Inside the Market

Corn Suspicions Endure

With choruses of "Auld Lang Syne" still in our ears, on the tenth of January, USDA will release the one "WASDE" report that is known for announcing final-crop estimates of corn and soybeans for 2019. I have to say again, 2019 has not been a typical crop year.

After providing an additional planting survey after its June estimates and an additional spring wheat-production survey after its September estimates, it would not be surprising to see USDA provide an additional corn-production estimate after its January "WASDE" report.

DIFFICULT CONDITIONS

The problem, of course, began with wet spring weather that pushed roughly 15.8 million acres of corn planting or 18% of the crop well into June. Late planting led to the slowest corn harvest pace since 2009, made more difficult by October winter storms in the northwestern U.S. Plains and wet fields across much of the northern Midwest.

U.S. propane prices that were at three-year lows in mid-August doubled by mid-November as demand for crop drying caught the industry unprepared. Many farms couldn't obtain the propane needed and left crops in the fields for Mother Nature to dry.

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WAVERING FACTORS

Had we known all this was going to happen a year ago, we could have made big bullish bets on the price of corn, but they wouldn't have panned out as well as many might have expected. DTN's National Corn Index of cash corn prices started 2019 at $3.43 a bushel and stands at $3.55 at the time of this writing.

The big excitement for prices happened in July when the index peaked at $4.45 a bushel, encouraged by swirling predictions for even higher prices. USDA's crop surveys, however, never shared the same enthusiasm, and the August crop estimate of 13.9 billion bushels (bb) sent corn bulls fleeing.

As of November, USDA's corn crop estimate of 13.66 bb is just 5% less than the 2018 harvest of 14.42 bb. I have to admit, it is still difficult to believe the worst planting conditions in modern history and a wet, difficult harvest season were only able to tax production by 5%. That lingering doubt is one reason USDA's final tally could still drop below 13.5 bb -- whenever the final number arrives.

LATE REVISIONS

All this reminds me of an interview I did with DTN contributing analyst Joel Karlin back in October. Joel explained his belief that USDA's lower-than-expected Sept. 1 corn stocks total of 2.114 bb was partly due to USDA overstating the 2018 crop estimate almost a year earlier -- a harvest that also turned out wet in many areas.

As Karlin mentioned, we may see a revision in the crop estimate when the next Ag Census comes out some four years from now. It will be too late to impact today's prices, but the 2019 corn crop tally is an acquaintance that will not be long forgot.

> Read Todd's blog at about.dtnpf.com/markets.

> You may email Todd at todd.hultman@dtn.com, or call 402-255-8489.

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