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Corn Futures Plummet on Surprise USDA Yield Hike
13 Jan
Summary
- Corn futures experienced their largest drop since June 2023.
- USDA unexpectedly raised US corn yield and production forecasts.
- Analysts anticipated a reduction in corn supplies, not an increase.
Corn futures experienced a sharp downturn, marking the most significant drop since June 2023. This decline followed the latest US Department of Agriculture (USDA) supply and demand report, which revised its outlook for American corn supplies upwards. The agency unexpectedly increased its average corn yield and production estimates to new record levels. This news sent corn futures reversing earlier gains, falling as much as 5.8% in Chicago.
The USDA's revised figures indicated larger quarterly and end-of-season stocks than anticipated by market analysts. Many had predicted a reduction in US corn yields due to dry weather late in the growing season. However, the USDA raised the yield to 186.5 bushels per acre, a figure no surveyed analyst had foreseen. This influx of supply exacerbates existing market pressures from substantial global grain harvests and weakened demand.
The report's findings suggest a bearish outlook for corn, impacting farmers who are now holding more supplies as a new planting season approaches. The Renewable Fuels Association suggested expanding corn-based ethanol blending into gasoline as a potential market solution. Meanwhile, the USDA also lowered its soybean export outlook, citing increased production and exports from Brazil, despite ongoing purchases by China.
