Time to re-invest in the corn market?
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For The Month: Thus far for the month of December, March corn futures value up 2%, January soybean futures value up 3% and March CBOT SRWW value up 9%.
For The Week: For the week of December 8, March corn futures value increased 20.7%, January soybean futures value increased 9% and March CBOT SRWW value increased 8%.
Corn Commentary: Despite a fundamentally bearish USDA domestic and world stocks report released on Thursday, funds may have decided enough bearish news may have funneled into corn and it may be time to re invest in the future of corn and staged a rally on Friday.
Helping as a catalyst was the release of one independent research firms estimates for 2009 planted corn acreage. The firm suggest 2009 corn acres to be 82.288 million vs its Nov estimate of 86.8 million acres vs 2008 planted acres of 85.9 million acres.
Consider if 82.288 million acres are planted, history tells us 91% of the planted acres are harvested. This suggest 74.88 million acres may be harvested and if USDA were to use trend yield of a stout 157 bu/acre, 2009 corn production may reach 11.756 billion bushels. Consider IF demand were to remain unchanged from 2008 at 12.185 billion bushels and carry-in stocks of 1.474 billion bushels, end stocks for 2009/10 may be at a level of 1.045 billion bushels. Our most recent low stocks have been 958 million in 2003. For each one bu per acre lost based on 74.88 million acres harvested the reduction factors to be 75 million bu. Slightly more than 1 bu per acre loss could pare 2009/10 end stocks below 2003 levels.
On the day it is estimated funds bought a combined 15,000 contracts of futures and options.
Corn Price Projections: based on $60/barrel crude oil, Allendale's price range projection for corn is $3.40-$4.40. Based on $40/barrel crude oil, Allendale's price range projection for corn is $2.75-$3.75.
Corn Technical Commentary: according to our Allendale Advanced Charts, corn posted a rally on large volume which may suggest a bottom may be forming. Allendale would like to see a close above 3800 to instill confidence in the March daily chart.
Vital Technical Indicator: the next projected major turn day is forecasted for January 7.
Trade Idea(s): (12/15) Buy 1 @ 3470. Risk and reverse 3330. Obj 4110
Option Strategy(s): there are no new option only trade recommendations.
Results of the 12/11/08 USDA WASDE report:
Highlight/Corn: USDA cut corn for ethanol use by 300 million bushels, down 7.5% and reduced corn for exports by 100 million bushels to a level of 1.8 billion and raised feed usage by 50 million bushels. Outside of the US the biggest single surprise was USDA's increase for China corn production by 4 million tonnes to a new record level of 160 million tonnes, up 2.5%.
Corn Domestic Stocks and Stocks to Use: 2008/09 end stocks are projected at 1.474 billion bushels vs November's USDA estimate of 1.124 billion bu. USDA's 2008/09 estimate for end stocks to use is 12.1% ( sixth tightest dating back to 1990) vs November's estimated 9% with 1995 the lowest at 5%. 2008/09 end stocks of 1.474 billion bu are 9.3% less than 2007/08 end stocks of 1.624 billion bu.