Large corn and soybean yields on the way
Indications are that the grain merchandizing business may be getting back to more normal times, say analyst Richard Brock Indications are that the grain merchandizing business may be getting back to more normal times, say analyst Richard Brock Indications are that the grain merchandizing business may be getting back to more normal times, say analyst Richard Brock
By Richard Brock, Brock Associates
There is one common psychological element that almost always occurs in bull and bear markets. In a bull market in grains as prices go up the news keeps getting more bullish. The fundamental news is almost always the most bullish right at the top.
In a bear market the fundamental news keeps getting more bearish all the way down until it becomes almost overwhelming, and then the market will make an exhaustion price move.
In the August Crop Report released on August 12, the USDA may well have set the stage for the bear market in corn and soybeans to come to an end. The news is negative, no denying it. The USDA estimated the corn yield at 183.1 bushels per acre. Timely rains throughout the central Corn Belt in mid-August, however, will likely result in that yield being 185 bushels per acre or more. That would push the carryout to 2.226 billion bushels, likely to result in the highest carryover of the last two decades.
In the case of soybeans USDA estimated the yield at 53.2. We believe it will be at least 54.2 and that will push U.S. soybean carryover to 616 million bushels. That still doesn’t reach the record of 2018/19, but it would be the second highest in history. The world carryover is already at the highest in history.
Getting Back to Normal
What it means is that the grain merchandizing business may get back to more normal times. Both corn and beans have reasonable carries in the futures market going forward. In markets such as this cash prices will typically go flat and then the futures gradually drift lower to meet the cash. Should be very profitable times for the grain merchandising industry and the feed industry.
