Newsom: Crop markets look bearish
DTN Senior Analyst Darren Newsom looked at crop markets moving into 2013 following the release of USDA’s Crop Report in a May 10 webinar.
“This year will be interesting because we have seen a very slow start to the planting season,” Newsom said. “Moisture and cold have made it impossible to get in and start planting.”
He noted that there are also questions over projected yields, noting that actual yields could go up, but they are very vulnerable to weather problems.
“We saw a slight increase in harvested acres,” he said of the report. “One thing that caught most people’s eye was the average yield of 158 bushels per acre.”
He also added that difficulties with dryness might result in the fourth year of below trend-line yields for corn.
“This is where the market shows vulnerability,” he said.
“The fact that USDA already trimmed yield to 158 is interesting, given that we are only in May,” Newsom commented. “Longer term, there is a great deal of room for USDA to get more bearish is we get more acres planted.”
USDA predicts that 97.3 million acres will be planted, marking an increase. As a result, harvested acres will also increase.
“Another question is what are we going to do with the old crop,” asked Newsom. “I think the old crop market is down, but I’m not sure traders actually believe it.”
“The old crop carry-up is not overly bullish or overly bearish, but if we compare back to where we have been before, it isn’t as bullish as it could be,” he continued.
Looking forward to USDA projections for the end of this year, Newsom marked over 2 billion bushels as ending stocks, showing more than a 1.2 billion bushel increase from this year.
As a result, Newsom said, “We saw corn initially move lower.”
However, numbers rebounded from a 19-cent drop to only 10 or 11 cents, and focus shifted from projections to concerns about what weather will bring this year, he commented.
Corn production, he added, will increase above last year’s, which set at fewer than 11 billion bushels.
“In one year, it looks like we will go over 14 billion, if everything comes out and we have nothing but ideal conditions,” he said, adding that, if that happens, stocks will be rebuild in only one year. “In one fell swoop, if everything works out, we should be able to rebuilt our stocks on the back of increased acres and better conditions.”
“There are a lot of things to consider,” Newsom commented of corn markets. “It poses a real problem in the fundamental standpoint for corn markets.”