Wheat making a strong argument for more acres in 2007
Corn Fundamentals: Strong weekly export sales announced Friday for corn lent strong fundamental support on top of the adjustment the USDA presented on Thursday. USDA dropped corn production under 11 bil bu and end stocks under 1 bil bu as a result of smaller planted acres. USDA dropped demand by 25 million bu vs the Sept crop report while dropping production by 209 mil bu. S Korea has sent the first warning shot across the bow of USA export demand prices by purchasing 88% of it two day total purchase of 477 K tonnes from China.
Weekly Export Sales: As of the most recent official USDA export sales data, 665 mil bushels of corn has been sold vs last years 426 mil bu and most recent three year ave level of 450 mil bu.
Corn End Stocks: Domestic stocks are estimated at 996 mil bu vs 1.971 bil last yr and 958 mil bu in 2003. World stocks of corn are 90 MMT vs 89 MMT in 1983 and 125 MMT last year.
Corn End Stocks to Use: USA projects end stocks to use at 8.4% vs 17.5% last year, 9.4% in 2003 and 5% in 1995. Globally end stocks to use are estimated at 11.1% vs 16.1% in 2005 vs 14.3% in 2003. World end stocks to use have not been this tight dating back to 1980.
Cash Corn: It is the March-April time period when the National corn price average more often than not finds its calendar year peak price dating back to 1998. For the end user it is more often in the Oct-Nov time frame when prices reach low levels to lock in long term needs. The Dec Mar corn spread is at 10 cents carry. At 2.85 spot cash prices, the cost of carry is 3.1 cts per bu per mth or 9.3 cents. Anything less than 9.3 is a warning flag to move cash corn on hedged bushels and have your pre planned re ownership plan activated.
LDP: Both the 6 and 7 year LDP average peak for corn has been Oct 11th while soybeans finds its peak in a range of Oct 14th through the 27th.
Export Sales: It is our belief much of the present sales have been front loaded to avoid high cash prices in the March-April 2007 time frame. Barring an Argentina harvest (March 2007) disaster, sales for the third quarter of the 2007 calendar yr are expected to be softer than normal.
90-10 Odds: From the Oct USDA crop report to the Nov WASDE report, odds are 90% favoring an ave increase in production of 110 mil bu. Those odds sink to 70% from Oct to the Jan annual with an ave increase of 131 mil bu. Six to Ten Day and Two Week Forecast: project continued interruptions primarily for an already lagging east Corn Belt harvest.
Five Year Ave Cash Price: The five year ave cash price for corn for the month of month of Oct $2.05, month of Dec $2.11.
Corn Technicals: Dec futures close is 3144 vs last Friday's 2710, up 15.5% for the week. Our key custom Moving Averages are 2880, 2810 and uses a 2600 bull to bear pivot point. March futures close is 3240 vs last Friday's 2840, up 14% for the week. Our key custom Moving Averages are 2980, 2930 and a 2700 bull to bear pivot point.