New crop corn lower on good weather
Read any market story and the vision of the market as a creature with its own quirks and foibles is hard to resist. Sometimes it’s the “Bull,” while other times it’s the “Bear.” It can be fickle, nonsensical, and driven by fear or greed. It can be spooked, confident, or ignore things altogether. It can even be tricked or manipulated.
In recent weeks, however, the market—specifically the corn market—has had its nose to the proverbial winds; corn pollen is in the air and weather can have important impacts on grain trade.
“It’s not unusual for weather to move the grain market, especially during pollination time,” said Jim Robb of the Livestock Marketing
Information Center. He explained that weather elements, particularly heat and rain (insomuch as it mitigates high temperatures), can have an impact on corn pollination. The corn pollination window is currently open in most of corn country and so attention to temperatures has been high.
Robb opined that recent reactivity in the corn market to weather concerns has been magnified from the norm given the tightness of the old corn crop. He pointed out that the spread between old crop corn and the new crop corn on the futures board has been as high as $2 in recent months.
Another facet of note is the fact we are on the brink of getting more solid data about what the new corn crop will be.
“After you get pollination you can get some better objective measures,” said Robb of the corn crop statistics. Up to this point, most projections of the size of the new corn crop have stemmed from reports of how many acres American farmers planned to—and then did—plant combined with historical averages regarding yield. Once pollination has occurred, more conditions-based observations and measurements can be made to inform crop production estimates.
“Yield estimates of 153/bpa to 162/ bpa remain in play,” said Andrew Gottschalk of Hedgers Edge. “Each one bpa change in yield will change final production by approximately 89 million bushels. In the final analysis, ending corn stocks are set to increase sharply from the current marketing year.”
Of late, the temperatures in corn country have been acceptable. Things have been hot, but reportedly not yet too hot too impact pollination. Rain in some key corn states in recent weeks has served to keep temperatures at bay.
“The ‘hit and miss’ moisture was more ‘hit’ in the last 24 hours, and prices are lower,” said Gottschalk last Tuesday, speaking of corn futures. “It is certainly not a massive drink for all the area, nor is it 100 percent coverage by any stretch of reporting. But the rains are helpful and were more than anticipated. Translation: Better for pollination and production—not for price.”
The hopeful temperatures and rainfall in corn country during this pollination time has had CME’s December corn contract on an occasionally interrupted downward trajectory in recent weeks. As of last Wednesday’s close, the December electronic corn contract had settled at $4.80’2/bu. — Kerry Halladay, WLJ Editor