Back in July I wrote:
"prices picked up through the July 4th holiday (following USDA acreage reports) with a 12 month and year to date high on July 11th at 4.17. Much of this was reaction to weather vs fundamentals in those reports.
However, interest and volume were not at the elevated levels we saw back during the June high of 4.09. Also, the RSI was near 70 on the 10th and 11th approaching levels giving a potential technical indication of being overbought. This of course may just be the kind of volatility we expect in a weather market while there is probably somewhat firm fundamental support based on the late plantings, replants, and current crop conditions and lack of uniformity in the crop progress across the corn belt compounding the uncertainty about weather."
I'm not a technician but the market has been downhill since then. USDA has continued to release disappointing WASDE reports indicating strong yields despite the early spring fundamentals and crop conditions being less than stellar across key cornbelt states. Current good to excellent ratings for corn are at 61% vs. 74% a year ago. Additionally the crop is behind, with 75% denting vs 81% 2012-16 average and 21% mature vs 31% 2012-16 average.
The latest WASDE report actually raised the national average corn yield slightly to 169.9 bushels per acre, and based on estimated planted and harvested acres and usage gives an ending stocks to use ratio of about 16.4%. While not a record yield this would be one of the best (2nd best) yields in the last 5 years. Current December futures puts price just above $3.54/bushel with some carry going into March and May at 3.67/3.75/bu.
Many producers and analysts are having a hard time taking these numbers to the bank. But industry analysts on average are putting yields in the 165-167 bushel range. These alone are not entirely favorable for price conditions.
|Year||Stocks to Use||Price||Yield|
My basic projections based on this data implies that to get any where near $4/bu, taking all other USDA estimates on usage and harvested acres, corn yields need to be in the 163-164 bu/acre range. More complicated estimates and some adjustments with the usage numbers may be a little friendlier.
|Projected Stocks to Use:||16.40%||14.70%||12.65%|
***This commentary is provided for descriptive and entertainment purposes only and is not intended to be used for specific trading strategies or interpreted to be investment advice. *****