On the global front, Brazilian, Argentinian, and Chinese output was revised upwards by a combined 11 million tonnes. Those increases were mostly offset by crop losses in the other significant Northern hemisphere producers who were afflicted by drought as well.
Even if the USDA’s estimate for US output is already in the right ballpark – and it might be – demand will eventually become the pivotal issue. So far, there seems to have been some sticker shock. Old-crop US sales ground to a halt when prices began to rise. Consider this: Average weekly old-crop export commitments since the first week in June have been 127,000 tonnes. That’s very weak, even when compared with the same period last year, which also had very poor new old-crop sales. New old-crop sales for 2010-11 for the comparable period were 432,000 tonnes. In the previous two seasons new old-crop sales from early June through mid-August averaged 701,000 tonnes in 2009-10 and 695,000 tonnes in 2008-09.
The USDA responded by lowering its target from the July estimate of 40.67 million tonnes, to 39.37 million tonnes – but that won’t do the trick. We will not reach the downwardly-revised estimate. Shipments stand at 36 million tonnes, and with only three weeks left to the marketing year and shipments averaging about 500,000 tonnes per week, the final number will be about 37.5 million tonnes.
The USDA cut its estimate for 2012-13 global demand by 4.3% from the July estimate. That compares with a 6.2% drop in output, which will result in a drawdown in global inventories. Prices should move higher if there is evidence that the sticker shock that we’ve seen begins to wear thin, which we believe is going to happen, sooner or later.
Buy December corn on setbacks and place stops based on your risk tolerance level. There is very little in the way of meaningful assistance from the chart.