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Hope for Corn Prices After USDA Delivers Bearish Surprise

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The final 2011 crop production report released by USDA on Thursday was expected to show a further decline in production numbers. This was not the case. For 2011, the USDA estimates U.S. corn production at 12.35 billion bushels vs. the USDA’s December estimate of 12.310 billion bushels and the average trade analysts’ estimate of 12.280 billion. The USDA estimates the U.S. 2011 soybean production at 3.056 billion bushels, compared to the average trade estimate of 3.042 billion and the USDA’s December estimate of 3.046 billion bushels.

 

In a move that many farmers may find hard to believe, the government actually raised their estimates on corn yield for the 2011 crop.  For corn, the USDA raised its 2011 U.S. yield at 147.2 bushels per acre vs. the trade’s average estimate of 146.4 bushels per acre and the USDA’s December estimate of 146.7. The USDA pegged the U.S. soybean yield at 41.5 bushels per acre vs. the average trade’s estimate of 41.3 bushels per acre and the USDA’s December estimate of 41.3.

 

Inventory numbers added to the bearish picture painted by the report. The USDA estimates the U.S. corn stocks, as of December 1, at 9.642 billion bushels vs. the average analyst estimate of 9.401 billion bushels. For soybeans, the USDA estimates the U.S. stocks at 2.366 billion bushels vs. the average analysts estimate at 2.312 billion bushels. USDA estimates the U.S. wheat stocks at 1.656 billion bushels vs. the average trade estimate of 1.679 billion bushels.

 

Corn and soybean futures prices fell sharply on Thursday, with corn moving down the 40 cent daily limit. Mike Silver, with Kokomo Grain, feels there is hope for corn prices in the long run, “The market will be drawn to the $5.75 to $5.80 level for March corn, but there is a lot of time before the 2012 crop is planted, pollinated and harvested.”  He told the HAT podcast that it is his opinion that it is not all over yet for higher corn prices.

 

Jim Riley, with Riley Trading, says, despite the big sell off, no major technical damage has been done, “We would have to get March corn below $5.80 in order to do major technical damage.”  Riley also believes there will be a recovery in corn prices, especially if the lower prices stimulate demand from the export market. Riley told HAT that the reason for the extremely bearish reaction by corn futures was spreading by commodity funds between corn and soybean contracts, “The funds were selling corn and buying beans.” Riley also expects concerns about South American production prospects to re-emerge by early next week.

 

Hear a complete discussion with both analysts

Mike Silver

[audio:http://www.hoosieragtoday.com//wp-content/uploads//2012/01/silver.mp3|titles=Mike Silver Kokomo Grain]

Jim Riley

[audio:http://www.hoosieragtoday.com//wp-content/uploads//2012/01/jim-riley.mp3|titles=Jim Riley Riley Trading]