Published on: 17:06PM Jun 11, 2009
Alarming is the immediate reaction when USDA’s most recent supply-demand report suggests 2009/10’s days supply of corn continues to slide to its lowest level during this decade. With USDA cutting the new crop corn yield by 2 bu. per acre, the U.S. now has a projected 32-day supply of corn after all demand is met. This level compares to projections of a 33-day supply the previous month and is below this decade’s lowest level of 34 days for the 2003/04 marketing year and well below the highest level of 72 days in 2004/05.
Now consider the fact that USDA only reduced yield and not projected harvested acres in the June WASDE as it switches its attention to gathering data for the June Planted Acreage report to be released June, 30, 2009. Most likely USDA will discover the need to reduce harvested corn acres within its July WASDE and ultimately force the days supply into an area of 25-26.
When analyzing the days supply of world corn, the projection also suggests a new decade record low in the making. The days supply is estimated at 52 vs. year-earlier levels of 59, previous low of 54 for 2006/07 and previous high of 93 days in 2000/01.
Just as serious as the dwindling supply of corn is the thinning days supply of old crop soybeans. USDA’s most recent supply-demand estimates for U.S. soybeans suggest less than a two-week supply after all demand is met. 2008/09 days supply now measures a mere 13 days vs. year-earlier levels of 25 days, decade former record low of 16 days in the 2003/04 marketing year and peak of 68 days for the 2006/07 marketing year. Be aware new crop (2009/10) days supply is now projected at 25, which mirrors 2007/08 levels. Equally important is to anticipate that just as USDA is likely to reduce harvested acres of corn, it is likely to increase the harvested acres of soybeans. Do not rule out the potential for an additional 1-2 million acres of soybeans to appear in the Planted Acreage report, additional new crop end stocks and a days supply revision up to an area of 33-36 days.
With respect to wheat, just as bullish as the old crop soybean and new crop corn days supply are, “all” wheat is as bearish. U.S. days supply for 2009/10 wheat now measures a staggering 110 days vs. year-earlier levels of 108 days. This new level of days supply is well above decade record level lows of just 47 in the 2007/08 marketing year and 16% less than the high of 132 days in 2001/02. With respect to world days supply, 2009/10 now measures 87 vs. year-earlier levels of 80, decade record level low of 71 in 2007/08 and peak of 125 days in 2001/02.
To best summarize, the outlook for the new crop corn cushion remains in a deflating mode, inflating for new crop soybeans and wheat.
What are your thoughts about the present tight supply for corn? Can bulging stocks of wheat remove a degree of the concern? Can a weak world economy reduce corn demand? How much weather risk lies ahead with the developing El Nino? What risk management tools are you implementing given the decline in new crop stocks for corn and building stocks of new crop soybeans?..........Joe Victor
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