Positive corn, soybean yield reports add market pressure

Corn prices are weakening and reports of a 14 billion bushel corn crop are circulating. This is increasing interest in distillers grains domestically and in the export markets.
By Jason Sagebiel | November 25, 2013

Oct. 25—Despite the government shutdown and delayed USDA reports, continued news of better-than-expected corn and soybean yields have been circulating, adding pressure to an already pressured market. The assumed additional yield is adding to total U.S. supply, approaching a 14 billion bushel production mark. December corn futures have traded to a low of $4.30, prices not seen since August 2010. As prices weakened, the opposite has happened to the cash market. Producers have storage and are expected to hold onto bushels. This has kept the cash market (basis) firmer this fall than originally anticipated. However, the key to increasing demand going forward will be the export sector, with lower prices encouraging that demand. With the firmer cash corn and soy complex, distillers grains has garnered attention both globally and domestically. Coproduct prices have remained at high values relative to corn. Coproduct revenue will become a greater percentage of ethanol production profitability this fall. 

The chart offers an illustration of a 2 billion bushel corn carryout. The carry-to-use ratio would then escalate to plus or minus15 percent, not seen since 2005-’06. This would support lower prices and encourage demand, most likely from the export sector. After U.S. harvest is complete, attention will turn to South American weather. What impact will weather have on Argentina and Brazil corn and soy production? That impact will spill over to U.S. markets.