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Corn demand strong, but will acres shift?

Agriculture.com Staff 04/14/2006 @ 8:40am

Allendale is registered with the CFTC and NFA and is a member of the NIBA. The bottom line is we are a regulated firm which can be extremely important in this day and age.

An update on the National Weather Service one and two-week forecast does not deviate away from above average temps and below average precip. The southern Plains wheat crop needs rain very soon. Meanwhile, straight north, our Minnesota branch office suggests farmers are considering adding a few more spring wheat acres because of attractive prices. Farmers in spring wheat country are expected to wait until next week to begin fieldwork. Flooded areas may need an additional week.

Two sales late this week provide evidence high prices for USA wheat may trim foreign interest in USA new crop supplies. Japan bought 20% less than its original tender and Taiwan bought 50% less. World competitors which grow wheat crops are very appreciative of the Chicago rally as it is viewed as what the doctor ordered to entice farmers to increase wheat production for 2006 and the first half of 2007.

A slightly negative bias was seen for July Chicago wheat on today's HPT page. Over the past 10 years the contract closed lower six times and higher four times in the next week. Those same 10 years over the next four weeks saw prices fall six times, close higher in three, and unchanged in one year. The July KC contract had mixed results. Over the next week that contract closed higher four times, lower three times, and closed unchanged three times. The history for the next four weeks shows six years that declined and four years that increased.

Key custom Moving Averages for July wheat futures are as follows: CBOT's SRWW ='s 3750-3670 & 3630, tonights close 3712, last Friday's close 3646, KCBT's HRWW ='s 4650-4440 & 4280, tonights close 4644, last Friday's close 4370 and MGEX Spring Wheat ='s 4190-4150 & 4140, tonights close 4366, last Friday's close 4226.

When looking back to similar years that have had dry weather as the southern Plains have experienced, three of five years continued its dry pattern into the beginning of harvest.

We were able to buy Chicago, KCBT and MGEX July wheat futures on its pullback Wednesday. Fundamentally the trades continued focus on hot dry conditions in the KCBT HRWW region and are the bullish mainstay. However the trade must also become increasing aware of how higher prices in the US could continue to choke demand for exports.

Allendale is registered with the CFTC and NFA and is a member of the NIBA. The bottom line is we are a regulated firm which can be extremely important in this day and age.

It was only about ten years ago when the soybean producers of South America and the USA were convinced they could never satisfy China's growing demand. At present we are for all intense purposes drowning in a pool of soybean global stocks. Allendale's Research suggest June 1 quarterly stocks could be as much as 89% higher tan the three year average. Add farmers plantings intentions for 2006 and projected 2006/07 end stocks are estimated at a whopping 721 mil bu vs proj 2005/06 end stocks of 565 mil bu and 256 mil bu for 2004/05. Farmers, think seriously about your projected demand for soybeans vs a much hungrier corn demand.

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