Corn bullish until seed is in the ground
Corn Fundamentals: Bullish to corn is the tightest global stocks we have witnessed dating back to 1980 and until the last seed in the ground this spring, will not change that particular concept. Bearish to corn is the weather in Argentina feeding a record corn crop and the announcement Brazil may have near 6.5 MMT of corn for export.
The 5 mmt USDA is estimating for 2006-07 is what Brazil is targeting with its own estimate of 6.5 MMT. We are well aware Japan and a handful of EU-27 countries did ask Brazil to increase production to help with supply needs. Japan has made it very clear it has little need to be held under the US corn for ethanol thumb and we would anticipate Brazil, Argentina as well as South Africa to answer the call with a building trend of increasing production as long as the demand for corn in the US battles and places a strain on the corn for feed or fuel debate.
End Stocks to Use: projected world end stocks to use of 10.8% are the smallest dating back to 1980 and compare to last years 15.9% and most recent five year ave of 17.18%. US end stocks to use of 6.4% are the second smallest dating back to 1980 vs 5% in 1995 and compare to the most recent five year ave of 14.9%.
Supply-Demand Tables: Allendale Inc released its outlook for 2007 crop supply and demand on Jan 20th, the Congressional Budget Office released its 2007 08 estimates compared to the 2006 07 marketing year on January 26th, USDA Budget estimates on 2/7/07 which are the same as the 15 year Baseline Projections for corn but it is not the case for soybeans. On Friday March 2nd the USDA Outlook Forum released its supply and demand and on the same day, Allendale Inc released the results of its 18th annual planting intention survey which created adjustments to its supply and demand balance. At least two more USDA projections are expected to be digested by the trade. The next major release will be USDA's March 30th "Planting Intention" report and then finally USDA's World Outlook Board will release its first official estimates for the 2007-08 marketing year on May 11th.
Observations: No doubt, the previous CBO and USDA projections are based on historical and statistical tendencies. Allendale's Farmer survey of planting intentions are actual responses from the farm sector. USDA will have the same opportunity to reveal the real facts of farmers planting intentions on March 30th. However as we all well know to well, the best laid plans for spring plantings can be derailed once "Mother Natures" influence is felt the day the top few inches of soils warm to 52 degrees and plantings begin in ernest. What is very apparent is with even the potential of record corn production, projected end stocks are likely to face the difficulty to reset to comfortable levels.
Corn planting intentions of 90.760 million acres would be the largest since 1944 when 95.475 million acres were planted. Peak planted acres of 113.024 million occurred in 1932. Using Allendale Inc. 149.79 bushel/acre trend yield, it would imply a record corn production of 12.347 billion bushels versus last year's 10.535 billion bushel crop. A more realistic 152.5 bushel/acre yield would yield 12.570 billion bushels.