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The Corn Rally Is On

The Corn Rally Is On

The grain market set new highs this week, as the overall crop condition continues to deteriorate and the weather patterns seem to be relatively unchanged. It’s fairly easy to talk to other producers these days and pick up anecdotal evidence of disappointing crop prospects, but weather- and supply-driven markets are always a lot more fickle than demand-driven markets.

Early on, I learned the mistake of using my own backyard as a big indicator of a national market. After all, the Minnesota and Wyoming wheat crop doesn’t have much of an impact on the harvest; and Colorado and Kansas usually aren’t great indicators of the corn market, either.

What we do know for certain is that we have record acreage and we had a great start on the growing season. But dry conditions have now settled over some fairly large areas, at what is a critical stage for the crop. As always, the next 2-3 weeks will be telling.

Last Friday’s USDA reports on grain stocks and acreage showed that U.S. farmers planted 96.41 million acres in corn this past spring, almost a half-million more acres than the initial March survey indicated and 4.5 million acres more than a year ago. As Len Steiner and Steve Meyer point out in the CME Group’s Daily Livestock Report, “Despite the higher acres, however, the impact on the corn balance sheet will be minimal or even negative. This is because the survey also showed that harvested acres are expected to be lower than USDA’s June estimate (higher abandonment rates and silage use than earlier forecasts). Even with a half-million more planted acres than expected, harvested acres are now expected to be about 200,000 acres lower than a year ago.”

With little rain in the forecast for the eastern Corn Belt and temps over 100° F, there’s significant concern of yield losses, Steiner and Meyer says. Already, some private forecasts are indicating they expect corn yields for 2012-13 to be in the low 150 bu./acre.

This spring, you could hear the extreme scenarios being thrown about regarding $4/bu. corn and of $8/bu. corn. The possibility of both now looks remote, but the market move seems to indicate that $8/bu. corn is a little more likely than $4 right now.

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