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How Will Corn Quality Affect Corn Prices?

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Aug. 18 2020, Updated 5:17 a.m. ET

Corn prices advance

December corn futures contracts, traded on the Chicago Board of Trade (or CBOT), increased by 1.68% and settled at $3.93 per bushel on September 14, 2015. Corn futures prices advanced to a ten-month rally, due to a better-than-expected crop progress report and slower harvest progress that reduced supply and increased prices.

The Teucrium Corn ETF (CORN) grew by 1.23% on September 14, 2015, following corn futures prices on CBOT.

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USDA weekly harvest progress report

The US Department of Agriculture’s (or USDA) weekly harvest progress report was released on September 14, 2015. According to the report, the corn harvest was 5%, equal to expectations, trailing from the five-year average of 9%. The slowing corn harvest pace would increase the chances of damage in the event of unfavorable weather changes.

The USDA’s September projection for 2015–2016 for corn was cut by 4.4% from last year to 13.585 billion bushels, due to the lower yield per harvested acre. If the September crop outlook decreases from the August outlook, the crop size has little chances of increasing. Minnesota, South Dakota, and Iowa are important states for reaching higher production numbers. With their reduced outlook in the latest USDA report, it would be difficult for the harvest figures to rise.

The corn crop progress report was expected to be weaker for the week ended September 13, 2015, due to unfavorable weather. The USDA’s crop progress report released on September 14, 2015, for corn’s good-to-excellent section was unchanged at 68%. Good quality corn would help to generate higher yield and support prices.

Ticker discussion

The recent steep increase in corn prices could motivate farmers to use fertilizers at the current level. This could hurt sales for fertilizer companies like Mosaic Company (MOS), Intrepid Potash (IPI), Potash Corp. (POT), and Terra Nitrogen Company (TNH).

The shares of these businesses increased on September 14, 2015, with the VanEck Vectors Agribusiness ETF (MOO) having an interest in these stocks.

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