Did you short corn when “Big Money” said it was time?

Market Pulse: Dec 5, 2011

Fundamentals

Corn prices are holding modestly above October’s 11-month low.

Bearish factors include:

  1. The prediction from Morgan Stanley that increased South American exports may curb demand for and cut 2011-12 U.S corn exports to 1.45 billion bu., below USDA estimates of 1.6 billion and the fewest in 26 years.
  2. Concern that the European debt crisis will crimp global economic growth and demand for commodities.
  3. Reduced corn demand by livestock producers which increased U.S. corn inventories on Sept. 1 to 1.128 billion bu., higher than estimates of 942 million bu.

Bullish factors include:

  1. The action by the IGC to cut its 2011-12 global corn production forecast to 853 MMT from a forecast last month of 855 MMT.
  2. USDA’s Nov. 9 cut in its U.S. corn production estimate for this year to 12.310 billion bu from 12.433 billion bu. forecast in October as it reduced its yield estimate to an eight-year low of 146.7 bushels per acre.
  3. USDA’s cut in its 2012 U.S. ending stocks estimate to 843 million bu and the cut in its 2012 global ending stocks estimate to a five-year low of 121.57 MMT.

Weekly corn exports (week ended Nov. 24): 810.3 MT; 2011/12 (September-August) cumulative exports –13.8% y/y.

Fundamental outlook — Medium-term bearish — Corn prices are attempting to recover from slack foreign demand, increased South American exports, and technical selling with the breakdown from the month-long trading range. Corn still has underlying support, however, from tight supplies after the USDA recently cut its U.S production estimate and its global ending-stocks estimate. The corn 2011-12 stocks/ use ratios are very tight with the U.S. at 6.7% and the world at 14.0%.




Have a prosperous trading week.

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