What is in this article?:
- Corn, soybean prices drop in classic marketing pattern
- History not a good guide
- Corn and soybean prices seem to be following the classic pattern associated with small crops -- peaking early in the marketing year and then declining as the year progresses.
Soybean prices seem to be following the classic pattern associated with small crops.
History not a good guide
History does not provide much guidance for forming expectations this year, Good said. “For corn, the pattern of yield forecasts this year, lower in September and October and higher in November was experienced only two other times,” he said. “The January yield estimate equaled the November forecast in one of those years and exceeded the November forecast by 0.7 bushels in the other. Again, history provides little guidance for forming January yield expectations this year,” he said.
Good said that the bigger issue for corn production may be the January estimate of acreage harvested for grain. There is a general expectation that the USDA’s large December survey may reveal fewer acres than currently forecast.
“On the supply side, the progress of the South American crops will be most important for the next three months,” Good said. “Weather conditions are currently improving somewhat from early wet conditions in Argentina and dry conditions in central and western Brazil. Some on-going dryness is noted in southern Brazil and Paraguay. Some argue that corn production potential has already been reduced in Argentina. For the near term, markets will likely continue to reflect expectations of very large crops,” he said.
Good commented that prices will also be influenced by the ongoing rate of consumption of the 2012 U.S. crops. For corn, there is some anticipation that the pace of export activity, which has been extremely slow to date, may accelerate as South American supplies dwindle and Asian customers return to the U.S. market.
“The larger issue, however, surrounds the pace of domestic feed and residual consumption,” Good said. “The USDA’s estimate of Dec. 1, 2012, stocks to be released on Jan. 11 will provide some much needed clarity to the rate of consumption in the last quarter of the 2011-12 marketing year and the first quarter of the 2012-13 marketing year. For soybeans, the National Oilseed Processors Association estimate of the size of the October crush is expected to be released later this week. That estimate will provide insight into the pace of crush relative to the projected rate. The pace of new export sales will also be important, with some concern about cancellations of earlier purchases by some customers.
“Prospects for further price declines for corn and soybean into 2013 favor pricing more of the old and new crop sooner rather than later. However, the transition to lower prices will be erratic so that timing of sales will still be important. Recent price declines, particularly for soybeans, seem to be a little excessive given the amount of production uncertainty,” Good said.