Volatile market expected as production estimates decrease

Corn Report
By Jason Sagebiel | June 26, 2013

May 31—Rain makes grain was the old adage but too much rain makes an uneasy volatile market.  The month of May saw snow, a narrow planting window and flooding.  The market has two adjustments to make between now and the June 30 planting intentions report. How much acreage has been lost, and have yields been negatively impacted?  For old crop, the issue will be the cash markets as this market continues to exhibit an aggressive approach.

The USDA was indicating a new crop carry-out of 2 billion bushels with 89.5 million acres harvested and a yield of 158 bushels per acre.  Demand was considered high at 12.92 billion bushels compared to the past two years of 11.135 billion bushels and 12.527 billion bushels.  Ultimately, multiple changes in both the supply and demand table are expected in the coming months. It could be argued the corn use in the feed and ethanol sectors was too high in the initial report.  Feed demand for next year was projected at 5.325 billion bushels compared to 4.40 billion bushels and 4.545 billion bushels the past two years. 

Last year was the other side of the spectrum in the weather arena but at least the acres were planted. Expect to see volatile markets this summer as production estimates decrease and demand adjusting accordingly.  There is no room for error and support for new crop corn should remain at the low $5 price level until there is a much clearer picture of production possibilities.