Next week's warm and dry weather should boost prices and encourage traders to get re-positioned long just before the June 12 USDA monthly crop report.
For the last five months, prices have rallied just before these reports. There's a fear that each month the government will lower ending stocks. With all planting nearly complete, weather will be the primary factor for weekly prices.
The last USDA monthly crop report made predictions based on 20-year average corn yields. The final number skipped last year's poor yield of 147 bushels per acre and came up with a projected 164 bushels per acre.
Then officials added two bushels per acre to report a record 1.66 bushels per acre. It appears they are counting on early planting or maybe just good luck. That total puts ending stocks inventory for the new year at 1.8 billion bushels.
A DIFFERENT PROJECTION
However, if you include last year in the 20-year average, it would total 160 bushels per acre. Ending stocks would be 1.3 billion bushels. This lower projection makes more sense. If good or bad weather increases or decreases yields, a shell game is played.
The last USDA report increased old crop ending stocks 50 million bushels, saying early planting will lead to an early harvest beginning in August, the old crop year, putting new crop year plantings into old crop year carryover.
Consider these numbers of corn harvested early:
- 2008-09: 300 million bushels harvested early
- 2007-10: 600 million bushels harvested early
- 2011: 450 million bushels harvested early
Some analytical gurus suggest this year 1 billion bushels that could be harvested early. This would change all the usage figures on distribution.
WHAT IT MEANS
Let's say we have a 160 bushels per acre yield and only harvest 500 million bushels early. That means the 1.3 billion bushels carryover drops to 800 million bushels on paper. We are back to where we are now.
Weather and spring's soybean rally could affect ending stocks. Some think farmers may have chosen to plant soybeans on 2 million acres set aside for corn in the March 30 planting intention report. If weather cuts yields by three bushels per acre and farmers planted beans over corn, it will put ending stocks under 400 million bushels.
This is the foundation of how traders are thinking right now from the fund management standpoint.
IN THE END
And this is what makes weather and its impact on the emerging crops 90% of its pricing influence to determine what the actual yields and production will be.
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