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Lower-than-Projected Yield Supports Corn Prices

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Corn prices rise

Corn futures on the Chicago Board of Trade (or CBOT) for March delivery rose by 1.4% and settled at $3.56 per bushel on January 12, 2016.

Corn prices rose following the lower-than-projected yield from the USDA’s (U.S. Department of Agriculture) WASDE (World Agricultural Supply and Demand Estimates) report. The Teucrium Corn ETF (CORN) followed CBOT and rose by 0.97% on January 12, 2016.

The USDA’s WASDE report for January 2016 was released on January 12, 2016. For the marketing year 2015–2016, the area of US corn harvested fell by 0.4 million acres to 88 million acres from the December 2015 WASDE projection.

The report estimated higher corn yield per acre by 0.9 million bushels, to 168.4 bushels per acre, compared to the December 2015 WASDE estimate. However, this was lower than analysts’ projection of 169.5 bushels per acre.

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At 1.8 billion bushels, 2015–2016 year-end US corn inventories were higher by 17 million bushels. Inventories were also higher than the analysts’ consensus of 1.78 billion bushels. Lower-than-consensus carry-out and acreage for US corn hurt the supply sentiment on January 12, 2016. It supported futures prices on the day.

The USDA’s National Agriculture Statistics Service released quarter-ending grain inventories as of December 1, 2015. Corn inventories were 11.21 billion bushels for the September to November quarter against the consensus projection of 11.24 billion bushels.

Inventories were slightly higher than they were in December 2014 due to a reduction in disappearance by 0.12 billion bushels. On-farm stocks of corn were at 6.8 billion bushels, 4% lower than the previous year, while off-farm corn inventories were higher by 6% at 4.4 billion bushels. Lower-than-consensus quarterly corn inventories supported corn prices on January 12, 2016.

Stock discussion

The rise in corn prices supported the inventory value and the profitability of corn trading and producing companies. With the advance in corn prices on January 12, 2016, ConAgra Foods (CAG), Ingredion (INGR), Archer Daniels Midland (ADM), and Tyson Foods (TSN) rose by 1.2%, 1.1%, 0.32%, and 1.7%, respectively. The PowerShares DB Agriculture ETF (DBA) rose by 0.61% on the day.

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