The market got a big bullish jolt from the USDA Supply/Demand report; domestic stocks were reduced to 675, which was well below trade estimates. At the same time the Argentina crop was reduced and world stocks declined across the board.
Implications: Demand will now have to be rationed through price. We believe upside potential is now open to $7.50+. We should see the carry go out of the old crop corn. If anyone has cash sales in the March, we feel you need to roll forward to the July to capture carry. Bull spreads should dominate the landscape for the near future.
While the old crop is going to be very strong, this rally should motivate producers to plant close to 92 million acres. I have been on the road this week in the southeast part of the U.S. and sense cotton farmers are not going to overreact by changing their corn, soybean and cotton acres. If we do not see the big jump in cotton acres, this could really allow a few more acres of corn and soybeans in the south.
Overall, we should start out with adequate acres. The big risk, however, is going to be all the concern about weather. Concerns are already quite high about a summer dry weather event. One has to expect the market will want to put in the maximum weather premium possible before planting to get as many acres as possible. Bob will be on the road over the next few weeks. He is looking forward to seeing a lot of producers. If you are going to the Louisville Farm Show next week, plan to attend his outlook sessions – Feb. 16 at 2:30 p.m. and/or Feb. 17 at 10 a.m.
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