Lower Corn Yields Leading to an Early Christmas Rally?

Can corn production on the western side of the U.S. Corn Belt offset the reduced yields due to excess moisture in the east? That’s one of the corn market’s main questions heading into harvest.

After visiting fields under knee-deep water in early July, Moe Agostino of Farms.com Risk Management says it was clear corn and soybean yields in Ohio, Indiana, Illinois and Missouri would be variable at best due to too much moisture, but he says there were also signs then that the corn crop in western areas would not be as large as expected.

Agostino scouted fields in 13 corn-growing states between June 27 and July 11 as part of his fourth annual U.S. Corn Belt Crop Tour.

“When I concluded the tour, I said the west was good, but it wasn’t great. It wasn’t what I saw last year. Last year was amazing, outstanding, great. It was ‘wow.’ I felt the west was good, but it was one or two weeks behind what I saw last year,” he says in this video filmed at the Outdoor Farm Show in Woodstock last week. (continues below)

Following earlier projections of record production in the Western Corn Belt, the USDA started to lower its corn projections in its September report, dropping the national yield average 1.3 bushels from August to 167.5 bushels per acre.

“In wet years like 2015, if the yield on corn drops in September, it typically drops in October and November,” says Agostino.

More from Canada’s Outdoor Farm Show ’15

So if the USDA has overestimated corn yields, is the corn market (and perhaps along with it, the wheat market) due for a rally? Nearby corn futures have recently been trading between $3.60 and $3.90 per bushel.

“There’s no question,” he says. “I think we go right back to that $4.50 high (hit in mid-July).”

Some analysts, including Agostino, believe the USDA will cut the corn number again in the next report on October 9.

“If we drop the yield to 164, ending stocks go from 1.592 (million bushels) to 1.3. That’s enough to ration some demand and I think we get an early Christmas rally,” he says.

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