The bull expected to run off of the short corn crop last year and tear through the market, taking prices to $8 per bushel and keeping them there, never ran. Arlan Suderman, marketing specialist for Farm Progress Companies, documented that fact in his monthly column and in his daily market reports. Now the bull is nowhere to be seen. Instead, a big bear looms on the horizon.
Chris Hurt, Purdue University ag economist, says that's after ag economists and traders alike were caught off guard with the last government report, issued as the final report for the 2011 crop year. Unlike a year ago when USDA shaved a few more bushels per acre off yield in the January report, they actually added a small amount back. Compared to August estimates, the yield per acre was still lower, but it was higher than in the last report in most cases. Most important of all, it was higher than what the trade expected. That sent markets tumbling late last week. The soybean picture didn't look any better, impacted partially by what's happening in South America.
It's still a long way until next September, however. What Suderman thinks it all does mean is that the size of the U.S. crop this year could have a tremendous impact on carryout and corn prices. If yields move back toward trend yield or higher with a good season, stocks will be replenished and prices will sag lower. However, if it's another bad weather year, a small change and another year below trend line yield nationally could keep stocks tight and corn prices up. He believes yield levels will be more important than ever for this upcoming crop year.
Hurt has suggested more stability coming into the market beginning in 2012. Part of that, even before the latest report, came from the fact that the government mandate eases back on the additional amount of ethanol it requires to replace fossil fuel over the next three years. Then the amount is capped around 2015.
Stability can remove the volatility farmers, and especially livestock feeders, have faced over the past few seasons, he observes. However, it can also make for years of tighter and lower margins for grain farmers in general. It could put management at a premium. Part of management is obtaining land at a cash rent agreement that you can sustain, even when prices aren't as high for commodities in 2011.