Corn market stays bullish
Corn Fundamentals: Bullish to corn is strong export sales and the investors interest in corn based ethanol. Bearish to corn are early warning signs of economic rationing and the over crowded room full of non commercial longs.
Two surprises were found within the monthly USDA monthly WASDE report, #1 was how production came in 97 mil bu below the pre release trade average. The second surprise was how world stocks increased over last month at the hands of bigger corn crops in Brazil and China.
Season Average Farm Price: USDA raised the Season Average Farm price by 40 to a level of $3/bushel. Allendale's research plugged in the $3 level into the special report released two weeks ago which suggested with a SAFP of $2.60 per bushel it could represent an increase of 5.3 million more corn acres to be planted in 2007 above 2006 levels. The $3 level suggest corn acres could be as much as 8.2 million more acres over 2006 plantings or 86.761 mil acres. The 86.761 mil acres would be a record dating back to 1970. The closest single season switch would be 1996's 7.8 million acre increase. The largest single season positive adjustment yr on yr is 1984's 20.3 million acres. At 86.71 mil acres, harvested acres could come in at 79.34 mil acres and have production of 11.861 bil bu if you use a 2007/08 baseline projection yield of 149.5 bu per acre or as much as 12.694 bil bu if you were to use 2004's record yield of 160.4 bpa.
More Interesting: as long as both futures and cash corn remain in its upward trend, if USDA were to raise the SAFP by 20 cents, then the Allendale special report suggest an increase in planted acres in 2007 over 2006 could reach 9.6 million.
Weekly Export Sales: Before we begin, USDA did reduce its 2006/07 export target from 2.25 bil bu to 2.2 bil bu. Estimates for Thursday morning's report were 800-1,200 K tonnes vs 1.027 K tonnes last week. USDA released actual findings of 1.929 MMT. Per the most recent official USDA export sales data, 855 mil bushels of corn has been sold (likely front loaded) vs last years 577 mil bu and most recent three year ave level of 639 mil bu.
End Stocks to Use: Domestically, corn is 7.9% vs last yrs 17.5% and the second tightest dating back to 1980, only to 1995's 5%. At 935 mil bu, they compare to 2003's 958 mil bu, but well above 1995's 426 mil bu. World end stocks to use are 11.1% vs last years 16% and are the tightest since 1980. 2003's level was 14.3%. World corn stocks of 90 MMT compare to last years 125 MMT and 2003's 103 MMT and compare closely to 1983's 89 MMT.
Broiler Hatchery Report: Eggs set into incubators, down three percent two weeks ago, down 2% last week and now down 3% in this weeks report. Total number of eggs in incubators now are 200,224,000 vs 206,422,000 the same week one year ago. This is a early warning signal of economic rationing for corn and soybean meal and would now be viewed as in a growing trend. Broilers placed are now 165,455,000 vs 167,802,000 last week. Remember it is the poultry sector which uses 50% of all meal demand and is the number two consumer of corn, 6.5% behind beef's 33.7% usage.