Supply and demand numbers from USDA’s September 10 estimates show corn leaning towards the bull with soybeans favoring the bear. However, analysts say major volatility is still in the mix.

The latest USDA report says there is record corn production of 3.2 billion bushels and another record for soybeans at 3.48 billion bushels. Ending stocks for 2010/2011, said USDA, would see 1.116 billion bushels of corn (compared to the earlier estimate of 1.100 billion bushels) and 350 million bushels of soybean (compared to the earlier estimate of 285 million bushels).

Corn

“As expected, the report showed a reduction in corn yields,” said Brian Basting of Advanced Trading during a press briefing sponsored by the Chicago Mercantile Exchange shortly after the report was released. “I would think the corn market will now be intently focused on the final yield numbers. I think we’ll see a rapid harvest pace, weather permitting, for the next 30 days. The crop is very mature and I think the market, by the October 8 report, will have a really good handle on what the final number is.

“I think with a fair amount of the market, bullishness is built in with the rally going into the report with the reduction in yield. Now, we’ll wait to see if the actual yields reach the numbers highlighted.”

The corn numbers are “particularly friendly with a stocks-to-usage level already the tightest since 1994/1995 crop year,” said Terry Roggensack of The Hightower Report. “The report opens up plenty of opportunity to see that tighten further. Will we end up with a yield as high as they talk about once the (drought) and heat issues impact the (grain) filling process late in the year?”

For corn, said Basting, the question now becomes: do we see any further increase in corn exports from the 2.1 billion bushel level? The report “also reduced feeding by 100 million. I want to underscore that because the feed component is still the largest use of corn. So, there’s a lot of volatility yet for corn.”