It doesn't pay to store old corn crop
Overview: This week we will wrap up the overall demand picture. Ethanol production was cleared up on Tuesday where it was suggested USDA needs to drop 15 million bushels off their old crop corn for ethanol number. For new crop we are adding 50 million bushels on USDA's figure. That day we explained how the national average output per bushel of corn is 2.62 gallons of ethanol. On Thursday export sales were covered. For corn we feel USDA needs to add a total of 60 million bushels to their old crop number but may only do 30 this month. New crop corn sales are doing great and a 50 million bushel increase on Friday is not out of reason. It appears the recent inspection pace is about right to meet USDA's old crop soybean expectation. We will add 20 million bushels to USDA's new crop soybean sales estimate. The diamond among the export world is wheat which is blowing the doors off expectations. USDA could easily add from 50 to 100 million bushels on Friday. We will split the difference and use a 75 million bushel increase in our numbers.
Corn Feed Use: From June to July USDA showed concern about the high corn prices at the time affecting feed demand. They dropped it by 100 million bushels to 5.750 billion . For Friday we would look for a return of 25 million of that as prices have declined. On the new crop end they see a small decrease to 5.700 billion but for overall corn fed to increase. Why do we say that? The reason is you now have to figure in corn byproduct. One third of the corn for ethanol comes back and is fed out or exported. Total corn for feed = straight fed corn + a certain amount of ethanol byproduct. Seeing as how ethanol production will be higher again next year there will be an increase in byproduct which will more than offset the 50 million bushel drop in straight corn fed. We have no problem with USDA's assumption. Beef production will be 0 to 1% higher, broilers will be 1 to 2.5% higher, and pork will be 1% higher. So for old crop we will add 25 million and for new crop we will keep it the same.
Corn Fundamentals: With weather back to neutral (scattered rains around the corner) and yield numbers starting to come out corn could tread water through Friday. Earlier this week two yield estimates out were at 152.5 and 148.0. Today one group suggested 153.3 while after the close another said 154.5. We are a little surprised at the last two numbers. This will be a wide range now from a low of 148.0 to a high end of 154.5. USDA was at 150.3 in July. Allendale will release ours on Monday.
The Technical: trend for Sept corn futures is down but potentially developing a near term bottom. Key immediate support is 3064 with resistance of 3374. Please note the very small upward trend for Dec corn futures which began on 7/23.
New Crop Marketing: based on our most recent price projections, Dec corn futures are in a downward correction and estimated to find a bottom near the 3200-3300 level. With the recent low of 3244 made on 7/23/07 Dec corn has met our downside correction. We do not recommend forward contracting at present levels. Before Dec corn expiration futures are expected to work back towards 3700-3800 level. End users and producers, use the preceding information for your individual marketing needs.