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MGEX Research

RSS By: Joe Victor, AgWeb.com

Joe Victor is a Business Development Specialist with Minneapolis Grain Exchange, Inc., where he monitors cash grain activity and cash grain opportunities. He provides marketing advice through this blog.

Corn Mutation

Jan 16, 2009
Corn Mutation:
 
At preciously 7:30 am central time on January 12th, the attitude towards corn futures experienced a notable change. Fading are ideas of worries of needing to buy 2009 corn acres and evolving are ideas of expanding soybean and spring wheat acres.
            Just in the recent two months of January and December, the balance sheet for 2008/09 corn ending stocks have risen 666 million bushels, largely at the hands of a 10.3% decline in potential exports of US corn and 10% decline in corn used for domestic ethanol production.
            End stocks projected at 1.79 billion bushels compares to year earlier levels of 1.624 billion bushels, and a five year average of 1.593 billion bushels. End stocks to use are now projected at 15% vs year earlier levels of 12.8% and a five year average of 14.22%.
            First Quarter use of corn for 2008/09 is 3.575 billion bushels vs year earlier levels of 4.083 billion bushels and a three year average of 3.694 billion bushels, solidifying USDA’s reasoning for building end stocks.
            To add insult to injury is a world corn end stocks projection of 136 million metric tonnes, representing a 9.8% month on month increase and 23.6% two month increase. The two major culprits are the US’s two month corn end stocks increase of 59% and China’s 25.6% build. World end stocks to use are presently projected at 15.8% vs year earlier levels of 14.8% and five year ave of 14.22%.
            Wheat (corn’s starch cousin) is of little help as US end stocks of 655 million bushels, are the highest dating back to 777 million bushels in 2001 and the 29 million metric tonne year on year stock build globally. This stock build is the third greatest correction dating back to 1980 with only 1997’s 32 million and 1990’s 36 million tonne greater.
            In the month of November when US corn end stocks were precariously close to 1.1 billion bushels, evidence pointed to the need to add as much as 3 million acres for 2009 plantings, above the 85.9 million planted in 2008. However with the recent 666 million bushels added in the last two months, it may suggest at 157 bu per acre “trend yield” rather than an acreage build required of 3 million to a reduction of 1.24 million to maintain the 1.1 billion bu end stocks.
            Consider the impact this may ultimately have on corn seed and fertilizer inputs and other connected service industries as opposed to added soybean plantings (new crop ratio of 2.33:1 as of 1/15/09). Also consider the impact on cash prices of corn and soybeans for the fall of 2008 as well as basis levels! Allendale would appreciate your comments 800 551 4626 or research@allendale-inc.com
            With recent notable change within the USDA balance sheet for corn, it is highly likely it could have a short term and long term impact on your balance sheet. Do you have an old crop-new crop marketing plan in place? If not, why not? If you do, call and compare to Allendale’s outlook.
 
Allendale Outlook Conference for Jan 23 and 24: Looking for Profit in 2009 and 2010? Get the answers, call 800-262-7538 or go to Allendale, Inc.
 
 
The thoughts expressed and the basic data from which they are drawn are believed to be reliable but cannot be guaranteed. Any opinions expressed herein are subject to change without notice. Hypothetical or simulated performance results have certain inherent limitations. Simulated results do not represent actual trading. Simulated trading programs are subject to the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Commodity trading may not be suitable for recipients of this publication. This is not a solicitation of the purchase or sale of any commodities. Those acting on this information are responsible for their own actions. Any republication, or other use of this information and thoughts expressed herein without the written permission of Allendale, Inc., is strictly prohibited. Allendale Inc. c2009
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