Ed Usset of Corn and Soybean Digest analyzes the chances of the current grain market taking an upturn. He makes the relatively safe assumption that only a supply-side event will upset the status quo pushing grain prices higher. His analysis comes a day before the USDA production report is released where grain market analysts are expecting a downward revision of South America’s crop production.
Usset defines a normal crop year as having yields that are +/- 5% of trend-line. Above or below 5% would indicate a great or poor crop.
Major producers and exporters [of corn are]: U.S., China, Brazil, EU, Ukraine and Argentina. From 1988 through 2012, I found only three years when all players delivered normal to great crops (1990, 1991, and 2009). These same six players have simultaneously delivered normal to great crops in four of the last five years! Good to great crops in four of the last five years from all of the major players is why we are living in a world of $3 corn.
Major producers and exporters include U.S., Brazil, Argentina, Paraguay and China. The most recent five-year period has shown [a high level of] consistency. The U.S. has delivered above trend-line yields in each of the last four years.
Wheat is a challenge to summarize because there are a dozen major producers and exporters in the world. [There have been] five consecutive years of good – and often great – wheat yields.
Usset remains readers that the chances of a normal to great year remain about 85% regardless of past years performances. His implicit conclusion is no supply shock is is imminent notwithstanding the drought in Argentina and pending USDA production report.
Therefore, Usset’s last comment is valuable and worth repeating.
Don’t forget to get something sold in the rallies.
Image Courtesy Corn and Soybean Digest