Corn Acres and Quarterly Stocks: (not out of the woods yet)
Joe Victor, July 2nd, 2009
With the June 30th USDA Planted Acres and Quarterly Grain Stocks released, Allendale's research suggests USDA's forthcoming World Agriculture Supply and Demand Estimates are likely forced to produce revisions to projected 2009/10 end stocks.
By viewing the chart, you will observe three distinct columns on the right hand side. The first 2009/10 column you will see the days supply of corn and wheat as a result of the USDA June WASDE which suggest decade record low number of days supply of corn at 32, two days less than the previous record low of 2001/02. The second of the three columns has revised the number of days supply to 36 as USDA's June planted acres reported 87.035 million acres vs its present WASDE estimate of 85 million, creating a growing supply of corn while leaving yield per acre unchanged at 153.4 bushels per acre. The third and final column includes the upward acre revision as well as USDA's June 30th quarterly corn stocks report estimate of 4.266 billion bushels.
Knowing the most recent three year average 4th corn use as well as lag in 2008/09 corn use, Allendale Inc suggests USDA has a discrepancy of 323 million bushels from its present old crop end stocks of 1.6 billion bushels and likely to cause a larger 2009/10 carry-in stocks estimate. Allendale's research suggest by adding in the potentially larger carry-in stocks and increased planted acres the days supply of corn may reach 46. Though building a degree of comfort for end users as well as grain handlers, corn is not out of the woods just yet as the ten year average days of corn supply is 54 and evidence of a downward trending bias since 2004/05's 72 day supply.
With reference to corn's starch cousin wheat, the trend bias is notably upward since 2003/04's level of a relatively tight situation of 85 days. USDA launched another acreage surprise on June 30th with regards to wheat by discovering additional 1.175 million acres vs its June WASDE estimate of 58.6 million acres. Before the June 30th USDA acres and quarterly stocks reports, the days supply of wheat numbered 110. By adding the additional acres the 2009/10 days supply of wheat has reached a level of 120 days and by adding in the quarterly stocks data suggest the outlook for 121 days.
Allendale Inc's most immediate response to this time sensitive data is the wheat supply may in fact be the darkest starch cloud for producers which may produce a gray cloud over the corn's ability to stage a significant weather rally for 2009. Allendale's research does advise we have likely experienced the 2009 December futures high in the month of May with the potential to reach $4.40 to $4.60 and a $3.40 to $3.50 low before the fall harvest. Allendale encourages you to utilize the fundamental and projected price range data with an Allendale representative to formulate your specific marketing plan.
Speculative investment traders may want to explore the potential of a long Sept futures corn vs short Sept wheat futures position as technical chart data suggest the spread remains confined within a twenty cent trade range.
What are your thoughts about the most recent USDA reports? Does USDA have the right acreage and stocks estimates? Could USDA begin to make immediate abrupt acreage and stocks adjustments in the July WASDE, or wait until the January Annual WASDE? The trade may suggest, there is plenty of the growing season ahead and El Nino could cause crop stress. Ask yourself this, what if there is not a major weather issue, are you prepared?
-Joe Victor
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Allendale Inc welcomes any questions you may have by calling 800-551-4626 or e-mail: research@allendale-inc.com
Joe Victor earned his Masters of Science Degree in Agriculture Education/Nutrition, with his Bachelor of Science majors in Production Agriculture, Agriculture Business and Ag Education from Western Kentucky University, Bowling Green, Kentucky. His Associates in Applied Science Degree was earned from Cobleskill Ag and Tech, Cobleskill, New York, with a major in Dairy Science.
In 1980 Joe became a full time college Agriculture Instructor, teaching a variety of agribusiness and production agriculture classes. In 1984 he was promoted to Department Head of Agriculture / Horticulture where he was responsible for all campus field crop research. After this Joe was employed by Seegers Grain, Inc., northern Illinois' largest country grain elevator. Joe currently serves as a Vice President at Allendale Inc, an NFA member Introducing broker.
