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Demand statement

Agriculture.com Staff 09/17/2007 @ 7:42am

The monthly Supply and Demand report released last week confirmed this year's corn crop is growing, as seems is generally the case most years. Whether this is a reflection of improved genetics, tillage practices or just better farmers is unknown; however, higher than expected yields, especially in weather stressed years are more common than not. Timely rains were of help this year.

The Supply and Demand report, while having a negative tone for corn due to increasing production as well as carryout, had traders either believing that this news was expected, or perhaps the market is looking beyond this year's crop to 2008 or even 2009. A positive price response may be the market acknowledging that the handwriting is on the wall. Corn acreage in 2008 will likely be down and demand up.

In fact, one could make the argument that the corn market will, sometime in the next three to six months, mirror what the bean and wheat markets have done recently, which is rally. Wheat is a world crop, and a series of world events has helped to tighten inventory to a critical point where the market has needed to ration supply through a price rally. We are not convinced the wheat to corn market movement correlation is going to be as strong as the soybean to corn relationship. Beans this year rallied on prospects for tighter inventory in 2008 due to a reduction in acreage in 2007. What if corn loses acreage in 2008?

At present, corn prices offered for new crop, along with input costs, are not exciting the farmers, at least not in comparison to new crop price for wheat and beans. Therefore, a decrease in corn acreage could put projected corn stocks at critical levels within six to twelve months. Just as the bean market rallied this summer, corn futures may rally unless an economic incentive (higher corn prices) provides farmers a reason to plant as much or even more corn acreage in the year ahead.

If you have any questions or comments, please contact Bryan Doherty at Top Farmer: 1-800-TOP-FARM.

The monthly Supply and Demand report released last week confirmed this year's corn crop is growing, as seems is generally the case most years. Whether this is a reflection of improved genetics, tillage practices or just better farmers is unknown; however, higher than expected yields, especially in weather stressed years are more common than not. Timely rains were of help this year.

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