Corn prices to work higher into March-April
Corn Fundamentals: USDA's season ave price projections may be a good indicator of just how many 2007 corn acres could be planted. Dating back to 1970, we have identified four previous marketing years when the percent increase of the season average farm price has responded similar to the projection for the 2006-07 mkting yr, as well as other common dynamics.
USDA is projecting 2006-07 season ave farm price at $2.60/bu vs last yrs $2.00/bu or 30% higher. When comparing this known fact to the other four years identified on the graph, the following years plantings have increased in a range from a minimum of 2.3% to a maximum of 10.8%. Allendale's research suggests corn acres to increase by an amount of 5.3 million in 2007 over 2006 plantings. This suggest total planted acres to be 83.86 million acres. You would have to venture back to 1985 to find remotely similar planted acres of 83.398 million but below 1981's 84.097 million acres and record acres of 1976's 84.588 when using 1970 as our starting point.
The first and foremost question on your mind could be "what if USDA increases the season average farm price in subsequent monthly WASDE reports". Good question and our research suggest IF USDA ventures higher with its SAFP to a level of $2.80/bu then acres added over 2006's 78.561 mil acres, could be 6.7 million or 85.261 million. IF USDA were to use a $3.20 SAFP, then Allendale's research suggest acres added could be 9.6 mil for a total 2007 corn planted acreage level of 88.161 million acres.
Weekly Export Sales: As of the most recent official USDA export sales data, 697 mil bushels of corn has been sold (likely front loaded) vs last years 463 mil bu and most recent three year ave level of 503 mil bu. Domestic corn stocks are estimated at 996 mil bu vs 1.971 bil last yr and 958 mil bu in 2003. World stocks of corn are 90 MMT vs 89 MMT in 1983 and 125 MMT last year. USDA projects end stocks to use at 8.4% vs 17.5% last year, 9.4% in 2003 and 5% in 1995. Globally end stocks to use are estimated at 11.1% vs 16.1% in 2005 vs 14.3% in 2003. World end stocks to use have not been this tight dating back to 1980.
Weekly Export Sales: Of the three main grains, corn was the only one to have slipped in the amount needed per week for the balance of the marketing year in order to meet USDA's target of 2.250 bil bu. It is apparent the aggressive beginning to this marketing, foreign buyers front loaded corn purchases in anticipation of higher prices this winter. Our number one world export competitor of Argentina will be harvesting its crop in March of 2007 and depending on its success or lack thereof, is expected to be a factor to price levels. S Korea the past 48 hours has bought 317 K tonnes of China corn.
90-10 Odds: From the Oct USDA crop report to the Nov WASDE report, odds are 90% favoring an ave increase in production of 110 mil bu. Those odds sink to 70% from Oct to the Jan annual with an ave increase of 131 mil bu. Six to Ten Day and Two Week Forecast: after five consecutive days of forecast calling for below ave precip and temps for both it is tonights 6-10 day which forecast above normal precip but the two week forecast is calling for normal precip. Look for a good start to next weeks harvest but potential interruptions in the northwest cornbelt by the end of the week. Harvest has been very active this week in the west with delays in the east Corn Belt.