Takeaway

The presenter argues that despite a second consecutive USDA corn yield cut, the focus should shift from supply to demand-side factors and outside market influences. He notes that the closest analog year, 2022, saw an identical-sized cut through September but the final yield ultimately increased. The key drivers for price going forward are now record managed money length and the strong correlation between grains and inflation.

What the presenter said

• The September WASDE cut corn yields by 2.2 bushels per acre to a national estimate of 178.5 bu/acre, slightly above the average trade guess of 178.2 bu/acre. (00:15, 00:25)
• This is the second consecutive monthly cut. Historically, only 2011-12 and 2022-23 saw an initial cut in August followed by another in September. (00:22, 02:00)
• The combined August and September yield cuts for the current 2026/27 marketing year are -4.5 bu/acre, which is identical to the cuts seen in 2022/23. (03:40)
• Higher overnight temperatures, which are detrimental to grain fill, were a key factor this year, whereas 2022 saw higher daytime highs. (04:55, 05:11)
• Crucially, after the September 2022 report, the final yield in January actually came in 0.8 bu/acre higher. A third cut is not guaranteed. (06:08)
• Managed money is at a new record net long in corn futures since 2022, driven by inflation concerns. (08:20)
• The correlation between the StoneX Grain&Oilseed Sub-Tracker and US CPI is a "shockingly strong" 0.89 over the last five years, stronger than energy's correlation. (09:24)
• The presenter believes the demand side and outside market influences will be more influential on price than US yield for the rest of the marketing year. (08:55)

Trade ideas

• None stated. The presenter's market view is that demand-side factors, inflation, and managed money positioning are now more important drivers for corn prices than the remaining questions around US yield.

Levels and data cited

• National Corn Yield (Sep USDA): 178.5 bu/acre
• Average Trade Guess (Corn Yield): 178.2 bu/acre
• 2022/23 Corn Yield (July): 177.0 bu/acre
• 2022/23 Corn Yield (September): 172.5 bu/acre
• 2022/23 Corn Yield (January final): 173.3 bu/acre
• Data: Managed money positioning in corn futures is at a new record high since 2022 (Source: CFTC & Refinitiv).
• Data: The 5-year correlation between the StoneX Grain&Oilseed Sub-Tracker and US CPI (YoY) is 0.89 (Source: StoneX, BLS).

Risks and what would invalidate this

• The assumption that two yield cuts will be followed by a third is not guaranteed; the 2022 analog shows the final yield can increase from the September report.
• The most bullish yield news from the USDA may already be priced into the market.
• Headlines related to an escalation of the Black Sea conflict between Russia and Ukraine could impact supply.
• It is uncertain how long managed money will maintain its current record long positioning.