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Corn stocks tighten; wheat in the lead?

Jeff Caldwell 01/11/2013 @ 11:04am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The U.S. had 8.03 billion bushels on hand on December 1 of last year, a number smaller than the trade expected -- 17% lower than the same time the previous year -- and based largely on continued apparent strong domestic feed demand. That number released by USDA Friday morning sent March corn futures up 20 cents, or about 2% in three seconds following its release, traders say, before prices settled down by midday.

"Projected corn use for 2012/13 is raised with higher expected feed and residual disappearance more than offsetting reduced prospects for exports. Feed and residual use is projected 300 million bushels higher based on September-November disappearance as indicated by December 1 stocks and on higher expected beef, pork, and poultry production," according to Friday's USDA World Agricultural Supply & Demand Estimates (WASDE) report. "Corn exports are projected 200 million bushels lower reflecting the slow pace of sales and shipments to date and increasing pressure from larger supplies and exports for South America. Corn ending stocks are projected 44 million bushels lower at 602 million."


 


The big variables behind Friday's corn stocks number were the crop year and feed usage, says Don Roose, analyst and broker with U.S. Commodities in West Des Moines, Iowa. Old-crop corn took the bulk of the downturn in supply that ultimately now has tightened up the balance sheet for that crop. At the same time, feed use came in higher than expected. These factors come together to send a clear signal.

"We're saying the rationing job on the feed sector still has to continue. It's supportive for the back months for livestock, but feed usage was up 300 million bushels. That's the story on this one," Roose says. "Exports got whacked and harvested acres were down 300,000 acres. I think this is going to keep a lid on exports. We have got to get competitive in the world market."

As for the early price spike followed by a mellowing in corn futures in the half-hour following the reports' release, Roose speculates many were looking to sell new-crop corn on the price rebound, especially considering "our feed usage was not as low as some people thought," he says. "Our ending stocks have dropped precipitously as of December 1."

That slipping trend could continue, he adds, because "South America's breathing down our neck" with harvest approaching in that key growing region.

While Friday's data is something of a "split decision" for corn and soybeans, wheat may find itself stepping into the lead moving ahead. It's foregone that the crop's not going to reach full potential on a national basis because of the drought in the U.S., and with similar problems abroad, some farmers say they see that crop feeling more of a bullish jolt moving forward, especially considering the world's growing needs for wheat as a livestock feed. And that may take the other grains along for the ride if the bears aren't pulling too tightly on the row crops.

"This is on a limb, but I think wheat is our key. The feeders need it to get through the year (at least some of them do)," says Agriculture.com Marketing Talk Adviser sw363535. "We could yet see wheat push this market along and if it goes up, corn will get drug higher at least some."

   

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