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Bryan Doherty: Now what?

Yesterday’s monthly USDA
supply and demand report swirled through the markets and caused another set of
strong rallies in many prices.  The corn data caught traders particularly
by surprise as the USDA increased demand for both ethanol and sweetener usage.  

The bullish corn data only serves to heighten the interest in the upcoming
annual Outlook Conference, to be held February 24-25.  At this meeting,
USDA analysts will have the chance to present their initial versions of the
2011 crop year supply/demand tables.  How does the USDA believe the tight
corn situation will resolve itself?  

There simply needs to be more acres planted to corn in 2011.  In an effort
to attract more corn acres, new crop prices continue to rally, although not
quite at the same pace as old crop.  Given that one area that could plant
corn acres is the south, the simultaneous rally in cotton prices is not good.  Cotton
and corn are competing for the same acres—how will this battle turn out?  Soybeans
are also an attractive crop, as well as possibly rice.  There will also be
a battle in the Dakotas between corn, soybeans and spring wheat.  There
are lots of acres up for grabs here.  

Beans continue to come up short in this battle, in spite of new crop futures
prices around $14.00.  So far, it would appear that bean acreage will hold
close to steady with last year.  To meet upcoming demand, the Brazilian
soy crop may be the saving grace.  Larger, even record, crop estimates for
this South American country are surfacing, based on strong early yields and
rainfall that is well distributed in the country.  For Argentina, the
estimates are fairly stable.  South American beans may turn out to be
crucial in meeting growing world demand for this vital source of protein and
cooking oil.  

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