Corn In A Battle For Acreage With Soybeans
Today’s Spotlight Market
The following are some of the highlights for Corn from USDA January Crop Report:
2014 U.S. Corn Production 14.216 billion bu. vs. 2013 production 13.925 billion bu.
2014 U.S. Corn Average Yield 171.0 bu. per acre vs. 2013 Average Yield 158.8 bu per acre
2014-15 U.S. Corn Stockpiles 1.877 billion bu. vs. 2013-14 Stockpiles 1.236 billion bu.
Fundamentals
Corn futures are apparently not immune from the overall bearish mentality for all thing commodity related that has penetrated the psyche of traders and the financial media of late. We see that clearly in the market reaction the past two sessions that followed a modestly bullish USDA ending stocks figure on Monday.? The USDA lowered the 2014-15 U.S. Corn stockpiles estimate to 1.877 billion bushels from the December estimate of 1.998 billion bushels. More importantly the government estimate was below pre-report estimates of traders and analysts of 1.940 billion bushels. The decline in Corn stocks was tied to lower than expected average yields this past season.
Even though there is snow on the ground in most of the U.S. Corn belt, this is the time of year when producers contemplate the coming season?s crops, including what to plant to hopefully maximize incomes. This becomes an even more important decision now that crop prices are well below record levels seen just a few seasons ago.
A current calculation of the new-crop Corn to Soybean ratio shows that the November 2015 Soybean price is approximately 2.40 times that for December 2015 Corn. This ratio is nearly spot-on with the average ratio seen since 1972. However, since 1998 this ratio has averaged closer to 2.20 which could be a sign that producers may tend to lean more towards planting Soybeans than Corn this season. Given what appears to be a record crop for Soybeans from South America, one has to wonder if Corn prices may start to find some support or at least outperform Soybean prices in the coming weeks as Corn may need to bid for acreage this season. ?
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