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Dismal demand

The problem with corn is simply demand. Monday's USDA reports were a clear reminder of that problem.

Every week the market is reminded that exports are horrible (this week's USDA export sales report was no exception). Right now, corn exports are down over 800 million bushels from last year. The USDA has projected almost a 700 million bushel drop for the year. Exports had better improve or the USDA will be revising that number lower.

In addition, the poor economics of ethanol right now are evident every day. The market knows there are fewer cattle, hogs and chickens to eat corn and the grain stocks report drives that home.

The only positive is that corn prices are more competitive in the export arena, although so far, this has had no effect. For awhile, it seemed like ethanol was looking better, too, but the recent dive in crude and ethanol has probably erased that. In this environment, what corn price stimulates an improvement in any category of demand?

The larger the carryout, the less worry there is about adequate acres for the 2009 corn crop. Most can still pencil in strong demand for the 2009-2010 marketing year- perhaps around 13 billion bushels. But with a current year carryout around 1.790 billion bushels, not much of an increase in crop size is required to meet that demand.

Keeping corn acres at around 85-87 million acres will mean adequate supplies, according to the market. Informa's December projection of 82 million acres is now being perceived as too low, especially with the decline in fertilizer prices. Informa will apparently release some updated acreage numbers on Friday.

The risk of loss in trading commodities can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

The problem with corn is simply demand. Monday's USDA reports were a clear reminder of that problem.

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