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Corn Outlook - Finding beauty in ugly year

Government supports could make corn profitable for 2019

USDA releases its next update on the 2019 corn crop Sept. 12 and the market is bracing for bearish data. But while the final story of the 2019 corn crop won’t be known for months, what seems like an ugly year could turn out plenty good-looking enough.

Lower production estimates could eventually turn the market around, at least a little. Even if they don’t, government programs could provide the average grower with a modest profit.

That’s not the way farmers want to make do. But this year, it’s reality.

USDA’s September numbers could provide the opportunity for the market to finally make a bottom. If the estimates are bearish, as I expect, a spike low could exhaust selling and trigger modest short covering and profit taking by funds ready to see what results actually come in off the combines from what should be a later than normal harvest.

The government could surprise with a bullish production estimate, which would accomplish the same objective in the short run. The Aug.12 report didn’t include data from field samples that will show up in this month’s numbers, along with yield estimates from the regular grower survey. It’s possible the field checks could confirm what many farmers are anecdotally saying, namely that the yields aren’t out there.

Other objective evidence leans to the contrary, including weather models, estimates from crop ratings and Vegetation Health Index maps. Those methods suggest the agency is like to boost its yields modestly, around 1.2 bushels per acre, increasing production to 14 billion bushels.

This could raise projected supplies a year from now to 2.285 billion, 100 million above USDA’s last forecast. The total would be even larger because my estimates are more optimistic on demand, which could offset the impact of what’s likely to be larger supplies of 2018 leftover corn. USDA could boost old crop carryout due to weaker exports and usage for ethanol, though it may wait until Sept. 1 inventory numbers come out at the end of the month.

That’s the bearish scenario. The bullish outlook included again in my supply and demand table cuts yields a little from USDA’s August reading, and more importantly trims 3.7 million acres off harvested acres. But lower acreage may not show up until later in the fall, or maybe even the final January number if late planting and other weather problems cause more fields to be chopped for sileage and not grain.

A smaller crop could cut new crop ending stocks near 1.8 billion, enough to trigger a rally. But even if the gains don’t come, the typical grower should be able to make a profit unless yields and prices are both very poor. And those who have made some sales at higher prices and can hedge inventory to capture decent carry should be in line for a profit.

USDA has announced signup for the new Farm Bill, but details so far don’t include all the data most growers need to determine how much of a safety net ARC will provide. Crop insurance benefits may depend on low prices in October when average December futures prices are collected.

But the real help this year should come from the Market Facilitation Program. Estimate your crop insurance and ARC or PLC protection, add in the MFP and make your best guess on yields. It may be good enough.

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USDA could increase corn yields Sept. 12, but a larger crop and increased old crop carryout could be at least partly offset by stronger demand for 2019 corn.

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Crop ratings and Vegetation Health Index maps show corn conditions that are steady to better as the growing season progresses – if there’s time for fields to mature before the first frost.

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USDA could cut its forecast of 2018 crop usage to make ethanol again Sept. 12 as production trends lower and supplies stay burdensome.

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The book of 2019 crop sales is at a 13-year-lot as the new marketing year begins because end users aren’t nervous about supplies.

 

Download a complete version of the outlook with extensive charts and analysis using the Download button at the end of this report.

More from Farm Futures:

Weekly Fertilizer Review
Weekly Energy Review
Weekly Basis Review

Senior Editor Bryce Knorr first joined Farm Futures Magazine in 1987. In addition to analyzing and writing about the commodity markets, he is a former futures introducing broker and is a registered Commodity Trading Adviser. He conducts Farm Futures exclusive surveys on acreage, production and management issues and is one of the analysts regularly contracted by business wire services before major USDA crop reports. Besides the Morning Call on www.FarmFutures.com he writes weekly reviews for corn, soybeans, and wheat that include selling price targets, charts and seasonal trends. His other weekly reviews on corn farming, basis, energy, fertilizer and financial markets  feature price forecasts for key crop inputs. A journalist with 38 years of experience, he received the Master Writers Award from the American Agricultural Editors Association.

For more corn news, corn crop scouting information and corn diseases to watch for, follow Tom Bechman's column, Corn Illustrated Weekly, published every Tuesday.

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