Japan buys U.S. corn, China stops corn exports
There is growing interest regarding Japan's purchasing of U.S. corn and the string of strong weekly export corn sales. As you well know, we did cover in detail more than a week ago, about our take on Japan's recent heavy corn buying as more likely booking ahead rather than stock building.
On Thursday night, China announced overnight they are stopping all corn exports to control internal prices. China gave no time table as to when they will resume its export program. You would think it would resume when the present rally has stalled and key trend line support is broken. By looking at tonights Allendale Advanced Charts March corn contract, trend line support is 2220, add the 20 cent spread between the March and July and the July trend line support level is 2420. Of course fundamentals in China are also expected to play a big role which would be planting weather and early growth.
We did however want you to see first hand how much of the big three Asian corn buying countries are performing this year vs last year and how the yr end final sales have stacked up. Allendale does anticipate these Asian countries to stay relatively close to its typical annual purchases. The one wild card we do continue to hold is China as a larger than usual supplier of corn exports last year and how they might be tightening its grip on domestic supplies. This transition of a key export player to potential net importer before the end of this year is likely to place greater dependency on US as the key supplier to Asian buyers. For the 2005-06 marketing year, China is estimated to be a exporter of 6 MMT (236 mil bu) vs year before levels of 7.59 MMT (299 mil bu and in 2003-04 of 7.55 MMT (297 mil bu). Its projected end stocks of 30.16 MMT (1.187 bil bu) is 33% less than 2003-04's 44.85 MMT (1.765 bil bu) and evident how its domestic use continues to trend higher by 2 to 2.4% the past few years.
The most notable single item in its balance sheet is how exports leapt in 2004-05 to 14 MMT (551 mil bu) from the previous yrs 10.94 MMT (431 mil bu) and 2005-06 is now projected at 10 MMT (394 mil bu). Even with reduced exports it is important to note how projected end stocks in 2005-06 are nearly double the 2003-04 mkt yr. Is the present 79 mil bu of increased exports of USA corn at the hands of the reduced 157 mil bu of corn exports from Argentina from last year to this year? What do you think? Allendale Projections: Our supply-demand data released on Jan 21st does suggest 1.8 mil fewer acres planted to corn in 2006 vs USDA's recent Outlook Forum est calling for a cut of 1.3 mil acres. At a 147.6 bu/acre yield, Allendale estimates 2006 corn production at 10.697 bil bu vs USDA's est of 10.810 bil bu. Allendale estimates total use at 11.080 bil bu and is preparing to increase usage as a result of more ethanol plants coming on line and in the process of expanding additional sites. USDA has dialed in use of 11.495 bil bu with a end stocks to use of 15% vs Allendale estimate of 19%, but once agin will need to trim this estimate because of expanding ethanol demand. The season ave farm price estimate for 2006 at the USDA Outlook Forum is $2.15/bu while Allendale estimates the SAFP at $2.07 but once again will need to tweak the level slightly higher because of the ethanol demand. All in all USDA's Feb Outlook Forum is not that far off of Allendale's Jan 21st data. Be aware there is data tossed around on the floor suggesting with a 10% drop in production, end stocks to use could fall to a level of 5%. The main problem with that particular data is it assumes demand will remain constant with a smaller supply and that simply does not happen.