(The opinions expressed here are those of the author, a market analyst for Reuters.)

NAPERVILLE, Illinois - Bullish corn speculators were rewarded on Friday when the U.S. Department of Agriculture slashed last year’s U.S. corn harvest by a significant and unexpected margin.

But does a January victory for the bulls increase their chances of punishment later?

Unfortunately, the answer is not straightforward as all years are unique and there are plenty of different angles to examine. Of course, outliers exist in almost every dataset.

One trend is pretty clear, though. Whenever U.S. corn production ends up smaller than previously forecast, farmers typically increase corn plantings for the next season. Analysts have already been very receptive to the idea that 2025 acres will be larger than in 2024.

But they may not be prepared for the magnitude. In the last two decades, any time the U.S. corn crop was smaller than was forecast in August, the trade underestimates corn planting intentions in the following March.

This would signal a bearish outcome ahead on March 31 as the 2024 harvest is now estimated to be 1.8% smaller than was projected in August.

There is one outlier, a shrinking 2020 crop and bullish corn acres in March 2021. Pandemic implications complicated farmers’ reporting that year, and ironically, the trade in March 2021 was significantly closer to the final plantings than USDA’s March survey suggested.

Some of this is inherent. In the last 10 times that corn acres rose year-over-year, the March planting number was bearish in eight cases. So this may be something that speculators consider over the next two months, especially with their notably bullish corn positions. 

Whether the trade correctly predicts March plantings, huge corn acres would likely weigh on prices. New-crop Chicago corn futures, relative to soybeans, have opened 2025 on the strongest note in over a decade, supporting corn plantings.

POSSIBLE BULL CASES?

There are a couple of friendly factors supporting bulls, particularly strong recent demand.

Despite the production cuts, USDA since August has increased total 2024-25 U.S. corn use by 1%. That is the only instance in more than two decades where use estimates rose in that period despite a materially smaller harvest.

Although this year’s case is slightly different with the smaller crop, rising use estimates between August and January often correspond with lower final ending stocks from here.

Regardless of whether that pans out, it could be a bumpy ride to get there by way of quarterly stocks, especially if those are poorly anticipated by analysts.

There is no correlation between a shrinking U.S. corn crop and trade biases on March 1, June 1 or Sept. 1 stocks – both bearish and bullish outcomes have ensued.

However, a late-season production misjudgment could produce a bearish outcome down the road. Whenever January corn yield was particularly bullish as happened this year, Sept. 1 stocks, effectively the ending stocks, are almost always neutral-to-bearish relative to expectations.

Rival corn exporters could come into play. U.S. ending stocks rarely have significant upside from this point whenever combined corn production out of Argentina, Brazil and Ukraine is steady to lower on the year.

USDA pegs that combined crop in 2024-25 unchanged from the prior year, although annual gains of more than 30% have been observed within the last decade.

That estimate has not yet factored in potential losses in Argentina, where dryness is largely expected to persist through late month. If this pattern continues beyond January, it could be a boon to U.S. exporters and corn bulls alike, though the latter should stay on alert come late March. Karen Braun is a market analyst for Reuters. Views expressed above are her own.

(Writing by Karen Braun Editing by Matthew Lewis)