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| Looking to the crop estimate, as with just about everyone in the market, I am obviously anticipating an increase in the corn crop, as well. The question, though, remains by how much and when. However, purely from a fundamental perspective, I see any increase in the crop estimate as adding to the negative structure already in place, with the degree of the increase likely having a notable impact on the eventual price action of the market. A modest 1-2 bushel/acre increase in they yield would likely leave the market heavily expecting another increase in the November report, which would then likely lead to a continuation of the longer-term choppy/defensive price action seen for months. If on the other hand, the USDA makes a notable 5+ bushel/acre upward yield revision on Friday, we would anticipate corn prices making a quick, potentially dramatic, downward price adjustment and turn into a much more choppy affair for the ensuing 3-4 weeks. So the bottom line here seems to be that the report will be bearish no matter what increase the USDA gives us. There is also widespread expectation for USDA to lower their U.S. corn acreage assumption based on the low level of FSA-reported program acreage filings so far. However, I feel there are mitigating factors to the slow pace of the FSA filings (priority being given to livestock disaster filings), leaving the risk of lower corn acreage possibly being less than feared by some. While some are expressing the risk of a 1.5-2.0 million acre decline, I do not anticipate that at this time. A look at past years shows USDA has revised harvested acreage by more than 800k acres in either direction in October on only one occasion over the last 20+ years. Given this year’s rather mundane planting weather, I feel the harvested acreage revision risk is relatively small in the big picture and should not materially impact the U.S. crop estimate.
I hope this helps answer your question.
JIM
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Friday thoughts
