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Corn to start Sunday at 6.78, analyst says

03/29/2013 @ 3:12pm

On Thursday, the USDA released the first official 2013 planting numbers <http://www.allendale-inc.com/wp-content/uploads/2013/01/ProspectivePlantings032013.jpg>  which came in at 97.282 million acres. 

This was only slightly higher than the 97.252 million that trade was looking for. Active new crop selling was not just due to the slightly higher acreage number but was also due to the fact new crop traders had been buying the bearish trade estimate for over a week. Old crop saw a much more bearish report today. Trade was expecting to see US stocks <http://www.allendale-inc.com/wp-content/uploads/2013/01/GrainStocks032013.jpg>  come in at 5.013 billion bushels and instead the USDA released a number of 5.399 billion. That results in a 386 million bushel larger pile of stocks than trade had factored on. 

Let’s remember that over the last 4 months we have seen USDA raise “feed and residual <http://www.allendale-inc.com/wp-content/uploads/2013/01/2013-03-28-corn-feed-and-residual.jpg> ” 400 million bushels. Now we see 386 million bushel higher than expected number. 

We can’t know for sure if that is where the extra bushels came from but if we assume USDA has accurately estimated ethanol and export use, that is the next logical area to expect to see future changes. It is hard to argue with the USDA about a number that is difficult to quantify. We will see if the next supply/demand report shows a reduction in that category in early April. 

Synthetically, the May corn finished Thursday at 678, which is where we would expect May corn to start trading Sunday night. This suggests continued weakness for the old crop Sunday night into Monday. For new crop, it didn’t look good taking out key 538 1/2 support near the end of the day but most of future direction will still be based on weather. If Monday’s forecasts call for cold temps, than early next week could start to see a slow bounce. If that forecast warms then a continued grind lower is expected. Let’s all keep focus on weather now, that will be our lead story once again going into planting.


Closed Trades:

Bought May 710 puts at 10, objective hit at 20, +$500

 

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