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Big corn yields and narrow trading ranges

Corn harvest this month had many Ohio producers scrambling for completion. The huge amount of corn and soybean acres replanted earlier this spring pushed maturity several weeks behind normal. The time change the first weekend of November brought the stark reality that harvest conditions had dramatically changed. Gone were the long harvest hours seen during the last half of October when the weather provided nearly two weeks of excellent harvest conditions. The 70-degree or higher daily temperatures evaporated along with the many hours of sunny weather. Those days were often replaced with daily highs struggling to reach even 50 degrees. The first 10 days of November brought rain nearly every day to much of Ohio. Those rains were particularly troublesome for those struggling to finish harvesting soybeans.

Producers and grain elevators alike have been working diligently to make room for the long harvest period seen in October and November. On farm storage is being used to the maximum as producers scramble to find room for all of the corn flowing out of combines this fall. Rain delays not only yielded time for equipment repairs, but allowed producers the opportunity to put even more corn in places which had not been used with regularity in past years. Producers continue to be flabbergasted with the corn yields this fall. Across Ohio, corn yields are setting new records for numerous producers. The huge amount of replanted acres pushed maturity later than desired. November brought less than desired harvest opportunities as farm dryers struggled to keep up with the huge amount of corn that needed to be dried. The rains of early November even pushed one central Ohio commercial grain facility to switch their dryer to soybeans, away from corn, in order to condition incoming grain to desired levels. That strategy was no doubt seen across the state.

The November USDA Supply and Demand Report estimated U.S. corn production at 14.578 billion bushels. The U.S. corn yield was estimated at 175.4 bushels per acre, up 3.6 bushels from October. In addition, 2017 marked the second consecutive year of a record U.S. corn yield. Last year the corn yield was 174.6 bushels per acre as it eclipsed the previous record of 171 bushels per acre in 2014. To summarize, corn has seen record setting years in three of the last four years. It certainly brings to light the tremendous genetics now being bred into each bag of seed corn. It also reminds us that corn likes wet, cool conditions, hating drought conditions. Ohio and the Midwest certainly saw those ideal growing conditions this summer.

Corn ending stocks were estimated at 2.487 billion bushels, just shy of 2.5 billion bushels. That mark is an overwhelming number, which brings joy to the bears while bringing fear to those holding a huge amount of corn on the farm. Looking further at the November corn table, domestic usage of corn was increased 75 million bushels along with corn exports increasing the same 75 million bushels. Some analysts suggest that Brazil and Ukraine could see less corn production than previously estimated, had them in agreement with USDA that U.S. corn exports could easily be increasing the second half of the September to August marketing year. Others point out that corn used for ethanol could also be increasing in coming months from the current USDA estimate of 5.475 billion bushels.

Corn and soybeans for much of October and early November had narrow trading ranges. Soybeans often had a daily range of seven cents or less while corn had a daily range of two cents or less. Overnight trading volumes were often very light for both corn and soybeans. This combination meant that grains were just not attractive for many traders. Option volatility was less than normal, meaning buyers of options had the opportunity to participate in the markets at less cost than seen in recent years. Some are suggesting that the nearby CBOT corn contract could reach $3.30. Soybeans during harvest spent some time above $10 but were unable to sustain those levels. Some speculators were exiting long soybean positions when the November report failed to reduce the U.S. soybean yield.

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