Why is Corn Ignoring Bullish News?

Despite the seemingly supportive USDA report this week, corn prices have so far not reacted in much of a bullish manner.  In fact, today's settlement price for Dec-13 corn is within $.02 of the closing price the day before the USDA report on Monday Aug. 12^th.  Before I lay out reasons for the markets muted response, let's first quickly summarize the latest USDA update.  US corn production was lowered 187 million bushels to 13.763 billion, roughly 215 million bushels below expectations.  Partially offsetting the lower production was a 75 million bu. cut in demand.  This left US corn ending stocks for the 2013/14 marketing year at 1.837 billion bu., which was 135 million bu. below expectations. In recent years, USDA data that was this far off from expectations often led to violent price movements.

Corn Futures - Weekly Continuation 

So why are prices so far not showing much reaction?  First of all, let's examine production.  Although the latest USDA estimate was below expectations, it is still a record crop.  In fact, it is just over 650 mil. bu. larger than the record crop in 2009. Next, let's take a look at US ending stocks.  While below expectations, they are still up just over 1.10 billion bu. from last year and are the highest in eight years.  Finally, let's factor in global supplies.  World endings stocks for the 2013/14 marketing year are forecast to swell to 150 million metric tons, up 27 mmt. from last year and the highest level in 13 years.  With this report out of the way and now fully digested by the market, we must address the following two questions.  Will this year's crop ultimately be bigger or smaller than the latest USDA estimate? What can we expect in terms of price movement heading into this year's harvest? (more)
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