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After a soaring summer in 2012, commodity investors saw a horrendous 2013 in the corn market. A record crop erased memories of 2012’s drought, and led to huge losses in this key food staple.

In fact, the main way for investors to target corn in the exchange traded world, the Teucrium Corn ETF (AMEX:CORN), plunged by roughly 30% in 2013. This contrasts sharply to 2012’s gain of about 4% (along with the May-July return of 33%), and left many quite bearish on the crop for the New Year (see all the agricultural commodity ETFs here).

However, thanks to a recent release from the USDA, some are becoming a bit more optimistic on corn heading further into the year. That is because the U.S. Department of Agriculture said that 2013’s corn crop hit 13.925 billion bushels, a 0.5% decline from its estimate a month ago, according to the WSJ. This estimate was also lower than what analysts had expected, as their expectation came in at 14.05 billion bushels.

Yields also slumped, which was a bit of a surprise to the market too. Corn yields came in at 158.8 bushels/acre, down from 160.4 bushel/acre, meaning that fields were a bit less productive than expected.

Following this release, corn futures rose by roughly 5% on Friday, and CORN—which spreads out futures over the year—saw gains of roughly 4% on the day, on what was heavy volume (see 3 Commodity ETFs to Watch in 2014).

Other Grains

Wheat wasn’t as lucky though, as this staple crop saw its prices tumble thanks to increasing supplies. The USDA boosted its outlook for wheat, with inventories up to 608 million bushels, an increase from 575 million projected last month. Soft-red winter wheat was the big shocker though, as stockpile estimates surged from 89 million bushels up to 117 million bushels, suggesting a huge uptick in supplies.

Thanks to this, wheat futures did see some weakness-- March futures tumbled by about 2.6%-- while the Teucrium Wheat Fund (AMEX:WEAT) slumped by about 3.4% on the session.

Bottom Line

The focus was really on corn in Friday trading though, as after a horrendous past 18 months, it might finally be turning around for the crop. The CORN ETF soared in Friday trading, as the government’s report surprised the market with a reduction in corn yields (read Buy American with these 3 Commodity ETFs).

However, 2013’s corn crop was massive, the biggest in U.S. history by almost a billion bushels assuming current projections are accurate, suggesting that supply will still be a problem even with this reduced estimate. So while this was certainly a great day for corn traders, the staple food may not be out of the woods just yet, though more volatility does appear to be ahead no matter what happens this growing season for corn.

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