Forecasts, not crop conditions will be the focus of the traders
The trade emphasis is providing signals it may be transitioning away from the first phase of spring, away from "planting pace" and into phase-two of early growth.
Anticipate more trade awareness of crop condition adjustments and focusing much more on 3-5 and 6-10 day more immediate weather forecast and less emphasis on two week forecast. Be aware that the existing 78% good to excellent breaks the most recent record of 1994 as 2007 was able to maintain its 78% rating for two consecutive weeks vs 1994 had a notable decline the second week to a level of 73%. 1994 was unique by bottoming at 73% good to excellent and reached a peak of 86% between the silk and dough stage of development. The most recent five year ave for good to excellent crop rating as detailed within our special reports section within our internet site, suggest an upward bias over the next month before gradually declining into the beginning stages of harvest. 2007 has already proven it is very unique and could have the resilience to outperform average history. When adding the fact there really has been no development of a set weather pattern of too wet or too dry, for the major Midwest, 2007 corn production has the potential to be at a minimum of an ave weather year and provide end stocks for 2007-08 to be nearly mirror to 2006-07's sub 1 bil bu, even with an additional 12.4 million acres planted above 2006 levels. Demand remains strong.
Acres: Question emailed to us, "What are the chances USDA could increase the amount of corn acres from the May WASDE to the June 11th WASDE"? Dating back to 1997, USDA has adjusted corn acres to be planted once and by 1 million acres because of planting delays. According to NASS data, dating back to 1997, only in 2002 was the corn planting progress below 94% complete as of May 31st by indicating progress at only 89%. USDA made a reduction in production of 285 million bushels. Provided the fact that as of May 27th, 2007 corn planting progress is estimated at 97%, Allendale does not anticipate an increase in corn acres within the June 11th WASDE report. Allendale does anticipate a change in acres when USDA releases its June 29th Planted acres report and will cover in detail, the closer we approach the actual release date.
Historical Price Trend: Be sure to check out the HPT page and you will see for the four week cumulative price ave adjustment odds are 90% over the most recent ten years, July corn futures have averaged a weaker bias. The one exception was 2002, up 29 cents. Coincidently it was 2002 when USDA dropped corn acres from the May to June WASDE by one million because of a slow planting pace. Interesting is how even in the bull rally year of 2004, July futures could not make it into positive ground according to the data for our HPT page.
July Corn Futures-Cash: Our plan was put into action on Thursday during our 12:30 pm update of our Allendale Advisory report by selling the 2006 corn inventory into the cash market. Factors used to make the final decision are Allendale's July corn futures price projection of $4 by the end of May-beginning of June, historical data which suggest in tight end stock years, timing suggest June has typically been a peak month for making cash sales of corn, strengthening Gulf basis levels of more than doubling over the past 18 days, and the discrepancy in next weeks weather forecast. At the beginning of this week, corn futures broke up through 3730 short term Moving Averages at the same time fundamentals traders began to discuss the chance for the first "Blocking Ridge" for the greater Midwest, due the middle of next week. Noon maps Thursday began to suggest temps not expected to be intense and also suggest the ridge may be pushed back to late next week or weekend. By Friday morning a few more from the private weather sector began to shift towards a bias of greater potential for rains mid to late next week. We need to point out at this juncture, our Weather Watch page author, World Weather Inc, never bought into the "Blocking Ridge" talk. One other deciding factor was the jump in old crop corn futures just two days before the end of the month of May. We are suspect as to the affirmation of funds to follow through with its emotional futures price strength into the first few days of the new month of June and just days in front of the USDA June WASDE reports release.