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It's all about the weather

Agriculture.com Staff 07/16/2007 @ 9:21am

Corn Fundamentals: It is all about weather this recent week and is expected to remain so through the month of July.

Most recent forecast call for high heat and lack of precip for the middle to end of this week. This could push USDA into trimming its trend yield in the August crop production report. Export demand remains unusually high for the 2007-08 marketing year, as end users want to make certain they receive its share before it is consumed by the US domestic demand sector. Condition reports are expected to erode next Monday and more obvious the following week, IF the weather forecast does develop the way it is painted as of recent. Volatile is the name of the present game and it is summer time when the most steadfast forecast can change in less than a day. The most recent 6-10 day forecast does support the hot and dry private weather forecasters outlook. Thursdays USDA crop production report: Allendale's research suggested USDA typically does not favor adjusting yield from the May to June report. USDA in fact did not adjust its yield projection.

USDA End Stocks: USDA's domestic old crop end stocks are projected at 1.137 bil bu vs the previous years 1.967 bil bu. New crop stocks are projected at 1.502 bil bu. USDA's world old crop end stocks are projected at 101 million tonnes, vs the previous years 123 MMT and new crop end stocks of 108 MMT, at 108 MMT it represents the 4th tightest stocks on record dating back to 1980. It is important to understand the 108 MMT projection could be an early warning sign world producers are responding to high prices.

End Stocks to Use: US old crop end stocks to use are 10% vs the previous years 17% and represent the third tightest dating back to 1980. New crop end stocks to use are 12% with much of the growth vs old crop dependent on the US new crop success.

Weekly Export Sales: Old crop corn sales are running 3% above year ago levels. We do need to note USDA did trim export potential by 50 million bu to a new level of 2.1 bil bu. With 8 weeks remaining in the 2006-07 marketing year, the most recent four week shipment pace suggest a final export target of 2.097 bil bushels. New crop export sales have now reached 201.6 mil bu vs year ago levels of 42.2 mil bu. This development continues to support ideas of futures and basis improvement the closer we draw to the actual 2007 harvest.

Ethanol: USDA left unchanged its demand for 2006-07 corn for ethanol use at 2.15 bil bu, 150 million more than for export and now the second largest user of corn. However based on our research, USDA proposes corn use in 2006-07 to be 34% larger than the previous year, a goal which has only been achieved once of the eight months thus far. Allendale's research suggest USDA does need to reduce its outlook by 30 million bushels.

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. Before Dec corn expiration futures are expected to work back towards 3800 with basis improving. End users and producers, use the preceding information for your individual marketing needs.

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