Corn fundamentals remain bullish
In a nutshell, it's obvious fundamentals are more bullish than bearish as world stocks of corn are at their second lowest level dating back to 1980. The trade is well aware of impending March harvest of Argentina and S Africa corn crops. However, the trade has been very concerned about what re-balancing of commodities the Index funds may have in store when they are expected to enter the futures and options trade this week.
Corn Technicals: March futures close is 3682 vs last Friday's 3902. Our key custom Moving Averages are 3790, 3810 (key resistance) and uses a 3000 bull to bear pivot point. July futures close is 3836, vs last Friday's 4024. Our key custom Moving Averages are 3930, 3940 and a 3130 bull to bear pivot point.
Weekly Export Sales: 2006-07 export demand is projected to be nearly the same as demand for ethanol production. Pre release estimate for Friday's mornings export sales data release was 750,000 to 950,000 tonnes (29.5 to 37.4 million bushels). Actual results released Friday morning were 22.6 million bu. Understand the holiday time frame is no friend to export sales and importers tend to historically shy away from typical thin trade and volatile wide swings. History has proven it is typically the middle of Jan before weekly corn sales get their legs back underneath them. Corn export sales thus far in the marketing year are 41% better than year ago levels while shipments of 743 million bushels are running 27% above yr ago levels and a three yr ave of 603 mil bu.
Cash Corn: The Mar-May corn spread is at 9.2 cents carry. At $3.45 spot cash prices, the cost of carry is 3.5 cts per bu per mth or 7 cents. The futures spread suggest the market is paying you to store corn. Check your local cash markets to see if they are paying you to store on farm at a rate of 3.5 cents per bu per month. Please call us to plan your cash sales in 2007. We anticipate a period of price consolidation beginning in March and then based on planting progress a potential slide to July and then let pollination decide if prices need to correct higher or lower. We need to note out of the past 100 years, 1 year was an epic flood, 3 to 4 years had a major Midwest drought similar to the magnitude which South Dakota suffered in 2006. One last weather note is two weeks ago a private weather provider suggest El Nino has peaked and the potential for dry spring weather is less likely to be intense.
Dec 2007 Corn Production: Be aware by looking into our Hedge Advice page you will see our level to hedge 2007 corn production is 3760, today's high is 3652 with a double top of 3750. 62% retracement is 3570, today's low 3586, today's close 3652.
Broiler Egg Set: This next section remains a problem for corn and soybean meal use. Broiler egg set was down 1% vs year ago levels for the same week of the year. This trend remains weakening. 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 211,100,000 vs 214,172,000 one year ago for this week of the calendar year. Broiler chicks placed are now 168,299,000 vs yr earlier levels of 173,580,000.