, it totally shrugged it off.
Right after the report release, December 2021 corn futures tested that important $5.00 support area on charts, and found a few sell stops underneath it when prices pushed down to $4.97-1/2, which was the low for the December 2021 contract on that day.
Then something happened. Prices began to work higher into the close of the business day, with December 2021 futures closing at $5.17-1/2, up 7-1/2 cents on the day.
After making a new low for the day, lower than the previous day’s low, prices closed higher on the day, posting bullish reversals on daily charts. For technical chart followers, this type of signal is likely a bottoming signal. That’s valid since the bullish reversal was created on a report day, after a bearish report, after testing key $5 support levels, and during a time of year when corn futures normally probe for a “harvest low.”
Do not ignore when the market posts bottoming signals off of a bearish report, especially this time of year! This type of trade action occurred last year after the bearish August 2020 USDA report – a bullish reversal, and a key clue that the fall low was in place, all be it earlier than normal.
Early yield results are mixed
After talking with clients, searching out social media, and talking to other industry folks, the early corn yield results are extremely variable. Most importantly, here is what I am NOT hearing: “Well, it’s better than I thought.” I have not heard that once yet. That tells me that truly the results are as mixed as you would expect from the sporadic summer rains that occurred this year.
One client in the “garden spot” of Eastern Iowa said his insurance appraised/adjusted corn silage came in at 205, below his actual production history and expected 230 bpa. Another client near Kansas City said his corn was the best he had ever seen. Clients in Michigan and Wisconsin are battling tar spots on corn, with yield suddenly potentially about to be 30 to 50 bushels lower than expected in portions of their fields. A client in Southwest Minnesota who faced the worst of the drought this summer had his corn silage appraised near 150, well below his nearly 225 annual results.
Three things to monitor going forward: getting power back on in the Gulf to get exports moving again, more yield results from producers, and a very important Quarterly Stocks report at month end.
Last year the Quarterly stocks report finally suggested tighter ending stocks than previously reported. I expect a similar review of information this year; tighter old crop supplies for corn than what has been reported by USDA. Many farmers were out of old crop corn in early August if not sooner.
If true, and old crop corn ending stocks are tighter, that means new crop carry-in will also be smaller.
Add that to yield that seems like it may likely be lower than current USDA, and then new crop carryout pushes back down toward that lower 1 billion bushel range.
Another potential alignment of the stars for another bull run for corn futures? Could be. Time will soon tell.
Reach Naomi Blohm: 800-334-9779 Twitter: @naomiblohm and [email protected]
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