Volatility the norm as new crop yield still unknown

By Jason Sagebiel | September 23, 2013

Sept. 3—New crop corn was able to achieve $5 plus per bushel for a short time. Granted, the corn crop needed the heat units, however, it came abruptly and the impact was feared worse for soybeans, spilling over to corn. As the end of August approached, the market began to agree with a national yield of 154 bushels per acre, in line with the USDA’s mid-August yield prospects. Initially, more private analyst groups were calculating higher yield potential. 

Volatility continues, not just in the futures price but in the cash market. Basis levels have gyrated almost daily. Due to the onset of the hot and dry weather at the end of August, the perception began to circulate of a rapidly maturing crop. It will allow bushels to hit the marketplace earlier than projected, putting pressure on the cash corn market. 

Fundamentalists still believe corn can come under pressure with a 1.5 billion bushel carryout but corn may be a follower of soybeans. At the time of this writing, it is very difficult to predict soybean yields so the expectations of corn choppiness will continue until the bushels are in the bin. If soybean yields decline and soybean values advance, one may expect new crop futures to find support in the mid-to-low $4s. The market has not dealt with a carryout percentage this high since 2005-’06. Additional global supply at cheaper levels will limit the upside potential in corn at this time.