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Trade expecting lower corn production in September crop report

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Written Thursday, September 08, 2011  

Expected lower U.S. corn and soybean production estimates in next week's crop production report from the Department of Agriculture could lead to marketing opportunities for farmers, an Ohio State University agricultural economist says.

The September crop report is particularly important this year because of the lateness of planting in many parts of the country, said OSU Extension ag economist Matt Roberts, an associate professor in the Department of Agricultural, Environmental and Development Economics.

"The market is really most interested in new information on yields," Roberts said. "Since the August report came out, six or seven major marketing services gave their own yield forecasts, and they've been all over the place."

He said those estimates from commodity market analysts ranged from as low as 143 bushels per acre for corn to as high as 152 bushels per acre. A yield estimate from USDA near or outside one of those extremes would likely lead to aggressive action in the corn market.

Specifically, Roberts said, the market consensus is a corn price based on a yield below 151 bushels per acre nationally, and anything above that mark will spark a significant selloff.

"A lot of the private analytical scuttlebutt centers on the Eastern Corn Belt and how things fared in August," he said. "ProFarmer, for example, came out with significantly lower estimates for Illinois, Indiana and Ohio."

Because of the lateness of planting in states such as Ohio, very few harvest reports are available from major corn producing states. The few areas of the country already shelling corn are reporting widely varied yields, Roberts said.

USDA will release its latest estimate of crop yields, as well as updated supply and demand estimates, on Monday, Sept. 12.

"I'm not sure if even by the October report how good an idea we're going to have of the size of this crop," Roberts said. "The problem there is it creates a lot of uncertainty in terms of rationing the crop."

With such uncertainty, Roberts is concerned that users will "defensively" ration corn, and should a larger than expected crop materialize at harvest, prices will soften on the reality of additional grain.

For soybeans, Roberts sees a somewhat different story in terms of market expectations.

"In relative terms, our soybean inventory is larger than corn," he said. "In the past week or so, volatility in the soy complex has largely come from concerns over the global economy. We export almost half of our annual production, so the continued health of importing countries like China is getting all the attention in the marketplace."

He cited the ongoing European debt situation as also weighing on the soybean market.

At this point in the growing season, Roberts expects that many good managers have already priced much of their anticipated production but that market volatility could yet yield pricing opportunities.

"When we see up days, those are times to price," he said. "If we see December corn above $7.80 before harvest, that's a good opportunity to sell. I think most guys have done a lot of selling already, so now it's time to sit back and watch the spreads to figure out storage. I'd be very leery of how much corn I'm going to store this year."

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