A record U.S. corn yield may be in the cards this year, but how markets use this potential depends on more than just acres and agronomy. Farmers are eyeing 96 million acres of corn and near-decade-best crop ratings heading into pollination, and that could damper the top-end of price potential unless something gives on weather or demand.
“The industry really expected a nice premium to sell old crop of July over December,” says Jody Lawrence of Strategic Trading Advisors, based at Nashville, Tennessee. "But now July is an inverse to December — and that tells us there’s likely more corn out there than the USDA projected”. With pollination ahead and only localized weather concerns, the crop outlook is solid, but that’s not necessarily bullish.
Still, Lawrence points to reasons for optimism — especially around soybeans. The U.S. Environmental Protection Agency’s unexpected support for stronger Renewable Volume Obligations (RVOs) could bolster domestic demand. “The industry came in with best-case scenarios, and nobody thought the EPA would approve them, but they came awfully close,” he says.
On wheat, a fund-led short-covering rally has helped lift prices, creating a window for hedging ahead of harvest. And on the livestock side, falling feed costs alongside strong beef demand and tightening cattle numbers could spur herd expansion, creating a bright spot for corn and soymeal demand downstream, Lawrence says.
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