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All futures exchanges will be closed for Monday's open outcry session in observance of President's Day.

Agriculture.com Staff 02/09/2016 @ 2:48pm

All futures exchanges will be closed for Monday's open outcry session in observance of President's Day.

USDA Forum and Funds: Each year in late February USDA holds an annual outlook conference. It is a two or three day long conference with presentations on multitudes of topics in the industry and specific supply and demand outlooks. Numbers released today were their early guesses at new crop numbers. They will adjust these on the May 12 supply and demand report and start the month to month changes from there.

The other factor to note this week is fund buying yet again. On the Player's page of this report we noted funds were buyers on a 3 to 1 ratio in corn and a 5 to 1 ratio in soybeans.

Corn USDA Forum: If there was an area of surprise it was in their corn numbers. Their drop in corn acres expected at 1.3 million is not out of range. Total supply compared with the 2005 supply is very similar. The difference is in demand. They have ethanol usage jumping from 1.600 to 2.150 billion bushels. That's a 34% increase! Keep in mind this year's ethanol number is a 21% increase over last year. Is that realistic? The answer could be yes. Current capacity is 4.3 billion gallons of ethanol a year. There are 42 projects of expansion of existing facilities or new plants being put up for an additional 2.1 billion gallons of capacity. Yes, There number could actually be realistic. Along with some other changes they have endings going from 2.401 this year down to 1.726 billion bushels next year. A 1.7 billion bushel ending stock is about back to a normal supply situation instead of an overburdened supply market.

Hedgers/Marketing: Allendale sold its remaining balance of 2005 corn prod to the cash markets when futures hit 2180 vs March futures 01/25/06. New crop hedges are 80% complete after hedging another 10% at 2610 on 2/10/06. For the futures and options section of our Hedge Advice page we added the 250 Dec calls as planned and have outlined the obj and risk.

Still Holding Old Crop?: Our price proj for July futures implied a move up to 2380 during the winter with an extreme up to 2520. We have met the obj. While it may have been easy to get caught up in the current investment led bull rally, we were very clear, there was downside potential. Our proj indicate 1950 could be here by spring. From there a move up to 2320 with an extreme up to 2570. If you have not forward sold corn to take advantage of a futures and in some regions of the country, a cash carry market, then you may have to hold for the potential of a summer fund led rally but only if you are hedged in the futures.

New Crop Marketing: Allendale projected a winter move up to 2540 with an extreme to 2610. That projection has been met as prices reached 2610 on 02/09/06. From the winter high down to spring low a move down to 2130 could be realized. Upside during summer is projected to 2610 with an extreme at 2810. You can still hedge now and cover the hedge with a long call to reduce marketing risk. July 1992, futures broke from 2600 to 2100 by the beginning of October!

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