Corn: More demand rationing?

Focus on Futures: Corn

The October USDA crop report for corn did not contain any extraordinary revisions from September data, although the market’s reaction – a 36¢-per-bushel rally – seemed to indicate otherwise.

There was some discussion about late rains salvaging some of the drought-ravaged corn crop as they did for soybeans, but the damage was done, and it was not realistic to expect much improvement. Analysts polled in the days leading up to the report estimated that harvested acreage would fall further, but yield would be bumped up. They didn’t get it quite right. The estimate for harvested acreage was raised by 300 million acres, to 87.7 million acres. The yield came in at 122 bushel-per-acre (bpa), down from the September estimate of 122.884 bpa. The crop estimate now stands at 10.706 billion bushels, 21 million bushels below last month’s estimate – in the grand scheme, a relatively small amount.

The estimate for 2012-13 US ending stocks fell to a 20-year low of 619 million bushels, or 5.6% of usage, down from the 733-millionbushel September estimate. The largest contributing factor was a near 200-million bushel downward revision of 2011-12 ending stocks, but that was known weeks ago – on September 28 – when the USDA surprised the market with a much lower-than-expected quarterly stocks figure.

In the meantime, export demand for US corn is almost nonexistent, at a time of year when harvest pressure depresses prices and foreigners are normally booking orders for the soon-to-be-harvested corn crop. US export commitments over the past four weeks averaged an embarrassing 100,000 tonnes – which included two weeks of near zero sales. In the same four-week period last year, average weekly commitments were just under 1 million tonnes. Actually, this year was not really an exception in regard to harvest pressure; it’s just that the “depressed” prices were still at record highs, as well as higher than those of other foreign origins.

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