Tight world corn supplies
USDA released its March "Crop Production" and World Agriculture Supply and Demand Estimates Friday morning. In the big picture the report held only a few minor surprises. Those included a 2 MMT increase for Brazil corn production on top of last mths 4 MMT increase, a 2.5 MMT drop for S Africa corn production to a new level of 7 MMT. In all, world corn stocks are now estimated at 88 MMT, the lowest on record dating back to 1980. This is a persistent reminder of the tightness and main reason why prices continue to hold firm, at least until the world responds with the 2007 northern hemisphere spring planting campaign.
Stocks to Use: Domestic end stocks to use of 6.4% vs last years 17.5% are the second lowest on record dating back to 1980. In 1995 the end stocks to use were the tightest at 5%. From 1995 to 1996 domestic stocks did more than double to a level of 883 million bushels. World end stocks to use are 10.7% vs last years 15.9% and are the smallest dating back to 1980. World stocks did increase 25% from 1995 to 1996 and more recently in 2003 to 2004 by 27%. Allendale does suggest world stocks to increase similarly as they did during the two periods mentioned above. A 26% increase in world stocks suggest 111 million metric tonnes which compares to the most recent five yr ave of 125.6 MMT.
Season Average Farm Price: USDA did not revise the season average farm price from the Feb to March report and uses a $3.10 to $3.50/bushel or $3.30 average estimate vs last years $2/ bu ave and the previous years $2.06/bushel estimate.
La Nina: Thursday the NOAA announced a shift to cooler temperatures in the equatorial Pacific Ocean waters. This signals an end to El Nino and suggest a very quick transition to La Nina conditions during March-May 2007. The NOAA went on to point out developing La Nina conditions can point to a more active Atlantic hurricane season. El Nino, an unusual warming of ocean temperatures, contributed to a unseasonable warm weather in the Northeast U.S. early this winter, NOAA said. Now conditions are becoming favorable for La Nina to develop. Typically, during the U.S. spring and summer months, La Nina conditions don't significantly impact overall inland temperature and precipitation patterns; however, La Nina episodes often do have an effect on Atlantic and Pacific hurricane activity. Very interesting for NOAA to point out the potential lack of impact on inland temperatures and precipitation. The question is will the CBOT trade care, likely not. Two other La Nina discussions developed on Thursday. One from a Midwest Land Grant college which ultimately suggested at this point and time, weather events may produce greater odds of sub 148 bu per acre corn yields. The other report from the private sector suggest La Nina to be weak in the early spring and not intensify until late in the summer. This particular private forecaster does remind us there are many other weather making influences which may temper or strengthen La Nina but also is in unison with the NOAA that just because its a La Nina it does not necessarily suggest hot and dry conditions.