Tight old-crop corn supports new-crop prices
Mar 30, 2012
From The Editor
March 30, 2012
Hello Pro Farmer Members!
The USDA reports everybody was waiting for have come and gone and USDA certainly didn't disappoint the market. The lower-than-expected March 1 corn stocks estimate was enough to drive May and July corn futures limit up on today's close as speculative traders piled back onto the long side of the market. PF Sr. Market Analyst Brian Grete tracks the activity of speculative trading funds on a daily basis. He tells me funds bought an estimated 40,000 corn contracts today. That's 200 million bu. of new speculative buying in the corn market in one day. "It's the biggest day of fund buying I can remember," says Brian.
Funds also bought an estimated 15,000 contracts of soybeans and 10,000 contracts of Chicago wheat. That's a huge flow of money back into the grain markets. With all markets "sprucing up" the technical outlook, funds are expected to buy more when trade starts up Sunday night. Some are already looking for sharply higher corn trade again Sunday night... which means beans will follow and wheat won't be left behind.
With corn acres expected to be up sharply in 2012, the strength in corn today (and expected strength to start next week) is a bit of a surprise. The lower-than-expected March 1 corn stocks tally was "bullish enough" to override the negatives of the big acreage increase.
In April, USDA should estimate lower 2011-12 corn carryover... which essentially will lower the supply-side cushion for the 2012-13 marketing year. The stocks data suggests corn carryover this year of about 650 million bushels... 150 million bu. less than estimated in March.
Today's corn planting intentions indicates harvested corn acres of about 88.7 million. So... if the 2012-13 supply cushion is cut another 150 million bu. (via lower 2011-12 corn carryover), that's like knocking about 1.7 bu. per acre off the 2012-13 supply. While gains in new-crop futures we're well behind those in old-crop, the expectations of a smaller old-crop carry provided the support for new-crop.
The Hogs & Pigs Report released this afternoon fell right in line with pre-report trade expectations. There are some obvious exceptions... the Dec.-Feb. pig crop was up 3% compared to pre-report trade expectations of up 2%. That, however, did not translate into a 3% increase in market hog inventories, which were up about 2% from year-ago.
Another "miss" by market expectations were farrowing intentions. March-May intentions and June August intentions are off a bit from year-ago levels. If right, that would tighten up supplies for late 2012 and into 2013.
That's it for this week...