Bullish to corn
Bullish to corn is stronger than usual old crop and new crop export demand. Also bullish to corn is less than ideal planting conditions.
The trade is anticipating Monday's planting progress to show 6-8% of the nation's corn crop planted. The five year ave suggests 8% of the corn should be planted. Bullish to corn is the very real prospects of the 2007-08 corn crop to have less end stocks (19 day supply) than the 2006-07 crop (25 day supply). Bearish to corn is Argentina's presence as the No. 2 corn exporter in the world with its 22-23 MMT (866 to 905 million bushels) production. Plus, do not forget Brazil as a reappearing export threat with a surplus of 6-8 MMT to be exported. Bearish to corn is the fact that China is prepared to have fresh export sales corn licenses. This could bring China export sales to a level of 4.5-4.6 MMT vs USDA's Tuesday est of 3.5 MMT, shaved by 500,000 tonnes vs the 4 MMT est in the March WASDE.
World Supply: The 2006-07 end stock estimates translate into a 37 day cushion vs 50 days the previous year and would represent record low levels dating back to 1993-94. Since 1993-94, the largest cushion the world had was 83 days supply (1998-99) but since that marketing year, the cushion has been very much become persistently smaller.
Old Crop Cash Marketing: Historical research data suggests the timing when to begin to sell cash corn in tight end stock years is late April to early May. The average cash value of Midwest corn is $3.33 per bushel which suggests a cost-of-carry of 3.7 cents per bu per month. The present May-July spread is offering 12 cents carry which is 4.6 cents per bu more than full carry. We remain hedged in the July and will continue to keep watch on the cash and futures carry for early warning signals to begin to move old crop.
The positive news is the fact the weekly sales of corn, soybeans and wheat were all large enough in order to meet the weekly amount needed to reach USDA final export target. We are raising a warning flag on US corn and wheat shipments as the amounts continue to weaken and could be interpreted as bearish to old crop futures. Since weekly shipment results for 3/22/07, corn has had three consecutive declines. Shipments of 28.9 mil bu compare to the five week ave of 38.4 mil bu and 10 week ave of 41.1 mil bu. With only 8 weeks remaining for the wheat marketing year, shipments bear close scrutiny. Each week for the remainder of the mkt yr, wheat shipments need to ave 25.25 mil bu, Friday's report had the most recent weekly shipment of 14.1 mil bu, five week ave of 15.6 mil bu and ten week ave of 17 mil bu. Any corn or wheat not shipped before the end of the official marketing year is automatically added to carry in stocks for the next marketing year.
The weekly broiler egg set was reported up 1% vs year ago levels for the same week of the year. This trend remains sideways. Why is that important? Because poultry is the largest consumer of soybean meal and 2nd largest user of corn when analyzing the feed use sector of the monthly WASDE reports. Eggs in incubators for broilers are now 218,304,000 vs 215,730,000 one year ago for this week of the calendar year. Broiler chicks placed (up 1%) are now 176,441,000 vs yr earlier levels of 173,986,000.