Traders Still Wondering About USDA's Old-Crop Corn Carryover Projection

April 11, 2012 04:14 AM

What Traders are Talking About:

* Traders still wondering about USDA's corn carryover figure. Signs pointed to USDA lowering its corn carryover projection in yesterday morning's Supply & Demand Report. After all, March 1 corn stocks in the March 30 Quarterly Grain Stocks Report came in well below expectations, suggesting second-quarter corn use was stronger than anticipated. But USDA opted to leave its corn carryover projection at 801 million bushels. Some believe USDA will eventually lower the old-crop ending stocks forecast, but 801 million bu. may turn out to be the low-water mark for the 2011-12 marketing year. The best clue of that, USDA made the following statement in its report commentary: "The quick start to corn planting this spring and more intended acres across the South raise the potential for a substantial increase in new-crop corn use before the September 1 start of the new marketing year."

The long and short of it: If some 2012-crop production is "borrowed" for the 2011-12 marketing year, it would help ease some of the strain from tight old-crop stocks. But longer-term, it would also mean less of the 2012-crop supply for the 2012-13 marketing year.

* Limited impact expected from freezing temps. Early morning temps dropped below freezing across the Upper Midwest and parts of the eastern Corn Belt a second straight night. But impact to crops is expected to be limited. Corn that's planted and emerged still has the growing point below ground in areas where temps dropped below freezing, so it won't kill the plants, although some leaves may be singed. And temps didn't get low enough for long enough to severely impact the soft red winter wheat crop. Temps remained above freezing across the Central and Southern Plains, so there was no impact to the hard red winter wheat crop.

The long and short of it: The biggest impact from the freezing temps will likely be felt on planting progress. While crop insurance "go dates" are now fully in effect, many producers across the northern and central Corn Belt are waiting for this week's freeze threats to pass before actively rolling out planters.

* Quake/tsunami impact seen limited. A large earthquake (estimated at 8.6 to 8.9 magnitude) hit off the west coast of Indonesia in the Indian Ocean early this morning. Tsunami warnings have been issued throughout the Indian Ocean region. The quake was in roughly in the same area as the 2004 earthquake that set off the massive tsunami throughout the region, although scientists and Indonesia's president say there are currently no major threats of disaster.

The long and short of it: Market impact is likely to be limited, especially for the grain and soy markets. If there's an impact, it would be felt most in the softs markets, especially cocoa, and the price response so far has been very limited.


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