Improving crop quality keeps corn from popping
Corn prices continued lower this week, dropping underneath $3.50 per bushel for the first time this year after the USDA showed improving corn crop quality last week..
The USDA already was projecting an ample 14.2 billion bushel crop, and improving quality could boost the crop size to the second largest ever. Southern states have begun harvesting this year’s crop and are reporting high yields.
Earlier this month, corn, wheat, oats, and soybeans collapsed after the USDA announced its improved forecast for larger-than-expected crops this year. Dry weather in the Midwest had many market watchers fearing significant crop losses, but the USDA projected bumper crops.
The USDA increased the size of the soybean crop to a record 4.381 billion bushels and forecast the corn crop size at 15.2 billion, a near record.
This news sent the grain markets in a downward spiral, with soybean and wheat prices reaching six-week lows. Following the announcement, the value of this fall’s corn crop collapsed to an 11-month low near $3.70 per bushel and continues to fall.
Many producers and investors are skeptical that the final harvests will match the USDA’s current outlook, which could result in a rally in the coming months if the crops end up being smaller. For now, the price reflects a large surplus of grain and another tough year for farmers who didn’t hedge during the past few months when prices were higher.
However, many private forecasters fear that the crop is in worse shape in Midwestern states, which could provide a spark to the markets if they are correct.
If there is a harvest shortfall this year, it could be exacerbated by the currently low prices. Demand for corn has been climbing as buyers scoop up the grain at a bargain price, and shipments to foreign buyers have risen 23 percent over the previous year.
Breitinger is associated with Breitinger & Sons LLC, a commodity futures brokerage firm