For months there have been four key focuses in our corn market:
1. January WASDE Final yield/Ending Stocks
2. South American Weather
3. United States Acreage
4. United States Weather Forecasts
January's WASDE report changed very little from Decembers numbers, dropping the corn yield by 7/10 of a bushel from December. A record yield was still realized, with the final number coming in at 174.6 bpa (see historical yield chart).
In early January, heavy rainfall in central Argentina inspired markets (specifically soybeans...and corn and wheat in sympathy) to move back towards the upper threshold of the four month range. However, now drying, ongoing planting and continued expectations of a large South American corn crop have taken the air out of that conversation. Regarding US weather, some things have changed since our first mention of it last November. Again, there is a commonly held belief that droughts in the Midwest begin with droughts in the southeast. A quick look back at past droughts in the southeast do not draw a perfect correlation to such a statement, however, there are some parallels. See 2009 and 2012 January Drought Maps.
These two years were met with mixed results. 2009 saw corn yields deviate 11 bushels higher from the previous years yield. Of course, 2012 was devastating. The national average corn yield dropped 24 bushels from the year prior. Here is a look at the progression of the drought monitor in the last three months. See Drought Monitor Maps below.
Obviously, the situation once believed to be extreme has changed quite dramatically. In essence, we are left with the conversation regarding US acreage. Some discussion of these things will take place at the February Ag Outlook Forum held by USDA. However, no meaningful reports regarding acreage will be published until the end of March. Much posturing and discussion will be taking place in the coming months. However, we are quick to point out that the market will likely be reserved to trading the range that has been the comfort zone for nearly five months. More about that in the weeks to come.
In the meantime, buyers of corn remain in a very strong position to wait out lower values, while sellers should be attending to rallies as they occur. To work through an individual plan to manage current prices, give us a call at 608-960-4771.