What now in Corn, should we lift hedges, buyback sales?
May 02, 2013
Corn bulls were happy to see ethanol production at 857,000 barrels per day (largest since last July), and were also happy to see strong blender demand pushing ethanol stocks lower as well. I should point out there were ZERO ethanol imports reported last week. Understand, even though al of this is good news, ethanol demand is going to need to keep this type of pace the remainder of the marketing year to reach the USDA's current estimate of 4.55 billion bushels used. With consumer demand at the pump continuing to fall the amount of corn we will use for ethanol continues to be questioned. US corn exports are also being questioned moving forward. With an extra 5-10 million metric tons of corn being harvested in South America and Argentine shipments running some $35 per ton cheaper then US suppliers, the outlook for increasing US corn exports look bleak. Point is "DEMAND" has still not given us a reason to get overly excited about sustained price appreciation. Yes, US new-crop "supply" looks as it will be moving lower on fewer acres going in the ground and a decrease in yield potential associated with a late planted crop. Keep in mind planting progress reported this coming Monday shouldn't be much more than 12-18% vs the average of just under 50% by this time of year. Bottom-line this could be the slowest planting pace on record up to this point. Farmers are obviously going to do everything in their power to get as much corn in the ground as possible, but we are already starting to hear from several producers who are trimming back their corn acres. the numbers haven't been drastic but certainly making some adjustments. My guess is the current USDA estimate of 97.3 million acres is eventually going to be closer to 93-95 million acres, with a crop somewhere between 13.0 and 14.0 billion bushels. The problem is with demand closer to 12.0 to 12.5 billion bushels I still see ending stocks being excessively burdensome...not tight. Next Fridays USDA report will more than likely confirm similar thoughts, therefore I believe producers should still be using the rallies to reduce risk, NOT to re-own!!!
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