USDA Supply & Demand report and weather support concerns in corn and beans.
May 12, 2009
Today was USDA Supply and Demand report day. The report came in very close to expectations. See our internet web site for the actual numbers. Overall, for corn projections are now at 1.145 billion bushels for the 2009/10 season and beans at 230 million bushels.
In regards to corn the interesting fact is USDA used ethanol projection of 4.1 which is unchanged even with all the EPA discussion about changing ethanol standards. The troubling factor is they used an average yield of 155 bu. per acre and 85 million planted acres. Both of these variables will be closely monitored now. The bias by most in the trade is they could slip due to late plantings. Bottom line 1.145 billion bushel is adequate and should not support prices much higher than current levels.
The bean numbers continue to support the concern about tight old and new crop beans. The market, however, saw active liquidation of the long-July and short-November price spread. We would view this as only temporary. Any move back into the 80- to 90-cent level we anticipate will be heavily bought for one more attempt at higher price values. Bottom line: It’s going to take a yield drop of some significance now to push November 2009 beans above $10. A breakout above $10.50 would be very bullish and force us to adjust all net short positions.
Weather Report:
TUESDAY MORNING WEATHER 5/12 WXRISK.COM
Once again the various weather models have more uncertainty in the 11-15 day. They are in strong agreement about the MAY 12-14 cold front but things are somewhat uncertain with regard to the MAY 6-17 cold front. The 1st cold front MAY 12-14 brings good rains to ND and northwest MN and over southern Manitoba (MB) but over SD lower MN NEB and western IA this front bring rains under 0.25" with 40% or less coverage.
The 2nd front on MAY 16-17 appears to be the same. Not much for the Upper Plains into MN and NEB then rapid increase in coverage and amounts central & eastern KS and ALL of the Midwest...70% coverage of 0.50 to 2.00". Some of the models are slowing the front down once it reaches the Delta and ECB. If so this would add additional rains to eastern OK eastern TX MO ARK LA KY into the ECB. Right now this aspect of the MAY 16-17 cold front is uncertain. All weather Models develop a HUGE ridge in the Jet stream over the West coast / Rockies this weekend into next week BUT now a new trough comes into western Canada by day 9-10. This trough forces the Ridge over the western CONUS east to the SE coast and that allows a for POSSIBLE new cold front to move into the Upper Plains and Midwest... MAY 20 - 21 and this front MIGHT linger over the Midwest to MAY 24-25.
BOB’S TAKE ON WEATHER: We are not going to get a solid 7 to 8 days of dry weather. This means the central and eastern Corn Belt is going to be planted under stress. A lot of ponds will not be planted. This implies we will need near picture perfect weather this summer to get the USDA's 155 bu. corn yield. I’m already suggesting a yield closer to 153 bu. should be considered. The final big factor will be how many acres will we lose in corn due to not being planted. At this stage we need the 85 million acres. If we drop below 83.5 million acres it could get dangerous for sellers. This is why producers are advised to maintain a “put” strategy until after the June acreage report.
If you need any help in implementing a speculative or hedging strategy give us a call at 1-800-832-1488 or email me at utterback@utterbackmarketing.com or laura@utterbackmarketing.com. Tomorrow we will talk a little about the bonds, gold and crude oil.
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